Extreme poverty is not natural, it is created

Over the past few years, this graphic has become a sensation. Developed by Our World In Data and widely promoted by Bill Gates and Steven Pinker, the graphic gives the impression that almost all of humanity was in “extreme poverty” from 1820 (i.e. Alive with less than $ 1.90 per day PPP; less is needed for staple food). OWID used this number to Claim that extreme poverty was the natural or basic condition of mankind, stretching far back into the past: “in the thousands of years before the start of the industrial age, the vast majority of the world’s population lived in conditions that we would today call extreme poverty. In other words, almost all of humanity, for all history, was destitute until the 19th century, when at last colonialism and capitalism came to the rescue.

There is only one problem: the long term trend of the chart is empirically unfounded. For the period 1981 to present, it uses data from World Bank household consumption surveys. It is a legitimate method to assess poverty. For the period prior to 1981, however, the graph is based on the GDP estimates of Bourguignon and Morrison. The problem is that GDP data cannot legitimately be used to tell us about poverty, because it is not an indicator of livelihoods or supplies; rather, it is an indicator of the production of commodities. Contrary to World Bank data, it does not take into account forms of household consumption not linked to basic products (subsistence, common goods, mutuality, etc.), which has been the dominant form of supply during the major part of the story. This is important, because we know that the colonial period was characterized by the destruction of subsistence economies, the closure of the commons, forced dispossession and massive slavery, all of which considerably limited the access of populations to means. subsistence and provisions. In other words, colonialism worsened poverty even in cases where the GDP increased. This violent story is obscured by the OWID graphic and repackaged as a happy story of progress. (For more on this review, see here, here, and here).

This criticism was articulated recently by Robert Allen in a item Posted in Annual review of the economy. He argues that GDP data cannot be used to assess poverty, and argues that the issue of long-term trends can only be addressed with historical consumption data. To this end, it constructs a basic needs poverty line that roughly equates to the World Bank’s $ 1.90 line, and calculates the share of people below that line for three key regions: states. United, UK and India.

Its results reveal a far different story than what the OWID chart would have us believe.

First, Allen demonstrates that the use of Bourguignon / Morrison data leads to a significant overestimation of poverty in the 19th century, especially in the case of rich countries. For example, using B / M data, OWID indicates that approximately 40% of the American population lived in extreme poverty in 1820. In contrast, Allen indicates that the exact figure is closer to 0%. This is not to say that people were not poor by today’s standards, but rather that very few lived in “extreme” poverty, that is, on less than $ 1.90 than one can buy in the United States today. This is what is at stake here.

The same goes for the UK. Even at the height of the feudal period, in 1290, extreme poverty in the United Kingdom did not exceed 20-30%. Welfare ratios suggest things improved from 1350 to 1500, during the post-feudal revolutionary era, and then worsened again with the close after 1500, a period characterized by massive dispossession and collapsing wages. . The standard of living of working people began to recover from a nadir in the mid-1600s, so that by 1688 the rate of extreme poverty was around 5-10%, according to Allen. In the 1800s, extreme poverty in the UK was eradicated, largely thanks to the early welfare system.

These data from the US and UK clearly contradict OWID’s claim that “in most wealthy countries the majority of the population lived in extreme poverty only a few generations ago. .

Allen’s findings on the comparatively low rates of extreme poverty in the UK in the pre-1820 era raise an interesting question. A number of economic historians have pointed out that well-being ratios in 18th century Asia were generally comparable to those in Europe and, in many cases, were even higher (Pomeranz 2000; Parthasarathi 1998; Sivramkrishna 2009 ; Wong 1997). If this is true, what does this mean for historical poverty trends in Asia?

World Bank data shows that about 50-60% of the Asian population lived in extreme poverty in 1981. The OWID account implies that prior to this period – indeed, apparently for all recorded history – the rate was even higher than that, with virtually everyone in extreme poverty. In other words, OWID would have us believe that Asia, home to the world’s most advanced historical civilizations, has always been extremely poor, unable to meet even the most basic food needs, until may it be rescued by imperial intervention and capitalist globalization. Is it true? Or is the 60% rate actually a modern phenomenon? As Allen puts it, is this level of poverty “a recent development in world history?”

Allen answers this question by looking at consumption data in India. He notes that in 1810, the rate of extreme poverty was only 23%. And he indicates that it was after an upward push under British colonialism. During Akbar’s reign at the beginning of the 17th century, before the British intervention, “it is quite possible that the poverty rates were much lower”. If Allen’s figures are correct, it means that the rate of extreme poverty increased dramatically during the period of British colonialism (World Bank data shows extreme poverty in India was 60% in 1981).

In other words, the high rates of extreme poverty we see in Asia in the 1980s are a modern phenomenon – “a development of the colonial era,” writes Allen; “Many factors may have been involved, but imperialism and globalization must have played a leading role.” Allen’s findings indicate that due to colonialism, extreme poverty in 20th century Asia was much worse than under 13th century feudalism. Progress, it seems, is not one-sided.

Of course, Allen only looked at data from three regions. It calls for further research on this issue, and such research is already underway. But if these results are valid, we must reassess the dominant discourse on long-term poverty trends. The idea that extreme poverty is the basic state of humanity crumbles, and it becomes clear that the story is more complicated. In general terms, extreme poverty likely increased during periods of confinement and colonization (after all, we know that imperial interventions caused an almost total demographic collapse in Latin America, serial famines that killed up to to 70 million people in India, a collapse of wages in China, etc.), before finally declining with the rise of labor movements, democracy and decolonization. Indeed, this is indicated by existing data on well-being ratios in Europe and Asia.

There is one final observation from Allen’s article that is worth noting. Allen finds that the $ 1.90 / day (PPP) line is lower than the level of consumption by slaves in the United States in the 19th century. In other words, the poverty line used by the World Bank that underlies the progress narrative is below the level of slavery. It is striking that anyone would accept this as a reasonable benchmark for “progress” in a civilized society.

Teaser photo credit: By Evstafiev – Own work, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=4778534

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