Mind the Gap

Global Development

Mind the Gap

Have you ever wondered how large the gap in living standards is between countries? Or how this has changed over time?

An excellent resource to allow you to look at the evidence in a visually engaging and user friendly way is http://www.gapminder.org/

For example, to explore how the Wealth and Health of Nations has changed over time click on the picture below to open Gapminder’s interactive display.

Gap Minder picture

Gapminder also has a series of brief and informative YouTube clips, such as the following video that shows how 200 countries have developed over the last 200 years in just 4 minutes.

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The World Cup is an Uneven Playing Field

Global Development

A country’s chance of winning the World Cup is strongly related to the size of its population and how rich the population is. Countries with bigger populations have a larger pool from which talented players can be sourced and richer countries are better able to nurture their players. All, except two (Uruguay and Colombia), of the top 15 ranked World Cup teams are from countries that have populations over 8 million people and income per person over US$12,000 a year. These countries have among the highest incomes and largest populations in the world and appear in the top right of the chart below.

Final World Cup Graph

Between the World Cup countries, an uneven playing field still exists. The richest qualifying country, Switzerland, has around 80 times more income per person, than the poorest qualifying country, Cameroon. While the largest country in terms of population, the United States, has almost 100 times more people that the smallest country in terms of population, Uruguay.

To learn more about just how uneven the playing field is and what life is like in the poorer World Cup countries, check out this blog http://mattdarvas.com/2014/06/18/the-poorest-world-cup-nations/

Source

World Bank 2014 <http://data.worldbank.org/data-catalog/world-development-indicators>

How much control do you have over your standard of living?

Global Development

Key Points

  • An individual’s standard of living is overwhelmingly determined by factors out of their control. As such poverty is largely entrenched from birth.
  • A person’s nationality and the level of income of their parents account for over 80% of global differences in standards of living. Nationality alone explains almost two-thirds of the difference.
  • All other factors such as effort, gender and ethnicity account for less than 20% of global differences in standards of living.

Background

Analysis by the World Bank finds that where you are born and who your parents are have huge implications on your standard of living. Nationality and parent’s income level account for over 80% of global differences in standards of living, as can be seen in the chart below.

Control over standard of living

This analysis provides further evidence to demonstrate that one’s standard of living is mainly due to circumstance rather than effort. A child born to parents in poverty in the Democratic Republic of Congo (one of the world’s poorest countries) will almost certainly live their life in extremely different conditions to a child born to middle class parents in Australia.

This has profound implications in regards to how one perceives poverty. Overwhelmingly it is not an individual’s own fault for being in poverty since they had no control over where their were born and how wealthy their parents are. This creates a profound impetus to address this injustice.

Source

World Bank 2009 http://www.arts.cornell.edu/poverty/kanbur/InequalityPapers/Milanovic.pdf

The Next Millennium Development Goals?

Global Development

One year ago, a panel of world leaders (including David Cameron, the UK Prime Minister) released a report about the next Millennium Development Goals (MDGs). The purpose of the report was to suggest goals to be achieved by 2030, which can follow on from the MDGs (due to expire in 2015). This September these goals will be voted upon by world leaders and are shown below:

The Next MDGs?

Among policy makers these goals have grown in popularity, however civil society groups are yet to heavily promote them. The exception to this is the first goal, which is to End Poverty by 2030. Organizations such as the Global Poverty Project have mobilized large numbers of people in support of this goal.

Please consider sharing these goals with your friends and colleagues. If you want them to be changed, contact your local politicians and join civil society groups that are trying to influence them. After all, decisions about what the world should be aiming for by 2030 are far too important to be left to policy makers alone.

Read the full report here: http://www.post2015hlp.org/the-report/

 

 

Who even benefits from Economic Growth?

Global Development

Key Points

  1. The Australian Government has recently changed the focus of the aid program away from poverty alleviation towards economic growth.
  2. However, historically economic growth has disproportionately benefited rich households in developing countries.
  3. Even when economic growth is more equal for rich and poor alike (i.e. equal across the income distribution), the income gap between rich and poor households still increases.
  4. The objective of Australia’s aid program should revert back to helping people overcome poverty.

Background

The Australian Government has changed the focus of the aid program away from poverty alleviation towards economic growth. However, the analysis below shows it is likely that this will largely benefit the wrong end of the income distribution in developing countries. This is because rich households gain the most from economic growth.

While economic growth is often argued to be the solution to poverty in developing countries, poor households have not benefited as much from economic growth as rich households over the last decade. This conclusion can be reached by analysing the World Bank survey data available at the online database Povcal.

Two country specific examples for the last decade of available data are provided below: one with rich households experiencing the greatest economic growth (Indonesia), and the other with more equal economic growth across the income distribution (Philippines).

Unequal economic growth in Indonesia over the last decade resulted in huge increases in income for the richest households. The first diagram below shows that the average income growth experienced by the poorest 20% of households was less than half the rate of growth of the richest 20% of households. The second diagram illustrates the even more unequal change in income that the economic growth brought about. Each year the total increase in income for the richest 20% of households was similar to the other 80% of households combined. In other words, half of the increase in income from economic growth went to the top 20% of the income distribution.

Indo1 Indo2

The Philippines experienced more equal economic growth across the income distribution over the last decade, however a similar pattern emerges. The first diagram below shows that the richest 10% of households experienced around half the rate of growth of the other 90% of households. However as the second diagram shows the richest 10% still experienced a greater increase in income than all the other households. In fact, the richest 10% of households had an increase in income of more than five times the increase in income of the poorest 10% of households. This is because a decade ago the richest households had an income around 30 times larger than the poorest households.

Phil1Phil2

Recent history has shown that a reduction in the income gap between the rich and poor has not occurred in a developing country during a period of prolonged economic growth. This evidence suggests that economic growth does provide some benefits to the poor, however the rich are the main beneficiaries. Even when economic growth is distributed more equally across the income distribution.

With promoting economic growth as the objective of the aid program, Australia’s aid will not focus on those who need it most. The Australian Government should revert back to the previous objective of the aid program – poverty alleviation. Otherwise rich households, as opposed to those in extreme poverty, will benefit the most from the aid program.

Sources

World Bank 2014A <http://iresearch.worldbank.org/povcalnet/index.htm>

World Bank 2014B <http://data.worldbank.org/data-catalog/world-development-indicators>