Yves here. The article below recaps a credible and important analysis that finds that extreme poverty, widely to be claimed to have fallen sharply, has gotten worse in absolute terms and fallen only a bit in percentage terms. Importantly, the study also shows that extreme poverty increased and then started to improve. And what was the cause of the deterioration? Neoliberal “reforms,” natch.
Note that the former beliefs about the wonderful elevation of the destitute thanks to globalization and other forms of market opening came from the World Bank. Keep in mind that the World Bank is one of the major promoters of policies that have not served poor countries well. Former UN economist Jomo Kwame Sundaram supplied this indictment in 2024:
Africans have long been promised trade liberalisation would accelerate growth and structural transformation. Instead, it has cut its modest production capacities, industry and food security.
Berg Helped Sink Africa
The 1981 Berg Report was long the World Bank blueprint for African economic reform. Despite lacking support in theory and experience, Africa’s comparative advantage was supposedly in export agriculture.
Once obstructionist government interventions were gone, farmers’ previously repressed productive potential would spontaneously achieve export-led growth. But there has been no sustained African agricultural export boom since.
Instead, Africa has been transformed from a net food exporter in the 1970s into a net importer. Over the next two decades, its share of world non-oil exports fell by more than half from the early 1980s…
Underdeveloped Agriculture
African agriculture has been undermined by decades of low investment, stagnation and neglect. Public spending cuts under structural adjustment programmes (SAPs) have also depleted infrastructure (roads, water supply, etc.), undermining output.
SAPs’ neglect of infrastructure and agriculture left many developing nations unable to respond to new agricultural export opportunities. Meanwhile, projections ignored the fate of African food security.
SAPs undermined the already poor competitiveness of African smallholder agriculture…
Wishful Development Thinking
World Bank research claimed African countries would gain $16 billion from ‘complete’ trade liberalisation…
Total welfare gains envisaged for SSA minus South Africa were slightly over half of one per cent. But World Bank projections for the overall effects of multilateral agricultural trade liberalisation expected significant losses for SSA.
Gains worldwide would mainly accrue to major food exporters, primarily from the Cairns Group, largely from rich countries. The rich world has long dominated food agricultural exports with indirectly subsidised farming…
Gains from Liberalisation?
Greater trade liberalisation in manufactures, enhanced by the WTO non-agricultural market access (NAMA) agreement, has also undermined African industrialisation.
Limited African market access to affluent country markets has been secured through preferential market access agreements rather than trade liberalisation. Mkandawire noted trade liberalisation would entail losses for Africa with the end of European Union preferential treatment under the Lome Convention.
Hence, the likely overall impacts of trade liberalisation on Africa were recognised as mixed and uneven. The economic welfare of SSA – without Zambia, South Africa and members of the Southern African Customs Union – was supposed to rise after a decade by three-fifths of one per cent by 2015!…
The Doha agreement envisaged then emphasised manufacturing trade liberalisation. Despite gains for some developing countries, SSA minus South Africa would lose $122 billion as SAPs accelerate deindustrialisation…
Africa’s export collapse in the 1980s and 1990s involved “a staggering annual income loss of US$68 billion – or 21 per cent of regional GDP”. Former World Bank economist Bill Easterly blamed these lost decades on SAPs…
Trade liberalisation has significantly reduced trade, industrial, technology and investment policy space for developing countries. Unsurprisingly, food security and manufacturing have been especially badly hit.
Another vector of damage is the International Finance Corporation, which in the 1980s if not even earlier, was sending teams to emerging economies to help them set up capital markets. More open financial markets facilitate the influx and exodus of destabilizing hot money, which is made worse by the Fed’s utter lack of interest in how its interest rate policies affect the rest of the world. One has to assume that liberalized financial markets also facilitate capital flight and extraction by multinationals and other foreign interests. More than a decade ago, Nicholas Shaxson documented in his book Treasure Islands how Africa was a capital exporter, the last thing you’d expect from a poor continent. A big reason was the transfer pricing practices of multinationals. Another was looting by corrupt leaders. For some detail, see How to Rob Africa: A Look into How the West Facilitates Moving Dirty Money.
Mind you, this is not to say that sub-Saharan Africa was the only place that the implementation of neoliberal development policies increased severe poverty, merely that it provides compelling proof of that thesis.
By Jason Hickel, Professor at the Institute for Environmental Science and Technology, Autonomous University of Barcelona, Dylan Sullivan, PhD candidate in the Macquarie School of Social Sciences, Macquarie University, and Michail Moatsos, Assistant Professor, School of Business and Economics, Maastricht University. Originally published at The Conversation
Data from the World Bank suggests that extreme poverty has declined dramatically over the past four decades, from 47% of the world’s population in 1981 to around 10% today.
This narrative is based on the World Bank’s method of calculating the share of people who live on less than US$3 per day in 2021 prices. This is adjusted for general price differences between countries (what’s known as purchasing power parity, or PPP).
But a growing body of literature argues that the World Bank’s PPP-based method has a major empirical limitation. The problem is that it does not account for the cost of meeting basic needs in any given context. Having more than US$3 PPP does not guarantee that a person can afford the specific goods and services that are necessary for survival in a particular location.
In recent years, scholars have developed what they argue is a more accurate method for measuring extreme poverty. This is done by comparing people’s incomes to the prices of essential goods (specifically food, shelter, clothing and fuel) in each country.
This approach is known as the “basic needs poverty line” (BNPL), and it more closely reflects what the original concept of extreme poverty was intended to measure. There is robust data from household consumption surveys and consumer prices covering the period from 1980-2011.
The BNPL data indicates that the story of global poverty over the past few decades is more complex – and troubling – than the World Bank narrative suggests.
This data indicates that between 1980 and 2011, the global extreme poverty rate declined by only six percentage points, from 23% to 17%. During the same period, the number of people in extreme poverty actually increased, from 1.01 billion to 1.20 billion.
What’s more, the alleviation of poverty has not been steady. In the 1980s and 1990s, an additional one billion people were thrown into extreme poverty. This occurred during the period when market reforms were implemented across most of the global south (developing countries in Africa, Asia and Latin America), often under pressure from western-controlled financial institutions. There was improvement throughout the 2000s, but progress has ultimately been slow and shallow.
Rising Food Insecurity
Robust BNPL data does not exist after 2011. However, data from the UN Food and Agricultural Organization’s (FAO) surveys on food insecurity shows that the proportion of the world population without reliable access to food increased steadily during the past decade or so, going from 21% in 2014 to 30% in 2022.
This includes cases of severe food insecurity, which is associated with prolonged periods of hunger. The share of the world population suffering in this way has increased from 7.7% to 11.3%.
Given that secure access to food is central to the BNPL method, we may assume that post-2011 poverty trends have probably not improved much, if at all.
This has important implications for the United Nations’ millennium development goals. The first of these set out to halve the proportion of the world’s population living in extreme poverty between 1990 and 2015. But the data on basic-needs poverty and food insecurity indicates that this goal was probably not achieved.
Extreme poverty is not a natural condition, but a sign of severe dislocation. Data on real wages since the 15th century indicates that, under normal conditions, across different societies and eras, people are generally able to meet their subsistence needs except during periods of severe social displacement.
This includes crises like famine and war, and the institutionalised denial of resources to marginalised people, particularly under European colonialism.
What’s more, the BNPL data shows that many countries have achieved very low levels of extreme poverty, even where GDP per capita is not high. They have done this by using strategiessuch as public provisioning and price controls for basic essentials.
This is consistent with previous research that found that these strategies can enable better social outcomes at any level of income.
In fact, research shows that the world economy already has enough productive capacity to eliminate global poverty many times over. Indeed it is possible not only to eliminate extreme poverty, but also to eliminate deprivation at much higher thresholds.
With these levels of production, we could ensure universal access to healthcare, education, modern housing, sanitation systems, electricity, clean cooking stoves, refrigeration, mobile phones, internet, computers, transport, household appliances and other necessities for decent living standards, for more than eight billion people.
The fact that poverty persists at such high levels today indicates that severe dislocation is institutionalised in the world economy – and that markets have failed to meet the basic needs of much of humanity.
Ending extreme poverty is the first objective of the UN’s sustainable development goals. The world economy has the resources and productive capacity to realise this goal – and more. But achieving it will require organising production to guarantee universal access to the specific goods and services that people need to live decent lives.
