 | | Kip Beckman
Principal Research Associate
Economic Services |
Ask any American or Canadian what they thought about the past ten years and a positive response is highly unlikely. The decade included the 9/11 terrorist attacks and two wars, one in Afghanistan and another in Iraq. In addition, Americans put up with two recessions; a relatively mild one in the early 2000s followed by a brutal downturn, the effects of which are still being felt today. Incomes adjusted for inflation for most Americans barely budged over the past decade or so and the unemployment rate ended the decade at 10 per cent and rising. Our close economic linkages with the United States meant that Canadians couldn’t avoid the economic difficulties from spilling over the border and affecting our lives.
Yet, for most countries in the developing world, the past decade was a huge success. Four of the largest countries in the world --China, India, Indonesia and Brazil -- account for around 40 per cent of the world’s population and they made significant strides in economic development. We all know about the success stories in China and India but many are not aware of the progress made in Indonesia and Brazil. Indonesia’s growth over the past decade has averaged around 5 per cent per year compared with the disastrous 1990s that saw standards of living plunge. Brazil recorded 3 per cent average annual growth, managed to tame inflation and is currently dealing with a currency that is too strong – a rather unique development in that part of the world.
Elsewhere in Latin America, countries like Columbia and Peru have made tremendous advances, while Chile is on the verge of joining the exclusive OECD club. Notwithstanding the attempts by Venezuela’s Hugo Chavez to accumulate power, polls show most Latin Americans have increasingly favourable views about globalization and democracy. This at a time when globalization is not too popular in the developed world.
There has even been progress, albeit uneven, in Africa. While life in many parts of the continent remains miserable, the continent has attained annual growth of 5 per cent in recent years and countries like Botswana, Mauritius and Ghana are fairly successful. Essentials like electricity, water and sanitation are more common and cell phones have become more popular. The move to democracy in Africa, while not necessarily what Thomas Jefferson envisioned, is also gaining momentum.
Except for maybe China and India, most of us are unaware of the progress that has transpired in many parts of the developing world. According to Economics Professor Tyler Cowen, this is mainly because the media doesn’t focus on the small steps that have been taken to improve the lives of people. For instance, an extra percentage point of growth in one year may not seem like a big deal. Yet, a 1 per cent difference in annual growth can have a major influence on a country doubling its standard of living in 35 or 70 years. Sustaining economic growth of 5 per cent per year, Africa’s current growth rate, would result in a doubling in the standard of living in less than 15 years. This is huge for people currently living in extreme poverty.
While many Americans and Canadians may lament the lack of economic progress made in the past ten years, the fact that emerging countries have become wealthier is a good thing and a development that can help the West. Richer developing countries consume more of our products, including Canada’s vast supply of natural resources. Also, Cowen contends that China is using some of its growing wealth to conduct research in important areas including solar power, scientific instruments and engineering. If Chinese scientists manage to make a breakthrough in the development of green energy, this benefits everybody. The dramatic improvement in cell phones recently may be, in part, linked to the fact that the number of customers have exploded as cell phones gain popularity in the developing world, notably Africa.
Viewed from the prism of a lingering economic downturn, it is easy to view the past ten years as a disaster at least from the perspective of many Western countries. However, if we look a bit beyond the economic situation in most developed countries, it is possible to conclude that the past decade was not so bad after all.