THE SECOND POVERTY ENLIGHTENMENT

The period from about 1950 saw a new trajectory of more rapidly declining incidence of absolute poverty in the world, as judged by the standards of what poverty means in the poorest countries.^[437] From about the same time, a significant shift in thinking was underway, with bearing on antipoverty policy.

Similarly to the First Poverty Enlightenment, the Second was a time of radical ques­tioning and instability, although, unlike the First, it did not come in the wake of rising absolute poverty. There were demands for new freedoms across the world. There was social ferment and civil unrest in the rich countries of the world, and newfound political independence combined with much political and economic upheaval in the poor coun­tries of the world.^[439] Also similarly to the First Poverty Enlightenment, there was new scholarly thought that had great bearing on antipoverty policy.

In philosophy and economics, the 1960s and 1970s saw renewed questioning of the utilitarian paradigm as a basis for public action against poverty and inequality, and in other domains of public policy. Critics of utilitarianism questioned whether policies that entailed welfare losses to the poorest could ever be justified by sufficiently large gains to the richest. A case was made for the ethical prioritization of helping the poorest first, as in Rawls’s (1967, 1971) formulation of the principles of justice, which we return to below. The 1970s saw efforts to generalize the utilitarian schema by embodying an aversion to inequality of utilities, such that the marginal social welfare attached to higher utility fell with the level of utility. In principle, marginal social welfare could then be driven down to virtually zero at a sufficiently high level of utility. Once one made the extra step of allowing the possibility that marginal social welfare could go to zero above some point, prioritizing poverty reduction could be interpreted as the negative of social welfare maximization.^[440] Whether or not one took that extra step, there was clearly common ground in these different emerging schools of thought about the social welfare objectives of public policy.

For many economists, the more contentious step (and it is still contentious) was attaching intrinsic value to “rights” and “freedoms.” Dissatisfaction with the lack of attention in economics to popular concerns about individual rights and freedoms was evident during the Second Poverty Enlightenment. Of course, the freedom to trade freely was often given high value in economics, but this was an instrumental value— the virtue of competitive exchange was a derived one from longstanding Benthamite or Paretean formulations ofpolicy objectives. The scope for ethically contestable policies was evident if one did not put certain rights above all else.^[441] Motivated by such concerns, mainstream thinking about poverty in both scholarly and policy circles was being given to nonutilitarian formulations that put freedom as the central issue, most notably in the writ­ings of Sen (1980,1985,1999).

Many policy issues, including debates on antipoverty policies, call for some form of interpersonal comparison of utility. Yet, in the wake of an influential book by Robbins (1935), the period up to around 1950 saw economists striving to purge welfare econom­ics of interpersonal comparisons—leaving little scope for normative economic analysis of poverty or income distribution more generally.^[442] One turning point in thinking on this issue came with Arrow’s (1951) famous theorem.^[443] In due course, Arrow’s theorem and the work on social choice theory that it stimulated led to a reaffirmation of the need for some form of interpersonal comparability in discussing issues such as antipoverty policy.^[444] Ethical considerations soon returned in full force to policy analysis by economists, although it also came to be understood that not all such analyses required fully compa­rable cardinal utilities (Sen, 1970b). The futility of attempting to infer uniquely compa­rable utilities solely on the basis of demand behavior also came to be accepted (especially following Pollak and Wales, 1979). The 1970s and 1980s saw new efforts to put poverty and inequality measurement on firmer theoretical foundations.^[445] There was an explosion of interest in the measurement of poverty and inequality, both in theory and in practice, starting from around 1970 (Ravallion, 2011).

Other seemingly sacred elements of economics started to be questioned, including whether people were rational, although some of the claims of “irrationality” that emerged from behavioral economics appeared to stem more from limited characteriza­tions of utility functions and/or limited allowances for mistakes (Saint-Paul, 2011).

The 1970s also saw a deeper questioning of the efficiency of competitive market allocations. The term “market failure” (introduced by Bator, 1958) had become widely used, and labor and credit markets’ imperfections in particular came to be seen as key to understanding poverty. The idea that labor markets were competitive, such that wage rates adjusted to remove any unemployment, had been in doubt since the Great Depression. In understanding poverty in rich countries in the 1960s, the idea of dual labor markets became prominent, following in particular Doeringer and Piore (1971). One segment of the labor market has high wages and good benefits while the second has low wages and little in the way of benefits. Bulow and Summers (1986) showed how this could be an equilibrium given the existence of high costs of monitoring work effort in certain activities, which become the high-wage segment in which profit-maximizing firms pay wages above market-clearing levels (following Shapiro and Stiglitz, 1984). Other activities with low monitoring costs form the competitive segment, which is where the working poor are found.

In another strain of the literature of this period, Akerlof (1970) showed how credit (and other) market failures can arise from asymmetric information, such as when lenders are less well-informed about a project than borrowers, thus constraining the flow of credit. This helped explain the efficiency role of institutions and governments in facili­tating better information signals and broader contract choices. For example, the idea of asymmetric information gave a new perspective on why share-cropping existed (Stiglitz, 1974).

The new economics of information held important implications for understanding poverty. In a perfect credit market, even poor parents will be able to borrow for schooling—to be paid back from children’s later earnings. However, if poor parents are more credit constrained than others, then we will see an economic gradient in school­ing, whereby the children of poor parents are less schooled.^[446] This is indeed what we see, almost everywhere. There will be too much child labor and too little schooling in poor families. Thus, poverty will persist across generations. Risk market failures can have sim­ilar implications. Parents will under-invest in their kid’s schooling when they cannot insure against the risk of a low economic return from that schooling.

In due course, this new strain of economic thinking would point to important ways in which inequalities in the initial distribution of wealth could persist and impede overall economic progress; Section 22.8 returns to this issue. The economics also pointed to the scope for promotional antipoverty policies—policies that essentially aimed to com­pensate for the credit and risk market failures, such as by compulsory schooling laws and public support for schooling, especially for children from poor families. Section 22.9 will return to such policies.

22.6.1 Rawls's Principles of Justice

If there is a single philosophical landmark of the Second Poverty Enlightenment, it must be Rawls’s (1971) Theory of Justice. Borrowing from early formulations of social contract theory (back to Hobbes), Rawls proposed that the principles of justice should be the social contract agreed to among equals in a veil of ignorance about where they would find themselves in the real world. (The veil of ignorance was a thought device to ensure that morally irrelevant—inherited or acquired—advantages in the real world did not color judgments about distributive justice.) Rawls argued that two principles would emerge.

This second idea was more radical in its egalitarianism than the French Revolution’s motto. However, it was not the kind of radical egalitarianism that said that equality always trumped efficiency. Indeed, society A, with a great deal of inequality, would be preferred by this moral principle to society B, with no inequality, if the poorest were better off in society A. Thus, the principle amounts to maximizing the advantages of the worst off group and hence became known as “maximin.” This was explicitly not a proposal to maximize the lowest income, as it is sometimes interpreted, but rather to maximize the welfare of the worst off group in society. The “worst off” people were to be identified by what Rawls called their command over “primary goods.” These are all those things needed to ensure that one is free to live the life one wants. This is a broader category than what are often called “basic needs” as it includes social inclusion needs and basic liberties—in short, rights as well as resources.

As Rawls recognized, one will need an index for determining the least advantaged. Possibly because of his evident desire to break all ties with utilitarianism, Rawls avoided using the term “utility function” (or “welfare function”), but this is evidently what he has in mind in his discussions of the “index problem” (especially, Rawls, 1971,pp. 90-95)— namely, a function that expresses the accepted tradeoffs. And Rawls agreed that it is also compelling that those tradeoffs be consistent with individual preferences over primary goods (Rawls, 1971, p. 94). However, he argues that we need not be concerned with the preferences of the nonpoor under the assumption that their primary good vectors are bound to dominate those of the poor.^[447] (This is an empirical question, but a plausible assumption in the absence of data.) Thus, the utility function of the worst off person should be decisive in aggregations across primary goods.^[448]

The Second Poverty Enlightenment had intellectual roots in the First. Rawls saw his difference principle as an interpretation of “fraternity” (as in the French Revolution’s motto): “[T]he idea of not wanting to have greater advantages unless this is to the benefit of others who are less well off.” This was a natural step (though it took a long time) from the aspirations for fraternity in the First Poverty Enlightenment. Utilitarianism was seen to be in conflict with fraternity as it could justify losses to the individual in the name of total utility. There would always be some gain to the richest person that could justify a loss to the poorest. The individual is subordinated to the common good, as measured by the sum of utilities. This Rawls rejected.

Rawls saw his theory as a reinterpretation of Kant. Poor people should have the right to veto any scheme that brings gains to the well-off at their expense. In direct contradiction to the dominant view 200 years earlier, poverty for some was judged to be unacceptable as the means to others’ prosperity. Utilitarianism (by contrast) could not guarantee a satisfactory minimum.^[449] And only if a satisfactory minimum was ensured would the social contract be “stable” in that “the institutions that satisfy it will generate their own support” (Rawls, 1967).

The reasoning here was that, as long as the worst off group was happy with the social arrangement, then the rest (all doing better than the worst off group) would have nothing to complain about (Cohen, 1989b). Of course, this reasoning is questionable in the real world as those not in the poorest stratum could be expected to have a different counter- factual in mind when assessing any policy to that of being the worst off.But recall that the social contract was being formed in the absence of information about real-world posi­tions. Rawls argued that maximin was more likely to emerge from rational choice behind the veil of ignorance.

Rawls’s theory of justice has stimulated much debate. Harsanyi (1975) questioned whether maximin was a more plausible choice for a social contract than maximizing average utility even behind the veil of ignorance. Roemer (1996, Chapter 5) also ques­tioned whether maximin would emerge as the solution. These critiques rested on the assumption that agents behind the veil would maximize expected utility, which depends solely on their own consumption (and leisure). This requires that subjective probabilities can be assigned to all states behind the veil, which Rawls (1971) questioned.^[450] Introduc­ing social preferences could also upset these critiques.

Other critiques of Rawls’s theory emerged. Soon after the publication of Theory of Justice, Nozick (1974) published a libertarian critique. Nozick gave primacy to historical property rights above all else, although it was never clear on ethical grounds why property rights were never to be questioned.^[451]

Sen (1980) took issue with Rawls’s concept of primary goods, arguing that this idea does not adequately reflect the freedoms that people have to pursue their goals, recog­nizing the heterogeneity in the ability of people to transform primary goods into free­doms. This critique led to Sen’s (1985) conceptualization of welfare in terms of primary “capabilities”—“what people are able to be and do (rather than in terms of the means they possess)” (Sen, 2000, p. 74).

As Pogge (1989) argues, one can defend the key aspects of Rawls’s principles ofjustice without accepting his rationale in terms of a social contract. Roemer (2013) argues for a version of maximin but from a different starting point, namely, the desire to equalize opportunities in society. This is premised on the view that poverty reflected exogenous circumstances facing individuals, as well as personal efforts. Severe empirical challenges remain in cleanly separating efforts from circumstances, but the conceptual distinction has bearing on thinking about antipoverty policy (as has long been recognized in policy debates reviewed below). In striving to equalize opportunities, we would not want to bring everyone down to a common but low level of opportunity. Instead, Roemer advo­cates that policy choices stemming from an “equal opportunity ethic” should maximize the welfare assigned to the worst off group, defined by a vector of exogeneous “circumstances”—those things that cannot be traced back to the choices made by the individual.^[452]

Rawls opened the way to new nonutilitarian thinking on the conceptual foundations of antipoverty policy. This marked a return to the themes that emerged in the First Pov­erty Enlightenment, although these found more complete and rigorous formulations in the wake of the Second Poverty Enlightenment. Rather than being blamed solely on the bad behaviors of poor people, poverty came to be seen as stemming in large part from circumstances beyond their control, given circumstances of birth and market and governmental failures. This perspective gave promotional policies a deeper conceptual foundation. It was still granted that there was an important role for individual responsibility—that poverty did sometimes stem from bad choices. But this had ceased to be the dominant model. Careful opportunity-based formulations emerged in the writ­ings of both philosophers (such as Cohen, 1989a and Arneson, 1989) and economists (including Roemer, 1998 and Fleurbaey, 2008).

So far the discussion has focused on the new philosophical and economic thinking of the Second Poverty Enlightenment. No less important to policy making were the new data, the new empirical research on those data, and the more popular writings and social movements of this time. We now turn to these.

22.6.2 The Rediscovery of Poverty in America

The industrialized world saw a boom in social spending in the second half of the twen­tieth century (Lindert, 2004).The new public attention to antipoverty policies is evident in the marked increase in references to “antipoverty,” “poverty alleviation,” and “redistribution” in the Viewer (Ravallion, 2011). References to “redistribution” peaked around 1980. “Redistribution of wealth” was often mentioned in the Great Depression, but use of this term declined during World War II and after until about 1960 when a new upsurge of interest emerged.

The change in popular thinking was especially evident in the United States. In the wake of the civil rights movement (starting around 1955), the rediscovery of poverty in the midst of affluence was stimulated by important social commentaries, including Galbraith’s (1958) The Affluent Society and Harrington’s (1962) The Other America, both bestsellers at the time.^[453] The success of Harrington’s book was clearly a surprise; the first print-run was only 2500 copies, but by the mid-1990s it had sold 1.3 million copies.

Knowledge made this new awareness of poverty possible. The First Poverty Enlight­enment lacked the theories and data that we take for granted today in measuring poverty, reckoning its costs, and informing public action. Nor was there much sign yet of the the­ories and movements that could represent the interests of poor people. That had changed by the 1950s. Authors like Harrington and Galbraith could formulate accessible knowledge-based arguments, including measurements from sample surveys. Many peo­ple were shocked in the early 1960s when the official calculations indicated that almost one-in-five Americans lived in poverty.

Although the type of quantification initiated by Booth and Rowntree 70 years earlier had been crucial, credibly reported qualitative observations in the media and popular books also had a huge influence, including on policy making at the highest levels. Many people were influenced by Harrington’s efforts to “describe the faces behind the statistics” (p. 17). This was research aimed squarely at promoting change through knowl­edge. In an introduction to a 1993 reprint of The Other America, Howe (1993, p. xii) describes its central premise: “... that if only people knew the reality they would respond with indignation, that if people became aware of ‘the invisible poor’ they would act to eliminate this national scandal.”

Galbraith and Harrington described a new “minority poverty” in America. A long period of poverty reduction had meant that the poor were now a minority, albeit a size­able one. Although overall economic growth had allowed many of the “old poor” to move into the new middle class, others were left behind or thrown into poverty from which they could not escape. Widely held views about upward mobility and equality of opportunity in America also came into question based on empirical studies showing how much parental income and schooling affects the life chances of children (Duncan et al., 1972; Bowles and Gintis, 1976).

There were differences between Galbraith and Harrington in their understanding of this new poverty in America. Galbraith identified two reasons why so many of the old poor were unable to participate in the new opportunities. The first was physical or mental disability—what Galbraith called “case poverty”—while the second was that some were trapped in geographic pockets of poverty (his “insular poverty”). Although not rejecting these categories, Harrington argued that this was incomplete in that many of the minority poor had been negatively impacted by the same economic expansion that had benefited so many others. Significant economic change had created their poverty, and they were unable to recover. Here, Harrington is making an important point—that even propoor overall progress comes with losers as well as winners. And his description sounds a lot like the model of wealth dynamics in Section 22.2, whereby large negative shocks create per­sistent poverty, and recovery to get back on track is no small thing.

The political response in the United States included new social programs, notably under the Economic Opportunity Act of 1964, popularly known as the Johnson admin­istration’s War on Poverty (Sundquist, 1968). From early on, this policy effort was framed in nonutilitarian and nonwelfarist terms, especially emphasizing opportunities. The new programs included Head Start, which continues today (and is discussed further in Section 22.9). Data and knowledge to support the War on Poverty was provided by (among other bodies) a new national institute created in 1966, The Institute for Research on Poverty at the University of Wisconsin-Madison. This organization was charged with studying the causes of poverty in the United States and evaluating antipoverty programs.^[454]

The War on Poverty was not, it seems, prompted by a mass shift in American public opinion; indeed, Heclo (1986) refers to US polls indicating that the public was evenly divided on whether welfare spending should increase. It seems that the political response was motivated by evidence and ideas, not attracting voters. Although causality is unclear, it is notable that the US poverty rate fell between the years 1960 and 1980 (Meyer and Sullivan, 2012).^[455]

Similar to the First Poverty Enlightenment, a backlash emerged in due course. An influential counterattack came from Murray’s (1984) Losing Ground. As was the case with the backlash from Malthus and others around the turn of the nineteenth century, con­cerns about adverse incentive effects on behavior returned to loom large, such as claims that welfare benefits to single mothers encouraged families to break up. However, as in the debates on the Old Poor Laws, rather little credible supportive evidence was pre­sented, and evidence to the contrary could be cited (Ellwood and Summers, 1986; Hoynes, 1997). Yet reforms followed in the United States during the 1990s; 30 years after declaring a “War on Poverty,” the American government declared a “War on Welfare.”^[456]

Although (again) the attribution to social policies alone can be questioned, it is nota­ble that the decline in US income poverty rates up to about 1980 stalled, and even reversed after that. Also notable is that this came with a marked shift in the demographic profile of US poverty, favoring the elderly. Indeed, the incidence ofpoverty continued to fall among the elderly in the United States after 1980, albeit at a slower rate. Lindert (2013) attributes this difference to a bias in US social spending in favor of the elderly over the young, in common with other rich countries.

In attempting to explain America’s poverty amidst affluence, the ideas of a “culture of poverty” and an “underclass” that emerged in the 1960s were much debated. Echoing the debates of prior times (reviewed earlier), critics saw these ideas as blaming poor people for their poverty and ignoring more deep-rooted “structural” inequalities (Gans, 1995; O’Connor, 2002). In some versions ofthe “underclass” idea, such as in Wilson’s (1987) The Truly Disadvantaged, a “culture ofpoverty” was seen to stem from structural inequal­ities and so was part of their explanation; echoing Harrington, Wilson emphasized mac­roeconomic factors, including structural changes in the economy, urban structural changes, and aggregate unemployment rates.

Although the debate continues about whether there is space for policy intervention aimed at changing culture,^[457] looking back over 200 years, it is clear that there has been a significant shift in thinking about poverty, from primarily blaming poor people to iden­tifying deeper factors beyond their control, yet amenable to public action. This new view did not deny personal responsibility or the scope for mistakes or seemingly irrational behaviors.^[458] In due course, evidence also emerged that the stresses ofpoverty diminished cognitive ability (Mani et al. 2013), again clouding the issue of cause and effect. But the key point to emerge was that “bad choices” was a dangerously incomplete explanation of poverty. As Shipler (2005, p. 6) put it with reference to America’s working poor: “Each person’s life is the mixed product of bad choices and bad fortunes, of roads not taken and roads cut off by the accident of birth or circumstances.”

22.6.3 Relative and Subjective Poverty

Before the Second Poverty Enlightenment, poverty was mainly seen in absolute terms.^[459] This changed radically in many of the rich countries of the world from around 1960.^[460] The Second Poverty Enlightenment saw a new concept of “relative poverty” in both America and Western Europe, where the idea attained widespread official acceptance. By this view, the definition ofpoverty was contingent on the average standard of living in the society one was talking about and so could be expected to evolve with the aver­age.^[461] Fuchs (1967) appears to have been the first to propose the sharpest version of this idea: that the poverty line should simply be set at 50% of the current median income. For a reason that will soon be clear, I will call these “strongly relative measures.”

Although all the debates in the United States that were reviewed earlier in this section were echoed across the Atlantic, this new idea of strongly relative poverty had more influence in Western Europe than in America, and it carried little or no weight in the developing world. In due course, the most widely used definition of poverty in Western Europe followed Fuchs’s suggestion, with national poverty lines often set at a constant proportion of the current mean (or median). Eurostat (2005) has produced such relative poverty measures across European countries and over time, as has the influential Luxembourg Income Study (LIS), which started in the mid-1980s and uses a poverty line set at 40-60% of the median in its summary statistics at country level. An immediate implication of these measures is that, when all income levels rise by the same proportion, the measure of poverty remains unchanged.

There were antecedents to the idea of relative poverty in the First Poverty Enlight­enment. As Himmelfarb (1984a,b) and others have observed, Adam Smith held a con­ception of poverty that was socially specific. In a famous passage in The Wealth of Nations (1776, Book 5, Chapter 2, Article 4), Smith pointed to the social role of a linen shirt in eighteenth-century Europe.^[462] Smith, it seems, wanted the poverty line to be relevant to its context.

That is what we see across countries. The average poverty line rises from $1.25 a day for the poorest countries to $30 a day in the richest (Ravallion, 2012a). At around $13 per person per day, the official poverty line in the United States is far higher than the poverty lines found in poor countries (though below average for rich countries). However, strongly relative lines go further in that they are changing over time in direct proportion to the mean or median, that is, with an elasticity of unity. It is not clear that Smith had in mind such a definition of poverty. One might argue that the poverty line should be rel­ative between countries but absolute for a given country. The official poverty line in the United States is still an absolute line over time (with fixed real value),^[463] as are almost all poverty lines in developing countries (Ravallion, 2012a). Logically, however, a poverty line that is fixed in real terms cannot remain relevant to prevailing living standards indefinitely in growing economies. Indeed, as Fuchs (1967) points out, the US poverty line in the 1930s was probably substantially lower in real terms than that of the 1960s.^[464] Some gradient over time is clearly called for.

Although the idea of relative poverty goes back to the First Poverty Enlightenment (though largely dormant between the two Enlightenments), explicitly relative measures were a product of the Second Poverty Enlightenment. However, there has been much debate, and it continues today. Some observers have been concerned about unequal treatment of people at similar levels of real income. The advocates of relative poverty lines for rich countries would not presumably have been comfortable in applying the same idea in comparing poverty measures between the majority population and minor­ities within one country; indeed, the Second Poverty Enlightenment started to see a breakdown of past discriminatory practices in this respect. There were clearly (though rarely explicit) moral bounds to relativism. However, the case for relative poverty lines rested on the view that poverty must be seen as absolute in the space of welfare, whether defined in terms of utility or capabilities; as Sen (1983, p. 163) put it: “... an absolute approach in the space of capabilities translates into a relative approach in the space of commodities.”

The more difficult issue was why the poverty line should be strongly relative, that is, proportional to the mean or median. Ifwe consider more closely the two most common arguments made in favor of relativism, neither is compelling in this respect. The first argu­ment concerns social inclusion. A linen shirt in eighteenth-century Europe is an example of what can be termed a “social inclusion need.” The existence of such needs has been the primary justification given for the Western European relative poverty lines. However, the cost of that shirt will be roughly the same for the poorest person as the richest. More gen­erally, the cost of social inclusion cannot be expected to go to zero in the limit, as mean income goes to zero, as implied by strongly relative lines. That would almost certainly understate the costs of social inclusion in poor countries.

The second argument made for the strongly relative measures is that they allowed for relative deprivation—that people care about their income relative to the mean or median of their country of residence.^[465] However, this, too, is not so convincing on closer scrutiny. As long as we think that poverty is absolute in the space of welfare (or capabilities) one can only derive these strongly relative poverty measures if welfare only depends on relative income (own income relative to the median) (Ravallion, 2012a). In other words, one needs to assume that welfare does not depend on own income at given relative income. This must surely be considered a very strong assumption.

None of this denies the welfare-relevance of social inclusion needs or relative dep­rivation. Arguably the case is now stronger than ever for incorporating relativist concerns in poverty measurement. Rather the issue is how best to do that. To allow for a (positive) minimum cost of social inclusion one requires what Ravallion and Chen (2011) dub “weakly relative measures.”^[466] These have the feature that the poverty line will not rise proportionately to the mean but with an elasticity less than unity for all finite mean incomes.^[467] Consistent with the national poverty lines, Ravallion and Chen (2013) pro­pose global poverty measures using a schedule of weakly relative poverty lines that con­tain the absolute lines (typical of poor countries) and relative lines (typical of rich ones) as the limiting cases.

Another strain of the new literature on poverty measurement emphasized the scope for calibrating welfare and poverty measures to subjective questions in surveys. These could take the form of a ladder (from “poor” to “rich” say),^[468] or a more general question on satisfaction with life or happiness. Alternatively, the survey questions asked what income level corresponded to specific subjective welfare levels, following Van Praag (1968). A special case was the “minimum income question” that derived the monetary poverty line as the fixed point in the regression function relating personal subjective min­ima to actual incomes. In other words, the poverty line was drawn such that people with an income below it tended to think their income was inadequate for meeting their needs, while those above the line tended to think their own income was adequate. Alternatively, the poverty line could be identified as the fixed point of adequacy across multiple dimen­sions of welfare, following Pradhan and Ravallion (2000).^[469]

22.6.4 The Rich World's Rediscovery of Global Poverty

A further surge of attention to poverty in the popular and scholarly literature in the late twentieth century stemmed from the Western public’s increasing awareness of the exis­tence of severe and widespread poverty in the developing world. Poverty and inequality in developing countries started to attract substantial mainstream scholarly attention in the West from the late 1960s.^[470] GDP per capita was no longer seen as the sole metric for judging success; for example, in his foreword to an overview by the World Bank of25 years ofdevelopment, the Bank’s first ChiefEconomist, Hollis Chenery (Chenery (1977, p. v)), wrote that.. economic growth is a necessary but not sufficient condition for social pro­gress and that more direct attention should be given to the welfare of the poorest groups.”

For most of the developing world, poverty was “majority poverty”—in marked contrast to Galbraith’s characterization of “minority poverty.” Travel and visual media made it vis­ible to those living in the West though it was already evident to almost everyone in the developing world. And poverty data were playing an important role in the post­Independence policy debates in some poor countries, including India, notably through its National Sample Surveys, which began in 1950.^[471] As was the case with the poverty research by Booth and Rowntree in late nineteenth-century England, around 1990 many people were shocked to learn that there were about one billion people in the world living on less than $1 per day, at purchasing power parity (PPP) (Ravallion et al., 1991; WorldBank, 1990)—an explicitly frugal line anchored to the national poverty lines found amongst the world’s poorest countries.^[472] Since 1990 there has been a massive expansion in survey data collection and availability and refinements to the methodology; the original estimates by Ravallion et al. (1991) used data for 22 countries, with one survey per country, while the latest estimates in Chen and Ravallion (2010) are based on survey data for 125 countries with more than six surveys per country on average. The efforts of country statistics offices— often with support from international agencies such as the UNDP, the World Bank, and the International Comparison Program—to collect household survey data and price data have provided the empirical foundation for domestic and international efforts to fight poverty since the 1980s. Public access to such data was crucial and gradually improved with help from efforts such as the World Bank’s Living Standards Measurement Study (LSMS), which facilitates the collection of household-level survey data in developing countries, and the LIS, which facilitates access to harmonized micro data, though mostly for rich countries.

The World Bank’s (1990) World Development Report: Poverty was influential in devel­opment policy circles, and soon after a “world free of poverty” became the Bank’s over­arching goal. A large body of empirical research on poverty followed in the 1990s, helped by a number of texts that provided useful expositions for practitioners of relevant theory and methods.^[473] The UNDP’s Human Development Reports began in 1990, and they have consistently argued for public action to promote basic health and education in developing countries. The importance to human development of combining poverty reduction with better access to basic services came to be appreciated (Anand and Ravallion, 1993). Sri Lanka’s longstanding emphasis on basic health and education services had been shown to bring a large dividend in longevity and other human development indicators relative to countries at a similar level of average income (Sen, 1981b). The emphasis most East Asian countries have long given to broadly shared investments in human development also came to be recognized in the 1990s as a crucial element to their economic success, even though the role played by some other elements ofthe East Asian policy package remained contentious (Fishlow and Gwin, 1994; Rodrik, 1994; WorldBank, 1993). It is clear that by the late twentieth century there had been a complete reversal in policy thinking about poverty, from the view 200 years earlier that human capital development for poor fam­ilies was a waste of public resources to the view that it is an essential precondition for growth and development.

The period also saw a broadening of the range of policies under consideration, espe­cially in the developing world. There was a new political will for antipoverty policy in many of the newly independent, postcolonial, states, although with mixed success. Pol­icies for promoting economic growth came to be seen and judged by their efficacy in promoting (among other goals) poverty reduction (World Bank, 1990). (The next sec­tion will return to this point.) By the 1990s, it seems that nothing in the policy arena was off-limits in discussing impacts on poverty. This brought a new danger too. Without some degree of separability, allowing instruments to be tied to goals risked policy paral­ysis. But economic analysis and a measure of good sense could often be trusted to guide effective policy action, recognizing the tradeoffs. And the shift in focus from protection to promotion is also evident in the types of policies being tried within the subclass of direct interventions, as we will see in Section 22.9.

By the turn of the twenty-first century, a new optimism about the scope for global pov­erty reduction had emerged. The Millennium Development Goals (MDGs) were ratified in 2000 at the Millennium Assembly, a meeting of world leaders at the United Nations. The first MDG was to halve the developing world’s 1990 “$1 a day” poverty rate by 2015. Sachs (2005b, p. 1) wrote a New York Times bestseller, The End of Poverty, outlining his personal vision of how “[o]ur generation can choose to end that extreme poverty by the year 2025.” Some of this optimism was well founded in subsequent events. Using the $1.25-a-day pov­erty line based on 2005 prices, the first MDG was attained in 2010, a full 5 years ahead ofthe goal (Chen and Ravallion, 2013). Even so, that important achievement leaves over one bil­lion people living in extreme poverty, as judged by the standards of the poorest countries. But continuing the success of the fight against extreme poverty begun in 2000 will lift one billion people out of extreme poverty by 2030 (Ravallion, 2013). Progress in reducing global relative poverty will be slower; today over 2.5 billion people remain poor by standards typical ofthe country they live in (Ravallion and Chen, 2013). However, national poverty elimination targets have emerged in many countries, both rich and poor. In 2010, the European Union adopted its Europe 2020 poverty reduction target to reduce by 25% the numbers of Europeans living below national poverty lines.

Some of the debates of 200 years ago survive today. For example, at the time of this writing, the US Congress was implementing substantial cuts to the Supplementary Nutri­tion Assistance Program (Food Stamps). During the relevant House of Representatives Committee Meeting, a Congressman was quoted as saying that “[w]hile it was a Christian duty to care for the poor and hungry, it was not the government’s duty” (Fifield, 2013). One heard such claims often 200 years ago. The difference today is that the vast majority of people clearly do not agree.

Although there is continuing debate about the causes of poverty and policy prescrip­tions, modern writings are invariably based on the premise that poverty is something that can be greatly reduced and, indeed, eliminated with the right economic and social pol­icies. By this view, poverty is in no small measure a global public responsibility, and gov­ernments and the economy are to be judged (in part at least) by the progress that is made against poverty.

22.7.