Money Matter
Galloping disparities in world income levels
By Daya Krishna
WDR 2005
According to the World Development Report 2005 (WDR-2005), the World Gross National Income (GNI) had risen from $31,484 billion in 2002 to 34,491 billion in 2003 and the world population had risen from 6,201 to 6,272 million resulting in the per capita income for the world rising from $ 5,080 to $5,500 in 2003.
In 2003, the low-income countries with a population of 2,310 million i.e. 37 per cent of world population, had a GNI of $ 1,038 billion i.e. 3 per cent of world GNI, and had a per capita income of $ 450. On the other hand, the high income countries with a population of 971 million i.e. 15 per cent of world population, had a GNI of $ 27,732 billion i.e. 80 per cent of world GNI, and had per capita income of $ 28,550, which is 63 times of the per capita income of $ 450 for the LICs.(See Table ).
During the 58 years period between 1945 and 2003 , the share of rich countries in the world population had fallen from 30 to 15 per cent but their share in world GNI had risen from 66 to 80 per cent. During the same period, the share of poor countries in the world population had declined from 50 to 37 per cent but their share in world GNI had fallen to one-fourth from 12 to 3 per cent!!
In 1945, the per capita income of the rich countries at $ 4,438 was only 9 times of the per capita income of $484 for the poor countries. But in 2003, this ratio had gone up seven times from 9 to 63 !! This is indicative of the extent of the widening of the chasm between the rich and the poor countries of the world which is the main cause of the rising wave of violence and crimes in the world.
Investment is the central theme of the WDR 2005, as services was the central theme of WDR 2004. The WDR 2005 says: “Investment plays a central role in growth and poverty reduction. Improving investment climates is critical for governments in the developing world where youths have more than double the average unemployment rate, where 1.2 billion people survive on less than $ 1 a day, and where population is growing rapidly. Expanding jobs and other opportunities for young people is essential to create a more inclusive, balanced and peaceful world.”
The WRD 2005 has addressed the developing countries only in regard to the need for increasing investments. But actually, the investment has been rising in the developing countries and had shown steep fall in developed countries . The World Investment Report 2004 (WIR-2004) says: “Global investment declined in 2003 for the third year in a row, again due to the fall in investment in the developed countries. America showed a dramatic fall of 53 per cent in investments. Only developing countries showed an increase in investments.” (Overview).
Between 2000 and 2003, the share of developed countries in world investment had fallen from 80 per cent to 65 per cent while the share of developing countries had risen from 18 per cent to 31 per cent.
Reasons for fall in investments in rich countries
The sharp fall in the investments in developed countries in due to the continuation of recessionary conditions which is attributed mainly to the following three factors.
1. A downward trend in the population of developed countries and a consequent weakening of demand for consumer goods and services.
2. Unemployment and underemployment caused by
(a) downsizing of firms; (b) mergers and acquisitions of firms; and (c) shifting of firms to low-wage countries.
3. Discontinuation and substantial reduction of exports to a large number of poor countries because of their poverty and debt due to excessive exploitation by the rich countries through their MNCs which control more than two thirds of the world trade.
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