Global Inequality and Global Poverty since the Cold War: How robust is the optimistic narrative?

CROP/UiB Global WORKING PAPER SERIES on Global Challenges, Issue #1. Authors: Peter Edward & Andy Sumner

This series seeks to disseminate research focused on issues such as poverty and inequality, sustainability, and other relevant global Challenges.

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Abstract

This paper considers how the growth in global consumption since the end of the Cold War, has impacted on the co-evolution of global inequality and poverty. It is often suggested that this era of growth has led to a dramatic reduction in global poverty and to the emergence of both a new global middle class and a more equal world. We argue that this dominant and optimistic narrative on globalisation since the Cold War is considerably more methodologically fragile than it at first seems. Further, we suggest that this has implications for the UN goal to end global poverty by 2030. The fall in inequality is almost exclusively attributable to the effect that the rise of China has had on betweencountry inequality. Changes in global inequality across the rest of the world are much more modest. Much heralded falls in global poverty have raised the consumption of the poorest, but the extent to which that is the case depends on where one draws the global poverty line as at the lower end of the global distribution a change of just 10c can remove 100 million people from global poverty headcounts. If one takes instead the average poverty line for all countries (a more genuinely global poverty line) of USD 5 per day poverty headcounts have hardly changed since the Cold War. Meanwhile, the numbers living at risk of sliding back into poverty (between USD 1.90 and USD 10 a day) grew by 1.6bn, compared to a rise of 1.1bn in the numbers living above this level, and around half of those living above this level saw their share of global consumption fall. We suggest therefore that the dominant or optimistic narrative, of falling poverty and an emerging 'middle class' largely free from the threat of poverty, disguises both considerable growth in the size of the 'global precariat' living in conditions that most in the developed world would consider to be well below 'middle class' and an erosion of the financial security of a significant proportion of those living at higher consumption levels.