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No more Poor Countries by 2035

January 23, 2014 Leave a comment

I’ve heard this myth stated about lots of places, but most often about Africa. A quick Web search will turn up dozens of headlines and book titles such as ‘How Rich Countries Got Rich and Why Poor Countries Stay Poor.’

Thankfully these books are not bestsellers, because the basic premise is false. The fact is, incomes and other measures of human welfare are rising almost everywhere, including in Africa.

So why is this myth so deeply ingrained?

I’ll get to Africa in a moment, but first let’s look at the broader trend around the world, going back a half-century. Fifty years ago, the world was divided in three: the United States and our Western allies; the Soviet Union and its allies; and everyone else. I was born in 1955 and grew up learning that the so-called First World was well off or “developed.” Most everyone in the First World went to school, and we lived long lives. We weren’t sure what life was like behind the Iron Curtain, but it sounded like a scary place. Then there was the so-called Third World—basically everyone else. As far as we knew, it was filled with people who were poor, didn’t go to school much, and died young. Worse, they were trapped in poverty, with no hope of moving up.

 

The statistics bear out these impressions. In 1960, almost all of the global economy was in the West. Per capita income in the United States was about $15,000 a year.1 (That’s income per person, so $60,000 a year for a family of four.) Across Asia, Africa, and Latin America, incomes per person were far lower. Brazil: $1,982. China: $928. Botswana: $383. And so on.

Years later, I would see this disparity myself when I traveled. Melinda and I visited Mexico City in 1987 and were surprised by the poverty we witnessed. There was no running water in most homes, so we saw people trekking long distances by bike or on foot to fill up water jugs. It reminded us of scenes we had seen in rural Africa. The guy who ran Microsoft’s Mexico City office would send his kids back to the United States for checkups to make sure the smog wasn’t making them sick.

Today, the city is mind-blowingly different. Its air is as clean as Los Angeles’ (which isn’t great, but certainly an improvement from 1987). There are high-rise buildings, new roads, and modern bridges. There are still slums and pockets of poverty, but by and large when I visit there now I think, “Wow, most people who live here are middle-class. What a miracle.”

Look at the photo of Mexico City from 1986, and compare it to one from 2011.

©Corbis, Owen Franken
^ Mexico City 1986, 2011
©Corbis, Keith Dannemiller

You can see a similar transformation in these before-and-after photos of Nairobi and Shanghai.

©Corbis, Nigel Pavitt
©Getty Images National Geographic

 

^ Nairobi 1969, 2009

 

©Corbis, John Heaton
©Corbis, Dean Conger

Shanghai 1978, 2012

These photos illustrate a powerful story: The global picture of poverty has been completely redrawn in my lifetime. Per-person incomes in Turkey and Chile are where the United States level was in 1960. Malaysia is nearly there, as is Gabon. And that no-man’s-land between rich and poor countries has been filled in by China, India, Brazil, and others. Since 1960, China’s real income per person has gone up eightfold. India’s has quadrupled, Brazil’s has almost quintupled, and the small country of Botswana, with shrewd management of its mineral resources, has seen a thirty-fold increase. There is a class of nations in the middle that barely existed 50 years ago, and it includes more than half of the world’s population.

Here’s another way to see the transition: by counting people instead of countries:

+

 

So the easiest way to respond to the myth that poor countries are doomed to stay poor is to point to one fact: They haven’t stayed poor. Many—though by no means all—of the countries we used to call poor now have thriving economies. And the percentage of very poor people has dropped by more than half since 1990.

That still leaves more than one billion people in extreme poverty, so it’s not time to celebrate. But it is fair to say that the world has changed so much that the terms “developing countries” and “developed countries” have outlived their usefulness.

Any category that lumps China and the Democratic Republic of Congo together confuses more than it clarifies. Some so-called developing countries have come so far that it’s fair to say they have developed. A handful of failed states are hardly developing at all. Most countries are somewhere in the middle. That’s why it’s more instructive to think about countries as low-, middle-, or high-income. (Some experts even divide middle-income into two sub-categories: lower-middle and upper-middle.)

Most poor countries that received aid 20 years ago are doing better than before.
  • Agree
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With that in mind, I’ll turn back to the more specific and pernicious version of this myth: “Sure, the Asian tigers are doing fine, but life in Africa never gets better, and it never will.”

First, don’t let anyone tell you that Africa is worse off today than it was 50 years ago. Income per person has in fact risen in sub-Saharan Africa over that time, and quite a bit in a few countries. After plummeting during the debt crisis of the 1980s, it has climbed by two thirds since 1998, to nearly $2,200 from just over $1,300. Today, more and more countries are turning toward strong sustained development, and more will follow. Seven of the 10 fastest-growing economies of the past half-decade are in Africa.

Africa has also made big strides in health and education. Since 1960, the life span for women in sub-Saharan Africa has gone up from 41 to 57 years, despite the HIV epidemic. Without HIV it would be 61 years. The percentage of children in school has gone from the low 40s to over 75 percent since 1970. Fewer people are hungry, and more people have good nutrition. If getting enough to eat, going to school, and living longer are measures of a good life, then life is definitely getting better there. These improvements are not the end of the story; they’re the foundation for more progress.

A growing number of countries in Africa are building community health systems, which are extremely cost-effective (Accra, Ghana, 2013).

Of course, these regional averages obscure big differences among countries. In Ethiopia, income is only $800 a year per person. In Botswana it’s nearly $12,000. You see this huge variation within countries too: Life in a major urban area like Nairobi looks nothing like life in a rural Kenyan village. You should look skeptically at anyone who treats an entire continent as an undifferentiated mass of poverty and disease.

The bottom line: Poor countries are not doomed to stay poor. Some of the so-called developing nations have already developed. Many more are on their way. The nations that are still finding their way are not trying to do something unprecedented. They have good examples to learn from. 

I am optimistic enough about this that I am willing to make a prediction. By 2035, there will be almost no poor countries left in the world. (I mean by our current definition of poor.)2 Almost all countries will be what we now call lower-middle income or richer. Countries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolution. Their labor forces, buoyed by expanded education, will attract new investments.

A few countries will be held back by war, politics (North Korea, barring a big change there), or geography (landlocked nations in central Africa). And inequality will still be a problem: There will be poor people in every region.

But most of them will live in countries that are self-sufficient. Every nation in South America, Asia, and Central America (with the possible exception of Haiti), and most in coastal Africa, will have joined the ranks of today’s middle-income nations. More than 70 percent of countries will have a higher per-person income than China does today. Nearly 90 percent will have a higher income than India does today.

It will be a remarkable achievement. When I was born, most countries in the world were poor. In the next two decades, desperately poor countries will become the exception rather than the rule. Billions of people will have been lifted out of extreme poverty. The idea that this will happen within my lifetime is simply amazing to me.

Some people will say that helping almost every country develop to middle-income status will not solve all the world’s problems and will even exacerbate some. It is true that we’ll need to develop cheaper, cleaner sources of energy to keep all this growth from making the climate and environment worse. We will also need to solve the problems that come with affluence, like higher rates of diabetes. However, as more people are educated, they will contribute to solving these problems. Bringing the development agenda near to completion will do more to improve human lives than anything else we do.

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Categories: General

Can Africa Innovate its way out of Poverty

December 10, 2013 Leave a comment

It is one of those unproven-but-probably-true facts that developing countries have an easier time getting out of poverty than getting into prosperity. They go from “low-” to “middle-income” level relatively fast, but rarely make it to “high-income” status. [A country is considered middle-income if its average citizen makes between $1,200 and $12,000 a year, give or take a few dollars]. Somehow, they get stuck in a dreaded middle-income “trap”. For them, the typical development story goes like this. They get an initial boost by reforming their agriculture or exploiting their oil and minerals. This releases the labor and the money needed to build industries that can use basic technology to produce cheaply the kind of goods that consumers in rich countries want to buy. Think of Brazil, China, Indonesia, Mexico, Russia, South Africa, or Turkey — chances are that your T-shirt, tool-box, tea-pot, and TV set were manufactured or assembled in a middle-income country like these. But when those countries try to climb up the technological ladder, sell more valuable stuff, be more productive, and create better-paying jobs, things get complicated. Then the game is no longer to sell cheap but to sell new, not just to be efficient but to be innovative.

Economists more or less agree on what a country has to do to be efficient — open the economy, keep inflation low, treat investors fairly, regulate smartly, spend on education, build good infrastructure, and so on. But when it comes to making a country more innovative, the playbook is thin. You may hear words like “matching grants,” “industrial clusters,” “patent protection,” “venture capital,” and “incubators” — all techniques to put creative people together and give them the cash to do new things, or to do old things in better ways. This is where your mind is suddenly filled with images of whiz kids trying cool ideas and becoming zillionaires. How on earth can governments promote that!?

A new book called Mass Flourishing, written by Edmund Phelps, says they can’t. Or, rather, it says that they need cultural change. [Disclaimer: when this book was presented in Washington, D.C., I chaired the event.] Being innovative is in a society’s DNA — or it isn’t. Either we have an appetite for innovation — in his words, we are “modern” — or we don’t — we are “traditionalists.” Either our people are for intrinsic, imaginative, individual self-expression, or they are not. Either they want to live “the good life,” or they don’t. This is not only or mainly about bright scientists in a lab or rich businessmen in a factory. This is also about the poor, the uneducated, and the daring, ordinary folk bent on changing the world for the heck of it — a “mass flourishing” that makes countries more productive and, eventually, richer.

I know what you are thinking. Hold that thought. Mr. Phelps is not your average economist. He won the Nobel Prize — and just about every other prize the profession has to offer. You can’t really get a Ph.D. in Economics without reading his mind-freeing papers. So, how does someone that credible come to the conclusion that innovation is rooted — or not — in culture? Simple: he looks at history. That is, the whole of history. His book is actually a review of the human experience from Jericho in 7,500 BC to the White House today. Every civilization, event, leader, philosopher, technology, economist, war, army, thinker, city, inventor, banker, politician, crook, saint, empire, government, corporation, religion, painting, musician, and even movie director that mattered to history is named and placed in a chronological chain of events. Everything and everyone is in there, aligned, explained, and dimensioned. [NB: the World Bank and the IMF get one mention each.]

And sure enough, when looking at the grand tableau of history, Professor Phelps finds only a few places where “mass flourishing” and real prosperity ever happened: Britain, France, Germany, and the U.S. at various points between about 1820 and 1960. Thereafter, it has all been downhill. Even today, for all the might of the internet, genetics, and satellites, he does not see a culture that nurtures innovation. But, wait, what about Steve Jobs? A one in a billion character. Twitter? Just a trendy way to conform. Silicon Valley? A rat race within the system. Fracking? A desperate technique in the hands of an old industry. Bitcoins? Funny money existed many times before. Mega corporations? They only care about their mutual-fund shareholders. China? More of the same, just cheaper. And so it goes. When compared with history, our inventiveness is in decline. We no longer live in societies where breaking the mold is the norm for most people — the “mass” in “mass flourishing.” We are too dependent of government, community, and tradition. Collectively, we are not modern enough, in the right sense of the word.

All of this is, of course, impossible to prove beyond reasonable doubt. We simply don’t have enough data. But it begs the question: if cultures are so important for the creative spark behind economic development, can they be changed through public policy? Can governments do anything to make their people more innovative? And, if they cannot, are we saying that those middle-income countries who fail to climb the technological ladder are “trapped” forever? These are difficult questions. As it happens, we may be one step closer to answering them.

A team led by Dr. Jason Rentfrow of Cambridge University recently managed to measure the distribution of personality traits across an entire nation — its “non-cognitive skills.” That nation is the U.S., no less. They measured things like people’s openness to new ideas, how conscientious they are in what they do, how they relate to others, or how stable their emotions are. Lo and behold, they found major differences across regions and states within the U.S. — yes, as it turns out, Californians are pretty innovative. A similar effort for developing countries is underway at the World Bank. [Another disclaimer: this writer is a regular commentator in that effort].

Presumably, one day soon we will be able not just to know who is more creative –across countries, regions, generations, backgrounds, and so on — but also what effect, if any, government policies and programs have on our capacity to create. From public education campaigns, to tax breaks for inventors, to cheap credit for “start-ups,” we may discover that our attitudes can be changed. Think about it: thirty years ago, did you know or care much about the environment? It took a long time and lots of communication, but most of us finally came around to the idea that polluting is bad and recycling is good. Our cultural values do change. Maybe the key to the mass innovation needed for material progress is still within us, waiting to be turned.

Source:
Huffingtonpress
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Categories: General