Dollar-a-Day Fallacy, The

The fallacy that poverty can reliably be measured in terms of money. For instance, more than one person in three, in the developed and less-developed countries, lives on a desperately low income—less than two dollars a day. At this level, we are down to a wage at or below subsistence, often combined with toxic and even lethal working conditions—that is, employment on terms no better, and on some comparisons worse, than slavery.D55

And yet, it is also true that extremely low incomes do not always mean devastating poverty—income is not always the appropriate measure for statements about living standards. This is because stable pre-market societies, such as that of Ladakh before it was thrown off course by globalisation, do not measure their living standards in terms of money; they are economies based on reciprocal obligation, and despite their evident well-being, a conventional economic estimate of incomes would conclude with horror that they were living on nothing at all.

Another example is the economy of Burma, which had endured in its traditional form when E.F. Schumacher was there in 1955 as an economic adviser to the Government. Interpreted in the framework of economics, the very low levels of per capita income indicated a desperate level of poverty; seen in terms of real life, it was not as simple as that. This persuaded Schumacher to argue that there is more than one kind of appropriate economic system, distinguishing between “economics” and “meta-economics”—the economics of people and nature—and we get a first look at this in a letter to his wife,

There is an innocence here which I have never seen before . . . In their gay dances with their dignified and composed manners, they are lovable; and one really wants to help them, if one but knew how. Even some of the Americans here say, “How can we help them when they are much happier and much nicer than we are ourselves?”D56

However, as their traditional reciprocities break down, they move into the world of market economics, in which their incomes are measured in money, and so their progress can be described as moving from “Nothing-a-Day” to “Ten Dollars-a-Day”—a great endorsement of the benefits of globalisation. In fact, it would represent not just a decline, but a collapse from a sustainable, non-monetary local economy to deep poverty and dependence. Incomes should therefore not be used as a measure of global advance in well-being without careful definition of the terms; to do otherwise simply begs the question, assuming that the market economy is the only option.D57

The Indian economist, Vandana Shiva, summarises,

I have witnessed again and again that as people’s resources are commoditised and people’s economies are commercialised, money flow does increase in society, but it is mainly outflow from nature and people to commercial interests and corporations. The money economy grows, but nature’s economy and people’s economy shrink.D58


Related entries:


« Back to List of Entries
David Fleming
Dr David Fleming (2 January 1940 – 29 November 2010) was an economist, historian and writer, based in London. He was among the first to reveal the possibility of peak oil's approach and invented the influential TEQs scheme, designed to address this and climate change. He was also a significant figure in the development of the UK Green Party, the Transition Towns movement and the New Economics Foundation, as well as a Chairman of the Soil Association. His wide-ranging independent analysis culminated in two critically acclaimed books, Lean Logic and Surviving the Future. A film about his perspective and legacy - The Sequel: What Will Follow Our Troubled Civilisation? - was released in 2019, directed by BAFTA-winning director Peter Armstrong. For more information, including on Lean Logic, click the little globe below!

Comment on this entry: