This graph caught my eye:
Notice that prior to 1980, the number of affluent people was growing rapidly, but the number of poor people was also increasing. After 1980, the number of affluent people rose even more rapidly, while poverty began declining. I was in grad school in 1980, and I don’t recall very many people expecting such a dramatic turnaround in the number of poor people. Many experts were predicting a global catastrophe, due to rapid population growth in poor countries.
So what changed in 1980? The most likely explanation for the plunge in global poverty is the neoliberal revolution, which began around 1980. Poverty fell especially rapidly in countries that adopted market reforms, such as Chile, Bangladesh, India and China. Ironically, the media is now full of stories claiming that neoliberalism has failed. My response is simple—compared to what?
READER COMMENTS
E. Harding
Dec 12 2019 at 2:27pm
People prior to the 1930s recognized that China and India had the potential to be more or less functional countries. The number will be higher in 2100 than today due to high population growth in poor countries like Niger, Nigeria, and Congo.
Mark Bahner
Dec 14 2019 at 11:58pm
I’m expecting the per-capita gross world product to be north of $10 million in 2100 (in year 2000 dollars). Needless to say, there I don’t expect any poor people in Niger, Nigeria, or Congo.
Mark Bahner
Dec 15 2019 at 12:06am
I forgot to include a link for why per-capita GWP would be above $10 million in 2100 (in year 2000 dollars).
It’s very simple: computers.
https://markbahner.typepad.com/random_thoughts/2016/02/recalculating-worldwide-computing-power.html
Mark
Dec 12 2019 at 3:20pm
Despite 40 years of this data, many perhaps even most people erroneously believe that global poverty is getting worse and therefore that neoliberalism has failed. And a lot of people today even still believe in Malthusianism—read any news article about global poverty and the top comments will mostly be accusing the affected countries of “overpopulation” (of course poverty in Appalachia is never blamed on “overpopulation”).
I chalk this up principally to innumeracy—people see more anecdotes of poverty today because the world is more interconnected, and put a huge weight on manual-laborer white men in rural parts of first world countries that is wholly out of their proportion to the world population.
I’m also starting to see some intellectuals make excuses for this innumeracy—they’ll say things like economics puts too much weight on statistics and not enough on “people.” But since statistics just reflect aggregates of people, what this argument really means is that we put too much weight on “those people” instead of “my people.”
Scott Sumner
Dec 12 2019 at 3:32pm
Good points. Here’s how I’d respond to people ignoring statistics and focusing on “people”. How many of the world’s 7.7 billion people are you personally acquainted with? Is that enough to know how the world is doing?
I’d add that much of Appalachia was even poorer during the 1960s
Thaomas
Dec 18 2019 at 7:57am
DO “most people” think world poverty is getting worse?
I think the rejection of Neo-liberalism shorn of its redistrubutionist component is a result of the very different life prospects facing young people now compared to the 60’s and the failure of tax reductions for high income people — never a part of Neo-liberalism — to produce faster economic growth as claimed.
Thaomas
Dec 12 2019 at 4:33pm
Compared to real neoliberalism that did not allow itself to become cover for reducing the tax rate of the highest income earners.
Lorenzo from Oz
Dec 12 2019 at 6:25pm
When folks says “neoliberalism has failed” they are probably thinking of wage stagnation and increasing polarisation in Western countries.
Policy regimes run out of puff. They evolve to fix some problem or deal with some concerns, and then, over time, their weaknesses become more manifest.
The social democratic policy regime of 1950-1970 actually did quite well on various fronts. It ran out of puff because productivity growth collapsed, which it needed to keep going. The policy regime shifted to getting the most economic efficiency out of economies to support the welfare state. The pioneers of that being the Hawke (Australia, elected 1983) and Lange (NZ, elected 1984) Governments though the 1979 Kennedy-Carter airline de regulation was the first major example and the Whitlam Government’s 1973 tariff cut was a precursor.
Wage stagnation and polarisation are issues that neoliberalism does not seem to have any clear handle on.
Scott Sumner
Dec 12 2019 at 8:26pm
Lorenzo, You said:
“Wage stagnation and polarisation are issues that neoliberalism does not seem to have any clear handle on.”
Compared to what?
Lorenzo from Oz
Dec 14 2019 at 6:39pm
Well, quite. Hence the current period of polarisation and drift.
Matthias Görgens
Dec 13 2019 at 6:44am
Political polarisation is pretty straightforward to combat: drop first past the post, and adopt range voting or some kind of proportional representation (like Germany or New Zealand).
The German constitution in particular has lots of features meant to avoid polarisation. For obvious historical reasons.
They have some political issues in Germany, of course. So you can measure the strength of what I’m suggesting by looking at how they manage to deal with them.
But yes, that has not too much to do with neoliberalism. But it’s entirely compatible with it.
Lorenzo from Oz
Dec 17 2019 at 7:53pm
You haven’t been following recent German or Swedish politics much, have you? Do the Swedish Democrats or Alternative for Germany ring a bell?
Lorenzo from Oz
Dec 17 2019 at 7:58pm
That said, I do recommend the Australian model of compulsory voting (so you have to pay attention to people), preferential voting (so people can express views but still state which governing group they prefer) and proportional representation upper house (so significant lumps of opinion get a say). But you still get stable governments somewhat more able to assert themselves against narrower interest groups.
Also, Canada has single member electorates with first past the post, and seems to have somewhat avoided polarisation.
Probably because they have no tabloid press and Anglo-Canada lost its previous ethnic grounding in Empire Loyalism. So, they now assert themselves against the US by multiculturalism and monarchy.
Thaomas
Dec 18 2019 at 7:45am
One advantage of compulsory voting is that it reduces the efforts that parties make to turn out “their” voters: everyone turns out anyway. That must at least marginally mean less bombastic appeals, more aimed at “everyone” not just motivating the already persuaded to vote. Or no?
Phil H
Dec 12 2019 at 7:58pm
I can’t understand how this is not noticed more. One of my earliest memories (I was born in the early 80s) is of TV reports of a major famine in Ethiopia. It was a big theme when I was a kid: there was that Christmas song about how bad life in Africa is, and the perennial “finish your dinner because there are children starving”. Since the 1990s, there hasn’t been anything comparable. There was a famine in North Korea, entirely man-made. But the combination of rising prosperity and better international aid really seems to have ended serious famine in our lifetime. That’s about as exciting a moment in history as one could wish to live in.
Mark Brophy
Dec 13 2019 at 3:38am
I’m amused by Chile which has attracted thousands of Venezuelans because it’s the richest country in Latin America while Chileans are protesting because they want to jettison capitalism in favor of socialism so that they can become more similar to Venezuela, Bolivia, Brazil, and Argentina.
Iskander
Dec 13 2019 at 6:26am
Scott,
Many countries didn’t see rapid catch up/poverty reducing growth in the original globalization period (which ended with WW1), despite most being market orientated. I don’t doubt that market reforms helped post 1980 but it seems technology has been the major factor, especially whether that technology is compatible with local conditions/culture.
Matthias Görgens
Dec 13 2019 at 6:47am
Yes. Though these days open markets mostly means markets open to disruption by technology. Be that either new technology or technology championed by foreigners.
Jon Murphy
Dec 13 2019 at 9:42am
As compared to what? There was a greater reduction in poverty in the 19th Century than in the thousands of years before. It was, of course, just the beginning, and surely technology has played a role, but we do see the same effects, generally speaking.
Mark Bahner
Dec 16 2019 at 12:23am
Some supporting data. My calculations, based on DeLong (1998):
Time period…Percent Annual Per Capita GDP Growth
1600-1650…………………..0.12
1650-1700…………………..0.18
1700-1750…………………..0.16
1750-1800…………………..0.18
1800-1850…………………..0.87
1850-1900…………………..1.65
1900-1950…………………..1.76
1950-2000…………………..2.83
Note: Annual growth rates prior to 1600 were basically less than 0.1 percent per year all the way back to “1 million BC”:
https://delong.typepad.com/print/20061012_LRWGDP.pdf
Michael Pettengill
Dec 14 2019 at 4:58pm
Looks to me like vaccinations happened. The population was growing, but then suddenly grew at an unsustainable rate. Not due to added births, but later death.
Children mostly died before they ceased to be a net burden on those who got through the death by new infection knothole. Once children did not die most of the time, they quickly become net producers over a lifetime as adults with increasing knowledge and productivity.
Once production per individual exceeds barely subsisting, excess production is directed to capital investment. For example, to formal education like reading, writing, math, getting into logic, argument, reasoning, planning. But it might be being able to maintain a cleaner living situation, with less waste, standing water, cleaner water, etc. Less illness means more production.
Economies are zero sum. For each unit of production there must be one unit of consumption. Investment time shifts both work and consumption, but it’s still zero sum. The greater the population, the greater the production and the equally greater consumption.
But a person is not capable of the same rate of production from birth to death, starting with consumption for in excess of production, shifting to production greater than consumption (which enable having children, for example, an investment), and then production falling to consumption and possibly below. Thus, preventing death between the age of 2-20 produces great gains to households rather rapidly.
I was born in 1947 and remember the fear of polio, but also kids going into hospitals. Small pox, yellow fever, etc, by then was limited to poor areas, but still a fear. Then in the 70s, kids no longer seemed to get more than colds and flu, almost overnight.
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