POETIC LICENCE: The gap between rich and poor nations is widening

www.dailytimes.com.pk Kaleem Omar

Japan’s GDP per capita, at $ 34,715, is 70 times higher than Pakistan's, at $ 492. The gap lessens when one adjusts per capita income statistics for purchasing power parity. But even adjusted for purchasing power parity, Japan’s GDP per capita, at $ 23,480, is still 15 times higher than Pakistan’s, at $ 1,570

There is a huge per capita income gap between rich and poor nations. Switzerland, the world’s richest nation in GDP per capita terms, has over 400 times the per capita income of Ethiopia, one of the world’s poorest countries. Japan’s GDP per capita, at $ 34,715, is 70 times higher than Pakistan’s, at $ 492. The gap lessens when one adjusts per capita income statistics for purchasing power parity, or what a dollar will buy in the respective economies. But even adjusted for purchasing power parity, Japan’s GDP per capita, at $ 23,480, is still 15 times higher than Pakistan’s, at $ 1,570.

Moreover, the gap between rich and poor nations continues to widen. In 1939, the income of the average American worker was 16 times higher than the average Indian worker’s income. By 1969, it was 40 times higher. Today, it is 78 times higher.

The emergence of a large middle class in India has made little difference to the overall picture. Caught in the nutcracker of low-income growth on the one hand and a burgeoning population on the other, India remains a very poor country. It has the largest concentration of impoverished people in the world, with some 350 million people living on less than a dollar a day and another 350 million that are not much better off.

As co-authors Philip Kotler, Somkid Jatuspripitak and Suvit Maesincee note in their study “The Marketing of Nations”, there is also a large and often widening gap between the rich and poor within individual nations. This income gap is generally greater in less developed nations than in industrial nations.

If we compare the share of national income that accrues to the poorest 40 per cent of the country’s population with that of the richest 20 per cent, we find that countries South Korea, Canada, Japan and Sweden have relatively lesser inequalities. Others like Malaysia, Tanzania, Chile, Costa Rica and Libya have moderate inequalities. Yet others like Brazil, Ecuador, Colombia, Jamaica, Mexico, Venezuela, Kenya, Sierra Leone, South Africa and Guatemala have drastic income inequality in their overall income distribution.

Apart from struggling with poverty, many people in developing nations fight a constant battle against malnutrition, disease and poor health. In 1999, the average number of doctors per 100,000 people was only 5 in the least developed countries compared with 220 in the industrial countries. Every year, about 20 million people die from infectious and parasitic diseases. The infant mortality rate is 99 per 1,000 births in the least developed countries, compared with about 74 in developing countries and only 11 in industrial countries. Average life expectancy is about 52 years in the least developed countries compared with 61 years in developing nations and 75 years in industrial nations.

Malnutrition is another major problem in the poor countries. About one billion people in poor countries still do not get enough food. In terms of per capita daily protein consumption, it is 97 grams per day in the United States, compared with 63 grams per day in Brazil and 43 grams per day in Ghana.

Literacy levels in poor countries also remain low. Literacy rates in the less developed and developing countries average only 45 per cent and 64 per cent of the population, respectively, in contrast with 99 per cent for the industrial nations.

Most important is the interaction of all the above characteristics. They tend to reinforce and perpetuate the pervasive problems of poverty, ignorance and disease that restrict the lives of so many people in poor countries.

In October 2000, the world population reached 6 billion, double the 1960 figure. The world population is projected to reach 7.2 billion in the year 2010, of which almost 5.9 billion will be living in poor countries.

The population of what comprises today’s Pakistan (the former West Pakistan) was only 37 million at the time of the first post-independence national census in 1951. Today, Pakistan’s population is close to 150 million, more than four times the 1951 figure. This very high rate of population growth lies at the heart of Pakistan’s economic problems.

As the authors of the “The Marketing of Nations” study note, the explosive birth rate found in many poor countries means that these nations have the burden of supporting millions of people younger than 15 (in Pakistan, for example, 40 per cent of the population is under 15).

Today, millions of children in poor countries are working in farms, factories, workshops, street corners and garbage dumps. Enhancing educational opportunities is a way to make schooling a real alternative for these children. However, the immediate challenge is, how will the poor countries build enough schools? And some years later, how will these countries provide enough jobs for young people entering the job market?

Discussing the job shortage problem, the authors of the study note that technology improves productivity but may reduce the number of jobs. The growth in GDP and unemployment in many countries indicates that employment has consistently lagged behind economic growth.

Developing countries have also experienced jobless growth. The labour force in developing countries continued to increase by 2.3 per cent throughout the 1990s, requiring the creation of an additional 260 million jobs – a staggering task for which the economies of developing countries were simply not equipped.

In Pakistan’s case, an estimated two million new jobseekers enter the job market each year. To create jobs in the large-scale manufacturing sector for so many jobseekers would be prohibitively expensive for a country of Pakistan’s means, given the fact that creating one job in large-scale manufacturing at today’s prices requires an investment of between Rs 300,000 to Rs 500,000.

The answer to the problem lies in adopting social sector policies aimed at reducing the population growth rate to below two per cent, and in creating more jobs in the agricultural sector, the small manufacturing sector and the services sector, which create more jobs per dollar of investment than the capital-intensive large-manfucturing sector. But success in this endeavour depends, among other things, on continuity in policy — something that has often been lacking in Pakistan.