We have now seen how prosperity, measured in terms of long life, is spreading throughout most of the planet. Yet when most people of think of disparity between nations, they usually think in terms of levels of income. Income is correlated with other factors that empower us to not only survive but thrive.
The common refrain we hear today is “The rich are getting richer and the poor are getting poorer” and that perspective is present in McLaren's Everything Must Change. N. T. Wright, a theologian whose work I’ve found very helpful and a theologian with high standing among many in the emerging church community, writes:
And now we have the new global evils: rampant, uncaring, and irresponsible materialism and capitalism on the one hand; raging unthinking religious fundamentalism on the other. As one famous book puts it, we have ‘Jihad versus McWorld.” (Whether there is such a thing as caring capitalism, or for that matter thoughtful fundamentalism, isn’t the point at the moment.) …. It doesn’t take a Ph.D in macroeconomics to know that if the rich are getting richer by the minute, and the poor poorer, there is something badly wrong. (Simply Christian, 8)
It also doesn’t take a Ph.D. in macroeconomics to verify such claims either. :) As we attempt to escape "parochialism of the present," what can we say about income on a historic basis?
Comparing income across eras is difficult. Inflation and other variables make direct comparison impossible. Furthermore, comparing contemporary currency based economies to barter economies will not work. To aid in this comparative analysis, economic historians have developed a concept called “purchasing power parity” (PPP). The value of a dollar at a fixed point in time is chosen and the value of income at all other points in time is pegged to the purchasing power of the fixed dollar. For our purposes, we will be using a PPP measure of “1990 International Dollars” (I$). Annual per capita Gross Domestic Product (the total market value of all final goods and services produced within a given country in a given period of time, usually a year) will be used as a proxy for income.
Not all economists agree on how to achieve parity between the present and more distant eras. Angus Maddison, one of the foremost authorities on this topic, suggests that I$400 per capita is a subsistence level of income and was typical of subsistence living prior to the industrial revolution. However, economist Brad Delong, who has done his own analysis, claims:
“A large proportion of our high standard of living today derives not just from our ability to more cheaply and productively manufacture the commodities of 1800, but from our ability to manufacture whole new types of commodities, some of which do a better job of meeting needs that we knew we had back in 1800, and some of which meet needs that were unimagined back in 1800.” (Brad DeLong)
Therefore, DeLong puts historic subsistence living at I$90, but both scholars end up with similar income estimates in recent eras.
Another difference is that while Maddison has tended to focus his analysis on the past two millennia, DeLong has analyzed more distant eras. Either way, when you plot their data over the past few millennia on a chart, you get this:
DeLong reports that it took from 10,000 BCE until 1750 for per capita GDP to double from I$90 to I$178. (I$109 in year 1 CE.) Maddison reports a per capita GDP of I$467 in 1 CE and I$616 in 1700. The following chart shows their estimates between 1600 and 2003:
You can see that the growth accelerates beginning in the early nineteenth century. Many have suggested that the industrial revolution began not long after 1750 and it is true that many inventions came in to being not long after that time. However, there was a lag time of a few decades between the advent of various technologies and the placement of them in productive use. Maddison argues for a beginning point of 1820 (as do other economic historians.)
Maddison offers us some other powerful insights by doing a regional analysis. The popular history of the world is that through colonization, the West European nations enriched themselves by robbing other regions of the world of their resources, thus driving them into destitution. Let’s take a look at the impact of colonization and the industrial revolution on those regions outside Western Europe, West European Offshoots (like USA, Canada, Australia, and New Zealand) and Japan:
Every region of the world has experienced magnitudes of growth since the beginning of the industrial revolution. We see this is particularly true after World War II. The former USSR data is a bit distorted on the graph because there was a significant drop in per capita income during the 1990s after the dissolution of the Soviet Union. However, growth has returned over the past decade. Russia’s per capita GDP has grown nearly 25% in the three years after 2003.
The truly bleak portion of the picture is Africa. Africa was actually ahead of Asia in growth throughout the twentieth century until the 1980s. Inability to establish sound governments and the AIDs epidemic have stagnated Africa’s growth and even reversed it in several sub-Saharan nations. Sub-Saharan Africa is one of the few stagnate or declining regions of the globe but this reversal did not begin until the 1980s.
The fact is that there has been a significant improvement in the absolute per capita income of nations outside the West. And not only are people not getting poorer outside the West, non-Western emerging economies have been growing at a faster rate than Western economies.
(Source: The Economist)
However, as this chart below shows there is a lot of catching up to do:
The realities of world economic growth are more complex than I can nuance in this short post. There are disparities when we disaggregate the data. Still, the percentage of people living on the equivalent of less than I$1 a day has shrunk from 39% in 1970 to less than 20% in 2000. The UN anticipates it will be less than 10% in 2015. All this during a period when the world population doubled!
Nearly half of humanity lives in forty nations that are experiencing 7% annual growth, a growth rate that will double the size of the economy every ten years. A recent article in the Economist reports:
...since the mid-1990s, the incomes of the poorest fifth have risen everywhere except, marginally, in Latin America, where they have been affected by after-shocks of debt crises. In Asia, the real incomes of the poorest fifth rose 4% a year; in Africa, by 2% a year, faster than the rise for other income groups.
The overall picture is one of unprecedented improvement in the lives of billions of people around the world. Whatever we may think of the rate of change, the overall picture is not one of the poor getting poorer under the oppression of Western consumerism.
Finally, a closing note on the impact of colonialism. Economic historian Paul Bairoch highlights two powerful and pervasive myths about colonialism in his book Economics and World History: Myths and Paradoxes. One is held by the right and the other by the left. The one held by the right is that the nations of Western Europe achieved their growth through free trade. He shows convincingly that only after about 1960 did free trade begin to be practiced widely among nations. The other myth, more pertinent to our discussion, is that colonialism was the backbone of European economic growth. On the contrary, Bairoch shows that imports of raw materials into Western economies accounted for a small fraction of total raw materials and colonial markets for finished goods never amounted to but few percentage points of the overall economy. In fact, colonial possessions, originally established when mercantilist thinking was in vogue, may actually have stunted the economic growth of colonial powers during the industrial revolution because of the high “carrying cost” of maintaining colonies.
The real damage done to colonies was less a matter of the resources extraction and far more about suppression of industrial development within the colonies. The good news is you don’t need colonialism to develop a strong economy. The challenge is to nurture industry among the former colonial states and that is happening around the world right now.
So once again when we look at our present circumstances in the context of the flow of history we see an expansion of prosperity working its way throughout the world. But there are a few more indicators we should take note of as well.