Homage to Catalonia, II
I’ve long been suspicious of international comparisons that weight all nations equally. When someone says “Former British colonies do better than former French colonies,” my reaction is “Yes, but India did badly for decades, and it’s probably got more people than all other British and French colonies put together.” Now Sala-i-Martin has a fascinating article that shows that – in at least one important case – my objection matters. If you count all countries equally, growth rates have diverged, and inequality has increased. But if you weight the data by population, growth rates have converged, and inequality has decreased:
[T]he few countries in Asia that have converged to income levels of the OECD are large and populous, while many of the countries that have diverged (chiefly African countries) are not. Since the total population of the 41 African nations is about half of that of China or India and only twice the population of Indonesia, the results where each country is one observation (and therefore Africa gets 41 times the weight of China) are completely different from those where each citizen is one observation (where Africa gets about half the weight of China).
(Confused? Check out the elegant graphs on page 42).
The bottom line is that if you care about the well-being of human beings rater than countries, average living standards have gone way up and inequality has decreased:
We report eight measures of global income inequality. All of them deliver the same picture: after remaining constant during the 1970s, inequality declined substantially during the last two decades. The main reason is that incomes of some of the poorest and most populated
countries in the World (most notably China and India, but also many other countries in Asia) rapidly converged to the incomes of OECD citizens. This force has been larger than the divergence effect caused by the dismal performance of African countries.
At this point, you could reasonably ask: “Why are you happy about lower inequality, Bryan? Haven’t you argued that abler people deserve more?” Indeed I have. But unlike income differences within countries, income differences between countries are not primarily based on differences in individual merit. Compared to other Americans, successful Americans usually have a lot more talent and a much better work ethic. But does the average American have a lot more talent and a much better work ethic than, say, the average Chinese? I think not.