Summary
Two centuries ago the majority of the world population was extremely poor. Back then it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. Economic growth is possible and poverty can decline. The world has made immense progress against extreme poverty.
But even after two centuries of progress, extreme poverty is still the reality for every tenth person in the world. This is what the ‘international poverty line’ highlights – this metric plays an important (and successful) role in focusing the world’s attention on these very poorest people in the world.
The poorest people today live in countries which have achieved no growth. This stagnation of the world’s poorest economies is one of the largest problems of our time. Unless this changes millions of people will continue to live in extreme poverty.
The World Bank has updated its poverty and inequality data
The data in this article uses a previous release of the World Bank’s poverty and inequality data in which incomes are expressed in 2011 international-$.
The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).
This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.
There are poor people in every country, people who live in poor housing and who struggle to afford basic goods and services like heating, transport, and healthy food for themselves and their family.
The definition of poverty differs from country to country, but in high-income countries the poverty line is around $30 per day.1
Even in the world’s richest countries a substantial share of people – between every 10th and every 5th person – lives below this poverty line.
In this map, and in all international poverty statistics on Our World in Data, the data is adjusted for inflation and cross-country-differences in the price level. In the fold-out-box below you find a more detailed explanation of how poverty is measured and how these statistics account for the differences in price level across countries.
Basics of global poverty measurement
We can apply this $30-a-day-poverty-line to the global income distribution to see the share in poverty as judged by the definition of poverty in high-income countries.5
The latest global data tells us that the huge majority – 85% of the world population – live on less than $30 per day. That means 6.5 billion people.
Extreme poverty is defined by the UN as living on less than $1.90 a day. Why do we need a poverty line that is so extremely low?
It is not enough to measure global poverty solely by a higher poverty line because a large number of people live on very low incomes. If we’d only rely on the poverty line from high-income countries we would hide the very stark differences between people with very different living standards. Whether someone was living on almost $30 a day or on 30-times less would not matter – they would all be considered ‘poor’.
Adding more poverty lines draws attention to the large income differences between people and highlights how many live on extremely low incomes.6
The $1.90 poverty line, set by the UN, shows that globally close to one in ten people live in extreme poverty. In all these statistics the researchers are not only taking people’s monetary income into account, but also their non-monetary income and home production. One reason why this is important is because many poor people are small scale farmers who produce their own food.7 The fact that there are so many extremely poor people in the world makes it necessary to have such a low poverty line. Without an extremely low poverty line, we would not be able to see that a large share of the world lives in such deep poverty.
The UN’s global poverty line is valuable because it has been successful in drawing attention to the terrible depths of extreme poverty of the poorest people in the world.8
In a related essay I focus on global poverty as defined by a higher poverty line. In this text here I’m focusing on the very poorest in the world and want to look at what needs to happen to end extreme poverty.
The big lesson of the last 200 years: Economic growth is possible, poverty is not inevitable
What needs explanation is not poverty, but prosperity. Deep poverty was the condition that the majority of humanity has always lived in. In the pre-modern days hunger was widespread and every second child died no matter where in the world it was born.
Historian Michail Moatsos has recently produced a new global dataset that goes back two centuries. The chart shows his data. According to his research three-quarters of the world lived in extreme poverty in 1820. This means they “could not afford a tiny space to live, some minimum heating capacity, and food that would not induce malnutrition.”9
The chart looks simple, but it would be a mistake to think that it was simple to produce this data. Underlying it is a wealth of careful historical research that Moatsos made use of. Historians gathered data for people around the world over two centuries to reconstruct how many of them were able to afford a set of very basic goods and services and aggregated this detailed information into this final picture. You find more information on the methodology at the footnote.10
Economic growth made it possible to leave the widespread extreme poverty of the past behind. It made the difference between a society in which the majority were lacking even the most basic goods and services – food, decent housing and clothes, healthcare, public infrastructure and transport – and a society in which these products are widely available.
Growth means that a society produces an increasing quantity and quality of economic goods and services. The key to economic growth is the development of technology that makes it possible to increase productivity by which these goods and services are produced.
Because the total production in an economy equals the total income in that country – as everyone’s spending is someone else’s income – incomes grow at the same rate as production increases.
The 9 charts show the data for different regions in the world. On the x-axis of each chart you find the average income (GDP per capita) and on the y-axis you see the share living in extreme poverty. The starting point of each trajectory shows the data for 1820 and it tells us that two centuries ago the majority of people lived in extreme poverty, no matter where in the world they were at home.11 Since then all world regions achieved growth – the production of goods and services increased – and the share living in poverty declined.
[In my post ‘What is Economic Growth?’ you find much more on what economic growth is and how it is possible.]
How far do we still have to go?
The previous chart showed that Sub-Saharan Africa is the poorest region. Almost 40% of the population lives in extreme poverty.
Not all African countries are struggling, in fact most African countries have achieved good growth after the end of the oppressive colonial regimes that hindered the growth of African economies. But in a number of countries the situation is particularly bad. These countries remain as poor as they were in the past. Since the economy is stagnant, poverty is too.
In the small chart you see the daily mean income in three of the poorest countries today. For four decades they did not achieve economic growth.12
To see the consequences of this let’s first focus on one country that achieved large growth and then contrast it with a country that did not.
A country that achieved large growth is the UK: the orange distribution on the left shows incomes in the UK two centuries ago; the majority lived in extreme poverty. The green distribution shows how the distribution of incomes has changed since then. Two centuries of economic growth lifted the majority of people out of the deep poverty of the past.13
The next chart shows the income distribution of the UK in 2019 in green – just as in the previous chart – and in red the income distribution of Madagascar, a country that did not achieve growth.
The majority of people in Madagascar still live in extreme poverty. Very similar to the global situation two centuries ago, three-quarters of Madagascar’s population are living in extreme poverty.
Not just economic growth, but also the distribution of that growth matters. If the inequality of incomes increases, the poorest can be left behind. But without economic growth there is no chance at all to leave poverty behind. The data from Madagascar makes clear that a reduction of inequality cannot end extreme poverty in a poor country. If inequality in Madagascar would be entirely eradicated then everyone would live on the average income. In Madagascar this is $1.60 a day. For poor countries, the only way to end poverty is an increase of incomes – and that means economic growth.
The majority of the world is making good progress against poverty, but not all: some of the very poorest economies are stagnating
The history of extreme poverty is at the same time one of humanity’s greatest achievements and failures.
The majority of the world left extreme poverty behind. To me this ranks among the most impressive and most important achievements in humanity’s history.
But, as we’ve seen, the fight against extreme poverty is far from over. About one in ten people still live in extreme poverty right now.
The worry with extreme poverty today is that some of the world’s poorest countries are not growing. Unless this changes hundreds of millions of people will continue to live in extreme poverty.
Crucially this was true before the pandemic hit – even before COVID, researchers expected that half a billion people would remain in extreme poverty by 2030. The global recession that followed the pandemic exacerbated this further.
When it comes to the consequences of climate change this is what I am most worried about. Richer people will be able to adapt in many ways. It is the extremely poor population that will be hardest hit.
The economic stagnation of some of the world’s poorest countries is not as widely known as it should be. I think it deserves more attention.
If the stagnation of the very poorest economies persists we will see a growing divide at the lowest end of the global income distribution. While the living standards of the majority of the world are rising, some of the world’s very poorest people remain in extreme poverty.
Whether or not the poorest countries achieve growth is among the most important questions for the coming years. It will decide whether humanity wins its long fight against extreme poverty or not.