Whyte on poverty

January 7th, 2016 at 4:00 pm by David Farrar

Jame Whyte writes at the NZ Herald:

There is no poverty in New Zealand. Misery, depravity, hopelessness, yes; but no poverty.

The poorest in New Zealand are the unemployed. They receive free medical care, free education for their children and enough cash to pay for basic food, clothing and (subsidised) housing. Most have televisions, refrigerators and ovens. Many even own cars. That isn’t poverty.

We spend well over $35 billion a year providing welfare, free education and free medical care.

Why then do we keep hearing that more than 20 per cent of New Zealand children live in poverty? Those who tell us this do not mean by “poverty” what most people do. They have a statistical definition: you live in poverty if your household’s income is less than 50 per cent of the national median (after tax and housing costs, and adjusted for the number of adults and children in the household).

For example, the Herald recently published an article by Susan St John, spokeswoman for the Child Poverty Action Group, that claimed 220,000 children live in poverty because they “fall under the stringent 50 per cent after-housing-costs poverty line”.

Alas, the measure is not stringent; it is ridiculous. It means, for example, that doubling everyone’s income would have no effect on the amount of poverty in New Zealand. Our incomes would all remain the same percentage of the median.

The more wealthy people who migrate to NZ means the more people are defined as being in poverty!

Poverty, when defined as a percentage of the median income, is something that only socialism can solve. The only way to have fewer people in poverty is tax the wealthy more and give more money to those on lower incomes.

Yet lowering incomes might reduce poverty. If the median income fell, then those on the minimum wage or unemployment benefit would find their unchanged incomes closer to the median.

Communist counties have very few people in poverty by this definition, as everyone is equally poor.

Using this definition, a 2014 Unicef report claimed there is more child poverty in Japan than in Hungary and more in the United States than in Greece. This at a time when the Greek economy was in tatters, unemployment was running at 27 per cent and masses of Greeks were queuing for handouts at soup kitchens.


Worse, the measure disregards consumption that people do not pay for with their own money. Consider two 10-year-old boys who live in the same quality of house, attend the same school, visit the same doctor when ill, wear the same brand of tracksuit and so on. Their material wellbeing differs in only one respect. Whereas Jimmy’s parents give him $20 a week in pocket money, Timmy’s give him only $10. Should we conclude that, since his disposable income is only half of Jimmy’s, Timmy is a pauper?

Suppose the housing, schooling and so on that they both receive are worth $200 a week, and that both spend all their pocket money. Then Jimmy consumes $220 a week and Timmy consumes $210. Though Jimmy’s disposable income is double Timmy’s, he is only 5 per cent better off.

The same goes for New Zealand households. A large portion of their consumption is not paid for from their disposable incomes. Education, healthcare and housing are all in this sense free. Differences in disposable income exaggerate differences in consumption. Yet poverty is a matter of consumption.

Excellent points. This is why I think the best definition of poverty in NZ is whether people are in material hardship, as measured by whether they can afford hings such as shoes for their kids.

Capitalism saving the world

December 30th, 2015 at 1:00 pm by David Farrar

Fraser Nelson writes in The Telegraph:

While overseas support has been crucial and highly effective in the struggle, the strongest force pushing back disease in the continent is capitalism; trade still brings in far more money than aid. Indoor smoke, dirty water and hunger still kill more Africans than malaria, so when a villager can afford rudimentary sanitation and healthcare, the effect on disease is profound.

A recent African Union conference set a two-year deadline to turn the whole continent into a free-trade area. This is no mere fantasy: since the beginning of the century, the value of trade between African countries has risen five times over; mobile phones are now as common in Nigeria and South Africa as they are in Britain.

A free trade zone within Africa – a very good idea. Wealth for Africa will  come from trade, not charity (but charity is needed for now).

Bill Gates’s charitable foundation has played a full role in the battle against malaria. It does not rely on pulling heartstrings to gain support, so he is free of any need to spin a tale of Africa in meltdown. Instead, he talks about “mind-blowing” progress being made before our eyes. On current trends, he says, there will be almost no poor countries left within 20 years.

If this sounds like a wild exaggeration, it shouldn’t: all the data is pointing in this direction.

This is a story that is not told very often, but it is none the less the story of our age: globalisation is spreading ideas, medicine and wealth, forcing down inequality and bringing the world closer together.

With enough capitalism, poverty might become history after all.

In 1990 over 40% of the world lived in extreme poverty, Today it is under 20% and shortly after 2020 it is projected to be under 10%. A remarkable change in just three decades.

Overseas travel on the benefit

November 24th, 2015 at 10:00 am by David Farrar

The Herald reports:

More than 30,000 New Zealanders had their benefits cut last financial year for travelling overseas without letting officials know.

Ministry of Social Development figures show 31,714 people had benefits cut for going overseas without telling Work and Income – down on the previous year’s 35,565.

Benefits related to jobseeker support were those most often cut.

Poverty advocates claim that benefit levels are so low, that those receiving them are in poverty.

Yet at least 31,000 can afford overseas travel.

Actually – may be much more than that. 31,000 is the number who didn’t tell MSD of their travel. No idea how many more traveled and did.

200 years of amazing progress

August 17th, 2015 at 11:00 am by David Farrar


A pretty stunning graph showing how much the world has changed for the better for the vast majority. We’ve gone from 95% of humans in poverty to under 20% – and the biggest change has been the last 50 years.

Dylan Matthew at Vox reports:

If you’ve ever doubted that 2015 is the best time to be alive in human history to date, take a look at this chart …

In the 19th century, extreme poverty — defined here as living on less than $1.25 a day* — was the norm. In 1820, 94.4 percent of humans were below that line. Only a tiny fraction of the world enjoyed standards of living that were remotely bearable. Progress was initially slow. By 1910, the share had only gotten down to 82.4 percent — a 12-point drop over 90 years. But things picked up after World War II, and 89 years after 1910, only 28.9 percent of people were in extreme poverty. To repeat: From 1820 to 1910, there was a 12-point drop. From 1910 to 1999, there was more than a 53-point drop.

This also explains a lot of our global political history. When 80% of the world is living in poverty, then communism and socialism looks very attractive. But it has actually been the spread of capitalism to China and India that has led to the massive declines in poverty.

Why the focus should be on hardship, not inequality

August 16th, 2015 at 4:00 pm by David Farrar

The Herald reports:

The number of Kiwi children in relative poverty has jumped over 300,000 for the first time since 2010 – but it’s because of record inequality, despite falling absolute hardship.

So fewer kiwi children are in hardship – that is good news. That is what we should focus on.

The Ministry of Social Development’s annual household incomes report shows that the numbers below a European standard measure of absolute hardship, based on measures such as not having a warm home or two pairs of shoes, fell from 165,000 in 2013 to 145,000 (8 per cent of all children) last year, the lowest number since 2007.

So fewer kids in hardship than under Labour. That’s good. And we should keep working to lower it more. All kids should have warm homes and decent footwear. However the answer is not always as simple as just more money – it is also budgeting advice, parenting skills, better agency support.

Children in benefit-dependent families also dwindled from a recent peak of 235,000 (22 per cent) in 2011, and 202,000 (19 per cent) in 2013, to just 180,000 (17 per cent) last year – the lowest proportion of children living on benefits since the late 1980s.

Again this is great. On almost every social indicator, the data is clear that growing up in a household with no working adults, you on average have much worse outcomes. It’s not just about income either.

So we have lower hardship than under Labour and fewer children in non working households than at any time in last 25 years. That’s headlines we won’t see much of.

But inequality worsened because average incomes for working families increased much faster at high and middle-income levels than for lower-paid workers.

Which shows how silly the focus on inequality is, as opposed to actual hardship. What counts is increasing living standards for all families, not seeing it as a negative thing that middle level incomes rose father than lower incomes.

Council of Trade Unions economist Dr Bill Rosenberg said: “Rising inequality means that even if the economy is growing, the income from it is not being fairly shared.”

No, and only in the former USSR did you have income “fairly” shared. In non communist countries income is earnt by individuals and families, not by the Government to share out. We do redistribute via tax and welfare, but you will never ever have no income inequality unless you tax people so much they all leave, so we have a universally low income society.

And frankly there is nothing wrong with the fact a 50 year old senior executive earns a lot more than an 18 year old in their first job, or a 75 year old who is retired.

Back to the material hardship measurement.  Here’s some data from the report:

  • Only 4% of households have severe material deprivation on the EU index – lower than 17 EU countries, and higher than only seven
  • For 65+ households, only 1% in severe material deprivation
  • For households with children, 8% in severe material deprivation on EU index – putting us at the midpoint for the EU
  • The percentage of children in hardship on the NZ index has declined from 17% in 2008 to 12% currently

NZ has third highest material living standard

July 28th, 2015 at 9:00 am by David Farrar

Stuff reports:

New Zealand families have the third-highest material living standard in the world, a local study has found.

Researchers at public policy research institute Motu used data from 800,000 households across 40 countries to create the new measure for wellbeing, which took into account homes that included a 15-year-old.

The measure is based on ownership of possessions such as books, internet connections, whiteware and cars, as well as the number of bedrooms and bathrooms in a house.

These are measures that actually matter to families – far more than whether the guy down the road has an even better car.

The top 10 are:

  1. USA
  2. Canada
  3. NZ
  4. Australia
  5. Liechenstein
  6. Luxembourg
  7. Ireland
  8. Norway
  9. Sweden
  10. Italy

They did look at inequality also. NZ was in 20th out of 40 countries.

Motu senior fellow Dr Arthur Grimes said the results should call into question the widespread negative impression of living standards in New Zealand compared with other developed countries.

“Our results show New Zealand is still a great place to bring up children, at least in material terms.

“Not only do we have wonderful natural amenities, but contrary to what GDP statistics tell us, most Kiwi families have a high standard of material wellbeing relative to our international peers.”

A great place to live in, NZ is.


A very misleading story

July 16th, 2015 at 3:00 pm by David Farrar

The headline:

Govt aware it’s doing little to help child poverty: report

You’d see that and think it was referring to the recent Budget initiatives, and that they would not help.

A report has revealed the Government is aware its programmes have been doing very little to help children out of poverty.

Radio New Zealand reported the Government received advice showing its child poverty policies would do little in the short to medium term.

Now we see that it is merely saying they may not help in the short to medium term. Not totally surprising, as much poverty is generational, and it can take a generation to break certain cycles.

The advice came before a $25 increase in benefits for families was announced in this year’s budget.

The paper was written by the Ministry of Social Development in February 2013 in response to the Children Commissioner’s expert advisory group report on child poverty, Radio New Zealand reported.

It’s a paper which was written 30 or so months ago, before both the last two Budgets.

The paper stated the Government had a credible and wide-ranging programme to address poverty – but said in the short to medium term this was unlikely to result in a reduction in child deprivation.

So actually the paper said the Government is addressing poverty – the exact opposite of the headline. Just that the measures work over the long-term.

Green Party social development spokeswoman Jan Logie said the Government chose to hide the fact its policies weren’t going to solve poverty because it did not want to raise low wages or benefits.

Sigh – MPs who just spew rhetoric, and ignore reality. This Government did raise benefits – the only one to do so in 43 years. And the minimum wage has risen significantly in real after tax terms.

The poverty industry

May 27th, 2015 at 3:00 pm by David Farrar

NBR reports:

Asked about measures to tackle poverty and child poverty, Mr English told a Maxim-organised gathering in Auckland last night that those terms have been taken over by ideologues and the government does not trust the way those words are used.

“The term ‘poverty’ has been captured by a particular idea of how you measure poverty and a particular solution to it. That is, you measure it relative to incomes, and the solution is mass redistribution.”

And we should resist that definition. Once you accept that as the definition then the only way you can solve poverty is to massively increase taxes on half the population to redistribute it to the other half. If you accept that as the definition, then the only solution is socialism or communism. Doubling the wealth of every person in NZ wouldn’t reduce poverty by one iota according to some in the poverty industry.

“We are not addressing that phenomenon. What we are addressing is absolute levels of hardship. That is someone not having enough to live, and we don’t think that is worse just because someone else has a bit more.”

But the poverty lobby groups do. They don’t want anyone earning too much more than anyone else.

Incomes are only one part of what keeps people at the bottom of the social heap, he says, and other factors matter more.

Labour have said that lifting benefits by $25 a week is not a solution to poverty, it just makes life easier for those in poverty. They are right. Just increasing benefits is not a solution to poverty.

The solutions to poverty take a generation or so to succeed. They are things such as:

  • Having a free economy and flexible labour market that creates jobs, for those wanting to get off welfare
  • Welfare reforms that don’t leave people on welfare for 20 years
  • Targeting the tail in education with initiatives such as the Investing in Educational Success initiative and charter schools
  • Reducing crime rates, and reducing reoffending rates
  • Reducing child abuse
  • Not taking kids from dysfunctional parents and sticking them with their extended family who are equally dysfunctional

Sadly labour have opposed most of these initiatives, which will actually make a difference long-term in reducing poverty. There is no doubt that being on welfare for more than a short period of time has a huge impact on not just income, but also education and health achievement. The data is crystal clear. So you need to ensure those on welfare are supported adequately, but you need to work just as hard at making sure you don’t leave adults who are able bodied on welfare.

Maxim on measuring poverty

March 31st, 2015 at 7:00 am by David Farrar

The Maxim Institute has published a very readable 13 page paper on how best to measure poverty in NZ.

They make several recommendations:

  1. Poverty should be defined as a situation where: a person or family lacks the material resources to meet their minimal needs as recognised by most New Zealanders.
  2. Regularly publish a poverty and deprivation dashboard including income measures, deprivation and outcome indicators. 
  3. Use consensual budget standards to better identify what most New Zealanders think is a minimal acceptable standard of living and potentially derive an income threshold from this process.
  4. Use clustering statistical techniques to target, tailor and evaluate policy by identifying people and families with different combinations of risk factors
  5. There should be some legislative requirement that the measures and indicators above are regularly published.
  6. A poverty-specific legislative framework should not be implemented.
  7. Extend the Better Public Service targets / Results for New Zealanders framework to include reasonable, time-specific targets aimed at reducing poverty.

I strongly support the first three recommendations. Poverty should be defined based on need, not based on comparative income standards.

I also think the recommendation to have a BPS target for reducing poverty is a bold one, but worth doing.

Words I wish a NZ Labour leader would say

December 17th, 2014 at 9:00 am by David Farrar

The Telegraph reports:

Jim Murphy has been announced as the new leader of the Scottish Labour Party. …

“The majority are fulfilled, getting on, getting by, being successful. A minority are falling behind, denied opportunity, trapped, unable to escape the hardship of their upbringing.

“That inequality is wrong and it is my driving purpose, it is our driving purpose, it is the Scottish Labour Party’s driving purpose to end that type of inequality once and for all.”

Mr Murphy said the best way to tackle poverty was to boost the economy.

“The most effective anti poverty measure is a successful economy,” he said.

Would we even hear NZ Labour or the Greens say this here?

“It’s about backing businesses, it’s about creating jobs, because if redistribution is our aim, which it is, then we need more wealth not less. We want more entrepreneurs, not fewer. A growing middle class that more families are able to join.

“The debate about how we spend our wealth starts with how we earn it.”


8 ways to measure poverty

July 11th, 2014 at 3:00 pm by David Farrar

The Maxim Institute has a very thoughtful discussion paper on poverty. They pose a number of questions, and also outline eight different ways you can measure poverty. They eight ways are:

  1. Average income threshold – a percentage of mean or median income
  2. Consumption expenditure – a percentage of amount spent on consumption compared to average household
  3. Budget standards – based on a budget judged high enough to avoid deprivation
  4. Component and multiplier – based on amount needed for an essential such as food, and multiplied
  5. Subjective measures – based on self-assessment as poor
  6.  Benefit-based/statutory measures – based on government definition of minimum income
  7. Material deprivation indices – based on actually lacking essential necessities
  8. Multi-dimensional measurement of poverty, deprivation or social exclusion – a mixture of the above and more

No measure is prefect. I don’t like the income measures because they treat all households as identical in terms of needs, and they are more about income spread than actual poverty. They also avoid the effect of tax, as they tend to be on before tax incomes.

My preference is No 7.  Stats NZ already do this – an occasional survey asking if families can afford stuff such as more than two pairs of shes for kids, transport to school etc etc. This is relatively objective, and measures actual deprivation rather than merely equality of income.




Behind the headline

March 21st, 2014 at 2:00 pm by David Farrar

The headline:

A global survey has found that one in every six Kiwis ran out of money for food in 2011-12 – more than in all except eight other developed nations.

Sounds shocking.

The shock finding contrasts with other data in an annual survey by the Paris-based OECD that put New Zealand near the top of the 34 developed countries on social indicators such as people’s perceived health status and employment rates, and above average on relative poverty.

So on most indicators doing well, so let’s do a shock headline on the one indicator that isn’t, which is based on three year old data.

The NZ figure matches Statistics NZ’s annual household economic survey which asks people if they have not enough, just enough, enough or more than enough money to meet “everyday needs for such things as accommodation, food, clothing and other necessities”. Those who said “not enough” rose from 16.2 per cent in 2007 to 18.5 per cent in 2010, but fell to 17.6 per cent in 2011, 16.6 per cent in 2012 and 14 per cent last year.

So the real headline should be fewer families unable to make ends meet than in 2007!

Here’s some other stats from OECD survey:

  • NZ 2nd highest in OECD for percentage of welfare going to low income families
  • Between 2007 and 2010 NZ richest 10% of households had higher drop in disposable income than the poorest 10%
  • NZ has 8th highest employment rate
  • Gini coefficient which measures income inequality declines from 2007 to 2010
  • NZ relative poverty rate declines from 2007 to 2010
  • NZ 2nd highest for adults in good health and highest in world for adults with low income
  • NZ 11th highest for overall life satisfaction
  • NZ 5th highest for confidence in government

This is not to say that things are not tough for some families. But if you read the overall OECD report, NZ is better than most other developed countries. And fewer people in 2013 than in 2007 are unable to make ends meet.

Does Cunliffe stick by shoes claim?

February 1st, 2014 at 10:00 am by David Farrar

Hamish Rutherford at Stuff reports:

When David Cunliffe tried to hit home the message that many Kiwis were struggling this week, he chose a simple, heartbreaking example.

Not only was one in four living below the poverty line ‘‘one in five don’t even have two pairs of shoes to wear to school’’ the Labour leader said in his state of the nation speech in Auckland.

Later in the week Cunliffe was challenged by Prime Minister John Key in Parliament to quote the source of the claim (as had Right wing commentators), but he did not do so.

His office is now ignoring questions on whether he sticks by it, but the foundations are shaky.

Staff confirmed that it was based on the report last year of Children’s Commissioner Russell Wills, which said 17 per cent of children (which is one in six, not one in five) were exposed to ‘‘a range of economising behaviours’’.

These included having at least two pairs of shoes in good repair, but could also mean parents cut back on fresh fruit, limit heating or avoid going to the doctor to save cash.

The report this all comes from I blogged on last week. It clearly states that only one in 20 families can;t afford two pairs of shoes. Cunliffe’s figure was 400% higher.

More on poverty and school results

January 30th, 2014 at 2:00 pm by David Farrar

Amanda Ripley at Talking Points Memo writes:

There is just one valid way to compare how students from different socio-economic backgrounds do on this same international test. And that’s to look at the scores for kids at different income levels, data the Organisation for Economic Co-operation and Development (OECD) routinely collects. What we see from the data is that our poorest kids perform worse than their peers in other countries—and so do our richest kids. Even our middle-class kids score worse than middle-class kids in Germany, Finland, New Zealand and Korea, among other places. Our kids do better in reading than in math or science—but they don’t tend to score at the very top of the world in any subject.

Countries with significant levels of child poverty now outperform the U.S. on international tests (Canada, Estonia, Poland and Vietnam, for example). So the urgent question is not whether we must fix poverty before we fix schools (or fix schools before we fix poverty). The question is, What did these other countries do to help mitigate against the toxic effects of poverty? And what can we learn from them?

Poverty is a factor, but as the US results show it is not a determining one.

To me, the value of the international educational comparisons is not to prove who is right or wrong; it is to see what is possible, to find the outliers and try to learn from them. Poland, which has a 16 percent child-poverty rate and spends dramatically less than we do per pupil, had worse PISA scores than we did in 2000. Today, Polish 15-year-olds outscore their American peers in math, reading and science. Poland has more teenagers performing at an advanced level in math than Finland (which has a mere 4 percent child poverty rate). Meanwhile, other countries have very low levels of child poverty but end up with worse education outcomes than Poland (Norway and Sweden come to mind).


The Huffington Post also reports:

The data was provided to The WorldPost by Pablo Zoido, an analyst at the Organisation for Economic Co-operation and Development, the group behind PISA. It shows that students’ wealth does not necessarily make them more competitive on an international scale. In the United States, for example, the poorest kids scored around a 433 out of 700 on the math portion of PISA, while the wealthiest ones netted about a 547. The lower score comes in just below the OECD average for the bottom decile (436), but the higher score also comes in below the OECD average for the top decile (554).

Mitchell on income inequality

January 28th, 2014 at 10:00 am by David Farrar

Inequality in NZ and the oecd trend

From Lindsay Mitchell.

The Gini coefficient is what most on the left say is the best measure of income inequality. This clearly shows no worsening trend, and in fact most of the OECD is getting more unequal, but not New Zealand.

Mitchell also looks at the standard measures of poverty. These are not measures the right might use such as actual need, but the normal proportion of median income. What is the record for NZ from 2007 to 2012:

  • AHC fixed line 60% dropped from 18% to 14%
  • AHC moving line 60% dropped from 18% to 17%
  • AHC moving line 50% dropped from 13% to 12%
  • BHC moving line 60% dropped from 18% to 16%

So when a politician claims NZ has more poverty or income inequality, just ask them a simple question. On what measure.

Gates on 3 myths that block progress for the poor

January 26th, 2014 at 7:00 am by David Farrar

Bill Gates writes:

By almost any measure, the world is better than it has ever been. People are living longer, healthier lives. Many nations that were aid recipients are now self-sufficient. You might think that such striking progress would be widely celebrated, but in fact, Melinda and I are struck by how many people think the world is getting worse. The belief that the world can’t solve extreme poverty and disease isn’t just mistaken. It is harmful.


The global picture of poverty has been completely redrawn in my lifetime. Per-person incomes in Turkey and Chile are where the United States level was in 1960. Malaysia is nearly there, as is Gabon. And that no-man’s-land between rich and poor countries has been filled in by China, India, Brazil, and others. Since 1960, China’s real income per person has gone up eightfold. India’s has quadrupled, Brazil’s has almost quintupled, and the small country of Botswana, with shrewd management of its mineral resources, has seen a thirty-fold increase. There is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world’s population.

Botswana has a huge focus on education and fights corruption actively. And progress is not just in Asia:

First, don’t let anyone tell you that Africa is worse off today than it was 50 years ago. Income per person has in fact risen in sub-Saharan Africa over that time, and quite a bit in a few countries. After plummeting during the debt crisis of the 1980s, it has climbed by two thirds since 1998, to nearly $2,200 from just over $1,300. Today, more and more countries are turning toward strong sustained development, and more will follow. Seven of the 10 fastest-growing economies of the past half-decade are in Africa.

Africa has also made big strides in health and education. Since 1960, the life span for women in sub-Saharan Africa has gone up from 41 to 57 years, despite the HIV epidemic. Without HIV it would be 61 years. The percentage of children in school has gone from the low 40s to over 75 percent since 1970. Fewer people are hungry, and more people have good nutrition. If getting enough to eat, going to school, and living longer are measures of a good life, then life is definitely getting better there. These improvements are not the end of the story; they’re the foundation for more progress.


It also helps to look at the overall impact this spending has. To get a rough figure, I added up all the money spent by donors on health-related aid since 1980. Then I divided by the number of children’s deaths that have been prevented in that same time. It comes to less than $5,000 per child saved (and that doesn’t include the improvements in health that go beyond saving the lives of young children).5 $5,000 may sound expensive, but keep in mind that U.S. government agencies typically value the life of an American at several million dollars.

Also remember that healthy children do more than merely survive. They go to school and eventually work, and over time they make their countries more self-sufficient. This is why I say aid is such a bargain.

And some things foreign aid has helped achieve:

  • 440 million children vaccinated
  • 2.5 billion children immunised against polio
  • 11.2 million cases of TB detected and treated
  • 360 million insecticide treated bed nets distributed


Second, the “aid breeds dependency” argument misses all the countries that have graduated from being aid recipients, and focuses only on the most difficult remaining cases. Here is a quick list of former major recipients that have grown so much that they receive hardly any aid today: Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia. South Korea received enormous amounts of aid after the Korean War, and is now a net donor. China is also a net aid donor and funds a lot of science to help developing countries. India receives 0.09 percent of its GDP in aid, down from 1 percent in 1991.


Going back at least to Thomas Malthus, who published his An Essay on the Principle of Population in 1798, people have worried about doomsday scenarios in which food supply can’t keep up with population growth. …

When children survive in greater numbers, parents decide to have smaller families. Consider Thailand. Around 1960, child mortality started going down. Then, around 1970, after the government invested in a strong family planning program, birth rates started to drop. In the course of just two decades, Thai women went from having an average of six children to an average of two. Today, child mortality in Thailand is almost as low as it is in the United States, and Thai women have an average of 1.6 children.


Because most countries—with exceptions in sub-Saharan Africa and South Asia—have now gone through this transition, the global population is growing more slowly every year. As Hans Rosling, a professor at the Karolinska Institute in Sweden and one of my favorite data geeks, said, “The amount of children in the world today is probably the most there will be! We are entering into the age of the Peak Child!”

Peak Child – I like it.

Gates summarises:

If you read the news every day, it’s easy to get the impression that the world is getting worse. There is nothing inherently wrong with focusing on bad news, of course—as long as you get it in context. Melinda and I are disgusted by the fact that more than six million children died last year. But we are motivated by the fact that this number is the lowest ever recorded. We want to make sure it keeps going down.

A really good open letter.

Chart of the greatest and most remarkable achievement in human history

January 25th, 2014 at 12:00 pm by David Farrar



Mary Perry at AEI writes:

Everybody’s featuring their “graphs and charts of the year,” like The Atlantic and theWashington Post (be sure to see Vice-President Joe Biden’s “Graph of the Year” on Amtrak ridership). Well, the chart above could perhaps qualify as the “chart of the century” because it illustrates one of the most remarkable achievements in human history: the 80% reduction in world poverty in only 36 years, from 26.8% of the world’s population living on $1 or less (in 1987 dollars) in 1970 to only 5.4% in 2006.

And what has been the major reason for this huge success?

So what did that? What accounts for that? United Nations? US foreign aid? The International Monetary Fund? Central planning? No.

It was globalization, free trade, the boom in international entrepreneurship. 

Yet so many who profess to care about the poor fight so hard against free trade.

An end to global poverty?

October 2nd, 2013 at 7:00 am by David Farrar

Nicholas Kristof writes in the NYT:

IMAGINE having to pick just one of your children to save, while leaving the others to face death.

One of my most searing experiences as a reporter occurred in Cambodia, where I met a woman whose daughter had just died of malaria and who was left caring for seven children and grandchildren.

The woman, Nhem Yen, showed me her one anti-malaria bed net and told me how every evening she agonized over which children to squeeze under it — and which ones to leave out and expose to malarial mosquitoes.

That’s the kind of excruciating question that extreme poverty forces on families.

Most of us couldn’t even comprehend having to make a choice like that.

For thousands of generations, a vast majority of humans have lived brief, illiterate lives marked by disease, disability and the loss of children. As recently as 1980, a slight majority of people in the developing world lived in extreme poverty, defined as surviving on less than $1.25 in today’s money.

So 30 years ago half the developing world were near starvation, or did starve.

The share of people in the developing world who live in extreme poverty has been reduced from 1 in 2 in 1980 to 1 in 5 today, according to the World Bank. Now the aim is to reduce that to almost zero by 2030.

That is a huge gain, and a trend we want to continue.

Timeout for a skeptical question that is both callous and common:

When additional kids survive in poor countries, does that really matter? Isn’t the result just a population explosion leading to famine or war, and more deaths?

That’s a frequent objection, but it’s wrong. When child mortality drops and families know that their children will survive, they are more likely to have fewer babies — and to invest more in them. There’s a well-known path from declining child deaths to declining births, which is why Bangladesh is now down to an average of 2.2 births per woman.

An interesting observation I had not seen before.

Ancient diseases are on the way out. Guinea worm and polio are likely to be eradicated in the coming years. Malaria has been brought under control in many countries, and a vaccine may reduce its toll even further.

AIDS is also receding. Last year in southern Africa, I interviewed coffin-makers who told me grumpily that their businesses are in recession because AIDS is no longer killing large numbers of people.

Good news for most is always bad news for some!

The drop in mortality understates the gains, because diseases don’t just kill people but also leave them disabled or unproductive, wrecking the economy. Poor people used to go blind routinely from disease or were unable to work for want of reading glasses. Now they are much less likely to go blind, and far more likely to get glasses.

These achievements aren’t just the result of work by Western donors or aid groups. Some of the biggest gains resulted from economic growth in China and India. When the poor are able to get jobs, they forge their own path out of poverty.

Their embrace of a market economy has pulled hundreds of millions out of extreme poverty.

The world of extreme poverty and disease that characterized life for most people throughout history may now finally be on its way out.

I’d love to see that in my lifetime.

Hooton on poverty and income inequality

July 28th, 2013 at 1:00 pm by David Farrar

Matthew Hooton writes in NBR:

Since then, activists and academics have emphasised inequality. 

In New Zealand, the Child Poverty Action Group says 270,000 children – half of them Maori or Pasifika – live in poverty, around a quarter of the total.

Otago University says 400,000 New Zealanders suffer fuel poverty.

Depending on the measure, the welfare industry tells us that around 760,000 New Zealanders live in poverty.  Our income inequality is said to be a bit better than the hellhole of Canada but a bit worse than the paradise of Greece.

So the aim of the left is to have us more like Greece, and less like Canada!

In reality, all these measures are mere statistical constructs.

If every New Zealander’s income immediately doubled (ignore for the sake of argument any inflation effect) so-called poverty in New Zealand would remain unchanged.

If dairy farmers and tourism operators have a good year, more children would be said to live in poverty because the median income would rise.

Similarly, cut middle-class salaries, or slash the value of the Rich List’s portfolios, and child poverty apparently falls.

This is very true, and those numbers quoted are near meaningless. The far better measure of hardship is the survey done by eithers Stats and/or MSD every few years asking a representative set of households what items or services they do not have, that they wish to have.

This is nonsense and confirms Margaret Thatcher’s famous assertion that the left would rather have the poor poorer provided the rich were less rich.

That case was made just last week by Dr Geoff Bertram – the architect of the Labour/Green electricity nationalisation to combat “fuel poverty” – when he proposed chief executive salaries should be no more than three times that of a company’s lowest-paid worker.

If Fonterra employed even one factory hand on, say, $20/hour, its chief executive would be limited to a salary of about $125,000 a year.  It is impossible to see how that would help even one of the 760,000 New Zealanders apparently living in poverty.  It is a proposal solely motivated by the politics of hate.

Dr Bertram is the architect of Labour’s and Green’s power policy.

Could you imagine Fonterra being unable to pay any staff member over $125,000 a year?

There is an argument that, at a certain point, inequality can become harmful because it can become a barrier to economic growth.

In a system of pure feudalism, where all new wealth that is created is confiscated by the rich, or a system of pure communism where all wealth is redistributed, no one would have an incentive to do anything, with economic collapse following.

The question, though, is whether there is the slightest evidence that New Zealand is remotely approaching either extreme.  If there is, it would surely be towards the latter.

Under the current tax system, including Working for Families which John Key rightly described as “communism by stealth” but has kept in place, the top 3% of New Zealand households pay a third of all net income tax.

The top 5% of households pay half and the top 12% pay three-quarters.

In net terms, the 44% of households earning under $50,000 pay no income tax at all.  Their true net tax rates are below zero.

Even when taking into account GST, fuel taxes and tobacco and alcohol excise, the redistributive effects of the current system are overwhelming.  Just 12% of indirect taxes are paid by the poorest 20% of households and a third by the wealthiest 20% of households.

The current economy is one that is growing, where unemployment is falling, wages are rising, inflation is below 1% and even the constructed measure of inequality is marginally narrowing.

It is also a country where someone like Rod Drury can turn an idea into a $2 billion company, including quite a few hundred million for himself.

We should return to the values of the 1980s and celebrate him and all those who have made it honestly onto this year’s list.

They create wealth and opportunities for New Zealanders.  It is a lie to say they make children poor.

A great column.

Begging for the essentials?

July 3rd, 2013 at 12:00 pm by David Farrar

The Herald reports:

Begging could be banned throughout Auckland under a bylaw being drafted by the council – a move described as overdue by advocates and fascist by those targeted.

An initial draft of the bylaw banned asking for money, food, other items or soliciting donations “in a manner that may intimidate or cause a nuisance to any person”.

But after public feedback, commissioners appointed by the Auckland Council and Auckland Transport have recommended all begging be banned.

The total ban was sought by business associations, including Heart of the City, and an upmarket department store, which said a hard core of beggars intimidated shoppers.

“We have too many examples of behaviour being defended under the guise of exercising a public right to occupy public spaces,” said Heart of the City chief executive Alex Swney.

NZ has a generous welfare system. We provide benefits, family and child support and accommodation assistance. There is no need for anyone to be begging. The few who do, tend to have issues of addiction or worse.

Simon Robinson, begging for money on Queen St yesterday, said he did so for about three hours a day, and felt he had the right to do so.

The 43-year-old, who began begging five years ago after his debts got on top of him and lives in a boarding house in Mt Eden, said banning begging was a “bit fascist” and “stepping towards a police state”.

“I used to shoplift, so it’s either that to get food, or sit there begging and not being a nuisance, and as soon as someone gives me $20 to get a decent meal and a couple of cans of beer, I’m off.”

Need more be said.

Some facts from Bono on the progress on poverty

April 8th, 2013 at 7:00 am by David Farrar

I get TED talks on my podcast to listen to while exercising. Found this one interesting enough to share, and embedded below.

Some facts he cited:

  • Since 2000 there are eight million more AIDs patients getting antiretroviral drugs.
  • Eight countries in Africa have cut their malaria rate by 75%
  • The same countries have 2.65 million fewer child deaths a year or 7,256 a day.
  • The number of people living in extreme poverty has reduced from 43% in 1990 to 21% in 2010.
  • At the current rate of decline, the number of people in extreme poverty would be close to zero by 2030

Poverty and choices

January 5th, 2013 at 6:33 am by David Farrar

Two items of interest. First the NZ Herald reports:

Adolescents living in the most deprived areas in New Zealand drink almost twice as much alcohol than their peers living at the other end of the scale, a joint study has found.

Researchers from the University of Southern Denmark and Massey University surveyed 1144 adolescents aged between 12 and 19 living in New Zealand across 10 area deprivation levels, 1 being the least deprived.

Their paper published in Health & Place found that at the poorer end of the scale, teenagers drank an average of 96.2ml of pure alcohol or 6.4 serves on each drinking occasion, while t the least deprived adolescents drank 50.6ml or 3.4 serves.

The left response to poverty is a belief that it is simply an issue of money. They say those not in work must be given more money, as they do not have enough money to afford even the basics such as food for breakfasts.

We see this in a Twitter exchange:


Hat Tip: Whale

On this rare issue I am with MP Lole-Taylor. The concept of personal responsibility and choice seems to be alien to some people. If a poor person makes awful decisions, it is not their fault. It is our fault because of poverty. Never mind that if the parents did not buy so much alcohol, and gamble so much, they might not actually be in poverty.


Raising money for Oxfam

September 28th, 2012 at 12:00 pm by David Farrar

It turns out that the five Labour MPs living on $2.25 a day are not making You Tube videos for WINZ offices on better budgeting but are in fact trying to raise money for charities like Oxfam that try to alleviate poverty in countries where significant numbers do live on under $2.25 a day.

Overall fewer people each year are living in poverty, due to the economic growth of China and India as they have opened up their economies. There are lessons there for other countries.

But I certainly support assistance to those less fortunate, and support a number of charities and also micro-financing organisations such as Kiva, which I’ve made a couple of dozen loans through.

Now you would think five of the most senior Labour MPs would raise a lot of money for people in poverty. So let’s look at their efforts.

The Deputy Leader, Finance Spokesperson, Welfare Spokesperson, Aid Spokesperson and Housing Spokesperson had raised around $1,400 between them, with some as low as just $90. They obviously have not hit their colleagues up enough!

This is less than the just over $1,500 raised by a Dunedin based Young Nat, Varsha Singh.

The challenge finishes at the end of today. Who will have raised more money – half the Labour frontbench, or the Young Nat?

Labour MPs showing beneficiaries how to budget

September 27th, 2012 at 1:00 pm by David Farrar

I think it is superb that a group of Labour MPs are living on $2.25 of food a day, for a week, to demonstrate how you can eat cheaply.

Their potato and spinach curry recipe should be displayed in all WINZ offices.

I am a bit confused that they are so eager to demonstrate you can feed yourself on just under $16 a week, that they demand increased welfare payments for beneficiary parents. Currently a low income parent gets $88 a week welfare for their first child, and $61 a week for additional children (on top of core benefit, accom supplement etc). Of course you have non food expenses also, but thanks to Grant, Jacinda, Phil, Annette and David they are showing you can have $72 to $45 a week for those other expenses.

I look forward to their other recipes on how to cook for $2.25 a day. Maybe they could publish a book with Muriel Newman on it?

Income distribution

April 26th, 2012 at 9:02 am by David Farrar

The Press reports:

Children raised in poor families will earn less and achieve at a lower academic standard but will not have higher crime levels, a Christchurch study has found.

The Christchurch Health and Development Study (CHDS), run by Otago University, has been following the lives of more than 1000 people since 1977.

The latest study, published in Social Science and Medicine, has looked at the impact of family poverty on children up to the age of 10 and how this is reflected in adulthood.

“Being brought up in an affluent family is advantageous to your education and career,” he said.

This is not a huge surprise.

Fergusson said the cohort was split into 20 per cent groups, with the bottom group earning an average of $43,000 a year and the top group earning $55,000.

“It’s not a huge difference but it’s definitely there, and we have seen that it definitely makes a difference.”

I am surprised it is not greater. This is saying the bottom quintile earn 80% of the top quintile. Sure that is a gap, but not as large as many would have predicted.

One of the reasons why the gap is less than other studies of income distribution, is these are people all the same age. Age is a large factor in income. That is why I have little time for the notion that an 18 year old with no experience should earn at least 60% of the income of someone with 25 years experience.

“Contrary to popular belief, being brought up in a poor family does not mean increased rates of crime or mental health problems in adulthood,” he said.

So let us stop blaming crime on poverty. There may be a correlation but that is not causative.