The lies capitalists tell about global poverty


During the recent Davos summit (and at other times) various people were claiming global poverty had fallen because of capitalism. This article methodically debunks that claim.

Some highlights:

First, the long-term poverty graph (1820-present) developed by Max Roser and recently tweeted by Bill Gates is misleading and has little empirical legitimacy. There are a few reasons for this:

Real data on poverty has only been collected since 1981, by the World Bank. It is widely accepted among those who research global poverty that any data prior to 1981 is simply too sketchy to be useful, and going back to as early as 1820 is more or less meaningless.

The narrative that Gates peddle relies on a poverty line of $1.90 per day….this line is not a neutral phenomenon, handed down by the gods or given in nature. It was invented by people, is used for particular ends, and is hotly contested both inside and outside of academia. Most scholars regard $1.90 as far too low to be meaningful.

Using the $1.90 line shows that only 700 million people live in poverty. But note that the UN’s FAO says that 815 million people do not have enough calories to sustain even “minimal” human activity. 1.5 billion are food insecure, and do not have enough calories to sustain “normal” human activity. And 2.1 billion suffer from malnutrition. How can there be fewer poor people than hungry and malnourished people? If $1.90 is inadequate to achieve basic nutrition and sustain normal human activity, then it’s too low – period. Lifting people above this line doesn’t mean lifting them out of poverty, “extreme” or otherwise.

Remember: $1.90 is the equivalent of what that amount of money could buy in the US in 2011. The economist David Woodward once calculated that to live at this level (in an earlier base year) would be like 35 people trying to survive in Britain “on a single minimum wage, with no benefits of any kind, no gifts, borrowing, scavenging, begging or savings to draw on (since these are all included as ‘income’ in poverty calculations).” That goes beyond any definition of “extreme”. It is patently absurd. It is an insult to humanity.

In fact, even the World Bank has repeatedly stated that the line is too low to be used in any but the poorest countries, and should not be used to inform policy. In response to the Atkinson Report on Global Poverty, they created updated poverty lines for lower middle income ($3.20/day) and upper middle income ($5.50/day) countries. At those lines, some 2.4 billion people are in poverty today – more than three times higher than you would have people believe.

But even these figures are not good enough. The USDA states that about $6.7/day is necessary for achieving basic nutrition. Peter Edwards argues that people need about $7.40 if they are to achieve normal human life expectancy. The New Economics Foundation concludes that around $8 is necessary to reduce infant mortality by a meaningful margin. Lant Pritchett and Charles Kenny have argued that since the poverty line is based on purchasing power in the US, then it should be linked to the US poverty line – so around $15/day.

The poverty rate has worsened dramatically since 1981, from 3.2 billion to 4.2 billion, according to World Bank data. Six times higher than you would have people believe.

Your argument is that neoliberal capitalism is responsible for driving the most substantial gains against poverty. This claim is intellectually dishonest, and unsupported by facts. Here’s why:

The vast majority of gains against poverty have happened in one region: East Asia. As it happens, the economic success of China and the East Asian tigers – as scholars like Ha-Joon Chang and Robert Wade have long pointed out – is due not to the neoliberal markets that you espouse but rather state-led industrial policy, protectionism and regulation.

During this period, the number of people in poverty outside China increased by 1.3 billion. In fact, even the proportion of people living in poverty (to use your preferred method) increased, from 62% to 68%.

In other words, the imposition of neoliberal capitalism from 1980 to 2000 made the poverty rate worse, not better.

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