World econ dev

Gross World Product was about £43.6 trillion dollars in the year 2000. World population was about 6.15 billion people. Average output per head (Gross World Product/head) in Year 2000 was about $7,000 at purchasing power parity (PPP). All the following estimates of Gross World Product, Gross Domestic Product and national income per head are in PPP. The data source for for these figures is the CIA World Factbook 2000 at http://www.odci.gov/cia/publications/factbook.

If all the countries of the world accelerate their economic development during the next twenty years to the living standards easily possible for this era (we are now in the upswing of the sixth Kondratieff cycle since the industrial revolution) of about $50,000 per head, world GDP would become about $307 trillion dollars. The most developed nations in the world can be expected to increase their GDPs, currently mainly between $16,000 and $32,000 a head, by a factor of four within half a century, so by 2050 the most developed countries of Asia, Europe and North America will have average incomes per head of between $64,000 and $128,000 a head.

The degree of current economic development of the world is about 14.0%, that is, Gross World Product of $43.6tr is about 14% of the potential GWP of $307tr and hence the countries of the world are achieving on average less than about one seventh of their economic potential.

Although the average income per head is about $7,000 pa - or about 19 dollars a day a head - it is very unequally distributed. The top 1% of world population - or about 60 million people - are living in communities where the income per head is beyond $100,000 a year, or about $275 a day. The data also implies that the bottom 4% of world population (or about 240 million people) are living in communities where the income is below $375 per head a year - below one dollar a day.

Data on the average GDP per head of the continents can be similarly misleading. There are extremes of great wealth and abject poverty in each continent and the average GDP per head, while illustrative of the average level of continental development, gives no clue about its distribution.

Estimates of GDP are sometimes not accurate due to systemic and random errors in the collection of national statistics. The quality of the data also varies greatly. Several nations have highly developed black markets and significant levels of unrecorded production which does not find its way into the data. Still, the information is interesting and indicative, although it is seldom accurate to better than plus or minus a few percent.

The economic development of different continents

That said, the current economic development of different continents varies enormously. The income per head of the continents is estimated as follows:

Table 1 - Development level of the continents

World GDP and population

	GDP	Population	Income/head	Development
	$bn	('000)	$000, PPP	Grade	Class
Africa	1,676	820,128	2.0	Grade 3	Very poor
Asia	17,129	3,905,356	4.4	Grade 4	Poor
Europe	10,049	585,284	17.2	Grade 6	Not fully developed
North America	11,828	460,031	25.7	Grade 7	Developed
South America	2,501	372,659	6.7	Grade 5	Average

99.8% World	43,182	6,143,458	7.03

Note: This table only covers 99.8% of Gross World Product (GWP) and summarises the GDPs of the 158 countries with populations of over a million people. There are another 34 independent countries and a further 66 dependent territories with populations totalling about 15m people that are not included in the above table. The grading system is explained here.

There is obviously a "proximity factor" in economic development. Countries tend to compare themselves with, and perhaps to imitate, their more successful neighbours. Hence industrialisation, born in Britain, spread first to Britain's near neighbours in continental Europe and to some of Britain's colonies. There tend to be higher levels of development in particular geographical areas in each continent - in Western Europe, or in Northern and Southern Africa or in the China sea area of Asia, for example. When looking at the different levels of economic development level of continents, it is best to keep in mind these regional differences.

The average development level of North America (including Mexico and the nations of the isthmus and the Caribbean) is considerably more developed than Europe, which is achieving much less than half of its current potential. In terms of economic grades, North America and Europe are both at different ends of the Grade 6 spectrum, which covers incomes per head between $16,000 and $32,000 a year.

Asia, where over 63% of mankind live, is only about 8.8% developed. Although China now has a real purchasing power of about $3,600 a head, and despite the economic miracles of the China Sea economies, much of the rest of Asia is still very underdeveloped.

Africa is by far the least developed of the continents. Africa's population of 820 million people is only slightly less than the 833 million people in both Americas, yet the GDP of Africa is 4% of Gross World Product (GWP) rather than the 33.2% of both Americas. Thee is no good reason why the low living standards of Africa should persist, and as we will see, much of the destitution of the world is in Africa.

Table 2

World GDP and population

	GDP	Population	Income/head	Possible
	% GWP	% of world	% world ave.	GDP $tr
Africa	3.9%	13.3%	29%	41,006
Asia	39.7%	63.6%	62%	195,268
Europe	23.3%	9.5%	244%	29,264
North America	27.4%	7.5%	366%	23,002
South America	5.8%	6.1%	95%	18,633

Total	100.0%	100.0%		307,173

Note: In Tables 1 and 2 above, Europe is defined geographically. That geographic definition is not consistent with analyses of the economic position and prospects of United Europe and the applicant states.

The above table summarises the shares of Gross World Product by continent and the percentage of world population in each continent.

The third column in the above table shows the average continental income as a percentage of the world average, and finally the last column shows the economic potential if each continent achieved an income of $50,000 a head. World income could be over 7 times larger than it is.

Average continental incomes compared to world average

The North American continent’s average GDP per head is about three and two thirds times the world average.

The GDP of Asia - at 39.7% of gross world product - is larger than that of North America (27.4%) or Europe (23.4%). The Asian continent’s GDP per head is about 62% of the world average. (Incidentally, the income per head in the oil-rich middle East is about the same per head as the rest of Asia. This is probably because internally financed economic development in China, Japan, and in East Asia and India is producing the same results as oil-financed development in a handful of Middle Eastern States and because the populous nations of the Middle East are oil poor.)

The average income of South Americans appears to be slightly lower than the average income in the world. They have collectively 5.8% of world incomes and 6.1% of world population.

For Africans, the average income per head in their continent is less than a 30% of average world income. Africa has collectively 3.9% of world income and 13.3% of world population.

Asia is growing very rapidly, mainly due to the high economic growth of China – about 28% of the world’s population growing at 9% pa – and due to the growth of Indian economy at about five percent a year.

During the mid 1990s and prior to the Asian Crisis and the real income cuts imposed on the economies destabilised by speculative attacks on their currencies and stock markets, the real income of the less developed world exceeded the income of the developed world for the first time since modern economic records began. Western Europe and North America are equal to about 50.7% of the Gross World Product. To crudely estimate the GDP of the developed world we could add Japan (7.2% of GWP) and deduct Eastern Europe (2.7%) and Mexico (2.1%), to arrive at a rough estimate that 53.1% of the GWP is in the developed world. A few more years of economic recovery in Asia and high growth in China and India might be enough to tip the scales again.

These calculations (and all the ones that follow) are based on purchasing power parities (PPP) and are a good reflection of the average real purchasing power of populations and, for national economies, a good estimate of the productive power of the economy. These estimates are different from the results one would get using Exchange Rate Values (ERV), which are often very misleading. The exchange rates of less developed countries are often low because of the weak trading position of these nations and do not reflect the true value of purchases of goods and services within the country, while these calculations, based on PPP are a good estimate of real differences in production and purchasing power.

A closer look at the different incomes of regions within each continent seems useful.

The development level of different areas within continents

The development level of different continents

The economic prospects of Africa

The economic prospects of Asia

The economic prospects of North America

The economic prospects of South America

The economic prospects of United Europe

Four possible futures for the world

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Date last modified: 07/07/06