Exaggerated Economic Growth of the Third World
Exaggerated Economic Growth of the Third World Author Jayant Bhandari – Acting-Man
Fund Managers, economists and politicians agree on the exciting future they see in the Third World. According to them, the engine of the world’s economic growth has moved from the West to what were once the poverty-stricken societies of the Third World. They feel mushy about the rapid increase in the size of the Middle Class in the Third World, and how poverty is becoming history.
GDP of India vs. UK in 2016 – crossing over.
Just one of the scores of countries that the British once ruled over, India, is now believed to be richer than its colonial master. What used to be colonized countries, believed to have had an inherent problem that prevented them from ever growing intellectually and economically, are finally seen to be emerging from under the yolk. But are they?
Between 2002 to 2012, the combined GDP of the Third World rose by ~90%, whereas that of the developed world grew by a “mere” ~15%.
GDP growth of developed vs developing world
The reason has been the faster rate of growth in the third world, which has outstripped that of the developed world for most of the last three decades. Future projections look even more exciting:
Annual real GDP growth, emerging markets vs developed markets
The end result has been that that while the combined GDP of the Third World on a purchasing power parity (PPP) basis was half as much as that of the developed world in 1980, it is now higher. This is nothing but astounding according to international organizations and the media. It is simply an impressive achievement of the third world, as they will say:
EM vs. DM cumulative GDP adjusted for purchasing power parity
Lies, Damned Lies, and Statistics
Except for China, Third World countries, erroneously known as “emerging markets”, haven’t achieved what the preceding graphs show. The graphs suffer from four statistical flaws, which are unhesitatingly repeated and regurgitated by the media, the World Bank, the IMF, the developed world, and the Third World.
Those from the developed world desperately want to be seen as self-deprecating and non-racist, while preserving their own jobs and even enhancing their career prospects. As Marc Faber experienced, even a glimmer of expression of facts that go against the conventional, politically-correct wisdom leads to vehement opposition.
In the boardrooms and discussion meetings of big organizations, it is hard to imagine that anyone has a chair to point out the statistical flaws. In our current institutional set-up dominated by virtue-signaling and political correctness, the truth and doing good are of no value.
The Third World fails to challenge the statistical flaws for they love being seen as geniuses and want to feel proud of their ancient cultures and religions which have shackled and ossified them mentally, socially and politically, resulting in their failure to contribute humanity in the areas of science, literature or arts.
In the end, this grave problem underlies the future of the Third World.
Let us consider the flaws before reinterpreting the same data:
Comparing growth rates: Mathematically, this is utter non-sense, for growth rates can be compared only and only if the entities being compared have the same base or at least similar bases.
According to the Economist, India and Ethiopia are among the fastest growing economies of the world, China is facing low growth and the US is struggling:
Let’s look at the absolute numbers to understand what the assertion of the Economist translates into:
If Ethiopia grows at the rate of 8.5%, it will add a mere US$72 to its per capita GDP. Similarly, India, if it grows by 7.7%, will add US$164. The US, despite its seemingly low growth rate, will add US$1,367.