Policy Research in Macroeconomics

The neoliberal road to autocracy – a response to criticism

In an article “The neoliberal road to autocracy”, published in April 2017 on the website of International Politics and Society, I wrote this:

“Of all these promises, the one that globalisation’s advocates proclaim most strongly is the fall in poverty worldwide. But in fact the decline in absolute poverty is part of a longer trend that has been traced from 1820, according to World Bank data. And much of that fall is not due to open, global markets, but to scientific and especially medical advances. Indeed, the numbers of those living on less than $1 a day fell most rapidly between 1950 and 1970. During the “Keynesian” era, absolute poverty (measured in US$ terms) fell as rapidly as in the neoliberal era.”

This was challenged on twitter today by William Winecoff, Assistant Professor of Political Science at Indiana University Bloomington, who – in an exchange with Steve Randy Waldman – argues that

“In % terms, relative poverty fell faster during the Gilded Age than during Trente Glorieuses, & much faster since.. Pettifor; no evidence offered for claim that poverty fell as fast in Keynesian era as in neoliberal era.”

The “Trente Glorieuses” refers to the period between 1945 and 1975. I had to search for a definition of the Gilded Age and note that it was Mark Twain’s description of the late 19th century decades: “the period (that) was glittering on the surface but corrupt underneath”. This differs from our current age in which both corruption and glitter are very much on the surface…

I humbly accept that I treated an extremely complex and important subject in a single paragraph of my short article – and that I was incorrect in referring to World Bank data as my source.  I had in mind, and should have linked to, the worldindata.org website (produced by Max Roser) which helpfully gives charts and connected data (including from the World Bank) on a range of issues, including poverty and longevity.

However it is also clear that Prof. Winecoff has used Twitter to engage in an ideological argument. He  produced this chart and argued: “Of course there was no poverty reduction at all until global capitalism, so the whole question is kind of weird.” 

Screen Shot 2017-08-18 at 21.07.47.png

In other words, Prof. Winecoff insists on narrowing down reductions in poverty to “global capitalism”. And in so arguing, he makes my point: that it is “kind of weird” to offer only one correlation. For all that the above chart shows is the very strong correlation between the discovery of fossil fuels (coal and then oil) and the conversion of those fuels into ‘growth’ – at first by Britain’s industrial revolution. To put such growth down to “global capitalism” and to ignore the crucial role that fossil fuels played in powering the global economy, is to adopt a narrow and ideological view of history. He no doubt also assumes, optimistically, that there will be no depletion of the resources that made “global capitalism” possible, and that the macroeconomy of the next two hundred years will mirror those of the last two hundred years.   

The “Trente Glorieuses”

In my piece I referred to the numbers of those living on less than $1 dollar a day, the traditional measure of extreme poverty, with data from Bourguignon and Morrison (2002), covering the period 1820 to 1992.  This dataset refers to the share (%) of people living below this line, not the numbers (as I had stated).  That said, the share of those living on less than $1 a day fell most rapidly between 1950 and 1970.  The table below, shows the position for the various “ages”, starting with the first age of globalisation (the Gilded Age) lasting around 40 years each.

In each era, the share of those in extreme poverty declines, but at an increasing rate. You will see that the average annual reduction percentage per year is just below 1% for the 1950 – 1970 period.

Table 1: Percentage of global population living in extreme poverty i.e. less than $1.00 a day (source: https://ourworldindata.org/extreme-poverty/  Bourguignon & Morrison data 2002)

AP response table 1.png

I have then looked at the figures for those living on less than $2 or $1.90 a day, which covers two different source datasets.  The first, long-run set up to 1992, is also from Bourguignon and Morrison (BM) – they use less than $2 a day.  The second is from the World Bank, and runs through to 2015.  This set refers to less than $1.90 a day. This table also follows similar “eras” of around 40 years each.  This shows a similar pattern, in which the share of those in poverty declines, but at a progressively increasing rate.

 It shows, as Mr Winecoff argues, that the current era shows the most rapid decline, going from an average annual reduction of around 0.5 to 0.6% in the 1950-92 period, to around 1% since.  (I should point out that there is a sharp break between the two datasets, since the BM set gives 55% below the $1.90 poverty line for 1980, while the World Bank gives 44% for 1981.  This reminds us that all these data are subject to interpretation, but the overall pattern is less likely to be wrong).

The data certainly do not bear out Mr Winecoff’s claim that “relative poverty fell faster during the Gilded Age [1870-1910] than during Trente Glorieuses [1950 on].” 

Max Roser helpfully breaks out the data from 1981 to 2013 to show the world including China, and the world without China.  This makes a big difference. The annual percentage reduction without China is around 0.5%, therefore almost identical to the Bretton Woods era.  The world including China is shown as just under 1%, i.e. almost identical to the reduction under the Bretton Woods era in the share of those living on less than $1 a day.

Table 2: Percentage of global population living in extreme poverty i.e. less than $2 or $1.90 a day (via https://ourworldindata.org/extreme-poverty/ Bourguignon & Morrison data to 1992, and World Bank data from 1981)

Screen Shot 2017-08-18 at 20.43.49.png

Now, China is of course a key part of the global economy and of the process of ‘globalisation’. But the Chinese government is controlled by the Communist Party, and has not signed up to a fully-fledged neoliberal economic programme. To date it has not deregulated its finance sector, large swathes of the economy are still state-owned; and the Bank of China periodically deploys capital controls to advance policy goals.

Of course, in looking at the data in this article, and noting the welcome improvements in the position of the very poor in a global context, we have not referred to the huge upsurge in inequality within countries that accompanied the age of hyper-financialisation from the mis-1980s.  The Gini index of many countries shot up, in particular in the early 2000s, but has flattened or marginally reduced since, according to statistics (which given the growing share taken by the top 1%, plus corruption and off-shoring, almost certainly under-state the level of real inequality). But that is another story.  (As is the fact that the price of neoliberal hyper-financialisation has largely been borne by the working classes of the “developed world”, e.g. in US and UK, where real wages have remained stagnant or fallen over many years.)


From all the above, I contend that, though perhaps I was less specific than I might have been, in what was not intended as an academic article, my essential points remain valid. The ‘share’ of those living on less than $1 a day, between 1950 and 1970, fell at around the same annual percentage rate as the share of those living on less than $1.90 between 1981 and 2015.  If we exclude post-1980 China (whose trend to autocracy is not based on neoliberal policy), we find that the average annual reduction in the percentage share of the extremely poor has been reasonably constant since about 1950.

The major point I was trying to make in my article, however, was that the real improvements in poverty reduction, as well as in life expectancy and many other fields, do not depend wholly on  economic policies, but also on the role of fossil fuels, and on scientific, medical and other advances, which, other things being equal, should accelerate in impact across time and space. Hence the fact that the rate of improvement is in the form of a curve, not a purely linear effect. These improvements have taken place under different economic systems, and are not a function of neoliberalism or “global markets”.  The  specific ‘achievement’ of neoliberalism, of elevating finance to the role of master not servant of society, has been to undermine confidence in democracy. Populations have turned to autocratic or authoritarian governments for protection from periodic financial crises brought on by unfettered market forces – perceived to be beyond the control of democratically elected governments..

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