Three questions

In this post I will answer questions that refer to my previous post on extreme poverty.

The first question is: How do we know that the data is correct?

In the previous post I included these graphs:

Our World In Data - extreme poverty graphs

The graphs show a decline in extreme poverty from 38% in 1990 down to 8.6% in 2024. This might seem too good to be true. This decrease in extreme poverty refutes the narrative that "capitalism causes poverty". So it would be reasonable to assume that if the data showing a decline in extreme poverty was inaccurate it would most likely be from a "pro capitalism" or right wing source.  You can review the Our World In Data staff members at  this link:

Our World In Data - team

The staff does not appear to be right wing.

Information about the founder of Our World In Data is at this link:

Max Roser

Max does not appear to be a right wing conspirator. 

Next we can examine the sources that Our World In Data use for their data at this link:

Data

Their data sources are legitimate and from reputable organizations.

Other organizations have reported the same facts:

World Bank poverty

The chart presented by the World Bank shows extreme poverty declining from 44% of the world's population in 1981 down to 9% in 2022.

Here is a news story from a paper that is not considered right wing:

New York Times - Extreme Poverty

In the New York Times story we find these statistics: In 1990, about 36% of the global population lived in extreme poverty and that in 2015 the share of the world’s population living in extreme poverty fell to 12%.

A page from the United Nations website discusses the reduction in extreme poverty:

UN - Ending Poverty

You will find the following statistics in the above UN story: 

From 1990 to 2014, the world made remarkable progress in reducing extreme poverty, with over one billion people moving out of that condition. The global poverty rate decreased by an average of 1.1 percentage points each year, from 37.8 percent to 11.2 percent in 2014.

The share of the world’s workers living in extreme poverty fell by half over the last decade: from 14.3 per cent in 2010 to 7.1 per cent in 2019.

After reviewing the sources above it is safe to say that the data presented in the last blog post is accurate and extreme poverty has indeed declined from 38% of the world's population in 1990 down to 8.6% in 2024. With the additional data on this page we now know that extreme poverty has declined from 44% of the world's population in 1981 down to 8.6% in 2024.

Our second questions is: What caused this decline in extreme poverty?

The answer to this question is: The decline in extreme poverty is a result of  the advance of individual liberty. China and India deregulated their economies, while the Berlin wall fell and the Soviet Union collapsed.

China’s Economic Liberalization (1978–Present) began shifting from a Marxist centrally planned economy toward a partially capitalist free market with the following results:

Growth: Sustained GDP growth averaging over 9% annually for decades.

Poverty Reduction: Over 800 million people were lifted out of extreme poverty, making it the largest poverty reduction effort in history.

Global Trade : Integration into global markets boosted exports and foreign direct investment 

India’s Economic Liberalization (1991–Present):

The 1991 balance-of-payments crisis led to reforms under Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh.

Growth: India's GDP growth accelerated from 3.5% to 6-7% on average post-liberalization.

Economic Transformation: Shift from a closed, socialist, public sector-led economy to a partially capitalist free market with a strong private sector.

IT and Services Boom: Emergence as a global IT and outsourcing hub.

Over 330 million people were lifted out of extreme poverty.

Fall of the Berlin Wall (1989):

Reunification of Germany: Eastern Germany faced economic stagnation and high unemployment as it transitioned to a market economy. Massive fiscal transfers from the West funded rebuilding.

Eastern Europe: Countries like Poland, Hungary, and the Czech Republic liberalized their economies, leading to robust growth, EU integration, and modernization. Over 10 million people were lifted out of extreme poverty.

Breakup of the Soviet Union (1991):

Economic Collapse: GDP in post-Soviet states, particularly Russia, contracted sharply in the 1990s.

Hyperinflation: Rapid price liberalization led to severe inflation in newly independent states.

Privatization and Oligarchs: A flawed privatization process in Russia created oligarchic wealth while impoverishing many.

Recovery: Russia stabilized in the 2000s due to resource exports (especially oil and gas).

Soviet Satellite Republics: Baltic states successfully transitioned to EU-oriented market economies, while other states faced prolonged instability. 45–55 million people lifted out of extreme poverty

The common themes across China, India, Eastern Europe, and the former Soviet Republics is that economic liberalization: deregulation of economic activity plus respect for private property and contracts spurred GDP growth lifting hundreds of millions of people out of extreme poverty.

Our final question: Why is this tremendous accomplishment not widely publicized?

The dramatic decline in extreme poverty worldwide over the past few decades has not been widely reported or celebrated for several reasons:

1. Focus on Negative News

Media Incentives: News organizations often prioritize crises, conflicts, and disasters, as they tend to capture more attention than positive trends.

Perception Bias: People are more drawn to problems needing immediate solutions than to progress already achieved. This "negativity bias" leads to underreporting of positive long-term trends.

2. Complexity of the Story

Abstract Data: Declines in extreme poverty are often expressed in statistics and long-term trends, which can seem abstract and less relatable than personal or localized stories of hardship.

Slow Progress: Poverty reduction is a gradual process and lacks a single dramatic moment, making it less newsworthy.

Complex Causes: The reasons behind poverty reduction (e.g., globalization, technological advances, market liberalization) are complex and not easily summarized.

3. Misperceptions About Global Poverty

Outdated Beliefs: Many people assume global poverty is static or worsening due to exposure to stories of suffering in specific regions, ignoring overall trends.

Lack of Awareness: Public understanding of global development issues is often limited, with many unaware of how much progress has been made.

4. Criticisms of Progress Narratives

Focus on Inequality: Critics argue that while extreme poverty has declined, income inequality has risen in many countries, diverting attention from poverty reduction achievements.

Environmental Concerns: Positive news is overshadowed by emphasizing the environmental costs of economic growth, such as deforestation and carbon emissions, which contribute to poverty reduction.

5. Ideological Divides

Skepticism of Capitalism: Much of the poverty reduction has been driven by globalization, trade, and market liberalization, which are controversial topics in political and academic debates.

Distrust of Data: Some question the reliability of statistics from developing countries or view poverty definitions (e.g., $2.15/day) as too low to reflect real well-being.

6. Competing Global Issues

Focus on Crises: Attention has shifted to pressing global challenges such as climate change, pandemics, migration, and conflict, overshadowing positive developments in poverty reduction.

To thoroughly examine the reasons that this type of story is not widely publicized read the following essay by F. A. Hayek: 

The Intellectuals and Socialism

Consider this quote from a rising star in the economics profession, Per Bylund: "What causes poverty? Nothing. It’s the original state, the default and starting point. The real question is: What causes prosperity?"

Extreme Poverty

Are you aware that the number of people living in extreme poverty worldwide has declined from 38% in 1990 to 8.6% in 2024? (Extreme poverty is defined as living below the International Poverty Line of $2.15 per day. This data is adjusted for inflation and for differences in the cost of living between countries.)  Data supporting this fact is available at the following link:

Extreme Poverty

This is a dramatic and wonderful accomplishment.  The greatest reduction in extreme poverty in recorded history.

If you were not aware of these statistics you are not alone, most people think global poverty is rising when in fact the opposite is happening:

Wrong about world poverty

News media and schools are not sharing the facts about the decline in extreme poverty. This may be because the main driver behind the decline is that more people are gaining the freedom to make their own economic decisions. The shift from central planning to freer markets has unlocked human creativity and productivity.

This good news should be celebrated and shared by all who value human flourishing.