Extreme poverty is not a natural condition. It is an effect of economic systems that appropriate labour and resources, or divert them away from meeting local needs in order to facilitate elite accumulation.
The rise of capitalism from the 16th century onward, and its imposition around the world by European colonizers, was associated with a dramatic decline in living standards for ordinary people. Wages fell to below subsistence, human stature deteriorated and mortality rates increased. Real improvements in human welfare only occurred around the 20th century, as political movements in the global South won independence from colonizers and as labour and socialist movements redistributed incomes and established public provisioning systems.1
This pattern is exemplified in the case of India. Research by Robert C. Allen indicates that extreme poverty in India increased dramatically under British colonialism.2 We do not know the exact shape of the curve between the datapoints for 1600, 1810 and 1977, but data on mortality and stature indicates that extreme poverty probably reached its highest point in the late 19th and early 20th centuries, before recovering with the rise of the labour movement and other progressive and radical anti-colonial forces.1 Despite progress in recent decades, India’s extreme poverty rate is still higher today than it was prior to colonialism. As we can see in the maps below, other countries in the global South have outperformed India, often by introducing public services and social protections.
The World Bank estimates extreme poverty in terms of the number of people who live on less than $1.90 per day (2011 PPP). The weakness of this approach is that it does not tell us whether people can actually afford the cost of meeting basic needs in any given context. In recent years, scholars have developed a more robust method that compares incomes to the prices of essential goods (such as food, clothing and shelter) in each country.3 Reliable data is available only for 1981-2011.4 This data shows that extreme poverty increased in the 1990s, as neoliberal structural adjustment programmes were imposed across the global South. Poverty rates have declined since 2004, but progress has been slow and shallow.
Historically, extreme poverty is a sign of severe social dislocation, dispossession and humanitarian catastrophe. The fact that it remains widespread and normalized today indicates serious structural problems in the world economic system.
Note that several countries in the global South, such as Algeria and Morocco, have extreme poverty rates that are close to zero, despite relatively modest levels of GDP per capita - in many cases outperforming much richer countries on this core indicator.
Robust data on basic-needs poverty is not available after 2011. But data on food insecurity suggests troubling trends over the past decade. The prevalence of moderate and severe food insecurity has increased every year since 2014, and now stands at 30% of the world population.
This map shows the prevalence of multidimensional poverty. 36.6% of the world population lives in a household that is deprived on at least one-fifth of ten weighted indicators related to basic nutrition, child survival, basic education, primary school attendance, cooking fuel, sanitation, drinking water, electricity, housing and basic assets. More than 70% of people in the world live in households that are deprived on at least one of these indicators.
Extreme poverty lines are very low. They tell us about the prevalence of humanitarian catastrophe, but they cannot tell us whether a population enjoys a ‘decent life’ or whether living standards have improved toward this goal. To measure this, we need to know whether people have access to necessary higher-order goods such as electricity, healthcare, clean cooking fuel, and so on. These goods should be available to everyone, and achieving this objective would not require much as a share of total productive capacity. This is the benchmark against which progress should be measured. And yet existing published sources show that as much as half or more of the global population is deprived of access to these essential goods.
Welfare ratios draw our attention to the number of subsistence baskets that low-wage workers are able to buy. In many countries the ratio is less than one, indicating severe deprivation. The global average is 2.8, and the average in non-core nations is less than 2. Only two countries in the global South - Cuba and China - have welfare ratios greater than 4. Cuba stands out as having the highest welfare ratio in the global South, thanks in large part to public provisioning programs that ensure everyone has access to essential goods.
Notes and references
1. Sullivan, D., & Hickel, J. (2023). Capitalism and extreme poverty: A global analysis of real wages, human height, and mortality since the long 16th century. World Development, 161, 106026.
2. Allen, R. C. (2020). Poverty and the labor market: today and yesterday. Annual review of economics, 12, 107-134.
3. This approach was first developed by Allen, R.C. (2017). 'Absolute poverty: When necessity displaces desire.' American Economic Review, 107(12), pp. 3690–3721; and Moatsos, M. (2017). 'Global Absolute Poverty: Behind the Veil of Dollars.' Journal of Globalization and Development. The most reliable figures for 2011 and for the historical period are from Allen, R.C. (2020). 'Poverty and the labor market: Today and yesterday.' Annual review of economics 12, pp. 107-134. For the period from 1981 to 2008, the best available data is Moatsos, M. (2021). 'Global extreme poverty: present and past since 1820.' In: OECD, ed. How was life? Vol. II: new perspectives on well-being and global inequality since 1820. Paris: OECD Publishing, 186–212; and Sullivan, D. Moatsos, M. & Hickel, J., (2023). 'Capitalist reforms and extreme poverty in China: Unprecedented progress or income deflation?' New Political Economy." At the Global Inequality Project, we have combined Allen’s estimate for 2011 with Moatsos’ estimates from 1981 to 2008. See here for a discussion of the strengths and limitations of this approach.
4. The OECD dataset we use here (cited in note 3) also provides estimates from 1820 to 2018. However, the estimates for 1820-1980 and for post-2008 suffer from several empirical limitations, which we describe in paragraph three here.