The Past, Present and Future of Poverty

Bill Gates and the World in Data indicate the extreme poverty below $1.90 PPP per day has massively decreased from 1820 to today.

Dr Jason Hickel of the University of London made the case that the global poverty line should be $7.40 PPP per day and that the number of people living under this line has increased dramatically since measurements began in 1981, reaching some 4.2 billion people today.

Steve Pinker pointed out issues with Hinkel’s analysis.

Hickel’s picture of the past is a romantic fairy tale, devoid of citations or evidence, and flatly contradicted by historians such as Fernand Braudel who have examined contemporary accounts of life in previous centuries, and economic historians such as Angus Maddison and his students who have tried to quantify it using wills, government records, and other data.

The drastic decline in extreme poverty is corroborated by measures of well-being other than income that are correlated with prosperity, such as longevity, child mortality, maternal mortality, literacy, basic education, undernourishment, and consumption of goods like clothing, food, cell phones, even beer—all have improved.

Others have indicated problems with Hickel’s analysis.

The World Bank webtool allows global poverty using whatever arbitrary threshold you like.

$3 a day? There has been a fall from 53.1pc of the global population earning below that in 1990 to 26.1pc in 2013 (an absolute fall from 2.8 billion to 1.9billion people).
$5 a day? The proportion failing to meet that standard fell from 65.5pc to 45.3pc over the same period (a more modest fall in the absolute number from 3.4 billion to 3.2 billion).
$10 a day? Again, the proportion has fallen from 76.0pc to 66.5pc — though in this case that represents a rise from 4 billion to 4.8 billion since 1990, a 19pc increase coinciding with a 36pc increase in global population.

Hickel notes that most of the gains have been in East Asia.

Our World in Data defended the methodology and data on poverty.

The chart shows global GDP per capita as constructed from the Maddison database. Economic growth is a reality – average income has increased by roughly a factor of ten over this period.

Extreme poverty estimates prior to 1981 are taken from the famous research paper of Bourguignon and Morrison. Their estimates are based on a reconstruction of the global income distribution using the Maddison Project’s database of historical GDP per capita series for different countries.

Future for China, India and Asia

The World will need the poorest who have about $1.90 per day now to get another $5.5 per day to reach the Hickel’s definition of non-poverty. This would be near the definition of global middle-class at $10-100 per day. It will require about an additional $8 trillion per year in GDP per capita.

There should be about 2 billion more people joining the global middle class by 2030. There will be slightly more at the $7.4 per day to $10 per day level. Those would be people who would likely become global middle class about 3-5 years later. There would be another 500 to 700 million people at the $7.4 per day to $10 per day level. About 6 billion will be above Hickel non-poverty level in 2030. There would still be 2.5 billion below the higher poverty level. About 150 million per year would be raised out of that higher poverty level every year based upon current trends and activity.

The world population is 7.7 billion now. The wealthy and the middle class are 3.9 billion today. World population will reach 8.5 billion in 2030. The wealthy and the middle class are 5.4 billion in 2030.

There would still be about 3.1 billion who will be less than global middle class in 2030. The vast majority would be in Africa. There will be about 500 to 700 million people at the $7.4 per day to $10 per day level.

Overall Asia is growing at 4-8% per year and South America at 0-3% per year.

Brazil is the dominates South America’s per capita GDP statistics. Half of the population of South America is in Brazil. 210 million in Brazil and 430 million in South America.

China and India dominate Asia GDP statistics. They each represent about 30% of the overall asian population.

China will pass Brazil in per capita GDP in 2019.

China’s GDP per capita will be 20 to 30% beyond Brazil by 2023.

Around 2028 to 2035, India and the ASEAN countries will be around the per capita income level of South America. India and most of the population of the ASEAN countries are currently at the 25-30% of the per capita income level of South America.

China will have an overall per capita GDP at the end of 2018 of about $10000 compared to $24000 per capita GDP in Europe. Europe has slow GDP growth of 1-2% per year. China should be at $12500 exchange rate GDP per capita in 2021. This will be about half the GDP per capita level of Europe.

On a per capita PPP GDP level, Europe is at $32000 now while China is at $17000.

China has a narrow range of GDP per person than Europe. The richest European country, Luxembourg is over 50 times richer than the poorest, Moldava on a per person basis. China richest province is about 5-6 times richer than its poorest.

China’s poorest province Gansu is richer than Armenia, Ukraine and Moldova.

2016 statistics

Beijing, Shanghai And Tainjin are at or slightly above the Cyprus level based upon PPP per capita GDP in 2017. Combined they have a population of 60 million.

Jiangsu with about the population of Germany at 80 million will be above the Portugal level of PPP per person.

Beijing, Shanghai And Tainjin should pass Portugal on exchange rate basis per capita GDP in 2018.

By 2024, the top 7 or 8 provinces with over 300 million should be past the Portugal level of exchange rate basis GDP per capita.

By 2027, the ten richest provinces in China with about 400 million people will be at about the middle-income level of Europe Portugal to Italy level. The richest cities in China will be like France in per capita income.

China has 33 provincial level regions with almost half with populations higher than Poland. Poland is the 8th most populace European country with 38 million. The 9th most populace European country is Romania with 19.7 million. Only 5 of China’s provinces have populations lower than Romania.

The World economic transformation over the next twenty years is Asia moving past South America in the next five years on per capita income. Most of China moving to Southern European levels by 2030. Southern Asia (India, Indonesia) reaching South American levels in per capita income around 2030. China reaching European levels around 2040. India and ASEAN getting close to Southern European levels around 2040.

From 2000 to 2010, Asia had one quarter to one-third of the per capita income of South America.

Currently on a per capita level, Asia and South America are close with Asia having about 80-90% of the per capita income of South America.