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Briefing The world's silver lining Somewhere over the rainbow Jan 24th 2008 From The Economist print edition In a week of financial uncertainty we look behind the headlines to a world that is unexpectedly prosperous and peaceful Nature PL POLITICIANS seem drawn to danger--as a rhetorical device, that is. George Bush justified last year's troop surge in Iraq by saying that otherwise the world would become "a more dangerous place". Gordon Brown, Britain's prime minister, said this would be "a dangerous year" for his country. Vladimir Putin told a NATO meeting that the world had become "more dangerous" because of the Bush administration. This sense of impending doom is not confined to politicians. Public attitudes generally seem to have become more pessimistic and inward-looking. The proportion of Americans who think their country should be active in the world (42%) is the lowest it has been since the early 1990s. Support for international trade and multinational companies is falling. Large minorities in most countries say globalisation is bad for them personally. Although the main perceived threat varies by time and place--from climate change to economic recession--the general mood is a bit despondent. And the outside world tends to be viewed as a source of trouble.
Indeed, for a great many people the way things are is pretty rotten: Burmese monks, for instance, or the Luo in Kenya. Life is not too bright for investors at the moment, either. Is the world really becoming worse for the majority of mankind? To some extent, our qualified optimism is borne out by impartial data. In this article we look at three pieces of evidence: the underlying social conditions in poor countries; By those measures the world seems to be in rather better shape than most people realise. Miracles behind the turmoil In China 25 years ago, over 600m people--two-thirds of the population--were living in extreme poverty (on $1 a day or less). In the world as a whole, a stunning 135m people escaped dire poverty between 1999 and 2004. This is more than the population of Japan or Russia--and more people, more quickly than at any other time in history. Poverty alleviation has gone hand in hand with improvements in basic services. Digging canals and building water-treatment plants has increased the number of people with access to safe water: in South Asia, for instance, the number of those without clean water has been nearly halved since 1990. Thanks to this, and to better public-health provision, the rate at which people die from infectious diseases such as malaria and tuberculosis is falling in most poor countries, Africa excepted. In 2007 Unicef, the United Nations child-welfare body, said that for the first time in modern history fewer than 10m children were dying each year before the age of five. That is still an awful lot but it represents a fall of a quarter since 1990. Life expectancy has increased a bit in low- and middle-income countries. The long march to literacy is nearing an end: three-quarters of people aged 15-25 were literate in 1975; All these things are the results of patient work over many years. But perhaps the biggest change affecting people's lives has little to do, at least directly, with development policy or public spending. People in poor countries are now able to exert more control over their own fertility, and hence over the size of their families. A generation ago the biggest worry about poor countries was over-population. Books such as "The Population Bomb" (1968) and "The Limits to Growth" (1972) predicted Malthusian crises in countries where women were having five children or more. Since then the fertility rate (the average number of children a woman can expect during her lifetime) in low- and middle-income countries has crashed. Now it is 21 In South Asia, the fertility rate halved (from 60 to 31). In the world as a whole, fertility has fallen from 48 to 26 in a generation (25 years). The biggest decline is in those countries that are most involved with globalisation (especially in East Asia, though China is a special case because of its one-child policy). The most important exception to the rule of declining fertility is sub-Saharan Africa. All the countries with fertility rates over 50 are in Africa (with the one exception of Yemen). Globalisation, it seems, leads to a shift in the direction of "replacement fertility": the rate at which the size of a population eventually stabilises. In closed agrarian societies, families need a lot of children as insurance against disaster. But in countries that have opened themselves up, families can rely on other sorts of protection, such as urban jobs or trade. These demographic changes help to create a virtuous circle of growth. When fertility rises then falls, you get a bulge of people at and just after the inflection point. Between 1960 and 1990 Europe and America had relatively few old people (because mortality rates had earlier been high), relatively few children (because fertility had fallen) and a disproportionately big number of economically active adults. These 30 boom years were (to borrow the French phrase) "les trente glorieuses". Developing countries are seeing a similar confluence now. Eventually, of course, the demographic bonus turns into a demographic onus, as is happening in parts of Europe. In the next one, low- and middle-income countries will have a demographic advantage to reinforce their economic gains. Up and up and up These social achievements have not come about by accident. A World Bank study of 19 poor countries concluded that every 1% increase in national income per head translates into a 13 point fall in extreme poverty. Hence the importance of the second broad indicator: the state of the world economy. Last year the global economy entered its fifth year of over 4% annual growth--the longest period of such strong expansion since the early 1970s. Despite financial turmoil and soaring oil and commodity prices, world growth barely dipped in 2007 and trade grew at 9%, even though trade talks fell apart. Unlike previous expansions, inflation remained more or less under control. According to the World Bank, national income in the European Union rose slightly more than in America for the first time in a decade. Growth in East Asia was 10%, in South Asia over 8%, in eastern Europe almost 7% and in Africa, thanks to the commodity boom, over 6%. In earlier booms, fast growth seemed to have been the preserve of a few miracle countries, such as the Asian tigers. Almost half of humanity, spread over more than 40 nations, lives in countries growing at 7% a year or more, a rate that doubles the size of an economy in a decade. This is twice the number of fast growers that existed in the years between 1980 and 2000. As a result, the world's economic balance is tilting from rich industrialised countries to emerging markets. Their share of world output in 2006 was just below half, and rising. The International Monetary Fund reckons that in 2008 China and India will be the largest contributors to worldwide growth for the first time. This does not mean that the world will be able to make light of a slowdown in industrialised countries. Nor will developing countries be unaffected by problems hitting America and Europe. Nevertheless, so far they have been hit less hard by the credit crunch than rich nations were. Yields on high-risk corporate bonds rose over 300 basis points after August 2007, an indication of the scale of damage to companies in rich nations. By contrast, emerging-market bond yields rose less than 100 points, peanuts compared with what happened after the Asian and Russian crises of 1995 and 1998. Equity markets in emerging markets, unlike those in America and Japan, shrugged off their losses last August.
Many people argue that the pattern of world growth over the past 20 years has not been beneficial. They point out that globalisation-driven growth has gone hand in hand with a growth in inequality. This inequality is a worry in its own right (communities get broken up; the poor get left behind) and also a missed opportunity (emerging markets might have done better still if...
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