Chart of the Day: 25 Jan 2015: Capitalism and the Asian Middle Classes

As you may have guessed, I have strong sympathies with those advocating a green agenda. Further, the existing domination of neo-liberal thought within the policy elites (almost everywhere) means that capitalism has gone global. While the planet has been a loser in this process because of the pathetic response to global warming, we must not forget that there are winners.

I’ve blogged on Branko Milanovic’s work on inequality before, but here is one of his charts again (source here; click for larger image):

Percentile of Global Income Distribution jpeg

The United States skilled working and middle class, who were the target of President Obama’s latest State of the Union Address, sit around the 80% percentile of the global income distribution. For them, life has not got better; indeed, since the end point of the data in this chart, 2008, things have got worse.

But below them lie a mass of Chinese and Indians who have done very well out of global capitalism. We may want to highlight downtrodden textile workers in Bangladesh or displaced farmers in Ethiopia, but they are a minority. In Milanovic’s words (here):

Nine out of ten people around the global median, the “winners” of globalization, are from “resurgent Asia.” They are people from rural China, including some 150 million who have seen their real incomes increase by a factor of 2.5; rural and urban Indonesia, 40 million people whose real incomes doubled; or urban India, 35 million people with increases in excess of 50 percent. There are also workers from Vietnam, Philippines and Thailand. These “winners” belong to the middle or upper parts of their own countries’ income distributions.

This process has shifted economic power eastwards. The boxes in the charts below represent the size of the economies. Note how 50 years ago China, India and Indonesia were bit players in the global economy. How the world has changed (taken from the McKinsey report “Can global growth be saved” I referenced last week; click for larger image):

Per Capital GDP jpeg

Critiques of the world economic order–with respect to sustainability or any other issue–have to recognise the fact that many, many people have done very well.

2 responses to “Chart of the Day: 25 Jan 2015: Capitalism and the Asian Middle Classes

  1. What’s truly scary about that second chart is the increase in the area under each curve, essentially total world product (GWP), since 1964. The increase is a result of increasing per capita GWP and increasing population, both of which are increasing exponentially, albeit at different rates.

    In animal populations exponential growth often ends in collapse of that growth. Since the human GWP growth curve slope is now very steep, I doubt it can go on much longer. Once it stops, get ready for free-fall.

    PS. Good to have you back on a regular basis again!

    • Thanks Joe. You are right. The increase in economic activity over my own lifetime is absolutely stunning. I guess my reaction is this: Has it led to an increase in overall global welfare: yes. Is it sustainable: no. Can you have a sustainable rise in welfare? Yes, but it’s hard work and will require enlightened leadership. Do we have such leadership? I wish.

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