The End of Poverty: Economic Possibilities for Our Time

Two undeniable facts frame Sachs’s analysis of China’s economic development: It was almost entirely closed to external trade for 500 years, causing a steady decline in per capita income relative to Europe, and it has seen tremendous growth since 1978. As Sachs puts it, “China has been the world’s most successful economy, growing at an average per capita rate of almost 8 percent per year” in recent decades (155).

The statistics of success are stunning. For example, from 1978 to 2003, the average per-person income has doubled every nine years (a nearly eightfold increase over the period). Further, reduction of extreme poverty has been equally striking, dropping the percentage of people living on less than $1 per day from 64% in 1981 to 17% two decades later.

Unlike Eastern Europe and Russia, China remained a largely agrarian economy in 1980, and not a particularly modernized one at that. Accordingly, the economic issues there were quite different. China was able, for example, to begin its reforms with a tremendous increase in agricultural productivity that permitted radical reforms toward the market. Other features important to Sachs’s differential diagnosis were the lack of significant foreign debt, overseas communities of Chinese investors and models, and a large and accessible coastline for trade.