Today's golden age of poverty reduction: the story the world bank and other agencies don't want you to know.

• Author: Bhalla, Surjit S.
• Position: Current poverty level

Have we just witnessed history? The last twenty years have been good for growth in the developing countries, and have been very good for poverty reduction--indeed, the best ever. More than a billion people have been moved out of poverty, defined according to the dollar a day measure. From about 1.3 billion poor in 1980, poverty in 2000 was close to 500 million. In no period in history has the number of poor people declined, let alone declined by such historic proportions.

Calculations of poverty reduction go back to at least 1820, but calculations of the decline in the number of poor are unfair to history. Because of health improvements, life expectancy has improved enormously over the last two hundred years. This has enhanced population growth for all levels of income, poor and rich alike. With each succeeding generation, reductions in poverty have become more difficult. A better index, therefore, of historical performance is the fraction of people in poverty. Chart I compares the pace of poverty reduction since 1820. The share of population in absolute poverty has declined at a rate of approximately 4 percentage points every twenty years for the 130-year period, 1820 to 1950. Between 1950 and 1980, the pace increased to a rate of 14 percentage points for each twenty years. But the golden age for the poor has been the period post-1980. During this age, the record is of an astonishingly large 20 percentage point plus decline.

What happened? In large part, Asia, the continent given up for "dead" by most economists, came alive. (Gunnar Myrdal won a Nobel prize for his pessimistic work on Asian poverty, Asian Drama: An Inquiry into the Poverty of Nations.) More accurately, the two population giants, India and China, reversed course on economic policy. The China conversion story is well known. Not as well known is the fact that until about 1980, the Indian policy regime was as "controlled" as China. So both economies changed at approximately the same time (1978-1980); both started to open up, reduce tariffs, and embrace markets. The rest is history. In 1980, the poverty head count ratio in India and China was 50 and 60 percent, respectively. By 2000, the poverty ratios in both economies were in the range 10 to 25 percent. The number of people moved out of poverty in these two countries alone was about a billion. This is history--an upliftment of 20 percent of the developing world's population. That is approximately the entire population share of the two other continents where poor people reside, Latin America and sub-Saharan Africa.

What has made this possible...