Is World Poverty Falling?

• Author: Angus Deaton
• Position: Dwight D. Eisenhower Professor of International Affairs and Professor of Economics at Princeton University

Real progress has been made in reducing poverty in recent years, particularly in India and China. However, there is still much uncertainty about the numbers. Using the same data, two reports released less than two years apart by the World Bank reached apparently different conclusions on whether world poverty was going up or down. How can we know whether the world poverty counts are accurate?

The first table of the World Bank's World Development Report 2000/2001: Attacking Poverty shows that the number of people living on less than $1 a day grew from 1.18 billion in 1987 to 1.20 billion in 1998-an increase of 20 million. Less than two years later, a headline chart in another major World Bank publication, Globalization, Growth, and Poverty: Building an Inclusive World Economy, showed that the number of people living in poverty fell by 200 million from 1980 to 1998 and showed no trace of an increase between 1987 and 1998. The poverty decrease was reaffirmed in the press release accompanying "The Role and Effectiveness of Development Assistance," a World Bank research paper issued before the March 2002 UN Financing for Development Conference in Monterrey, Mexico: "Over the past 20 years, the number of people living on less than $1 a day has fallen by 200 million, even as the world's population grew by 1.6 billion."

Can these statements be reconciled? Has there been a marked reduction in poverty in the last two years? Or has the Bank revised its interpretation of history?

Getting an accurate poverty count is important. The Bank sails under the banner "Our dream is a world free of poverty," which not only invites the use of the poverty count as a measure of the extent to which the dream is being fulfilled but also raises the issue of whether the organization's success can be convincingly measured by its own numbers. We also need an accurate poverty count to assess whether the international community is achieving one of the Millennium Development Goals endorsed by 189 countries at the September 2000 UN Millennium Summit-to "halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day." A lot depends on whether the scorecard is being credibly tallied, and the apparent discrepancies in the Bank's numbers deserve serious scrutiny. That scrutiny produces some genuinely good news about poverty declining but also raises some serious concerns about the numbers. With respect to the production of data, still greater transparency on the Bank's part is called for.

Poverty in India

Take the case of India. Its poverty counts are important not only because they have a large direct effect on world poverty counts-more than one-fourth of the world's poor live in India-but also because the world debate on globalization, poverty, and inequality has been echoed in an intense domestic debate.

India's economic liberalization in the early 1990s was followed by historically high rates of growth. But did this growth help or hurt the poor? Were their numbers reduced or did economic growth benefit only an increasingly wealthy urban elite?

The political debate has been fueled by questions about the accuracy of poverty measurements in light of the discrepancies between estimates of consumption growth based on national accounts statistics...