Good news from the World Bank's Global Economics Prospects 2007, released today. Growth in developing countries will reach a near-record 7 percent in 2006. That's much higher than the economic growth in high-income countries, a still respectable 2.6 percent, which is held down by slow growth in many of the sluggish welfare states of Europe. But the chief point is that the huge gap between the developed and the developing worlds is narrowing. This is wonderful news.
"The number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030," the bank's chief economist says but adds that Africa may be left behind and that economic inequality within some countries will increase. Well, there's always some downside, I guess. But how can you avoid inequality if you grow? Not everyone is going to get richer at the same pace.
Why is the Third World growing so rapidly? Market economics, the rule of law, growing world trade. China in the 1980s and India after the collapse of the Soviet empire in 1989–91 moved to free-market policies, and tens of millions have moved out of poverty. It's a simple formula, and it's too bad that people didn't figure it out 40 or 50 years sooner. Instead, we messed around with government-centric policies that failed to do much good, as William Easterly recounts in his book The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Create an environment in which talented entrepreneurs can go to work, and you can have marvelous growth, as in the United States in the 50 years after the Civil War: For a wonderful account, see Charles Morris's The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supereconomy. I'm in the middle of this now and may blog more about it when I'm finished.
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