Because the factors used to determine poverty vary
so much from country to country, world poverty fig-
ures are difficult to calculate. As a result, such interna-
tional organizations as the World Bank and the United
Nations view poverty differently. These organizations
track extreme poverty, the threshold for which is less
than $1 a day. In 2001, more than one billion people
worldwide lived below this level. And according to
World Bank estimates, another 2.7 billion lived on
less than $2 a day.
PRODUCTIVITY
The relationship between the output of goods and ser-
vices and the input of resources.
Productivity is the amount of goods or services that a
person can produce at a given time. It is closely linked
to economic growth, which is defined as an increase in
a nation’s real gross domestic product (GDP)from
one year to the next. A substantial rise in productivity
means the average worker is producing more, a key
factor in spurring economic expansion. Between 1995
and the early 2000s, for example, worker productivity
in the United States increased about 2.5 percent each
year. This increase, along with other economic factors,
helped the nation’s real GDP grow an average of about
3.5 percent during those years.
A number of elements affect productivity, including
available supplies of labor and raw materials, educa-
tion and training, attitudes toward work, and techno-
logical innovations. Computer technology, for instance,
is believed to have played a significant role in bolstering
productivity during the 1990s by allowing workers to
do their jobs more quickly and efficiently. Computer-
operated robot arms (above, right) have greatly
increased production in the automobile industry.
Conversely, a lack of adequate training and fewer
technological innovations were thought to be behind
the meager productivity growth rates of the 1970s and
1980s—when productivity rose at an annual rate of
less than 1 percent.RECESSION
A period of declining economic activity.
In economic terms, a recession takes place when the
gross domestic product (GDP)falls for two quarters,
or six months, in a row. The United States has experi-
enced several of these business-cyclecontractions in
its history. On average, they have lasted about a year.
If a recession persists and economic activity plunges,
it is called a depression.SOCIALISM
An economic system in which the government owns
most of the means of production and distribution.
Like communism,the goal of socialism is to use the
power of government to reduce inequality and meet
people’s needs. Under socialism, however, the govern-
ment usually owns only major industries, such as
coal, steel, and transportation. Other industries are
privately owned but regulated by the government.
Government and individuals, therefore, share economic
decision-making. Also, under socialism, the govern-
ment may provide such services as reasonably priced
health care. The diagram on the next page shows the
level of government involvement in various types of
economic systems.0520251981 1985 1989 1993 1997 2001Percent of populationbelow poverty levelSource: U.S. Bureau of the CensusPoverty in the United States, 1981–2001
ECONOMICSHANDBOOKR71