The world as a whole has made great progress in reducing the incidence of extreme poverty over the last 200 years, as can be seen from the graph below. The numbers are uncertain (and even more so as one goes further back in time). But as best can be determined, the proportion of the world’s population living in poverty fell from roughly four out of five in 1820 to less than one in five today.
Source: Based on the estimates of the global distribution by Francois Bourguignon and Christian Morrisson, “Inequality among World Citizens: 1820-1992,” American Economic Review 92(4): 727-744, 2002. Poverty rates by country/region estimated by Martin Ravallion from the distributions kindly provided by Bourguignon and Christian Morrisson. Further details can be found here.
Progress was far slower in reducing the count of the number of people living in such extreme poverty, which stated around one billion until the late 20th century.It was not until the late 20th century that we started to see falling numbers of people living in poverty by this standard. The good news is that there are fewer people living in extreme poverty in the world today than 30 years ago.
While that is an achievement, continuing progress for poor people is far from assured. Inequalities in access to key resources threaten to stall growth and poverty reduction in many places. The world’s poorest have made only a small absolute gain over those 30 years. We have seen rising absolute gaps between rich and poor. Progress has been slow against relative poverty, judged by the standards of the country and time one lives in. And a great many people in the world’s emerging middle class remain vulnerable to falling back into poverty.
Much progress has been made in measuring global poverty. However, there are a number of challenges that need to be addressed if the measures are to stay reliable and relevant, including:
(i) Allowing for social effects on welfare, recognizing that relative deprivation matters to welfare and that there are costs of social inclusion in richer societies;
(ii) Monitoring progress in raising the consumption floor above its biological level, in addition to counting the number of people living near the floor; and
(iii) Addressing the longstanding concerns about prevailing approaches to making inter-country comparisons of price levels facing poor people using the results of the International Comparison Program.
Some suggestions for operational solutions are offered here: Toward Better Global Poverty Measures.