Economics and Wealth
Global Challenges excerpt from the 2010 State of the Future report
This section includes regional views on the following challenges:
Rich-Poor Gap
How can ethical market economies be encouraged to help reduce the gap between rich and poor? [Challenge 7]
-- Regional Considerations --
Africa: Despite progress, extreme poverty in sub-Saharan Africa is still approximately 50%, and this is not expected to fall below 30% by 2020. In 2009, net bilateral ODA to Africa was $27 billion, out of which $24 billion was allocated to sub-Saharan Africa. Sub-Saharan Africa is expected to have GDP growth of 4.7% in 2010 and 5.9% in 2011. The rapidly evolving Chinese-African alliance is a new geopolitical reality that could help reduce income gaps for both sides. China's trade with Africa increased 10-fold over the past decade, to more than $107 billion, and in 2010 China pledged $10 billion in loans to developing African countries. The region's development continues to be impeded by high birth rates, weak infrastructure, high indirect costs, corruption, armed conflicts, poor governance, environmental degradation, desertification, climate change, poor health conditions, and lack of education.
Asia and Oceania: World economic power is shifting toward Asia. Developing Asia is expected to grow by over 8.5% per year over the next five years, led by China at around 10%. In 2009, China generated 12% of the world's GDP, and by 2025 it might represent 43% of Asia's GDP, while Japan's part would decrease from 41% to 20%. Japan is the only OECD country to have seen its level of absolute poverty rise in the past two decades. China became the world's largest exporter and the second largest economy, but over 200 million Chinese still live in extreme poverty. In India, despite progress, population growth increased the number of poor to 456 million. Increasing pollution, water and energy problems, and the rich-poor gap threaten the future economic growth of developing Asia. Corruption, organized crime, and conflict continue to impede Central Asia's development. Natural disasters and the effects of climate change are threatening the development and the very existence of entire Pacific communities.
Europe: The EU is the world's largest FDI investor and recipient. Within the EU, FDI from the EU-15 to new Member States is particularly dynamic, fostering integration. Although the economy is expected to begin recovery in 2010, unemployment in the euro-area is expected to remain at 10.5% for 2010–11. Cutbacks in social expenditures in many European countries are likely to increase inequality. The European Financial Stabilization Mechanism will address the needs of euro-area members with difficulties and defend the stability of the euro, while the Europe 2020 Strategy sets the framework for stimulating economic growth. However, in order to work, these strategies should be more considerate towards local and regional capacities. The combination of aging populations, a shrinking middle class in some countries, and expensive public services is not sustainable without increasing numbers of immigrants and more tele-entrepreneurs among retired Europeans. Russia was strongly affected by the 2008–09 global economic crises as commodity prices plummeted and the government's 2007 program to strengthen high-tech sectors so far generated weak results.
Latin America: The region showed resilience to the financial crisis, even though FDI fell 42% and remittances fell 15% in 2009. The region's economy is expected to grow 4% annually 2010 15, yet 39 million people could fall below national poverty lines by the end of 2010. In general, South American countries are more neopopulist, while Mexico, Central America, and the Caribbean are more neoliberal; hence, different approaches to closing the income gaps are applied. Both models need to attract high technology investments, create better access to the means of projection, change land tenure, and encourage international companies to increase salaries to help reduce the rich-poor gap.
North America: The unemployment rate in April 2010 was 8.1% in Canada and 9.9% in the U.S. The U.S. national debt is about $13 trillion and total debt is over $55.7 trillion; poverty reached 13.2% in 2009, and in mid-2010 over 40 million people (one in eight Americans) were enrolled in the food stamps program. The six largest U.S. banks control 63% of U.S. GDP and in 2009 handed out $149 billion in bonuses and other compensations. New financial regulations will give government more control over the banking system and financial markets.
Source: World Bank Global Monitoring Report 2010 and Development Indicators
- Short overview
- Suggested Actions
- Indicators
- Detailed discussion on this challenge is in the CD-ROM accompanying the State of the Future reports