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April 27, 2013

Brad DeLong: Global Inequality

Another long travel day today, so for now a quick post via Brad DeLong:
Global Inequality: Saturday Twentieth Century Economic History Weblogging: Those economies relatively rich at the start of the twentieth century have by and large seen their material wealth and prosperity explode. Those nations and economies that were relatively poor have grown richer, but for the most part slowly. The relative gulf between rich and poor economies has grown steadily over the past century. Today it is larger than at any time in humanity’s previous experience...
This glass can be viewed either as half empty or as half full. The glass is half empty: we live today in a world that is nearly the most unequal world ever. Only the world of the 1970s and 1980s—with standards of living in China greatly depressed by the legacy of Mao, his Great Leap Forward, and his Cultural Revolution and with standards of living in India depressed to a lesser extent by the License Raj of the Nehru Dynasty—was more unequal than ours is, even today. The glass is half full: most of the world has already made the transition to sustained economic growth; most people live in economies that (while far poorer than the leading-edge post-industrial nations of the world’s economic core) have successfully climbed onto the escalator of economic growth and thus the escalator to modernity. The economic transformation of most of the world is less than a century behind the of the leading-edge economies...
On the other hand, one and a half billion people live in economies that have not made the transition to economic growth, and have not climbed onto the escalator to modernity. It is hard to argue that the median inhabitant of Africa has a higher real income than his or her counterpart of a generation ago.
From an economist’s point of view, the existence, persistence, and increasing size of large gaps in productivity levels and living standards across nations seems bizarre. We can understand why pre-industrial civilizations had different levels of technology and prosperity: they had different exploitable nature resources, and the diffusion of new ideas from civilization to civilization could be very slow. Such explanations do not apply to the world today. The source of the material prosperity seen today in leading-edge economies is no secret: it is the storehouse of technological capabilities.. Most of it is accessible to anyone who can read. Almost all of the rest is accessible to anyone who can obtain an M.S. in Engineering. Because of modern telecommunications, ideas today spread at the speed of light. Governments, entrepreneurs, and individuals in poor economies should be straining every muscle ... to do what Japan began to do in the mid-nineteenth century: acquire and apply everything in humanity's storehouse of technological capabilities.
This “divergence” in living standards and productivity levels is another key aspect of twentieth century economic history: economies are, by almost every measure, less alike today than a century ago in spite of a century’s worth of revolutions in transportation and communication. Moreover, there seems to be every reason to fear that this “divergence” in living standards and productivity levels will continue to grow in the future. ...
This is a potential source of great danger, because today’s world is sufficiently interdependent—politically, militarily, ecologically—that the passage to a truly human world requires that we all get there at roughly the same time.

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