The Eradication of Poverty - Why it Will Happen in Our Lifetime

The economic situations of countries are not as constant as it sometimes seems. Especially for the young, who haven't lived as long, it is easy to think that some are poor and others are rich and that that's just they way it is. But that's not the way it is. Nobody needs to be poor for others to be wealthy and in the not-so-distant future, extreme poverty will be little more than an uncomfortable part of human history. Thousands of ongoing concerted efforts towards poverty reduction will at some point in the course of the current century culminate in a near complete eradication of the absolute poverty that today ails some 25% of the world's population.

The best macro-level indicators we have for where we've been, where we are, and where we're going in terms of poverty reduction is the UN's extensive annual report on the progress of their Millennium Development Goals (MDGs). In the year 2000, all 192 countries in the UN agreed on 8 main goals to collectively pursue for the next 15 years. The number one goal was to halve the proportion of the world's population who live beneath the poverty line (currently defined as a daily income of less than $1.25 (PPP)) from the 1990 level of 42% to 21% by 2015.

By 2005, the proportion of the world's denizens living below the poverty line had fallen from 42% to 25%, an impressive achievement in a mere 15 years. The greatest progress was made in East Asia and the Pacific, who reduced the proportion of extremely poor from 55% to only 17% in 2005, with countries such as China and Vietnam regularly posting annual growth rates of ten per cent (and sometimes more) for their economies. Southern Asia, led by India, Pakistan and Bangladesh, reduced their proportion from 52% to 40%. The region with the most sluggish growth has, as expected, been sub-Saharan Africa, with only a 7 percentage point reduction from 58% to 51%.

The global recession of 2008, the full extent of which we have yet to see, has stalled much of the progress made between 1990 and 2005, and we may miss the number one MDG when it's due in 2015, but in all likelihood only by a few years.

Stock exchanges are a good indicator of the future of the real economy, or "Main Street" as it is all too commonly referred to. Financial market started turning sour in late 2007 to early 2008, but it is more recently, in 2009 and 2010 that we've seen its real world manifestation with mass lay-offs, a tighter job market and reduced development. There is a delay from Wall Street to Main Street. And the bear market on Wall Street is or has already ended, and indexes and macro-figures are slowly but surely pointing upwards. So if what happens on Wall Street is any indication of what will soon happen on Main Street (which it usually is), we'll soon be back on track. And, by extension, so will the MDG number one.

In 1978, when Deng Xiaoping took over after Mao and trod China's first careful steps towards a free market economy, the country was dirt poor, 64% of the population living on less than $1.25 a day. In 2004, only 26 years later, that same figure was 10% (wow!). With its estimated 1.3 billion inhabitants, China is the most populous country in the world, and home to about one in five humans. 50 years ago, their average lifespan was 36 years. Today it is 74, compared to 78 in the US.

China was the single biggest obstacle to the eradication of extreme poverty. A huge chunk of humanity was lifted out of poverty during the last 30 years. If you live in the western world, that's only 0.4 lifetimes, so imagine what can happen in a full lifetime.

China's GDP is set to surpass that of the US by 2025, and their GDP per capita is poised to equal the that of the US by 2035. So in 25 years, the average Chinese will be as well off as his American counterpart. And I haven't even mentioned India whose GDP per capita will intersect with that of the US in 2060.

Since the vast majority of people in Asia and South America have reached high standards of living, there's really only Africa left. And the good news is that development is going to pick up speed exponentially when new billions of people have money with which to donate or buy products and services, thus creating jobs in the remaining poor countries. It's much easier to extinguish the flames in your neighbor's house when your own house is no longer burning.

If poverty reduction, after we're out of this recession mire, returns to the same rates as between 1990 and 2005, the extremely poor, those living an income of less than $1.25 daily, will constitute a meager 8% by 2025. These 8% are likely to reside mainly in Africa. But even these will eventually escape their impecunious situation, albeit a decade or two later.

It's highly unlikely that a significant proportion of the human population will be desperately poor in 2050. It's largely a matter of economic growth outpacing population growth soon enough. In 2007, the world's population was growing by 1.17% a year, while the world's economic growth rate was 4% in 2007. The freshest figures are a bit lower, but the world as a whole is expected to return to 2007 levels of growth within the next three years.

If you look even farther ahead, to the 2060s and -70s, the vast majority of the world's inhabitants are likely to enjoy a US-level standard of living. Naturally, this is too far ahead, and relies on too many variables, to give accurate predictions.