Laurence Chandy & Geoffrey Gertz
We are in the midst of the fastest period of poverty reduction the world has ever seen. The global poverty rate, which stood at 25 percent in 2005, is ticking downward at one to two percentage points per year, lifting around 70 million people — the population of Turkey or Thailand — out of destitution annually. Advances in human progress on such a scale are unprecedented, yet they remain almost universally unacknowledged.
In 2005, the number of people living under the international poverty line of $1.25 per day stood at 1.37 billion — an improvement of half a billion compared with the early 1980s, but a long way from the dream of a world free of poverty.
Behind these aggregate figures lies a somber reality. In assessing the fortunes of the developing world during the late 20th century, countries can be roughly divided into two categories: China and the rest.
China’s stunning economic reversal — 30 years ago, only 16 percent of its population lived above the poverty line, but by 2005, only 16 percent stood below it — masks others’ failings. Excluding China, the 500 million decrease in global poverty becomes an increase of 100 million.
In the world’s poorest region, sub-Saharan Africa, the poverty rate remained above 50 percent throughout the period, which, given the region’s rapid population growth, translated into a near doubling in the number of its poor.
Similarly, in South Asia, Latin America and Europe-Central Asia there were more poor people in 2005 than there were a quarter of a century earlier.
This depressing track record shapes perspectives on poverty that abound today. Global poverty has come to be seen as a constant, with the poor cut off from the prosperity enjoyed elsewhere.
In a new study of global poverty, we upend this narrative, finding that poverty reduction accelerated in the early 2000s at a rate that has been sustained throughout the decade, even during the dark recesses of the financial crisis. Today, we estimate that there are approximately 820 million people living on less than $1.25 a day.
This means that the prime target of the Millennium Development Goals — to halve the rate of global poverty by 2015 from its 1990 level — was probably achieved in 2008.
Whereas it took 25 years to reduce poverty by half a billion people up to 2005, the same feat was likely achieved in the six years between then and now. Never before have so many people been lifted out of poverty over such a brief period of time.
This stunning progress is driven by rapid economic growth across the developing world. During the 1980s and 1990s, per capita growth in developing countries averaged just 1 to 2 percent a year, not nearly fast enough to make per serious dent in poverty levels. Since around 2003, however, growth in the developing world has taken off, averaging 5 percent per capita per year.
How and why sustained high economic growth in developing countries took hold are questions likely to be debated by economic historians for many decades.
Already one can point to a number of probable sources emerging or accelerating around the turn of the century: an investment boom triggered by rising commodity prices; high growth spillovers originating from large, open emerging economies that utilize cross-border supply chains; diversification into novel export markets from cut flowers to call centers; spread of new technologies, in particular rapid adoption of cellphones; increased public and private investment in infrastructure; the cessation of a number of conflicts and improved political stability; and the abandonment of inferior growth strategies such as import substitution for a focus on macroeconomic health and improved competitiveness.
These factors are manifestations of a set of broader trends — the rise of globalization, the spread of capitalism and the improving quality of economic governance — which together have enabled the developing world to begin converging on advanced economy incomes after centuries of divergence.
Taking a long view of history, the dramatic fall in poverty witnessed over the preceding six years represents a precursor to a new era.
We’re on the cusp of an age of mass development that will see the world transformed from being mostly poor to mostly middle class.
Fundamentally, it is a story about billions of people around the world finally having the chance to build better lives for themselves and their children. We should consider ourselves fortunate to be alive at such a remarkable moment.
Laurence Chandy is a fellow at the Global Economy and Development Program in the Brookings Institution. Geoffrey Gertz is a research analyst in the same program.