The Chinese eradication of extreme poverty in one generation

There have been write-ups in the media of the decline of extreme poverty due to a World Bank data release in the past few days. This is kind of a pretty big deal, and one of the reasons that books like Enlightenment Now are still worth writing: much of the American public is unaware of the “good news.”

But as made clear in the graphic in The Wall Street Journal, this is to a great extent a regional story. In particular, it is the story of the near eradication of extreme poverty among the ~20% of the world’s population that is Chinese.

As the chart makes visible, the “Third World” or the “Global South” or the “Developing World”, whatever you call it, is very economically diverse. Was very economically diverse. In 1990 most of the world’s extreme poor lived in East Asia. Overwhelmingly in China. Outside of Sub-Saharan Africa and South & East Asia extreme poverty, using this definition, was actually not that common. Latin America, the Middle East & North Africa, and the post-Soviet world suffered by comparison to North America and Western Europe.

People who traveled widely across the “Third World” knew this. In the 1980s and 1990s one of my uncles was an engineer, and later officer, for an Iranian oil tanker, and so traveled across the Middle East. He eventually wrote a peculiar book on poverty in Bangladesh after he retired, and in it he recounted how clear and distinct the differences in acute poverty were when he compared Iran with his homeland.

To give you a different general sense, I pulled the World Bank data and focused on a few large nations of diverse profiles. And, rather than looking at just the % below a very low poverty threshold ($1.90 per day), I increased the threshold ($5.50) and focused on the poverty gap. While the poverty headcount just tells you what % of the population falls below the threshold, the poverty gap is measuring the average distance below the threshold. In other words, it is measuring intensity of poverty.

What you can see above is that China went from having the highest poverty gap to the lowest in 25 years. But the story isn’t just about China. Fifteen years ago Vietnam had just as much extreme poverty as Bangladesh, but today it is in the same range as China. In the 1990s we talked a lot about the “Asian Miracle.” But that was minor leagues. The real miracle has occurred in the 21st century.

But it wasn’t really a miracle at all. Nations such as Vietnam and China (and earlier Japan and Korea) had relatively high literacy rates, and a tradition of meritocratic advancement, long before contact with European colonialism. Before Communism. With high native human capital resources to begin with, they were poised for lift-off before they ever made it down the runway.

My wife happens to know a Chinese man who is now a professor of science at an American Research I University. Because this is someone we know, aspects of his life history have slowly emerged. In short, he grew up in a very poor peasant household in rural China. And not one that had just recently fallen down the class ladder from what we can tell.

Today he is a professor doing rigorous science, who has achieved an upper middle class American lifestyle. My horizons may be narrow, but I have never met a South Asian in the United States who has come from an analogous background of such grinding deprivation. I know they exist. But in general South Asian peasants in deep deprivation, the children of landless laborers and the like, do not seem to have the opportunity or expectation that they could become researcher professors in the United States.

Finally, Communism. It is strange today, though perhaps not, that much of the younger populace of developed nations are beginning to look with eagerness toward some sort of inchoate socialism. And yet here you have more than a billion who sloughed off the dead hand of command socialism, and in the process eradicated extreme poverty.

I understand the qualms about Chinese authoritarianism. I’m well aware that some elements of China’s economic growth are unlikely to be sustainable. Perhaps there will be a correction. Almost certainly there has to be one. But we can’t forget what the very recent past was like. We shouldn’t shrug off the miracle of anti-poverty that has occurred in East Asia.

To Americans, and Mexicans as well, 1990 wasn’t a different land. But in the past generation nations like China and Vietnam have transformed themselves in ways that we can’t even imagine.

The bourgeoisie baby blues

There are those instances when you see a plot that resonates with your experience so much that you don’t need to say anything. You just share it. Those who know, know. Those who don’t know, won’t know until they are in a position to know.

Median household income in the United States today is $59,000. “Household” is a broad category. All families are households, but not all households are families. The median family income is $72,000. If the plot above is correct households in the bottom 25% and somewhere in the top 1% are above demographic replacement. The 1% cut-off is $430,000, and from what I can tell poking around the households making $1,000,000 per year are probably the 0.1%. In other words, between the 75th percentile and 0.10% percentile Americans are below replacement in total fertility.

There is a particular trough between $50,000 and $250,000. From the core of the middle class into the heart of the upper middle class.

From $50,000 a year household income of $250,000 a year may look comfortable, but these are the children of Epictetus. The modern world is filled with those who lack freedom but live with some modicum of comfort, as well as avenues for leisure and self-cultivation. But freedom is reserved for capital, in particular, those with a lot of liquid capital.

It is a truth universally acknowledged that a slave with a substantial income remains but a slave at the end of their days. Their comforts persist only at the sufferance of those who have inherited or grasped their freedom.


When America is no longer the world

On this week’s Slate Money the author of The Big Picture: The Fight for the Future of Movies, was a guest. I’m not going to be reading this book, but it seemed interesting. Basically, he suggested that the reason franchise movies, and in particular comic book films, were taking over is that television has taken over niches such as period dramas. The comparative advantage of the movie theater is in big-budget action & special effects spectacles, and audiences enjoy revisiting “shared universes” so much that they’re far less risky than singletons.

This shouldn’t be surprising, there’s a reason that standalone fantasy books are not notable.

An issue that is discussed on the podcast is the fact that international blockbusters tend to be American. China tried to produce something that would be exportable to the USA with The Great Wall, but it was a bust.

It strikes me that when American movies no longer dominate internationally, that’ll be a good sign that true dusk is coming to our time as the global hegemon.

The supply chain in lieu of the welfare state

The Wall Street Journal, of all places, has a fascinating human interest piece on Dollar General which is dense with insight, How Dollar General Became Rural America’s Store of Choice:

The local Dollar General store, built on a rural highway and surrounded by farmland, sells no fresh meat, greens or fruit. Yet the 7,400-square-foot steel-sided store has most of what Eddie Watson needs.

Dollar General Corp.’s 14,000 stores yielded more than double the profit of Macy’s Inc. on less revenue during its most recent fiscal year. And its $22 billion market value eclipses the largest U.S. grocery chain, Kroger Co., which has five times the revenue.

The more the rural U.S. struggles, company officials said, the more places Dollar General has found to prosper. “The economy is continuing to create more of our core customer,” Chief Executive Todd Vasos said in an interview at the company’s Goodlettsville, Tenn., headquarters.

Dollar General’s typical shopper “doesn’t look at her pantry or her refrigerator and say, ‘You know, I’m going to be out of ketchup in the next few days. I’m going to order a few bottles,’” said Mr. Vasos, the company’s chief executive. “The core customer uses the last bit of ketchup at the table the night prior, and either on her way to work or on her way home picks up one bottle.”

Camouflage is a proven winner. This year, Dollar General became the exclusive seller of dog food from the camouflage-gear brand Mossy Oak. “Even off-brand camo does well here,” said the Evensville store manager Justin Ray, who has a display of camouflage merchandise, including pacifiers and pet toys.

The Asian world

We live in interesting times. The world system is slowly shifting back to the historical norm. That norm being that most people and economic production would occur in Asia.

The book When Asia Was the World chronicles period the between after the fall of the Roman Empirea and on the cusp of the European Age of Discovery. It prefigures a world of interconnections which don’t necessarily loop back to the West. It is strange on Facebook seeing my cousins on Bangladesh joining the international economy, but that economy not necessarily having the United States at its center and fulcrum. We are still the biggest player…but we are not necessarily an indispensable player.

A story in The New York Times brings this to mind, IBM Now Has More Employees in India Than in the U.S.:

Today, the company employs 130,000 people in India — about one-third of its total work force, and more than in any other country. Their work spans the entire gamut of IBM’s businesses, from managing the computing needs of global giants like AT&T and Shell to performing cutting-edge research in fields like visual search, artificial intelligence and computer vision for self-driving cars. One team is even working with the producers of Sesame Street to teach vocabulary to kindergartners in Atlanta.

This is as much a social story as it is a matter of economics. A new global class is organically developing along the scaffolds provided by international corporations. This class, dare I say caste, is beginning to supersede the importance of the Tribes which Joel Kotkin wrote about in the early 1990s.

And no matter what Thomas Friedman and Francis Fukuyama tried to tell us, I’m not quite sure that the global cosmopolitan culture will reflect the mores and preoccupations of the Western post-materialist elite. To be entirely frank I’m not totally sure that this is a bad thing, either.

We can look at economic projections all we want. But the protean and unpredictable nature of cultural changes is really where the action is going to happen in the next few decades, as Islamic revivalism begins to fade and burn itself out.

Nearly 20% of McDonald’s will have electronic kiosks by the end of 2017

McDonald’s hits all-time high as Wall Street cheers replacement of cashiers with kiosks:

Andrew Charles from Cowen cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017. The technology upgrades, part of what McDonald’s calls “Experience of the Future,” includes digital ordering kiosks that will be offered in 2,500 restaurants by the end of the year and table delivery.

There are 14,500 locations. Right now 500 stores have kiosks.

In a hopeless world hope is better than resignation

There’s really nothing one can say anymore about what Hugo Chavez did to his country, No Food, No Medicine, No Respite: A Starving Boy’s Death in Venezuela. But now in France a left-wing politician is on the rise who praises Chavez, Left-Wing Politician Shakes Up France’s Presidential Race:

That man is Jean-Luc Mélenchon, admirer of Fidel Castro and Hugo Chávez, sworn enemy of NATO and high finance, and candidate of his own “France Unsubjugated” movement, who has been drawing tens of thousands to his rallies, especially the young, as he did here Sunday at Toulouse on the banks of the Garonne River. They came to hear a veteran French politician give them a dousing of old-fashioned Robin Hood-revolutionary rhetoric, with promises to tax the rich hard, give to the poor and start a “citizen revolution.”

There is a serious chance that this will be the next president of the French republic. This man, who has no problems being called a Communist. If there is one political system where the experiment has been done, it is command economy socialism. There may be cases of market failure where the state needs to intervene, but by and large an economy dominated by the state has not done good for the common man.

And yet the reality is what alternatives are the people being given? They are looking Left and looking Right, because they want hope that the future will have some of the promise that the past had. Sober realistic centrists with broadly liberal views only offer them only hard truths.

Truths such as this: Evidence That Robots Are Winning the Race for American Jobs. The far Left anti-capitalist program in economics really doesn’t offer a long run path to prosperity. But capitalism itself only leads to individual and broad-based prosperity as a side effect of market logic. If returns to capital could accrue without labor inputs, then that would be even “better.”