Tuesday, January 26, 2010

Global Poverty

We have posted in the past on the fact that global poverty is falling.  This work helps quantize it rather well.  This also tells us that the ideological debate is long over.  Everyone knows what needs to be done and it looks as if progress is taking place almost everywhere.  At worst we are waiting for a few bad actors to get out of the way.


The big changes took place in south Asia and Latin America and accounted for most change.  In fairness, the next big wave of economic improvement will be visibly in Africa.  The cell phone is empowering the people hugely.


The remaining laggards are mostly in the Islamic Middle East but not the Islamic Far East.  They are determined to proceed slowly it seems.


It really informs us just how massively the world has changed in just the past thirty five years.  1970 was the end of the recovery stroke from the Second World War.  The next decade saw consolidation and minor liberalization.  The last twenty five years saw the adoption of modern methods by both China first and then India and Brazil with many others getting on board along the way.


China has now entered consolidation and India will also begin consolidation in another decade.  That does not mean a lack of growth so much as that everyone who is able to actively participate is.  Their strength will strongly accelerate Africa’s response.


The hard thing to get used to is that the US economy is continuing to fade proportionally and to have less an less impact on the global economy.  When you have spent your entire life checking US numbers as the present best case, you have a habit to break.  China is now our largest car maker having grown fifty percent this past year.  Those percentage jumps are still hard to accept.  Yet the reality is there while we drift.




Global Poverty Progress - Model Income Past, Present and Future

January 22,2010



There is an analysis of the model income of the world from 1970 and 2006. Model income is the level of income that is most common in the world. The graphs show on the left vertical the population with a particular income level and the bottom horizontal shows the income level. In 1970 about 50 million people had $500 of income per year. In 2006, About 100 million had $5000 of income per year.

World poverty is falling. Between 1970 and 2006, the global poverty rate has been cut by nearly three quarters. The percentage of the world population living on less than $1 a day (in PPP-adjusted 2000 dollars) went from 26.8% in 1970 to 5.4% in 2006. 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa.

An Attempt to Project Foreward 40 Years on Model Income

Goldmans Sachs had a forecast of GDP for the top 22 countries until 2050 and this was used to approximate world GDP growth. Using wikipedia estimates of future population the mean average GDP per capita was calculated. This was used to approximate the shift in modal income into the future. 

There are several ways that this method could be off. 

1) The Goldman Sachs estimates could be wrong. In particular China's GDP is projected by some to be 20% of Goldmans estimate and some have it 200% of Goldman Sachs. Disruptive technology such as molecular nanotechnology, super robotics, cheap nuclear fusion or AGI could arrive and alter the economic picture.

2) The World GDP may not track proportionally with the GDP of the top 22.

3) The modal income may not shift exactly in proportion to the mean income.

4) The population projection could be off

The biggest source of error is the first and the degree of possible error shrinks for the factors listed.

Projected Modal Income is on the last line of the table.

No comments: