Winning the Global Game by Jeffrey A. Rosensweig

Author:Jeffrey A. Rosensweig
Language: eng
Format: epub
Publisher: Simon & Schuster

Figure 5-5 TOMORROW’S CUSTOMERS The Emergence of Developing Markets

(Shares of World Middle-Class Market)

However, such growth is not rapid enough to reach all members of a growing population that has, as a starting point, many people living in poverty. So I fear that, even with optimistic projections of economic development, widespread and often abject poverty will continue in the nations of the Populous South. Sadly, the absolute number of persons in poverty will probably rise in the nations that are experiencing rapid population growth, even as economic development also increases these nations’ numbers of people with significant purchasing power. To be sure, economic reforms that lead to more entrepreneurial capitalism and that open economies to international trade and attract foreign investment will not, by themselves, cure all poverty in the short, or even the medium, term. However, this strategy is still the best hope for the people of the Populous South. The evidence clearly shows that such open capitalist policies lead to dramatically higher economic growth, and it is only with a rapidly growing overall economic pie that these nations can have any hope of feeding and educating their significantly increasing populations. A detailed recent World Bank study 12 shows that, for a sample of nations in sub-Saharan Africa, the ones that are reforming macroeconomic policy experience more rapid economic growth and are better able to contain poverty, even if such growth is a long way from solving the ubiquitous and serious nature of poverty in Africa:

The evidence … demonstrates the poverty was more likely to decline in those that improved their macroeconomic balances than in those that did not. The critical factor is economic growth: the economy grew more rapidly and poverty declined faster in countries that improved macroeconomic balances…. But the findings also highlighted three causes for policy concern. First, many African governments have yet to display a real commitment to macroeconomic reform; second, the poorest of the poor have not benefited from recent growth in some countries; and, third, the prospects for the poor are not rosy unless there is more investment in human capital and better targeting of social spending. (p. 39)

Policy reforms (toward open and capitalist economic policies) are crucial, for the World Bank study concludes (p. 40): “The most striking finding, however, is the systematic link between policy implementation and outcomes for the poor— effective reform programs are associated with reduced overall poverty, inadequate ones with worsening poverty.” 13

Let us turn to the important implications of Figure 5-5. The left-hand pie chart shows that as late as 1990, a vast majority of the world’s people with purchasing power (PWPP) lived in the advanced nations of the traditional triad. Interestingly, we see once again that the 80/20 split we showed in Chapter 1 is indicative of current global inequality. However, the second pie chart in Figure 5-5 is the key one for business leaders and strategists. It shows that in a mere 20 years, the proportion of the world’s PWPP that resides in the developing nations will rise dramatically.

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