Evaluating economic well-being is a tricky matter. But a new organisation for economic co-operation and development (OECD) study shows that the global trends are far more positive than we might expect, writes Gordon Sharpe, a lecturer in economics and a former senior banker.
How can we devise effective measures for ‘quality of life’ that will stand the test of time across generations? It’s not an easy task to compare economic well-being in different eras. But the OECD has found a way to do just that and the result is highly instructive and somewhat surprising.
The report, entitled ‘How Was Life? Global Well-Being Since 1820’, presents clear evidence that the economic well- being of the world’s nations is fast becoming more equal, with the notable exception of Sub-Saharan Africa.
The study relies on a huge amount of detailed historical data for every decade since 1820 for 25 major countries. It covers eight separate regions of the world and more than 80% of the world’s population. The scale of the project means it achieves the near impossible – it succeeds in charting long-term economic progress across generations in different countries.
The researchers identified 10 major factors that contribute to a society’s well- being: gross domestic product, real wage levels, educational attainment, life expectancy, average height, personal security,availabilityofpoliticalinstitutions, environmental quality, extent of income inequality and gender inequality.
Let us consider some of the broader and mainly very positive outcomes:
– In 1820, less than 20% of the world’s population was literate but this had reached 80% by 2000.
– Life expectancy was around 30 years in 1880 but has now reached 70 for the global population and is rising.
– There have been general improvements in education, healthcare, nutrition, hygiene and diet, even when GDP has not increased.
– There is little correlation between the overall wealth creation in any country and its personal security, when measured by homicide rates and exposure to conflict.
– The inflation-adjusted wages of manual workers have increased eightfold globally over the study period while GDP per capita rose 10 times.
– Income inequality decreased during the period from 1900 to 1970. Then it increased considerably, accelerated by the collapse of communism in the 1990s in Eastern Europe. This is one of the report’s most negative findings and something that needs to be addressed.
– There has been substantial progress in reducing gender inequality since 1950 in many countries although there are significant variations between the eight regions, with Western Europe and North America performing best.
We should, however, put these findings into perspective as the world’s population has tripled to around seven billion since 1950. The environment never stays the same in different eras and the next generation always benefits from the advances of the previous one. There are also major historical factors influencing the outcomes for some generations. To give an obvious example, two world wars led to a great deal of destruction in many countries.
There have also been many massive post-war changes across national boundaries triggered by huge advances in science and technology. Today’s world, with its scheduled flights and digital technology, would be unrecognisable for anyone living in the 1820s.
In most developed countries, the growth of the liberalised consumer society has defined the modern era. We can readily accept that technological advances do not necessarily result in improved well-being but we can safely state that all the evidence from the OECD study indicates that we live in the best of times experienced to date.
The characteristics of the modern era, however, present distinct challenges for global CEOs and international entrepreneurs. The international marketplace has expanded rapidly and this generation is digitally savvy. This means the correct marketing mix requires careful planning to reap the benefits.
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