$11 a day as a Poverty Threshold

Post #1067

Governments like relative poverty thresholds because they never change. If you set the threshold at 60% of the median income, then it is pretty much always the case that approximately 30% of people will get characterized as living in poverty. Always having 30% of the people dependent on certain welfare plans can create voting blocs for you.

But an absolute, objective poverty threshold would be better, because it would help prove whether the economy is free or not. In a free economy, poverty decreases over time. One absolute, objective poverty threshold would be disposable income that is 3 times the cost of a healthy diet — so that you spend a third of income on food:

At the bottom dashed line (the $11-a-day line), a healthy diet would eat up a third of your income. Below that line, you would be living in poverty. Because the shaded parts show median incomes, half of the nation has income below the top of the shaded part. Half of China sits below this objective poverty threshold, and most of India does.

This indicates that the economy is not “free” in those places, but that the government is intervening into economic affairs, instead. Because government intervention displaces the productive endeavors of enterprising individuals, it acts to keep people poor. People can remain poor for generations when governments intervene like that.

Reference

[affording a healthy diet] — https://ourworldindata.org/diet-affordability