Friday, April 19, 2013

The War on Extreme Poverty


Who’s winning the war on extreme poverty? Obviously, China is.

Anyone who subsists on less than $1.25 a day counts as extremely poor.

In the last three decades the amount of extreme poverty has decreased significantly around the world.

The World Bank reports:

Extreme poverty in the world has decreased considerably in the past three decades (figure 1). In 1981, more than half of citizens in the developing world lived on less than $1.25 a day. This rate has dropped dramatically to 21 percent in 2010. Moreover, despite a 59 percent increase in the developing world’s population, there were significantly fewer people living on lessthan $1.25 a day in 2010 (1.2 billion) than there were three decades ago (1.9 billion).



As the chart shows, most of the improvement comes from China.

In 1981, after a little more than three decades of Maoism, China was suffering an extreme poverty rate of 84%. In 2010 the rate had fallen to 12%.

By way of comparison, in India the rate dropped from 60% to 33% over the same time period.

Martin Wolf’s statement that Deng Xiaoping was the greatest free market reformer of our time is certainly defensible.

It's worth noting that the engine of economic growth in China was free market capitalism. It had nothing to do with foreign aid or larger government. Privatizing the socialized economy decreased government power.

The question is, could China have expanded economic freedom and rolled back the tide of Maoism while also granting more political freedom?

Would greater political freedom have changed the economic growth numbers for better or for worse or not at all?

And also, could China have achieved these results without producing an unconscionable level of pollution?

Did the nation’s leaders believe that they had to choose between famine and pollution?

 If so, were they right or wrong?

4 comments:

  1. Another factor in China's rise has been the increased globalization of trade, enabled largely by three factors:

    1) Sea transport via container freight
    2) Fuel-efficient jet aircraft
    3) Low-cost data and voice communications

    Absent a large export market, would China's move toward free markets have still achieved today's levels of economic growth and poverty elimination? My suspicion is that the answer is Yes, but it would have taken considerably loner.

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  2. "Who’s winning the war on extreme poverty? Obviously, China is.

    Anyone who subsists on less than $1.25 a day counts as extremely poor."

    China's also winning the war on population growth.

    Total Fertility Rate is down to 1.40.

    We don't know what happens then, but it went along with the victory of the "war on poverty".

    The cities are all under 1.

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  3. I recall reading somewhere that China is going to relax the one-child policy. Anyone else see the story?

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  4. @Stuart:

    "I recall reading somewhere that China is going to relax the one-child policy. Anyone else see the story?"

    Yes, I saw the story.

    However, the fertility rate of China is not going to rise for the same reason that Japan and Korea have low fertility rates.

    The fertility rate for China in 2000 was 1.85. Now it's 1.40.

    The one child policy didn't change.

    China's economy changed.

    Japan - Fertility rate - 1.39
    S. Korea - Fertility rate - 1.30

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