The Prosperity Hoax
NO ONE DENIES THAT A LARGE number of people worldwide live in drudgerous poverty. But it would appear that we are in the midst of a historic transformation. In recent years, a spate of articles in the anglophone press and academia have suggested that global poverty has entered terminal decline—all thanks to capitalism. Writing for the World Economic Forum in 2015, Ricardo Hausmann lamented that “capitalism gets blamed for many things nowadays: poverty, inequality, unemployment, even global warming,” which was unfair, since “it also lifted [thousands] out of poverty and made them more prosperous.” The following year, Charles Lane proclaimed in the Washington Post that “freer flows of international trade and private capital” have produced “historic progress, with its overwhelmingly beneficial consequences for millions of the world’s humblest inhabitants.” In the New York Times, Nicholas Kristof wrote that 2017 was “probably the very best year in the long history of humanity . . . a smaller share of the world’s people were hungry, impoverished or illiterate than at any time before.”
The World Bank has churned out a series of reports over the last six years promoting this cheery story. “The world has made tremendous progress in reducing extreme poverty,” the Bank declared in its “Poverty and Shared Prosperity 2018” report. Over a quarter of humanity had escaped indigence in the past twenty-five years, its research showed. Where once the majority of the world population lived in poverty, now the figure was just 10 percent. Just a decade earlier, it had seemed like hard times for free-market triumphalists, particularly in America, as the financial crisis rudely discredited their fantasies of ineluctable progress. Against this, the World Bank offered a redemptive story. Whatever the injustices and corruptions of globalized capitalism, it had lifted millions out of destitution. The spread of privately owned capital and free trade would see extreme poverty disappear by as early as 2030. With that, the most basic form of human suffering would be consigned to history.
It was clear to those who lived in poor countries that there were problems with the World Bank’s data. Consider only the Middle East. Anyone who visits Egypt for even a short time will not fail to notice that at least half of the country’s one hundred million people live in terrible penury. Egypt’s military regime, which had every reason to downplay the problem, pegged the official poverty headcount at 33 percent in 2019. Yet the World Bank announced in 2015 that poverty had been all but eliminated in Egypt. Not nearly a third, but only 1 percent of the Egyptian population were deemed to be living in extreme poverty by the Bank’s calculations. In Algeria it was zero percent. The scavengers who scrape a living from the edges of the Diyarbakir garbage dump in southeastern Turkey were not living in extreme poverty either. According to the Bank, no one in Turkey was.
Of course, there’s another side to the story—one that reflects reality on the ground. In July 2020, Philip Alston, the outgoing UN Special Rapporteur on extreme poverty and human rights, published a remarkable report on the global response to poverty. Alston argues that there has been a wholesale misrepresentation of the facts. “Single-mindedly focusing on the World Bank’s flawed international poverty line,” he writes, “facilitates greatly exaggerated claims about the impending eradication of extreme poverty and downplays the parlous state of impoverishment in which billions of people still subsist.” Appointed to his position in 2014, Alston served during the apogee of the World Bank’s triumphalist rhetoric on poverty reduction. His report was the culmination of five years of research. Its conclusions are as damning as is conceivable in the context of a sober UN document.
Where the World Bank states that “extreme poverty is nearing eradication,” Alston responds that “that claim is unjustified by the facts, generates inappropriate policy conclusions, and fosters complacency.” This is not just a quibble about the statistics. The Alston report is rather a wholesale critique of the World Bank’s framework. It shows that hundreds of millions of people have been “airbrushed out” of survey data. A more honest assessment, the report argues, would reveal that global poverty, far from seeing an unprecedented reduction, is in fact rising. International efforts at poverty eradication are failing. The message delivered by the World Bank has allowed the international policy community to adopt a fantasy vision of progress.