Drop in Poverty
However, the very best news of all is that the number people that live in extreme poverty (defined as those subsisting on under $1.90 daily) have plummeted dramatically over the past 3 decades.
In year 1990, the United Nations established a goal to reduce the poverty rate of the World by 50% by the year 2015. That goal was reached 5 year early in the year of 2010. This means that more than a billion people were saved from extreme poverty in over 20 years. This is quite an amazing and even unprecedented shift.
But Poverty is Still Alive and Well
Before enjoying the new numbers too much, we can’t forget about the 10% of the world who still live in extreme poverty. The question is can we ever get that number down to zero? Further still, would it even be possible to accomplish that? When we look at all the factors that were responsible for cutting poverty over the past 20 years, all signs indicate that there are more obstacles than bridges in the future.
The story behind the poverty drop that began in the 1980s to today was mainly driven by only two countries, and those were India and China. The data from China is particularly amazing. In the year 1981, there was an incredible 88% of all Chinese who were living in extreme poverty, but by the year 2013, that number had fallen to 2%. The statistics from India are not as dramatic, but are still very good. In India, that number fell from 54% down to 21%.
Sub-Saharan Africa, for instance, started with a 54% extreme poverty population in year 1990, and that number fell to 41% by 2013. These numbers are an example of how statistics can lie to you. Because of the massive growth in population taking place in Africa, the actual number of people living in poverty actually increased by 113 million during those years – even though the percentages show a decline.
So why exactly could the World not eradicate extreme poverty altogether? Could we not duplicate the actions that China took to improve their people’s lives?
The Chinese Miracle
In order to allow 86% of their people to escape extreme poverty in 32 years, China obviously did some things right, or had some great luck – maybe even both. To begin with, we understand that China enjoyed an explosion in manufacturing because of the country’s plentiful supply of cheap labor. China also enjoyed 3 primary drivers for this shift – each also has its own drawback.
Political Structure
China has operated under an authoritarian government for many years. This has actually helped reduce poverty over the past few decades. The government owns all lands, so it has no roadblocks when building infrastructure projects that create jobs. And when it implements policy, there is no reason to worry about appeasing voters.
The drawback with their politics is that they are lagging far behind the west in vital areas like human rights and most certainly environmental concerns – China among the worst in the world when it comes to pollution and clean air.
Population Control
As we pointed out with Africa’s population growth earlier, if a country’s population isn’t controlled somehow, it will not matter how much growth they have. When the population grows more than the GDP does, there will not be enough to go around. China overcame this by introducing its one-child policy back in the year 1979.
This policy indeed worked when you compare China’s 38% population growth from 1980-2013, to the 84% population growth of India during the same time period, and Africa’s whopping 147% growth.
A big drawback with this one-child policy was a general preference to have boys rather than girls which led to baby girls getting discarded. This has led to dramatic gender imbalance.
Demographics
China’s economy had great timing as well. Because there were high birth rates prior to the government’s one-child policy, this provided them with a massive population of working age adults. This led to the biggest urban migration in history as people in their 20s to 40s moved to cities for employment.
The drawback here is that all these people who were in the prime and available to work are not anymore. They have all aged and now the country’s reduced birth rate are not high enough to replace them. Needless to say, the Chinese miracle is coming to an abrupt halt.
Conclusion
As we can see, China has pretty given the World all the improvement in reducing extreme poverty that it possibly can. We can no longer look to them for more poverty reduction.
However, if their actions starting in the 1980s could be applied to Africa, then maybe we could be talking about the African Miracle in about 30 years.
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