The rise of the rest

Ian Boyne

NEWS THAT Jamaica's unemployment rate had hit over 16 per cent came last week amid images of a hoard of unemployed teachers who turned up at a career fair to compete for scarce or non-existent jobs.

Jamaica is likely to pass its first International Monetary Fund (IMF) test, but beyond that, there seems to be few willing to stick their necks out that we will pass the next one. Many seem gloomy about the prospects for the Jamaican economy. For over 40 years, our economy has grown at a scandalous annual rate of 0.9 per cent. For over 30 years, our productivity has declined on an annual basis by 1.3 per cent.We have the third-highest debt rate in the world as well as the third-highest crime rate - not unrelated to our dismal economic performance.

But one of the most amazing stories of recent times has been what is now known in the development literature as 'the Rise of the Rest', a take-off from the more famous Rise of the West. The West is in decline - some say it's terminal, and the Rest - the South - is in ascendancy. Countries which were formerly dismissed as basket cases have been growing spectacularly.

Africa, once described by The Economist as 'The Hopeless Continent', now boasts six of the 10 fastest growing countries in the world. The IMF's latest World Economic Outlook says Africa's growth rate of over five per cent is expected to continue well into next year. Some even predict Africa will overtake Asia in economic performance by 2040.

Developing countries, whose prospects were seen as grim and which many thought were relegated to mendicancy and kleptocracy, are now leading the world in terms of economic growth. Chief group economist and global head of economics and asset allocation at HSBC, Stephen King, just published his gloomy book, When the Money Runs Out: The End of Western Affluence (2013). King demonstrates how Europe and America have declined economically and the structural reasons this decline is set to continue.

Says Jamaican-born, high-flying, Ivy League-educated economist Peter Blair Henry in his recent book, Turnaround: Third World Lessons for First World Growth: "Times have changed ... we need to acknowledge the shifting landscape ... developing countries have made astonishing progress. For the first time in history, economic growth in emerging countries will be the key to growth of incomes and employment in the advanced economies, not the other way around".

Continues Henry: "Indeed, with the rise of production and consumption in the developing world, the road to renewed global prosperity runs less through New York, London and Tokyo than it does through Shanghai, Mumbai and Sao Paulo ... the centrality of developing countries to the health of the world economy is readily apparent from their contribution to the income statements of Fortune 500 companies ... ."

The authoritative Human Development Report, published by the United Nations, titles its 2013 edition: The Rise of the South: Human Progress in a Diverse World. The report shows the remarkable progress which has been made by developing countries, noting, "the rise of the South is unprecedented in its speed and scale. Never in history have the living conditions and prospects of so many people changed so dramatically, so fast".

Great Britain took 150 years to double output per capita. The United States took 50, Japan took 23 and China and India have now done it in less than 20 years.

Take China's progress as an example. Just three and a half decades ago China - with some 900 million people - had a gross domestic product (GDP) of under US$200 billion. Yet today, with population growth since then of 40 per cent (1.3 billion people), China's economic output has grown 35 times to US$7 trillion. Per capita GDP grew from under US$200 to over US$5,000 today. China has lifted over 500 million out of poverty in the last two decades, reducing its poverty level from 60.2 per cent in 1990 to 13.1 per cent in 2008.

PHENOMENAL GROWTH

India, which increased its GDP from US$300 billion in 1981 to US$2 trillion today, reduced its poverty rate from 49.4 per cent in 1990 to 32.7 per cent in 2010. Brazil has reduced its poverty rate from 17.2 per cent in 1990 to 6.1 per cent in 2009. Growth and development in the entire developing world has been phenomenal. Says the noted development economist Dani Rodrik in his recently published 62-page paper, The Past, Present and Future of Economic Growth: "The last decade has been extraordinarily good for developing countries and their mostly poor citizens-so good in fact that it has become commonplace to look upon them as the saviours of the world economy. Their economies have expanded at unprecedented rates, resulting both in a large reduction in extreme poverty and a significant expansion of the middle class".

In 1990, 43 per cent of the population of the developing world lived in extreme poverty defined as subsisting on US $1 a day. By 2010, it had been slashed by 21 per cent. And similarly, the global poverty rate has been cut in half in just two decades, leading the World Bank to target the elimination of poverty by 2030.

For the first time in 150 years, the combined output of the developing world's three leading economies - China, India and Brazil - is roughly equal to the combined GDP of long-standing industrial powers of the North - Canada, France, Germany, the United Kingdom and the United States. This is a dramatic rebalancing of global economic power.

In 1950, China, India and Brazil accounted for a mere 10 per cent of the world economy, while the six biggest economies accounted for roughly half. The South today - the Rest - accounts for nearly half of the world's economic output. Not only that. The 2013 World Investment Report, which focuses on global value chains, reveals that for the first time in history, developing countries account for a greater share of global foreign direct investment flows (52 per cent) than developed countries, pulling in $142 billion more than the North.

Between 1990 and 2010, the South's share of the global middle class expanded from 26 per cent to 58 per cent by 2030. Almost 80 per cent of the world's middle class is expected to be concentrated in the South. The World Bank projects that if developing countries continue their post-2000 growth performance, the number of extremely poor people will fall from the current 1.2 billion to just 200 million by 2027.

Rwanda is growing. Cambodia is growing. Mozambique is growing.

OBJECT LESSON

I end with an object lesson. In 1960 Korea, with a GDP per capita then of US$1,000, was poorer than Jamaica. Then, the average Korea, earned less than the average Ghanaian. Remember Korea had a war with North Korea and in three years, four million South Koreans died. Half of South Korea's manufacturing base was lost and 75 per cent of its railways destroyed. Both the US Congress and the World Bank said Korea had no hope of sustained growth. None.

Schools in South Korea had up to ninety per class. Korea's main exports were tungsten ore, fish and wigs made with human hair. Ha-Joon Chang, one of the world's most distinguished development economists and himself a South Korean, says in his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, that "spending on foreign exchange on anything not essential for industrial development was prohibited or strongly discouraged through bans, high tariffs and excise taxes. Even foreign travel was banned except for business or study abroad without explicit Government permission. I remember the minor national euphoria when a consignment of Danish cookies was imported under special Government permission in the late 1970s".

Today, South Korea, which we led in 1960, now has a GDP of $32,800, while ours is nearly $9,000. It is the sixth-largest exporter in the world, the ninth largest importer and joined the rich man's club, the Organization of Economic Cooperation and Development, from the 1980s.

Perhaps, if Jamaica starts to learn what Korea and other developing countries have been doing right-and start changing course, there might be some hope for us after all.

Ethiopia, which suffered disastrous droughts, famines and civil wars, is now growing at over eight per cent, one of the fastest growth rates in the world.

The backwater Asian country Laos (Fourth World) is growing at 7.9 per cent.

Niger, a certified failed state, last year was growing at 8.5 per cent.

Angola was last year growing at 9.9 per cent.

Sri Lanka at 6.3 per cent.

Afghanistan at 7.2 per cent.

Vietnam is growing at 6.3 per cent and is one of the rising stars of Asia.

Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.