Monday, January 1, 2007

Separate but not equal: The World Bank has been stunningly optimistic about economic growth worldwide in the next 25 years. But Michael Blim at 3 Quarks Daily writes, in his Monday column, that one of the problems is the focus on middle-class growth. The way that the world population is growing, the population living in poverty will grow much faster than the middle-class population:

The news gets worse. Economic growth through 2030 will only slightly close the income gap between rich and poor countries. For every positive economic stride taken by poor countries, for every climb on the income ladder made by this new middle class in poor countries, rich countries and most importantly their rich citizens, take two steps forward. By 2030, the rich will have increased their proportion of the world’s income from 58% in 2000 to 69%. Thus far, massive industrialization in poor countries has not really shifted the economic balance of power. “Five decades of development have done little to bring the average incomes of developing countries closer to those of OECD (rich) countries,” says the Bank, practically in an outburst of unusual clarity.

Moreover, inequality inside poor countries is likely to worsen. This has been happening in rich countries since the seventies. In poor countries, the new middle class will be pulling away from everyone else, working class and poor alike.

Still another cloud noted by the Bank itself casts a shadow over its sunny optimism. Between now and 2030, the world economic growth rate will stagnate at 3%, a point lower than the period between 2004 and 2006, and significantly lower than the 4.5% rate that created the rich country middle class between 1960 and 1980. Developing countries will grow at a 4% rate, a point above the world rate, but the increment must outrace any population growth while motoring an economic catch-up rate to rich countries much greater than heretofore seen. The remarkable rise of China, as well as its remarkable size, disguises the probable fates of other poor countries that will not grow at China’s astronomical rates. Their improvements will be in increments too small to pull up incomes generally.


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