World Poverty

In the past only a small elite lived a life without poverty. Since the onset of industrialization – and as a consequence of this, economic growth1 – the share of people living in poverty started decreasing and has kept on falling ever since. But as a consequence of falling poverty, the health of the population improved dramatically over the last two centuries, and the population started to grow.2 The growth of the population caused the absolute number of poor people in the world to increase; only recently has the absolute number of people living in poverty started to fall as well.

This data entry chronicles the falling poverty over the last centuries.

# Empirical View

# What Do Poor People Think about Poverty?

Almost all people in pre-modern times lived in poverty. This has changed dramatically over the last few decades; more and more people have left the extreme poverty of the past behind. But why should we care? Is it not the case that poor people might only have less income but enjoy their lives just as much – or even more – than rich people?

One way to find out is to simply ask, which is what the Gallup Organization did. In the World Poll the organization asked people around the world what they think about their standard of living – not only about their income. The economist Angus Deaton compared the answers that people in different societies gave with the average income of these societies. This research is summarized in the following graph; it shows that people living in poverty are clearly less satisfied with their living standards in a broader sense.

This is one way of seeing that economic prosperity is not an end in itself but a means for a better life. The correlation between rising incomes and happiness and higher life satisfaction is shown in the Our World in Data Entry on Happiness here.

# Fractions of people reporting that they are dissatisfied with their standard of living – Deaton3

 

Fractions of People Reporting That They Are Dissatisfied with Their Standard of Living - Deaton

# Poverty Lines

The most straightforward way to measure poverty is to calculate the share of population living below a certain poverty line as the fraction of the total number of people in the society. But drawing the line between the poor and the rest is not easy. If you look at the previous graph, it is easy to understand why. It would be easy if there was a clear delineation between people who were satisfied with their standard of living and people who aren’t. This is not the case. We see, on the contrary, that having more income always improves the self-percieved living standard of the people.

The fact that higher income always improves the standards of living means that defining poverty by drawing a line is always rightly subject to debate. It is necessarily controversial to propose a line that separates those that are poor from those that ‘merely’ have a low income.

The World Bank, which gathers data on income from people around the world, defined absolute poverty as living on less than $1.25 per day. This is measured in international dollars that are adjusted for the fact that people in different countries face different price levels (PPP adjustment). It is also expressed in real terms to adjust for price changes over time.

# 200 Years of Lifting the World out of Poverty

The World Bank data has published data on absolute poverty for 1981 onwards, but researchers have tried to reconstruct information of the living standards of the more distant past. The most cited paper was written by Bourguignon and Morrison (for the reference see the following footnote) in which the two authors reconstructed measures of poverty as far back as 1820. The poverty line of 1.25 Int. Dollar per day was introduced in 2008 and the 2002 paper used the measure of 1$ per day that was used at the time. All of this information is presented in the following graph. The upwards revision of the poverty line meant that more people were considered to be poor than before.

In 1820, the vast majority of people lived in extreme poverty and only a tiny elite enjoyed higher standards of living. Economic growth over the last 200 years completely transformed our world, and poverty fell continuously over the last two centuries. This is even more remarkable when we consider that the population increased 7-fold over the same time (which in itself is a consequence of increasing living standards and decreasing mortality – especially of infants and children – around the world). In a world without economic growth, an increase in the population would result in less and less income for everyone, and a 7-fold increase would have surely resulted in a world in which everyone is extremely poor. Yet, the exact opposite happened. In a time of unprecedented population growth we managed to lift more and more people out of poverty! Even in 1981 more than 50% of the world population lived in absolute poverty – this is now down to about 14%. This is still a large number of people, but the change is happening incredibly fast. For our present world, the data tells us that poverty is now falling more quickly than ever before in world history. The first of the Millenium Development Goals set by the UN was to halve the population living in absolute poverty between 1990 and 2015. Rapid economic growth meant that this goal  – arguably the most important – was achieved (5 years ahead of time) in 2010.

# Declining global poverty: share of people living in extreme poverty, 1820-2011 – Max Roser4

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# Absolute number of people living in extreme poverty, 1820-2011 – Max Roser5

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# Freeing Ourselves from Poverty by Economic Growth

In 1820 only a few places in the world achieved economic growth – and only to a rather small extent. The progress of the last 200 years was achieved as economic growth brought higher incomes to more and more people in the world. The following graph shows the relation between average income and the share of the population that lives in absolute poverty. The correlation suggests that in a society with an average income around 10,000 International Dollar, absolute poverty is abolished. Clicking on the graph links you to the animated version of this graph where you can see how economic growth decreased or abolished absolute poverty in more and more countries on our planet.

# GDP per capita and share of people living in absolute poverty – Gapminder6

GDP per Capita and Share of People Living in Absolute Poverty - Gapminder Graph0

The static image of the Gapminder graph above shows the cross sectional evidence of the link between economic prosperity and poverty. In the following graph we look at the relationship over time for Brazil. The country with a population of almost 200 million people achieved an average annual growth rate of 1.7% over the 20 years. Economic growth together with the expansion of the government’s effort to redistribute to the country’s poorest people, Brazil halved the share of people living in absolute poverty over this short period of time. Similarly to other industrializing countries, this reduced the income inequality (measured with the Gini coefficient) over this period.

# Economic growth, decreasing inequality and decreasing poverty in Brazil, 1990-2011 – The Economist7

Economic Growth, Decreasing Inequality and Decreasing Poverty in Brazil (1990-2011) - The Economist

# Beyond Income – Poverty in Other Dimensions

So far we have only looked at poverty in terms of low productivity and low income. There is good reason to regard these measures as extremely important (the first graph shows the importance to the people living in poverty). But income is a means to an end and not an end in itself. Other measures of poverty look at the ends itself and study progress in terms of extending education, improving health and psychological wellbeing, and human rights and violence. These measures do not only look at work as a source of income but at the safety and quality of the work itself.

The Oxford Poverty & Human Development Initiative publishes reports on the changes of poverty measured with multidimensional poverty indices. Their research supports the idea that we are progressing towards a world with fewer and fewer poor people. The recent results of the global assessment of poverty can be found on their website here. They also have a great tool to visualize their research results on a world map here.

# Poverty by World Regions – in absolute numbers

We have seen that back in 1820 the majority of our ancestors lived in extreme poverty. Poverty back then and for the many millennia previous was equally prevalent in all parts of the world. Economic growth then started to lift the early industrialized countries out of poverty, and absolute poverty disappeared there. I think it is important to notice how very recent this development is even in the rich countries of the world.

Inequality is often the consequence of unequal progress. Poverty is a good example of this. The early progress in some countries and the stagnation in others meant that poverty has largely decreased in some countries and was still as widespread as ever in other countries. With industrialization and economic growth catching on in more and more regions around the world, the standards of living have increased in these countries. Poverty remains in those regions in which the accumulated economic growth is still small and industrialization still at the early stages.

The recent decrease of poverty is shown in the following graph; the graph is now showing the absolute number of poor people. We see that the Americas and Europe left poverty behind before 1981. Over the last thirty years large parts of East Asia and the Pacific achieved rapid economic growth and this meant that poverty has been rapidly decreasing there.

# Poverty by World Regions – as the share of the population

In the following graph one can study the declining share of the poor population by continent. Probably the most outstanding achievement is the reduction of poverty in East Asia and Pacific. The reduction from 77% to 12% is especially important as it is a very populous part of the world.

# Share of population living in absolute poverty by world region, 1981-2011 – Max Roser8

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# The Distribution of Poverty in the World today

From the charts above we have seen that around 1 billion people live in extreme poverty today. Where do these poorest people live?

Number of people in extreme poverty by continent:9

  • 551 Million in Asia
  • 436 Million in Africa
  • 15 Million in South America
  • 5.9 Million in North America
  • 0.3 Million in Europe
  • 50 Thousand in Oceania

The following map gives an answer to the question for every country in the developing world. The share of people in poverty is highest in the Democratic Republic of Congo (87.7%) and Madagascar (87.6%). In India 23% of the population live in poverty and in China 6%.

 

Poverty World Map - Poor Square in total square

The barchart below shows the number of people in absolute poverty.

India – with almost 300 million people in people – is the country with most poor people in the world. Nigeria and China follow with 107 and 84 million people.

Barchart-abolute-number-people-in-poverty

# Data Quality & Definition

The World Bank – the most important institution measuring poverty – describes the measure and the methodology here.

The word poverty is used in two distinct meanings in social research. Not understanding the difference causes confusion when comparing poverty across time and across countries. Absolute poverty is measured relative to a fixed standard of living that is consistent over time and between countries. Relative Poverty on the other hand is measured relative to the living standards in some particular society and varies both over time and between societies as the living standards in change. In this entry I compare poverty across the world over time – so I am looking at absolute poverty.10

# Data Sources

# Long-Term Development of Global Poverty

# Bourguignon and Morrisson (2002)
  • Data: Several measures of poverty and inequality
  • Geographical coverage: Global – by world regions/continents
  • Time span: 1820 to 1992
  • Available at: The research paper is: Bourguignon and Morrisson (2002) – Inequality Among World Citizens: 1820–1992. In American Economic Review, 92, 4, 727–744.
  • This data were used above in the graph showing the declining share of people living in poverty since 1820.

  • Economists Xavier Sala-i-Martin and Maxim Pinkovskiy estimated the share of the world population living in absolute poverty.11
  • An important recent paper on absolute poverty is Chen and Ravallion (2010) – The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty. In The Quarterly Journal of Economics, 125, 4, 1577–1625.

# Data on Global Poverty in Recent Decades

# World Bank
  • Data: Several measures of absolute poverty.
  • Geographical coverage: Global – by country and world region.
  • Time span: Since 1980
  • Available at: World Bank’s PovcalNet – an interactive tool — that is visualising data on absolute poverty and makes the data available for download. It is available here.
  • Many World Bank articles about declining poverty are collected here.
  • The World Bank data on extreme poverty (% of people below 1.25$ a day) is also available through Gapminder where the relationship with other measures of wellbeing can be visualised. It is here.

Data on the sub-national level (with huge coverage!) is available from the World Bank here. These are data on the poverty headcount – at national poverty line, urban poverty line, and the rural poverty line.