During the 20th century, global average per capita income rose strongly, but with considerable variation among countries. It is clear that the income gap between rich and poor countries has been widening for many decades. The most recent World Economic Outlook studies 42 countries (representing almost 90 percent of world population) for which data are available for the entire 20^th century. It reaches the conclusion that output per capita has risen appreciably but that the distribution of income among countries has become more unequal than at the beginning of the century.

But incomes do not tell the whole story; broader measures of welfare that take account of social conditions show that poorer countries have made considerable progress. For instance, some low-income countries, e.g. Sri Lanka, have quite impressive social indicators. One recent paper finds that if countries are compared using the UN’s Human Development Indicators (HDI), which take education and life expectancy into account, then the picture that emerges is quite different from that suggested by the income data alone.

Indeed the gaps may have narrowed. A striking inference from the study is a contrast between what may be termed an "income gap" and an "HDI gap". The (inflation-adjusted) income levels of today’s poor countries are still well below those of the leading countries in 1870. And the gap in incomes has increased. But judged by their HDIs, today’s poor countries are well ahead of where the leading countries were in 1870. This is largely because medical advances and improved living standards have brought strong increases in life expectancy.

But even if the HDI gap has narrowed in the long-term, far too many people are losing ground. Life expectancy may have increased but the quality of life for many has not improved, with many still in abject poverty. And the spread of AIDS through Africa in the past decade is reducing life expectancy in many countries.

This has brought new urgency to policies specifically designed to alleviate poverty. Countries with a strong growth record, pursuing the right policies, can expect to see a sustained reduction in poverty, since recent evidence suggests that there exists at least a one-to-one correspondence between growth and poverty reduction. And if strongly pro-poor policies—for instance in well-targeted social expenditure—are pursued then there is a better chance that growth will be amplified into more rapid poverty reduction. This is one compelling reason for all economic policy makers, including the IMF, to pay heed more explicitly to the objective of poverty reduction.

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