Wednesday, 7 October 2015

The End of Extreme Poverty

Absolute poverty will be gone by 2030
Guest post by Marian Tupy

According to the World Bank, for the very first time in human history, “less than 10 percent of the world’s population will be living in extreme poverty by the end of 2015.”

The bank has “used a new income figure of $1.90 per day to define extreme poverty, up from $1.25. It forecasts that the proportion of the world’s population in this category will fall from 12.8 percent in 2012 to 9.6 percent.”

As scholars have noted, historically speaking, grinding poverty was the norm for most ordinary people. Even in the most economically advanced parts of the world, life used to be miserable.

To give one example,

by a test employed in Lyons, France, in the 17th century, poverty was reached when daily income was less than the daily cost of minimum bread requirement – in other words, when a person could not make enough money to buy a crust of bread.

The condition was common.

Prior to the advent of industrial capitalism (in roughly the 1760s) the lot of the English working class was generally miserable. Utter destitution was rampant, literal starvation not uncommon and the country was overrun with paupers. “There was, in point of fact, widespread poverty of the most abject kind in England and other countries of 18th century Europe.” It is difficult for men in the industrial West today to conceive of the kind of poverty that was widespread in pre-capitalist Europe.

Thanks to industrial revolution and trade, economic growth in the West accelerated to historically unprecedented levels, and the numbers in grinding poverty pushed back. Over the course of the 19th and 20th centuries, real incomes in the West, at least, increased fifteen-fold. But the chasm that opened up as a result of the Western take-off is now closing. 

The rise of the non-Western world is, unambiguously, a result of economic growth spurred by the abandonment of central-planning and integration of many non-Western countries into the global economy. After economic liberalisation in China in 1978, to give one example, real incomes rose thirteen-fold.

As Princeton University Professor Angus Deaton notes in his book The Great Escape,

The rapid growth of average incomes, particularly in China and India, and particularly after 1975, did much to reduce extreme poverty in the world. In China most of all, but also in India, the escape of hundreds of millions from traditional and long established poverty qualifies as the greatest escape of all.

Capitalism destroyed poverty in the west. It is now rescuing people in the east and elsewhere.

You’d think more people would be celebrating this.

imageMarian L. Tupy is the editor of and a senior policy analyst at the Center for Global Liberty and Prosperity. 

A version of this post first appeared at the Cato at Liberty blog.

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