This article was first published in July 2005.
The National Institute of Statistics (INE) has announced the creation of the Social Well-being Index, which it says will more accurately measure socio-economic levels of the population through inclusion of the impact of government social programs. Yet, critics call the new statistic politically motivated and argue that a lack of transparency could hinder its credibility and effectiveness.
In 2000, Venezuela joined 188 other nations in signing the Millennium Declaration, a United Nations pact promising to cut poverty and hunger in half by 2015. However, after assessing the country’s progress five years later, the Economic Commission for Latin America and the Caribbean (ECLAC) reported in June that Venezuela’s fight against poverty had experienced a "backward movement" and that extreme poverty levels had risen between 1990 and 2004.
The government responded by sending Carlos Alvarado, vice minister of social development, to make an official complaint at the United Nations in early July. “Nowhere does (the report) mention our fundamental policy: the social missions—which makes us think that it is an intentional omission," Alvarado said.
Striving to make sure social aid is not omitted from national poverty statistics, the National Institute of Statistics (INE) announced in late June that it would launch the new Social Well-being Index (IBS, after its initials in Spanish) in the second semester of this year. Proponents say the index will be more comprehensive than current studies, which they say leave out non-cash benefits such as free education, free health care and food subsidies.
Yet, some critics see the new index as a political move to shine a favorable light on government programs. They also are concerned that the INE has yet to issue reports detailing how the new index will be calculated, arguing that this opacity could make it harder to use the index as a yardstick to improve social conditions.
Three’s a crowd…and four?
INE president Elías Eljuri argues that social benefits allow some citizens to live more prosperously even as their income remains unchanged. Although Eljuri turned down repeated interview requests, he said in a press release that the new Social Well-being Index would incorporate nine variables, expanding “the collection of socio-economic data that reflect the social investment realized by the government.” The components include access to hygienic services, access to electricity, the infantile survival rate, possession of a refrigerator, possession of a stove, access to all educational levels, household income and employment.
Mark Weisbrot of the Center for Economic and Policy Research in Washington D.C. (and notoriously pro-Chávez) is a proponent of the new study. In a telephone interview, he called it “essentially meaningless” to measure poverty without including the non-cash income of the poor. “With subsidized food now reaching 46% of the population, [subsidized food stores] alone could easily push millions of people over the official poverty line that is based on cash income only,” Weisbrot said.
A preliminary study revealed that the new Social Well-being Index remained between 0.81 and 0.87 points on a scale of 0 to 1 between the years of 1995 and 2004. A reading of 0.8 translates to a “satisfactory” standard of living, with less than 0.5 considered “inadequate.” Like other indices, the IBS shows that the well being of the population rose steadily between 1997 and 2001, dropped between 2001 and 2003 due to the national strikes, and then rose again during economic recuperation in 2004.
Despite the INE’s promotion of the new index, the institute already publishes three poverty indices, two of which incorporate non-cash indicators. One is a purely income-based index called Línea de Pobreza, which measures household and individual income and the cost of goods in the market. Households that cannot satisfy basic consumption needs are considered poor, while those that cannot afford essential food purchases are considered to be in extreme poverty.
In the Unsatisfied Basic Needs index, households that do not fulfill one of five basic needs are considered under the poverty level, while those registering two or more are deemed to be in extreme poverty. The five needs include an adequately constructed house, three people or less per sleeping room, housing with access to potable water and/or toilets, children between the ages of 7 and 12 attending school and three or less people dependent on one person financially.
According to 2004 INE statistics, the Línea de Pobreza index concluded that 53.1% of the population was in poverty while the Basic Unsatisfied Needs index calculated only 29.6%. These figures suggest that a significant number of households with income under the poverty line were indeed above the poverty threshold when it came to health conditions and access to education.
The Human Development index (HDI) is a more recently developed study published both by the INE and the United Nations Development Program. It assimilates three fundamental factors: health, education and income. Venezuela currently finds itself in the “Medium-High” level. On a scale of 0 to 1, the country rose from 0.69 in 1998 to 0.78 in 2001. It then fell to 0.76 in 2002 and 2003—the years of the national strikes—and then climbed to 0.80 in 2004.
An angle from La Católica
The INE argues that the new IBS index will allow for more accurate economic and social development planning. But Luis Pedro España, director of the Institute for Economic and Social Research (IIES) at the Universidad Católica Andrés Bello argued in an interview that the government was promoting the new index because the Human Development Index was no longer reporting attractive results.
“If the executive branch did not qualify as ‘neo-liberal’ or ‘imperialist’ social indicators when they are not to their liking, the initiative of the INE to construct an Index of Social Well-being would be none other than a topic of discussion among technicians, planners and experts on the issue,” España said. “But this is not the case.”
España also argued that the use of so many variables forced experts to pick apart the index to determine which factors were responsible for general trends. “[The IBS] will have the virtue of collecting diverse aspects of the Venezuela social dynamic, but like all aggregate indicators it will have the defect of not knowing what is being measured,” España said. This “defect” would make it difficult to use the index as a benchmark for social improvement, he said.
He also cast doubts on the IBS because he said the government had not yet issued formulas showing how the index is calculated. In addition, Venezuela would not be able to compare its IBS figures with other countries because it was a uniquely Venezuelan index, he said.
The IIES director wrote off government claims that the new index will vary much from current statistics. First, he argued that not enough time had passed to measure the true effect of the missions on the population. Secondly, he claimed that the missions would not yield the results that the government expected.
España said it was “difficult to know whether (the missions) are working or not” because of a lack of financial reports or measured results and objectives issued by the government. He also cited an INE report that the national infant mortality rate rose by 5% between 2001 and 2003. Others argue, however, that the true impact of the missions cannot be determined until more recent figures are published, especially since the reach of the programs has been intensified in the past two years.
The Datos outlook
Like España, Edmond Saade, president of the private research company Datos Information Resources, said in an interview that it would be helpful for the INE to release specific and quantifiable information about how the IBS index is calculated. He explained, however, that the extent to which poverty indices could prove social programs successful depended on one’s objectives.
The Chávez government’s aim, he said, was to create a more equal society and to pay more attention to the marginal classes. A socio-economic study by Datos showed that the government was successful in this regard, he contended, because average income for the lowest class—or “E” class—increased by 30% between 2003 and 2004.
“There is no question but that living standards have improved,” he said. “There are more people in that class now, but they are happier.” He also pointed out that the average Venezuelan income—approximately $220 a month—was much higher than the average Latin American income, which is at $130 a month.
On the other hand, if the objective was to improve social mobility and achieve middle class values, recent results did not paint a triumphant picture of the missions, Saade said. Datos found that the E class had grown from 52% to 58% of the population between 1998 and 2004. The study also showed that the top three classes (ABC+) diminished from 28% of the population in 1984 to only 4% in 2004. The C- class accounted for 15% in 2004.
The Datos president underscored that his company was completely apolitical and merely strove to serve its clients with accurate data. In so doing, it has not changed its methodology in the 50 years it has been in existence, leading many analysts to consider its indices as more comprehensive than the government’s. Datos’ research spans 27 cities, measures over 3,000 commercial outlets catering to all socio-economic levels, and samples the consumption habits of 5.5 million Venezuelans per month.
Saade did maintain that the Poverty Line index was “good as an indicator,” but said it was too limited to stand alone as comprehensive socio-economic study. While income is one fundamental factor in Datos’ calculations, 51 other components combine to complete the aggregate. The fact that almost 50% of working Venezuelans and 90% of the E class participated in the informal economy made precise income difficult to measure, Saade said. He also contended that measuring consumption habits was essential in order to account for higher income people who did not save money and therefore could not improve their living standards.
An opaque trendThe new IBS index is not the only example of state efforts to produce economic calculations that reflect social programs. The Central Bank (BCV) has recently incorporated rising sales at government-subsidized Mercal grocery stores into its inflation calculations, having a decelerating effect on the rate. This is nothing new: since 1997, the bank’s methodology has involved generating a weighted average price for each good based on the volume sold at each kind of outlet, including supermarkets, street sales, the informal economy and, now, Mercal.
Saade saw nothing wrong with the move, as long as the figures were calculated correctly. He noted that prices at the subsidized stores are 20% to 40% lower than commercial outlets in a country where 60% to 65% of marginal class income is spent on food. “This is a godsend for them to save,” Saade said.
Concern arose among critics, however, because the BCV repeated assurances that no changes had been made to the calculations before acknowledging that it had gradually adjusted its inflation gauge to account for Mercal. Providing more transparency, then, is the government’s challenge—if it wants to dampen criticism and ensure the credibility of its data.
JENS ERIK GOULD
Jens Erik Gould is a political, business and entertainment writer and editor who has reported from a dozen countries for media outlets including The New York Times, National Public Radio and Bloomberg News.