Monday, June 22, 2009

Before the global economic crisis began in 2007

“In 1991, the GDP of the world in dollars was $4,997. In 2000, it was $4,909…. the wealth-producing capacity of the world is no longer keeping up with its population growth, and the wealth-producing capacity of nearly a quarter of its people is literally marching backwards…. In the 90s per capita GDP in the countries in transition fell between 50% and 75% depending on the measure adopted, catapulting them into the ranks of the developing countries.” .”… Even in PPPs, poverty is clearly increasing in the modern world…. [Since 1970] “differential growth did not speed up the growth of the advanced countries relative to the rest of the world. It slowed down the growth of the rest of the world, relative to the advanced countries The present organisation of the world economy [is] acting systematically to undermine it. The US is growing at the expense of other advanced industrial nations…. up till 1980, US investment was financed from internal savings, which always exceeded investment. This reversed in 1980 and savings from then on fell behind investment. This was particularly marked in the 1990s expansion in which savings and investment moved in opposite directions.” *

The new world order and the failure of globalisation
Alan Freeman (2002): Unpublished.

The new political geography of poverty. University of Greenwich

[This is a fuller but earlier prepublication version of an analysis of stagnation and divergence in the world economy which appeared in Pettifor, A (2003) Real World Economic Outlook, pp152-159. Basingstoke: Palgrave MacMillan, pp152-164. ]


juan said...


Post-Keynesian economist James Crotty has also done some work along that line. A number of his papers can be downloaded _here_, though I'm not sure he makes the connection between capital accumulation and differentials in rate of nonfinancial profit and financial returns which, in 19th c. form, originated(?) in Capital Vol. III and can help explain why nonfinancial stagnation/contraction may drive [and to degrees, institutionalize] speculative booms.

Barkley Rosser said...


I know Alan Freeman, but I am wondering what his source is for those numbers. The latest figure for world PPP per capita GDP is $10,000, which is more than double his supposed 2000 number.

The main areas of the world that had declining per capita GDPs in the 1990s were the transition economies, many of which started growing again before 2000, and some of the African countries, many of which have done much better since 2000. I would note that both China and India had solid real per capita growth in the 1990s, China at a very high rate, which has continued since 2000, and they constitute 3/8 of the world's population. So, I am skeptical about the numbers you present.

Brenda Rosser said...

Thanks for the link. Will check his Crotty's research out.

Quoting from Alan Freeman's article (footnote one):
"1 Measured in constant 1995 dollars at current (period average) market exchange rates. All information in this chapter, unless otherwise notified, is extracted from GDP data published by the IMF in its World Economic Outlook database, data before 1992 on the countries in transition from the Groningen Growth and Development Centre, and population data from the US Bureau of the Census. "

Other writing of interest:

2006 – January 23rd. Poor See Fewer Benefit From Global Growth according to UK-based New Economics Foundation (NEF). “it took $34.50 of economic growth in Asia to generate just $1 of poverty reduction in the region between 1990 and 2001--three times as much as in 1981-90.

Nearly six million children die each year of hunger and malnutrition.

2009 – June 21st. The bulk of Indian salaries are spent on paying off loans. Even as the average salary has gone up by 30 percent, the actual take-home has fallen 30 percent in the last 10 years on account of monthly loan repayments.

Bulk of salaries spent on paying off loans: Industry group

India’s economic miracle a myth. “the Indian daily Hindustan Times on 14 October 2007 revealed that according to a study by a government institute, 77% of the population - in other words 836 million Indians - live on less than 20 rupees a day (less than 0.5 US dollars). These figures are very different from those of the World Bank, which only attest to about 300 million Indians living on less than one US dollar a day |4|.

India’s economic miracle – a myth

“In June 2006, an official at China's State Council said environmental damage (everything from crop loss to health care costs) was costing 10 percent of its gross domestic product—in other words, all of the economy's celebrated growth. "

The Last Empire: China's Pollution Problem Goes Global
Can the world survive China's headlong rush to emulate the American way of life?
Jacques Leslie. December 10 , 2007.

I'd be interested to know which economies have been doing well over the last decade. Certainly Australians are not faring well with the amount of paid work per capita declining. There's also increased cost of housing, greater illness, unmeasured inflation generally, environmental collapse (Murray River basin, Tasmania's forests and wildlife, widespread pesticide contamination of fresh water around the nation, chronic disease and cancer epidemics in the human population, collapse of the agricultural and 'forestry' industries ...).

Shag from Brookline said...

The Irish economic miracle comes to mind. Erin Go Broke! said...


That poverty remains high in India is certainly true, although there is reason to believe that the rate is gradually declining. Most of the economic growth there had been in the cities until very recently, but the strong reelection of the Singh government there has been seen by some as evidence that efforts by this government to spread the benefits to rural areas have begun to take hold.

There is no question that poverty rates in China have drastically fallen. Your arguments about China are where I think you have a case, not on some estimate of official real per capita PPP GDPs made by Alan Freeman. The matter is that those estimates do not account for environmental costs, and there we fully agree that there are very serious problems.

Brenda Rosser said...

The Millenium Ecosystem report published a few years ago emphasised that if a nation destroys its forests it is destroying its economy. In money terms and otherwise.

I don't know why many economists can't do a money calculation of the economic impacts of ecosystem destruction. [I know, I know. This has been said so many times before.] Here in Tasmania the money equation stares you in the face every day.

The transnational corporations (like Murdoch and Fairfax media, major banks, insurance corporations, Norske Skog, Gunns etc) gut the native forests because there is BIG MONEY in this activity.

It reduces the cost of the production of paper, making it easier to sell their products. It also makes it possible for the corporate insiders to pocket a larger difference between the cost of production and the sale price of the commodities they 'market'.

Then taxpayer comes along and pays MONEY to clean out the rivers that are clogged with logs and mud. The taxpayer pays MONEY to constantly test the water for pesticide residues. Then more MONEY is paid to treat the outbreak of cancers and other chronic diseases that arise as a result.

MONEY, MONEY, MONEY. It's there in GDP calculations. And the destroyers pat themselves on the back and say 'good for us' we've increased GDP.

The progression from ecosystem collapse is then a massive and sustained loss of production and even GDP. Sick people don't work or establish businesses. Sick rivers don't produce fish. Sick forests die of disease and stop producing woodchips. Sick air means people leave the towns and cities subjected to the smog and go elsewhere.

Above all, there is a 'spiritual migration' away from the very society in which we live. Go bush and hide.

Brenda Rosser said...

"There is no question that poverty rates in China have drastically fallen"

I find this statement really hard to believe.

Chinese peasant on the land earns the equivalent of $2/day. Most sustenance comes from crops grown, harvesting of local seafood, construction of own house and buildings, energy from local forest, home production.

Chinese peasant evicted from land. Gets $5/day job in city. Result: 'less poverty'. But the extre $3/day doesn't meet the cost of rent and the maintenance of the previous healthy diet. No time for home production.

Barkley Rosser said...


Do keep in mind that prices are much lower in China than in OZ or the US. I was just at a conference where a Chinese academic reported that his salary is $20 per month, but his rent is only $2 per month.

I just googled "poverty rates in China," and the first thing up was a Wikipedia entry on "Poverty in China." According to it, using $1.25 PPP per day as the poverty line, the poverty rate in China has fallen from 64% in 1981 to about 10% in 2004.

Better to focus on the lack of environmental accounting going into these numbers, and there have been efforts to do such accounting. I think you have seen them, and they do document large losses.

Brenda Rosser said...

I'm not sure that your example (the academic's predicament) is typical in China. How does the academic fare compared to ordinary working Chinese?

Also, I tend to think that the $1.25 PPP poverty line definition given at Wikipedia would be a 'political' one; that is, it could be a simple assertion of 'not poverty because we say it's not'.

I, OTOH, was pointing to the 'purchasing power parity' between a rural peasant who lived in a reasonably self-sufficient situation versus the [domestic] PPP of the same peasant evicted from that same land and from the supporting infrastructure. That peasant would then be left to fend on a questionable wage level (relative to the monetary cost of food, clothing, shelter etc). So PPP domestically, rather PPP across national boundaries.

Some relevant documents I've gathered:

"In China, a part of the existing housing stock was built under a command economy (Danwei housing). The pattern of housing consumption in 2007 might therefore partially reflect the past command economy....

Affordable housing: the supply side

By Alain Bertaud
Beijing, July 19, 2007

"Housing affordability in China is a pressing social and economic issue..."

Privatization, housing conditions and affordability in the People's Republic of China
Stephen W.K. Maka, Lennon H.T. Choya and Winky K.O. Hob,
Habitat International
Volume 31, Issue 2, June 2007, Pages 177-192


60% of Chinese exports to the US are from foreign-owned corporations
Brenda Rosser. Friday, May 29, 2009

[Related to:]
2000 – 2003 – foreign firms built 60,000 manufacturing plants in China.
Between 2000 and 2003 alone, foreign firms built 60,000 manufacturing plants in China. European chemical
companies, Japanese carmakers, and US industrial conglomerates are all building factories in China to supply export markets around the world. Similarly, banks, insurance companies, professional-service firms, and IT companies are building R&D and service centers in India to support employees, customers, and production worldwide." ("The Globally integrated Enterprise" Samuel Palmisano, Foreign Affairs page 130)

Early 2000s. Employment in Chinese state-owned enterprises now half of previous levels through their dismantling and State directives that encouraged efficiency through workforce reduction. 30-40 million workers were displaced....

[6] Hart-Landsberg and Burkett, China and Socialism, p. 33; ‘A Survey of China’, Economist, 25 March 2006; Shahid Yusuf, Kaoru Nabeshima and Dwight Perkins, Under New Ownership: Privatizing China’s State-Owned Enterprises, Stanford 2006.

2000 October. Inside a Chinese sweatshop. A life of fines and beating. Inadequate audits.
Guangdong Province in southern China, where thousands of factories churn out goods for Western companies. ...word among migrant workers in the area was that managers there demanded long hours of their workers and sometimes hit them. ... A factory job would give ... living quarters and the temporary-residence permit internal migrants need to avoid being locked up by police in special detention centers. .. many experts think most factories in China producing for Western companies routinely break China's labor laws. ....

Inside a Chinese Sweatshop: "A Life of Fines and Beating". OCTOBER 2, 2000 ISSUE
SOCIAL ISSUES.By: Dexter Roberts in Zhongshan and Aaron Bernstein in Washington