Attending a university that didn’t offer humanities subjects and following that with five years training to be an accountant at a police service I had been perhaps fortunate enough to not really meet many economists in my formative years. This all changed when I started working in treasury management in the mid-2010s and had to give myself a crash course in the wider world and its impact on credit risk and interest rates. My take from this is that economists are always pessimistic. I don’t think I have yet to meet an economist that thinks things are looking up, although that may simply reflect the situation over the last 10 years...
However, I don’t think that it's just that my career has spanned a particularly gloomy time, consisting of the credit crunch, great recession, austerity, eurozone crisis, the rise of popularism and then pestilence and war. The term ‘dismal science’ has been in use since 1849 and in today’s context is seen as a derogatory word for economists’ negative stance on everything. Think Malthus’ predictions that population growth will always outstrip food supply dooming us to constant poverty and hardship and it only gets worse from there.
Economists are wrong: history is a story about how we have all got richer, much richer. We are also expected to continue to get richer in the future. Here are a few reasons to be a bit less depressed next time you switch on the news or read Arlingclose’s weekly commentary. Links are to graphical illustrations provided by the World Bank.
GDP is crudely a measure of how much money we have. At current US$ prices global GDP per capita has increased from $468 (£374) in 1960 to $10,916 (£8,717) today. We are all 23 times richer than we were only two generations ago. Despite widespread and widely reported concern about inequalities this hasn’t all gone into making only a few much richer without benefiting the rest of us. In fact, the very poorest people in the world have stood to benefit the most from this rising GPD which brings us on to:
Extreme poverty means really not being able to afford the essentials in life such as adequate food, shelter, clothing, sanitation and healthcare. It is currently defined as living on less than $1.90 (£1.50) a day. It’s different to the commonly used definition of poverty in the UK which is relative poverty (hence why bizarrely during the great recession the number of people in the UK living in poverty went down because everyone got poorer at the same time). Before the industrial revolution everyone but a tiny minority live in extreme poverty. Now only 8.6% of people do despite the global population being about seven times bigger. And much of this decline has happened quite recently: in 1981 the percentage of people living in extreme poverty was 42.6%.
Whilst money may not buy you happiness it does by you lots of handy things like enough food, clean water, vaccinations, antibiotics, hospitals and doctors. All these things are helping us live longer. Global life expectancy at birth is now 73 years, compared to 53 in 1960. This increase in life expectancy has in part been due to infant mortality more than halving this period from 63 deaths per 1,000 life births to 27. Increasing numbers of woman are also now surviving childbirth with maternal mortality having dropped from 342 per 100,000 live births in 2000 to 211 (and that’s only since 2000). Again, these changes in life expectancy are benefitting the poorer countries in the world the most.
Lower birth rates are a commonly held indicator of improved living standards and things generally being better. Given access to contraception and some economic safety net most parents want to have two children rather than ten. Having fewer children means that parents can distribute more resources such as food, healthcare (see above) and education to each child. With the possible exception of Sub-Saharan Africa, most women in the world generally will now only have two children. Global birth rates have fallen from 5 children per woman in 1960 to 2.4 today. Whilst low birth rates can present new challenges around an aging population, they also represent a great hope for the lessening of our future impact on the planet.
Once you have enough food and your other basic needs there are resources available to educate yourself and your children. This is a self-perpetuating cycle as better educated people earn more and produce more. In just 1976 a third of the world’s population did not even have a basic level of education defined as being able to read and write. Now this figure is only a tenth.
Expectations for the future made by experts are that these levels will continue to improve around the world as they have done for the last 200 years, even if there are a few blips on the way (such as the Covid-19 pandemic). There is a very realistic expectation that extreme poverty will essentially continue its downward projection and ultimately end. It’s not to say factors such as climate change, aging populations and stagnating incomes in developed countries do not present significant challenges, but just like other challenges we’ve faced in the past there is every hope that we will overcome them. A doomsday scenario where we all get dramatically poorer and are lives become much worse has been predicted many times before and has not come true. Be happy: don’t believe the economists!
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