Last month, the World Bank announced that this year, for the first time on record, the percentage of the earth’s population that is living in extreme poverty is likely to fall below ten per cent. As recently as 1990, the proportion was more than a third. “This is the best story in the world today—these projections show us that we are the first generation in human history that can end extreme poverty,’’ Jim Yong Kim, the head of the World Bank, said in a statement accompanying the release of the new figures.
The transformation certainly is remarkable. Twenty-five years ago, according to the bank, 37.1 per cent of humanity lived below its metric for the global poverty line, which is now roughly $1.90 a day. This year, according to the bank’s new projections, the proportion living in extreme poverty will be 9.6 per cent. To put it another way, since 1990 the number of people in extreme poverty has fallen from close to two billion to about seven hundred million. About 1.3 billion people have been lifted above the poverty line. Even if these figures are off by twenty or thirty per cent, the change would still be extremely significant.
It’s worth injecting a note of caution, though. The World Bank and the United Nations have set a goal of eliminating extreme poverty by 2030, but achieving this target will be very difficult. Today, close to half of all extreme poverty is concentrated in sub-Saharan Africa, which, despite some recent progress, is still beset by war, disease, and a lack of properly functioning institutions. In addition, it is important not to read too much from the extreme-poverty figures as regards the fight against poverty as a whole. If you are an African, an Asian, or a South American, just because you have edged above the World Bank’s bar doesn’t mean that you aren’t still poor. In the poorest forty per cent of countries, according to the bank’s own figures, about half the population is still in “moderate poverty,” which it defines as existing on less than four dollars a day of income.
Furthermore, some of the recent decline in the rate of extreme poverty may be an artefact of how the bank calculates it, which changed recently. In a sceptical piece in the Financial Times, Shawn Donnan explained some of the tricky technical issues, which largely revolve around how to compare prices across countries and across time. Meanwhile, Francisco Ferreira, a senior economist at the World Bank, defended its procedures in a blog post arguing that, whichever numbers are used, the trend in extreme poverty is a downward one.
That does seem to be true, and it’s something to celebrate. Above all else, it reflects the entry of China, India, and other developing countries into the global trading system, not merely as sources of raw materials and cheap labour but also, increasingly, as independent players in global capitalism. In industries ranging from steel to autos to energy to solar panels, Chinese and Indian companies are now competing head-to-head with western rivals. The global market that Karl Marx and Friedrich Engels wrote about in 1848 is now largely a reality, with individual countries and corporations vying for the spoils.
That’s what trade agreements like the T.P.P. are all about. With a good deal of justification, critics like Bernie Sanders argue that previous deals, such as NAFTA, favoured business interests at the expense of workers and the environment. Many progressives argue that the T.P.P. will be another giveaway. Meanwhile, conservative critics such as Donald Trump, with rather less justification, argue that the United States’ trading partners have outsmarted and out-negotiated us. In fact, the known details of the agreement, which include strong guarantees for intellectual-property rights and some binding resolution procedures for cross-border disputes, appear to reflect pretty closely what corporate America wanted, even if some individual interests, such as tobacco producers, aren’t happy about last-minute concessions that U.S. negotiators made in order to get a deal.
For the sake of American workers threatened by overseas competition, sick people in poor countries who buy American drugs, and many, many others, it is important to get the details right. But the larger context is also worth bearing in mind. With the remarkable rise of China and India, the global economy’s centre of gravity has shifted to the east—and there, despite the problems currently facing China and other developing countries, it is likely to stay. Not for nothing are the White House and other supporters of the T.P.P. busy promoting it as way of defining some rules for a more Asia-centric world, and also—in traditional mercantile fashion—as a means of checking a rising rival power, in this case China.
While the World Bank’s briefing didn’t include poverty figures for individual countries, it did provide regional breakdowns that show the extent of the global transformation that is taking place. In 1990, 60.8 per cent of the population in the East Asia and Pacific region, which includes China, lived below the extreme poverty line. By 2012, that figure had fallen to 7.2 per cent, and this year it will be 4.1 per cent, according to the bank’s projections. For the South Asia region, which includes India, the trend is similar, if a bit less dramatic. In 1990, 50.6 per cent of the population lived in extreme poverty; by 2012 the figure had fallen to 18.8 per cent, and this year it will be 13.5 per cent.
One flip side of this transformation, which the bank’s study didn’t linger on, is the rise of sweatshops, Chinese “princelings,” and Indian billionaires. As in Britain and the United States during the nineteenth century, the price of industrial development has been a sharp rise in intranational inequality. How will this play out? Will it eventually produce a populist backlash that threatens the shift toward market economies? Nobody knows.
Another aspect of this new global economy, which the bank does acknowledge, is that in many developed countries the poor and near-poor are actually falling further behind. One way to see this is to look at how households in the bottom forty per cent of the income distribution are doing. When the bank’s researchers did this, they found that in seventeen of thirty-six advanced countries, per-capita income in such households has fallen since 1990.
That figure doesn’t easily jibe with the upbeat story of mutually reinforcing prosperity that trade economists used to tell. It reflects the reality of a world transformed, with globalization creating winners and losers in a manner that defies easy description. Globalization reduces some inequities, such as the scourge of extreme poverty, while accentuating others, and everywhere it causes political tensions. No wonder these trade deals are controversial.
(The New Yorker)