The rise of Asia’s economies since the 1980s delivers an ideological challenge few Western thinkers have been willing to acknowledge, despite the moral imperative of reducing the poverty scourge.
With trade war tensions between China and Western powers sending shivers through global markets, The Economist this week ran a cover story titled ‘A new kind of cold war’, cautioning that ‘the world should be worried’.
In Washington, the hawks were warning of the need for containment strategies on par with those applied to the Soviet Union in order to curb Chinese influence. In the same week, the IRR was in Beijing at the Conference on Dialogue of Asian Civilisations, addressed by President Xi Jinping. What follows below is extracted from a document presented by the IRR at a forum of that conference, which was hosted by the Chinese Academy of Social Sciences and organised by the National Institute for Global Strategy.
When examining the material circumstances of the world’s population over the past 10 000 years, it is striking how most human development has taken place over the last century alone. Even as recently as the 19th century, the vast majority of people lived in what we today consider extreme poverty. Outside Europe and North America, the majority of people continued to live in conditions of extreme poverty until the latter half of the 20th century.
While all the world’s regions have made progress in reducing poverty and raising living standards, none have seen the rate of poverty reduction that has occurred in Asia since the end of the Second World War – and the Asian example has, as a result, come to pose a daunting intellectual challenge to Western liberal thought. Yet few Western thinkers or policy makers are prepared to acknowledge the extent of this challenge and even fewer have risen to meet it.
By almost any metric – wealth, income, life expectancy, child mortality, Gross Domestic Product (GDP) per capita – poverty and poor living standards have been the default experience for the majority of people on Earth. It is estimated that, in 1820, on the eve of the Industrial Revolution, 94% of all people across the globe lived in a state of poverty, defined as living on less than $2.00 per day (expressed in 1985 purchasing power parity). By the beginning of the 20th century, this had only fallen to 84%.
Since 1981, the World Bank has tracked extreme poverty, defining it as applying to people living on less than $1.90 per day of income (in 2011 dollars purchasing power parity). Contemporary World Bank data suggests that the proportion of the global population living in extreme poverty stood at around 10% in 2015, a dramatic reduction from the 94% that authors François Bourguignon and Christian Morrisson estimated was the case in 1820. (Bourguignon is a former Chief Economist of the World Bank and Morrisson a former economist at the Organisation for Economic Co-operation and Development.) More striking is that this reduction occurred despite the global population growing from around 1 billion to 7.3 billion over the same period.
By comparing the data of Bourguignon and Morrisson and the World Bank’s estimates, we can infer that it was only between 1960 and 1980 that the proportion of people living in extreme poverty globally dropped below the 50% mark.
Not only did people suffer from low levels of income, but average life expectancy was short for almost every society on Earth, and – up until the late 19th century – no major region of the world had an average life expectancy much above 40 years. In parallel with falling extreme poverty levels, life expectancy had risen to a global average of 71.5 years in 2014. Whereas Thomas Hobbes could once imagine human life being ‘solitary, poor, nasty, brutish and short’, today that risk is much less, and much of the recent reason for this can be found in Asia.
When the World Bank first began calculating the proportion of people in East Asia and the Pacific living in extreme poverty in 1981, it estimated that proportion to be approximately 81% of the population living on $1.90 of income a day. By 2015, this proportion had declined to 2.3% of the population. More remarkable still is the low economic base and extreme levels of poverty that defined these economies as recently as the 1960s.
In 1960, South Korea and Ghana had a similar GDP per capita. Ghana stood at $1 080 per capita and South Korea at around $973 per capita. By 2017, Ghana’s GDP per capita had grown to $1 810, while in South Korea it had mushroomed to $26 200.
Singapore has seen a similar trajectory to that of South Korea. In 1960, Singapore had a GDP per capita of $3 400, lower than South Africa’s, at $4 500 per capita. But by 2017, Singapore had a GDP per capita equivalent to the United States, at $55 200, while South Africa stood at $7 500.
In 1960, Ghana and South Africa demonstrated child mortality rates of 180 and 215 children dying (between the ages of 0-5 for every 1 000 born) respectively. Conversely, South Korea had a child mortality rate of 80 and Singapore had a rate of 115. By 2017, South Korea’s rate had fallen to 2.5 per 1 000 live births, and that in Singapore to 3.5, while in South Africa it was 40 and in Ghana, 60.
While a number of Asian economies have shown remarkable progress, one cannot properly discuss poverty reduction in Asia or the world without discussing China.
In 1990, the United Nations (UN) set several development goals to be achieved by 2015. Known as the Millennium Development Goals, the most important objective was to halve the number of people globally living in extreme poverty by 2015. At the time of the adoption of these goals, the World Bank estimated the number of extremely poor people globally at close to 1.9 billion.
Of the 1 billion people living in China in 1990, it was estimated that 67% were living in extreme poverty, which accounted for roughly a third of the world’s extremely poor. However, since 1979, China has averaged an annual GDP growth rate of around 9%, which, though it has slowed recently, remains remarkably high, at around 6%. The effect on levels of extreme poverty has been dramatic. From 67% in 1990, the level dropped to 38% in 2000, 11% by 2010 and 0.7% in 2015. During the same period, China’s population grew by around 400 million people.
So successful has been the eradication of extreme poverty that new higher thresholds for measuring extreme poverty have been proposed as the alternative standard. Even under revised metrics, the growing prosperity of China is unquestionable. For example, if poverty is measured at $3.20 of income per day, then levels of Chinese extreme poverty have reduced from 90% in 1990, to 7% in 2015. If the measure is set at $5.50 income per day, then the reduction is from 98% in 1990 to 27% in 2015. Without the remarkable transformation in China’s prosperity, it is unlikely the UN would have been able to claim the victory it did in 2015 in the fight against extreme poverty.
Consider that, in 1960, China’s GDP per capita was estimated at $200 (making it significantly poorer than Ghana). By 2017 it was $7 300. The effect of this prolonged period of economic growth has been, in absolute numbers, the largest sustained reduction of poverty in human history.
The improvements in GDP per capita and $/day income metrics are in turn reflected in indicators beyond income. In 1990, for example, China had a child mortality rate of 80 deaths per 1 000 live births, a rate similar to that of the United Kingdom in the 1930s. Three decades later, in 2018, the Chinese rate had fallen to 10 per 1 000 live births. A similar pattern is repeated across all Chinese socio-economic metrics.
The world today is distinct from all other periods of history in that grinding poverty is no longer the norm for the majority of people. The remarkable transformation of global wealth and standards of living in the last 100 years is entirely unprecedented in human history, particularly with regards to Asian and, more specifically, Chinese development in recent decades. Yet, until the end of the Second World War, ideas dating back to the Enlightenment had been dominant in framing models for economic development – to the extent that these are assumed to be default frameworks. The rise of Asia’s economies since the 1980s has produced an ideological challenge to the previous hegemony of Western-inspired development thinking. It is a challenge based on the extraordinary successes in raising human living standards recorded in Asia.
Few Western thinkers have been prepared to meet or even acknowledge the challenge, despite the moral imperative to reduce levels of poverty in those parts of the world particularly affected by the scourge.
Nicholas Lorimer is an analyst at the IRR and produced the bulk of this paper. David Ansara is COO of the Centre for Risk Analysis at the IRR. Frans Cronje is CEO at the IRR.