walter russell mead peter berger lilia shevtsova adam garfinkle andrew a. michta
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Developing World Success Shocks Economists

We’ve grown used to thinking of the developing world as a region beset by insurmountable poverty and strife, but the truth is that sometimes there’s good news too. A new report cited in the New York Times claims that the past few years have in fact been very kind to developing countries. Economists have been surprised to find that, despite the ravages of the global financial crisis, poverty has actually fallen across the developing world and some of the UN’s ambitious Millennium Development Goals have been reached ahead of schedule — and the number of people living in “extreme poverty” has been falling in every world region.

This is very good news, but it merits more study before we draw any broad conclusions. Economic statistics often bear only a hazy relation to the facts on the ground, and a small change in methodology can often change the outlook entirely. Estimating incomes is especially hard in developing countries, where informal economies are responsible for much of a country’s wealth. There are simply no reliable statistics for a country like Congo. Even purchasing power parity (PPP), generally touted as a fair comparison of wealth between the developing and developed worlds, is more of an accounting fiction than an actual measure of things.

But it’s safe to say that the overall trend lines in the developing world are pointing up, and that poverty is falling (little thanks to the antipoverty movement). That is something we should all be happy about; perhaps market capitalism isn’t as evil as its many critics allege.

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  • http://facingzionwards.blogspot.com/ Luke Lea

    Economic statistics are iffy even in the most advanced economies. The nobel economist Oskar Morgenstern once wrote a book about them. We should add statistics to sausage and legislation as things you don’t want to watch being made.

  • Gringo

    This Ted Talk is relevant to the discussion about progress in the underdeveloped world: Hans Rosling shows the best stats you’ve ever seen. Dr. Rosling makes the point that in the last 50 years there has been a vast narrowing of the gap between the developed world and the underdeveloped world for a number of health and demographic parameters: life expectancy, fertility rate, infant mortality, etc. He also points out that Swedish medical students, who should constitute a fairly well-informed group, were unaware of this.

    Another example of the narrowing of the gap has been in telecommunications. The proliferation of the cell phone in the underdeveloped world has leapfrogged the lack of landlines compared to the developed world.

  • teapartydoc

    When reading De Soto’s Mystery of Capital it is easy to see how the above may very well be true as more economies find ways to legitimize and mainstream their underground sectors. Indeed, there is likely to be a huge amount of economic activity taking place off the books that will make growth in these regions look positively explosive when it finds its way into the above-board ledger. This will also explain why, after some initial surges, there will appear to be early plateaus prompting calls for “action” among idiots, I means interventionalists. On the other hand, faith in internationally generated statistics is something I, as a medical professional, see as the rantings of the insane, or the product of calculating liars, take your pick.

  • Jeff77450

    You can’t have infinite growth in a finite world/system. I’m always pleased to read about poverty decreasing in some part of the world but the other shoe will drop, sooner or later. Sooner or later economic-growth will become a zero-sum game. (Cue the snarky Malthus-is-always-proven-wrong remarks).

  • JimGl

    Are they really that much smarter than we are? Seems like only last week or so that we were sure the western world was collapsing and getting our survival gear together and now the Euro’s all solved, our economy is apparently reviving (with them in charge of course)and now the underdeveloped nations are ddoing fine.

    Makes a conservative guy wonder (and I really am conservative, since Goldwater even)

  • MikeP

    Perhaps this is an indicator of the extensive self-destruction seen in the developed world.
    When the costs of simply existing as an ongoing entity become increasing onerous (e.g. social/welfare/medical costs in the developed world, like EU and US) it makes it difficult to export basic goods to developing countries, forcing them to develop their own internal production. Instead of being led passively by dominant economies and allowed to fester, they are forced to become more and more self-sufficient. Mild stressors like this are an outstanding mechanism to foster and encourage economic growth and development.

  • Tarquin the Meek

    Third World countries don’t (yet) have governments strong enough to steal the fruits of economic growth and discourage entrepreneurship.

    In other words, if you live in, say, Ghana and have a great idea to get rich, you do have to contend with bad infrastructure and corruption, but these aren’t the institutionalized Western problems such as having to deal with planning commissioners, regulators, tax and employment law compliance, unions, the diversity cult, etc.

  • Mark

    Economists, like Wall street analysts, are always surprised. Can’t predict the future, even in the short term.

  • Rich K

    Simply adding in India,China and Vietnam in the last decade will raise that average without any other inputs. Its almost like Africa doesn’e exist or need to be counted anymore,hehe.

  • Jon A.

    One of the interesting developments is that countries that were once seen as sources of cheap labor are now themselves outsourcing labor to their less-developed neighbors. One wonders when the circle will close, and what will happen then.

  • Basil Seal

    Two recent books have persuaded me that Africa is the probably about to have its moment in the spotlight. They are Stealth of Nations by Robert Neuwirth and Emerging Africa: How 17 Countries are Leading the Way by Steven Radalet. It seems like the place to go to seek your fortune is no longer Silicon Valley or even Wall Street but Africa.

  • http://www.pacrimjim.com PacRim Jim

    How easy growth is, to those who spend less than they earn.
    (I would quote Ben Franklin here, but I suspect that most Americans have never heard of the man, having been educated by Democrat ideologues.)

  • Nick

    It’s diffusion of technology through globalization is the prime mover here. The Internet and the cell phones alone have enabled some parts of the world to leap frog a century of development. There has also been a gradual improvement in human development indices development – education and health care in particular (again aided by the diffusion of technology)
    In terms of GDP per capita, PPP or otherwise, large parts of the world will probably never catch up with the “rich” parts of the world. Instead of obsessing over GDP and PPP, the focus should be technology assisted quality of life improvement – cheap pharmaceuticals and medical equipment, telemedicine, reverse osmosis water treatment, solar power, GM crops, cheaper mobile devices, new materials for housing to name a few.
    Then of course political stability is the necessary condition.

  • TTT

    The term ‘third world’ is obsolete. What is the ‘second world’?

    People who still use that term are the ones who fail to grasp that China’s US$ GDP has grown 100% in the last 4 years, vs. just 7% total growth for the US and zero for Europe.

  • teapartydoc

    The comment above stating that eventually things will become zero-sum and imputing ignorance to those who state that Malthus is always proved wrong needs to acquire an economic education. A zero-sum situation is one in which no exchange is possible. In a market, things are exchanged, whether they be articles of barter, articles representing goods, such as money, or services. Zero-sum exists only in the imaginations of small minded people. As to Malthus, he has never been proven to be correct in his predictions about either human behavior, or the consequences of the supposed behavior. I direct our ignorant reader to the letters of Nassau Senior regarding this from even the time of Malthus. This is one situation where the most perfect-seeming of theories has an air of inevitable rightness about it, but because it comes up inadequate on an empirical basis and has no practical predictive value sooner or later it has to be abandoned, because persisting in trying to apply bad ideas eventually leads to bad outcomes.

  • Corlyss

    Weren’t western economists responsible for the World Bank/IMF model that has kept the developing world impoverished and subject to tyranny for 40 years?

  • Corlyss

    @TTT

    “The term ‘third world’ is obsolete.”

    Yeah. Most of them don’t measure up to even that low threshold.

  • richard40

    I agree the zero sum comment is pretty lame, but not entirely wrong. It is pretty simple to determine whether an economic situation is zero sum, are you dealing with looting or trade. In a looting situation, like slaves working for a master, serfs for a lord, piracy, fraud, theft, wealth by conquest, wealth by lawsuit, wealth by handout, wealth by crony capitalism, or wealth by government bloat, it is a zero sum game, because you are not dealing with wealth creation, but wealth redistribution. But in any voluntary trade or employment situation, it by definition cant be zero sum, because if the trade does not enhance the wealth of both parties, they wont make the trade.

    Basically Jeff77450 isn’t entirely wrong. A socialist economy can indeed be zero sum, and could lead to a Malthusian catrostrophe, because it is based mainly on wealth redistribution rather than wealth creation. But a capitalist economy, based on voluntary trade and labor, can never be zero sum, since it is based on wealth creation.

    As for Malthus, the only way his prediction comes true is if we no longer have advancing technology, and the resulting productivity gains, which exceed the geometric population growth Malthus pointed to. Malthus also ignored the tendency for people to have less children as their prosperity grew, making it so population growth was no longer geometric growth, but instead fell to replacement level or less. Once again, the only way Malthus predictions could come true is if feudalism, socialism or crony capitalism takes over the world, thereby stopping productivity enhancing innovation and trade, and upping the birth rate again as people get poorer.

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