When most people of think of economic disparity, they usually think in terms of income. Income is correlated with other factors that empower us to survive and thrive. What can we say about per capita income on an historical basis?
Comparing income across eras is difficult. Inflation and other variables make direct comparison impossible. Comparing contemporary currency based economies to barter economies will not work either. 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 past eras. Angus Maddison, one of the foremost authorities on this topic, suggests that I$400 per capita is a subsistence level 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. 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 ancient 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 into being not long after that. However, there was a lag of a few decades between the advent of various technologies and their placement into productive use. Maddison argues for a beginning point of 1820 (as do other economic historians.) Whichever the case, keep in mind that the world population grew sevenfold between 1750 to 2010 as this explosion in per capita income unfolded. In the aggregate, we can see that the growth in worldwide per capita income is astounding. But how broadly spread is it?
Angus Maddison offers us some powerful insights into the recent global economic expansion through 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. It 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. The recent recession has sent most of this temporarily into reverse but emerging nations like China, India, and Brazil have been weathering the recession better than the U. S.
(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 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. (We will see what impact the recession has.) All this during a period when the world population doubled!
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.
- It is frequently noted how violent the Twentieth Century was, yet death through violence as a proportion of the world population was not high for the century. The past thirty years have been some of the most peaceful in recorded history.
- As ranked by Freedom House, the number of people living in free countries rose from 16% to 43% between 1975 and 2005. (See 1975 and 2005)
- Daily caloric intake has shown improvement for the past thirty years. (Chart)
- Child labor rates have been in decline for thirty years. (Chart)
- Literacy has been improving dramatically around the world, even in the poorest nations. (Chart)
The changes we have seen in the past two centuries are unprecedented but they can't be totally attributed to economic change. Economic changes have been accompanied by changes in governance, scientific discovery, improvement in human health ... all of which contribute to, and draw from, each other. But economic productivity has been a major driver of the changes.
The process by which these economic changes came about were often chaotic and destructive. Colonialism and slavery are dark chapters in Western history that preceded and then accompanied many of the changes. But the questions is whether these practices were some how inherent in the emergence of market economies and capitalism. The fact is, colonialism and slavery are ancient practices. They have been practiced by societies that knew nothing of capitalism. The great technological and economic power that capitalism created made Western nations especially proficient at these activities, but were they essential?
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 truly 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 a few percentage points of the overall economy. In fact, colonial possessions, originally established when mercantilist thinking was in vogue (16th to 18th Century), 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 extracted and far more about the 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 at various rates around the world right now.
More directly related to capitalism is what happened to workers as urbanization and industrialization unfolded. That process is happening elsewhere around the world and careful attention needs to be given to these developments by theologians and economists.
I wrote yesterday that one of the standards of shalom was, "Nature itself will be altered into a more peaceful order." While we have seen concern about pollution and environment move higher on the list of developed nations, and there has been significant improvement, other nations are emerging into industrial societies where pollution and environmental destruction are increasing. Possible unforeseen side effects of CO2 have emerged as well. This clearly is tied to the economic decisions we make and needs our reflection as well.
The overall trajectory of life on earth is one rising and expanding prosperity across the planet. It is not a transformation without challenges. In addition to the above concerns, globalization and the impact it has on cultures is something to be considered. Furthermore, we can't simply justify the means by the ends alone. However, what we can see is that the changes of the last two centuries are absolutely unprecedented in the amount of widespread prosperity the world experiences.
If you have about twenty minutes, you may enjoy this presentation by Hans Rosling at TED that graphically illustrates the change that has occurred.
We turn next to asking how we might think both theologically and economically about these issues.