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The State of Global Poverty

WASHINGTON, DC – The economic geography of the world is changing. The eurozone faces the specter of another round of stagnation; Japan has slipped into recession; and the United States, despite relatively strong performance in the latter part of 2014, has raised concerns worldwide with its exit from quantitative easing. Meanwhile, emerging economies have continued to perform well. India and Indonesia are growing at more than 5% per year; Malaysia at 6%; and China by more than 7%.

The scale of the global change can be seen when purchasing power parity (PPP) – a measure of the total amount of goods and services that a dollar can buy in each country – is taken into account. According to the figures for 2011, released last year, India is now the world’s third largest economy in terms of PPP-adjusted GDP, ahead of Germany and Japan. The data also revealed that China would overtake the US as the world’s largest economy in PPP terms sometime in 2014 – a shift that, according to our estimates, occurred on October 10th.

Despite this progress, a large proportion of people in developing countries remain desperately poor. Globally, the poverty line is defined as a daily income of $1.25, adjusted for PPP – a line that many criticize as shockingly low. But what is truly shocking is that nearly one billion people – including more than 80% of the populations of the Democratic Republic of Congo, Madagascar, Liberia, and Burundi – live below it.

One reason global poverty has been so intractable is that it remains largely out of sight for those who are not living it, safely somebody else’s problem. The fact that most participants in discussions about global poverty – the readers of this commentary included – know few, if any, people who live below the poverty line is an indication of the extent of the world’s economic segregation. If poverty were communicable, its incidence would be far lower by now.