In the modern world, poverty remains a complex issue, often defined and measured in different ways depending on social and political contexts. While some view it as an absolute financial reality, others view poverty in terms of overall quality of life. At the same time, economic liberalism, and particularly its neoliberal version, is often accused of widening inequalities. But if we look at global trends, this economic model has above all enabled millions of people to escape poverty, particularly in countries previously considered developing.
Poverty is a ubiquitous term, but its definition varies widely. We sometimes speak of absolute poverty when individuals do not have the resources necessary to meet their basic needs in food, health, and housing. On a global scale, this definition is reflected in the poverty line set at $1.90 per day by the World Bank. However, many countries also adopt definitions of relative poverty, taking into account indicators such as access to education, housing conditions and local income inequalities. In Europe, for example, households whose income is less than 60% of the median income of the population are considered poor.
Two people living on the same income in two different contexts can experience radically different living conditions. Poverty must be understood as the inability to participate fully in society and to project oneself into the future with prospects for improvement. Thus, our analysis is not limited to the financial aspect, but explores the dimensions of health, education and access to public services, which strongly influence individuals’ prospects for improvement.
Economic opening policies
Since the 1980s with the advent of neoliberalism, many countries have adopted policies of economic opening, privatization and market deregulation. These changes have sparked criticism, often based on the idea that liberalism exacerbates inequality. Yet data shows that globalization and associated economic growth have led to a significant reduction in global poverty. According to World Bank figures, the number of people living below the extreme poverty line has fallen from nearly 1.9 billion in 1990 to around 700 million in 2023, despite growth in the world population.
The People’s Republic of China is the most striking example of this dynamic. Under the impetus of economic reforms initiated at the end of the 1970s by Deng Xiaoping, China has gradually integrated market mechanisms into its planned economy. Openness to international trade and foreign investment has enabled the country to post high economic growth rates over several decades. As a result, more than 800 million Chinese people have been lifted out of absolute poverty. This success would not have been possible without partial adherence to the principles of economic liberalization, which allowed the country to modernize its infrastructure, stimulate industrial production, and strengthen agricultural productivity.
Feeling of frustration
Liberalism is often criticized for its effects on inequality. In many so-called developed countries, economic growth has not always been accompanied by a fair redistribution of wealth between the different economic actors. Income gaps have widened, fueling a sense of frustration among the middle and disadvantaged classes. This gap is particularly measured in OECD countries, with an evolution over almost three decades. In the 1980s, the richest 10% in OECD countries earned seven times more than the poorest 10%: they earned almost ten times more in 2018.
Thus, the accentuation of inequalities does not necessarily mean that there is an increase in poverty since what matters is the evolution of the wealth of the entire population. In the United States, the concentration of wealth in the hands of a few is frequently highlighted as proof that the liberal model worsens disparities. However, their GDP per capita, or the wealth produced on average by each American, has increased significantly from $48,570 in 2008 to $81,695 in 2023 according to the World Bank. In addition, to be more representative of the population, the median salary, i.e. the salary received by at least 50% of the population, has increased significantly. According to BLS (the Bureau of Labor Statistics), it went from $32,390 per year in 2008 at almost $48,060 per year in 2023, i.e. +48% salary increases over the period.
We can be pleased that in less than twenty years, more than a billion people have emerged from poverty thanks to economic growth developed during the neoliberal era. This unprecedented feat in our history shows that liberalism leads to an increase in inequalities but can reduce poverty. This process of enrichment not only raises the overall standard of living, leading to an upward leveling of the entire population.
*William Thay is president of the independent think tank Le Millénaire, specializing in public policy. Hugo Spring-Ragain is an economic analyst for the Millennium.