80% Reduction in Extreme Poverty Worldwide

Let’s take another break from bad news to highlight some good news. Good things usually happens slowly;  you build a house over a year or get in shape in 6 months, etc. Bad news happens quickly; that house burns down overnight or you get diagnosed with cancer, etc. Sometimes to find good news you have to stop and reflect on what’s happened, or as Maxim Pinkovskiy and Xavier Sala-i-Martin from the Colombia University did, you can do an economic analysis to show how much poverty has decreased over the past 40 years:

“ABSTRACT: We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions. Finally, we show that our results are robust to a battery of sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and dealing with survey misreporting.”

That is unprecedented! While getting above that $1/day threshold doesn’t bring a cushy lifestyle with it, it’s nonetheless a massive improvement. A visual representation is even more dramatic:

It’s truly amazing that all this has gone under the radar. I guess clean laundry isn’t very interesting. Regardless, this dramatic reduction in world poverty, outside of Africa at least, is probably the result of a global move toward free markets and free political systems as well as technological improvements and the Green Revolution (the move to increase crop yields lead by Norman Bourlag). Economist Mark Perry claims free trade is a big factor.

In my mind, all of those contributed to it. Regardless of the reasons though, this is just more evidence that while we have plenty of problems, our species has certainly come a long way.


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