The ‘purchasing power parity’ US dollar

“It cannot buy anything and is nowhere legal tender … The Purchasing Power Parity (PPP) international dollar is not, in a word, money.” (Freeman, 2009, p.1427-8). Nevertheless PPP is a widely used measure and the basis of many poverty and inequality measures; it presented a barrier to interpreting the maps and graphs. PPP aims to equalize buying power by currency, rather than relying on exchange rates. This is done by pricing comparable baskets of basic goods across countries and the PPP equivalents are calculated in terms of the purchasing power of the currency. A PPP measure should indicate how much can be bought with that money in the country in which it is earned. Both maps and one graph show Purchasing Power Parity (PPP) United States Dollars (US$), the trade graph used exchange rate based US$.

The PPP US$ measure is challenging because (i) it is not a familiar measure for many people, (ii) it is assumed to mean the currency of United States dollars which is most meaningful to Mexicans, then British people, then Kenyans, and (iii) the ‘$’ sign is ambiguous because this is the sign for dollars and pesos, so is used in Argentina, Australia, Cuba, Canada, Hong Kong, Mexico, New Zealand, Nicaragua, Singapore, and Tonga. A similar symbol but with two vertical lines is used in Brazil, Cape Verde and Chile. That ‘$’ refers to the US$ is due to the United States-centric world data production. That the meaning of the poverty measures is highly abstracted makes it challenging to grasp.

A critical reading of these images necessitates a consideration of the variable measured, the conditions of production of these data, and what such data obscure. Good practice requires the detailing of data sources. That the maps provided source information alerted some readers to the production of maps and 5 out of 24 groups spoke about the data source or funding source for the mapping project. The graphs were over 10 years out of date and several groups commented on this, taking the age of the data to somewhat discredit what was shown. Data vintage should be considered case by case because information changes at different rates: a developing city changes fast whereas a geology changes slowly (Monmonier, 1996, p.54-55). To present visualisations without this information would encourage an uncritical reading because the

reader, receiving apparently source-less but nevertheless authoritative information, would have nothing on which to base their musings about map production. Whilst appearing to invite a critical reading and demonstrating some degree of neutrality and transparency, the listing of data and funding sources performs a validating role, to show that they are not one person’s eccentric drawing. Reference to the United Nations Development Programme’s Human Development Report (the data source) and other organisations supporting this research28 asserts that it is a credible project with sufficient gravitas to make claims about the world.

Whilst the UK groups did not convert the PPP US$ into the local currency, half the Mexican groups and 2 of the 9 Kenyan groups did so. However their conversions were based on current exchange rates, not PPP. It was frequently commented that prices differ between countries so US$2 buys less in a richer country than a poorer country, however PPP equalises these differences to create an internationally comparable measure so that PPP US$2 theoretically buys the same amount of goods and services anywhere in the world. Converting dollars into the local currencies, Mexican Pesos and Kenyan Shillings, changed an abstract measure into something tangible:

“It’s in dollars Yes, it’s a lot

That’s more than 2000 pesos at the moment. In the USA

Yes in the USA

I say that yes, it’s a lot. [Quiet chat]

Here it says, dollar adjusted for purchasing power, so it depends on purchasing power, it’s an approximation, nothing more.”

(Mexico 8, private urban Catholic school)

28 _{Supporting organisations include: The University of Sheffield and the}

University of Michigan (the home Universities of the academics who produced these maps), The Leverhulme Trust (the philanthropic organisation that funded the project), and the Geographical Association (that endorsed the work).

Calculating what PPP US$2 or PPP US$200 would be in the local currency using actual exchange rates distorts the value, because PPP US$1 is not equal to US$1. In fact it is hard to really know what PPP US$1 is worth, even if you live in the United States. The data shown in the maps use World Bank PPP values (United Nations Development Programme, 2002, Box 5). These come from the International Comparison Programme that produces PPP data every 5 years; participating countries provide prices for at least 450 of 2000 broadly comparable items. The most countries surveyed in a single round was 90: for those not participating estimates are extrapolated from the last measurement; for those who have never been measured a regression model based on estimated Gross Domestic Product and secondary school enrolment is used to estimate PPP values (World Bank, 2010). PPP is not widely known to be the standard measure for comparing incomes despite disparity in purchasing power being widely acknowledged. Ironically this disparity is flagged up as invalidating international income comparisons when it is already accounted for by PPP. The exchange rate based conversions made by participants may produce estimates many times greater than what the actual purchasing power would be.

“Yeah, US dollars is good money, you can survive. Two US dollars, because that is 150 shillings, Kenyan.

Yeah, you can operate on it in the village even the one pound, yeah. On 125 you can operate for 3 days.

If I’m living in my hut

In Nairobi and you are not paying transport, eh? I say, 125.

Not a lot eh. It’s enough to keep you going.

Mm, it seems that the majority of Kenyans live below one dollar. One dollar

One dollar

That is the kind of money we had even

That means that 2 dollars per day is too much.” (Kenya 1, urban trainee teachers)

That people do not know that income comparisons and poverty data are usually measured in PPP has several implications. Firstly the interpretation that PPP US$2 is sufficient to live on or even too much raises the question of what

public support for policies addressing poverty. Secondly, it is ironic that world poverty levels and the Millennium Development Goals are expressed in terms that school teacher research participants did not know about, so it is unlikely that the subjects of these policies will understand them. Particular technical knowledge distinguishes the authors from the beneficiaries of these policies, a distinction that is reinforced by the measurement being based on the currency of the United States (and Ecuador). For map-readers, not recognising purchasing power parity as a measure and interpreting maps as being based on exchange rates impedes complete understanding. Nevertheless, map readers readily identified which countries have large rich and poor populations.