by Max Roser
January 11, 2022
from OurWorldInData Website


 

 

 

 


The decline of global poverty

is one of the most important

achievements in history,

but the end of poverty

is still very far away...

 


The Reverend Thomas Malthus asserted that poverty is inevitable.

"It has appeared that from the inevitable laws of our nature, some human beings must suffer from want. These are the unhappy persons who, in the great lottery of life, have drawn a blank." 1

Writing in the 18th century it is understandable that he came to this conclusion.

 

Poverty was such a persistent reality in humanity's history up to then, that it was unimaginable that it could ever be different. In the two centuries since Malthus' death we have learned however that he was wrong.

The deep poverty of the past is not inevitable.

Economic growth is possible and entire societies can leave the widespread poverty of the past behind.

 

 

 


It is possible to leave widespread poverty behind

Let's look at one of the societies that has achieved this.

 

Two centuries ago, the huge majority of people in Sweden lived in deep poverty.

 

Every fourth child died, and close to 90% of the population was so very poor that they could not afford a tiny space to live, some minimum heating capacity, and food that would not induce malnutrition. 2

Adjusted for inflation the income distribution looked like this: 3
 

 


From the late 19th century onwards Sweden's economy increasingly adopted modern production technology and achieved the productivity gains that made economic growth possible.

 

A century ago Swedes were still poor, but the majority had left the very worst poverty behind. 4
 


Today the poverty line in Sweden is set at about $30 per day (this is adjusted for price differences between countries and measured in international-dollars). 5

The strong economic growth in the last century made it possible that the majority of Swedes are living above the poverty line. 6
 


 

Sweden is one of the countries that achieved large growth and thereby proved Malthus wrong.

The three distributions show how the majority of Swedes left the deep poverty of the past behind.

 

 

 


The majority of the world is poor

Other high-income countries adopted poverty lines very similar to Sweden's poverty line of $30 a day.

 

And as I documented before, the size of social care payouts and proposals for Universal Basic Incomes are also around $30 per day.

 

Just like the UN relies on the $1.90 per day poverty line to track 'extreme poverty', I therefore rely on the $30 a day threshold as a definition for 'poverty'.

 

It is based on the notion of who is considered poor in the world's richer countries.

Taking into account the different price levels across countries, the latest statistics show that 85% of the world population live below this poverty line.

 

This large visualization shows where they live. The height of the purple bar corresponds to the share in poverty in each country.

I ordered the countries by income:

from the poorest countries on the very left to the richest countries on the right.

The width of each country corresponds to the country's population size.

The only countries in which not nearly everyone lives in poverty are high-income countries. GDP per capita is a measure of average income that not only takes people's individual incomes, but also government expenditure, into account. 7

 

As noted in the chart, in all countries that have a GDP per capita of less than $30,000 the majority of the population lives in poverty.

But the data also shows that in all countries a significant share lives in poverty. No country, not even the richest countries, has eliminated poverty.

 

There are no 'developed' countries, there is work to do for all.

 


 

 

 


How far away are we from a world in which no one lives on less than $30 a day?

The economic history of today's richest countries shows that widespread poverty is not inevitable.

What needs to happen to achieve the same for all people in the world?

The share in poverty in any country depends on two factors: the average level of income and the level of inequality.
 

Some countries reduced inequality successfully and thereby reduced poverty. Lower inequality in the future can further reduce poverty.

 

But because the average income in the majority of countries in the world is much lower than $30-poverty-line, strong growth is necessary for global poverty to decline. 

 

I calculated that at a minimum the world economy needs to increase five-fold for global poverty to substantially decline.

 

This is in a scenario in which the world would also achieve a massive reduction in inequality: inequality between all the world's countries would disappear entirely in this scenario.

 

It should therefore be seen as a calculation of the minimum necessary growth for an end of poverty. 

 

A five-fold increase of the global economy is certainly not easy to achieve, but it is also not impossible - it is what the world has achieved in the last 5 decades, and the climate researchers of the IPCC expect even more growth for this century in their 'Sustainability Scenario', the scenario in which the world is most successful in avoiding climate change. 8

 

That all of the world will live on more than $30 a day might be hard to imagine right now.

 

But then it's good to remember that today's reality in high-income countries was also entirely unimaginable very recently.

 

 

 

 

Two centuries of progress and still a very long way to go

 

The final chart summarizes the global history of poverty. It focuses on the last two centuries when humanity left the stagnation of the past behind and achieved growth for the first time. 

 

The world made good progress - in the last decade the share that lives on less than $10 per day has declined by 10 percentage points - but the chart also shows that much progress is still needed. 62% live on less than $10 per day and 85% live on less than $30. 

 

The global data makes clear why the world needs much more growth to end poverty. The world as a whole today is in a situation not so different from Sweden a century ago.

 

The majority of the world left extreme poverty behind, but is still far poorer than $30 a day. 

 

Even after two centuries of the global fight against poverty we are still in the early stages. The history of global poverty reduction has only just begun.





 

Our World in Data presents the data and research to make progress against the world's largest problems.


This article draws on data and research discussed in our entry on Global Poverty...

 

 

 

 

Endnotes

  1. Thomas Malthus (1798) - An Essay on the Principle of Population. Chapter X, paragraph 29, lines 12-15. Online here.

     

  2. Michail Moatsos (2021) - Global extreme poverty: Present and past since 1820. Published in OECD (2021), How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820, OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en.

     

  3. The data for the income distribution plotted below is produced by the team of Gapminder - it is documented here.

     

  4. Moatsos estimates that in 1920 a third of Sweden's population (34%) still lived in extreme poverty.

     

  5. Sweden's median monthly income in 2017 was $1469 according to PovcalNet. 60% of the median expressed in daily income/consumption is (0.6*1469)/30=$29.38 per day

     

  6. Much of this progress was achieved in the recent past, since the early 80s the share living on less than $30 has declined from 60% to 16%.

     

  7. GDP per capita is a more comprehensive measure of average incomes and there are several reasons why it is typically higher than the averages found in both income surveys and expenditure surveys. 

     

    GDP includes many items that are typically not measured in household income surveys, such as an imputed rental value of owner-occupied housing, the retained earnings of firms and taxes on production such as VAT.

     

    The gap is even larger when GDP is compared to surveys of household consumption - the latter concept excluding both investment expenditure and government expenditure on public services such as education and health.

     

    Other aggregates beyond GDP are available in the national accounts that are more comparable to the concepts applied in household income and consumption surveys.

     

    However, important differences still remain even here.

     

    For example, in addition to imputed rents, imputations for the value of certain financial services, such as bank accounts, are included in aggregate household consumption measured in national accounts, with no equivalent for these items recorded in the survey data. In many countries the consumption of 'nonprofit institutions serving households' (NPISH) is included as part of household consumption within national accounts, but not within household surveys.

     

    On top of these conceptual differences are a range of mis-measurement problems that affect both sets of data. On this topic see Deaton (2005), and Pinkovskiy and Sala-i-Martin (2016).

     

    Deaton, Angus. 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)." The Review of Economics and Statistics 87 (1): 1–1.

     

    Pinkovskiy, Maxim, and Xavier Sala-i-Martin. 2016. "Lights, Camera… Income! Illuminating the Nation"

     

  8. In this scenario global GDP per capita increases to $81,250.