posts: 41648

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41648	How much economic growth is necessary to reduce global poverty substantially?	poverty-minimum-growth-needed	post	publish	<!-- wp:html --> <div class="blog-info"> <p>Our World in Data presents the data and research to make progress against the world’s largest problems.<br> This post was last updated on May 24, 2021. It draws on data and research discussed in our entries on <strong><a href="https://ourworldindata.org/income-inequality" target="_blank" rel="noopener">Income Inequality</a></strong>, <strong><a href="https://ourworldindata.org/extreme-poverty" target="_blank" rel="noopener">Global Extreme Poverty</a></strong> and <strong><a href="https://ourworldindata.org/economic-growth" target="_blank" rel="noopener">Economic Growth</a></strong>.</p> </div> <style> .no-frame img { box-shadow: none; padding: 0; background: none; } </style> <!-- /wp:html --> <!-- wp-block-tombstone 53780 --> <!-- wp:owid/help --> <!-- wp:heading {"level":4} --> <h4>The World Bank has updated its poverty and inequality data</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>The data in this article uses a previous release of the World Bank's poverty and inequality data in which incomes are expressed in 2011 international-$.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.</p> <!-- /wp:paragraph --> <!-- wp:owid/prominent-link {"title":"","linkUrl":"https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line","className":"is-style-thin"} --> <!-- wp:paragraph --> <p>Read more about the World Bank's updated methodology</p> <!-- /wp:paragraph --> <!-- /wp:owid/prominent-link --> <!-- wp:owid/prominent-link {"title":"Explore the latest World Bank data on poverty and inequality","linkUrl":"https://ourworldindata.org/explorers/poverty-explorer","className":"is-style-thin"} --> <!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --> <!-- /wp:owid/prominent-link --> <!-- /wp:owid/help --> <!-- wp:paragraph --> <p>Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In an earlier post <a href="https://ourworldindata.org/poverty-growth-needed">I said</a> that ‘if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.’ In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don’t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced – increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find <a href="https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073">in so many publications</a> that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.” </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Since people not only care about the number of goods, but also about their quality, it is important to add this aspect – the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the <em>capacity</em> of an economy to produce goods and services, this is a useful variation of the definition. Some others (<a href="https://en.wikipedia.org/wiki/Economic_growth">including Wikipedia</a>) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense – just like life expectancy is a measure of population health and hardly the definition of population health.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In <a href="https://ourworldindata.org/higher-poverty-global-line">another earlier text</a> I asked who is considered poor in a high-income country. Based on existing national poverty lines – but also the size of social care payouts, a proposal for Universal Basic Income, and survey results – I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>One of the most important insights of economics is that people live in poverty not because of who they are, but because of <em>where </em>they are. A person’s knowledge, their skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together <a href="https://voxeu.org/article/income-inequality-and-citizenship">matter less</a> than the one factor that is entirely outside of a person’s control: whether they happen to be born into a large, productive economy or not.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country – economic growth – is so crucial for reducing poverty.</p> <!-- /wp:paragraph --> <!-- wp:columns --> <div class="wp-block-columns"><!-- wp:column --> <div class="wp-block-column"><!-- wp:html --> <div data-no-lightbox class="no-frame"> <!-- /wp:html --> <!-- wp:image {"id":41711,"linkDestination":"custom","className":"size-large"} --> <figure class="wp-block-image size-large"><a href="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark.png"><img src="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png" alt="" class="wp-image-41711"/></a></figure> <!-- /wp:image --> <!-- wp:html --> </div> <!-- /wp:html --></div> <!-- /wp:column --> <!-- wp:column --> <div class="wp-block-column"></div> <!-- /wp:column --></div> <!-- /wp:columns --> <!-- wp:paragraph --> <p>Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people’s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.<br>Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.<br><br>Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.<br>Deaton, A., and Heston, A. 2010. “Understanding PPPs and PPP-Based National Accounts.” American Economic Journal: Macroeconomics 2 (4): 1–35.<br>Throughout this text I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I’m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>Most people in the world live in countries in which more than 90% live on less than $30 per day</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country’s population living on less than $30 per day. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country’s population size.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>→ Daniel Bachler built an <a href="https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd">interactive visualization of this chart</a> in which you can set any poverty line you might be interested in.</p> <!-- /wp:paragraph --> <!-- wp:image {"id":41813,"sizeSlug":"full","linkDestination":"none","className":"wp-block-full-content-width"} --> <figure class="wp-block-image size-full wp-block-full-content-width"><img src="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png" alt="" class="wp-image-41813"/></figure> <!-- /wp:image --> <!-- wp:heading {"level":3} --> <h3>Poverty is not inevitable</h3> <!-- /wp:heading --> <!-- wp:paragraph --> <p>In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) – On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every <a href="https://ourworldindata.org/child-mortality-in-the-past">second child died</a> and where hunger was <a href="https://ourworldindata.org/famines">widespread</a>, the majority of people <a href="https://ourworldindata.org/extreme-history-methods">lived in poverty</a>. And since <a href="https://ourworldindata.org/breaking-the-malthusian-trap">poverty did not change</a>, it was easy to believe that poverty was unchangeable. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined and living conditions improved: average incomes increased <a href="https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK">more than 25-fold</a>, the child mortality rate <a href="https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK">declined from more than a quarter</a> to less than half a percent – one of the lowest levels in the world – and Denmark is today one of the countries where people report to be most <a href="https://ourworldindata.org/grapher/gdp-vs-happiness">satisfied with their lives</a>.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>As such I will use Denmark as a benchmark of what it means for poverty to fall ‘substantially’. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a> – or you can view it in our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL">Data Explorer</a>.{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>How do living standards in Denmark and a poorer country compare?</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>The previous chart showed that in the majority of the world’s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>There is no <em>global</em> survey of incomes: researchers need to rely on the available <em>national</em> surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people’s incomes, while in poorer countries these surveys capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">Data</a><a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp"> </a><a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL">Explorer</a> of this data, you can select to show the data from <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">income</a> and <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">consumption</a> surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>It’s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform <a href="https://worldbank.github.io/PIP-Methodology/index.html">methodology</a>.<br><br>The importance of capturing people’s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>What does the chart tell us about living standards in these two countries? </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark’s level we can read it off the two parameters that describe the distribution – the average level of income and the inequality of those incomes.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a>. In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK">Data Explorer</a>, you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67<br>If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew <a href="https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH">by more than that</a> over the last few generations, and such growth is <a href="https://ourworldindata.org/economic-growth-since-1950">not rare</a> in recent economic history. </p> <!-- /wp:paragraph --> <!-- wp:image {"id":41651,"sizeSlug":"full","linkDestination":"none"} --> <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png" alt="" class="wp-image-41651"/></figure> <!-- /wp:image --> <!-- wp:heading {"level":4} --> <h4>How would average incomes need to change globally?</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country’s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.</p> <!-- /wp:paragraph --> <!-- wp:image {"id":41652,"sizeSlug":"full","linkDestination":"none"} --> <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png" alt="" class="wp-image-41652"/></figure> <!-- /wp:image --> <!-- wp:heading {"level":4} --> <h4>How much would average incomes have to increase to reach the level of Denmark?</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark’s mean income. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country’s population. The population size is relevant because we need to take into account each country’s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark’s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The very richest countries don’t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>How much growth would be needed in total?</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a>. In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK">Data Explorer</a>, you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The daily total income in 2017 is each country’s mean income multiplied by the number of people in each country.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017.<br>Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Or put differently, a world economy with substantially less poverty is <em>at a minimum</em> 5-times bigger than today’s global economy.</p> <!-- /wp:paragraph --> <!-- wp:image {"id":41653,"sizeSlug":"full","linkDestination":"none"} --> <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png" alt="" class="wp-image-41653"/></figure> <!-- /wp:image --> <!-- wp:paragraph --> <p></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>A five-fold increase is a <em>minimum</em> estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.</p> <!-- /wp:paragraph --> <!-- wp:owid/additional-information {"defaultOpen":true} --> <!-- wp:heading {"level":3} --> <h3>In which ways does a realistic scenario differ from the minimum scenario?</h3> <!-- /wp:heading --> <!-- wp:columns {"className":"is-style-sticky-right"} --> <div class="wp-block-columns is-style-sticky-right"><!-- wp:column --> <div class="wp-block-column"><!-- wp:paragraph --> <p>To calculate the <em>minimum</em> growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>In this scenario every country stops economic growth entirely once they reach the average income of Denmark</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>In this scenario every country that is richer than Denmark reduces average incomes</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people’s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>As a consequence there is no global inequality between countries in this scenario</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>You have to be extremely optimistic about the future of inequality to think this is likely. If you don’t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark’s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>In this scenario inequality within countries declines very substantially</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see <a href="https://ourworldindata.org/grapher/economic-inequality-gini-index">this map</a>) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55. Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In many countries around the world inequality <a href="https://ourworldindata.org/income-inequality-since-1990"><em>did</em> decrease</a> over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the <em>minimum</em> growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day – just above the poverty line – and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($301.44). The required growth from the current mean income is therefore ((301.44-16)/16)=170%.{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>The required economic growth in GDP terms will be higher than in household income terms</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people’s incomes – importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of <a href="https://ourworldindata.org/higher-poverty-global-line">this post</a>). </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>It would not be the end of poverty – only a substantial reduction of poverty</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>How much does future population growth matter?</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division’s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature <a href="https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have">suggests</a> that increases in incomes would lead to a decline of fertility rates. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is <a href="https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL">past its peak</a><a href="https://ourworldindata.org/peak-child"> </a>and much of the future population growth is due to ‘<a href="https://ourworldindata.org/population-momentum">population momentum</a>’. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>Is it enough to reduce poverty?</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone’s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich.<br>These reports are called ‘Armuts- und Reichtumsbericht der Bundesregierung’ online at <a href="https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html">armuts-und-reichtumsbericht.de</a></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The latest survey was produced by aproxima and published in 2016. It is published as <a href="https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5">Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repräsentativen Bevölkerungsbefragung „ARB-Survey 2015“</a>, Berlin: Bundesministerium für Arbeit und Soziales (Hrsg.).</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Asked for the income level above which they consider a person to be rich the mean answer was 9,696€, but the median was ‘closer to 5,000€’, as the report puts it.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>€5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Calculations:<br>€5000/0.778=int.$6,426.74<br>int.$6,426.74/30.5=int.$210.71{/ref}</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p><strong>My takeaway</strong></p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The purpose of this scenario was to calculate the <em>minimum</em> necessary growth. I’m cautiously optimistic about the possibility that global income inequality <a href="https://osf.io/preprints/socarxiv/du5g6">declines further</a>, but I’m not as optimistic as this minimum scenario envisages and I therefore think that <em>if</em> the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase.</p> <!-- /wp:paragraph --></div> <!-- /wp:column --> <!-- wp:column --> <div class="wp-block-column"><!-- wp:html /--></div> <!-- /wp:column --></div> <!-- /wp:columns --> <!-- /wp:owid/additional-information --> <!-- wp:heading {"level":4} --> <h4>Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty?</h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity’s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:</p> <!-- /wp:paragraph --> <!-- wp:list --> <ul><li>If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. </li><li>If however we want to achieve a future in which global poverty is substantially lower than today <em>and</em> in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.</li></ul> <!-- /wp:list --> <!-- wp:paragraph --> <p>In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries <a href="https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR">have reduced</a> consumption-adjusted CO₂ emissions while incomes increased. Global emissions of ozone-depleting substances have <a href="https://ourworldindata.org/ozone-layer">declined by more than 99%</a> in the last three decades. And global <a href="https://ourworldindata.org/global-deforestation-peak">deforestation rates have declined strongly</a> since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people <a href="https://ourworldindata.org/global-inequalities-co2-consumption">are much higher</a> than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is <a href="https://ourworldindata.org/worlds-energy-problem">the world's energy problem</a>.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us <em>now</em> to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor <em>and</em> in which humanity has a smaller negative environmental impact – we document what we know about global poverty and humanity’s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: <a href="https://ourworldindata.org/cheap-renewables-growth">1</a>, <a href="https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions">2</a>, <a href="https://ourworldindata.org/land-use-diets">3</a>, <a href="https://ourworldindata.org/worlds-energy-problem">4</a>, <a href="https://ourworldindata.org/what-are-drivers-deforestation">5</a>, <a href="https://ourworldindata.org/outdoor-air-pollution">6</a>, <a href="https://ourworldindata.org/renewable-energy">7</a>, <a href="https://ourworldindata.org/water-use-stress">8</a>, <a href="https://ourworldindata.org/safest-sources-of-energy">9</a>, <a href="https://ourworldindata.org/energy-access">10</a>, <a href="https://ourworldindata.org/fossil-fuels">11</a>, <a href="https://ourworldindata.org/environmental-impacts-of-food">12</a>, <a href="https://ourworldindata.org/forests-and-deforestation">13</a> and many more). </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products – and thereby reduce the use of specific resources and forgo some economic growth – to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In <a href="https://ourworldindata.org/shrink-emissions-not-the-economy">a guest post for Our World in Data</a> Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: <em>“Ironically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed “degrowth”). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.”</em>{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually <em>increase</em> economic growth over the coming decades. {ref}<a href="https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020">World Economic Outlook, October 2020: A Long and Difficult Ascent</a>. In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve <em>more growth</em>.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2°C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, <em>relative to a baseline growth of 1.6% to 3%</em>. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today’s economy. With measures in place to limit warming to 2°C, growth would be 0.06% smaller – i.e. 1.54% per year. The world economy would then ‘only' be 461% of the size of today.<br><br>In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today’s economy. With measures to limit warming to 2°C, growth would be 0.06% smaller – i.e. 2.94% per year. The economy would then ‘only' be 1813% the size of today.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2°C.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions.<br><br>See:<br>Edenhofer et al. (2014). <a href="https://www.ipcc.ch/report/ar5/wg3/">IPCC, 2014: Summary for Policymakers</a>. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.<br><br>See also: IPCC (2014) – <a href="https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf">Climate Change 2014: Synthesis Report</a>. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.<br><br><a href="https://www.sciencedirect.com/science/article/pii/S0095069617308707">https://www.sciencedirect.com/science/article/pii/S0095069617308707</a>{/ref} Fighting climate change is not just compatible with fighting poverty, the two goals — to reduce emissions and to increase economic growth — actually <em>strengthen</em> each other.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>And when important goals <em>are</em> in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>Is it possible for poor countries to achieve this growth? </h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>But whether or not global poverty can possibly decline that much – from the current level of 85% to Denmark’s level of 14% – overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were <a href="https://voxeu.org/article/economic-impact-colonialism">exploited by colonial powers</a> that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in <a href="https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy">many</a> <a href="https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=" target="_blank" rel="noreferrer noopener">ways</a>, but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>A third aspect to consider is that countries around the world saw large improvements in <a href="https://ourworldindata.org/health-meta">health</a> and <a href="https://ourworldindata.org/global-education">education</a> in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>A fourth reason is to see that <a href="https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth">’catch-up growth’ can be very fast</a>: several countries have achieved annual growth rates of more than 5% in recent decades. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>And a last reason to consider is that up to the pandemic the majority of countries in the world – <a href="https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty">but not all</a> – <em>did</em> make progress against poverty. Global poverty has declined very substantially in recent decades, <a href="https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative">no matter</a> what poverty line you want to draw. </p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Increasing productivity substantially and reducing humanity’s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.</p> <!-- /wp:paragraph --> <!-- wp:heading {"level":4} --> <h4>Conclusion </h4> <!-- /wp:heading --> <!-- wp:paragraph --> <p>What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.</p> <!-- /wp:paragraph --> <!-- wp:paragraph --> <p>If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition.</p> <!-- /wp:paragraph --> <!-- wp:separator --> <hr class="wp-block-separator"/> <!-- /wp:separator --> <!-- wp:spacer {"height":"139px"} --> <div style="height:139px" aria-hidden="true" class="wp-block-spacer"></div> <!-- /wp:spacer --> <!-- wp:separator --> <hr class="wp-block-separator" id="block-3b267837-eb86-4261-8c36-10661a418d16"/> <!-- /wp:separator --> <!-- wp:paragraph --> <p id="block-c5b72515-60b3-4670-b276-489e0ca2f023"><strong>Acknowledgement:</strong> I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article.</p> <!-- /wp:paragraph --> <!-- wp:separator --> <hr class="wp-block-separator"/> <!-- /wp:separator --> <!-- wp:paragraph --> <p id="block-e516cb16-4d90-475e-a618-428e83b2b833"><em><strong>Continue reading Our World in Data:</strong></em></p> <!-- /wp:paragraph --> <!-- wp:owid/prominent-link {"title":"What is driving deforestation? And how can it come to an end?","linkUrl":"https://ourworldindata.org/forests-and-deforestation","mediaId":40024,"mediaUrl":"https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-–-Marimekko.png","mediaAlt":"","className":"is-style-thin"} --> <!-- wp:paragraph --> <p>My colleague Hannah Ritchie on how to bring humanity's long history of deforestation to an end.</p> <!-- /wp:paragraph --> <!-- /wp:owid/prominent-link --> <!-- wp:paragraph --> <p></p> <!-- /wp:paragraph -->	{ "id": "wp-41648", "slug": "poverty-minimum-growth-needed", "content": { "toc": [], "body": [ { "type": "text", "value": [ { "text": "Our World in Data presents the data and research to make progress against the world\u2019s largest problems.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "\nThis post was last updated on May 24, 2021. It draws on data and research discussed in our entries on ", "spanType": "span-simple-text" }, { "children": [ { "url": "https://ourworldindata.org/income-inequality", "children": [ { "text": "Income Inequality", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "spanType": "span-bold" }, { "text": ", ", "spanType": "span-simple-text" }, { "children": [ { "url": "https://ourworldindata.org/extreme-poverty", "children": [ { "text": "Global Extreme Poverty", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "spanType": "span-bold" }, { "text": " and ", "spanType": "span-simple-text" }, { "children": [ { "url": "https://ourworldindata.org/economic-growth", "children": [ { "text": "Economic Growth", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "spanType": "span-bold" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "The World Bank has updated its poverty and inequality data", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The data in this article uses a previous release of the World Bank's poverty and inequality data in which incomes are expressed in 2011 international-$.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line", "type": "prominent-link", "title": "", "description": "Read more about the World Bank's updated methodology", "parseErrors": [] }, { "url": "https://ourworldindata.org/explorers/poverty-explorer", "type": "prominent-link", "title": "Explore the latest World Bank data on poverty and inequality", "description": "", "parseErrors": [] }, { "type": "text", "value": [ { "text": "Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In an earlier post ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/poverty-growth-needed", "children": [ { "text": "I said", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " that \u2018if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.\u2019 In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. ", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don\u2019t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced \u2013 increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find ", "spanType": "span-simple-text" }, { "url": "https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073", "children": [ { "text": "in so many publications", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " that I don\u2019t know which one to quote is that economic growth is \u201can increase in the amount of goods and services produced per head of the population over a period of time.\u201d\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Since people not only care about the number of goods, but also about their quality, it is important to add this aspect \u2013 the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the ", "spanType": "span-simple-text" }, { "children": [ { "text": "capacity", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " of an economy to produce goods and services, this is a useful variation of the definition. Some others (", "spanType": "span-simple-text" }, { "url": "https://en.wikipedia.org/wiki/Economic_growth", "children": [ { "text": "including Wikipedia", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ") define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense \u2013 just like life expectancy is a measure of population health and hardly the definition of population health.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/higher-poverty-global-line", "children": [ { "text": "another earlier text", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " I asked who is considered poor in a high-income country. Based on existing national poverty lines \u2013 but also the size of social care payouts, a proposal for Universal Basic Income, and survey results \u2013 I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "One of the most important insights of economics is that people live in poverty not because of who they are, but because of ", "spanType": "span-simple-text" }, { "children": [ { "text": "where ", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": "they are. A person\u2019s knowledge, their skills, and how hard they work all matter for whether they are poor or not \u2013 but all these personal factors together ", "spanType": "span-simple-text" }, { "url": "https://voxeu.org/article/income-inequality-and-citizenship", "children": [ { "text": "matter less", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " than the one factor that is entirely outside of a person\u2019s control: whether they happen to be born into a large, productive economy or not.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country \u2013 economic growth \u2013 is so crucial for reducing poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "", "size": "wide", "type": "image", "filename": "Share-living-on-less-than-30-Ethiopia-vs-Denmark.png", "parseErrors": [] }, { "type": "text", "value": [ { "text": "Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people\u2019s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article \u2013 and in global income and expenditure data generally \u2013 the statisticians who produce these figures are careful to make these numbers as comparable as possible.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "Deaton, A., and Heston, A. 2010. \u201cUnderstanding PPPs and PPP-Based National Accounts.\u201d American Economic Journal: Macroeconomics 2 (4): 1\u201335.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "Throughout this text I\u2019m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out \u2018international\u2019 as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I\u2019m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Most people in the world live in countries in which more than 90% live on less than $30 per day", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country\u2019s population living on less than $30 per day.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country\u2019s population size.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "\u2192 Daniel Bachler built an ", "spanType": "span-simple-text" }, { "url": "https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd", "children": [ { "text": "interactive visualization of this chart", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " in which you can set any poverty line you might be interested in.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "", "size": "wide", "type": "image", "filename": "Share-living-on-less-than-30-2.png", "parseErrors": [] }, { "text": [ { "text": "Poverty is not inevitable", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) \u2013 On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/child-mortality-in-the-past", "children": [ { "text": "second child died", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and where hunger was ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/famines", "children": [ { "text": "widespread", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", the majority of people ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/extreme-history-methods", "children": [ { "text": "lived in poverty", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". And since ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/breaking-the-malthusian-trap", "children": [ { "text": "poverty did not change", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", it was easy to believe that poverty was unchangeable.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined\u00a0and living conditions improved: average incomes increased ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK", "children": [ { "text": "more than 25-fold", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", the child mortality rate ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK", "children": [ { "text": "declined from more than a quarter", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " to less than half a percent \u2013 one of the lowest levels in the world \u2013 and Denmark is today one of the countries where people report to be most ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/gdp-vs-happiness", "children": [ { "text": "satisfied with their lives", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As such I will use Denmark as a benchmark of what it means for poverty to fall \u2018substantially\u2019. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's ", "spanType": "span-simple-text" }, { "url": "https://pip.worldbank.org/home", "children": [ { "text": "Poverty and Inequality Platform", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " \u2013 or you can view it in our ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL", "children": [ { "text": "Data Explorer", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "How do living standards in Denmark and a poorer country compare?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The previous chart showed that in the majority of the world\u2019s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "There is no ", "spanType": "span-simple-text" }, { "children": [ { "text": "global", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " survey of incomes: researchers need to rely on the available ", "spanType": "span-simple-text" }, { "children": [ { "text": "national", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people\u2019s incomes, while in poorer countries these surveys capture people\u2019s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP", "children": [ { "text": "Data", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp", "children": [ { "text": " ", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL", "children": [ { "text": "Explorer", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " of this data, you can select to show the data from ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP", "children": [ { "text": "income", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP", "children": [ { "text": "consumption", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about \u2018the income of people in richer countries and the monetary value of consumption in poorer countries\u2019. But since it\u2019d be a bit much to repeat this every time researchers simply speak of \u2018living standards\u2019 or \u2018income\u2019 instead. I do the same in this text.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "It\u2019s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform ", "spanType": "span-simple-text" }, { "url": "https://worldbank.github.io/PIP-Methodology/index.html", "children": [ { "text": "methodology", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "The importance of capturing people\u2019s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "What does the chart tell us about living standards in these two countries?\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark\u2019s level we can read it off the two parameters that describe the distribution \u2013 the average level of income and the inequality of those incomes.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform \u2013 which has been superseded the ", "spanType": "span-simple-text" }, { "url": "https://pip.worldbank.org/home", "children": [ { "text": "Poverty and Inequality Platform", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". In our ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK", "children": [ { "text": "Data Explorer", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH", "children": [ { "text": "by more than that", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " over the last few generations, and such growth is ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/economic-growth-since-1950", "children": [ { "text": "not rare", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " in recent economic history.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "", "size": "wide", "type": "image", "filename": "Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png", "parseErrors": [] }, { "text": [ { "text": "How would average incomes need to change globally?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country\u2019s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "", "size": "wide", "type": "image", "filename": "mean-income-by-country-Denmark-highlight.png", "parseErrors": [] }, { "text": [ { "text": "How much would average incomes have to increase to reach the level of Denmark?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark\u2019s mean income.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country\u2019s population. The population size is relevant because we need to take into account each country\u2019s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark\u2019s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The very richest countries don\u2019t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "How much growth would be needed in total?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform \u2013 which has been superseded the ", "spanType": "span-simple-text" }, { "url": "https://pip.worldbank.org/home", "children": [ { "text": "Poverty and Inequality Platform", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". In our ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK", "children": [ { "text": "Data Explorer", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The daily total income in 2017 is each country\u2019s mean income multiplied by the number of people in each country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Or put differently, a world economy with substantially less poverty is ", "spanType": "span-simple-text" }, { "children": [ { "text": "at a minimum", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " 5-times bigger than today\u2019s global economy.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "", "size": "wide", "type": "image", "filename": "growth-needed-to-reach-Denmark.png", "parseErrors": [] }, { "type": "text", "value": [ { "text": "A five-fold increase is a ", "spanType": "span-simple-text" }, { "children": [ { "text": "minimum", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "gray-section", "items": [ { "text": [ { "text": "Additional information", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "expandable-paragraph", "items": [ { "type": "text", "value": [ { "text": "To calculate the ", "spanType": "span-simple-text" }, { "children": [ { "text": "minimum", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "In this scenario every country stops economic growth entirely once they reach the average income of Denmark", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "In this scenario every country that is richer than Denmark reduces average incomes", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people\u2019s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "As a consequence there is no global inequality between countries in this scenario", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "You have to be extremely optimistic about the future of inequality to think this is likely. If you don\u2019t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark\u2019s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "In this scenario inequality within countries declines very substantially", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/economic-inequality-gini-index", "children": [ { "text": "this map", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ") so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55.\u00a0Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In many countries around the world inequality ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/income-inequality-since-1990", "children": [ { "children": [ { "text": "did", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " decrease", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the ", "spanType": "span-simple-text" }, { "children": [ { "text": "minimum", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day \u2013 just above the poverty line \u2013 and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($301.44). The required growth from the current mean income is therefore ((301.44-16)/16)=170%.{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "The required economic growth in GDP terms will be higher than in household income terms", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people\u2019s incomes \u2013 importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/higher-poverty-global-line", "children": [ { "text": "this post", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ").\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "It would not be the end of poverty \u2013 only a substantial reduction of poverty", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "How much does future population growth matter?", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division\u2019s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have", "children": [ { "text": "suggests", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " that increases in incomes would lead to a decline of fertility rates.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL", "children": [ { "text": "past its peak", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "url": "https://ourworldindata.org/peak-child", "children": [ { "text": " ", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": "and much of the future population growth is due to \u2018", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/population-momentum", "children": [ { "text": "population momentum", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": "\u2019.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "Is it enough to reduce poverty?", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone\u2019s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "These reports are called \u2018Armuts- und Reichtumsbericht der Bundesregierung\u2019 online at ", "spanType": "span-simple-text" }, { "url": "https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html", "children": [ { "text": "armuts-und-reichtumsbericht.de", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The latest survey was produced by aproxima and published in 2016. It is published as ", "spanType": "span-simple-text" }, { "url": "https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5", "children": [ { "text": "Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repr\u00e4sentativen Bev\u00f6lkerungsbefragung \u201eARB-Survey 2015\u201c", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", Berlin: Bundesministerium f\u00fcr Arbeit und Soziales (Hrsg.).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Asked for the income level above which they consider a person to be rich the mean answer was 9,696\u20ac, but the median was \u2018closer to 5,000\u20ac\u2019, as the report puts it.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "\u20ac5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Calculations:", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "\u20ac5000/0.778=int.$6,426.74", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "int.$6,426.74/30.5=int.$210.71{/ref}", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "My takeaway", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The purpose of this scenario was to calculate the ", "spanType": "span-simple-text" }, { "children": [ { "text": "minimum", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " necessary growth. I\u2019m cautiously optimistic about the possibility that global income inequality ", "spanType": "span-simple-text" }, { "url": "https://osf.io/preprints/socarxiv/du5g6", "children": [ { "text": "declines further", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", but I\u2019m not as optimistic as this minimum scenario envisages and I therefore think that ", "spanType": "span-simple-text" }, { "children": [ { "text": "if", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] } ], "parseErrors": [] }, { "text": [ { "text": "Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity\u2019s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. ", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "text": "If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. ", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "If however we want to achieve a future in which global poverty is substantially lower than today ", "spanType": "span-simple-text" }, { "children": [ { "text": "and", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR", "children": [ { "text": "have reduced", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " consumption-adjusted CO\u2082 emissions while incomes increased. Global emissions of ozone-depleting substances have ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/ozone-layer", "children": [ { "text": "declined by more than 99%", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " in the last three decades. And global ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/global-deforestation-peak", "children": [ { "text": "deforestation rates have declined strongly", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/global-inequalities-co2-consumption", "children": [ { "text": "are much higher", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/worlds-energy-problem", "children": [ { "text": "the world's energy problem", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us ", "spanType": "span-simple-text" }, { "children": [ { "text": "now", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor ", "spanType": "span-simple-text" }, { "children": [ { "text": "and", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " in which humanity has a smaller negative environmental impact \u2013 we document what we know about global poverty and humanity\u2019s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/cheap-renewables-growth", "children": [ { "text": "1", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions", "children": [ { "text": "2", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/land-use-diets", "children": [ { "text": "3", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/worlds-energy-problem", "children": [ { "text": "4", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/what-are-drivers-deforestation", "children": [ { "text": "5", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/outdoor-air-pollution", "children": [ { "text": "6", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/renewable-energy", "children": [ { "text": "7", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/water-use-stress", "children": [ { "text": "8", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/safest-sources-of-energy", "children": [ { "text": "9", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/energy-access", "children": [ { "text": "10", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/fossil-fuels", "children": [ { "text": "11", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/environmental-impacts-of-food", "children": [ { "text": "12", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/forests-and-deforestation", "children": [ { "text": "13", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and many more). ", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products \u2013 and thereby reduce the use of specific resources and forgo some economic growth \u2013 to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/shrink-emissions-not-the-economy", "children": [ { "text": "a guest post for Our World in Data", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: ", "spanType": "span-simple-text" }, { "children": [ { "text": "\u201cIronically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed \u201cdegrowth\u201d). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.\u201d", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": "{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually ", "spanType": "span-simple-text" }, { "children": [ { "text": "increase", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " economic growth over the coming decades. {ref}", "spanType": "span-simple-text" }, { "url": "https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020", "children": [ { "text": "World Economic Outlook, October 2020: A Long and Difficult Ascent", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve ", "spanType": "span-simple-text" }, { "children": [ { "text": "more growth", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": ".{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2\u00b0C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, ", "spanType": "span-simple-text" }, { "children": [ { "text": "relative to a baseline growth of 1.6% to 3%", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": ".\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today\u2019s economy. With measures in place to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 1.54% per year. The world economy would then \u2018only' be 461% of the size of today.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today\u2019s economy. With measures to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 2.94% per year. The economy would then \u2018only' be 1813% the size of today.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2\u00b0C.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "See:", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "text": "Edenhofer et al. (2014). ", "spanType": "span-simple-text" }, { "url": "https://www.ipcc.ch/report/ar5/wg3/", "children": [ { "text": "IPCC, 2014: Summary for Policymakers", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "text": "See also: IPCC (2014) \u2013 ", "spanType": "span-simple-text" }, { "url": "https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf", "children": [ { "text": "Climate Change 2014: Synthesis Report", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.", "spanType": "span-simple-text" }, { "spanType": "span-newline" }, { "spanType": "span-newline" }, { "url": "https://www.sciencedirect.com/science/article/pii/S0095069617308707", "children": [ { "text": "https://www.sciencedirect.com/science/article/pii/S0095069617308707", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": "{/ref}\u00a0Fighting climate change is not just compatible with fighting poverty, the two goals \u2014 to reduce emissions and to increase economic growth \u2014 actually ", "spanType": "span-simple-text" }, { "children": [ { "text": "strengthen", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " each other.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "And when important goals ", "spanType": "span-simple-text" }, { "children": [ { "text": "are", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Is it possible for poor countries to achieve this growth?\u00a0", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "But whether or not global poverty can possibly decline that much \u2013 from the current level of 85% to Denmark\u2019s level of 14% \u2013 overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were ", "spanType": "span-simple-text" }, { "url": "https://voxeu.org/article/economic-impact-colonialism", "children": [ { "text": "exploited by colonial powers", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in ", "spanType": "span-simple-text" }, { "url": "https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy", "children": [ { "text": "many", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "url": "https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=", "children": [ { "text": "ways", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "A third aspect to consider is that countries around the world saw large improvements in ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/health-meta", "children": [ { "text": "health", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/global-education", "children": [ { "text": "education", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "A fourth reason is to see that ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth", "children": [ { "text": "\u2019catch-up growth\u2019 can be very fast", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ": several countries have achieved annual growth rates of more than 5% in recent decades.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "And a last reason to consider is that up to the pandemic the majority of countries in the world \u2013 ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty", "children": [ { "text": "but not all", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " \u2013 ", "spanType": "span-simple-text" }, { "children": [ { "text": "did", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " make progress against poverty. Global poverty has declined very substantially in recent decades, ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative", "children": [ { "text": "no matter", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " what poverty line you want to draw.\u00a0", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Increasing productivity substantially and reducing humanity\u2019s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Conclusion\u00a0", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "text": "Acknowledgement:", "spanType": "span-simple-text" } ], "spanType": "span-bold" }, { "text": " I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "children": [ { "text": "Continue reading Our World in Data:", "spanType": "span-simple-text" } ], "spanType": "span-bold" } ], "spanType": "span-italic" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/forests-and-deforestation", "type": "prominent-link", "title": "What is driving deforestation? And how can it come to an end?", "description": "My colleague Hannah Ritchie on how to bring humanity's long history of deforestation to an end.", "parseErrors": [] } ], "type": "article", "title": "How much economic growth is necessary to reduce global poverty substantially?", "authors": [ "Max Roser" ], "excerpt": "I study the data on today's global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.", "dateline": "March 15, 2021", "subtitle": "I study the data on today's global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.", "sidebar-toc": false, "featured-image": "Screen-Shot-2021-03-15-at-12.14.00.png" }, "createdAt": "2021-03-26T09:06:45.000Z", "published": false, "updatedAt": "2023-04-10T09:25:37.000Z", "revisionId": null, "publishedAt": "2021-03-15T12:12:39.000Z", "relatedCharts": [], "publicationContext": "listed" }	{ "errors": [ { "name": "unkown element tag", "details": "type was style" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag owid/help" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag image" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag image" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag image" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag image" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag image" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag list" }, { "name": "unhandled html tag found", "details": "Encountered the unhandled tag hr" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag separator" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag spacer" }, { "name": "unhandled html tag found", "details": "Encountered the unhandled tag hr" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag separator" }, { "name": "unhandled html tag found", "details": "Encountered the unhandled tag hr" }, { "name": "unexpected wp component tag", "details": "Found unhandled wp:comment tag separator" } ], "numBlocks": 92, "numErrors": 15, "wpTagCounts": { "html": 4, "list": 1, "image": 5, "column": 4, "spacer": 1, "columns": 2, "heading": 10, "owid/help": 1, "paragraph": 114, "separator": 3, "owid/prominent-link": 3, "owid/additional-information": 1 }, "htmlTagCounts": { "p": 115, "h3": 2, "h4": 8, "hr": 3, "ul": 1, "div": 9, "figure": 5 } }	2021-03-15 12:12:39	2024-02-16 14:22:51	1BAcnqfO9nKJhdnocDlZ9CzO2Ypyyjn2iJsls5QM9DI0	[ "Max Roser" ]	I study the data on today's global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.	2021-03-26 09:06:45	2023-04-10 09:25:37	https://ourworldindata.org/wp-content/uploads/2021/03/Screen-Shot-2021-03-15-at-12.14.00.png	{}	Our World in Data presents the data and research to make progress against the world’s largest problems. This post was last updated on May 24, 2021. It draws on data and research discussed in our entries on [Income Inequality](https://ourworldindata.org/income-inequality), [Global Extreme Poverty](https://ourworldindata.org/extreme-poverty) and [Economic Growth](https://ourworldindata.org/economic-growth). ### The World Bank has updated its poverty and inequality data The data in this article uses a previous release of the World Bank's poverty and inequality data in which incomes are expressed in 2011 international-$. The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices). This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures. ### Read more about the World Bank's updated methodology https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line ### Explore the latest World Bank data on poverty and inequality https://ourworldindata.org/explorers/poverty-explorer Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day. In an earlier post [I said](https://ourworldindata.org/poverty-growth-needed) that ‘if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.’ In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially. As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don’t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced – increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find [in so many publications](https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073) that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.” Since people not only care about the number of goods, but also about their quality, it is important to add this aspect – the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the _capacity_ of an economy to produce goods and services, this is a useful variation of the definition. Some others ([including Wikipedia](https://en.wikipedia.org/wiki/Economic_growth)) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense – just like life expectancy is a measure of population health and hardly the definition of population health.{/ref} In [another earlier text](https://ourworldindata.org/higher-poverty-global-line) I asked who is considered poor in a high-income country. Based on existing national poverty lines – but also the size of social care payouts, a proposal for Universal Basic Income, and survey results – I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries. One of the most important insights of economics is that people live in poverty not because of who they are, but because of _where _they are. A person’s knowledge, their skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together [matter less](https://voxeu.org/article/income-inequality-and-citizenship) than the one factor that is entirely outside of a person’s control: whether they happen to be born into a large, productive economy or not. The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country – economic growth – is so crucial for reducing poverty. <Image filename="Share-living-on-less-than-30-Ethiopia-vs-Denmark.png" alt=""/> Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people’s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible. First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure. Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world. To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved. Deaton, A., and Heston, A. 2010. “Understanding PPPs and PPP-Based National Accounts.” American Economic Journal: Macroeconomics 2 (4): 1–35. Throughout this text I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I’m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref} ### Most people in the world live in countries in which more than 90% live on less than $30 per day This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country’s population living on less than $30 per day. I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country’s population size. This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref} → Daniel Bachler built an [interactive visualization of this chart](https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd) in which you can set any poverty line you might be interested in. <Image filename="Share-living-on-less-than-30-2.png" alt=""/> ## Poverty is not inevitable In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) – On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every [second child died](https://ourworldindata.org/child-mortality-in-the-past) and where hunger was [widespread](https://ourworldindata.org/famines), the majority of people [lived in poverty](https://ourworldindata.org/extreme-history-methods). And since [poverty did not change](https://ourworldindata.org/breaking-the-malthusian-trap), it was easy to believe that poverty was unchangeable. Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined and living conditions improved: average incomes increased [more than 25-fold](https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK), the child mortality rate [declined from more than a quarter](https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK) to less than half a percent – one of the lowest levels in the world – and Denmark is today one of the countries where people report to be most [satisfied with their lives](https://ourworldindata.org/grapher/gdp-vs-happiness). As such I will use Denmark as a benchmark of what it means for poverty to fall ‘substantially’. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark? Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway. Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty. If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's [Poverty and Inequality Platform](https://pip.worldbank.org/home) – or you can view it in our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL).{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty. ### How do living standards in Denmark and a poorer country compare? The previous chart showed that in the majority of the world’s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue. There is no _global_ survey of incomes: researchers need to rely on the available _national_ surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people’s incomes, while in poorer countries these surveys capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our [Data](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP)[ ](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp)[Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL) of this data, you can select to show the data from [income](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP) and [consumption](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP) surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text. It’s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform [methodology](https://worldbank.github.io/PIP-Methodology/index.html). The importance of capturing people’s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref} What does the chart tell us about living standards in these two countries? If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark’s level we can read it off the two parameters that describe the distribution – the average level of income and the inequality of those incomes. Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the [Poverty and Inequality Platform](https://pip.worldbank.org/home). In our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK), you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67 If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref} Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref} A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew [by more than that](https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH) over the last few generations, and such growth is [not rare](https://ourworldindata.org/economic-growth-since-1950) in recent economic history. <Image filename="Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png" alt=""/> ### How would average incomes need to change globally? We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark? The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country’s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right. The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day. Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still. <Image filename="mean-income-by-country-Denmark-highlight.png" alt=""/> ### How much would average incomes have to increase to reach the level of Denmark? This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark’s mean income. I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country’s population. The population size is relevant because we need to take into account each country’s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty. The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark’s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less. The very richest countries don’t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there. The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark. How much growth would be needed in total? You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the [Poverty and Inequality Platform](https://pip.worldbank.org/home). In our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK), you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country). The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100. The daily total income in 2017 is each country’s mean income multiplied by the number of people in each country. The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017. Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref} An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy. Or put differently, a world economy with substantially less poverty is _at a minimum_ 5-times bigger than today’s global economy. <Image filename="growth-needed-to-reach-Denmark.png" alt=""/> A five-fold increase is a _minimum_ estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth. ## Additional information To calculate the _minimum_ growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section. The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty. A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario. In this scenario every country stops economic growth entirely once they reach the average income of Denmark This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario. The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced. In this scenario every country that is richer than Denmark reduces average incomes To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people’s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced. As a consequence there is no global inequality between countries in this scenario The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day. You have to be extremely optimistic about the future of inequality to think this is likely. If you don’t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher. In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark’s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref} In this scenario inequality within countries declines very substantially The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see [this map](https://ourworldindata.org/grapher/economic-inequality-gini-index)) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55. Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today. In many countries around the world inequality [_did_ decrease](https://ourworldindata.org/income-inequality-since-1990) over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the _minimum_ growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher. An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day – just above the poverty line – and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today. Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level. There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($301.44). The required growth from the current mean income is therefore ((301.44-16)/16)=170%.{/ref} This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth. The required economic growth in GDP terms will be higher than in household income terms None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people’s incomes – importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of [this post](https://ourworldindata.org/higher-poverty-global-line)). The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger. It would not be the end of poverty – only a substantial reduction of poverty And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day. How much does future population growth matter? In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division’s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature [suggests](https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have) that increases in incomes would lead to a decline of fertility rates. On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is [past its peak](https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL)[ ](https://ourworldindata.org/peak-child)and much of the future population growth is due to ‘[population momentum](https://ourworldindata.org/population-momentum)’. There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario. Is it enough to reduce poverty? This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone’s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich. These reports are called ‘Armuts- und Reichtumsbericht der Bundesregierung’ online at [armuts-und-reichtumsbericht.de](https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html) The latest survey was produced by aproxima and published in 2016. It is published as [Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repräsentativen Bevölkerungsbefragung „ARB-Survey 2015“](https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5), Berlin: Bundesministerium für Arbeit und Soziales (Hrsg.). Asked for the income level above which they consider a person to be rich the mean answer was 9,696€, but the median was ‘closer to 5,000€’, as the report puts it. €5000 are int.-$6,426.74. Per day this is an income of int.-$210.71. Calculations: €5000/0.778=int.$6,426.74 int.$6,426.74/30.5=int.$210.71{/ref} My takeaway The purpose of this scenario was to calculate the _minimum_ necessary growth. I’m cautiously optimistic about the possibility that global income inequality [declines further](https://osf.io/preprints/socarxiv/du5g6), but I’m not as optimistic as this minimum scenario envisages and I therefore think that _if_ the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase. ### Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty? Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity’s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need: * If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. * If however we want to achieve a future in which global poverty is substantially lower than today _and_ in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need. In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries [have reduced](https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR) consumption-adjusted CO₂ emissions while incomes increased. Global emissions of ozone-depleting substances have [declined by more than 99%](https://ourworldindata.org/ozone-layer) in the last three decades. And global [deforestation rates have declined strongly](https://ourworldindata.org/global-deforestation-peak) since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people [are much higher](https://ourworldindata.org/global-inequalities-co2-consumption) than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is [the world's energy problem](https://ourworldindata.org/worlds-energy-problem). I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us _now_ to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor _and_ in which humanity has a smaller negative environmental impact – we document what we know about global poverty and humanity’s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: [1](https://ourworldindata.org/cheap-renewables-growth), [2](https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions), [3](https://ourworldindata.org/land-use-diets), [4](https://ourworldindata.org/worlds-energy-problem), [5](https://ourworldindata.org/what-are-drivers-deforestation), [6](https://ourworldindata.org/outdoor-air-pollution), [7](https://ourworldindata.org/renewable-energy), [8](https://ourworldindata.org/water-use-stress), [9](https://ourworldindata.org/safest-sources-of-energy), [10](https://ourworldindata.org/energy-access), [11](https://ourworldindata.org/fossil-fuels), [12](https://ourworldindata.org/environmental-impacts-of-food), [13](https://ourworldindata.org/forests-and-deforestation) and many more). As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products – and thereby reduce the use of specific resources and forgo some economic growth – to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general. We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In [a guest post for Our World in Data](https://ourworldindata.org/shrink-emissions-not-the-economy) Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: _“Ironically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed “degrowth”). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.”_{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually _increase_ economic growth over the coming decades. {ref}[World Economic Outlook, October 2020: A Long and Difficult Ascent](https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020). In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve _more growth_.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2°C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, _relative to a baseline growth of 1.6% to 3%_. In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today’s economy. With measures in place to limit warming to 2°C, growth would be 0.06% smaller – i.e. 1.54% per year. The world economy would then ‘only' be 461% of the size of today. In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today’s economy. With measures to limit warming to 2°C, growth would be 0.06% smaller – i.e. 2.94% per year. The economy would then ‘only' be 1813% the size of today. This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2°C. The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions. See: Edenhofer et al. (2014). [IPCC, 2014: Summary for Policymakers](https://www.ipcc.ch/report/ar5/wg3/). In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. See also: IPCC (2014) – [Climate Change 2014: Synthesis Report](https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf). Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp. [https://www.sciencedirect.com/science/article/pii/S0095069617308707](https://www.sciencedirect.com/science/article/pii/S0095069617308707){/ref} Fighting climate change is not just compatible with fighting poverty, the two goals — to reduce emissions and to increase economic growth — actually _strengthen_ each other. And when important goals _are_ in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty. ### Is it possible for poor countries to achieve this growth? Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty. But whether or not global poverty can possibly decline that much – from the current level of 85% to Denmark’s level of 14% – overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not. One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere. Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were [exploited by colonial powers](https://voxeu.org/article/economic-impact-colonialism) that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in [many](https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy)[ways](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=), but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty. A third aspect to consider is that countries around the world saw large improvements in [health](https://ourworldindata.org/health-meta) and [education](https://ourworldindata.org/global-education) in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind. A fourth reason is to see that [’catch-up growth’ can be very fast](https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth): several countries have achieved annual growth rates of more than 5% in recent decades. And a last reason to consider is that up to the pandemic the majority of countries in the world – [but not all](https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty) – _did_ make progress against poverty. Global poverty has declined very substantially in recent decades, [no matter](https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative) what poverty line you want to draw. Increasing productivity substantially and reducing humanity’s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals. ### Conclusion What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty. Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially. If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition. Acknowledgement: I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article. _Continue reading Our World in Data:_ ### What is driving deforestation? And how can it come to an end? My colleague Hannah Ritchie on how to bring humanity's long history of deforestation to an end. https://ourworldindata.org/forests-and-deforestation	{ "id": 41648, "date": "2021-03-15T12:12:39", "guid": { "rendered": "https://owid.cloud/?p=41648" }, "link": "https://owid.cloud/poverty-minimum-growth-needed", "meta": { "owid_publication_context_meta_field": { "latest": true, "homepage": true, "immediate_newsletter": true } }, "slug": "poverty-minimum-growth-needed", "tags": [], "type": "post", "title": { "rendered": "How much economic growth is necessary to reduce global poverty substantially?" }, "_links": { "self": [ { "href": "https://owid.cloud/wp-json/wp/v2/posts/41648" } ], "about": [ { "href": "https://owid.cloud/wp-json/wp/v2/types/post" } ], "author": [ { "href": "https://owid.cloud/wp-json/wp/v2/users/2", "embeddable": true } ], "curies": [ { "href": "https://api.w.org/{rel}", "name": "wp", "templated": true } ], "replies": [ { "href": "https://owid.cloud/wp-json/wp/v2/comments?post=41648", "embeddable": true } ], "wp:term": [ { "href": "https://owid.cloud/wp-json/wp/v2/categories?post=41648", "taxonomy": "category", "embeddable": true }, { "href": "https://owid.cloud/wp-json/wp/v2/tags?post=41648", "taxonomy": "post_tag", "embeddable": true } ], "collection": [ { "href": "https://owid.cloud/wp-json/wp/v2/posts" } ], "wp:attachment": [ { "href": "https://owid.cloud/wp-json/wp/v2/media?parent=41648" } ], "version-history": [ { "href": "https://owid.cloud/wp-json/wp/v2/posts/41648/revisions", "count": 30 } ], "wp:featuredmedia": [ { "href": "https://owid.cloud/wp-json/wp/v2/media/41657", "embeddable": true } ], "predecessor-version": [ { "id": 58161, "href": "https://owid.cloud/wp-json/wp/v2/posts/41648/revisions/58161" } ] }, "author": 2, "format": "standard", "status": "publish", "sticky": false, "content": { "rendered": "\n<div class=\"blog-info\">\n<p>Our World in Data presents the data and research to make progress against the world\u2019s largest problems.<br>\nThis post was last updated on May 24, 2021. It draws on data and research discussed in our entries on <strong><a href=\"https://ourworldindata.org/income-inequality\" target=\"_blank\" rel=\"noopener\">Income Inequality</a></strong>, <strong><a href=\"https://ourworldindata.org/extreme-poverty\" target=\"_blank\" rel=\"noopener\">Global Extreme Poverty</a></strong> and <strong><a href=\"https://ourworldindata.org/economic-growth\" target=\"_blank\" rel=\"noopener\">Economic Growth</a></strong>.</p>\n\n</div>\n\n<style>\n .no-frame img {\n box-shadow: none;\n padding: 0;\n background: none;\n }\n</style>\n\n\n\t<block type=\"help\">\n\t\t<content>\n\n<h4>The World Bank has updated its poverty and inequality data</h4>\n\n\n\n<p>The data in this article uses a previous release of the World Bank’s poverty and inequality data in which incomes are expressed in 2011 international-$.</p>\n\n\n\n<p>The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).</p>\n\n\n\n<p>This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.</p>\n\n\n <block type=\"prominent-link\" style=\"is-style-thin\">\n <link-url>https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line</link-url>\n <title></title>\n <content>\n\n<p>Read more about the World Bank’s updated methodology</p>\n\n</content>\n <figure></figure>\n </block>\n\n <block type=\"prominent-link\" style=\"is-style-thin\">\n <link-url>https://ourworldindata.org/explorers/poverty-explorer</link-url>\n <title>Explore the latest World Bank data on poverty and inequality</title>\n <content>\n\n<p></p>\n\n</content>\n <figure></figure>\n </block>\n</content>\n\t</block>\n\n\n<p>Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day. </p>\n\n\n\n<p>In an earlier post <a href=\"https://ourworldindata.org/poverty-growth-needed\">I said</a> that \u2018if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.\u2019 In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially. </p>\n\n\n\n<p>As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. </p>\n\n\n\n<p>The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don\u2019t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced \u2013 increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find <a href=\"https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073\">in so many publications</a> that I don\u2019t know which one to quote is that economic growth is \u201can increase in the amount of goods and services produced per head of the population over a period of time.\u201d </p>\n\n\n\n<p>Since people not only care about the number of goods, but also about their quality, it is important to add this aspect \u2013 the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the <em>capacity</em> of an economy to produce goods and services, this is a useful variation of the definition. Some others (<a href=\"https://en.wikipedia.org/wiki/Economic_growth\">including Wikipedia</a>) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense \u2013 just like life expectancy is a measure of population health and hardly the definition of population health.{/ref}</p>\n\n\n\n<p>In <a href=\"https://ourworldindata.org/higher-poverty-global-line\">another earlier text</a> I asked who is considered poor in a high-income country. Based on existing national poverty lines \u2013 but also the size of social care payouts, a proposal for Universal Basic Income, and survey results \u2013 I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries. </p>\n\n\n\n<p>One of the most important insights of economics is that people live in poverty not because of who they are, but because of <em>where </em>they are. A person\u2019s knowledge, their skills, and how hard they work all matter for whether they are poor or not \u2013 but all these personal factors together <a href=\"https://voxeu.org/article/income-inequality-and-citizenship\">matter less</a> than the one factor that is entirely outside of a person\u2019s control: whether they happen to be born into a large, productive economy or not.</p>\n\n\n\n<p>The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country \u2013 economic growth \u2013 is so crucial for reducing poverty.</p>\n\n\n\n<div class=\"wp-block-columns\">\n<div class=\"wp-block-column\">\n<div data-no-lightbox class=\"no-frame\">\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark.png\"><img loading=\"lazy\" width=\"800\" height=\"149\" src=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png\" alt=\"\" class=\"wp-image-41711\" srcset=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png 800w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-400x75.png 400w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-150x28.png 150w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-768x143.png 768w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-1536x287.png 1536w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-2048x382.png 2048w\" sizes=\"(max-width: 800px) 100vw, 800px\" /></a></figure>\n\n\n\n</div>\n</div>\n\n\n\n<div class=\"wp-block-column\"></div>\n</div>\n\n\n\n<p>Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people\u2019s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article \u2013 and in global income and expenditure data generally \u2013 the statisticians who produce these figures are careful to make these numbers as comparable as possible. </p>\n\n\n\n<p>First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.<br>Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.</p>\n\n\n\n<p>To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.<br><br>Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.<br>Deaton, A., and Heston, A. 2010. \u201cUnderstanding PPPs and PPP-Based National Accounts.\u201d American Economic Journal: Macroeconomics 2 (4): 1\u201335.<br>Throughout this text I\u2019m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out \u2018international\u2019 as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I\u2019m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}</p>\n\n\n\n<h4>Most people in the world live in countries in which more than 90% live on less than $30 per day</h4>\n\n\n\n<p>This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country\u2019s population living on less than $30 per day. </p>\n\n\n\n<p>I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country\u2019s population size.</p>\n\n\n\n<p>This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}</p>\n\n\n\n<p>\u2192 Daniel Bachler built an <a href=\"https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd\">interactive visualization of this chart</a> in which you can set any poverty line you might be interested in.</p>\n\n\n\n<figure class=\"wp-block-image size-full wp-block-full-content-width\"><img loading=\"lazy\" width=\"4276\" height=\"2556\" src=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png\" alt=\"\" class=\"wp-image-41813\" srcset=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png 4276w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-400x239.png 400w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-800x478.png 800w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-150x90.png 150w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-768x459.png 768w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-1536x918.png 1536w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-2048x1224.png 2048w\" sizes=\"(max-width: 4276px) 100vw, 4276px\" /></figure>\n\n\n\n<h3>Poverty is not inevitable</h3>\n\n\n\n<p>In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) \u2013 On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every <a href=\"https://ourworldindata.org/child-mortality-in-the-past\">second child died</a> and where hunger was <a href=\"https://ourworldindata.org/famines\">widespread</a>, the majority of people <a href=\"https://ourworldindata.org/extreme-history-methods\">lived in poverty</a>. And since <a href=\"https://ourworldindata.org/breaking-the-malthusian-trap\">poverty did not change</a>, it was easy to believe that poverty was unchangeable. </p>\n\n\n\n<p>Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined and living conditions improved: average incomes increased <a href=\"https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK\">more than 25-fold</a>, the child mortality rate <a href=\"https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK\">declined from more than a quarter</a> to less than half a percent \u2013 one of the lowest levels in the world \u2013 and Denmark is today one of the countries where people report to be most <a href=\"https://ourworldindata.org/grapher/gdp-vs-happiness\">satisfied with their lives</a>.</p>\n\n\n\n<p>As such I will use Denmark as a benchmark of what it means for poverty to fall \u2018substantially\u2019. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?</p>\n\n\n\n<p>Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.</p>\n\n\n\n<p>Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty. </p>\n\n\n\n<p>If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank’s <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a> \u2013 or you can view it in our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL\">Data Explorer</a>.{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.</p>\n\n\n\n<h4>How do living standards in Denmark and a poorer country compare?</h4>\n\n\n\n<p>The previous chart showed that in the majority of the world\u2019s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue. </p>\n\n\n\n<p>There is no <em>global</em> survey of incomes: researchers need to rely on the available <em>national</em> surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people\u2019s incomes, while in poorer countries these surveys capture people\u2019s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">Data</a><a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp\"> </a><a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL\">Explorer</a> of this data, you can select to show the data from <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">income</a> and <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">consumption</a> surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about \u2018the income of people in richer countries and the monetary value of consumption in poorer countries\u2019. But since it\u2019d be a bit much to repeat this every time researchers simply speak of \u2018living standards\u2019 or \u2018income\u2019 instead. I do the same in this text.</p>\n\n\n\n<p>It\u2019s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank’s Poverty and Inequality Platform <a href=\"https://worldbank.github.io/PIP-Methodology/index.html\">methodology</a>.<br><br>The importance of capturing people\u2019s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}</p>\n\n\n\n<p>What does the chart tell us about living standards in these two countries? </p>\n\n\n\n<p>If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark\u2019s level we can read it off the two parameters that describe the distribution \u2013 the average level of income and the inequality of those incomes.</p>\n\n\n\n<p>Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank’s PovcalNet platform \u2013 which has been superseded the <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a>. In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK\">Data Explorer</a>, you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67<br>If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}</p>\n\n\n\n<p>Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}</p>\n\n\n\n<p>A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew <a href=\"https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH\">by more than that</a> over the last few generations, and such growth is <a href=\"https://ourworldindata.org/economic-growth-since-1950\">not rare</a> in recent economic history. </p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"3000\" height=\"1570\" src=\"https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png\" alt=\"\" class=\"wp-image-41651\" srcset=\"https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png 3000w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-400x209.png 400w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-800x419.png 800w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-150x79.png 150w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-768x402.png 768w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-1536x804.png 1536w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-2048x1072.png 2048w\" sizes=\"(max-width: 3000px) 100vw, 3000px\" /></figure>\n\n\n\n<h4>How would average incomes need to change globally?</h4>\n\n\n\n<p>We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?</p>\n\n\n\n<p>The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country\u2019s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.</p>\n\n\n\n<p>The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.</p>\n\n\n\n<p>Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.</p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"2921\" height=\"2474\" src=\"https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png\" alt=\"\" class=\"wp-image-41652\" srcset=\"https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png 2921w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-400x339.png 400w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-649x550.png 649w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-150x127.png 150w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-768x650.png 768w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-1536x1301.png 1536w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-2048x1735.png 2048w\" sizes=\"(max-width: 2921px) 100vw, 2921px\" /></figure>\n\n\n\n<h4>How much would average incomes have to increase to reach the level of Denmark?</h4>\n\n\n\n<p>This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark\u2019s mean income. </p>\n\n\n\n<p>I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country\u2019s population. The population size is relevant because we need to take into account each country\u2019s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.</p>\n\n\n\n<p>The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark\u2019s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.</p>\n\n\n\n<p>The very richest countries don\u2019t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there. </p>\n\n\n\n<p>The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.</p>\n\n\n\n<p>How much growth would be needed in total?</p>\n\n\n\n<p>You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank’s PovcalNet platform \u2013 which has been superseded the <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a>. In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK\">Data Explorer</a>, you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).</p>\n\n\n\n<p>The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.</p>\n\n\n\n<p>The daily total income in 2017 is each country\u2019s mean income multiplied by the number of people in each country.</p>\n\n\n\n<p>The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017.<br>Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}</p>\n\n\n\n<p>An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.</p>\n\n\n\n<p>Or put differently, a world economy with substantially less poverty is <em>at a minimum</em> 5-times bigger than today\u2019s global economy.</p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"2921\" height=\"3087\" src=\"https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png\" alt=\"\" class=\"wp-image-41653\" srcset=\"https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png 2921w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-378x400.png 378w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-520x550.png 520w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-142x150.png 142w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-768x812.png 768w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-1453x1536.png 1453w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-1938x2048.png 1938w\" sizes=\"(max-width: 2921px) 100vw, 2921px\" /></figure>\n\n\n\n<p></p>\n\n\n\n<p>A five-fold increase is a <em>minimum</em> estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.</p>\n\n\n\t<block type=\"additional-information\" default-open=\"true\">\n\t\t<content>\n\n<h3>In which ways does a realistic scenario differ from the minimum scenario?</h3>\n\n\n\n<div class=\"wp-block-columns is-style-sticky-right\">\n<div class=\"wp-block-column\">\n<p>To calculate the <em>minimum</em> growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.</p>\n\n\n\n<p>The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.</p>\n\n\n\n<p>A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.</p>\n\n\n\n<p><strong>In this scenario every country stops economic growth entirely once they reach the average income of Denmark</strong></p>\n\n\n\n<p>This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.</p>\n\n\n\n<p>The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.</p>\n\n\n\n<p><strong>In this scenario every country that is richer than Denmark reduces average incomes</strong></p>\n\n\n\n<p>To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people\u2019s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.</p>\n\n\n\n<p><strong>As a consequence there is no global inequality between countries in this scenario</strong></p>\n\n\n\n<p>The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day. </p>\n\n\n\n<p>You have to be extremely optimistic about the future of inequality to think this is likely. If you don\u2019t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.</p>\n\n\n\n<p>In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark\u2019s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}</p>\n\n\n\n<p><strong>In this scenario inequality within countries declines very substantially</strong></p>\n\n\n\n<p>The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see <a href=\"https://ourworldindata.org/grapher/economic-inequality-gini-index\">this map</a>) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55. Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today.</p>\n\n\n\n<p>In many countries around the world inequality <a href=\"https://ourworldindata.org/income-inequality-since-1990\"><em>did</em> decrease</a> over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the <em>minimum</em> growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.</p>\n\n\n\n<p>An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day \u2013 just above the poverty line \u2013 and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.</p>\n\n\n\n<p>Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.</p>\n\n\n\n<p>There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($301.44). The required growth from the current mean income is therefore ((301.44-16)/16)=170%.{/ref}</p>\n\n\n\n<p><strong>This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today</strong></p>\n\n\n\n<p>In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth. </p>\n\n\n\n<p><strong>The required economic growth in GDP terms will be higher than in household income terms</strong></p>\n\n\n\n<p>None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people\u2019s incomes \u2013 importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of <a href=\"https://ourworldindata.org/higher-poverty-global-line\">this post</a>). </p>\n\n\n\n<p>The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.</p>\n\n\n\n<p><strong>It would not be the end of poverty \u2013 only a substantial reduction of poverty</strong></p>\n\n\n\n<p>And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.</p>\n\n\n\n<p><strong>How much does future population growth matter?</strong></p>\n\n\n\n<p>In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division\u2019s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature <a href=\"https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have\">suggests</a> that increases in incomes would lead to a decline of fertility rates. </p>\n\n\n\n<p>On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is <a href=\"https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL\">past its peak</a><a href=\"https://ourworldindata.org/peak-child\"> </a>and much of the future population growth is due to \u2018<a href=\"https://ourworldindata.org/population-momentum\">population momentum</a>\u2019.\u00a0</p>\n\n\n\n<p>There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.</p>\n\n\n\n<p><strong>Is it enough to reduce poverty?</strong></p>\n\n\n\n<p>This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone\u2019s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich.<br>These reports are called \u2018Armuts- und Reichtumsbericht der Bundesregierung\u2019 online at <a href=\"https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html\">armuts-und-reichtumsbericht.de</a></p>\n\n\n\n<p>The latest survey was produced by aproxima and published in 2016. It is published as <a href=\"https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5\">Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repr\u00e4sentativen Bev\u00f6lkerungsbefragung \u201eARB-Survey 2015\u201c</a>, Berlin: Bundesministerium f\u00fcr Arbeit und Soziales (Hrsg.).</p>\n\n\n\n<p>Asked for the income level above which they consider a person to be rich the mean answer was 9,696\u20ac, but the median was \u2018closer to 5,000\u20ac\u2019, as the report puts it.</p>\n\n\n\n<p>\u20ac5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.</p>\n\n\n\n<p>Calculations:<br>\u20ac5000/0.778=int.$6,426.74<br>int.$6,426.74/30.5=int.$210.71{/ref}</p>\n\n\n\n<p><strong>My takeaway</strong></p>\n\n\n\n<p>The purpose of this scenario was to calculate the <em>minimum</em> necessary growth. I\u2019m cautiously optimistic about the possibility that global income inequality <a href=\"https://osf.io/preprints/socarxiv/du5g6\">declines further</a>, but I\u2019m not as optimistic as this minimum scenario envisages and I therefore think that <em>if</em> the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase.</p>\n</div>\n\n\n\n<div class=\"wp-block-column\"></div>\n</div>\n\n</content>\n\t</block>\n\n\n<h4>Is it possible to achieve both, a reduction of humanity’s negative impact on the environment and a reduction of global poverty?</h4>\n\n\n\n<p>Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity\u2019s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. </p>\n\n\n\n<p>This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:</p>\n\n\n\n<ul><li>If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. </li><li>If however we want to achieve a future in which global poverty is substantially lower than today <em>and</em> in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.</li></ul>\n\n\n\n<p>In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries <a href=\"https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR\">have reduced</a> consumption-adjusted CO\u2082 emissions while incomes increased. Global emissions of ozone-depleting substances have <a href=\"https://ourworldindata.org/ozone-layer\">declined by more than 99%</a> in the last three decades. And global <a href=\"https://ourworldindata.org/global-deforestation-peak\">deforestation rates have declined strongly</a> since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world’s richest people <a href=\"https://ourworldindata.org/global-inequalities-co2-consumption\">are much higher</a> than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is <a href=\"https://ourworldindata.org/worlds-energy-problem\">the world’s energy problem</a>.</p>\n\n\n\n<p>I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us <em>now</em> to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor <em>and</em> in which humanity has a smaller negative environmental impact \u2013 we document what we know about global poverty and humanity\u2019s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: <a href=\"https://ourworldindata.org/cheap-renewables-growth\">1</a>, <a href=\"https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions\">2</a>, <a href=\"https://ourworldindata.org/land-use-diets\">3</a>, <a href=\"https://ourworldindata.org/worlds-energy-problem\">4</a>, <a href=\"https://ourworldindata.org/what-are-drivers-deforestation\">5</a>, <a href=\"https://ourworldindata.org/outdoor-air-pollution\">6</a>, <a href=\"https://ourworldindata.org/renewable-energy\">7</a>, <a href=\"https://ourworldindata.org/water-use-stress\">8</a>, <a href=\"https://ourworldindata.org/safest-sources-of-energy\">9</a>, <a href=\"https://ourworldindata.org/energy-access\">10</a>, <a href=\"https://ourworldindata.org/fossil-fuels\">11</a>, <a href=\"https://ourworldindata.org/environmental-impacts-of-food\">12</a>, <a href=\"https://ourworldindata.org/forests-and-deforestation\">13</a> and many more). </p>\n\n\n\n<p>As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products \u2013 and thereby reduce the use of specific resources and forgo some economic growth \u2013 to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.</p>\n\n\n\n<p>We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In <a href=\"https://ourworldindata.org/shrink-emissions-not-the-economy\">a guest post for Our World in Data</a> Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: <em>\u201cIronically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed \u201cdegrowth\u201d). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.\u201d</em>{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually <em>increase</em> economic growth over the coming decades. {ref}<a href=\"https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020\">World Economic Outlook, October 2020: A Long and Difficult Ascent</a>. In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve <em>more growth</em>.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2\u00b0C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, <em>relative to a baseline growth of 1.6% to 3%</em>. </p>\n\n\n\n<p>In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today\u2019s economy. With measures in place to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 1.54% per year. The world economy would then \u2018only’ be 461% of the size of today.<br><br>In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today\u2019s economy. With measures to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 2.94% per year. The economy would then \u2018only’ be 1813% the size of today.</p>\n\n\n\n<p>This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2\u00b0C.</p>\n\n\n\n<p>The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions.<br><br>See:<br>Edenhofer et al. (2014). <a href=\"https://www.ipcc.ch/report/ar5/wg3/\">IPCC, 2014: Summary for Policymakers</a>. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.<br><br>See also: IPCC (2014) \u2013 <a href=\"https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf\">Climate Change 2014: Synthesis Report</a>. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.<br><br><a href=\"https://www.sciencedirect.com/science/article/pii/S0095069617308707\">https://www.sciencedirect.com/science/article/pii/S0095069617308707</a>{/ref} Fighting climate change is not just compatible with fighting poverty, the two goals \u2014 to reduce emissions and to increase economic growth \u2014 actually <em>strengthen</em> each other.</p>\n\n\n\n<p>And when important goals <em>are</em> in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.</p>\n\n\n\n<h4>Is it possible for poor countries to achieve this growth? </h4>\n\n\n\n<p>Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.</p>\n\n\n\n<p>But whether or not global poverty can possibly decline that much \u2013 from the current level of 85% to Denmark\u2019s level of 14% \u2013 overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not.</p>\n\n\n\n<p>One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere.</p>\n\n\n\n<p>Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were <a href=\"https://voxeu.org/article/economic-impact-colonialism\">exploited by colonial powers</a> that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in <a href=\"https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy\">many</a> <a href=\"https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=\" target=\"_blank\" rel=\"noreferrer noopener\">ways</a>, but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty. </p>\n\n\n\n<p>A third aspect to consider is that countries around the world saw large improvements in <a href=\"https://ourworldindata.org/health-meta\">health</a> and <a href=\"https://ourworldindata.org/global-education\">education</a> in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind.</p>\n\n\n\n<p>A fourth reason is to see that <a href=\"https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth\">\u2019catch-up growth\u2019 can be very fast</a>: several countries have achieved annual growth rates of more than 5% in recent decades. </p>\n\n\n\n<p>And a last reason to consider is that up to the pandemic the majority of countries in the world \u2013 <a href=\"https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty\">but not all</a> \u2013 <em>did</em> make progress against poverty. Global poverty has declined very substantially in recent decades, <a href=\"https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative\">no matter</a> what poverty line you want to draw. </p>\n\n\n\n<p>Increasing productivity substantially and reducing humanity\u2019s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.</p>\n\n\n\n<h4>Conclusion </h4>\n\n\n\n<p>What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.</p>\n\n\n\n<p>Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.</p>\n\n\n\n<p>If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition.</p>\n\n\n\n<hr class=\"wp-block-separator\"/>\n\n\n\n<div style=\"height:139px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n\n\n\n<hr class=\"wp-block-separator\" id=\"block-3b267837-eb86-4261-8c36-10661a418d16\"/>\n\n\n\n<p id=\"block-c5b72515-60b3-4670-b276-489e0ca2f023\"><strong>Acknowledgement:</strong> I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article.</p>\n\n\n\n<hr class=\"wp-block-separator\"/>\n\n\n\n<p id=\"block-e516cb16-4d90-475e-a618-428e83b2b833\"><em><strong>Continue reading Our World in Data:</strong></em></p>\n\n\n <block type=\"prominent-link\" style=\"is-style-thin\">\n <link-url>https://ourworldindata.org/forests-and-deforestation</link-url>\n <title>What is driving deforestation? And how can it come to an end?</title>\n <content>\n\n<p>My colleague Hannah Ritchie on how to bring humanity’s long history of deforestation to an end.</p>\n\n</content>\n <figure><img width=\"768\" height=\"475\" src=\"https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-768x475.png\" class=\"attachment-medium_large size-medium_large\" alt=\"\" loading=\"lazy\" srcset=\"https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-768x475.png 768w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-400x248.png 400w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-800x495.png 800w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-150x93.png 150w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-1536x951.png 1536w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko.png 1974w\" sizes=\"(max-width: 768px) 100vw, 768px\" /></figure>\n </block>\n\n\n<p></p>\n", "protected": false }, "excerpt": { "rendered": "I study the data on today’s global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.", "protected": false }, "date_gmt": "2021-03-15T12:12:39", "modified": "2023-04-10T10:25:37", "template": "", "categories": [ 51, 1 ], "ping_status": "closed", "authors_name": [ "Max Roser" ], "modified_gmt": "2023-04-10T09:25:37", "comment_status": "closed", "featured_media": 41657, "featured_media_paths": { "thumbnail": "/app/uploads/2021/03/Screen-Shot-2021-03-15-at-12.14.00-150x75.png", "medium_large": "/app/uploads/2021/03/Screen-Shot-2021-03-15-at-12.14.00-768x383.png" } }

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How much economic growth is necessary to reduce global poverty substantially?

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<div class="blog-info"> Our World in Data presents the data and research to make progress against the world’s largest problems. This post was last updated on May 24, 2021. It draws on data and research discussed in our entries on <a href="https://ourworldindata.org/income-inequality" target="_blank" rel="noopener">Income Inequality</a>, <a href="https://ourworldindata.org/extreme-poverty" target="_blank" rel="noopener">Global Extreme Poverty</a> and <a href="https://ourworldindata.org/economic-growth" target="_blank" rel="noopener">Economic Growth</a>. </div> <style> .no-frame img { box-shadow: none; padding: 0; background: none; } </style>     <h4>The World Bank has updated its poverty and inequality data</h4>   The data in this article uses a previous release of the World Bank's poverty and inequality data in which incomes are expressed in 2011 international-$.   The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).   This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.    Read more about the World Bank's updated methodology         Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day.    In an earlier post <a href="https://ourworldindata.org/poverty-growth-needed">I said</a> that ‘if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.’ In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially.    As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth.   The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don’t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced – increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find <a href="https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073">in so many publications</a> that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.”    Since people not only care about the number of goods, but also about their quality, it is important to add this aspect – the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the capacity of an economy to produce goods and services, this is a useful variation of the definition. Some others (<a href="https://en.wikipedia.org/wiki/Economic_growth">including Wikipedia</a>) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense – just like life expectancy is a measure of population health and hardly the definition of population health.{/ref}   In <a href="https://ourworldindata.org/higher-poverty-global-line">another earlier text</a> I asked who is considered poor in a high-income country. Based on existing national poverty lines – but also the size of social care payouts, a proposal for Universal Basic Income, and survey results – I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries.    One of the most important insights of economics is that people live in poverty not because of who they are, but because of where they are. A person’s knowledge, their skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together <a href="https://voxeu.org/article/income-inequality-and-citizenship">matter less</a> than the one factor that is entirely outside of a person’s control: whether they happen to be born into a large, productive economy or not.   The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country – economic growth – is so crucial for reducing poverty.   <div class="wp-block-columns"> <div class="wp-block-column"> <div data-no-lightbox class="no-frame">   <figure class="wp-block-image size-large"><a href="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark.png"><img src="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png" alt="" class="wp-image-41711"/></a></figure>   </div> </div>   <div class="wp-block-column"></div> </div>   Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people’s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible.    First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure. Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.   To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved. Deaton, A., and Heston, A. 2010. “Understanding PPPs and PPP-Based National Accounts.” American Economic Journal: Macroeconomics 2 (4): 1–35. Throughout this text I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I’m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}   <h4>Most people in the world live in countries in which more than 90% live on less than $30 per day</h4>   This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country’s population living on less than $30 per day.    I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country’s population size.   This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}   → Daniel Bachler built an <a href="https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd">interactive visualization of this chart</a> in which you can set any poverty line you might be interested in.   <figure class="wp-block-image size-full wp-block-full-content-width"><img src="https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png" alt="" class="wp-image-41813"/></figure>   <h3>Poverty is not inevitable</h3>   In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) – On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every <a href="https://ourworldindata.org/child-mortality-in-the-past">second child died</a> and where hunger was <a href="https://ourworldindata.org/famines">widespread</a>, the majority of people <a href="https://ourworldindata.org/extreme-history-methods">lived in poverty</a>. And since <a href="https://ourworldindata.org/breaking-the-malthusian-trap">poverty did not change</a>, it was easy to believe that poverty was unchangeable.    Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined and living conditions improved: average incomes increased <a href="https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK">more than 25-fold</a>, the child mortality rate <a href="https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK">declined from more than a quarter</a> to less than half a percent – one of the lowest levels in the world – and Denmark is today one of the countries where people report to be most <a href="https://ourworldindata.org/grapher/gdp-vs-happiness">satisfied with their lives</a>.   As such I will use Denmark as a benchmark of what it means for poverty to fall ‘substantially’. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?   Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.   Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty.    If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a> – or you can view it in our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL">Data Explorer</a>.{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.   <h4>How do living standards in Denmark and a poorer country compare?</h4>   The previous chart showed that in the majority of the world’s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue.    There is no global survey of incomes: researchers need to rely on the available national surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people’s incomes, while in poorer countries these surveys capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">Data</a><a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp"> </a><a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL">Explorer</a> of this data, you can select to show the data from <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">income</a> and <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP">consumption</a> surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text.   It’s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform <a href="https://worldbank.github.io/PIP-Methodology/index.html">methodology</a>. The importance of capturing people’s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}   What does the chart tell us about living standards in these two countries?    If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark’s level we can read it off the two parameters that describe the distribution – the average level of income and the inequality of those incomes.   Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a>. In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK">Data Explorer</a>, you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67 If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}   Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}   A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew <a href="https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH">by more than that</a> over the last few generations, and such growth is <a href="https://ourworldindata.org/economic-growth-since-1950">not rare</a> in recent economic history.    <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png" alt="" class="wp-image-41651"/></figure>   <h4>How would average incomes need to change globally?</h4>   We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?   The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country’s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.   The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.   Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.   <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png" alt="" class="wp-image-41652"/></figure>   <h4>How much would average incomes have to increase to reach the level of Denmark?</h4>   This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark’s mean income.    I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country’s population. The population size is relevant because we need to take into account each country’s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.   The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark’s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.   The very richest countries don’t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there.    The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.   How much growth would be needed in total?   You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the <a href="https://pip.worldbank.org/home">Poverty and Inequality Platform</a>. In our <a href="https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK">Data Explorer</a>, you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).   The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.   The daily total income in 2017 is each country’s mean income multiplied by the number of people in each country.   The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017. Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}   An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.   Or put differently, a world economy with substantially less poverty is at a minimum 5-times bigger than today’s global economy.   <figure class="wp-block-image size-full"><img src="https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png" alt="" class="wp-image-41653"/></figure>     A five-fold increase is a minimum estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.    <h3>In which ways does a realistic scenario differ from the minimum scenario?</h3>   <div class="wp-block-columns is-style-sticky-right"> <div class="wp-block-column"> To calculate the minimum growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.   The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.   A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.   In this scenario every country stops economic growth entirely once they reach the average income of Denmark   This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.   The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.   In this scenario every country that is richer than Denmark reduces average incomes   To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people’s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.   As a consequence there is no global inequality between countries in this scenario   The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day.    You have to be extremely optimistic about the future of inequality to think this is likely. If you don’t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.   In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark’s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}   In this scenario inequality within countries declines very substantially   The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see <a href="https://ourworldindata.org/grapher/economic-inequality-gini-index">this map</a>) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55. Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today.   In many countries around the world inequality <a href="https://ourworldindata.org/income-inequality-since-1990">did decrease</a> over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the minimum growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.   An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day – just above the poverty line – and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.   Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.   There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($30*1.44). The required growth from the current mean income is therefore ((30*1.44-16)/16)=170%.{/ref}   This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today   In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth.    The required economic growth in GDP terms will be higher than in household income terms   None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people’s incomes – importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of <a href="https://ourworldindata.org/higher-poverty-global-line">this post</a>).    The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.   It would not be the end of poverty – only a substantial reduction of poverty   And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.   How much does future population growth matter?   In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division’s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature <a href="https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have">suggests</a> that increases in incomes would lead to a decline of fertility rates.    On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is <a href="https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL">past its peak</a><a href="https://ourworldindata.org/peak-child"> </a>and much of the future population growth is due to ‘<a href="https://ourworldindata.org/population-momentum">population momentum</a>’.   There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.   Is it enough to reduce poverty?   This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone’s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich. These reports are called ‘Armuts- und Reichtumsbericht der Bundesregierung’ online at <a href="https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html">armuts-und-reichtumsbericht.de</a>   The latest survey was produced by aproxima and published in 2016. It is published as <a href="https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5">Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repräsentativen Bevölkerungsbefragung „ARB-Survey 2015“</a>, Berlin: Bundesministerium für Arbeit und Soziales (Hrsg.).   Asked for the income level above which they consider a person to be rich the mean answer was 9,696€, but the median was ‘closer to 5,000€’, as the report puts it.   €5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.   Calculations: €5000/0.778=int.$6,426.74 int.$6,426.74/30.5=int.$210.71{/ref}   My takeaway   The purpose of this scenario was to calculate the minimum necessary growth. I’m cautiously optimistic about the possibility that global income inequality <a href="https://osf.io/preprints/socarxiv/du5g6">declines further</a>, but I’m not as optimistic as this minimum scenario envisages and I therefore think that if the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase. </div>   <div class="wp-block-column"></div> </div>    <h4>Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty?</h4>   Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity’s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is.   This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:   <ul><li>If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. </li><li>If however we want to achieve a future in which global poverty is substantially lower than today and in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.</li></ul>   In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries <a href="https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR">have reduced</a> consumption-adjusted CO₂ emissions while incomes increased. Global emissions of ozone-depleting substances have <a href="https://ourworldindata.org/ozone-layer">declined by more than 99%</a> in the last three decades. And global <a href="https://ourworldindata.org/global-deforestation-peak">deforestation rates have declined strongly</a> since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people <a href="https://ourworldindata.org/global-inequalities-co2-consumption">are much higher</a> than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is <a href="https://ourworldindata.org/worlds-energy-problem">the world's energy problem</a>.   I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us now to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor and in which humanity has a smaller negative environmental impact – we document what we know about global poverty and humanity’s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: <a href="https://ourworldindata.org/cheap-renewables-growth">1</a>, <a href="https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions">2</a>, <a href="https://ourworldindata.org/land-use-diets">3</a>, <a href="https://ourworldindata.org/worlds-energy-problem">4</a>, <a href="https://ourworldindata.org/what-are-drivers-deforestation">5</a>, <a href="https://ourworldindata.org/outdoor-air-pollution">6</a>, <a href="https://ourworldindata.org/renewable-energy">7</a>, <a href="https://ourworldindata.org/water-use-stress">8</a>, <a href="https://ourworldindata.org/safest-sources-of-energy">9</a>, <a href="https://ourworldindata.org/energy-access">10</a>, <a href="https://ourworldindata.org/fossil-fuels">11</a>, <a href="https://ourworldindata.org/environmental-impacts-of-food">12</a>, <a href="https://ourworldindata.org/forests-and-deforestation">13</a> and many more).   As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products – and thereby reduce the use of specific resources and forgo some economic growth – to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.   We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In <a href="https://ourworldindata.org/shrink-emissions-not-the-economy">a guest post for Our World in Data</a> Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: “Ironically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed “degrowth”). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.”{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually increase economic growth over the coming decades. {ref}<a href="https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020">World Economic Outlook, October 2020: A Long and Difficult Ascent</a>. In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve more growth.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2°C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, relative to a baseline growth of 1.6% to 3%.    In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today’s economy. With measures in place to limit warming to 2°C, growth would be 0.06% smaller – i.e. 1.54% per year. The world economy would then ‘only' be 461% of the size of today. In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today’s economy. With measures to limit warming to 2°C, growth would be 0.06% smaller – i.e. 2.94% per year. The economy would then ‘only' be 1813% the size of today.   This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2°C.   The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions. See: Edenhofer et al. (2014). <a href="https://www.ipcc.ch/report/ar5/wg3/">IPCC, 2014: Summary for Policymakers</a>. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. See also: IPCC (2014) – <a href="https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf">Climate Change 2014: Synthesis Report</a>. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp. <a href="https://www.sciencedirect.com/science/article/pii/S0095069617308707">https://www.sciencedirect.com/science/article/pii/S0095069617308707</a>{/ref} Fighting climate change is not just compatible with fighting poverty, the two goals — to reduce emissions and to increase economic growth — actually strengthen each other.   And when important goals are in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.   <h4>Is it possible for poor countries to achieve this growth? </h4>   Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.   But whether or not global poverty can possibly decline that much – from the current level of 85% to Denmark’s level of 14% – overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not.   One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere.   Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were <a href="https://voxeu.org/article/economic-impact-colonialism">exploited by colonial powers</a> that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in <a href="https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy">many</a> <a href="https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=" target="_blank" rel="noreferrer noopener">ways</a>, but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty.    A third aspect to consider is that countries around the world saw large improvements in <a href="https://ourworldindata.org/health-meta">health</a> and <a href="https://ourworldindata.org/global-education">education</a> in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind.   A fourth reason is to see that <a href="https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth">’catch-up growth’ can be very fast</a>: several countries have achieved annual growth rates of more than 5% in recent decades.    And a last reason to consider is that up to the pandemic the majority of countries in the world – <a href="https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty">but not all</a> – did make progress against poverty. Global poverty has declined very substantially in recent decades, <a href="https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative">no matter</a> what poverty line you want to draw.    Increasing productivity substantially and reducing humanity’s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.   <h4>Conclusion </h4>   What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.   Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.   If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition.   <hr class="wp-block-separator"/>   <div style="height:139px" aria-hidden="true" class="wp-block-spacer"></div>   <hr class="wp-block-separator" id="block-3b267837-eb86-4261-8c36-10661a418d16"/>   Acknowledgement: I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article.   <hr class="wp-block-separator"/>   Continue reading Our World in Data:    My colleague Hannah Ritchie on how to bring humanity's long history of deforestation to an end.

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                        "text": "Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day.\u00a0",
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                        "text": "The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don\u2019t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced \u2013 increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find ",
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                        "text": " I asked who is considered poor in a high-income country. Based on existing national poverty lines \u2013 but also the size of social care payouts, a proposal for Universal Basic Income, and survey results \u2013 I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries.\u00a0",
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                        "text": "The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country \u2013 economic growth \u2013 is so crucial for reducing poverty.",
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                "filename": "Share-living-on-less-than-30-Ethiopia-vs-Denmark.png",
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                        "text": "Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people\u2019s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article \u2013 and in global income and expenditure data generally \u2013 the statisticians who produce these figures are careful to make these numbers as comparable as possible.\u00a0",
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                        "text": "First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.",
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                        "text": "Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.",
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                        "text": "To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.",
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                        "text": "Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.",
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                        "text": "Deaton, A., and Heston, A. 2010. \u201cUnderstanding PPPs and PPP-Based National Accounts.\u201d American Economic Journal: Macroeconomics 2 (4): 1\u201335.",
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                        "text": "Throughout this text I\u2019m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out \u2018international\u2019 as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I\u2019m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}",
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                "text": [
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                        "text": "Most people in the world live in countries in which more than 90% live on less than $30 per day",
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                        "text": "This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country\u2019s population living on less than $30 per day.\u00a0",
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                        "text": "I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country\u2019s population size.",
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                        "text": "This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}",
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                "type": "text",
                "value": [
                    {
                        "text": "\u2192 Daniel Bachler built an ",
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                        "url": "https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd",
                        "children": [
                            {
                                "text": "interactive visualization of this chart",
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                        "spanType": "span-link"
                    },
                    {
                        "text": " in which you can set any poverty line you might be interested in.",
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                "alt": "",
                "size": "wide",
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                "text": [
                    {
                        "text": "Poverty is not inevitable",
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                        "text": "In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) \u2013 On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every ",
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                        "url": "https://ourworldindata.org/child-mortality-in-the-past",
                        "children": [
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                                "text": "second child died",
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                        "text": " and where hunger was ",
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                        "url": "https://ourworldindata.org/famines",
                        "children": [
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                                "text": "widespread",
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                        "spanType": "span-link"
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                        "text": ", the majority of people ",
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                        "url": "https://ourworldindata.org/extreme-history-methods",
                        "children": [
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                                "text": "lived in poverty",
                                "spanType": "span-simple-text"
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                    {
                        "text": ". And since ",
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                        "url": "https://ourworldindata.org/breaking-the-malthusian-trap",
                        "children": [
                            {
                                "text": "poverty did not change",
                                "spanType": "span-simple-text"
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                        ],
                        "spanType": "span-link"
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                    {
                        "text": ", it was easy to believe that poverty was unchangeable.\u00a0",
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                        "text": "Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined\u00a0and living conditions improved: average incomes increased ",
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                        "url": "https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK",
                        "children": [
                            {
                                "text": "more than 25-fold",
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                        ],
                        "spanType": "span-link"
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                    {
                        "text": ", the child mortality rate ",
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                        "url": "https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK",
                        "children": [
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                                "text": "declined from more than a quarter",
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                        "text": " to less than half a percent \u2013 one of the lowest levels in the world \u2013 and Denmark is today one of the countries where people report to be most ",
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                        "url": "https://ourworldindata.org/grapher/gdp-vs-happiness",
                        "children": [
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                                "text": "satisfied with their lives",
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                        "text": ".",
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                        "text": "As such I will use Denmark as a benchmark of what it means for poverty to fall \u2018substantially\u2019. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?",
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                        "text": "Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.",
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                        "text": "Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty.\u00a0",
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                        "text": "If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's ",
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                    {
                        "url": "https://pip.worldbank.org/home",
                        "children": [
                            {
                                "text": "Poverty and Inequality Platform",
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                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " \u2013 or you can view it in our ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL",
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                                "text": "Data Explorer",
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                        "spanType": "span-link"
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                        "text": ".{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.",
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                "text": [
                    {
                        "text": "How do living standards in Denmark and a poorer country compare?",
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                        "text": "The previous chart showed that in the majority of the world\u2019s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue.\u00a0",
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                        "text": "There is no ",
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                        "children": [
                            {
                                "text": "global",
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                        "text": " survey of incomes: researchers need to rely on the available ",
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                        "children": [
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                                "text": "national",
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                        "text": " surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people\u2019s incomes, while in poorer countries these surveys capture people\u2019s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our ",
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                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP",
                        "children": [
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                                "text": "Data",
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                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp",
                        "children": [
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                                "text": " ",
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                        ],
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                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL",
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                                "text": "Explorer",
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                        "text": " of this data, you can select to show the data from ",
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                    {
                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP",
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                                "text": "income",
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                        "text": " and ",
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                    {
                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP",
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                                "text": "consumption",
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                        "text": " surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about \u2018the income of people in richer countries and the monetary value of consumption in poorer countries\u2019. But since it\u2019d be a bit much to repeat this every time researchers simply speak of \u2018living standards\u2019 or \u2018income\u2019 instead. I do the same in this text.",
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                        "text": "It\u2019s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform ",
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                        "url": "https://worldbank.github.io/PIP-Methodology/index.html",
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                                "text": "methodology",
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                        "text": ".",
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                        "text": "The importance of capturing people\u2019s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}",
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                        "text": "What does the chart tell us about living standards in these two countries?\u00a0",
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                        "text": "If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark\u2019s level we can read it off the two parameters that describe the distribution \u2013 the average level of income and the inequality of those incomes.",
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                        "text": "Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform \u2013 which has been superseded the ",
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                    {
                        "url": "https://pip.worldbank.org/home",
                        "children": [
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                                "text": "Poverty and Inequality Platform",
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                        "spanType": "span-link"
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                    {
                        "text": ". In our ",
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                    {
                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK",
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                                "text": "Data Explorer",
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                        "text": ", you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.",
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                        "text": "In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67",
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                        "text": "If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}",
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                        "text": "Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}",
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                        "text": "A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew ",
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                        "url": "https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH",
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                                "text": "by more than that",
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                        "text": " over the last few generations, and such growth is ",
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                                "text": "not rare",
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                        "text": " in recent economic history.\u00a0",
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                "text": [
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                        "text": "How would average incomes need to change globally?",
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                        "text": "We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?",
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                        "text": "The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country\u2019s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.",
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                        "text": "The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.",
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                "value": [
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                        "text": "Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.",
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                "size": "wide",
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                "text": [
                    {
                        "text": "How much would average incomes have to increase to reach the level of Denmark?",
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                "type": "heading",
                "level": 3,
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                "value": [
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                        "text": "This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark\u2019s mean income.\u00a0",
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                "value": [
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                        "text": "I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country\u2019s population. The population size is relevant because we need to take into account each country\u2019s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.",
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                        "text": "The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark\u2019s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.",
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                        "text": "The very richest countries don\u2019t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there.\u00a0",
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                        "text": "The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.",
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                        "text": "How much growth would be needed in total?",
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                        "text": "You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform \u2013 which has been superseded the ",
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                        "url": "https://pip.worldbank.org/home",
                        "children": [
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                                "text": "Poverty and Inequality Platform",
                                "spanType": "span-simple-text"
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                        "spanType": "span-link"
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                    {
                        "text": ". In our ",
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                    },
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                        "url": "https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK",
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                                "text": "Data Explorer",
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                        "text": ", you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.",
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                        "spanType": "span-newline"
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                        "text": "This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).",
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                        "text": "The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.",
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                        "text": "The daily total income in 2017 is each country\u2019s mean income multiplied by the number of people in each country.",
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                        "text": "The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017.",
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                        "text": "Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}",
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                        "text": "An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.",
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                        "text": "Or put differently, a world economy with substantially less poverty is ",
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                                "text": "at a minimum",
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                        "text": " 5-times bigger than today\u2019s global economy.",
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                        "text": "A five-fold increase is a ",
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                                "text": "minimum",
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                        "text": " estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.",
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                                "text": "Additional information",
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                                        "text": "To calculate the ",
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                                                "text": "minimum",
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                                    {
                                        "text": " growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.",
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                                        "text": "The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.",
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                                        "text": "A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.",
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                                                "text": "In this scenario every country stops economic growth entirely once they reach the average income of Denmark",
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                                        "text": "This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.",
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                                        "text": "The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.",
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                                                "text": "In this scenario every country that is richer than Denmark reduces average incomes",
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                                        "text": "To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people\u2019s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.",
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                                                "text": "As a consequence there is no global inequality between countries in this scenario",
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                                        "text": "The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day.\u00a0",
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                                        "text": "You have to be extremely optimistic about the future of inequality to think this is likely. If you don\u2019t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.",
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                                        "text": "In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark\u2019s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}",
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                                                "text": "In this scenario inequality within countries declines very substantially",
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                                        "text": "The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see ",
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                                    {
                                        "url": "https://ourworldindata.org/grapher/economic-inequality-gini-index",
                                        "children": [
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                                                "text": "this map",
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                                        "text": ") so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55.\u00a0Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark  today.",
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                                        "text": "In many countries around the world inequality ",
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                                    {
                                        "url": "https://ourworldindata.org/income-inequality-since-1990",
                                        "children": [
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                                                "children": [
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                                                        "text": "did",
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                                                "text": " decrease",
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                                        "text": " over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the ",
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                                                "text": "minimum",
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                                    {
                                        "text": " growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.",
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                                        "text": "An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day \u2013 just above the poverty line \u2013 and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.",
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                                        "text": "Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.",
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                                        "text": "There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($30*1.44). The required growth from the current mean income is therefore ((30*1.44-16)/16)=170%.{/ref}",
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                                                "text": "This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today",
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                                        "text": "In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth.\u00a0",
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                                                "text": "The required economic growth in GDP terms will be higher than in household income terms",
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                                        "text": "None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people\u2019s incomes \u2013 importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of ",
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                                        "url": "https://ourworldindata.org/higher-poverty-global-line",
                                        "children": [
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                                                "text": "this post",
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                                    {
                                        "text": ").\u00a0",
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                                        "text": "The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.",
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                                                "text": "It would not be the end of poverty \u2013 only a substantial reduction of poverty",
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                                        "text": "And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.",
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                                        "children": [
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                                                "text": "How much does future population growth matter?",
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                                        "text": "In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division\u2019s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature ",
                                        "spanType": "span-simple-text"
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                                    {
                                        "url": "https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have",
                                        "children": [
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                                                "text": "suggests",
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                                    {
                                        "text": " that increases in incomes would lead to a decline of fertility rates.\u00a0",
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                                        "text": "On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is ",
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                                    {
                                        "url": "https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL",
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                                                "text": "past its peak",
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                                        "url": "https://ourworldindata.org/peak-child",
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                                                "text": " ",
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                                    {
                                        "text": "and much of the future population growth is due to \u2018",
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                                    {
                                        "url": "https://ourworldindata.org/population-momentum",
                                        "children": [
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                                                "text": "population momentum",
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                                    {
                                        "text": "\u2019.\u00a0",
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                                        "text": "There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.",
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                                                "text": "Is it enough to reduce poverty?",
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                                        "text": "This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone\u2019s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich.",
                                        "spanType": "span-simple-text"
                                    },
                                    {
                                        "spanType": "span-newline"
                                    },
                                    {
                                        "text": "These reports are called \u2018Armuts- und Reichtumsbericht der Bundesregierung\u2019 online at ",
                                        "spanType": "span-simple-text"
                                    },
                                    {
                                        "url": "https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html",
                                        "children": [
                                            {
                                                "text": "armuts-und-reichtumsbericht.de",
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                                            }
                                        ],
                                        "spanType": "span-link"
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                                ],
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                                "type": "text",
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                                    {
                                        "text": "The latest survey was produced by aproxima and published in 2016. It is published as ",
                                        "spanType": "span-simple-text"
                                    },
                                    {
                                        "url": "https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5",
                                        "children": [
                                            {
                                                "text": "Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repr\u00e4sentativen Bev\u00f6lkerungsbefragung \u201eARB-Survey 2015\u201c",
                                                "spanType": "span-simple-text"
                                            }
                                        ],
                                        "spanType": "span-link"
                                    },
                                    {
                                        "text": ", Berlin: Bundesministerium f\u00fcr Arbeit und Soziales (Hrsg.).",
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                                        "text": "Asked for the income level above which they consider a person to be rich the mean answer was 9,696\u20ac, but the median was \u2018closer to 5,000\u20ac\u2019, as the report puts it.",
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                                    {
                                        "text": "\u20ac5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.",
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                                    {
                                        "text": "Calculations:",
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                                    {
                                        "spanType": "span-newline"
                                    },
                                    {
                                        "text": "\u20ac5000/0.778=int.$6,426.74",
                                        "spanType": "span-simple-text"
                                    },
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                                        "spanType": "span-newline"
                                    },
                                    {
                                        "text": "int.$6,426.74/30.5=int.$210.71{/ref}",
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                                "type": "text",
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                                    {
                                        "children": [
                                            {
                                                "text": "My takeaway",
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                                    {
                                        "text": "The purpose of this scenario was to calculate the ",
                                        "spanType": "span-simple-text"
                                    },
                                    {
                                        "children": [
                                            {
                                                "text": "minimum",
                                                "spanType": "span-simple-text"
                                            }
                                        ],
                                        "spanType": "span-italic"
                                    },
                                    {
                                        "text": " necessary growth. I\u2019m cautiously optimistic about the possibility that global income inequality ",
                                        "spanType": "span-simple-text"
                                    },
                                    {
                                        "url": "https://osf.io/preprints/socarxiv/du5g6",
                                        "children": [
                                            {
                                                "text": "declines further",
                                                "spanType": "span-simple-text"
                                            }
                                        ],
                                        "spanType": "span-link"
                                    },
                                    {
                                        "text": ", but I\u2019m not as optimistic as this minimum scenario envisages and I therefore think that ",
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                                    },
                                    {
                                        "children": [
                                            {
                                                "text": "if",
                                                "spanType": "span-simple-text"
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                                        ],
                                        "spanType": "span-italic"
                                    },
                                    {
                                        "text": " the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase.",
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                "text": [
                    {
                        "text": "Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty?",
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                "level": 3,
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                        "text": "Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity\u2019s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. ",
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                        "text": "This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:",
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                                "text": "If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. ",
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                        "value": [
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                                "text": "If however we want to achieve a future in which global poverty is substantially lower than today ",
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                            },
                            {
                                "children": [
                                    {
                                        "text": "and",
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                            {
                                "text": " in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.",
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                    {
                        "text": "In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR",
                        "children": [
                            {
                                "text": "have reduced",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " consumption-adjusted CO\u2082 emissions while incomes increased. Global emissions of ozone-depleting substances have ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/ozone-layer",
                        "children": [
                            {
                                "text": "declined by more than 99%",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " in the last three decades. And global ",
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                    },
                    {
                        "url": "https://ourworldindata.org/global-deforestation-peak",
                        "children": [
                            {
                                "text": "deforestation rates have declined strongly",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/global-inequalities-co2-consumption",
                        "children": [
                            {
                                "text": "are much higher",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/worlds-energy-problem",
                        "children": [
                            {
                                "text": "the world's energy problem",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ".",
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                "type": "text",
                "value": [
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                        "text": "I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "now",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
                    },
                    {
                        "text": " to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "and",
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                    {
                        "text": " in which humanity has a smaller negative environmental impact \u2013 we document what we know about global poverty and humanity\u2019s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/cheap-renewables-growth",
                        "children": [
                            {
                                "text": "1",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions",
                        "children": [
                            {
                                "text": "2",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/land-use-diets",
                        "children": [
                            {
                                "text": "3",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/worlds-energy-problem",
                        "children": [
                            {
                                "text": "4",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/what-are-drivers-deforestation",
                        "children": [
                            {
                                "text": "5",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/outdoor-air-pollution",
                        "children": [
                            {
                                "text": "6",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/renewable-energy",
                        "children": [
                            {
                                "text": "7",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/water-use-stress",
                        "children": [
                            {
                                "text": "8",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/safest-sources-of-energy",
                        "children": [
                            {
                                "text": "9",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/energy-access",
                        "children": [
                            {
                                "text": "10",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/fossil-fuels",
                        "children": [
                            {
                                "text": "11",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/environmental-impacts-of-food",
                        "children": [
                            {
                                "text": "12",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ", ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/forests-and-deforestation",
                        "children": [
                            {
                                "text": "13",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " and many more). ",
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                        "text": "As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products \u2013 and thereby reduce the use of specific resources and forgo some economic growth \u2013 to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.",
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                        "text": "We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://ourworldindata.org/shrink-emissions-not-the-economy",
                        "children": [
                            {
                                "text": "a guest post for Our World in Data",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": " Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "\u201cIronically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed \u201cdegrowth\u201d). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.\u201d",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
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                    {
                        "text": "{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "increase",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
                    },
                    {
                        "text": " economic growth over the coming decades. {ref}",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020",
                        "children": [
                            {
                                "text": "World Economic Outlook, October 2020: A Long and Difficult Ascent",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ". In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "more growth",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
                    },
                    {
                        "text": ".{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2\u00b0C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "children": [
                            {
                                "text": "relative to a baseline growth of 1.6% to 3%",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
                    },
                    {
                        "text": ".\u00a0",
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                        "text": "In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today\u2019s economy. With measures in place to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 1.54% per year. The world economy would then \u2018only' be 461% of the size of today.",
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                        "text": "In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today\u2019s economy. With measures to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 2.94% per year. The economy would then \u2018only' be 1813% the size of today.",
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                "value": [
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                        "text": "This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2\u00b0C.",
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                        "text": "The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions.",
                        "spanType": "span-simple-text"
                    },
                    {
                        "spanType": "span-newline"
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                    {
                        "text": "See:",
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                    },
                    {
                        "spanType": "span-newline"
                    },
                    {
                        "text": "Edenhofer et al. (2014). ",
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                    },
                    {
                        "url": "https://www.ipcc.ch/report/ar5/wg3/",
                        "children": [
                            {
                                "text": "IPCC, 2014: Summary for Policymakers",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ". In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.",
                        "spanType": "span-simple-text"
                    },
                    {
                        "spanType": "span-newline"
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                    {
                        "spanType": "span-newline"
                    },
                    {
                        "text": "See also: IPCC (2014) \u2013 ",
                        "spanType": "span-simple-text"
                    },
                    {
                        "url": "https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf",
                        "children": [
                            {
                                "text": "Climate Change 2014: Synthesis Report",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": ". Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.",
                        "spanType": "span-simple-text"
                    },
                    {
                        "spanType": "span-newline"
                    },
                    {
                        "spanType": "span-newline"
                    },
                    {
                        "url": "https://www.sciencedirect.com/science/article/pii/S0095069617308707",
                        "children": [
                            {
                                "text": "https://www.sciencedirect.com/science/article/pii/S0095069617308707",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-link"
                    },
                    {
                        "text": "{/ref}\u00a0Fighting climate change is not just compatible with fighting poverty, the two goals \u2014 to reduce emissions and to increase economic growth \u2014 actually ",
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                    },
                    {
                        "children": [
                            {
                                "text": "strengthen",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "spanType": "span-italic"
                    },
                    {
                        "text": " each other.",
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                        "text": " in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.",
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                        "text": "Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.",
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                        "text": ", but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty.\u00a0",
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                        "text": " what poverty line you want to draw.\u00a0",
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                        "text": "Increasing productivity substantially and reducing humanity\u2019s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.",
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                        "text": "What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.",
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                        "text": "Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.",
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                                        "text": "Continue reading Our World in Data:",
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2021-03-15 12:12:39

2024-02-16 14:22:51

1BAcnqfO9nKJhdnocDlZ9CzO2Ypyyjn2iJsls5QM9DI0

[
    "Max Roser"
]

I study the data on today's global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.

2021-03-26 09:06:45

2023-04-10 09:25:37

https://ourworldindata.org/wp-content/uploads/2021/03/Screen-Shot-2021-03-15-at-12.14.00.png

{}

Our World in Data presents the data and research to make progress against the world’s largest problems. This post was last updated on May 24, 2021. It draws on data and research discussed in our entries on **[Income Inequality](https://ourworldindata.org/income-inequality)**, **[Global Extreme Poverty](https://ourworldindata.org/extreme-poverty)** and **[Economic Growth](https://ourworldindata.org/economic-growth)**. ### The World Bank has updated its poverty and inequality data The data in this article uses a previous release of the World Bank's poverty and inequality data in which incomes are expressed in 2011 international-$. The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices). This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures. ### Read more about the World Bank's updated methodology https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line ### Explore the latest World Bank data on poverty and inequality https://ourworldindata.org/explorers/poverty-explorer Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day. In an earlier post [I said](https://ourworldindata.org/poverty-growth-needed) that ‘if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.’ In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially. As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don’t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced – increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find [in so many publications](https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&client=firefox-b-d&sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&ei=awlRYLqeCt6BhbIPo4qpsAo&start=20&sa=N&ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&biw=1920&bih=1073) that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.” Since people not only care about the number of goods, but also about their quality, it is important to add this aspect – the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the _capacity_ of an economy to produce goods and services, this is a useful variation of the definition. Some others ([including Wikipedia](https://en.wikipedia.org/wiki/Economic_growth)) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense – just like life expectancy is a measure of population health and hardly the definition of population health.{/ref} In [another earlier text](https://ourworldindata.org/higher-poverty-global-line) I asked who is considered poor in a high-income country. Based on existing national poverty lines – but also the size of social care payouts, a proposal for Universal Basic Income, and survey results – I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries. One of the most important insights of economics is that people live in poverty not because of who they are, but because of _where _they are. A person’s knowledge, their skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together [matter less](https://voxeu.org/article/income-inequality-and-citizenship) than the one factor that is entirely outside of a person’s control: whether they happen to be born into a large, productive economy or not. The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country – economic growth – is so crucial for reducing poverty. <Image filename="Share-living-on-less-than-30-Ethiopia-vs-Denmark.png" alt=""/> Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people’s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible. First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure. Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world. To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved. Deaton, A., and Heston, A. 2010. “Understanding PPPs and PPP-Based National Accounts.” American Economic Journal: Macroeconomics 2 (4): 1–35. Throughout this text I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I’m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref} ### Most people in the world live in countries in which more than 90% live on less than $30 per day This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country’s population living on less than $30 per day. I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country’s population size. This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref} → Daniel Bachler built an [interactive visualization of this chart](https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd) in which you can set any poverty line you might be interested in. <Image filename="Share-living-on-less-than-30-2.png" alt=""/> ## Poverty is not inevitable In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) – On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every [second child died](https://ourworldindata.org/child-mortality-in-the-past) and where hunger was [widespread](https://ourworldindata.org/famines), the majority of people [lived in poverty](https://ourworldindata.org/extreme-history-methods). And since [poverty did not change](https://ourworldindata.org/breaking-the-malthusian-trap), it was easy to believe that poverty was unchangeable. Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined and living conditions improved: average incomes increased [more than 25-fold](https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&time=earliest..latest&country=ETH~DNK), the child mortality rate [declined from more than a quarter](https://ourworldindata.org/grapher/child-mortality?tab=chart&time=earliest..2016&country=~DNK) to less than half a percent – one of the lowest levels in the world – and Denmark is today one of the countries where people report to be most [satisfied with their lives](https://ourworldindata.org/grapher/gdp-vs-happiness). As such I will use Denmark as a benchmark of what it means for poverty to fall ‘substantially’. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark? Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway. Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty. If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank's [Poverty and Inequality Platform](https://pip.worldbank.org/home) – or you can view it in our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL).{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty. ### How do living standards in Denmark and a poorer country compare? The previous chart showed that in the majority of the world’s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue. There is no _global_ survey of incomes: researchers need to rely on the available _national_ surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people’s incomes, while in poorer countries these surveys capture people’s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our [Data](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP)[ ](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp)[Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=~OWID_WRL) of this data, you can select to show the data from [income](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Income+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP) and [consumption](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Share+in+poverty&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Expenditure+surveys+only&country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP) surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text. It’s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank's Poverty and Inequality Platform [methodology](https://worldbank.github.io/PIP-Methodology/index.html). The importance of capturing people’s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref} What does the chart tell us about living standards in these two countries? If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark’s level we can read it off the two parameters that describe the distribution – the average level of income and the inequality of those incomes. Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the [Poverty and Inequality Platform](https://pip.worldbank.org/home). In our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK), you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67 If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref} Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref} A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew [by more than that](https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&stackMode=relative&time=earliest..2018&country=DNK~ETH) over the last few generations, and such growth is [not rare](https://ourworldindata.org/economic-growth-since-1950) in recent economic history. <Image filename="Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png" alt=""/> ### How would average incomes need to change globally? We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark? The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country’s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right. The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day. Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still. <Image filename="mean-income-by-country-Denmark-highlight.png" alt=""/> ### How much would average incomes have to increase to reach the level of Denmark? This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark’s mean income. I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country’s population. The population size is relevant because we need to take into account each country’s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty. The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark’s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less. The very richest countries don’t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there. The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark. How much growth would be needed in total? You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank's PovcalNet platform – which has been superseded the [Poverty and Inequality Platform](https://pip.worldbank.org/home). In our [Data Explorer](https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&facet=none&Metric=Mean+income+or+expenditure&International-%24=2011+prices&Poverty+line=%2430+per+day&Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&country=ETH~DNK), you can view the latest World Bank data – expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank. This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country). The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100. The daily total income in 2017 is each country’s mean income multiplied by the number of people in each country. The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017. Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref} An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy. Or put differently, a world economy with substantially less poverty is _at a minimum_ 5-times bigger than today’s global economy. <Image filename="growth-needed-to-reach-Denmark.png" alt=""/> A five-fold increase is a _minimum_ estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth. ## Additional information To calculate the _minimum_ growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section. The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty. A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario. **In this scenario every country stops economic growth entirely once they reach the average income of Denmark** This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario. The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced. **In this scenario every country that is richer than Denmark reduces average incomes** To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people’s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced. **As a consequence there is no global inequality between countries in this scenario** The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day. You have to be extremely optimistic about the future of inequality to think this is likely. If you don’t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher. In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark’s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref} **In this scenario inequality within countries declines very substantially** The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see [this map](https://ourworldindata.org/grapher/economic-inequality-gini-index)) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55. Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark today. In many countries around the world inequality [_did_ decrease](https://ourworldindata.org/income-inequality-since-1990) over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the _minimum_ growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher. An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day – just above the poverty line – and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today. Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level. There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($30*1.44). The required growth from the current mean income is therefore ((30*1.44-16)/16)=170%.{/ref} **This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today** In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth. **The required economic growth in GDP terms will be higher than in household income terms** None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people’s incomes – importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of [this post](https://ourworldindata.org/higher-poverty-global-line)). The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger. **It would not be the end of poverty – only a substantial reduction of poverty** And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day. **How much does future population growth matter?** In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division’s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature [suggests](https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have) that increases in incomes would lead to a decline of fertility rates. On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is [past its peak](https://ourworldindata.org/explorers/population-and-demography?facet=none&Metric=Population&Sex=Both+sexes&Age+group=Under+5+years&Projection+Scenario=Medium&country=~OWID_WRL)[ ](https://ourworldindata.org/peak-child)and much of the future population growth is due to ‘[population momentum](https://ourworldindata.org/population-momentum)’. There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario. **Is it enough to reduce poverty?** This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone’s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich. These reports are called ‘Armuts- und Reichtumsbericht der Bundesregierung’ online at [armuts-und-reichtumsbericht.de](https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html) The latest survey was produced by aproxima and published in 2016. It is published as [Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repräsentativen Bevölkerungsbefragung „ARB-Survey 2015“](https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&v=5), Berlin: Bundesministerium für Arbeit und Soziales (Hrsg.). Asked for the income level above which they consider a person to be rich the mean answer was 9,696€, but the median was ‘closer to 5,000€’, as the report puts it. €5000 are int.-$6,426.74. Per day this is an income of int.-$210.71. Calculations: €5000/0.778=int.$6,426.74 int.$6,426.74/30.5=int.$210.71{/ref} **My takeaway** The purpose of this scenario was to calculate the _minimum_ necessary growth. I’m cautiously optimistic about the possibility that global income inequality [declines further](https://osf.io/preprints/socarxiv/du5g6), but I’m not as optimistic as this minimum scenario envisages and I therefore think that _if_ the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase. ### Is it possible to achieve both, a reduction of humanity's negative impact on the environment and a reduction of global poverty? Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity’s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need: * If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. * If however we want to achieve a future in which global poverty is substantially lower than today _and_ in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need. In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries [have reduced](https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&endpointsOnly=1&time=1990..latest&country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR) consumption-adjusted CO₂ emissions while incomes increased. Global emissions of ozone-depleting substances have [declined by more than 99%](https://ourworldindata.org/ozone-layer) in the last three decades. And global [deforestation rates have declined strongly](https://ourworldindata.org/global-deforestation-peak) since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world's richest people [are much higher](https://ourworldindata.org/global-inequalities-co2-consumption) than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is [the world's energy problem](https://ourworldindata.org/worlds-energy-problem). I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us _now_ to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor _and_ in which humanity has a smaller negative environmental impact – we document what we know about global poverty and humanity’s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: [1](https://ourworldindata.org/cheap-renewables-growth), [2](https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions), [3](https://ourworldindata.org/land-use-diets), [4](https://ourworldindata.org/worlds-energy-problem), [5](https://ourworldindata.org/what-are-drivers-deforestation), [6](https://ourworldindata.org/outdoor-air-pollution), [7](https://ourworldindata.org/renewable-energy), [8](https://ourworldindata.org/water-use-stress), [9](https://ourworldindata.org/safest-sources-of-energy), [10](https://ourworldindata.org/energy-access), [11](https://ourworldindata.org/fossil-fuels), [12](https://ourworldindata.org/environmental-impacts-of-food), [13](https://ourworldindata.org/forests-and-deforestation) and many more). As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products – and thereby reduce the use of specific resources and forgo some economic growth – to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general. We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In [a guest post for Our World in Data](https://ourworldindata.org/shrink-emissions-not-the-economy) Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: _“Ironically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed “degrowth”). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.”_{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually _increase_ economic growth over the coming decades. {ref}[World Economic Outlook, October 2020: A Long and Difficult Ascent](https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020). In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve _more growth_.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2°C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, _relative to a baseline growth of 1.6% to 3%_. In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today’s economy. With measures in place to limit warming to 2°C, growth would be 0.06% smaller – i.e. 1.54% per year. The world economy would then ‘only' be 461% of the size of today. In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today’s economy. With measures to limit warming to 2°C, growth would be 0.06% smaller – i.e. 2.94% per year. The economy would then ‘only' be 1813% the size of today. This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2°C. The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions. See: Edenhofer et al. (2014). [IPCC, 2014: Summary for Policymakers](https://www.ipcc.ch/report/ar5/wg3/). In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. See also: IPCC (2014) – [Climate Change 2014: Synthesis Report](https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf). Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp. [https://www.sciencedirect.com/science/article/pii/S0095069617308707](https://www.sciencedirect.com/science/article/pii/S0095069617308707){/ref} Fighting climate change is not just compatible with fighting poverty, the two goals — to reduce emissions and to increase economic growth — actually _strengthen_ each other. And when important goals _are_ in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty. ### Is it possible for poor countries to achieve this growth? Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty. But whether or not global poverty can possibly decline that much – from the current level of 85% to Denmark’s level of 14% – overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not. One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere. Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were [exploited by colonial powers](https://voxeu.org/article/economic-impact-colonialism) that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in [many](https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy)[ways](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=doi.org%2F10.2307%2F20034426&btnG=), but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty. A third aspect to consider is that countries around the world saw large improvements in [health](https://ourworldindata.org/health-meta) and [education](https://ourworldindata.org/global-education) in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind. A fourth reason is to see that [’catch-up growth’ can be very fast](https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth): several countries have achieved annual growth rates of more than 5% in recent decades. And a last reason to consider is that up to the pandemic the majority of countries in the world – [but not all](https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty) – _did_ make progress against poverty. Global poverty has declined very substantially in recent decades, [no matter](https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative) what poverty line you want to draw. Increasing productivity substantially and reducing humanity’s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals. ### Conclusion What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty. Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially. If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition. **Acknowledgement:** I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article. _**Continue reading Our World in Data:**_ ### What is driving deforestation? And how can it come to an end? My colleague Hannah Ritchie on how to bring humanity's long history of deforestation to an end. https://ourworldindata.org/forests-and-deforestation

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        "rendered": "\n<div class=\"blog-info\">\n<p>Our World in Data presents the data and research to make progress against the world\u2019s largest problems.<br>\nThis post was last updated on May 24, 2021. It draws on data and research discussed in our entries on <strong><a href=\"https://ourworldindata.org/income-inequality\" target=\"_blank\" rel=\"noopener\">Income Inequality</a></strong>, <strong><a href=\"https://ourworldindata.org/extreme-poverty\" target=\"_blank\" rel=\"noopener\">Global Extreme Poverty</a></strong> and <strong><a href=\"https://ourworldindata.org/economic-growth\" target=\"_blank\" rel=\"noopener\">Economic Growth</a></strong>.</p>\n\n</div>\n\n<style>\n  .no-frame img {\n    box-shadow: none;\n    padding: 0;\n    background: none;\n  }\n</style>\n\n\n\t<block type=\"help\">\n\t\t<content>\n\n<h4>The World Bank has updated its poverty and inequality data</h4>\n\n\n\n<p>The data in this article uses a previous release of the World Bank&#8217;s poverty and inequality data in which incomes are expressed in 2011 international-$.</p>\n\n\n\n<p>The World Bank has since updated its methods, and now measures incomes in 2017 international-$. As part of this change, the International Poverty Line used to measure extreme poverty has also been updated: from $1.90 (in 2011 prices) to $2.15 (in 2017 prices).</p>\n\n\n\n<p>This has had little effect on our overall understanding of poverty and inequality around the world. But because of the change of units, many of the figures mentioned in this article will differ from the latest World Bank figures.</p>\n\n\n    <block type=\"prominent-link\" style=\"is-style-thin\">\n        <link-url>https://ourworldindata.org/from-1-90-to-2-15-a-day-the-updated-international-poverty-line</link-url>\n        <title></title>\n        <content>\n\n<p>Read more about the World Bank&#8217;s updated methodology</p>\n\n</content>\n        <figure></figure>\n    </block>\n\n    <block type=\"prominent-link\" style=\"is-style-thin\">\n        <link-url>https://ourworldindata.org/explorers/poverty-explorer</link-url>\n        <title>Explore the latest World Bank data on poverty and inequality</title>\n        <content>\n\n<p></p>\n\n</content>\n        <figure></figure>\n    </block>\n</content>\n\t</block>\n\n\n<p>Billions of people in the world are living in poverty. Adjusted for the purchasing power in each country, 85% of the world population live on less than $30 per day.&nbsp;</p>\n\n\n\n<p>In an earlier post <a href=\"https://ourworldindata.org/poverty-growth-needed\">I said</a> that \u2018if we want global poverty to decline substantially then the economies that are home to the poorest billions of people need to grow.\u2019 In this post I want to make this statement more concrete. I will look at the depth of global poverty today to get a quantitative sense of just how much the global income distribution would need to change to reduce global poverty substantially.&nbsp;</p>\n\n\n\n<p>As a starting point for the discussion I will consider the inequality of incomes in the world today and think through a scenario that would allow the maximal reduction of global poverty under minimal global aggregate income growth. After calculating the minimum aggregate growth that is required to reduce global poverty substantially I will consider in which ways a possible more realistic scenario of the future might differ from the minimum scenario. Even the minimum growth scenario is one of very large economic growth. </p>\n\n\n\n<p>The reason that such large economic growth is necessary to reduce global poverty is that the world is still very poor. I think that those who don\u2019t see the importance of growth are not aware of the extent of global poverty. Being poor means that people do not have access to the goods and services that they need. As we will see, the reason for this is partly the large inequality, but it is also due to the fact that these goods and services are simply not produced \u2013 increasing the production of the goods and services that people want, this is what economic growth is.{ref}The textbook definition of economic growth that you find <a href=\"https://www.google.com/search?q=%22an+increase+in+the+amount+of+goods+and+services+produced+per+head+of+the+population+over+a+period+of+time.%22&amp;client=firefox-b-d&amp;sxsrf=ALeKk01DJGDj60fWi9YHVl12T7lLC08X-Q:1615923563174&amp;ei=awlRYLqeCt6BhbIPo4qpsAo&amp;start=20&amp;sa=N&amp;ved=2ahUKEwj6_92vyLXvAhXeQEEAHSNFCqYQ8NMDegQIARBA&amp;biw=1920&amp;bih=1073\">in so many publications</a> that I don\u2019t know which one to quote is that economic growth is \u201can increase in the amount of goods and services produced per head of the population over a period of time.\u201d&nbsp;</p>\n\n\n\n<p>Since people not only care about the number of goods, but also about their quality, it is important to add this aspect \u2013 the various ways to measure economic growth also aim to take the quality aspect into account. Some authors define growth as an increase in the <em>capacity</em> of an economy to produce goods and services, this is a useful variation of the definition. Some others (<a href=\"https://en.wikipedia.org/wiki/Economic_growth\">including Wikipedia</a>) define growth by how it is typically measured (an increase in inflation-adjusted GDP or GDP per capita), which makes less sense \u2013 just like life expectancy is a measure of population health and hardly the definition of population health.{/ref}</p>\n\n\n\n<p>In <a href=\"https://ourworldindata.org/higher-poverty-global-line\">another earlier text</a> I asked who is considered poor in a high-income country. Based on existing national poverty lines \u2013 but also the size of social care payouts, a proposal for Universal Basic Income, and survey results \u2013 I found that $30 per day is, very approximately, the level below which people are considered poor in high-income countries.&nbsp;</p>\n\n\n\n<p>One of the most important insights of economics is that people live in poverty not because of who they are, but because of <em>where </em>they are. A person\u2019s knowledge, their skills, and how hard they work all matter for whether they are poor or not \u2013 but all these personal factors together <a href=\"https://voxeu.org/article/income-inequality-and-citizenship\">matter less</a> than the one factor that is entirely outside of a person\u2019s control: whether they happen to be born into a large, productive economy or not.</p>\n\n\n\n<p>The comparison of a high-income country like Denmark and a much poorer country like Ethiopia makes clear just how important this aspect is. A person living in Denmark has a chance of 86% that they are not poor. A person who happens to be born into a country where the average income is low is almost certainly living in poverty. In Ethiopia more than 99% of the population live on less than $30 per day. This is why a rise in the average level of income in a country \u2013 economic growth \u2013 is so crucial for reducing poverty.</p>\n\n\n\n<div class=\"wp-block-columns\">\n<div class=\"wp-block-column\">\n<div data-no-lightbox class=\"no-frame\">\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark.png\"><img loading=\"lazy\" width=\"800\" height=\"149\" src=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png\" alt=\"\" class=\"wp-image-41711\" srcset=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-800x149.png 800w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-400x75.png 400w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-150x28.png 150w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-768x143.png 768w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-1536x287.png 1536w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-Ethiopia-vs-Denmark-2048x382.png 2048w\" sizes=\"(max-width: 800px) 100vw, 800px\" /></a></figure>\n\n\n\n</div>\n</div>\n\n\n\n<div class=\"wp-block-column\"></div>\n</div>\n\n\n\n<p>Throughout this entire text all poverty statistics are adjusted for differences in purchasing power across different countries. Without taking into account the price differences it is not possible to compare people\u2019s living standards in different countries. See the footnote for a more detailed explanation of how poverty is measured.{ref}In this article \u2013 and in global income and expenditure data generally \u2013 the statisticians who produce these figures are careful to make these numbers as comparable as possible.&nbsp;</p>\n\n\n\n<p>First, many poorer people rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.<br>Second, price changes over time (inflation) and price differences across countries are both taken into account: all measures are adjusted for differences in purchasing power. This is possible by relying on the work of the International Comparison Project, which monitors the prices of goods and services around the world.</p>\n\n\n\n<p>To this end incomes and expenditures are expressed in so-called international dollars. This is a hypothetical currency that results from the price adjustments across time and place. An international dollar is defined as having the same purchasing power as one US-$ in the US. This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do.<br><br>Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.<br>Deaton, A., and Heston, A. 2010. \u201cUnderstanding PPPs and PPP-Based National Accounts.\u201d American Economic Journal: Macroeconomics 2 (4): 1\u201335.<br>Throughout this text I\u2019m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $1.90 poverty line. Sometimes I leave out \u2018international\u2019 as it is awkward to repeat it all the time; but every time I mention any $ amount in this text I\u2019m referring to international-$ and not US-$. [Keep in mind that in the special case of the US the US-$ equals the international-$.]{/ref}</p>\n\n\n\n<h4>Most people in the world live in countries in which more than 90% live on less than $30 per day</h4>\n\n\n\n<p>This large visualization here shows the same comparison that we have just seen for Denmark and Ethiopia, but now for countries around the world. In purple you see the share of each country\u2019s population living on less than $30 per day.&nbsp;</p>\n\n\n\n<p>I ordered the countries by income: from the poorest countries on the very left of this chart to the richest countries on the right. The width of each country corresponds to the country\u2019s population size.</p>\n\n\n\n<p>This visualization shows the extent of global poverty today. The huge majority of the world lives in countries where the majority is poor. As you can read above this chart, 77% of the world population live in countries in which more than 90% live on less than $30 per day.{ref}And 84% live in countries in which more than 80% live on less than $30 a day.{/ref}</p>\n\n\n\n<p>\u2192 Daniel Bachler built an <a href=\"https://observablehq.com/@danyx/share-of-population-in-each-country-living-on-less-than-x-usd\">interactive visualization of this chart</a> in which you can set any poverty line you might be interested in.</p>\n\n\n\n<figure class=\"wp-block-image size-full wp-block-full-content-width\"><img loading=\"lazy\" width=\"4276\" height=\"2556\" src=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png\" alt=\"\" class=\"wp-image-41813\" srcset=\"https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2.png 4276w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-400x239.png 400w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-800x478.png 800w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-150x90.png 150w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-768x459.png 768w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-1536x918.png 1536w, https://owid.cloud/app/uploads/2021/03/Share-living-on-less-than-30-2-2048x1224.png 2048w\" sizes=\"(max-width: 4276px) 100vw, 4276px\" /></figure>\n\n\n\n<h3>Poverty is not inevitable</h3>\n\n\n\n<p>In the past it was unimaginable that it would ever be possible to reduce poverty.{ref}See Martin Ravallion (2020) \u2013 On the Origins of the Idea of Ending Poverty. NBER Working Paper No. 27808, September 2020.{/ref} In a world in which every <a href=\"https://ourworldindata.org/child-mortality-in-the-past\">second child died</a> and where hunger was <a href=\"https://ourworldindata.org/famines\">widespread</a>, the majority of people <a href=\"https://ourworldindata.org/extreme-history-methods\">lived in poverty</a>. And since <a href=\"https://ourworldindata.org/breaking-the-malthusian-trap\">poverty did not change</a>, it was easy to believe that poverty was unchangeable.&nbsp;</p>\n\n\n\n<p>Today we know that this was wrong, we know that poverty is not inevitable because poverty has declined very substantially in many countries. The population of Denmark was once as poor as the population of Ethiopia today, but since then poverty declined&nbsp;and living conditions improved: average incomes increased <a href=\"https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&amp;time=earliest..latest&amp;country=ETH~DNK\">more than 25-fold</a>, the child mortality rate <a href=\"https://ourworldindata.org/grapher/child-mortality?tab=chart&amp;time=earliest..2016&amp;country=~DNK\">declined from more than a quarter</a> to less than half a percent \u2013 one of the lowest levels in the world \u2013 and Denmark is today one of the countries where people report to be most <a href=\"https://ourworldindata.org/grapher/gdp-vs-happiness\">satisfied with their lives</a>.</p>\n\n\n\n<p>As such I will use Denmark as a benchmark of what it means for poverty to fall \u2018substantially\u2019. Using Denmark as a benchmark, we can ask: how equal and rich would countries around the world need to become for global poverty to be similarly low as in Denmark?</p>\n\n\n\n<p>Denmark is not the only country with a small share living on less than $30, as the visualization above showed. In Norway and Switzerland an even smaller share of the population (7% and 11%) is living in such poverty. I chose Denmark, where 14% live in poverty, as a benchmark because the country is achieving this low poverty rate despite having a substantially lower average income than Switzerland or Norway.</p>\n\n\n\n<p>Considering a scenario in which global poverty declines to the level of poverty in Denmark is a more modest scenario than one that considers an end of global poverty altogether. It is a scenario in which global poverty would fall from 85% to 14% and so it would certainly mean a substantial reduction of poverty.&nbsp;</p>\n\n\n\n<p>If you think that my poverty line of $30 per day is too low or too high, or if you want to rely on a different country than Denmark as a benchmark, or if you would prefer a scenario in which no one in the world would remain in poverty, you can follow my methodology and replace my numbers with yours.{ref}You find all data for countries around the world at the World Bank&#8217;s <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a> \u2013 or you can view it in our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Share+in+poverty&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&amp;country=~OWID_WRL\">Data Explorer</a>.{/ref} What I want to do in this text is to give an idea of the magnitude of the changes that are necessary to substantially reduce global poverty.</p>\n\n\n\n<h4>How do living standards in Denmark and a poorer country compare?</h4>\n\n\n\n<p>The previous chart showed that in the majority of the world\u2019s countries the vast majority lives on less than $30 per day. The following chart zooms in from the global view of the previous chart to a more detailed comparison of just two countries: our benchmark country Denmark in red and Ethiopia in blue.&nbsp;</p>\n\n\n\n<p>There is no <em>global</em> survey of incomes: researchers need to rely on the available <em>national</em> surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries there are some important differences across countries. In most richer countries the surveys capture people\u2019s incomes, while in poorer countries these surveys capture people\u2019s consumption. The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing).{ref}In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Share+in+poverty&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&amp;country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">Data</a><a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp\"> </a><a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Share+in+poverty&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&amp;country=~OWID_WRL\">Explorer</a> of this data, you can select to show the data from <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Share+in+poverty&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Income+surveys+only&amp;country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">income</a> and <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Share+in+poverty&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Expenditure+surveys+only&amp;country=OWID_WRL~AGO~BEL~BGD~USA~TUR~RUS~GRC~ESP\">consumption</a> surveys separately. For very rich people that are able to save much of their income, the two concepts can differ substantially, for most people in the world they are very close.{/ref} When speaking about these statistics it would therefore be accurate to speak about \u2018the income of people in richer countries and the monetary value of consumption in poorer countries\u2019. But since it\u2019d be a bit much to repeat this every time researchers simply speak of \u2018living standards\u2019 or \u2018income\u2019 instead. I do the same in this text.</p>\n\n\n\n<p>It\u2019s also important to remember that in poorer countries many work as subsistence farmers who do not, or only partly, rely on a monetary income. To properly capture their living standards, and allow comparisons between households, the statisticians who conduct the household surveys include an estimate of the monetary value of the food and other goods that they produce for their own consumption.{ref}For detail, see the World Bank&#8217;s Poverty and Inequality Platform <a href=\"https://worldbank.github.io/PIP-Methodology/index.html\">methodology</a>.<br><br>The importance of capturing people\u2019s living standards in this way is easy to see when you consider what it would mean to only capture the monetary income of people around the world: the resulting minimum growth that would be necessary to reduce global poverty would then be much larger, because it would not accurately capture the living standards in poorer countries.{/ref}</p>\n\n\n\n<p>What does the chart tell us about living standards in these two countries?&nbsp;</p>\n\n\n\n<p>If we want to know how much the distribution of Ethiopia would need to change to reduce the share in poverty to Denmark\u2019s level we can read it off the two parameters that describe the distribution \u2013 the average level of income and the inequality of those incomes.</p>\n\n\n\n<p>Ethiopia has a much lower average income: an increase of average incomes is called economic growth and to increase the average from $3.30 per day to $55 would mean that Ethiopia would need to increase its income 16.7-fold (because $55 is 16.7-times higher than $3.30).{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank&#8217;s PovcalNet platform \u2013 which has been superseded the <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a>. In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Mean+income+or+expenditure&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&amp;country=ETH~DNK\">Data Explorer</a>, you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>In the interest of keeping the text readable I rounded the numbers. The precise average income reported by PovcalNet was $55.48 in Denmark and $3.33 in Ethiopia so that the ratio is 55.48/3.33=16.66. But the ratio between the two incomes (which expresses the necessary average income growth) remains the same: 5.50/3.30=16.67<br>If you want to think of this in terms of a growth rate (rather than a multiplier) then the necessary growth for Ethiopia is (55.48-3.33)/3.33=1566%.{/ref}</p>\n\n\n\n<p>Inequality is also higher in Ethiopia. To reach the same level of poverty at the same level of average income the Gini would have to fall by 5 points. But the current average is so far below $30 a day that without economic growth no amount of redistribution would lower the poverty rate relative to this threshold.{ref}The share living on more than $30 per day would actually very slightly increase because the small share who is currently living on more than $30 per day are the very richest in Ethiopia and their income would decline if inequality would decrease.{/ref}</p>\n\n\n\n<p>A more than 16-fold increase in average incomes is certainly not easy to achieve, but it is also not impossible. The average income in Denmark grew <a href=\"https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions?tab=chart&amp;stackMode=relative&amp;time=earliest..2018&amp;country=DNK~ETH\">by more than that</a> over the last few generations, and such growth is <a href=\"https://ourworldindata.org/economic-growth-since-1950\">not rare</a> in recent economic history.&nbsp;</p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"3000\" height=\"1570\" src=\"https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png\" alt=\"\" class=\"wp-image-41651\" srcset=\"https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018.png 3000w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-400x209.png 400w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-800x419.png 800w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-150x79.png 150w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-768x402.png 768w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-1536x804.png 1536w, https://owid.cloud/app/uploads/2021/03/Incomes-poor-and-rich-country-Ethiopia-vs-Denmark-2018-2048x1072.png 2048w\" sizes=\"(max-width: 3000px) 100vw, 3000px\" /></figure>\n\n\n\n<h4>How would average incomes need to change globally?</h4>\n\n\n\n<p>We have seen that the average income in Ethiopia is 16.7-times lower than the average in Denmark. How do the incomes of people in all other countries in the world compare with Denmark?</p>\n\n\n\n<p>The chart here shows us the answer by plotting the average incomes for all countries in the world. The height of each bar represents the average daily income in a country; the width of each country again corresponds to the country\u2019s population size and again I have ordered the countries by income: from the poorest country on the very left to the richest country on the very right.</p>\n\n\n\n<p>The reason why such substantial economic growth is necessary for reducing global poverty is that the average income in many countries in the world is very low: 82% of the world population live in countries where the mean income is less than $20 per day.</p>\n\n\n\n<p>Denmark is highlighted in green. With an average income of $55 per day it is among the richest countries in the world, though there are several countries where average incomes are higher still.</p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"2921\" height=\"2474\" src=\"https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png\" alt=\"\" class=\"wp-image-41652\" srcset=\"https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight.png 2921w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-400x339.png 400w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-649x550.png 649w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-150x127.png 150w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-768x650.png 768w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-1536x1301.png 1536w, https://owid.cloud/app/uploads/2021/03/mean-income-by-country-Denmark-highlight-2048x1735.png 2048w\" sizes=\"(max-width: 2921px) 100vw, 2921px\" /></figure>\n\n\n\n<h4>How much would average incomes have to increase to reach the level of Denmark?</h4>\n\n\n\n<p>This next chart is based directly on the previous one and shows for every country by how much the mean income would need to increase to reach Denmark\u2019s mean income.&nbsp;</p>\n\n\n\n<p>I rotated the orientation of this chart so that now the height of each bar is proportional to the size of that country\u2019s population. The population size is relevant because we need to take into account each country\u2019s share in world population, and expected future population growth, in order to calculate the minimum necessary global aggregate growth that is required to reduce poverty.</p>\n\n\n\n<p>The chart shows that Ethiopia is among the poorer countries and, as we have seen above, its average income would need to increase 16.7-fold to reach Denmark\u2019s. The countries that have a lower average income than Ethiopia need higher economic growth to reach the level of Denmark; the countries that are already richer than Ethiopia require less.</p>\n\n\n\n<p>The very richest countries don\u2019t need additional growth to reach Denmark, they are already richer. If they would achieve a reduction of inequality they could reduce the share of their population living on less than $30 per day to the level of Denmark. Those countries I have shown in red and for the calculation of the minimum necessary global growth I assumed that these countries reduce the average income of the people that live there.&nbsp;</p>\n\n\n\n<p>The simple idea of this hypothetical scenario is that every country that is poorer than Denmark increases average incomes to the level of Denmark and every country that is richer decreases the income of the people in those countries. And in addition to this every country in the world reduces its income inequality to the low level of Denmark.</p>\n\n\n\n<p>How much growth would be needed in total?</p>\n\n\n\n<p>You find the calculation in the footnote. The minimum necessary growth to reduce global poverty to the level of poverty in Denmark is 410%.{ref}Note that these figures do not refer to the latest World Bank estimates. They were taken from the World Bank&#8217;s PovcalNet platform \u2013 which has been superseded the <a href=\"https://pip.worldbank.org/home\">Poverty and Inequality Platform</a>. In our <a href=\"https://ourworldindata.org/explorers/poverty-explorer-2011-vs-2017-ppp?tab=chart&amp;facet=none&amp;Metric=Mean+income+or+expenditure&amp;International-%24=2011+prices&amp;Poverty+line=%2430+per+day&amp;Household+survey+data+type=Show+data+from+both+income+and+expenditure+surveys&amp;country=ETH~DNK\">Data Explorer</a>, you can view the latest World Bank data \u2013 expressed both in 2011 international-$ as in this article, and in 2017 international-$ as now preferred by the World Bank.<br><br>This calculation has to take three metrics into account: the average income in each country (as plotted above from PovcalNet), the average income of Denmark ($55.48) as a target, and the expected population growth in each country (I take the latest UN projection until 2100 for each country).</p>\n\n\n\n<p>The daily total income in 2100 in which every country reaches the average income of Denmark today is simply $55.48 multiplied by the expected number of people that will be alive in 2100.</p>\n\n\n\n<p>The daily total income in 2017 is each country\u2019s mean income multiplied by the number of people in each country.</p>\n\n\n\n<p>The ratio between these two total income figures is 5.1. Expressed in terms of growth, the minimum total income in 2100 that is necessary to bring global poverty down to the level of Denmark today is 410.3% higher than the total income in 2017.<br>Since PovcalNet does not include data for several smaller countries (Aruba, Curacao, Cuba, Brunei and several others) these countries are not taken into account in 2017 or 2100. Since most of these countries are poorer than Denmark this lowers the estimate for total necessary growth.{/ref}</p>\n\n\n\n<p>An increase by 100% would mean that the size of the economy would double. A 410% increase is therefore a 5.1-fold increase of the global economy.</p>\n\n\n\n<p>Or put differently, a world economy with substantially less poverty is <em>at a minimum</em> 5-times bigger than today\u2019s global economy.</p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" width=\"2921\" height=\"3087\" src=\"https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png\" alt=\"\" class=\"wp-image-41653\" srcset=\"https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark.png 2921w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-378x400.png 378w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-520x550.png 520w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-142x150.png 142w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-768x812.png 768w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-1453x1536.png 1453w, https://owid.cloud/app/uploads/2021/03/growth-needed-to-reach-Denmark-1938x2048.png 1938w\" sizes=\"(max-width: 2921px) 100vw, 2921px\" /></figure>\n\n\n\n<p></p>\n\n\n\n<p>A five-fold increase is a <em>minimum</em> estimate of the economic growth that is necessary to reduce global poverty substantially. In the following box I discuss in which ways a more realistic expectation of what the future might look like would imply larger economic growth.</p>\n\n\n\t<block type=\"additional-information\" default-open=\"true\">\n\t\t<content>\n\n<h3>In which ways does a realistic scenario differ from the minimum scenario?</h3>\n\n\n\n<div class=\"wp-block-columns is-style-sticky-right\">\n<div class=\"wp-block-column\">\n<p>To calculate the <em>minimum</em> growth that is necessary one has to rely on a scenario that would allow the maximal reduction of global poverty under minimal growth. This is what I did in the previous section.</p>\n\n\n\n<p>The result of this calculation is that the total size of the global economy would need to be more than 5-times larger than currently to substantially decrease global poverty.</p>\n\n\n\n<p>A minimum growth scenario for poverty reduction of course implies much lower economic growth than any realistic scenario of how the future global economy might look like. It therefore makes sense to consider in which ways a more realistic scenario would imply more economic growth than this minimum scenario.</p>\n\n\n\n<p><strong>In this scenario every country stops economic growth entirely once they reach the average income of Denmark</strong></p>\n\n\n\n<p>This calculation is based on a scenario in which every country stops economic growth once they reach the level of Denmark. The chart just above shows this: After additional economic growth of 30% South Korea would reach the average income of Denmark and in this scenario it would stop exactly there. Russia would grow until incomes are 2.8-fold higher than now and stop then. And the same is assumed for all other countries in this scenario.</p>\n\n\n\n<p>The reason I went with this assumption for this scenario is to calculate the minimum growth needed to substantially reduce global poverty. Of course there is no reason to expect that countries would actually do this, which means that global economic growth would be higher before global poverty is substantially reduced.</p>\n\n\n\n<p><strong>In this scenario every country that is richer than Denmark reduces average incomes</strong></p>\n\n\n\n<p>To calculate the minimum necessary aggregate growth I assumed that the countries that are richer than Denmark would shrink their economies so that people\u2019s incomes there would decline.{ref}You could also think of this aspect of the scenario as a redistribution of incomes from richer countries to poorer countries.{/ref} Again, this is helpful to see the minimum growth needed, but since there is no reason to expect that countries would actually do this we should expect more economic growth before global poverty is substantially reduced.</p>\n\n\n\n<p><strong>As a consequence there is no global inequality between countries in this scenario</strong></p>\n\n\n\n<p>The consequence of the previous two features of this scenario is that global inequality between countries disappears entirely: every country in the world would have an average income of $55 per day.&nbsp;</p>\n\n\n\n<p>You have to be extremely optimistic about the future of inequality to think this is likely. If you don\u2019t think this will happen, then the economic growth that the world will see before any possible substantial reduction of global poverty will be higher.</p>\n\n\n\n<p>In a scenario in which countries do not decrease average incomes of the population and in which average incomes of all countries increase at a rate of 2% per year, the global economy would be 7.2-times larger.{ref}In this scenario all countries in the world keep increasing average incomes by 2% every year and those countries which would not reach Denmark\u2019s average income by 2100 on this growth path are assumed to catch up. In this scenario the total size of incomes would increase by 622% before by 2100.{/ref}</p>\n\n\n\n<p><strong>In this scenario inequality within countries declines very substantially</strong></p>\n\n\n\n<p>The scenario assumes a massive reduction of inequality within many countries. Denmark is one of the most equal countries in the world today (see <a href=\"https://ourworldindata.org/grapher/economic-inequality-gini-index\">this map</a>) so that almost all countries in the world would need to achieve large reductions of within-country inequality to reach a poverty headcount ratio as low as Denmark on an average income of $55.&nbsp;Since there is no inequality between countries in this scenario it is implied that the world as a whole achieves the same inequality of incomes as Denmark  today.</p>\n\n\n\n<p>In many countries around the world inequality <a href=\"https://ourworldindata.org/income-inequality-since-1990\"><em>did</em> decrease</a> over the past generation and this might give us some confidence that further reductions of inequality are indeed possible. But you need to be extremely optimistic about the future of inequality to believe that all countries will achieve the very low inequality of Denmark. Again, I assumed it here to calculate the <em>minimum</em> growth necessary. If you believe that this scenario is not realistic then the implication is that the necessary economic growth to reduce global poverty will in reality be higher.</p>\n\n\n\n<p>An even more optimistic scenario would be to expect that perfect equality between every single person in the world could be achieved. The richest person in the world would live on $30 per day \u2013 just above the poverty line \u2013 and the poorest person too. Even then very substantial economic growth would be needed to end global poverty: the world economy would need to more than double.{ref}Calculation: In a scenario in which perfect equality between every person on the planet would be achieved the global economy would need to be 2.7-fold larger than today.</p>\n\n\n\n<p>Again we need to take into account population growth. As the world population is expected to increase by 44% from 2017 (latest income data) before global population growth comes to an end at the end of this century the economy needs to grow in proportion to keep per capita incomes at the required level.</p>\n\n\n\n<p>There are several ways to arrive at this result. One simple way to calculate the necessary growth is to consider that an income of int.-$30 for a global population that is 44% larger is equivalent to an increase from the current level to int.-$42.3 ($30*1.44). The required growth from the current mean income is therefore ((30*1.44-16)/16)=170%.{/ref}</p>\n\n\n\n<p><strong>This scenario is based on Denmark rather than the richer countries where a smaller share of the population live in poverty today</strong></p>\n\n\n\n<p>In this scenario I have based all calculations on Denmark. The country that actually has the lowest share of the population living in poverty is Norway, a country that is substantially richer than Denmark. Calculating the growth required for every country in the world to reach the average income of Norway would therefore yield higher necessary minimum growth.&nbsp;</p>\n\n\n\n<p><strong>The required economic growth in GDP terms will be higher than in household income terms</strong></p>\n\n\n\n<p>None of the discussion and none of the calculations here relied on GDP per capita. The average incomes reported throughout this post are based on what people report in household surveys. GDP per capita is the more commonly used measure of average incomes as it is a more comprehensive measure of people\u2019s incomes \u2013 importantly GDP per capita includes government expenditure (for more background on the differences see footnote 24 of <a href=\"https://ourworldindata.org/higher-poverty-global-line\">this post</a>).&nbsp;</p>\n\n\n\n<p>The differences between these two average income measures matter for the calculation of the necessary minimum growth. The gap between average incomes as determined in household surveys and GDP per capita typically increases with rising income, which means that if we would consider the necessary minimum growth in GDP terms rather than household income terms the required growth would be larger.</p>\n\n\n\n<p><strong>It would not be the end of poverty \u2013 only a substantial reduction of poverty</strong></p>\n\n\n\n<p>And lastly keep in mind that this is a scenario in which there will still be people in poverty. Poverty is lower in Denmark than in much of the rest of the world, but it is nevertheless a large problem in Denmark. In the scenario here the same would be true for the world. Global poverty would be reduced very substantially, but it will nevertheless be a world in which 14% of the population live on less than $30 per day.</p>\n\n\n\n<p><strong>How much does future population growth matter?</strong></p>\n\n\n\n<p>In the calculations here I relied on the most widely used demographic projection of future population growth, the UN Population Division\u2019s mid-variant projections. There are other projections and it makes sense to consider how different demographic scenarios would impact the calculations, in particular because the demographic research literature <a href=\"https://ourworldindata.org/fertility-rate#what-explains-the-change-in-the-number-of-children-women-have\">suggests</a> that increases in incomes would lead to a decline of fertility rates.&nbsp;</p>\n\n\n\n<p>On the other hand it is important to not overstate the possible impact of these changes. The number of children in the world is <a href=\"https://ourworldindata.org/explorers/population-and-demography?facet=none&amp;Metric=Population&amp;Sex=Both+sexes&amp;Age+group=Under+5+years&amp;Projection+Scenario=Medium&amp;country=~OWID_WRL\">past its peak</a><a href=\"https://ourworldindata.org/peak-child\"> </a>and much of the future population growth is due to \u2018<a href=\"https://ourworldindata.org/population-momentum\">population momentum</a>\u2019.\u00a0</p>\n\n\n\n<p>There are several global population projections, some that expect lower population growth expect a world population that is about 18-20% smaller than the UN mid-variant. Accordingly the minimum size of total incomes would therefore need to be about 18-20% lower under a lower population growth scenario.</p>\n\n\n\n<p><strong>Is it enough to reduce poverty?</strong></p>\n\n\n\n<p>This scenario here is envisaging the necessary changes to reduce poverty. A reduction of poverty is an important goal, but it is surely not the only goal a society might have, the ambition is not to lift everyone\u2019s living standards just above the poverty line. The question of what living standards make a person or a household well off is an important one, but it is beyond the considerations in this text.{ref}Perhaps as an upper limit it is relevant to ask at what level a person is considered rich. For the regular poverty report of the German government, a survey is conducted in which the German population is asked what income level they consider as rich.<br>These reports are called \u2018Armuts- und Reichtumsbericht der Bundesregierung\u2019 online at <a href=\"https://www.armuts-und-reichtumsbericht.de/DE/Startseite/start.html\">armuts-und-reichtumsbericht.de</a></p>\n\n\n\n<p>The latest survey was produced by aproxima and published in 2016. It is published as <a href=\"https://www.armuts-und-reichtumsbericht.de/SharedDocs/Downloads/Service/Studien/forschungsprojekt-wahrnehmung-armut-reichtum.pdf?__blob=publicationFile&amp;v=5\">Wahrnehmung von Armut und Reichtum in Deutschland, Ergebnisse der repr\u00e4sentativen Bev\u00f6lkerungsbefragung \u201eARB-Survey 2015\u201c</a>, Berlin: Bundesministerium f\u00fcr Arbeit und Soziales (Hrsg.).</p>\n\n\n\n<p>Asked for the income level above which they consider a person to be rich the mean answer was 9,696\u20ac, but the median was \u2018closer to 5,000\u20ac\u2019, as the report puts it.</p>\n\n\n\n<p>\u20ac5000 are int.-$6,426.74. Per day this is an income of int.-$210.71.</p>\n\n\n\n<p>Calculations:<br>\u20ac5000/0.778=int.$6,426.74<br>int.$6,426.74/30.5=int.$210.71{/ref}</p>\n\n\n\n<p><strong>My takeaway</strong></p>\n\n\n\n<p>The purpose of this scenario was to calculate the <em>minimum</em> necessary growth. I\u2019m cautiously optimistic about the possibility that global income inequality <a href=\"https://osf.io/preprints/socarxiv/du5g6\">declines further</a>, but I\u2019m not as optimistic as this minimum scenario envisages and I therefore think that <em>if</em> the world will ever substantially reduce poverty then it would be a future with more aggregate global economic growth than a 5-fold increase.</p>\n</div>\n\n\n\n<div class=\"wp-block-column\"></div>\n</div>\n\n</content>\n\t</block>\n\n\n<h4>Is it possible to achieve both, a reduction of humanity&#8217;s negative impact on the environment and a reduction of global poverty?</h4>\n\n\n\n<p>Reducing global poverty is not the only important global goal. It will also be crucial to reduce humanity\u2019s very large impact on the environment. Yes, it will be very hard to achieve both goals at the same time and we should be clear about how difficult this challenge is. </p>\n\n\n\n<p>This challenge comes down to the question of whether it will be possible to decouple economic growth from environmental harm and then achieve the transition to a sustainable production of the goods and services that people need:</p>\n\n\n\n<ul><li>If those who say that it is not possible to decouple growth from environmental harm are right, then the future will be bleak. If indeed there should be no possibility to sufficiently decouple growth from environmental impacts then the future will will be either one of continuing global poverty or one of continuing environmental destruction, or both. </li><li>If however we want to achieve a future in which global poverty is substantially lower than today <em>and</em> in which humanity has a smaller negative impact on the environment, then it will be necessary to decouple growth from environmental impacts and achieve a sustainable production of the products we all need.</li></ul>\n\n\n\n<p>In the last years many countries have reduced negative environmental impacts while production and incomes increased. Many European countries <a href=\"https://ourworldindata.org/grapher/consumption-co2-per-capita-vs-gdppc?zoomToSelection=true&amp;endpointsOnly=1&amp;time=1990..latest&amp;country=AUT~CYP~DNK~FIN~FRA~DEU~GRC~IRL~ITA~NLD~ROU~ESP~SWE~GBR~HUN~NOR\">have reduced</a> consumption-adjusted CO\u2082 emissions while incomes increased. Global emissions of ozone-depleting substances have <a href=\"https://ourworldindata.org/ozone-layer\">declined by more than 99%</a> in the last three decades. And global <a href=\"https://ourworldindata.org/global-deforestation-peak\">deforestation rates have declined strongly</a> since the 1980s. But many large environmental problems remain and greenhouse gas emissions caused by the world&#8217;s richest people <a href=\"https://ourworldindata.org/global-inequalities-co2-consumption\">are much higher</a> than those caused by poorer people. No country has achieved a sustainable production of the goods and services that people need, a major reason for this is <a href=\"https://ourworldindata.org/worlds-energy-problem\">the world&#8217;s energy problem</a>.</p>\n\n\n\n<p>I do not know whether humanity will be successful in leaving poverty behind, while substantially reducing its environmental impact. The future is not yet written. But this also means it is up to us <em>now</em> to do what we can to make a future of much less environmental harm and less poverty possible. Much of our work here at Our World in Data is therefore dedicated to studying how it might be possible to achieve a future in which an increasing share of humanity is less poor <em>and</em> in which humanity has a smaller negative environmental impact \u2013 we document what we know about global poverty and humanity\u2019s impact on the environment and consider possible solutions for how to decrease global poverty while reducing environmental harm (some of the texts you might be interested in, in this regard: <a href=\"https://ourworldindata.org/cheap-renewables-growth\">1</a>, <a href=\"https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions\">2</a>, <a href=\"https://ourworldindata.org/land-use-diets\">3</a>, <a href=\"https://ourworldindata.org/worlds-energy-problem\">4</a>, <a href=\"https://ourworldindata.org/what-are-drivers-deforestation\">5</a>, <a href=\"https://ourworldindata.org/outdoor-air-pollution\">6</a>, <a href=\"https://ourworldindata.org/renewable-energy\">7</a>, <a href=\"https://ourworldindata.org/water-use-stress\">8</a>, <a href=\"https://ourworldindata.org/safest-sources-of-energy\">9</a>, <a href=\"https://ourworldindata.org/energy-access\">10</a>, <a href=\"https://ourworldindata.org/fossil-fuels\">11</a>, <a href=\"https://ourworldindata.org/environmental-impacts-of-food\">12</a>, <a href=\"https://ourworldindata.org/forests-and-deforestation\">13</a> and many more). </p>\n\n\n\n<p>As you will see in our writing there are several important cases in which an increased consumption of specific products gets into unavoidable conflict with important environmental goals; in such cases we aim to emphasize that we all as individuals, but also entire societies, should strongly consider to reduce the consumption of these products \u2013 and thereby reduce the use of specific resources and forgo some economic growth \u2013 to achieve these environmental goals. We believe a clear understanding of which specific reductions in production and consumption are necessary to reduce our impact on the environment is a much more forceful approach to reducing environmental harm than an unspecific opposition to economic growth in general.</p>\n\n\n\n<p>We should also emphasize when the two goals are not in conflict with each other. Some, for example, believe that the decarbonisation of our economies conflicts with economic growth.{ref}This view is shared by two antagonistic groups. In <a href=\"https://ourworldindata.org/shrink-emissions-not-the-economy\">a guest post for Our World in Data</a> Linus Mattauch, Alexander Radebach, Jan Siegmeier, and Simona Sulikova put it like this: <em>\u201cIronically, the proponents of this claim come from two antagonistic camps. On the one hand, there are those who believe that addressing climate change must take priority and that this requires an organised diminution of economic output (termed \u201cdegrowth\u201d). On the other hand, there are those who believe that economic growth and the social stability that comes with it should be prioritised: concerning oneself with climate policy should not be a priority if it impacts competitiveness.\u201d</em>{/ref} But this is no longer the mainstream view. The latest annual IMF report estimates that policies, including carbon pricing, that mitigate climate change actually <em>increase</em> economic growth over the coming decades. {ref}<a href=\"https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020\">World Economic Outlook, October 2020: A Long and Difficult Ascent</a>. In October 2020. Their central point estimate is a boost of up to 13% of global GDP by 2100.{/ref} This means that there is no trade-off between fighting climate change and economic growth. Fighting climate change is a way to achieve <em>more growth</em>.{ref}Even the last IPCC report (published 6 years ago) did not suggest that the antagonism of growth vs climate is correct. The IPCC report lays out what the cost of limiting global warming to less than 2\u00b0C would be. The policy scenario for the 21st century that relies on carbon pricing and technological innovation corresponds to an annualized reduction of economic growth by 0.06%, <em>relative to a baseline growth of 1.6% to 3%</em>.&nbsp;</p>\n\n\n\n<p>In other words, if the world economy would grow at 1.6% per year, the world economy in 100 years would be 1.016^100=489% the size of today\u2019s economy. With measures in place to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 1.54% per year. The world economy would then \u2018only&#8217; be 461% of the size of today.<br><br>In case the world economy would grow 3% per year the world economy in 100 years would be 1.03^100=1922% the size of today\u2019s economy. With measures to limit warming to 2\u00b0C, growth would be 0.06% smaller \u2013 i.e. 2.94% per year. The economy would then \u2018only&#8217; be 1813% the size of today.</p>\n\n\n\n<p>This is to say that the IPCC report in 2014 found rapid economic growth compatible with limiting climate change to 2\u00b0C.</p>\n\n\n\n<p>The opposite is of course not true; while climate mitigation in the short-term raises growth over the mid-term, it is not the case that more growth necessarily leads to lower greenhouse gas emissions.<br><br>See:<br>Edenhofer et al. (2014). <a href=\"https://www.ipcc.ch/report/ar5/wg3/\">IPCC, 2014: Summary for Policymakers</a>. In: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.<br><br>See also: IPCC (2014) \u2013 <a href=\"https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf\">Climate Change 2014: Synthesis Report</a>. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.<br><br><a href=\"https://www.sciencedirect.com/science/article/pii/S0095069617308707\">https://www.sciencedirect.com/science/article/pii/S0095069617308707</a>{/ref}&nbsp;Fighting climate change is not just compatible with fighting poverty, the two goals \u2014 to reduce emissions and to increase economic growth \u2014 actually <em>strengthen</em> each other.</p>\n\n\n\n<p>And when important goals <em>are</em> in conflict with each other we should be clear about the immense difficulty of the challenge. In those cases it is certainly not helpful and actually harmful to pretend that there are easy ways out. Pretending that it is possible to reduce global poverty without large aggregate growth would leave us entirely unprepared to meet the difficult challenge that we actually face, a reduction of environmental harm while also reducing global poverty.</p>\n\n\n\n<h4>Is it possible for poor countries to achieve this growth?&nbsp;</h4>\n\n\n\n<p>Before discussing the possibilities for future growth I also want to stress that the level of economic inequality matters for the reduction of poverty. We saw this in the data above: the average income in the US is higher than in Denmark, yet because these incomes are much less equally distributed there is a higher share of Americans living in poverty.</p>\n\n\n\n<p>But whether or not global poverty can possibly decline that much \u2013 from the current level of 85% to Denmark\u2019s level of 14% \u2013 overwhelmingly depends on whether the average incomes in those countries that are home to the poorest billions of people in the world will increase or not.</p>\n\n\n\n<p>One reason why you might want to consider that this is possible is the reality of those countries in which the majority left poverty behind in recent decades. As we have seen before, even a country like Denmark was extremely poor until recently and there is no reason to believe that the productivity increases that made economic growth in Denmark possible should not be possible elsewhere.</p>\n\n\n\n<p>Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were <a href=\"https://voxeu.org/article/economic-impact-colonialism\">exploited by colonial powers</a> that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in <a href=\"https://www.cgdev.org/publication/new-estimates-eu-agricultural-support-un-common-agricultural-policy\">many</a> <a href=\"https://scholar.google.com/scholar?hl=en&amp;as_sdt=0%2C5&amp;q=doi.org%2F10.2307%2F20034426&amp;btnG=\" target=\"_blank\" rel=\"noreferrer noopener\">ways</a>, but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty.&nbsp;</p>\n\n\n\n<p>A third aspect to consider is that countries around the world saw large improvements in <a href=\"https://ourworldindata.org/health-meta\">health</a> and <a href=\"https://ourworldindata.org/global-education\">education</a> in recent years. Health and education do not automatically translate into higher prosperity, but surely make it more likely that a country can leave poverty behind.</p>\n\n\n\n<p>A fourth reason is to see that <a href=\"https://ourworldindata.org/economic-growth#growth-at-the-technological-frontier-and-catch-up-growth\">\u2019catch-up growth\u2019 can be very fast</a>: several countries have achieved annual growth rates of more than 5% in recent decades.&nbsp;</p>\n\n\n\n<p>And a last reason to consider is that up to the pandemic the majority of countries in the world \u2013 <a href=\"https://ourworldindata.org/poverty?insight=hundreds-of-millions-will-remain-in-extreme-poverty-on-current-trends#key-insights-on-poverty\">but not all</a> \u2013 <em>did</em> make progress against poverty. Global poverty has declined very substantially in recent decades, <a href=\"https://ourworldindata.org/grapher/distribution-of-population-poverty-thresholds-2011-ppp?stackMode=relative\">no matter</a> what poverty line you want to draw.&nbsp;</p>\n\n\n\n<p>Increasing productivity substantially and reducing humanity\u2019s impact on the environment are certainly not easy, but these are some of the points to consider when thinking about the question of whether it might be possible to make progress towards these two goals.</p>\n\n\n\n<h4>Conclusion&nbsp;</h4>\n\n\n\n<p>What this post has shown is that if you consider a person who lives on less than $30 per day to be poor, then the extent of poverty in our world today requires very large global aggregate growth to substantially reduce global poverty.</p>\n\n\n\n<p>Personally I certainly believe that a person who lives on less than $30 per day is poor and I believe it is unjust that in most countries in the world the majority lives in such poverty. This is why I believe that the economies that are home to the poorest billions of people need to grow if we want global poverty to decline substantially.</p>\n\n\n\n<p>If you are opposed to global economic growth for one reason or another, then I hope this post is helpful in considering the implications of this opposition.</p>\n\n\n\n<hr class=\"wp-block-separator\"/>\n\n\n\n<div style=\"height:139px\" aria-hidden=\"true\" class=\"wp-block-spacer\"></div>\n\n\n\n<hr class=\"wp-block-separator\" id=\"block-3b267837-eb86-4261-8c36-10661a418d16\"/>\n\n\n\n<p id=\"block-c5b72515-60b3-4670-b276-489e0ca2f023\"><strong>Acknowledgement:</strong> I would like to thank Joe Hasell for his thoughtful comments on draft versions of this article.</p>\n\n\n\n<hr class=\"wp-block-separator\"/>\n\n\n\n<p id=\"block-e516cb16-4d90-475e-a618-428e83b2b833\"><em><strong>Continue reading Our World in Data:</strong></em></p>\n\n\n    <block type=\"prominent-link\" style=\"is-style-thin\">\n        <link-url>https://ourworldindata.org/forests-and-deforestation</link-url>\n        <title>What is driving deforestation? And how can it come to an end?</title>\n        <content>\n\n<p>My colleague Hannah Ritchie on how to bring humanity&#8217;s long history of deforestation to an end.</p>\n\n</content>\n        <figure><img width=\"768\" height=\"475\" src=\"https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-768x475.png\" class=\"attachment-medium_large size-medium_large\" alt=\"\" loading=\"lazy\" srcset=\"https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-768x475.png 768w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-400x248.png 400w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-800x495.png 800w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-150x93.png 150w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko-1536x951.png 1536w, https://owid.cloud/app/uploads/2021/02/Long-term-forest-loss-\u2013-Marimekko.png 1974w\" sizes=\"(max-width: 768px) 100vw, 768px\" /></figure>\n    </block>\n\n\n<p></p>\n",
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    "excerpt": {
        "rendered": "I study the data on today&#8217;s global inequality to calculate the minimum aggregate growth that is required to reduce global poverty substantially.",
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    "date_gmt": "2021-03-15T12:12:39",
    "modified": "2023-04-10T10:25:37",
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    "ping_status": "closed",
    "authors_name": [
        "Max Roser"
    ],
    "modified_gmt": "2023-04-10T09:25:37",
    "comment_status": "closed",
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