Tired of obsessing over what happened in the economy yesterday? Let's go
to the other extreme and look at what's been happening in the past 200
years, and broaden the focus from poor, ailing Australia to the world.
In
October, the Organisation for Economic Co-operation and Development
published a report, How Was Life? Global Well-Being Since 1820. It's an
extension of the work of great economic historian Angus Maddison.
His
life work was to piece together estimates of real gross domestic
product for all the big countries and regions of the world between 1820,
which he took to be the end of the (first) industrial revolution, and
2000.
This latest study has extended the GDP figures to 2010, but
also tried to estimate measures of various other socio-economic
indicators of well-being.
It paints a picture of the way economic
development has spread throughout the world, raising living standards,
widening but then narrowing the gap between incomes, fostering
population growth and, when you combine the two, causing great damage to
the globe's natural environment.
The world's population was about
1 billion at the start of the 19th century, but has grown to more than 7
billion today. That growth was both a cause and a consequence of
economic development and the technological advance it promotes.
Advances
in public health, particularly sewerage and clean water, led to falling
death rates, which slowly encouraged people to have fewer children.
Then advances in medical science took over, eventually including more
effective means of contraception.
However, these improvements took
a long time to spread from Western Europe and the "Western Offshoots"
(Maddison's name for the United States, Canada, Australia and New
Zealand) to the rest of the world.
This is the story of the huge
challenge the world economy has faced in the past 200 years: how to
feed, clothe and house this growing population. Overall, we've done it.
Between
1820 and 2010, the world's average real GDP per person increased by a
factor of 10. Multiply that by the sevenfold increase in population and
world real GDP rose by a factor of 70.
The first weakness in this
materialist success story is obvious: this economic growth was spread
very unevenly. In 1820, the richest country, Britain, was at most five
times as wealthy as the poorest countries. By 1950, the richest
countries were more than 30 times as well off.
Only recently has
the spread of industrialisation to China and India, which between them
contain about one-third of the world's population, caused global income
inequality to begin to decline.
Another indicator the study
examines is the movement in the real wages of unskilled labourers. They
rise more or less in line with real GDP, suggesting that some income
does indeed trickle down, even if it has to be helped along by
government interventions such as minimum wages.
During the first
half of the 19th century, unskilled wages were above subsistence level
only in Europe and the Western Offshoots. Now, however, world unskilled
real wages are about eight times what they were then.
They were
always highest in the Western Offshoots, with Western Europe catching up
only since World War II, and they are still low in south-east Asia and
Africa.
Turning to education, in 1820 less than 20 per cent of the
world's population was literate, and most of these were in Europe and
its offshoots. Today, literacy is nearly 100 per cent almost everywhere,
although in south-east Asia, the Middle East and North Africa, it's
about 75 per cent, and in the rest of Africa it's only 64 per cent.
Much
of the increase in literacy has been achieved since the war and
decolonisation. It has been accompanied by rising average years of
education in all parts of the world. Levels of global inequality are
much lower for education than for income.
At the start of the
industrial period, average life expectancy was about 40 years in Europe
and its offshoots, and 25 to 30 in most of the rest of the world. Only
after the late 1890s did life expectancy start to rise significantly.
Now, it's about 80 in the rich countries. Elsewhere, the catch-up
started after the war, with most of the other world regions now up to
about 60 to 70, and only Africa lagging significantly behind.
Income
inequality within particular European and offshoot countries has
followed a U shape, declining between the end of the 19th century and
about 1970, since when it has risen sharply. In other parts of the
world, particularly in China, recent trends have led to greater income
inequality.
However, when we look at global income inequality, it
was driven largely by increasing inequality between countries, as
opposed to within them. It worsened until the 1950s, but has since
stabilised.
The other big weakness in the success story is, of
course, what we have done to the quality of the environment. There has
been a long-term decline in biodiversity worldwide. Emissions of carbon
dioxide have been rising since the industrial revolution, with its shift
to fossil fuels such as coal and oil.
Although almost all the
greenhouse gases that have built up in the atmosphere since the early
19th century are the result of economic activity in the developed
countries, China's huge population and remarkably rapid
industrialisation mean that it has now taken over from the US as the
world's largest emitter.
Something tells me that, from here on,
climate change and other environmental damage will be the main factor
limiting the spread of industrialisation and prosperity to the remaining
less-developed parts of the world.