Mark Twain once observed that we have “lies, damn lies, and then statistics.” Unfortunately, to understand the world, we are often forced to dance with that devil, and hope it explains what’s actually happening. A recent United Nations’ publication, “Economic and Financial Globalization: What the Numbers Say,” attempts to do that, but leaves out some relevant details.
Population Density and Demographics: The report offered some surprises here. Population is increasing rapidly in the largest countries, especially Pakistan. But Russia’s population has actually fallen in recent years. Generally, growth is much slower in industrialized nations than developing ones: Although the population of North America – 320 million in 1950 – is expected to reach 500 million by 2010, its share of the world total is projected to drop from 17 to 10 percent.
Important demographic changes have also been identified. The age of people in industrialized nations is growing older due to a reduction in the proportion of youngsters, not a large increase in number of elderly. The proportion of young people in developing countries has meanwhile fallen slightly.
While urbanization has increased steadily since 1950, especially in Latin America and sub-Saharan Africa, the European Union (EU) has the most urbanized population. Latin America is closing in on EU levels, but lacks the infrastructure to cope with the results.
Telecommunications: Internet capacity exploded in the 90s, as did telecom infrastructure investment. However, although the costs of calls fell like a stone, the perceived benefits to residential users didn’t materialize. Most are paying the same or more as local services once subsidized by high long-distance rates have been replaced by higher costs for simple services.
Transport: Air freight expansion has dramatically out-paced not shipping and air passenger numbers. Over a 30-year period, the volume of air traffic rose fivefold, while sea traffic doubled. Figures for the EU show a 45 percent rise in the use of roads and a 40 percent rise for inland waterway traffic, both at the expense of rail. The use of mail has increased broadly per capita, but domestic postal costs haven risen within the developed world.
Employment: About half the world’s population is economically active, a share that remained stable from 1950 to 2000. Developing nations have seen a big increase in those working in agriculture, industry, and services. The number of women employed has risen much more sharply in industrialized nations than developing countries. Significantly for the EU, figures suggesting that the US has a much lower unemployment rate due to a more flexible labor market are flawed. In fact, the US statistics are compiled differently.
For the European Commission (EC), some numbers reveal a failure in analysis and evaluation related to business policy. The EC has been keen to stress the importance of small and medium enterprises as growth engine. Yet, according to the report, the role of such businesses in job creation may have been overstated, since some overseas subsidiaries of major corporations have been classified as small or medium. Among the major nations, only North America’s large corporations employ a high proportion of the labor force.
Checks vs. Credit: The global economy has become more integrated, but differences in financial culture persist. Checks remain very popular for private purchases in the US, and, to a lesser extent, the UK. But their use is negligible in much of Europe, including Germany, Sweden, and Switzerland. Credit transfers and direct debits are popular in much of the Eurozone, but remain marginal in the US and uncommon in Canada. Only credit cards have a significant level of penetration across the world, but the variation is significant, from 18 percent of non-cash transactions in France and Italy to 52 percent in Canada.
Public Debt: The proportion of countries with a low level of national debt (below 30 percent of GDP) fell from 65 percent in 1972 to 33 percent in 1998. Meanwhile, the share of countries whose total debt is greater than their GDP rose from five to 14 percent.
The size of outstanding loans and commitments from the International Monetary Fund (IMF) is also instructive. Loans were negligible until the early 70s, then peaked in the mid-80s before falling slightly. They hit a new and much higher peak at the end of the 90, dropping again since then. Outstanding debt to the IMF has doubled since 1983, but annual commitments remain below half a percent of GDP for countries not part of the Organization for Economic Cooperation and Development (OECD), which includes the US, Japan, Germany, and other large economies.
International Trade: World exports have increased at a steady rate, and global trade’s importance more than doubled between 1960 and 1999. But international trade is much more important for Europe than the US or Japan. The growth in global sales has been much faster for manufactured goods than other products.
Foreign Direct Investment (FDI): FDI flows have fluctuated in line with the health of major economies. In 1993, inflows were half those of 1990, but bounced back and rose almost threefold by 2000. FDI tends to flow between industrialized nations and a group of non-OECD countries that includes the Pacific Rim, Latin America, Egypt, and South Africa. There is evidence of a gradual consolidation of commercial assets by major transnational corporations. But the report points out that national FDI figures can be inconsistent and the total picture is difficult to assess accurately.
Such statistics are often used to reinforce an agenda whose effects, while they may look good on paper, are actually devastating. Where the absence of accurate figures may raise questions, other modes of analysis are employed.
An example is the OECD’s report, “Quantifying the Benefits of Liberalizing Trade in Services.” Regulatory reforms in product markets (e.g., liberalization and privatization) have not only increased innovation and productivity, but also employment rates, says this report. Where high levels of unemployment remain, this can be explained by employment protection and benefit policies.
The report argues that trade restrictions on services result in high costs for many people and benefits for few. It admits that some regulations are necessary to meet economic and social objectives, but nevertheless insists that they must be minimized to keep prices low. Their conclusion is simple: A more liberal regime for trade in services benefits all countries, but most of all nations where protection has been highest, usually in developing nations.
The central assumptions are that the prevailing economic model has produced real benefits, and that the significant wider impacts of liberalization policies can be effectively addressed using the same model. But increased levels of poverty, environmental degradation, and a debasement of local and national cultural traditions aren’t mentioned. If Mark Twain were still alive, I wonder how he’d react to that?