Readers of The Economist magazine may recognize their panel of charts which they have repeatedly printed over the past several years with the caption:
Attentive readers of The Economist will remember seeing before this panel of charts...we make no apologies for showing the again: at a stroke, they cut through much of the statistical fog surrounding this subject.
As Thomas Pogge points out the Economist's claim is that "the poor are benefiting mightily [from globalization] —the rise of China and India is living proof of this. A further message here conveyed is that globalization’s supporters, such as the Economist, care about poverty and inequity and would not be such ardent supporters if the poor were not benefiting along with the rich."
In light of the latest estimates the World Bank, The Economist editors must hope no one ever sees their panel of charts again, since both China and India were overestimated by 40%.
Under new estimates based on price levels for its updated 2005 survey, called the International Comparison Program (ICP), over 50 countries' average citizen income has been adjusted. As a result, The the rich are better off, the poor worse off than previously thought. The ICP program is conducted approximately every five years, each time with an improved methodology and more countries participating. However, it also measures in the most comprehensive way changes in the price level and price structure across countries in a comparative way.
Overall,
The share of emerging markets in global GDP has been revised downwards by a significant amount. It is now estimated that emerging markets accounted for 41% of world GDP in 2005, down from the previously estimated 47%
This may be explained by better statistics (and indeed some economists argue), but it is more likely explained by changes in price level. For example, in China, whose price level was last compared in 1986, a t-shirt may have cost only 25% of the price of the same tee in the United States in that year. But in 2005, it may have cost 50%. Only a survey such as the ICP would pick up such invisible "price inflation."
Therefore,
The reductions in GDP per head imply a large increase in measured poverty in China and India, based on poverty rates calculated according to the international one-dollar-a-day standard–these now look far higher than assumed in a host of studies by the World Bank and others.
The claim that China and India in particular have achieved massive poverty reduction and relative catch-up as a result of their market reforms of the 1980s and 1990s is important because it underlies two decades of claims by neoliberal economists that freer markets have helped poorer countries catch up, and is therefore good for them. It is well known that, during the 1980s, 1990s, and early 2000s, economic growth developing parts of the world, particularly Africa, Latin America, and the Middle East, slowed, or even shrank.
According to the Bank's previous estimates, the global number of poor people fell by approximately 150 million between 1990 and 1999 (the proportion falling from 28 to 22 per cent). This was due to some 150 million people supposedly leaving the ranks of the poor in China. Outside of China, reductions in the number of poor in other Asian nations were offset by increases in Eastern Europe, Central Asia, Latin America and especially Sub-Saharan Africa. So any major change in the Chinese picture could turn a net positive picture into a negative one.
Without the China and India counter-examples, the "globalization helps developing countries" argument, which has been accepted for two decades, would be bankrupt based on macro-empirical evidence alone. Both China and India participated in the 2005 ICP round for the first time since the 1980s, so it can now be conclusively established that, not only are the World Bank's poverty measures in disarray, but developing countries as a whole almost certainly did better in the 1950s-1970s than they have since the 1980s. Which, according to modernization theory, may help explain why the wave of democratization that broke out circa 1975-1995 has now slowed or reversed.