Posted on 10/12/2005 6:30:04 PM PDT by dangus
The Bush years have seen an economic boom take place among the world's developing nations, according to my analysis of the CIA world fact book, and www.indexmundi.com, an internet site which keeps historical record of past CIA world fact books.
This article is merely describing a positive trend that appears to be benefiting billions of the world’s poor. I make no inference as to why it is happening, apart from the title tease; I do find it ironic, however, that it is occurring at this time: Among those who most vocally profess concern for the world’s poor, their most hated man in history is steering the world’s largest economy, pursuing exactly the policies which they were so certain would lead to global impoverishment.
Some suppositions may be made, but they can only weakly be tested by observing correlations. If free trade that is fueling this economic boom, it is curious that the boom is slowest in the regions most affected by improved trade. NAFTA and the European Community account for nearly half of the global economy, but, apart from the United States, both experienced growth well below the global average.
In fact, what is most striking about this report is that, apart from the United States, the growth has been constrained to the developing world.
If the world’s economy was divided into nine parts, the United States would have 2 shares; the European Union would have two shares; the rest of the “western economy” would have one share, and the developing world would have four shares. In 2004, the world economy grew at a strong 4.9% clip. Of that, the United States had a healthy, but slightly below average growth rate of 4.4%; the European Union grew at a rate of only 2.4%, mainly from what Defense Secretary called the “New Europe.” Several other major U.S.-trading partners did better in 2004 than they have lately, including Japan, and Mexico. The economy of the rest of the world, home to the vast majority of the world’s population, grew at a rate approaching 7%.
The news is good for mega-nations. In the past five years, India’s economy has grown 78%. China’s has grown 46%. (China has reported annual growth rates higher than India’s, but my figures were obtained by dividing the CIA’s present GDP estimates by previous estimates; the year-to-year claims have been widely regarded as absurd.)
The news is even better for the “New Europe.” Several former Eastern bloc nations, like Ukraine and Lithuania, have had economies which have nearly tripled. Russia’s economy is rebounding sharply after the post-Soviet collapse, up 127%. And despite a moderating pace in 2003, Ireland is now wealthier than Europe’s traditional global powers, like France, and Germany, after her economy grew 73%. Poland’s grew by 71%. Latin America has done well, also. Even Argentina, which lacks the oil reserves of Venezuela or Brazil, had 8.3% annual growth last year.
Do not be misled into believing the fantastic growth rates in many developing nations is due to high population growth. Third world population growth has slowed dramatically. The population of the world’s babies peaked in 1980, and collapsed in the 1990s, due to industrialization, not because of anything done after the UN Population Conference. Current population growth is largely a function of longer lifespans and the residual effects of the prior baby boom, which is causing populations of thirty-somethings to soar even while the population of babies is declining. (The fact that the population of babies is declining while the population of people in child-bearing years is soaring should be very impressive.)
During the last decade, the United States’ population growth rate was about 1.3%, higher than current growth rates in China (0.57%), Mexico (1.18% -- they must all be coming here!), Brazil (0.94%) Argentina (1.02%) and quite comparable to India (1.40%), and Indonesia (1.49%).
Growth rates in 2004 for the world’s largest nations.
China (1.298 billion), 9.1% to $5,500 per capita
India (1.065 billion), 6.2% to $3,100
[European Union (457 million), 2.4% to $26,900]
United States (293 million), 4.4% to $37,800
Indonesia (242 million), 4.9% to $3,400
Brazil (184 million), 5.1% to $7,600
Pakistan (162 million), 6.1% to $2,200
Bangladesh (144 million), 4.9% to $2,000
Russia (143 million), 6.7% to $9,800
Nigeria (129 million), 6.2% to $900
Japan (127 million), 2.9% to $28,000
Growth rates for world’s largest economies.
United States, up 4.4% to $11.750 trillion
[European Union, up 2.4% to $11.650 trillion]
China, up 9.1% to $7.262 trillion
Japan, up 2.9% to $3.750 trillion
India, up 6.2% to $3.319 trillion
Germany, up 1.7% to $2.362 trillion
United Kingdom, up 3.2% to $1.782 trillion
France, up 2.1% to $1.727 trillion
Italy, up 1.3% to $1.609 trillion
Brazil, up 5.1% to $1.408 trillion
Others:
Canada, up 2.4% to $1.023 trillion
Spain, up 2.6% to $938 billion
South Korea, up 4.6% to $925 billion
Iraq, up 52.3% to $54 billion
North Korea, up 1.0% to $40 billion
And, yes, that's right... Iraq's economy has grown over 50% last year. It is now considerably larger than it was before we invaded.
I question how long we can continue to do this.
I don't think your theory explains it. The economy of the developing world is now twice as large as our own. So claiming it is driven by the US means you would add our own economic growth (4.4%) to the double the developing world's (7%x2). That means that if the growth you attribute to outsourcing happened inside the United States, we would have grown at an 18.4% pace. We weren't growing nearly that fast before "outsourcing," so your theory would lead me to thinnk that outsourcing is an economically beautiful thing which can rescue the entire world from poverty. If only I believed your theory.
More likely, the information age has allowed nations to leap past the industrial revolution and straight to the information revolution. True, this is helped by the United States' outsourcing, and also by our little invention, the internet. And also by our helping the price of oil upwards. But the new economies, like India, and the "New Europe" are developing their own markets very quickly. I predict that in 20 years, India will be an ecomonic collossus, while China struggles.
>> If free trade that is fueling this economic boom, it is curious that the boom is slowest in the regions most affected by improved trade. <<
I question how long we can continue to do this.
Maybe another 50 years.
More like it, it's what I'd call "irrepressable trade": Technology.
Actually, we're starting to get rid of the knowledge industries too...
I question how long we can continue to do this.
So long as China wants the status quo. When they tire of giving us credit, the situtaion will change.
And that will come soon enough.
>> I question how long we can continue to do this. Maybe another 50 years. <<
At least until the birth dearth kicks in:
Many nations have cut their child-bearing too rapidly. China, Korea, Japan, and Europe will see their populations implode. As I noted, the population of infants in the world is already declining... by as much as 20%! That means that this generation (X+1) will be 20% smaller than the previous one (X). Populations are still growing because the previous one (X) is still alive, still larger than the one before it (X-1). And Generation X-1 is still alive, and still larger than the one before it, X-2. What happens when X, X-1, and X-2 aren't around anymore? When each generation is smaller than the one that preceded it?
For a little while, modest population growth can still continue, as longevity increases. (smaller generations, but more of them living concurrently). But eventually, the total population will fall. What then?
The long-term results shouldn't be bad at all... we'll have fewer people to share our natural resources if this should happen. If we can continue our rate of producing, we can have more product per person, an excellent thing. We can maintain a steady outout (such as measured by GDP), so long as productivity grows.
But it's the transition that worries me. In our current world, it is ALWAYS smart to invest, even during a recession, as long as you can afford to. You can invest with absolute certainty that eventually the value of your investment will increase, because demand for whatever you invested in must rebound since the number of consumers is constantly growing. Economic recessions create lower employment, but lower employment creates increased productivity; increased productivity creates reduced cost; reduced cost creates profit; profit creates economic growth. In every recession lies the seeds of economic recovery
What if investors cannot rely on that certainty? What if lowered employment creates abandoned means of production? What if reduced cost only creates deflation, which causes loss, not profit? Why invest in new production abilities when your consumers are getting fewer and fewer? Why invest in improved efficiency, when there's no-one to buy the products you make?
A smaller number of consumers does not necessarily spell economic disaster; Economy is the ability to better satisfy demand. But it may create a FISCAL disaster, which in turn MAY create an economic disaster.
But fiscal disasters don't need to create economic disaster. No-one will build more factories if there are no profits to be had; and there will be no profits to be had if there isn't "economic growth," as measured by GDP. But if the present factories succeed in meeting the needs of the consumers, there will be no reason to shut them down, even if their net profit approaches zero.
As long as the factories do not shut down, declining populations can manage the economies of growing populations, until resource distribution reaches an equilibrium. At that point, the economy may still grow so long as people discover new needs.
I've also been following global trends over the past 15 years and the CIA World Fact Book has been my primary source of information.
It bears point out the CIA World FactBook GDP and GDP/Capita figures are based on PPP instead of international exchanges. Thus, despite China's PPP GDP amounts to around $7.5 trillion; it's actual GDP is perhaps a tenth that. What this means is goods (and the correlating wages) are a lot cheaper in China and money is flipped over more times over there, but if they were to attempt to purchase things on the international market; their $7.5 trillion PPP won't be able to acquire $7.5 trillion worth of materials, perhaps only a tenth of that amount.
Still, China's expansion and rapid militarization is cause for concern until they transform into a liberal democracy.
Good point. But since the focus of the article was on the improving lives of the people in the developing world, Purchasing Power is the appropriate measure. If Chinese pay an exchange equivalent of 11 cents in a grocery store for a box of pasta, or $3 for a CD player; what matters is that the Chinese guy got fed and got some music, not that a box of pasta costs $1.09 a box here, or $30 for a cheapie CD player.
best guess why the improvement:
BECAUSE PEACE AND CONFIDENCE ARE GOOD FOR THE ECONOMY.
That's right: The War On Terror is good for the eocnomy of deveoping democracies. (India, Poland, Ukraine, Indonesia, Philippines). And, less joyfully, has been a boon to some oil-producing nations, too (Venezuela, Iran).
By the way, growth rates are real, not PPP. But then again, when I cite five-year growth rates, I am comparing PPP GDP. Only the annual growth rates, like in the charts, are not derived.
The "knowledge industries" are moving to India apace.
I question how long we can continue to do this.
Until labor and transport costs make it more efficient to produce locally.
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