We discuss it further in this blog post. Given that one purpose of poverty lines is to reflect minimum social standards, as well as aspirations and targets for improving the welfare of the poor, richer countries tend to set themselves higher poverty lines. The headline poverty figures for the rich country of Norway for example relate to a poverty line of roughly int.
Whether someone lives in poverty should not depend on where in the world this person lives and this is one of the many good arguments for much higher poverty lines. Almost the entire world population is living on less than int. The proposal of Lant Pritchett to rely on at least two poverty lines is a very good one. The chart below shows the number of people living below 4 different poverty lines.
The rise in incomes in many Asian countries occurred largely beneath this threshold until very recently. Again, different poverty lines are helpful for different questions. One of us published a research paper in which we suggest a poverty line of int. And recently the world did in fact make rapid progress against poverty relative to higher poverty lines. There is a long tradition in economics of focussing on income or consumption as a key metric.
But everyone — economists included — would agree that other things matter too, and indeed often matter much more: good health , education , human rights , leisure time , mental health , life satisfaction , and many other aspects — the list is long. It is because the list is so long that we are working on a very broad number of global problems here on Our World in Data.
Across our website we have more than entries and show more than 3, other charts presenting the evidence on global living standards and the environment over time, across many, many dimensions that matter to people. Extreme poverty is an important one, but it is shown next to other important metrics.
What has happened in nutrition, health and education can also be viewed as a reality-check on the extreme poverty chart. These substantial improvements in several dimensions have made each other possible and the substantial fall in extreme poverty was a key development in this aspect of global change. In considering long-run global poverty trends, people are at times too quick to present arguments on what has brought about progress, and what has undermined it.
Some champion the increased role of the state , through social spending or the broader management of the economy. Others emphasize globalized trade and free markets. These debates on why this has happened are important, but they are not the same as the historical work that establishes what has happened.
In order for this discussion to be sound and helpful, we first need to know how income and consumption around the world have in fact changed over time. Thanks to the sustained academic research of hundreds of historians, we can. This research clearly shows that the share of people extreme poverty rate has declined over the last two hundred years. The fact that such a large share of the world population is living in poverty is unacceptable.
The fact that we can make progress against poverty means that we do have to accept it. This research matters. For many — including us — ending extreme poverty is one of the most important tasks for our time and our generation. But just as with climate change, global health, or demographic challenges, any meaningful debate concerning how we should pursue this goal requires all the participants to understand the best evidence on how poverty has changed over time, and what these numbers represent.
Otherwise we cannot hope to be helpful. This is one of my favorite infographics. It is very well written and authored by one of the most important economic historians of our time. Deaton does not only focus on the escape from poverty, but puts this development into the broader context of improving living conditions. Recommended here is also the commentated reference list published by Pseudorasmus here. Online here. Peter H. From Princeton UP here.
Barro, R. Ursua, Ward, M. The Journal of Economic History, 72 1 , Arroyo Abad, L. Growth under Extractive Institutions? The Journal of Economic History, 76 4 , Prados de la Escosura, L. De Corso, G. Kalmanovitz Seminario, B. Bertola, L. PHES working paper No This symbiotic relationship galvanized through the development of new economic and political institutions. The merchants demanded more political rights and protection from expropriation by the monarchs and the elites.
These institutions were pivotal to the success of capitalism and the Industrial Revolution. Unfettered and sometimes favorable access to overseas markets in other parts of the empire without doubt helped the cause of the Industrial Revolution. Cotton textile, sugar, rum, and guns produced in Manchester, Liverpool, and other parts of industrial England were traded for slaves in Africa until abolition.
These slaves would be exported to the Caribbean and the American South to work in sugar and cotton plantations respectively. Raw sugar and cotton from the New World would then be exported back to England for processing in the industrial mills.
The capitalist economic institutions survived and were bolstered by more representative political institutions. These economic and political institutions were key to the success of capitalism in England. These institutions and the ideas related to the Industrial Revolution also spread to the continental European West and contributed to the success of capitalism there. In summary, the success of Western Europe is due to multiple factors. To start with, the long history of successful agriculture and overcoming diseases was one.
This was followed by military conquests and unstoppable imperial glut for precious metals. This gave rise to maritime trade, new institutions, the Industrial Revolution, and capitalism.
North America prior to European colonization was land abundant and labor scarce. The disease environment in North America was conducive to European settlement. Mercantilist policies, fertile land, and the pursuit of religious freedom were the main drivers of European settlement in this part of the world. The first English settlers arrived in and established Jamestown colony in Virginia. Subsequently, they also claimed Canada. These colonies attracted settlers who came armed with Western knowledge and Western institutions.
They were also blessed with extremely fertile temperate soil. Since the first settlement in Jamestown, productive agriculture, Western technology p. Agriculture in Africa began almost 7, years after agriculture in Europe. Therefore, the history of agriculture in Africa is fairly recent.
African soil is also not as fertile as the glaciated soil of Europe. As a result, the continent became trapped in the cobwebs of unfavorable geography. Furthermore, tropical diseases, such as malaria and yellow fever, also created almost insurmountable challenges for development on the African continent.
Bhattacharyya c , presents evidence and describes the challenges Africa faced over the long run. To summarize, the African development story is a poverty trap due to almost insurmountable constraints imposed by geography and diseases.
These constraints did not allow accumulation of food surpluses and population growth, which are essential for the development of a complex society, institutions, and economy. Many of these institutions and diseases still persist and continue to exert negative impacts on economic development in Africa. South America was also a settler colony after European conquest. However, the non-European population density in the South was relatively higher than the North.
Furthermore, it was also well endowed with mineral resources and commercial crops that are suitable for plantations. Therefore, the initial endowments of resources were quite different between North America and Central and South America. The colonizers in South America also came from Europe in pursuit of fertile land, mercantilism, and religious freedom. However, the initial endowment dictated the type of institutions that were set up in these colonies.
After overpowering the Mayas and the Incas, colonizers took control of the mines. They also set up plantations in the tropical climates.
These mines and plantations were run with slave labor from Africa as there was a labor scarcity. Many of the native population perished from alien European diseases such as small pox. This type of colonization led to high inequality and perverse institutions—institutions that were extractive and p.
These institutions persisted over time and continue to exert negative influences on the economies in Latin America. Russia fell behind Western Europe but not due to geography.
Russia, especially modern-day Ukraine, is endowed with extremely fertile, glaciated soil. Agricultural output in this part was at least as good as Western Europe. However, there were institutional weaknesses that imposed constraints and did not allow the economy to prosper to its full potential. Landed elites in Russia had enormous power and influence over the royal court in tsarist Russia. They were vigorously opposed to democratic pressure from the merchants and the masses.
Their opposition was based on the fear that any form of democratization might lead to a loss of their exclusive control over land. Land was the main asset from which the Russian elite made their wealth.
This opposition to democratic pressure created a highly unequal society that had implications for both political and economic institutions.
A skewed distribution of economic and political power created institutions that were not conducive to capitalist development. Bitter power struggles within the society led to sharp polarization and armed revolutions. The creation of the Soviet Union and a socialist economy also altered incentives. The Soviets attempted to replace economic incentives with social incentives.
It worked for a while, however, it harmed economic incentives to innovate over the long run. As a result, the Soviet economy struggled from the s onward. In this chapter I explored the long-term origins of poverty in developing countries.
I started with an analysis of causality and the existing theories of causality used in previous studies. That section also presented the perspective on causality used in the chapter.
This is followed by a unified framework relating factors such as geography, disease, colonial history, and technology in explaining the process of development in Western Europe and the New World colonies.
The final section applied this framework to explain why Africa, Latin America, and Russia fell behind. The overwhelming evidence from research on the root causes of development and poverty suggest that the explanation comprises not a single factor but a combination of factors.
This is not surprising given that the process of economic development is complex and very closely related to the evolution of our species. The latest research indicates that perhaps we should spend more time and scientific energy on integrating p. These factors have played out in different ways in different parts of the world. Therefore, economic history is not independent of geography, society, politics, and the order in which these factors played out.
Acemoglu, Daron and Simon Johnson. Find this resource:. Allen, Robert, C. Amsden, Alice, H. New York: Oxford University Press. Arrighi, Giovanni, T. Hopkins, and Immanuel Wallerstein.
Anti-systemic Movements. London: Verso. Bhattacharyya, Sambit. Cheltenham: Edward Elgar. Bloom, David and Jeffrey Sachs. Clark, Gregorey. Collier, Paul and Jan W. Diamond, Jared. New York: W. Engerman, Stanley and Kenneth Sokoloff. Evans, Peter, B. Embedded Autonomy: States and Industrial Transformation.
Findlay, Ronald. Gallup, John and Jared Sachs. Galor, Oded and Omer Moav. Hall, Robert and Charles Jones. Rome: United Nations. Inikori, J.
Inikori, Joseph. Landes, David. London: Abacus. Lipset, Seymour. Manning, Patrick. Slavery, Colonialism and Economic Growth in Dahomey, — Cambridge: Cambridge University Press. Milanovic, Branko. Miller, David, J. Madison: University of Wisconsin Press. Mokyr, Joel. Montesquieu, Charles-Louis. The Spirit of Laws. New York: Cambridge University Press. Moore, Barrington. North, Douglass, C. Nunn, Nathan. Olsson, Ola and Douglas Hibbs. Parker, Philip. Sachs, Jared. Sachs, Jared and Andrew Warner.
Schumpeter, Joseph. The Theory of Economic Development. The Wealth of Nations. Edwin Cannan ed. Chicago: University of Chicago Press. Tawney, Richard. Religion and the Rise of Capitalism. London: John Murray. Thelen, Kathleen. As early as November , Social Security Administration policymakers and analysts began to express concern about how to adjust the poverty thresholds for increases in the general standard of living.
There is extensive historical evidence from the U. In , the Social Security Administration tried to take a very modest step towards raising the poverty thresholds to reflect increases in the general standard of living. The Bureau of the Budget the predecessor of the Office of Management and Budget prohibited the modest increase in the poverty thresholds, but initiated an interagency Poverty Level Review Committee to re-evaluate the poverty thresholds. This Committee decided to adjust the thresholds only for price changes, and not for changes in the general standard of living.
In , the Committee decided that the thresholds would be indexed by the Consumer Price Index instead of by the per capita cost of the economy food plan, and that farm poverty thresholds would be set at 85 percent rather than 70 percent of corresponding nonfarm thresholds.
In August , the Bureau of the Budget designated the poverty thresholds with these revisions as the federal government's official statistical definition of poverty. In , three interagency subcommittees were formed to conduct a thorough review of federal income and poverty statistics.
The Subcommittee on Updating the Poverty Threshold recommended that the poverty thresholds be updated every ten years using a revised food plan and a multiplier derived from the latest available food consumption survey; this would generally have resulted in higher poverty thresholds at each decennial revision. The Subcommittee also recommended that the definition of income used to measure overall income should also be the income definition used to calculate the multiplier for revised poverty thresholds.
No changes were made in the poverty definition as a result of the review of poverty and income statistics. In , in response to a Congressional requirement, an interagency Poverty Studies Task Force was established to undertake an intensive review of the current poverty measure and alternative measurement schemes.
Among the list of threats one can identify to attaining that goal, inequality stands out as a major concern today. Rising inequality can mean that growth largely by-passes poor people. This has been happening in some countries of the rich world, including the US.
Experience among developing countries has been varied. Inequality falls about as often as it rises in growing developing countries, although absolute poverty measures tend to fall with growth. High-inequality countries have a harder time reducing poverty in that they typically need higher growth rates than low-inequality countries to attain the same pace of progress against poverty, and their high inequality often makes that growth even harder to attain.
In thinking about the implications for policy it is important to un-pack inequality—to identify the specific dimensions most relevant to progress against poverty. Inequalities in access to good quality schooling and health care stand out in many developing countries today. In many rural economies, inequalities in access to land including insecurity of rights over land also remain an impediment to pro-poor growth.
Gender inequalities stand out everywhere, though not just in terms of command over material goods. More pro-poor policies call for better quality public institutions and services that are inclusive of the needs of poor people. With the required political will there is much that can be done to improve health and education services in poor places and in making legal systems more inclusive. These are high priorities for antipoverty policy everywhere. And that role is unlikely to be temporary; all countries need a permanent safety net.
In thinking about the many options, policymakers in developing countries should be more open to the idea of only broadly targeted and largely unconditional transfers as distinct from finely targeted conditional transfers. Improving tax systems in poor countries to expand the revenue for domestic antipoverty policies must also be a high priority.
External development assistance should continue to play a role. This is ethically compelling in its own right but also as compensation for the costs rich countries impose on poor ones such as through past contributions to the stock of greenhouse gases and the past injustices of colonial exploitation and trade restrictions. Aid has two important roles. First there will be emergency aid—short-term assistance to deal with crises. There will be concerns about moral hazard, which have to be taken seriously, but wealthier countries should be called upon to help poor countries deal with agro-climatic and other shocks.
Second, development assistance should help foster the conditions for sustainable poverty reduction in the longer-term, including institutional development and building better public administrations such as for domestic resource mobilisation. It must be acknowledged, however, that the record of development aid has been uneven, and not always well-considered in the light of what we have learned about the economics of poverty.
For example, a common view among aid donors is that they need to incentivise better policies—to use a carrot and stick approach, rewarding good efforts and punishing bad ones. This is a risky strategy and may well push fragile states into a poor-institutions trap Ravallion , Chapter 9. Market failures are an important reason why inequality matters to progress against poverty.
Credit market failures have been a prominent concern. The policy responses entail some combination of efforts to make markets and institutions work better for poor people and efforts to compensate for market failures through other means, including redistribution. Inequality can also undermine the potential for making such policies happen. Those who benefit from their ability to capture new opportunities will often resist reforms that try to assure broader access to those opportunities, also given that poor people on their own have little current capacity to compensate the non-poor losers from pro-poor reforms.
History is full of examples. English industrialists in the 19th century lobbied against compulsory schooling and against bans on child labour, and helped stall those reforms for a long period.
Indian industrialists in the post-Independence decades lobbied for trade protection that diminished the scope for poverty reduction through labour absorbing export-led manufacturing growth. Powerful landholders in both these countries and elsewhere effectively undermined the potential for land reforms and other redistributive policies. And in many countries, insiders in urban formal-sector labour markets on both sides of the market act to effectively restrict competition from outsiders.
The differences in how inequality is perceived can also stall pro-poor economic policies.
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