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Compared to what?

Summary:
This graph caught my eye: Notice that prior to 1980, the number of affluent people was growing rapidly, but the number of poor people was also increasing. After 1980, the number of affluent people rose even more rapidly, while poverty began declining.  I was in grad school in 1980, and I don’t recall very many people expecting such a dramatic turnaround in the number of poor people.  Many experts were predicting a global catastrophe, due to rapid population growth in poor countries. So what changed in 1980?  The most likely explanation for the plunge in global poverty is the neoliberal revolution, which began around 1980.  Poverty fell especially rapidly in countries that adopted market reforms, such as Chile, Bangladesh, India and China.  Ironically, the media is

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This graph caught my eye:

Compared to what?Notice that prior to 1980, the number of affluent people was growing rapidly, but the number of poor people was also increasing. After 1980, the number of affluent people rose even more rapidly, while poverty began declining.  I was in grad school in 1980, and I don’t recall very many people expecting such a dramatic turnaround in the number of poor people.  Many experts were predicting a global catastrophe, due to rapid population growth in poor countries.

So what changed in 1980?  The most likely explanation for the plunge in global poverty is the neoliberal revolution, which began around 1980.  Poverty fell especially rapidly in countries that adopted market reforms, such as Chile, Bangladesh, India and China.  Ironically, the media is now full of stories claiming that neoliberalism has failed.  My response is simple—compared to what?

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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