For most of the last 200 years, the story of global incomes has been one of the rich getting richer and the poor staying poor -- or "divergence, big time," as Harvard Kennedy School professor Lant Pritchett put it in a 1997 article. Pritchett argued that in 1870, the world's richest country was probably about nine times as rich as the poorest country. By 1990, that gap had increased to a 45-fold difference. And populations grew fast in many of the stagnant economies at the wrong end of this divergence. By 1981, according to the World Bank, 1.9 billion people, or half of the population of the developing world, lived on $1.25 a day or less.
It's easy to assume, faced with images of continuing destitution in rural Africa and South Asia, that things have just kept getting worse. But they haven't. In fact, over the last two decades the pattern has reversed. The world has got a lot less poor -- and the nature of the poverty that remains has changed in important ways.
COMMENTS (8) SHARE:
Twitter
Reddit
Buzz
Bookmark and Share More...
Start with the numbers: In the 1980s, the average GDP per capita growth rate in developing countries was 1.4 percent, according to data from the World Bank. By the first decade of the 21st century, however, the average had shot up to 4.4 percent -- considerably higher than growth rates in rich countries. As a result of this economic explosion, the number of countries classified as low income -- that is, with a GDP per capita of less than about $1,000 -- has fallen from 60 in 2003 to 39 today.
It's not just countries that are getting richer -- individual people are, too. In 2005, the number of people worldwide living in absolute poverty, or on $1.25 or less a day, was around 1.3 billion, according to estimates from Laurence Chandy and Geoffrey Gertz of the Brookings Institution. The same researchers suggest it was below 900 million last year. From one-half of the developing world in 1981, they estimate the proportion of people in absolute poverty today at less than one-sixth.
This isn't just a story of Chinese tigers and Indian elephants -- even Africa is getting in on the action. To be sure, the continent was late to the party, but the last 10 years have seen impressive growth in countries both oil-rich and oil-poor, landlocked and coastal. According to Xavier Sala-i-Martin and Maxim Pinkovskiy of Columbia University and the Massachusetts Institute of Technology, respectively, Africa is on track to halve the number of people living in absolute poverty between 1990 and 2017. Already, poverty rates are 30 percent lower than they were in 1995.
Of course, all these numbers need to be taken with a cellar's worth of salt. Measuring incomes within countries is hard, and meaningfully comparing them across borders -- when the same goods have different prices from country to country, and people buy different things -- is even harder. Measuring across time adds additional uncertainty. Trying to come up with regional and global estimates, especially for the last few years, requires filling in big gaps using rafts of arguable assumptions. One indication of the lacking exactitude of cross-country income data is that with a few exceptions we don't really know whether African countries south of the Sahara are richer or poorer than each other.
Caveats aside, the trends are strong enough that the broad picture of falling global poverty and rising incomes is widely accepted -- and that makes for some dramatic changes in the nature of the world's poverty problem.
