Good News About the Good News: It's Real

If you're not a regular reader of The New York Times, you may have missed this column by Nicholas Kristof. It makes a startling point: The world has gotten dramatically better, and most Americans don't know it. For example, the number of people living in extreme poverty has "fallen by more than half, from 35 percent in 1993 to 14 percent in 2011." But 95 percent of Americans think the number has either gone up or remained the same.

I began to wonder, though, about that poverty statistic. I knew that China's industrialization had reduced poverty there by a lot. And China, as you may know, has a very large population. How much of the reduction was just China pulling down the average? Is this a real phenomenon in other parts of the world ?

I went to the World Bank data set that Kristof used, and looked at results broken down by region. Here are some (in evenly spaced years):

	Percentage in extreme poverty ($1.25/day or less) E Asia Eur, Ctl Asia Lat Am, Carib. M East, N Afr S Asia Sub-S Afr Total 1984 65.6 2.3 13.4 6.6 57.7 56.3 47.5 1990 57.0 1.5 12.6 5.8 54.1 56.8 43.4 1996 38.3 4.2 10.6 4.8 48.6 59.7 35.9 2002 27.3 2.1 10.2 3.8 44.1 57.2 30.5 2008 13.7 0.5 5.4 2.1 34.1 49.7 21.9 2011 7.9 0.5 4.6 1.7 24.5 46.9 17.0

Yes, this looks pretty real. The decline in East Asia is the most dramatic, a reduction of 88% over the period shown. But poverty in South Asia (India, Pakistan, Bangladesh, etc) has fallen by more than half, and in Latin America by two-thirds.

And what about within East Asia? Surely that must be just the effect of China. Actually, no. There are huge reductions in Cambodia, Indonesia, Vietnam. There is a smaller but still dramatic reduction in the Philippines.

Does this just mean that there are a lot of people making $1.30/day? No, worldwide the number of people making $2/day or less has fallen by almost half. It's real.

Kristof, unfortunately, says nothing about what brought this about. But if China is representative, globalization, the shifting of production to the Third World, played a big role in raising Third World incomes. This is a rather uncomfortable conclusion for liberals; one has to ask, "Are decades of wage stagnation for the middle class in the developed world too high a price to pay for lifting billions of people out of extreme poverty?"  (If the answer is that it's not too high a price, of course, we can still do better about asking the rich to bear some of the burden.)

Finally, it is disturbing that progress has been so slow in sub-Saharan Africa. Undoubtedly, a big part of the explanation is war: Extreme poverty is at 97 percent in Congo, for example, and 95 percent in Liberia.  And a part of that, in turn, is the resource curse.