New data shows that as economies have grown in emerging areas such as south Asia and Asia Pacific, poverty rates have dropped. Globalization, more decentralized markets and information technology advances may be part of the reason.
Dr. Mark Perry of the University of Michigan recently posted some interesting data, culled from a National Bureau of Economic Research (NBER) working paper from Maxim Pinkovskiy and Xavier Sala-i-Martin, which shows a significant plunge in world poverty rates across the globe.
The authors employed a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. They estimate that world poverty rates have fallen by 80% from 1970 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006.
Perry says the figures hold up when adjusted for inflation, and provides the following additional perspective:
“[The study reports] some pretty amazing results for East Asia (includes mainland China, Taiwan and S. Korea), which in 1960 had the highest regional poverty rate in the world by far, at 58.8%, compared to 39.9% for Africa, 11.6% for Latin America, 8.4% for MENA (Middle East, N. Africa) and South Asia (20.1%). In the 36-year period between 1970 and 2006, the poverty rate in East Asia fell to only 1.7% by 2006, which was below any of the other four regions: Africa (31.8%), Latin America (3.1%), MENA (5.2%) and South Asia (2.6%).”
Perry adds that while the authors don’t explore the reasons for the record reduction in world poverty, much of this lifting of global growth can be attributed to globalization, market-based reforms, liberalization, Information Age technology, productivity gains in agriculture, and the collapse of central planning in China and India.”
The opportunities generated by the global economy are now reaching into every corner of the world. It’s smart business to recognize that both robust producer and consumer markets now exist across much of the world, and information technology brings these markets as close as if they were next door.