China's Pro-Market Reforms and Reduction in Poverty

It has become an article of faith among many economists that China’s pro-market reforms of the 1980s and 1990s ushered in a sustained reduction in poverty. This narrative relies on figures from the World Bank, showing that over the past 40 years the number of people in China living in “extreme poverty” (less than US$1.90 per day) fell by almost 800 million. That’s a fair chunk of the world population, which is currently about eight billion.

The World Bank’s calculations suggest China’s rate of extreme poverty has plummeted from one of the highest in the world – 88% – in 1981, to virtually zero today, with the fastest gains in the 1980s and 1990s during the capitalist reforms of Chairman Deng Xiaoping. It depends how you define purchasing power The World Bank calculations use purchasing power parity, which is a standard way of comparing general purchasing power over time and between countries. But this approach does not tell us about people’s purchasing power over the specific goods and services that are necessary for surviva

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