World Economic Outlook : Asset Prices and the Business Cycle
The International Monetary Fund 2000

We like Mr. Bruce Springsteen. But we wonder sometimes whether some of his early lyrics might have had a damaging effect on some of today's twenty/thirty - somethings. In memory, the song in question opens : "Well, we busted out of class / Had to get away from those fools / We learned more in a three minute record, baby / Than we ever did at school". Fast forward to the demos of Seattle and Prague. Think of all that ferocious "anti-capitalism". Think, our suit today, of all whose interpretation of the doings of the global economy is so flagrantly at variance with empirical evidence that meaningful discussion becomes very hard. We come not to be snobby. We come merely to praise data. We come to stick up for school over pop. Sorry, boring, but….

An alarming number of otherwise sensible and well-meaning commentators argue that the world has got worse, the poor more numerous and more poor, the environment more putrid or more fragile, our children more neglected, our moral senses more brutalised, the stock of intra-human indifference more colossal than ever… It can be difficult, in questioning the culture-of-decline school of analysis, to squeeze a fact or two in sideways. And if one tries, this can - in certain circles - be taken as a revealingly reactionary act. Nowhere is this more true than in the debate about the actual condition of the global economy and the contemporary distribution of the riches of the earth.

This notice concerns a perfectly standard IMF study : full of statistics and national case studies. Its politics seem to us doggedly centrist : extended concern about the persistence of absolute poverty, unwillingness to favour an ideological approach to problem-solving, recognition that financial orthodoxy is not the only thing that matters in life (nor the only thing that leads to human well-being). The text bears appropriate sensitivity to all the bitter criticisms that have been made of IMF economics over the years. This is not a riveting, but certainly a sober read. The facts-and-figures on offer would not, we feel, outrage or surprise anyone who reads other sources of global data on issues of development. The interpretation on offer will detain us a little later. Let's stick with the fact thing for now.

The best part of this report is the section which reviews the economics of the last hundred years. It opens :-

"The transformation of the world economy in the course of the twentieth century would have been impossible for even the most acute observer living in 1900 to forecast or perhaps even to imagine. Output per capita, the structure of production, and the domestic and international financial system that sustained the growth of economic activity over this period have been altered almost beyond recognition".

It goes on :-

"Between the years 1900 and 2000, world GDP at constant prices has increased about 19-fold, corresponding to an average annual growth rate of 3%".

And later :-

"Although the richest quarter of the world population has seen its per capita GDP increase close to sixfold over the century, per capita income for the poorest quarter of the world population has increased less than threefold, although - from along-term historical perspective - this is still a notable acceleration of income growth".

Now, some readers might already be thinking all frowningly - what is it Jerry Springer says - we can see where you are going with this. So let's deal with some issues here.

The incidence of absolute poverty is a disgrace to civilisation. Hundreds of millions of people still have, in the definition first coined in the late 1970's, "a condition of life so characterised by malnutrition, illiteracy and disease as to be beneath any reasonable standard of human decency". For the general inhabitants of countries like Angola, Burkina Faso or Burundi - to pick just three examples - the notion of economic progress must seem like a sarcasm and the glory of globalisation a sickening tease. We are not here discussing, incidentally, countries whose meagre household incomes are being sucked into the bank accounts of big-brand owners. We are discussing countries whose citizens' membership of the global market economy is barely titular.

In these circumstances, it seems like a crashing moral insensitivity to insist that much of the assault mounted on human misery over the last generation has been sustained and successful. Even this IMF report is so timid and so tentative as it grazes this delicate subject that is becomes very difficult to find the facts that really kick. On this evidence, the IMF - and presumably the other institutions of the global order - simply feel that they cannot be seen in public to defend the very order they serve or celebrate the real successes of economic management since the 1970's.

Across the developing world, some 90% of people live in countries where, in the last thirty years, average incomes have not declined; indeed, some 70%, meanwhile, live in countries where income growth has "exceeded that in industrial countries". Though the figures still make a gruesome read, poverty levels in India have dropped appreciably since the 1970's. Serious improvements in health and life expectancy can be measured all over Latin America and Asia. In some of the poorest countries of the world, people can now expect to live an average of 13 years longer than they did in 1970. And, in general, GDP growth is being translated into improved incomes for the poorest groups.

Of course, there are giant inequalities in income distribution across the world and these are a source of moral upset to many. This report actually discusses how just income inequalities inside developing countries may actually detain the forward movement of economic growth. All this is a thoroughly proper debate to have. But it is a flight into distortion to deny or indeed to minimise the successes that have been achieved within the whole evolution of international trade and global economic management. And this IMF study almost manages to do just that. One has the unmistakable sense that the Seattle protestors and all their clamour have sapped the confidence of the bodies they hate so much. Facts do get trivialised and ignored in the middle of all this.

But it is not just the Seattle demonstrators and co.that put a black fantasy where a white fact should be. In a recent article about the IMF, the UK economist Sarah Hogg discusses the aims of the founding governments of the post-war settlement and comments on their "profoundly damaging faith in the efficacy of big government". This is a still common sub-text in the writings of economists from certain ideological stables. And yet in the sweep of the historical analysis under review here, it is once again made stark that the huge economic gains of the last century came alongside a massive increase in the roles and responsibilities of the state. In the USA, for example, public sector expenditure as a proportion of GDP was just over 7% in 1913; by 1998, it was nearly a third. The equivalent figures for the UK were 9% and 40%; for France 17% and 54%. As this report says out loud :-

"Although there has been much political rhetoric during the final quarter of the century about the desire to scale back the public sector, in no country outside the former Soviet bloc has the public sector expenditure ratio been reduced by anywhere near the amount of its increase following World War Two".

It is good to walk through the cold spray of facts every now and then. It is bad to listen to too much mental muzak. Too many facts are getting drowned out by pop politics. This report does not say this out loud. But surely, surely this is what is all means.