5 Charts In The Spirit Of Thanksgiving

In the spirit of Thanksgiving, I want to share with you five charts.

Some of them may already be familiar, but….

…since we are bombarded by a relentless stream of apocalyptic predictions,?

…since we keep reading about high inflation, impending recession, the energy crisis,

…since we hear a lot about everything that’s wrong with our society and the world at large…

I thought it might be good to remind ourselves of a few important trends that keep moving in the right direction, and that we should be thankful for — much as we do when giving thanks before the traditional Thanksgiving dinner. So here it goes:

Less poverty

Over the past thirty years, we have reduced by three-quarters the proportion of people living in extreme poverty. In 1990, close to 40% of the world population was struggling to survive on less than $2.15 per day; now it is just over 8%.

China has recorded the most drastic reduction: in 1981, nine Chinese out of ten were living in extreme poverty; now almost no-one is. India’s progress has been almost as impressive: the share of the population in extreme poverty has dropped from over 60% in 1977 to 10%.

Global economic growth over the past three decades has been erratic, unequally distributed, marred by periodic crises and rife with unintended consequences — but if it lifted a third of the world population out of abject misery, maybe it was all worth it.?

Broader access to water and electricity

The decline in poverty goes hand in hand with an improvement in overall basic living conditions. Access to clean water and electricity plays a key role, and this is another area where we have made important progress:

In 1998, 27% of the world population (nearly one person in three) had no access to electricity; today it’s less than 10%. Access to clean water remains more problematic, but the share of people who lack clean water has dropped from nearly 40% in 2000 to just over 25%.

Innovation is doing its part here. In particular, distributed energy technology has helped bring electricity — often from renewable sources — to rural areas still unreachable by the energy grid.

Lower infant mortality

Better living conditions bring better health, and here one of the most telling indicators is infant mortality. The chart below tells another heartwarming story: for the world as a whole, infant mortality has been more than halved in the past 30 years, from about 65 deaths per 1,000 live births to 27.?

Income, health and living conditions remain very unequally distributed. Some degree of inequality will always be part of life — life itself can be very unfair and the distribution of talents at birth is highly unequal. But the degrees of inequality we observe today are still egregious. So let’s take a look at a couple of key indices of inequality:

Improving literacy — and narrowing gender gap

The global literacy rate has risen for both men and women over the past four decades. That’s good news in itself, but the best part is that the rate for women has improved faster, closing the gap. The “literacy gap” defined as the difference between the literacy rate for adult males and adult females (15 years and older) has been more than halved, from 17% to under 7% (the green bars in the chart below).?

It is still too high, and the countries where it is especially high — you know who you are — should take action. No country can hope to advance by neglecting or hindering the education of half of its population.?

But we’ve made sizable progress in the right direction. As of 2020, the female literacy rate stood at 83%, compared to 58% in 1976; over the same period the male literacy rate has risen from 75% to 90%.?

Declining global income inequality

Let’s close with one of the most controversial issues: economic inequality. We’ve heard a lot about rising income inequality, and about the steady enrichment of the top 1% or 0.1% of the population — it’s been a major part of the political debate in many western countries for a number of years.?

Unpacking the income inequality debate within any country, say for example the US, would require a long blog in itself. Here let me just say that one thing that bothers me is that the discussion is always based on pre-tax, pre-transfers income. In other words, numbers that completely ignore the impact of the tax system and most social subsidies in reducing inequality.?

I wanted to point that out in part because the numbers I show below are also pre-tax and transfers. But here I want to focus on global income inequality. Also, allow me a degree of cheating: since I promised five charts in the title and I have already used four, I will claim that what you see below is really just one chart with two panels…

The panel on the left hand side shows the share of income of the top 10% of the global income distribution. You can see that a sharp rise during the 1980s and 1990s has been almost completely reversed since 2000, marking an important reduction in global income inequality over the past twenty years.?

The panel on the right hand side is taken from a very recent working?paper ?by Branko Milanovic. A little care in interpreting the chart: on the horizontal axis you have the segments of the income distribution, starting with the lowest near the origin. They are ventiles, so where you see “1” on the horizontal axis that is the poorest 5% of the global population; at the right end of the horizontal axis you have the richest, with the top 1% singled out.?

On the vertical axis what you read is the increase in real per capita income for each segment of the income distribution, over two different periods: between 1988 and 2008 (blue line) and between 2008 and 2018 (orange line).?

The blue line tells you that between 1988 and 2008 we had a very strong rise in incomes for most of the middle of the global income distribution — the rise of the global middle class — and for the richest; the poorest and the very-rich-but-not-richest (middle class in western countries) stagnated.?

This already implies a strong reduction in global inequality.?

But the orange line tells an even more uplifting story: between 2008 and 2018 it shows continued strong income growth for the middle of the global income distribution, but accompanied this time by an even stronger improvement for the poorest segments of the global income distribution, and a much smaller improvement for the richest.?

A more detailed discussion of who around the world has become better off would require a lot more space. As Milanovic notes, there is significant churn within the distribution: if you are in the bottom 5% in year-1 and enjoy strong income growth, the next year you will be in a higher percentile of the income distribution; so when the chart shows that real incomes for the poorest 5% have grown by about 7.5% over 2008-18, this does not mean that the same exact individuals where in that segment throughout the ten-year period. It does mean, however, that the 5% poorest in 2018 where 7.5% better off than the 5% poorest ten years earlier.

But there is no need to get into the details here. The main message stands out clearly: global growth has delivered a major reduction in global income inequality over the past thirty years, and over the last ten years that has benefited especially the poorest segments of the global population, while continuing to fuel the growth of a new global middle class.?

Many other things have improved; Steven Pinker compiled a long list in Enlightenment Now. But even just looking at these five charts, that’s a lot to be thankful for — and a reminder that we must be doing something right.