Wealth of nations, 1950-80: standards rising

By , Staff writer of The Christian Science Monitor

Total income of the world was between $19 trillion and $20 trillion last year. The United States accounted for $3.75 trillion last year -- almost one-fifth of the total.

Robert Summers, an economist at the University of Pennsylvania, calculated the global number ``on the back of an envelope.'' With two colleagues at the university, Irving B. Kravis and Alan Heston, he has taken a much more sophisticated look (in the Journal of Policy Modeling) at the distribution of income among the nations of the globe for the 1950-80 decades. Their recent findings are fascinating:

The rich nations are getting richer and the poor nations are getting richer. Only four or five nations saw their standard of living drop in this 30-year period.

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The world as a whole has grown in constant dollars by 4.7 percent a year on average during the 1950-80 period. ``That's phenomenal,'' Professor Summers says.

On the basis of gross domestic product (GDP) per person, the 4 billion people in the world have seen their income climb 2.7 percent a year. The figure is lower than for world growth because of growing population. (GDP does not take account of income from overseas, whereas gross national product does; GDP, therefore, measures economic activity within the geographical boundaries of a nation.)

The fastest-growing group of countries are the middle-income nations, including some of the less populous OPEC countries and such countries as Argentina, Brazil, Egypt, Greece, South Korea, and so on. They enjoyed a 5.8 percent annual growth on average in GDP for the three decades. That slips to 3 percent on a per capita basis.

These countries are catching up gradually with the industrial nations.

Next in the growth race were the ``centrally planned economies'' (communist) nations, including China, the Soviet Union, and the East European nations. (The numbers for Cuba, Vietnam, Laos, and Kampuchea were not accurate enough to include.) The others' GDP grew at 5.4 percent annually, or 3.6 percent on a per capita basis. Many of these nations have only small population increases.

(Last year, by the way, the Soviet economy grew at only a 2.6 percent rate. Among experts there is some suspicion that at least this communist country is having trouble maintaining its earlier rapid growth rates.)

Thirty industrial nations grew at a 4.1 percent average rate, or 3.1 percent on a per person basis. The poorest nations -- such as Afghanistan, Bangladesh, Ethiopia, India, Indonesia, and Pakistan -- grew only 3.9 percent a year, and, because of their rapidly growing population, just 1.5 percent a year on a per capita basis. Thus, though the poorest nations were ``definitely'' becoming better off, their income gap with the rich nations has widened.

The inequality of incomes between nations is likely to be greater than that within nations. That inequality between nations seems likely to have increased between 1950 and 1980.

The communist countries have a third of the world's population, but only 27.5 percent of its output (in 1980). Still, their share of output grew from 22.2 percent in 1950.

Within the market economies' share (72.5 percent), the low-income countries have a mere 9.5 percent of output and more than 40 percent of world population. At the other end of the income scale, the industrial nations have two-thirds of the output of the market economies and only a fourth of the population. (These industrial nations have about half of world output.) That GDP share used to be 72 percent in 1950 but has been slipping with the more rapid growth of the middle-income and communist countries.

Despite all the fuss over the OPEC cartel, the oil nations' share of world output remains small. In terms of constant 1975 dollars, their share was 4.4 percent in 1970 and in 1980. If current prices are used, reflecting changes in relative international prices, the oil nations' chunk grows from 2.5 to 5.3 percent.

The study uses statistics for 127 countries, ignoring 60-odd other ``political subdivisions,'' all very small, that are home to 3 percent of the earth's population.

Professors Summers and Heston together did another paper for the Review of Income and Wealth which compares national incomes per capita on the basis of purchasing power. (Mr. Heston is serving as chief of the international price statistics section of the UN Statistical Office.) Among its findings are these:

1. The poor of the world are not so poor as simple translation of a country's income at current foreign-exchange levels would indicate. By examining the ``purchasing-power parity'' of nations -- the relative cost of all the things made in each country, not just what enters into foreign trade -- the University of Pennsylvania economists show that the poor countries, though indeed far poorer than the rich nations, aren't as bad off as the simple foreign-exchange calculation would show.

For example, India's per capita output of goods and services comes to only 2 percent of that of the US, using traditional foreign-exchange numbers. Employing statistics of the United Nations International Comparison Project compiled at the university, India's per capita GDP rises to 6 percent of that of the US. Instead of being 50 times as wealthy as India, the US becomes just 16 times so.

So far the World Bank has not adopted the purchasing-power statistical system in its annual World Development Report. Since foreign aid levels and contributions to such international bodies as the bank hang partly on a nation's income levels, some poor nations, such as India, prefer to see their proverty -- which is bad enough -- exaggerated by the income comparisons based on foreign exchange.

2. The US remains the richest nation. In 1983, its per capita GDP was $8,268, with Sweden next at $7,479. If foreign-exchange rates are used, such countries as Sweden and Switzerland sometimes appear richer than the US.

The UN International Comparison Project has been planning to publish a Phase 4 of its work based on ``benchmark'' surveys of prices of more than 400 items in some 60 nations. The third phase, in 1982, depended on such surveys in 34 nations and was extrapolated to other countries. A Thursday column Map: The world's wealth: a comparison of purchasing power. Annual per capita gross domestic product by country. Figures are from 1980. Source: The Review of Income and Wealth UNITED STATES $8,089 CANADA $7,521 MEXICO $2,547 GUATEMALA $1,422 NICARAGUA $1,324 COSTA RICA $2,170 JAMAICA $1,414 HAITI $439 BARBADOS $2,944 TRINIDAD $3,994 VENEZUELA $3,310 BOLIVIA $1,114 PERU $1,746 CHILE $2,372 ARGENTINA $3,209 BRAZIL $2,152 PARAGUAY $1,753 URUGUAY $3,269 NORWAY $6,825 SWEDEN $7,142 FINLAND $5,939 BRITAIN $4,990 IRELAND $3,467 BELGIUM $6,293 FRANCE $6,678 SWITZERLAND $6,610 ITALY $4,661 SPAIN $4,264 PORTUGAL $3,092 EGYPT $1,177 ETHIOPIA $337 UGANDA $535 KENYA $460 ZAMBIA $672 ZIMBABWE $930 SOUTH AFRICA $2,354 TUNISIA $1,857 ALGERIA $2,043 MALI $250 LIBERIA $828 GHANA $739 NIGERIA $1,476 ISRAEL $4,041 IRAQ $2,783 IRAN $1,796 AFGHANISTAN $306 PAKISTAN $663 INDIA $498 BANGLADESH $432 JAPAN $5,996 CHINA $1,135 TAIWAN $2,522 PHILIPPINES $1,022 THAILAND $1,181 SINGAPORE $3,948 MALAYSIA $2,204 SRI LANKA $838 INDONESIA $734 AUSTRALIA $6,308 NEW ZEALAND $4,553 SOVIET UNION $3,943 WEST GERMANY $6,967 POLAND $3,509 HUNGARY $3,861 TOBAG O $3994

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