The average person at present is about four times richer than the average person back in 1950, according to Max Roser in his article Which countries achieved economic growth? And why does it matter? in Our World In Data.
Apart from the global average, Roser also analyzed the changes in income of the world in the national level. Here, we will summarize the key insights from his analysis. Let’s begin.
How did incomes change in countries around the world?
The chart above shows the countries with the largest growth from 1950 to 2016.
In terms of 2016 GDP per capita (with purchasing power parity or PPP adjustment), it is Norway which recorded the highest figure at $76,397. Meanwhile, in terms of GDP growth (1950-2016), the Equatorial Guinea recorded the best figure at a 37.8-fold increase.
On the flip side, the Central African Republic has the lowest 2016 GDP per capita. The Democratic Republic of Congo recorded the worst GDP decline (1950 -2016) at a two-fold decrease.
The chart above is yet another helpful visualization.
Across the chart is a diagonal division line. Below the line are the countries which experienced negative growth. Above the line are countries which experienced positive growth.
It can be seen that an overwhelming number of countries are richer in 2016 than they were in 1950.
There are nine countries which recorded a decline in PPP-adjusted GDP per capita:
- Sierra Leone
- Democratic Republic of Congo
- Central African Republic
Moreover, Liberia is the only country which didn’t experience any improvement in GDP if the years 1950 and 2016 are compared.
Why should we care about the growth of incomes?
In the modern world, GDP is becoming an obsolete measure of growth:
- It measures economic activity only based on cash.
- It doesn’t take into account the distribution of wealth. This is problematic since the GDP will register a rise in income as growth even if only the upper 1% of an economy truly contributed to the spike.
- It doesn’t take into account the intrinsic value of free products, services, and information that drive growth (e.g., Wikipedia, Google, Facebook, etc.) which definitely increased productivity in the modern world.
- It is quantity-centric, only basing economic activity on how large the GDP is instead of also taking into account the source of this income. The 2008 Global Financial Crisis was characterized by an initial increase in income, but we know that this is in no way indicative of genuine growth.
Why then should we still be concerned with the growth of income in the world?
As Roser pointed out in his article, “economic growth does not matter for its own sake, but because rising prosperity is a means for many ends.”
While it may not be the end-all and be-all indicator of economic growth, it provides some insight on a country’s available resources that it can dedicate for other equally important facets of growth such as education, health care, and job satisfaction.