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Conclusions

            Recent declines in the number of the world’s poor are primarily a result of institutional improvements in Asia, especially in China and India.  Since 1980, more than 200 million people have moved above the poverty threshold measure.  The policy shifts allowing private holdings of land in China and greater freedom to create commercial enterprises to produce and exchange goods are revolutionizing life there.  These changes were formally institutionalized in 2004 by constitutional changes bolstering private property rights and again in 2007.  In contrast, the number of poor people in Africa continues to grow, as insecure property rights and weak regimes of law and order discourage investment, production, and exchange throughout much of the continent.

            Evidence on the economic growth effects of expansive markets and integration into world exchange is given in Figure 5 which shows the phenomenal growth rate of economies that have moved away from centrally-planned, closed economic systems, to open, globally integrated systems. (See Appendix 2 for a static ranking of countries by measures of openness to international trade.)  The comparison to both advanced rich nations and to those which, by design or lack of opportunity, have not globalized is striking.  The faster growth rates of nations entering into the world market system is positive news, holding out the very real possibility of poorer nations “catching up” to the material comforts enjoyed by the advanced/rich nations, even as the less globalized fall farther behind. 

            This positive conclusion requires elaboration because it rests on both actual growth rates and population size.  From the work of Stanley Fisher (2003), we can see the growth rates of nations in Figure 6, unaccounted for population size.  The upward trend line shows richer nations growing more rapidly on average than poorer nations.  Figure 7, however, magnifies the dots according to population size, revealing a downward trend, a catching up. Especially in Asia, where institutional economic change has been notable, populous China and now India are following Hong Kong, Singapore, Japan, Taiwan, and South Korea out of poverty.

            This catching up process is in sharp contrast to the white dot representing sub-Saharan Africa.  Africa is the great institutional challenge of the 21st Century.

            Recent research by Haber, North and Weingast emphasizes this point especially with regard to political institutions in Africa.

Economists have made an impressive start on the types of economic institutions needed to support efficient markets, but have not made equal strides in devising political institutions that will accomplish that objective. It took a Sekou Touré, or a Hastings Banda, five minutes of despotism to undo the finest economic theory…

…In effect, solving the development problem in Africa requires the crafting of political institutions that limit the discretion and authority of government and, more saliently, of individual actors within the government. No simple recipe for limiting government exists. (The Wall Street Journal, July 30, 2003)⁷

            Devising political systems that divide power, either (1) by checks and balances among branches or components of one level of government; or (2) by federalism creating competition among layers of government, holds promise for the needed economic institutional support of enterprise and markets.  The daunting challenge for poor nations is to craft better political institutions and to promote the rule of law, rather than the more arbitrary rule of men (North, et al., 2007).   This challenging transition is vital because “history offers us no case of a well-developed market system that was not embedded in a well-developed political system” (see footnote 7 and “A Survey of Sub-Saharan Africa,” The Economist, January 17, 2004).

            Regardless of the fact that some areas of the world are still struggling (and failing in some cases) to move onto and along the road out of poverty by getting the institutions right, greater and greater numbers of humans are living longer, in greater ease and comfort, and with more dignity.  It is noteworthy that two hundred years ago, scholars, most notably Malthus, were preoccupied with the challenge of feeding the poor, while in advanced countries today the main challenges are fighting obesity and caring for the aged. Although revolutions, natural and man-made catastrophes, and war can imperil regions, the  economic evidence and historical record provide ample reason to expect that the global progress launched by open markets and individual freedoms secured by rule of law around 1750 will continue indefinitely. The creative powers inherent in secure, stable, competitive, open-market systems are the well-spring for optimism about the future of mankind.

Footnotes

¹ Such glorification has a long tradition: " The humour of blaming the present, and admiring the past, is strongly rooted in human nature, and has an influence even on persons endued with the profoundest judgment and most extensive learning," from David Hume, 'Of the Populousness of Ancient Nations,' in 1777/1987, 464.

² For example, see Winston Churchill's description of life in Britain during and after the Roman Era (Churchill, 1956, Vol 1).

³ Haber, Stephen, North, Douglass C., and Weingast, Barry R. "If Economists Are So Smart, Why Is Africa So Poor?" Wall St. Journal (July 30, 2003).

⁴ For a sober reflection on the hundred most important people ever, and their inventions, creations, and achievements, see Hart, 1994.

⁵ Minimum daily energy requirements (citations in Goklany, p. 37) to engage in light work and maintain body weight and health require between 1720 and 1960 calories per day.  Per capita estimates, of 1750 for France in 1790, and of 2060 in England, are well over 3000 today.  1950 averages of 1635 in India, and of 2115 in China, compare to 2466 and 2972 in 1998 (Goklany 2001, p. 5).

⁶ For the dramatic growth of human time available for leisure and other (non-work) discretionary uses since 1880 see Fogel, 2004, Ch. 4.

⁷ Haber, Stephen, North, Douglass C., and Weingast, Barry R. “If Economists Are So Smart, Why Is Africa So Poor?”  Wall St. Journal (July 30, 2003).

Appendix 1

Appendix 2

Selected References and Suggested Readings

Burnette, Joyce and Joel Mokyr. "The Standard of Living Through the Ages." In The State of Humanity, ed. Julian L. Simon. (1995): 135-148.

Churchill, Winston S. A History of the English Speaking People. Vols 1-4. New York, Dorset Press, 1956.

Dollar, David. (consignment research paper for the Foundation for Teaching Economics, Davis, California, 2003).

Fisher, Stanley, "Globalization and Its Challenges, American Economic Review, 93, 2, May 2003, pp.1-30.

Fogel, Robert W. "Economic Growth, Population Theory, and Physiology: The Bearing of Long-Term Processes on the Making of Economic Policy." The American Economic Review, 84, (1994): 369-395.

Fogel, Robert W. "Catching Up with the Economy." The American Economic Review, 89, (1999): 1-21.

Haines, Michael R. "Disease and Health through the Ages." In The State of Humanity, ed. Julian L. Simon. (1995): 51-60.

Harberger, Arnold C. "A Vision of the Growth Process." The American Economic Review, 88, (1998): 1-32.

Mokyr, Joel The Lever of Riches: Technological Creativity and Economic Progress, New York, Oxford University Press, 1990.

North, Douglass C. "Economic Performance Through Time." The American Economic Review, 84, (1994): 359-368.

North, Douglas C. Institutions, institutional change and economic performance, Cambridge, MA: Cambridge University Press, 1990

Preston, S.H., "Human Mortality throughout History and Prehistory," In The State of Humanity, ed. Julian L. Simon, 1995.

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich. New York: Basic Books, Inc., 1986.

Schumpeter, Joseph A. The theory of economic development. Cambridge, MA: Harvard University Press, 1934.

United Nations Development Program. 1999. Human Development Report 1999. New York: Oxford University Press.

World Resources Institute. 1998. World Resources 1998-99 Database. Washington DC.

Wrigley, E.A., and R.S. Schofield. 1981. The Population History of England, 1541-1871: A Reconstruction. Cambridge, MA: Harvard University Press.

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