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Economy Watch: Complacency could put two centuries of progress at risk

 

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We may be living longer, but birth rates have falled causing a fall in labour supply

We may be living longer, but birth rates have falled causing a fall in labour supply

Getty Images/iStockphoto

We may be living longer, but birth rates have falled causing a fall in labour supply

You may be fearful about the future for the world and UK economies, but some commentators have been highlighting data showing that life has been getting better for most people.

Swedish academic Hans Rosling, who died in 2017, did this in his book Factfulness. A similar message comes from German economist Max Roser and his website Our World in Data (ourworldindata.org).

Here are seven metrics which have been used to support optimism about humanity's position...

1. The percentage of the world's population in the worst absolute poverty has been declining

For most of human history, almost everyone has lived in absolute poverty, if we use the modern definition of having an income of less than $1.90 a day (in 2011 prices). In the last 20 years, the percentage below that threshold has halved to just under 10%.

2. Average life expectancy has soared

The world average is 72 years, double what it was two centuries ago.

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3. Infant mortality is in steady decline

As recently as 1950, almost one in four of the world's children died before the age of five. Today that proportion is just under one in 20. Infant mortality rates are still relatively high in poor countries but declining.

4. The population explosion is coming to an end

The worldwide fertility rate is now 2.5 children per mother, compared to 5.5 in 1950. Birth rates have declined as incomes have risen. Declining birth rates correlate with another potential positive metric: increased economic and social equality between the sexes.

5. Long-term economic growth at the world level has been very impressive

Western economies have experienced growth rates averaging 2% annually over the last 150 to 200 years. That may not sound impressive, but it implies that the volume of output doubles every 35 or so years.

6. Major wars are much less frequent

Rosling and Roser both note that wars between the major powers are much less frequent than they were before 1945 or, indeed, the 16th to 19th centuries.

7. More and more countries have adopted democracy

In 1950, about a third of the world's population lived within democracies. That's now 56%.

We should be grateful to Rosling, Roser and others for compiling such figures. Nevertheless, I wouldn't be an economist if I didn't dispute some points.

Two dollars a day is still a fairly low and miserable level of income.

Wars between great powers are now rare, but the period since 1945 has been characterised by many minor wars, civil wars and low-intensity conflicts (think of the Troubles).

In an era of autocratic presidents (Russia, Turkey), defining democracy is not straightforward.

In terms of increasing life expectancy, we may now have hit diminishing returns.

Rosling and Roser are right that global population growth is slowing, but it could be argued that the west has another problem - birth rates have fallen so far that the labour supply does not match demand and there is an increased reluctance to use migrants to make up the shortfall.

A more profound criticism would admit that while we are richer and living longer, this does not equate to more happiness.

Economists argue about how strong any positive relationship is between income and happiness.

While there may be an income level at which gains to happiness cease, this criticism may miss the point.

Increased longevity is a good thing. More controversially, growth is also good. It represents increased knowledge, technological advances and increased control over the environment.

A further criticism would be that some of the measures demonstrate complacency.

Direct military confrontation between the great powers may not have happened since 1945, but one war between the nuclear powers would be sufficient to wipe out most life on the planet.

It is true that the world's population has never been bigger, and on average we are many times richer than two centuries ago.

But critics might counter that past increases were not sustainable and that the earth's resources and climate will not be able to endure further increases.

Climate scientists have already highlighted the massive adjustment needed, in terms of reduced carbon gas emissions, to limit temperature rises to 'only' 1.5 degrees centigrade by 2050.

Modelling global climate is at least as difficult as forecasting economic developments. Both involve hugely complex systems with a great many unknowns.

Nevertheless, some of these forecasts imply we need a combination of a rapid shift to non-carbon technologies and a drastic reduction in consumption.

In conclusion, Rosling and Roser are entirely right that the human race has made a lot of material progress over the last two centuries.

However, we cannot be complacent about the next century, let alone the next 30 years.


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