Acton Institute Powerblog

The 2010s: The decade we (nearly) won the war on poverty

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As a new decade begins, it bears pausing to celebrate the strides the human race has made toward eradicating poverty at home and around the world. This is doubly important, as the television retrospectives not only omit our growing prosperity, but so many people believe things are actually getting worse.

The global misconception that poverty is spreading is especially pronounced among those who support state intervention in the economy. The website Common Dreams proclaimed, “The Evidence Pours In: Poverty Getting Much Worse in America.” The error persists in the UK, where the Guardian insisted, “Bill Gates says poverty is decreasing. He couldn’t be more wrong.” (Improving global living standards represent nothing more than “coerced proletarianization,” the Guardian avers.) Even Pope Francis said in November that “the poor are always poorer, and today they are poorer than ever.”

Thankfully, this is false, both in the U.S. and at the global level.

Much of the problem is the changing definition of poverty. A new study, published in the last month of the last decade by the National Bureau of Economic Research, controls for this variable.

A team of researchers compared apples to apples by using the standard President Lyndon Johnson set when he declared the “War on Poverty” in 1963: “the scientifically arbitrary but policy relevant 20 percent baseline poverty rate.” But unlike other surveys, their “Full-income Poverty Measure” includes the effect of U.S. policies: taxes and transfer payments, such as welfare and food stamps.

By that measure, the U.S. poverty rate currently stands at a mere 2.3 percent. They write:

While the Official Poverty Rate fell from 19.5 percent in 1963 to 12.3 percent in 2017, our Full-income Poverty Rate based on President Johnson’s standards fell from 19.5 percent to 2.3 percent over that period. Today, almost all Americans have income above the inflation-adjusted thresholds established in the 1960s. Although expectations for minimum living standards evolve, this suggests substantial progress combatting absolute poverty since the War on Poverty began.

For some reason, the media have not shouted this victory from the rooftops.

These researchers were not the first to discover the policy-adjusted surge in living standards. James Early of the Cato Institute wrote in April 2018 that “[i]mproved estimates of poverty show that only about 2 percent of today’s population lives in poverty, well below the 11 percent to 15 percent that has been reported during the past five decades.” Curiously, the media did not herald his findings, either.

I do not mean to imply that relative poverty has decimated in the United States. That would be too modest. In much of the world, extreme poverty has virtually been stamped out.

Matt Ridley makes that case in an article titled, “We’ve just had the best decade in human history. Seriously” in Spectator magazine. The author of The Rational Optimist writes:

Let nobody tell you that the second decade of the 21st century has been a bad time. We are living through the greatest improvement in human living standards in history. Extreme poverty has fallen below 10 per cent of the world’s population for the first time. It was 60 per cent when I was born.

The trend continued in the 2010s. Extreme poverty – the number of people in the world living on $1.90 a day – fell from 15.7 percent in 2010 to 8.6 percent in 2018 (the most recent year for which we have data), according to the World Bank. Child mortality fell by nearly a third, from 51.3 deaths per 1,000 children to 38.6 in 2018. Life expectancy has risen by nearly two years in the last eight. Backing up to 2008 yields more dramatic improvements.

As the Acton Institute has noted numerous times – and as does Ridley in his article – most of the worst poverty disappeared due to China’s decision to replace socialism with a modest sliver of capitalism, liberally suffused with cronyism and cultivated under the all-seeing eye of the state.

Yet even a meager leaven of capitalism has given the world’s most desperate people bread.

In the United States, the government has taken large strides away from wealth redistribution – much to the chagrin of outlets like Common Dreams and the Guardian. As democratic socialists love to point out, top marginal tax rates in 1963 stood at a whopping 91 percent. They bottomed out at 28 percent in the 1980s and now stand at 37 percent. Top federal corporate tax rates also fell from 52 percent in 1963 to 21 percent today.

And the second Democrat to succeed Lyndon Johnson kept his promise to “end welfare as we know it” by imposing lifetime limits.

Yet real, inflation-adjusted U.S. GDP grew 410 percent during that time.

Make no mistake: While extreme poverty has fallen, too many people live just above that level – especially in nations lacking economic freedom. The number of Americans in their prime work years who remain outside the workforce, although falling, is still too high – and far too many are on opioids or other addictive substances, relying on government assistance to make ends meet.

Tellingly, the poverty level as measured the traditional way – without adjusting for government transfers – had stalled since the advent of the Great Society. “American poverty rates were already declining 15 years before President Johnson’s declaration of war, dropping from 35 percent to 19 percent in 1964,” writes Vicki E. Alger of the Independent Institute. “Since 1967, however, the poverty rate has remained largely flat hovering between 11 percent and 15 percent.” The problem is not too little welfare but too much, creating perverse incentives blocking further progress. Our joy is dimmed with a sober recollection of these facts.

Yet the 2010s continued the world’s march out of the shadow of extreme poverty – a fact people of faith should celebrate. We should also note, and expand, the policies that made that progress possible.

(Photo credit: Children smiling at Nyakembene Primary School, Kisii county, in Kenya. SolarAid Photos. This photo has been cropped. CC BY 2.0.)

Rev. Ben Johnson

Rev. Ben Johnson is Executive Editor of the Acton Institute's flagship journal Religion & Liberty and edits its transatlantic website.