Tuesday, June 30, 2020

The World Rises Out of Extreme Poverty

Between 1750 and 1820, capitalism had its start in the Western World. It would prove to bring more prosperity than had ever been known -- ever. 

In 1800, 90% of the world's population lived in extreme poverty. In 2019, 10% did. During this 220 year span, 80% of the population of Earth rose out of extreme poverty.

According to the World Bank, people living in poverty have access to shelter, food, clean water, and basic services provided by the government or private entities. On the other hand, people who live in extreme poverty are severely deprived of basic human needs and often do not have access to service aids.
Most of a country's shift out of extreme poverty coincides with its industrialization.

The entire population of the U.S. has been effectively out of extreme poverty since about 1940. 

Most of China's population was stuck in extreme poverty until 1976, after which, the country suddenly began advancing out of it, slowly at first, then much more quickly, as if they had been unnaturally constrained before.

India's rise out of poverty is also impressive, though it started progressing earlier than China and has maintained a somewhat slower pace.

The largest country whose population still mostly falls below the extreme poverty line is the Democratic Republic of Congo, which though it has grown significantly in population, has fallen back behind other countries in its region in recent decades.

World GDP per capita was essentially flat for 2,000 years. It began increasing during and after the Enlightenment. Beginning about 1820, the rate exploded. 

Further Reading

The Origins of Power, Prosperity, and Poverty  What explains the enormous differences in income per capita that exist across the world today? The question has been posed many times over. The gaps in prosperity that surround us in the modern age are much wider than those that motivated Adam Smith to write The Wealth of Nations in 1776, which of course is where the modern discipline of economics began.
Why Nations Fail

Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities.

The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Acemoglu and Robinson explain how institutions are key to prosperity, and how bad or extractive institutions prevent prosperity. 
 The Birth of Plenty

In The Birth of Plenty, William Bernstein, the bestselling author of The Four Pillars of Investing, presents his theory of why prosperity has been the engine of civilization for the last 200 years.

This is a “big-picture” work that highlights and explains the impact of four elements that when occurring simultaneously, are the fundamental building blocks for human progress:
  • Property rights, which drive creativity
  • Scientific rationalism, which permits the freedom to innovate without fear of retribution;
  • Capital markets, which provide funding for people to pursue their visions;
  • Transportation/communication, which allows for the effective transfer of ideas and products.

 The Age of Abundance 

Until the 1950s, the struggle to feed, clothe, and employ the nation drove most of American political life. From slavery to the New Deal, political parties organized around economic interests and engaged in fervent debate over the best allocation of agonizingly scarce resources. 

But with the explosion of the nation's economy in the years after World War II, a new set of needs began to emerge—a search for meaning and self-expression on one side, and a quest for stability and a return to traditional values on the other.

Lindsey offers a bold reinterpretation of the latter half of the twentieth century. In this history of postwar America, the tumult of racial and gender politics, the rise of the counterculture, and the conservative revolution of the 1980s and 1990s are portrayed in an entirely new light. 

 How the West Grew Rich

How did the West—Europe, Canada, and the United States—escape from immemorial poverty into sustained economic growth and material well-being when other societies remained trapped in an endless cycle of birth, hunger, hardship, and death?

In this elegant synthesis of economic history, two scholars argue that it is the political pluralism and the flexibility of the West's institutions—not corporate organization and mass production technology—that explain its unparalleled wealth.

This book is a summary of the factors which were necessary to the breakthrough, or series of economic breakthroughs (they actually mention at least five -- the expansion of trading and markets, the first and second industrial revolution, the modern information/technology revolution, and science).

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