The ‘International Poverty Line’ set by the United Nations defines ‘extreme poverty’ as living on less than 1.90 international dollars per day. International dollars (int.-$) are inflation-adjusted and corrected for price differences between countries, which is what makes them ‘international’.
The share of the world population living below any poverty line has declined. In recent decades, the share and the number of people in extreme poverty has declined faster than ever before in human history.
Often when I point this out – in conversation or on social media – I hear the response ‘Yes, but this is only because of China.’
This post asks whether this statement is true. Is the substantial decline of global poverty only due to the poverty decline in China?
First, let us look at the historical evolution of extreme poverty in China. The following chart shows the declining share of the Chinese population living below the International Poverty Line (1.90 int.-$), according to World Bank estimates.
In 1990 two-thirds of the Chinese population lived in extreme poverty. According to the latest estimates, extreme poverty – measured in the same way – has declined to less than 1% in China.
The decline from almost every Chinese person living in extreme poverty to almost no Chinese people living in extreme poverty is of course an exceptional achievement. But is this the entire story of falling global poverty?
To see whether it was China alone that was responsible for this decline in extreme poverty, we recalculated the share of people living in extreme poverty and disregarded China entirely. This allows us to compare a planet with China to a planet without China. (At the end of the post it is explained how poverty for the non-Chinese world population was calculated.)
The chart below shows the results. In blue is the decline of global poverty, in red the decline of poverty excluding China.
We see that the reduction of global poverty was very substantial even when we do not take into account the poverty reduction in China. In 1981 almost one third (29%) of the non-Chinese world population was living in extreme poverty. By 2013 this share had fallen to 12%.
What is also interesting to see is that until 2005, the inclusion of China increased the share of the world population living in extreme poverty; but since then, this has reversed. The inclusion of China is now reducing the global poverty headcount ratio. This is because 2005 is the year when China’s poverty ratio fell below the world poverty ratio.
As a side note, it is of course silly anyway to say ‘the decline of global poverty is only because of China’. We care about people – not about countries, and since more than every 5th person in the world is Chinese, it is a really important achievement for the world that extreme poverty has decreased so substantially in China.
Still, the decline of global extreme poverty is even more than that. Extreme poverty declined in China and in the rest of the world.
Explanation of how poverty for the world without China was calculated:
In 1981 there were 4.5 billion people in the world. 42% of these were extremely poor.
So there were 1.9 billion extremely poor people and 2.6 billion people not in extreme poverty.
In the same year – 1981 – the population of China was 1 billion. Of these 1 billion Chinese 88% were living in extreme poverty. This means that out of all the 1.9 billion extreme poor 0.88 billion were Chinese. Almost half. There were 1.02 billion extreme poor non-Chinese in the world
The world population without China in 1981 was 3.5 billion; and of these there were 1.02 billion extreme poor. This is 29%, as shown in the chart.