5 Myths About Global Poverty

If you’ve been reading enough Current Affairs, or just paying attention to the world at all, you might get the impression that there are some serious problems out there. When Syrian refugees are drowning in the Mediterranean sea, Palestinians are living in open air prisons, Yemeni children are starving (that is, those that haven’t been killed with American weapons), life expectancy in the richest country in the world is decreasing, six billionaires own more wealth than half of humanity, and the globe is approaching a level of warming that will leave entire countries underwater, millions displaced, and destroy a third of the world’s food production—things can seem pretty grim. You may even be tempted to suggest that we ought to try something radically different.

But you’re wrong. Thankfully, a brave collection of billionaires, journalists, academics, hair models and meditation gurus have claimed the mantle of science and reason to show us that the world is actually better than ever. It looks like things are getting worse, but the Facts say otherwise. The data show that things are pretty swell.

Now, I don’t want to misrepresent these individuals, so don’t take it from me. After all, it is not appropriate to put words in other people’s mouths (unless of course those people are impoverished, starving, and brown and you’re telling them how great their lives are). So, let’s hear from one of them directly:

In the past everything was worse. For roughly 99% of the world’s history, 99% of humanity was poor, hungry, dirty, afraid, stupid, sick and ugly … But in the last 200 years, all of that has changed. In just a fraction of the time that our species has clocked on this planet, billions of us are suddenly rich, well-nourished, clean, safe, smart, healthy, and occasionally even beautiful. Where 84% of the world’s population lived in extreme poverty in 1820, by 1981 that percentage had dropped to 44% and now, just a few decades later, it is under 10%. If this trend holds, the extreme poverty that has been an abiding feature of life will soon be eradicated for good… Welcome, in other words, to the Land of Plenty.

Defenders of global capitalism are obsessed with this story. It has been the focus of Bill Gates tweets, Dylan Matthews Vox columns, and even a self-congratulatory movie about American Enterprise Institute President Arthur Brooks. Silicon Valley futurist guru Yuval Noah Harari dreams about it during his meditation retreats, Thomas Friedman thinks he discovered it while waiting for one of his imaginary friends, and Effective Altruists across the world repeat it to themselves under their breath as they walk into their soulless Wall Street offices (to do the Most Good They Possibly Can). Steven Pinker even did humanity the great service of taking 600 pages to make the very same argument (don’t worry, it’s a quick read—a good chunk simply consists of charts showing the arrow of good things going up and the arrow of bad things going down).

This obsession makes complete sense. After all, if taken seriously, the “Don’t Worry, Everything is Better now” or DWEIB (pronounced “dweeb”) narrative is perhaps the most compelling defense of global capitalism out there. Sure, the wealthiest individuals might own a grossly disproportionate amount of global wealth, the rules may be rigged in favor of the rich, and hundreds of millions may continue to live without their basic needs met, but the DWEIBs (shorthand for those who promote the DWEIB narrative) are quick to point out that the system that produced these conditions has done more for the poor than any other. Global capitalism may not be perfect but the benefits it brings—namely, eradicating poverty as we know it—far outweighs its costs.

As Arthur Brooks wrote in 2017:

Economics taught me that two billion of my brothers and sisters had escaped poverty in my own lifetime. This was a modern-day miracle. I had to find its source… Virtually all development economists, across the mainstream political spectrum, agreed on the core explanation… In short, it was the American free enterprise system, spreading around the world, that had affected this anti-poverty miracle.

It is no wonder that ardent defenders of neoliberal capitalism, like Brooks, Pinker, and Gates, believe that they are real advocates of the marginalized and leftists are backwards ideologues. Once you accept the DWEIB narrative—that global capitalism has indeed been responsible for lifting billions out of poverty and radically improving the lives of even the most marginalized—then calls for systemic or structural change seem misguided at best and sinister at worst. Defenders of the status quo are framed as agents for progress and social justice while leftists calling for change are portrayed either as blindly ignorant or uninterested in actually helping the marginalized.

This story is not restricted to those who identify with the political right. Center-left leaders like President Obama constantly say things like “the free market is the greatest producer of wealth in history—it has lifted billions of people out of poverty” (even if they acknowledge that “some [are] left behind”). Increasingly, even self-identified progressives are beginning to accept this narrative. The author who penned the “Land of Plenty” paragraph may be one of the last people you expect: Dutch journalist Rutger Bregman—the same Rutger Bregman who made headlines when he told the elite at Davos that they need to start paying their fair share of taxes, and then flayed Tucker Carlson over his phony populism.

On the surface, Bregman seems like a typical leftist. He is an avowed social democrat, bashes professions like consulting and banking, and argues for policies like a universal basic income, open borders and a 15-hour workweek. But, like many who have claimed the mantle of the left in recent years, something is off about Bregman. He believes the greatest challenge of our time is not unjust and exploitative system but a lack of imagination. He advocates for big, bold ideas, not simply because they will make the world more just but because they will make politics less boring. He speaks about the importance of “innovation,” “meritocracy,” and “cut[ting] the nanny state” while terms like “class conflict,” “distribution of power” and “structural violence” rarely, if ever, enter his political vocabulary.

Bregman, in other words, is the exception that proves the rule: When you believe that our existing economic system has brought with it unprecedented prosperity for all, then a view of politics as class conflict and collective struggle falls by the wayside—the only radicalism that remains is a radicalism of imagination.

This is why the DWEIB narrative is the single greatest threat to the leftist project. It is no longer merely a weapon of the political right—it has started to infect and splinter the left from within. If we do not address it, then we leftists, SJWs, and socialists may just find ourselves part of a losing movement—or perhaps without a movement at all.

Lucky for us, the DWEIB narrative is nothing more than a carefully crafted fantasy. At its core are five interlocking myths about poverty, capitalism, development, and progress. Let’s evaluate these myths one at a time.

Myth 1: We have nearly eliminated extreme poverty in the last 40 years

This chart from Our World in Data (OWD) tells a compelling story. It shows that the number of people living in extreme poverty has plummeted from almost 90 percent of humanity at the outset of the Industrial Revolution to around 10 percent today. This trend is so promising that in 2015 the World Bank predicted we could conceivably eliminate extreme poverty altogether by 2030. It is no wonder that the DWEIBs, are obsessed with this chart: For them, it represents empirical evidence that global capitalism really is “the rising tide that lifts all boats.”

There is only one problem: This chart is completely misleading—borderline insulting in fact. First, the claim that it shows the “number of people in poverty” going back to 1820 is inaccurate. The World Bank did not actually start measuring poverty until 1981, so the database used for the pre-1981 numbers is based on rough and incomplete estimates of GDP rather than accurate measurements of poverty.[1] If we want to empirically assess the changing rates of poverty, we should focus on the time period after 1981 (a focus which, in many ways, actually favors the DWEIB narrative).[2]

Since 1981, the World Bank data shows a steep decline in the proportion of individuals in extreme poverty: from nearly half of all humanity (44 percent) to a mere fraction (10 percent). On its face, this is quite an impressive outcome. Yet, these data contain a fundamental flaw. They say nothing about how we define poverty in the first place.

Global poverty is calculated according to what is called the “International Poverty Line” (IPL)—an international estimate of how much income is needed to meet the basic needs of life, adjusted for the purchasing power of each country. For instance, the current IPL was set by the World Bank at $1.90 per day, meaning that anyone who earns their country’s equivalent of less than ~$2 U.S. per day is considered to be in “extreme poverty.” What the OWD chart shows, then, is the percentage of people in the world who are now earning more than their country’s equivalent of $1.90/day.

The problem is that the $1.90/day IPL is not a meaningful measure of poverty. Remember, the $1.90/day IPL is the international equivalent of living in the United States on only $1.90/day. Anyone living in the U.S. knows that living on $2/day is inadequate to even afford breakfast, let alone adequate nutrition, shelter, or clothing (and we can just forget health care). Economist David Woodward has calculated that living at the World Bank’s poverty line is the equivalent of “35 people living on a single minimum wage, with no benefits of any kind, no gifts, borrowing, scavenging, begging or savings to draw on (since these are all included as “income” in poverty calculations), and no free health services or education (since these are not generally available to the poor).”[3] This flaw becomes even more clear when we compare poverty data to international hunger data, which reveals that anywhere between 115 million and 1.8 billion people who have supposedly been “lifted out of poverty” by the World Bank’s standards can’t even afford enough food to meet their caloric needs.[4] This disparity calls the legitimacy of the $1.90/day IPL into question. After all, if “living above the poverty line” does not even mean that one can afford to meet their basic nutritional needs, then how can we call this line a meaningful measurement of poverty?[5]

Unsurprisingly, most serious development economists and international agencies (including the World Bank itself) agree that the $1.90/day IPL is far too low—even if they disagree on how high the IPL should be. The USDA states that around $6.70/day is necessary for achieving basic nutrition. Multiple scholars agree that $7.40 is the bare minimum ethical poverty line (one that would allow the poor to achieve a normal life expectancy). Even development economist Charles Kenny (whose salary is paid by the Gates Foundation) wants a $10 per day line while his colleague Lant Pritchett argues that the threshold should be no less than $15 per day.

When we apply any of these more accurate thresholds, the picture of global progress against poverty changes dramatically. As anthropologist Jason Hickel points out, even if we use the relatively conservative poverty line of $7.40 per day, we find that global poverty has only dropped from 71 percent of people in 1981 to around 58 percent today—a mere 13 percent reduction. Of course, that is still progress, but it is a far cry from the notion that we have nearly eliminated extreme poverty altogether.

But when we look at absolute numbers, the news gets worse. Remember when Arthur Brooks touted free markets for lifting “over 2 billion people” out of poverty? Well, under the $7.40/day threshold, it turns out that nearly 1 billion have been added to the ranks of the global poor since 1981. Let that sink in for a minute. There are 1 billion additional people living in conditions of extreme poverty today compared to 40 years ago. That is no cause for celebration. It is a tragedy.

When we do bring the number of people living on less than $1.90/day to zero, as the World Bank predicts, the Economist will celebrate the true End of Suffering, Steven Pinker will write another celebratory book, and Bill Gates will receive a Nobel Peace Prize. Meanwhile billions will remain unable to afford to meet the most basic necessities for themselves and their families, and their ranks may keep increasing.

Myth 2: Global capitalism is responsible for the gains we have made against poverty.

As more sophisticated commentators like Vox’s Dylan Matthews point out, just because people can’t afford the basic necessities of life, doesn’t mean their lives aren’t getting better (for instance, their incomes may have risen from 50¢ to $2 per day). In other words, just because we haven’t gotten close to alleviating extreme poverty doesn’t mean we haven’t made considerable progress in reducing the poverty gap.

Of course, if people don’t even have the means to buy enough food to meet their basic caloric needs—let alone take care of health care, housing, transportation and the like—then we cannot say they have been “lifted out of poverty.” Period. Still, Matthews has a point: On the whole, things have at least gotten better for the global poor since 1981.

The question, then, is “why?” Is this progress attributable to the global capitalist model of development peddled by international institutions, western countries, and mainstream economists since the late 1980s?

Not quite. For the poor in most countries of the Global South, things haven’t been getting much better at all. A closer look at the data reveals that the gains made against global poverty in the last 40 years stem primarily from one region: East Asia. If we take just one country, China, out of the global poverty equation, then even under the $1.90 poverty standard we find that the extreme poverty headcount is the exact same as it was in 1981. And when we look at proportions we find a similar story. As the chart below shows, while East Asia has made consistent progress against poverty, South Asia only began seeing a decline after 2000 and Latin America and Sub-Saharan Africa have made shockingly little progress at all.

The impact of East Asia becomes even more obvious when looking at the $7.40 per day line. While looking at the world as a whole showed modest progress against poverty since 1981 (from 71 percent to 58 percent), as Jason Hickel has noted, the picture changes entirely when you take China out of the equation. Under the $7.40 per day line minus China, we find that over a billion people have been added to the ranks of the global poor and that the proportion of people in poverty has barely budged.[6]

Why does this matter? As Economist Ha-Joon Chang has demonstrated time and time again, the East Asian countries that have made the most progress against poverty (namely, China, Korea, and Japan) have explicitly rejected the sort of laissez-faire, free market orthodoxy often heralded as the secret ingredient to economic development. These countries took advantage of extremely high tariffs, protected infant industries through import substitution, pirated Western inventions, invested in massive state-owned enterprises, and allowed for high-levels of inflation—all of which directly contradict the “neoliberal” (or as Chang calls it, “neo-idiotic”) development model characterized by free trade, privatization, strict patents, deregulation, and public austerity.[7] Meanwhile, the countries in Latin America and Africa who more closely followed the neoliberal development path failed to develop at nearly the same levels.

As Chang’s analysis makes clear, laissez-faire capitalism cannot take credit for the gains made against poverty in the last 40 years. If anything, neoliberal policies have significantly impeded this progress. At the very least, the story is far more complicated than the DWEIBs would have us believe.

Myth 3: While our current economic system isn’t perfect, we just can’t afford to risk trying something different.

On the contrary, it seems we can’t afford not to try something different. Writing in the World Economic Review, Economist David Woodward found that if we maintain the fastest rate of income growth that the poorest have enjoyed since 1981 (assuming the absence of any financial crises or economic downturns), it will take 100 years to eradicate $1.90 per day poverty and 207 years to eradicate $7.40 per day poverty.[8] Oxfam economist Mujeed Jamaldeen calculated that it would take over 250 years for the income of the poorest 10 percent to merely reach the global average income of $11 per day.

Worse yet, to reach the $7.40 per day level Woodward shows that GDP would have to be 175 times its current level, at which point the average global income would be $1.3 million/year. In other words, under our current economic system, the average income would have to be over a million dollars per year just so that the poor could live on $7.40 per day.

But here’s the real kicker. In 2017, nearly 20,000 scientists from 184 countries issued a “warning to humanity” that our consumption levels are on “a collision course with the natural world” that will result in “widespread misery and catastrophic biodiversity loss” if we don’t start acting now to reverse this trajectory. The UN’s IPCC report released last fall (which some scientists critiqued as “too conservative”) came with a similar message: Time is running out – we must act now to significantly cut emissions or face dire consequences.[9] And just this week, a report co-written by a former fossil fuel executive called climate change “a near- to mid-term existential threat to human civilization” citing the forced relocation of billions of people from unlivable conditions, the collapse of much of the world’s agriculture, massive water shortages and natural disasters on a scale we’ve never seen. It isn’t surprising, then, that our best estimates indicate that we need something closer to “degrowth” if we want to achieve the CO2 emissions levels needed to meet reasonable warming targets.

If we hope to save our planet—or at the very least stave off mass human misery and financial catastrophe—we cannot afford to remain on our current trajectory for the next 10 years, let alone the next 250. The scale of economic growth needed to alleviate poverty under capitalism would mean catastrophic climate change beyond the levels at which even the fiercest climate hawks are willing to make predictions.

The classic “capitalism may be flawed, but it is the best we got” argument is simply irreconcilable with the environmental realities of the 21st century. If we continue on our current trajectory, then the lengthy timeline to alleviate poverty and the resulting inequality will be the least of our problems. The status quo is a catastrophic risk to all of humanity. What we can’t afford to do is ignore alternatives.

Myth 4: At least Western countries are trying to alleviate poverty. If it weren’t for the billions Western countries give to the rest of the world, who knows how bad things would be in the Global South?

It is true that Global North countries give billions in financial support to Global South every year. But this narrative changes dramatically when we look at the flow of money in the opposite direction.[10] In 2016, researchers from Global Financial Integrity (GFI) tallied up the total net outflows between rich and poor countries, finding that while $1.3 trillion is transferred every year from Global North countries to the Global South in the form of foreign aid, foreign direct investment, remittances, approximately $3.3 trillion is transferred in the other direction (mostly due to illicit financial flows, e.g., multinational corporations cheating poor countries out of much-needed tax revenue).[11]

In fact, GFI calculated that that poor countries have sent a total of $16.3 trillion in net outflows to the Global North since 1980. In other words, for every $1 of aid that the South receives, they lose $24. The reality, as Jason Hickel puts it, is that “aid is effectively flowing in reverse. Rich countries aren’t developing poor countries; poor countries are developing rich ones.”[12]

The real question is not a matter of how bad things would be without us—it is a matter of just how much better things would be if powerful countries didn’t rig the rules of the global economy in their favor.

Myth 5: Eradicating poverty is too difficult – we should just give up

In the face of seemingly intractable problems, it is easy to lose hope. However, poverty is not an intractable problem—in fact, we have a greater capacity to truly eliminate poverty now than ever before in history. Jason Hickel calculates that today it would cost only 3.9 percent of the total incomes of those who live at more than double the poverty line to eradicate poverty for good (even less per person if the super-rich were to pay a higher portion).[13] That is worth repeating: We could end extreme poverty tomorrow and it would cost less than 5 cents on the dollar. What this means is that the poverty we face today is not the result of resource scarcity; we have more than enough to eradicate global poverty 20 times over.[14]

…

For most of human history, poverty has existed because humans lacked certain basic resources. Today poverty exists because we fail to distribute those resources in a remotely just way. We lack the political will, not the economic means, to end poverty once and for all.

And this brings us full circle: Why is it that we lack the will to end global poverty? The answer is obvious: Every day we are inundated with stories about how great everything is already. We are told that we are living in an age of unprecedented global progress. That, thanks to our current economic system, human welfare has increased more in the last 40 years than the previous 400. That all we need to do is sit back and wait for the rising tides of Global Capitalism to lift us all to Utopia.

Denial is a powerful sedative, and there is no more effective form of denial than clinging to the notion that everything is just fine. Without it we all might start questioning a system that benefits the few while leaving so many behind. Without it we may start fighting back. Without it the status quo may just begin to crumble before our eyes.

The first step to recovery is recognizing the problem. We have celebrated the end of poverty while billions remain unable to meet their most basic needs. We have patted ourselves on the back for charity while taking far more than we would ever give. We have misidentified the root causes of genuine progress. And we have worshiped an economic system that not only produced morally abhorrent outcomes but poses an existential threat to the future of our planet.

Only once we stare this harsh reality in the face can we ever hope to find ourselves capable of imagining a more just and equitable world.

[1] The database underwriting the OWD GDP estimates is largely incomplete for much of the Global South (almost no data exists for Africa). Further, GDP itself is a terrible proxy for poverty, especially for pre-industrialized nations. GDP estimates don’t include goods acquired outside of the market, such as through farming or fishing—which just so happened to be major sources of subsistence in the 19th century.

[2] As soon as we go back farther than 1981, we are forced to weigh the supposed benefits of capitalist growth against the body counts of Western colonialism (estimated to be 50 million in the 20th century alone) and trans-Atlantic slavery (involving at least 12.5 million West Africans) as well as the extermination of indigenous peoples across the Americas (estimated to be up to 100 million)—all of which were justified under the guise of acquiring new land and extracting economic wealth.For more in depth discussion of the colonialism, slavery, and genocide associated with early-stage capitalism check out Jason Hickel’s The Divide, Ellen Wood’s The Origin of Capitalism: A Longer View, or Edward Baptiste’s The Half Has Never Been Told.

[3] As Reddy and Lahoti demonstrate, the $1.25 per day line (which Woodward used for his calculation) was actually higher in real terms than the $1.90 per day line, implying that Woodward’s estimate is actually conservative.

[4] Under the prevailing poverty line, the World Bank calculates that 700 million people live in poverty. The same year these poverty numbers were unveiled, the United Nation’s Food and Agriculture Organization calculated that anywhere from 815 million to 2.5 billion people did not have enough food to sustain their lifestyles. These numbers vary because the FAO calculates hunger levels separately under different assumptions about physical activity, namely whether one lives a “minimally active,” “moderately active,” or “highly active” lifestyle, each of which necessitates different caloric needs. If you assume the poor are “minimally active” then there are 815 million people in hunger, whereas for “moderately active” there are around 1.5 billion and for “highly active” there are 2.5 billion. The FAO’s “official” hunger number of 815 million people is based on the “minimally active” assumption, which, according to experts, causes it to “gravely underestimate” the extent of global hunger (as these experts point out, it is fairly standard to assume that most of the global poor are in the latter two categories considering they often subsist on manual labor). Worse yet, even the highest lifestyle estimates still are a vast understatement of global hunger. The UN only counts someone as “hungry” if they have failed to meet their caloric needs for an entire year. Imagine how high the numbers of those experiencing hunger would be if we counted people who experienced hunger for three, six or even eight months out of the year?

[5] The artificially low levels of the $1.90 per day line are, in part, due to a series of major flaws in the World Bank’s methodology for calculating the IPL. For example, the way that the World Bank standardizes the IPL across different countries (known as purchasing power parity or PPP), is heavily skewed against the global poor. The standardized “basket of goods and services” used to calculate purchasing power across different countries is based on the average Western consumer’s spending habits. This is problematic because the global poor spend far higher proportions of their income on basic necessities like food than their Global North counterparts. As Thomas Pogge puts it, “in 88 poor countries for which we have data, in each and every one of the 88, the PPP for food shows that poor people can buy less food than you would expect from the PPP that the World Bank is using.” Lahoti and Reddy estimate that the poverty line would be around 33 percent higher if the actual spending habits of the poor were taken into account (largely due to the fact that global food prices have risen while the prices of other consumer goods have fallen).

[6] These trends carry for hunger as well. As experts pointed out in 2012, 73 percent of the UN’s supposed progress against hunger came from China (and they point to China’s land reform policies as the cause). Many developing countries, in fact, have seen a net increase in the number of hungry people, even according to the FAO’s most conservative definition.

[7] Other East Asian countries have also rejected neoliberal economic policies in different ways. For example 80 percent of citizens of Singapore live in public housing.

[8] Woodward’s calculations were made before the World Bank’s inflation-based adjustment of the poverty line, so his calculations are based on a $1.25 per day and $5 per day poverty line. These numbers map closely to the $1.90 per day and $7.40 per day lines (though many argue that, in real terms, the $1.25 line was actually higher than the $1.90 line, which would make Woodward’s calculations even more conservative).

[9] As a reminder, these consequences include a 23 percent reduction in average incomes (the equivalent of a permanent Great Recession), a 50 percent increase in the likelihood of violent conflict and institutional breakdown, a 35 percent decrease in global crop yields, hundreds of millions of climate refugees and an onslaught of natural disasters (not to mention the fact that Spain will be a desert, the U.K. will be flooded and New York City will be underwater).

[10] However, as Peter Singer and others have noted, even the aid we do give has historically been (and often continues to be) tied to strategic geopolitical goals, instead of being focused on the needs of the global poor.

[11] While GFI’s methods are up for debate, even the study’s harshest critics admit that corporate tax evasion, misinvoicing, etc. are major issues harming the Global South.

[12] This isn’t a new phenomenon. The history of colonialism and slavery show us that poor countries have been developing rich countries for centuries. For instance, the British took the equivalent of $45 trillion from India during its rule and the United States stole $14 trillion worth of slave labor from Africa, without which the industrial revolution would not have been possible.



[13] Alternatively, Thomas Pogge estimates it would cost around two-thirds of the U.S. military budget.

[14] However, Pogge and Hickel stress that we should not think of poverty eradication as a matter of collecting money and giving it to the poor. Rather, we should think of it as reforming the global rules that structurally disadvantage the poor. This could mean cancelling the conditions of structural adjustment loans, forgiving the debt of developing nations, getting rid of unequal trade laws/treaties, instituting a global minimum wage, giving poor nations an equal voice at institutions like the IMF, World Bank, and WTO, or myriad other suggestions.

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