Global progress in slashing poverty
Studies suggest big economic strides, but many debate the pace and causes of progress.
Broad new studies suggest that the world has made extraordinary progress in slashing poverty in recent decades.Skip to next paragraph
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The magnitude of the change is the subject of strong debate. But the research suggests that the pace of economic progress has been rapid and sustained for decades, built on the foundations of relative political stability, rising trade, and economic liberalization in the postwar era.
One new study, published Thursday by the Institute for International Economics in Washington, finds that the proportion of the 6.1 billion people in the world who live on $1 a day or less shrank from 63 percent in 1950 to 35 percent in 1980 and 12 percent in 1999 (adjusted for inflation). By some other measures, the progress has been more modest. Still, economists agree that poverty has plunged in key nations such as India and especially China, thanks to slowing population growth as well as economic freedom.
"This is a smashing success for the world as a whole," says Harvard University economist Richard Cooper. "We are doing something right."
The news comes as the World Bank is about to open its annual meeting in Washington an event that has been dogged in recent years by vocal protests that the Bank and its sister institution, the International Monetary Fund (IMF), have done too little for the world's poor.
The new economic research will not put an end to that controversy. Vast populations remain poor, and many still question the wisdom of World Bank policies.
Nonetheless, the research findings are relevant to the question of what policies should be followed by the those institutions and hundreds of other development groups striving to hasten the pace of world economic progress.
If dramatic gains are under way, the present mainstream policies calling for open markets, free enterprise, and stern fiscal and monetary discipline are working and correct. They need only "tinkering," as Mr. Cooper puts it.
But critics of IMF and World Bank policies maintain that such economic success stories as Japan, Taiwan, China, South Korea, and Singapore are rooted in more than just "free" markets. These nations have managed to grow rapidly, and thereby reduce poverty, by restraining imports when their domestic industries were young, pushing exports to rich nations, and putting controls on purely international financial flows. They have been open to foreign-owned factories but have often insisted that those investors share know-how on modern technologies.
Thus, some of the purely capitalist policies urged today, critics say, are damaging.
Measuring incomes and poverty in many developing countries is extremely difficult. Thus, studies are imprecise and conclusions controversial.
A Columbia University professor, Xavier Sala-i-Martin, published two working papers last spring tending to support the rapid-progress thesis. Looking at data from 125 nations, he finds that the number of extremely poor people declined by 235 million between 1976 and 1998, even though population grew hugely. The $1-a-day poverty rate (in 1985 value dollars; $532 a year in today's dollars) fell from 20 percent to 5 percent.