Thursday, January 06, 2011

Almost Unimaginable: Africans and Afghans Will Have Same Income as Today's Americans by 2050

The Rational Optimist Matt Ridley asks the question: "With one tenth – well, 11% -- of the twenty-first century now consigned to history, what is the verdict so far?"

"According to the IMF, away from Europe and North America, the world was booming this year. Asia has grown by 7.9%, South America by 6.3%, Africa by 5% and the Middle-east and North Africa by 4.1%. China and India, with 40% of the world’s population, achieved roughly 10% growth between them. Moreover, this boom, because it is happening in poor countries, is rapidly reducing both poverty and inequality.

Despite the Great Recession, the per capita GDP of the average human being – that is to say, the value of goods and services that she consumes in a year – is now just over $11,000, up from about $8,500 (in today’s dollars) at the start of the century. If it continues to increase at this rate of just under 3% a year – as it has more than done for 60 years – then by the year 2050 the average citizen of Earth will be earning and spending over $30,000 a year in today’s money, roughly the same as the average American spends today. By 2100 she will be spending nearly $150,000 a year, or five times what an American now consumes (see chart above).

This is almost unimaginable. Try to get your heads round the prospect of Africans and Afghans having the disposable income of today’s Americans within the lifetime of your own children, let alone grandchildren. If it seems fanciful, consider this. If my great grandfather had made a similar forecast in 1910, based on the then growth rate of the world economy, then even assuming he would not have predicted two world wars and a Great Depression, he would still have hugely underestimated the average income of today.

The economic growth of the past decade took a century to achieve in 1810 and took a millennium to achieve in 810. That acceleration shows no signs of stopping, indeed it may be about to redouble. The root cause of economic growth is the mixing of ideas: ideas on how to recombine the atoms and electrons of the world in such a way as to supply people’s needs and wants more efficiently. Bring down barriers to the mixing of ideas (barriers in trade, energy, communication and education) and you will cause faster growth whether you want to or not. Nothing has brought down barriers to the mixing of ideas faster than the Internet. Today a man in Shanghai and a woman in San Francisco can spark each other’s thoughts in seconds, where two decades ago they needed books or airplanes to have such mental sex."


At 1/06/2011 3:40 PM, Blogger Colin said...

Very interesting. On a related note you may also want to check out this chart from The Economist.

At 1/06/2011 4:16 PM, Blogger Benjamin Cole said...

In 2050, I predict that we will just about be ready to begin to start the planning to prepare for an eventual withdrawal from a war-torn Afghanistan, if we can gain assurances from Pakistan that they will cooperate, and if we can find a government to install that will not collapse immediately after we withdraw.

At 1/07/2011 10:07 AM, Blogger bix1951 said...

population growth must be considered
if the economy of a country doubles and the population also doubles then has there been any economic progress?
China has tried to limit population growth, India has not. Which country has had more improvement in per capita GDP?

At 1/08/2011 10:11 PM, Blogger Expected Optimism said...

Bix: These numbers are based on per-capita GDP, not total GDP. As Matt Ridley has said, humans are the only species to become more prosperous as we've become more populous. The reason is this mixing of ideas. The more humans there are, the more ideas we will have, and the more ways we will be able to combine those ideas.

As China's population stagnates and eventually falls, I expect India will easily overtake them.


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