What the Poverty Chart Says About Neoliberalism
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What the Poverty Chart Says About Neoliberalism
In 1950 six in every ten people on earth lived in extreme poverty. In 2025 one in ten did. The World Bank published these figures in October, in a short post by Christoph Lakner and Samuel Kofi Tetteh Baah, and it drew the line at $3.00 a day. Over the same years the world's population more than tripled, from 2.5 billion to 8.3 billion, and still the number of extreme poor fell, from about 1.5 billion to just over 800 million.
Most of those years belong to the neoliberal era. The German economist Alexander Rüstow coined the word at a meeting of liberal thinkers in Paris in 1938, and he meant a liberalism in which a strong state set the rules of the market. The word changed sides later. Critics tied it to the market reforms of Augusto Pinochet's Chile, and it became an insult. By the 1980s the program had its leaders in London and Washington. Ronald Reagan fired 11,345 striking air traffic controllers in August 1981. Margaret Thatcher's government sold British Telecom in 1984 and British Gas in 1986, and it outlasted a miners' strike that ran for 51 weeks until March 1985. The IMF and the World Bank made adjustment loans to indebted governments on condition that they reformed their budgets and opened their markets. Defenders of the program point to the poverty chart and say the market did this.
The Bank's own chart tells a narrower story. China cut the number of its people in extreme poverty from about a billion in 1990 to almost none by 2015, and India began its fall about a decade later. Take those two countries out and the global decline looks modest. Neither country followed the Washington script. The Chinese Communist Party opened to trade and foreign investment, but the state kept the big banks and kept the capital account closed. As late as 2005 the IMF urged Beijing to take the government out of bank management. India opened after its 1991 balance-of-payments crisis, with IMF support, but it opened in stages.
The countries that took the full program did worse. Across Latin America the debt crisis of the 1980s brought adjustment programs and what ECLAC called a lost decade of falling income per head. In the first half of the 1980s UNICEF found that real government health spending per person fell in most of Africa and Latin America, and that public spending per person on primary schooling fell in two-thirds of the developing countries with data. Sub-Saharan Africa took more of the program than any other region. Of the twenty countries that took the most IMF and World Bank adjustment loans between 1980 and 1999, William Easterly counted twelve in the region, with 14 to 26 loans each, against an average of seven for developing countries. The reforms set out to phase out subsidies on fertilizer and other farm inputs. Income per head in the twenty grew by about 0.1 percent a year, and the number of people in extreme poverty in Sub-Saharan Africa kept rising until, by 2015, the region held more than half the world's extreme poor.
Russia took the program fast. It freed prices in January 1992 and transferred more than 15,000 firms through vouchers between 1992 and 1994, and managers and workers ended up with about two-thirds of the shares. Output fell by 45 percent or more, by a World Bank evaluation. Life expectancy for Russian men fell from 63.8 years in 1990 to 57.7 in 1994.
The World Bank published its flagship Poverty, Prosperity, and Planet Report 2026 on the same day as the blog post, and the report measures the stall. In 2026, 811 million people live on less than $3.00 a day, and the rate has not moved since 2019. More than half of them live in nine economies. By 2030 the Bank expects 87 percent of the extreme poor to live in Sub-Saharan Africa, in states it classes as fragile or in conflict, or in both, and without faster growth it projects more extreme poor in 2030 than there are now.
The $3.00 line also hides how little the escape bought. Nearly half of humanity, 3.7 billion people, lives on less than $8.30 a day, and that number has not fallen since 1990. The Bank says most of them are one shock away from falling back. Its Prosperity Gap, a measure of how far the world stands from a secure daily standard of living, halved between 1990 and 2013 and has narrowed by barely 1 percent a year since. Hundreds of millions of people left extreme poverty and stopped a few dollars above it.
The Bank no longer talks about budgets and open capital. It talks about jobs. Nearly every poor household owns one productive asset, the skill and labor of its members, and the report finds that raising poor workers' schooling to the level of those above the line would lift their earnings by about 40 percent and cut extreme poverty nearly in half. Putting three in four working-age adults in poor households into work, mostly by bringing women into jobs, would cut it by about a fifth, and so would moving poor workers off the farm and into wage work. To bring extreme poverty down to 3 percent by 2050, income per person would have to grow about 4 percent a year, twice the pace of the last 25 years.
In the 1980s the same institution lent to poor governments on condition that they cut public spending, and UNICEF found that spending on schools fell with it. Steger and Roy write that the people who saw the Soviet collapse as the end of history did not see the populists coming, with their promise of a return to the autonomous nation state. The poverty numbers help explain the surprise. The great escape from poverty happened in countries whose governments kept their grip on money and trade, and in 2022 about two in three of the world's extreme poor lived in Sub-Saharan Africa, the region that took the most adjustment loans.