You may have noticed that the cheerleaders for capitalism ran a victory lap recently.



The history of capitalism, as portrayed in academia and among much of the media, is a sad story. It's one of smokestacks, sweatshops, child labor, robber barons, social stratification and general exploitation of workers. But this amazing chart, put together by Max Roser, a fellow at the Institute for New Economic Thinking at Oxford University's Martin School, tells a much different story — one of industrialization being associated with a rapid decline in poverty.

Yes, it's good thing that trustworthy wealthy bankers are here to correct the record on capitalism from the elitist college professors.

Wait. That doesn't sound right.

World Bank president Jim Yong Kim says that this is “the lowest poverty rate in recorded history”, but how did the World Bank arrive at these numbers?



For example, more than 55% of South Africa’s population lives below the country’s upper poverty line, of R1,138 (USD$80) a month. But, according to the World Bank, only 18.85% of the South African population lives in poverty. This suggests that the international poverty lines touted by the World Bank systematically underestimates the extent of global poverty.

That in itself creates questions about who is counted as being in poverty according to the World Bank.

But in fact the problems with this report's claim are actually much, much worse, because the measuring stick was intentionally and repeatedly changed.



Using this threshold, the World Bank announced in its 2000 annual report that "the absolute number of those living on $1 per day or less continues to increase. The worldwide total rose from 1.2 billion in 1987 to 1.5 billion today and, if recent trends persist, will reach 1.9 billion by 2015." This was alarming news, especially because it suggested that the free-market reforms imposed by the World Bank and the IMF on Global South countries during the 1980s and 1990s in the name of "development" were actually making things worse. This amounted to a PR nightmare for the World Bank. Not long after the report was released, however, their story changed dramatically and they announced the exact opposite news: While poverty had been increasing steadily for some two centuries, they said, the introduction of free-market policies had actually reduced the number of impoverished people by 400 million between 1981 and 2001. This new story was possible because the Bank shifted the IPL from the original $1.02 (at 1985 PPP) to $1.08 (at 1993 PPP), which, given inflation, was lower in real terms. With this tiny change - a flick of an economist's wrist - the world was magically getting better, and the Bank's PR problem was instantly averted.

Hmmm. Bankers changing the way that things are calculated in order to come up with a more acceptable conclusion, without any actual underlying improvement.

That sounds familiar. I wonder if bankers have ever done this in the past?



The IPL was changed a second time in 2008, to $1.25 (at 2005 PPP). And once again the story improved overnight. The $1.08 IPL made it seem as though the poverty headcount had been reduced by 316 million people between 1990 and 2005. But the new IPL - even lower than the last, in real terms - inflated the number to 437 million, creating the illusion that an additional 121 million souls had been "saved" from the jaws of debilitating poverty.

...

According to Peter Edwards of Newcastle University, if people are to achieve normal life expectancy, they need roughly double the current IPL, or a minimum of $2.50 per day. But adopting this higher standard would seriously undermine the poverty reduction narrative. An IPL of $2.50 shows a poverty headcount of around 3.1 billion, almost triple what the World Bank and the Millennium Campaign would have us believe. It also shows that poverty is getting worse, not better, with nearly 353 million more people impoverished today than in 1981.

A rising global poverty rate sort of changes the debate.

Essentially these numbers are less than useless to measuring the success and failures of capitalism.

For example, most of South America turned to semi-socialist policies during the first 15 years of this century.



Between 2000 and 2014, the percentage of Latin Americans living in poverty (under $4 per day) shrank from 45 to 25 percent.

Yet capitalists claim this success for themselves.

Meanwhile, newly capitalist nations like Ukraine still have a smaller economy per capita than it did 27 years ago under communism.