The Expanding Economic Pie & Grinding Poverty

A review of data from the past 200 years indicates not only a huge increase in the world's population, but an even more significant increase in real incomes. This is illustrated using the data series developed by the late Angus Maddison of the Organization for Economic Cooperation and Development that included historic estimates of economic performance by geographical area (nations and other reported geographies) from 1500 to 2000. The Maddison data is expressed in international dollars adjusted for purchasing power, so that the impact of inflation and differing prices is factored out, to the extent feasible. Caution is required, however, because there are difficulties with longer term purchasing power and inflation time-series, not least because technological advances make it nearly impossible to accurately account for the changed standard of living. For example, there were no telephones of any sort in 1820, yet today, low-income Nigeria has 143 million mobile phones, nearly 90 for every 100 persons.

I extended the Maddison data for another 10 years, to 2010, using the database of the International Monetary Fund (IMF) and converted all data to 2010 inflation adjusted international dollars.

Fast Population Growth and Faster Economic Growth

Between 1820 and 2010, the world population grew from 1.0 billion to 6.8 billion as indicated in the databases. This 550% increase, however, pales by comparison to the increase in the world real gross domestic product (GDP), which grew nearly 13 times as fast as the population (Figure 1). The relationship between rising urbanization and increasing wealth is evident in comparing Figure 1 to Figure 2 from the recent feature What is A Half-Urban World. Between 1820 and 1900, the real economic growth rate was 1.5 times of that of population growth. This improved to 2.2 times between 1900 and 1950. In each of these succeeding decades, the economic growth rate relative to population growth was even greater, except in the decade of the 1980s when economic growth was 1.9 times population growth. Despite the economic difficulties, particularly in Japan and the West, 2000 to 2010 showed the largest rate of economic growth compared to population growth, at 3.0.

GDP Per Capita (Purchasing Power)

The real GDP per capita data strongly indicates the expanding economic pie. In 1820, the world GDP per capita was approximately $1100, expressed in 2010$, adjusted for purchasing power. By 1900, this had nearly doubled to $2100. The largest gains came after 1950 when the GDP per capita reached $3500. Since that time the GDP per capita has risen to $12,200 (Figure 2).

A History of Poverty

Even so, the history of economics is a history of poverty. University of Rochester (NY) Economist stated the case this way:

Modern humans first emerged about 100,000 years ago. For the next 99,800 years or so, nothing happened. Well, not quite nothing. There were wars, political intrigue, the invention of agriculture – but none of that stuff had much effect on the quality of people’s lives. Almost everyone lived on the modern equivalent of $400 to $600 a year, just above the subsistence level.

The $1100 GDP per capita from 1820 would rank among the poorest areas in the world today. The world's richest area at that time was the Netherlands, which had a GDP per capita of $3100. This is more than Nigeria today, with its 143 million mobile phones and nearly as high as the GDP per capita of India.

Distribution of Income

Today, the large majority of the world's population lives in lower income areas.

• 16% of the population lives in areas with a GDP per capita of less than $2500. The largest of these are Bangladesh and Tanzania.
• 29% of the world's population is in areas with a GDP per capita of $2500 to $5000. The largest are India, Indonesia, Pakistan, Bangladesh, Nigeria and the Philippines.
• 26% live in low middle income areas with a GDP per capita of between $5000 and $10,000, such as China and Ukraine.
• 14% live higher middle income areas (a per capita GDP of $10,000 to $20,000). The largest such areas are Brazil, Mexico and Russia.
• 10% of the population lives in relatively well off areas (a GDP per capita of $20,000 to $40,000) including France, the United Kingdom, Korea and Japan.
• Only 5% of the world's population enjoys a GDP per capita exceeding $40,000, the largest of which are the United States, Germany, Canada and Australia. (Figure 3).

The Richest Areas

The very richest countries in the world on a per capita basis are generally small. Oil rich Qatar has the highest GDP per capita at nearly $100,000 annually. Europe's Luxemburg is the second most affluent, followed by the city-state of Singapore. Resource rich Brunei-Darassalam is the world's fifth richest area. The United States ranks sixth and is by far the largest of the richest areas. More than 55% of the world's population in areas with more than $40,000 GDP per capita lives in the United States. The balance of the richest 10 is completed by the United Arab Emirates, another oil rich Gulf state, the world's other large city-state, Hong Kong, as well as the Netherlands and Switzerland in Europe (Figure 4).

Generally, IMF data indicates that the largest high-income world economies have experienced real GDP per capita growth of from 40% to 80% since 1980. The UK has grown the most among the examples, while Italy has grown the least (Figure 5). Germany's lower growth rate is, at least in part, due to the complexity of combining virtually bankrupt East Germany with far healthier West Germany in the early 1990s. The US has been hobbled by its housing bubble-induced economic bust, which hurt other economies as well. Canada's recent stronger growth could presage an improved ranking in the years to come. Other areas, such Italy, Spain, Japan and France could experience slower growth in the future, due to the seemingly intractable fiscal difficulties and, in some cases, demographic stagnation or even decline.

Who’s Growing Rich Fastest?

A number of countries have experienced spectacular growth in their GDP per capita over the past three decades, according to the IMF data (Figure 6). Oil rich Equatorial Guinea experienced the greatest growth, reaching a GDP per capita more than 16 times the 1980s figure. Equatorial Guinea is small, with a population of only 700,000 people (similar to the size of metropolitan areas such as Colorado Springs, Colorado, Hamilton, Ontario or Florence, Italy).

The broadest and most significant progress has been made by China. According to the IMF data, in 1980 China had the second lowest GDP per capita of any reporting area, ranking above only Mozambique. This was approximately the same time that the economic reforms began, under the leadership of Deng Xiaoping. By 2010, China's GDP per capita had reached more than 12 times the 1980 figure. China's gross GDP-PPP grew more than that of any other area. Once on the low end of the poverty league table China now has entered the middle rank in terms of wealth.

Other areas have also done well, especially in Asia. The largest of these include Korea, Vietnam, Taiwan, Thailand and Singapore. One African area is included among the fastest growing per capita economies, Botswana (Figure 6). Each of these areas grew from four to five times in GDP per capita from 1980.

The Poorest Areas

All 10 of the world's poorest areas are located in Africa. The poorest is the Democratic Republic of the Congo, with a GDP per capita of less than $400. Torn by civil war its GDP per capita would rank it among the poorest areas even in the 1820 listing. The four next poorest areas have also faced severe domestic disruptions, Liberia, Zimbabwe, Burundi and Eritrea (Figure 7).

Some Areas Getting Poorer

The severity of the world's poverty is indicated by the fact that 26 of the 138 areas for which there is data experienced declines in their GDPs per capita from 1980. The population of these declining areas was about 300 million, or approximately four percent of the world’s total. The Democratic Republic of the Congo, the world's poorest area, experienced a 60% decline in real GDP per capita, which was the largest decline.

Conclusion

While the economic pie has expanded much faster than its population, there is still plenty of poverty in the world. It is no surprise that the developing world focused the attention of the recent 2012 Rio +20 conference on poverty, with a declaration that eradicating poverty is the greatest global challenge facing the world today.

Photo: Ojota, Lagos, Nigeria (by Seun Oyeniran)

Reposted with permission. Originally posted on http://www.newgeography.com by Wendell Cox 11/29/2012

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

Global Gender Gap Index

The Global Gender Gap Report 2012 benchmarks national gender gaps of 135 countries on economic, political, education- and health-based criteria. The Global Gender Gap Index was developed in 2006, partially to address the need for a consistent and comprehensive measure of gender equality that can track a country’s progress over time. The index points to potential role models by revealing those countries that – within their region or income group – are leaders in dividing resources more equitably between women and men than other countries, regardless of the overall level of resources available.

The Global Gender Gap Report 2012 emphasizes persisting gender gap divides across and within regions. Based on the seven years of data available for the 111 countries that have been part of the report since its inception, it finds that the majority of countries covered have made slow progress on closing gender gaps.

This year’s findings show that Iceland tops the overall rankings in The Global Gender Gap Index for the fourth consecutive year. Finland ranks in second position, overtaking Norway (third). Sweden remains in fourth position. Northern European countries dominate the top 10 with Ireland in the fifth position, Denmark (seventh) and Switzerland (10th). New Zealand (sixth), Philippines (eighth) and Nicaragua (ninth) complete the top 10.

The index continues to track the strong correlation between a country’s gender gap and its national competitiveness. Because women account for one-half of a country’s potential talent base, a nation’s competitiveness in the long term depends significantly on whether and how it educates and utilizes its women. 

Download the full Global Gender Gap Report (PDF) here or Country Gender Gap Highlights here

The full web page to this blogpost can also be found here

My Country, My Heart and My Prayers on My Birthday

Seun Oyeniran

Its been about 11months since I wrote on this blog and its about the same time since I deactivated my Facebook page. Facebook is extremely useful to me so I miss being there a lot and I miss writing on my blog too. However the 11months break was useful because it provided me ample opportunity to look into various other issue beckoning for my attention especially since I returned to Nigeria after my MSc degree in UK (so I didn't regret the social media break at all and I may go on a few more breaks before coming on back finally soon ;). Today is my birthday and I'm reviewing and evaluating how I've spent my 28years in life. Reviewing, yes, but thinking more - becoming more less asleep - and out of my very busy schedule I decide to make some time to scribble out these few lines; first to connect back with all of you my friends; to tell you that I'm well; and to share my heart on various issues that remain pressing since I returned back to my dear country.

Among the thousand and one issues ravaging my mind right now, my dear country, Nigeria, happens to be top on the list. Not only because I am a Nigerian, but because from my little travel across continents, I have come to see and appreciate how beautiful Nigeria is. Through these same trips, my heart has also been remarkably enlightened by the challenges we continue to face as a Nation. This is the core of my burden. I increasingly find it hard to understand how Nigeria's issues have become so terrible. I keep wondering how a country termed by a WIN-Gallup poll as the second most religious country in the World with 93% of the people tagging themselves as believers (second to Ghana at 96%) continue to rank high in corruption and her people continue to witnesses increasing poverty levels like that which has never been seen before. 

Source: http://www.transparency.org/country#NGA

My heart is worried that while many countries transformed the lots of their people, lifting them out of penury through the discovery of oil, this same process has resulted in worse condition for our people. Gelb (1988) in Ismail (2010) IMF working paper WP/10/103 finds that Ecuador, Iran, Nigeria and Trinidad and Tobago went through the Dutch disease, mainly due to a decline in Agriculture, over the first and second oil booms of 1972–81, while Algeria, Indonesia and Venezuela went through a strengthening of their non-oil tradables. Oil will continue to be a problem for Nigeria because the volatility of the supply-price nexus of the commodity in the international market that will continue to result in volatility and instability as Nigeria's economic indices and revenue generation is strongly connected to the export of oil. The need to focus not only on agriculture (through the agricultural transformation agenda), but also on other sectors such as manufacturing and services is now more important in a modern economy where every country has to maximize its comparative advantage in our globalizing world. Even the reforms that worked for countries like China has hit gridlock in Nigeria; our corrupt and ignorant nature being one of the major hinderances. While the Investment Climate and Enterprise Survey carried out by World Bank puts Nigeria in an in-between condition of hope with many underlying issues to be addressed and several reports testifying Nigeria's growth (in fact IMF 2011 Regional Annex estimates 7.4% growth for 2010), yet youth unemployment and lack of jobs sinks down this hope as it public and private sectors are greeted by a demographic progression that continues to elude the knowledge frame of those in positions of authority. Lack of key knowledge of Nigeria's demographic dynamics continue to manifest itself across various policy making institutions across the nation. For example, it has already been established that the causes of instability in certain states such as Nigeria is youth 'bulginess'. A British Council Next Generation report captures this quiet clearly pointing out the downside of not reaping the demographic dividend. The World Bank, in its "Doing Business Survey" that aims specifically to measure and track changes in regulations affecting 11 areas in the life cycle of a business identified that for starting a business, Nigeria ranked 119 (out of 185); dealing with construction permits, 88; getting electricity, 178; registering property, 182; getting credit, 23; protecting investor, 70; paying taxes, 155; trading across borders, 154; enforcing contracts, 98; and resolving insolvency, 105. Access to finance and infrastructure, especially power continue to cripple young, fledgling businesses and entrepreneurial capacities of Nigerian people.

The ongoing issues in the Niger Delta are equally complex. The problems are clearly too big to handle by one company alone, or even by a consortium of companies. The environmental issues should be addressed  with structured programmes implemented to eliminate the major gas flaring that has been part of the history of oil development in the delta region. Among other things, the success of the massive investments in gas liquefaction projects - the largest investments in Africa needs to be sustained. But the problems of revenue allocation and distribution, questions of law and order, the construction of infrastructure and the tensions between different ethnic groups in relation to electoral and local government areas need proper regional planning and local and national government intervention; probably through the NDDC.

How much can I say about the many burning issues in my heart as I continue to watch with utter dismay as our country continue to witness more bomb blasts. A situation that seems like an insurgency in 2009 in the north-eastern city of Maiduguri with rudimentary bombs and drive-by shootings; men on motorbikes targeted police and clergy has rapidly evolved, with suicide-bombing hitting among other notable places, the UN headquarters in Abuja, the capital, last August, killing 25 people. Suicide-bombings, barely known in west Africa until last year, are now the most potent weapon in many militia's arsenal. Same time last year November 2011 more than 100 people were killed in such bombings as well as in gun attacks. The effect of the insecurity in the country is becoming increasingly pronounced so much so that, even Transcorp Hilton, where in recent years getting a bed there has often been difficult at almost any price because doing business in Africa's most populous country was impossible without setting foot in one of the seven restaurants and bars nestled away in the hotel's two decade-old, concrete hull is witnessing major occupancy decline as as foreign companies have taken their business to Lagos, the commercial capital, and kidnap-prone Port Harcourt in the south. International airlines, who were long among the Hilton's best clients, no longer dare to keep crews in Abuja; British Airways, Lufthansa and Air France now either fly there and back with two crews on board, or have their flight attendants stay in Lagos or Accra, Ghana's capital.

But I know deep within me that a change will come, time will turn for Nigeria. Our MIFFS (middle-income fragile or failed states) profile will change. We will continue to keep close watch with how the $75 per barrel benchmarks feeds into the entire budgetary and allocation system. We will keep our contacts on how the Sovereign Wealth Fund (SWF) launched in May this year will impact the lives of all Nigerians. We will progressively monitor the SURE-P policy and match their comments and reports with impacts on education and infrastructure and the lives of ordinary people. We will keep up with evidence based policy initiatives through our research and work very hard to see to their appropriate implementation. We will keep our gaze on the demographic transition our country is witnessing and keep hoping it tilts to produce dividends rather than disaster. We need to move away from ethnic lines and connect with one another in sincere honest ways. Development indicators must start to favour us as a nation.  And should I break this down further by adding that we need to develop a learning culture, rather than a copying culture. Our growth will remain unsustainable as long as we fail to understand what the key ingredients of nation building is all about. The patience to learn processes and procedures and the intent to follow due process should improve. We need to develop the capacity to be slow to talk but more to listen and learn. We need to check how things are been done and develop the capacity to learn. Someone recently retorted: "what do we have to learn about the hurricane Sandy and the elections both taking place in the US?" A question I think requires a urgent response. Economic theories and principle may work elsewhere but we need to understand our Nigerian context and develop strategies to implement growth initiatives that will bring about emancipation for all Nigerian people.

The family units in Nigeria must continue to work harder because it still remains the fundamental institution where values are imparted. And I strongly believe this unit is still the only tool for transforming our nation as more empirical evidences are emerging that shows us that we can tackle both the economic outcomes of the young people as well as reduce poverty tremendously if we continue to sustain good family life (Aleshina and Giuliano, 2010; Krishnan, 1996; Lam and Schoeni, 1993). The Economist recently reported that Quamrul Ashraf, David Weil and Joshua Wilde estimated that a decrease in Nigeria’s fertility rate by one child per woman would boost GDP per head by 13% over 20 years, with almost all the gains coming from the “dependency effect” of there being fewer children to look after.

I see Hope in these Primary School Students
I'm Currently working on a Library Project for them

We must continue to show indomitable courage and resilience despite our many challenges.  We must continue to seek knowledge. Our reading culture also needs to improve. I particularly recommend these two books I just finished reading: Son of Hamas and Confession of an Economic Hitman; which both shed light on fundamental issues affecting our nation but with deep spiritual inclination. Our Church model needs an overhaul, we are doing more gathering and less of shinning as our master commands us. Yes Nigeria is the second most religious, but its more than religion. We must shine; in the dark places, not in the already 'lighted' places. We must pray, not for our needs alone, but for a healing for our nation. As I continue to discuss with top academics and scholars about our many issues in Nigeria, trying to gather points of solution and to chart a way forward for our country, many of them propose bloodshed and killings. But I refuse to agree with them. I have come today to re-affirm that prayers can work and it will work for Nigeria. Its a call to prayer and it starts with me, you and everyone of us.  Its a sober time for us all that requires our heart to be open to our creator.

I can't end without saying how grateful I am to God the Father, Jesus his son and the Holy Spirit my teacher, comforter and closest companion. And to my very own, Channon, I love you so very much. Very many thanks to family,  friends and associates and networks. I'm now even more convinced that God has a lot to do with us than ever before. Lets keep on with the master.

References

AfDB ,  OECD ,  UNDP   and UNECA   (2012) : "African Economic Outlook 2012: Promoting Youth Employment",  African Economic Outlook.

Where will the world’s poor live? Global poverty projections for 2020 and 2030 (http://www.ids.ac.uk/files/dmfile/InFocus26-Final2.pdf) ". Institute of Development Studies "Where do the world’s poor live? A new update (http://www.ids.ac.uk/idspublication/where-do-the-world-s-poor-live-a-new-update) ". By Andrew Sumner. Institute of Development Studies

"Horizon 2025 (http://www.odi.org.uk/resources/docs/7723.pdf) ". By Homi Kharas and Andrew Rogerson. Overseas Development Institute 


British Council and Harvard School of Public Health Nigeria The Next Generation Report


Alesina A. and P. Giuliano (2010), The power of the family, J Econ Growth 15:93–125

Krishnan, Pramila   (1996) : "Family Background, Education and Employment in Urban Ethiopia",  Oxford Bulletin of Economics and Statistics, 58, 167-183.

Lam, D. and Schoeni, R. F. (1993). 'Effects of Family Background on Earnings and Returns to Schooling: Evidence from Brazil', Journal of Political Economy, Vol. 101, No. 4, pp. 711-37.

WIN-Gallup International, Global Index Of Religiosity And Atheism (2012), available <http://www.wingia.com/web/files/news/14/file/14.pdf>, accessed 6/11/2012

Alan Gelb and associates, Oil Windfalls: Blessing or Curse? (Oxford University Press, for the World Bank, New York, etc.. 1988) pp. 357.

Bello, Steven Tairu   (2005) : "A Comparative Analysis of Chinese-Nigerian Economic Reforms and Development Experiences",  China and World Economy, 13, 114-121.

Downie, R., and Cooke J.G., (2011),’ Assessing Risk and Stability in Sub-Saharan Africa’, Centre for Strategic and International Studies, Africa Programme (June)

World Development Report 2013