It is difficult, even for those who have lived through it, to fathom the pace of progress over the past half-century.

The OECD Development Centre recently published a study by economist and historian Angus Maddison presenting comprehensive estimates of population, gross domestic product (the total value of goods and services produced in an economy) and GDP per head for different countries and regions, and in the world as a whole, down the centuries. British economist David Henderson drew from this study for his book co-published by the New Zealand Business Roundtable last month, ‘The Role of Business in the Modern World'.

Historically, rising GDP per head has gone together with longer life expectancy, advances in health, higher educational standards, some notable environmental improvements, and greater leisure; and it can reasonably be taken as a first-approximation measure of material living standards.

Henderson uses Maddison's figures to make the point that in 1950, Australia and New Zealand already had a well-established claim to be viewed as economic success stories: they ranked as the third and fourth richest countries in the world, after the US and Switzerland. Australian GDP per head was $7,400 using 1990 US dollars as a measure. The annual rate of growth of GDP per head over the 80 years from 1870 to 1950 was close to 1 percent. A continuation of this growth rate would have resulted in GDP per head in Australia of $12,000 in 2000. A more optimistic projection, using 1.5 percent growth, would have produced a figure of $15,500. In the 1950s, such an outcome would have been seen as close to the upper limit of the possible.

Australia's average annual growth rate between 1950 and 2000 was 2.1 percent and GDP per head in 2000 was close to $21,500 – almost triple the 1950 figure. Judged by past standards, which had made Australia one of the richest nations in the world, this has been a truly remarkable improvement in performance.

Yet Australia's experience over this time was not unusual. In fact, the nation's relative position in the world had slipped by 2000 and New Zealand's had slipped even further. Almost without exception, nations which were already well advanced in 1950 had grown since then at average rates comparable to (or higher than) the rate of growth of Australia.

Up until 1950, some questioned whether it was possible for modern economic growth to be achieved outside a so-called ‘magic circle' of countries which were all – with the exception of Japan – either European or of predominantly European origin. This view has since been completely dispelled. Leaving aside the smallest economies with a population in 2000 of less than 1 million, Maddison's evidence shows some 25-30 newly successful countries. Among these, 15 have seen an increase in GDP per head greater than fivefold between 1950 and 2000: the list includes Greece, Portugal and Spain in Europe; and in Asia, Hong Kong, Malaysia, Singapore. South Korea, Taiwan, Thailand and – last but far from least – China.

For most of the world the period from 1950 to 2000, judged by all past standards, emerges as one of striking economic progress. Other indicators of welfare have also risen: life expectancy in less developed countries rose from 41 years in the 1950s to 66 years in 2000. And as David Henderson notes “In the course of the past half-century or so, the numerous citizens of the more economically successful poorer countries have been rapidly catching up with their counterparts in the former magic circle.”

Not surprisingly, these success stories are only part of the picture. In many poor countries, especially though by no means only in Africa, progress has been slow. These countries have been falling further behind both the rich countries and the more dynamic developing economies. Much has been written about the ‘widening gap'. But it is not the gap between richer and more dynamic economies and the less successful poorer ones that poses a problem, but the slow rate of progress in the latter. The economic progress made by countries in general, and poor countries in particular, is to be welcomed. It should not be labelled as a problem, or as a source of injustice, merely because not all countries have shared in this success.

The past half-century offers clear evidence of rapid, sustained and increasingly widespread improvements in material welfare. Looking at both the success stories and the failures of these decades, including of course the failure of the communist experiment, a general moral can be drawn. There is good reason to think that it is the framework of economic freedom and competitive market economies, in rich and poor countries alike, which has played a decisive part in making such achievements possible.

For more information, contact:

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Advisor
Ph: 04 494 9101
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz