Economic historian Angus Maddison offers us some other powerful insights in to the recent global economic expansion by doing some regional analysis. The popular history of the world is that through colonization, the West European nations enriched themselves by robbing other regions of the world of their resources, thus driving them into destitution. Let’s take a look at the impact of colonization and the industrial revolution on those regions outside Western Europe, West European Offshoots (like USA, Canada, Australia, and New Zealand) and Japan:
Every region of the world has experienced magnitudes of growth since the beginning of the industrial revolution. We see this is particularly true after World War II. The former USSR data is a bit distorted on the graph because there was a significant drop in per capita income during the 1990s after the dissolution of the Soviet Union. However, growth has returned over the past decade. Russia’s per capita GDP has grown nearly 25% in the three years after 2003.
The truly bleak portion of the picture is Africa. Africa was actually ahead of Asia in growth throughout the twentieth century until the 1980s. Inability to establish sound governments and the AIDS epidemic have stagnated Africa’s growth and even reversed it in several sub-Saharan nations. Sub-Saharan Africa is one of the few stagnate or declining regions of the globe but this reversal did not begin until the 1980s.
The fact is that there has been a significant improvement in the absolute per capita income of nations outside the West. And not only are people not getting poorer outside the West, non-Western emerging economies have been growing at a faster rate than Western economies.
(Source: The Economist)
However, as this chart below shows there is a lot of catching up to do:
The realities of world economic growth are more complex than I can nuance in this short post. There are disparities when we disaggregate the data. Still, the percentage of people living on the equivalent of less than I$1 a day has shrunk from 39% in 1970 to less than 20% in 2000. The UN anticipates it will be less than 10% in 2015. All this during a period when the world population doubled!
Nearly half of humanity lives in forty nations that are experiencing 7% annual growth, a growth rate that will double the size of the economy every ten years. A recent article in the Economist reports:
...since the mid-1990s, the incomes of the poorest fifth have risen everywhere except, marginally, in Latin America, where they have been affected by after-shocks of debt crises. In Asia, the real incomes of the poorest fifth rose 4% a year; in Africa, by 2% a year, faster than the rise for other income groups.
A recent Reuters story indicates that while Brazil's overall annual economic growth for the first decade of the 21st Century has been at 5%, while the annual economic growth rate for Brazil's bottom 10% of the populaton has been 9%.
The overall picture is one of unprecedented improvement in the lives of billions of people around the world. Whatever we may think of the rate of change, the overall picture is not one of the poor getting poorer under the oppression of Western consumerism.
Finally, a closing note on the impact of colonialism. Economic historian Paul Bairoch highlights two powerful and pervasive myths about colonialism in his book Economics and World History: Myths and Paradoxes. One is held by the right and the other by the left. The one held by the right is that the nations of Western Europe achieved their growth through free trade. He shows convincingly that only after about 1960 did free trade begin to be practiced widely among nations. The other myth, more pertinent to our discussion, is that colonialism was the backbone of European economic growth. On the contrary, Bairoch shows that imports of raw materials into Western economies accounted for a small fraction of total raw materials and colonial markets for finished goods never amounted to but a few percentage points of the overall economy. In fact, colonial possessions, originally established when mercantilist thinking was in vogue, may actually have stunted the economic growth of colonial powers during the industrial revolution because of the high “carrying cost” of maintaining colonies.
The real damage done to colonies was less a matter of the resources extracted and far more about the suppression of industrial development within the colonies. The good news is you don’t need colonialism to develop a strong economy. The challenge is to nurture industry among the former colonial states and that is happening at various rates around the world right now.
So once again when we look at our present circumstances in the context of the flow of history we see an expansion of prosperity working its way throughout the world. But there are a few more indicators we should take note of as well.