The Third World is in trouble. Standards of living are plummeting. While the West is getting richer while they are getting poorer. It seems that everyone believes it. The Left wants to believe it as a justification for global socialism. Racists want to believe it because it "proves" the superiority of the white race. The media thinks its a good story and promotes it constantly, leading to the vast majority of the public believing it.

     But is it actually true?

     We've all heard the slogan that some significant percentage of the world's population lives on less than a dollar a day.

     Now the first thing that comes to mind is how do they know this? Secondly, is it significant? And what does it mean?

     The first problem with the slogan is that when it says a dollar a day it doesn't actually mean what most people think of as a dollar. The dollar a day standard was set by the World Bank and is based on 1985 dollars not dollars from 2002 – which is about 60% more. Of course most people think of the value of the dollar in 2002 when they hear the slogan. Even so the number of people living on a 1985 dollar per day is lower than it was before – in spite of increasing world population. In other words fewer and fewer people are impoverished by this definition as time goes by.

     Of course a dollar in London or New York is not quite the same thing as a dollar anywhere in the Third World.

     Having lived in Africa for over a decade I can attest that one dollar goes a very long way. If we take South Africa as an example only 21,000 out of 42 million earn more than $3000 per month. The average "wealthy" family in South Africa would have an income close to around $10,000 per year. Of course that money has greater purchasing power.

     When people think about it they realize one can buy a lot more housing for $1 in Peoria than one can in San Francisco. The differences in purchasing power are far greater when you enter the Third World.

     The United Nations Development Programme uses a different standard for the dollar a day measurement. They use the 1993 value of the dollar but do consider purchasing power. They report: "Between 1990 and 1998 the proportion of people living on less than $1 (1993 PPP US$) a day in developing countries was reduced from 29% to 24%." Please note that's not 24% of the world's population but 24% of the population in the developing world only!

     Another statistic that is trotted out to prove things are getting worse in the Third World is the per capita gross national product. How is this calculated? The way this is done is that clever people take an estimate of the total economic output of a nation and then divide it by the number of people living in that nation. But that neglects an important facet about these economies: many of them are cash poor but labor rich. The value of human labor is not taken into account.

     In the West a farmer would till a field using a tractor that represents a substantial capital investment but the Third World farmer will replace the tractor with labor. Hence one of the reasons for high birth rates in such countries – children are seen as an investment in the future. In the First world the tractor is factured into GNP while in the Third World the labor is not.

     Now there are some problems with the way in which per capita income is calculated. Each new birth of a child reduces the per capita income while each death increases it. If a huge number of the population died overnight the nation, on paper at least, would appear much richer. But would anyone actually say the people there are better off?

     In cash poor countries labor replaces monetary investment for the obvious reason that it is more plentiful. When a farmer clears a field of rocks through back breaking effort the field increases in value. But does that effort show up in the national statistics for per capita income? Of course not. In fact very little of Third World investments, in the form of labor, is ever considered at all. There are many people who do not earn the cash equivalent of $1 per day yet they are accumulating wealth.

     That fact may not be reflected immediately in the national income but it is reflected in the higher standards of living for these people. Infant mortality rates in the Third World have plummeted and life spans have increased. The slow, sometimes painfully slow, accumulation of wealth is improving the lives of these people.

     One other factor that is forgotten is that Third World wealth is kept artificially low due to the insecurity of property rights in those countries. Hernando de Soto has noted that a large percentage of Third World capital is "dead" – meaning those who "own" it can't capture the value, or the full value, because legal recognition of their rights has been withheld. Often bureaucratic hurdles limit the value of capital held by the poor as well. Some simple changes in the legal system could free up billions in capital. In addition a reduction in strife, corruption and antiquated regulatory systems would attract billions more in foreign investment. One fact remains: the wealth of the Third World could be substantially increased simply by changing their own legal systems and regulatory impediments to wealth creation.

     But what precisely is the happening to the Third World? Luckily the United Nations, the World Bank and a myriad of other groups keep track for us. And in general the standard of living for the Third World is consistently improving. I have always argued that the most basic statistic, which almost trumps the others, is life span. People who find conditions progressively worse shouldn't live as long. People who find conditions improving should live longer.

     Life span improvements are consistently better in the Third World then they were a century ago‹or even half a century ago. In 1906 the life expectancy in India was 25 years; today its around 64. As recently as 1930 the average life span in China was only 24 years. while today it's 69 for men and 73.5 for women.

     Bjorn Lomborg, in The Skeptical Environmentalist, notes that in France in 1800 the average life span was 30 years and It was 45 years in Denmark in 1845. The vast majority of the Third World is doing much better then that. According to the UN, the worst region in regards to life expectancy, is Africa. And it has an average life expectancy of about 51 years. In terms of comparison the worst of the Third World today is about where France was in 1913 in terms of life expectancy. Africa's life expectancy today is better than similar rates in the United States a century ago.

     A good deal of this improvement is due to the massive decline in infant mortality. It is believed that half of all infants died in Europe as late 1400. And Lomborg notes that the infant mortality rate for 16th century English nobility‹who presumably lived better than most‹was about one in four. He also notes that Sweden ,which has the oldest records on infant mortality rates, shows a decline from one in five in 1800 to one in ten around 1900 to one in 280 today. Of course the Third World has also shown massive improvement. According to the UN the current African average infant mortality rate is 83 per 1,000. That's slightly better than it was in Sweden in 1900.

     Of course none of this says things are as good as they could become. But things are never as good as they could be. Life is a process and so is economic development and its benefits. On average the Third World today is about where the Western world was at the turn of the last century. One interesting indication of this improvement is that the doomsday merchants at the United Nations have dramatically shifted the focus of their annual reports on the world's population. In past years they concentrated on food, infant mortality, and life spans, particularly in light of a "population explosion". The 2001 report played down all of those issues and instead concentrated on long-term environmental "problems" like global warming. Projections of famine in the next few decades have been replaced by concerns about slight changes in the world's climate over the next few hundred years.

     Improving life spans and lower infant mortality rates would seem to indicate rising levels of wealth. And, in fact, that is exactly what is happening. If we look at world economic progress over the last two centuries it has been nothing short of miraculous. The capitalist nations of the world saw wealth expand 13 times in that period, Latin America expanded its wealth seven-fold and even Africa had a fourfold increase in wealth. No wonder the United Nations has said that poverty worldwide has decreased more in the last 50 years than in the previous 500.

     While some clerics and socialists assume that contact with the West has impoverished the Third World the fact is that those areas with the most contact with the West are the richest not the poorest. South Africa has more trade with the West than any other sub-Saharan African nation – it also is the richest nation in Africa. Anyone who has ever visited Africa, or lived here, should realize that those areas which have the least contact with the rest of the world are the poorest regions. They have no natural wealth just natural poverty. Trade, freely entered, increases wealth for all trading partners.

     The United Nations Development Programme for years said inequality was increasing. But they compared inequality using an exchange rate basis as opposed to comparing the purchasing power of each dollar in the different countries. With the first method they simply convert income, say in yen, to dollars and then measure inequality. Under the ppp system you compare the buying power of the currency. Lomborg said that the exchange rate comparison produced "unreliable comparisons that will greatly exaggerate inequality".

     Eventually the UNDP came to the same conclusion and abandoned this method. In their Human Development Report 2001 they noted: "With the exchange rate measure, the ratio of the income of the richest 20% to that of the poorest 20% grew from 34 to 1 in 1970 to 70 to 1 in 1997. With the PPP measure, the ratio fell, from 15 to 1 to 13 to 1."

     The idea that the world is becoming more "unequal" is an important weapon in the arsenal of the egalitarian Left. To support their thesis they manipulate the facts. UNICEF and the Green group Worldwatch argue that inequality is increasing. They compare the differences in income in straight dollar terms. An example of this would be if you earned $500 per year and I earned $5000. Two years later your income is $1000 per year and mine is $6000. In the first year I earned $4500 more than you per year. In the second year I earned $5000 more than you. That is considered evidence that things have become more unequal.

     But in fact you doubled your income in a period of two years while mine only improved 20 percent. Surely our levels of inequality actually declined. In the base year your earned 10 percent of my income. In the comparison year your income was now almost 17 percent of mine. That's a dramatic reduction in inequality. The method preferred by groups with agendas, like those mentioned, is to simply look at dollar differences not relative income.

     By most objective standards the Third World today is a much improved place. Birth rates are down; incomes are up. Life spans have increased, infant mortality rates have dropped. Educational levels are up and starvation is down. There is wider access to clean water and health care than at any time in history. None of this means that more can't be done or that further progress can't be made. But the idea that conditions for the Third World have been deteriorating is unfounded. Claims to the contrary are political propaganda not scholarship and they should be evaluated as such. The UNDP summed it up well:

     "...too few people recognize that the impressive gains in the developing world in the past 30 years demonstrates the possibility of eradicating poverty. A child born today can expect to live eight years longer than one born 30 years ago. Many more people can read and write, with the adult literacy rate having increased from an estimated 47% in 1970 to 73% in 1999. The share of rural families with access to safe water has grown more than fivefold. Many more people can enjoy a decent standard of living, with average incomes in developing countries having almost doubled in real terms between 1975 and 1998, from $1,300 to $2,500 (1985 PPP US$)." (17)

     In addition they noted:

• The numbers of undernourished people in the developing world fell by 40 million between 1990-92 and 1996-99. This fall in absolute numbers was in spite of high population growth rates as well.
• Around 80% of people in the developing world now have access to improved water sources.
• In 1990-99 infant mortality was reduced by more than 10%, from 64 per 1,000 live births to 56.
• Under-five mortality was reduced from 93 per 1,000 live births to 80 in 1990- 99. (18)

     What explains this improvement? Since the collapse of communism in 1989 the world went through an ideological revolution. The idea of central economic planning as a path to prosperity was discredited. The 2002 Index of Economic Freedom gives some indication of how this translated into policy changed in Third World nations. The Index rates the majority of nations on economic freedom going back to 1995. Of those nations rated some 105 would be considered developing countries. While economic freedom rises and falls from year to year I looked at how it stands today compared to the average rating for the last seven years. Out of the 105 developing countries almost two-thirds, or 65 of them, are more economically free today then they were in the past. In 23 economic freedom declined and in 17 it has remained relatively the same.

     Of course to say that, on average, life is improving does not mean that things are improving equally for all people. Most of the economic progress in developing countries is taking place in a minority of the nations. Luckily those nations contain about 60 percent of the population of less developed countries.

     So why are 60 percent seeing major improvements in life while 40 percent are not? The integration of individual economies into a global free trade regime has dramatically changed the world and this improvement is most obviously seen in the standard of living for in globalized Third World nations. According to the World Bank 24 developing countries in particular have joined the globalization revolution and most of the improvement in Third World economic conditions are limited to those nations alone. The World Bank said: "Countries that strongly increased their participation in global trade and investment include Brazil, China, Hungary, India, and Mexico. Some 24 developing countries‹with 3 billion people – have doubled their ratio of trade to income over the past two decades. The rest of the developing world actually trades less today than it did 20 years ago. The more globalized developing countries have increased their per capita growth rate from 1 percent in the 1960s, to 3 percent in the 1970s, 4 percent in the 1980s, and 5 percent in the 1990s. Their growth rates now substantially exceed those of rich countries..."

     The Third World is now divided between nations that have liberalized their economies and joined the global economy and those which cling to the outmoded economic policies of interventionism and protectionism. While the new globalizers are prospering those who cling to the past are not just stagnating but declining. The average per capita growth in those countries was a negative 1.5 percent. The World Bank study noted:

"The striking divergence between the moral globalized and less globalized developing countries since 1980 makes the aggregate performance of developing countries less meaningful. However, since 1980 the overall number of poor people has at last stopped increasing, and has indeed fallen by an estimated 200 million. It is falling rapidly in the new globalizers and rising in the rest of the developing world. Non-income dimensions of poverty are also diverging. Life expectancy and schooling are rising in the globalizers‹to levels close to those prevailing in rich countries around 1960. They are falling in parts of Africa and the FSU."

     So why is it that people think things are getting worse? Let's take an example to illustrate what is happening.

     The headline in the New York Times screamed: "World Hunger Increasing, New U.N. Report Finds." The opening paragraph made it clear that the situation was dire. "The number of hungry people world-wide swelled in recent years, particularly in sub-Saharan Africa, thanks to war, drought, AIDS and trade barriers, according to a report released today by the United Nations Food and Agricultural Organization."

     What exactly is happen here? Haven't market liberals been applauding the good news that world hunger is diminishing? Have the environmental doom sayers finally been proven right?

     The headline was not quite accurate. The report, "The State of Food Insecurity in the World 2003", from the UN's Food and Agricultural Organization, covers undernourishment in the developing world only. The report covers the period from base years 1990-1992 to 1999-2001. Now if you look at the full period you'll see that the number of undernourished dropped both in raw terms, from 816 million to 798 million, and in percentage terms, from 20 percent to 17 percent. The number of hungry declined by 18.7 million. During that same time period the population of the developing world increased by a massive 662.2 million. This means that within a 10 year period about 681 million additional people were being fed.

     The choice for the base year can also effect how dramatic the decline in hunger will appear. The report uses as its base the years 1990-92. From then until now the undernourished proportion of the population declined from 20 percent to 17 percent. Had the UN gone back one decade further the decline would have been more impressive since in 1990 28 percent were hungry. While the improvement may have slowed down we should not lose sight of the fact that this is still an improvement.

     The Times reported "that more than 840 million people, or 1 in 7 world-wide, went hungry." The foreword to the report says: "an estimated 798 million were undernourished in 1999-2001..." And in the statistical tables the figure is give as 797.9 million. So why the discrepancy?

     The UN Report basically covers the developing world. But in one section they mention a total world figure of 842 million which includes 10 million in the Industrialized nations and 34 million in transitional nations, mainly the former Soviet block. In a sense the 842 million number is a combination of apples and oranges. Being undernourished in London and being undernourished in Tanzania are two very different things.

     This general improvement in undernourishment rates remain true across most of the globe. During the last decade hunger rates dropped in Asia and the Pacific from 20 percent to 16 percent; in Latin America and Caribbean from 13 to 10 percent; and even Sub-Saharan Africa dropped from 35 to 33 percent. Only in the Near East and North Africa did rates go up, from 8 percent to 10 percent. Some of the sub regions saw rather impressive declines. East Africa saw a decline from 44 percent to 39 percent; Southern Africa declined from 48 percent to 41 percent; West Africa dropped from 21 percent to 15 percent; East Asia went from 20 percent to 16 percent; and South America declined from 14 to 10 percent.

     Such large regional drops in hunger rates were ignored by the New York Times. It reported instead: "Only 19 countries, including China, reduced hunger among its people throughout the 1990s." In fact that is simply not true. The real number is far in excess of that. The reporter apparently misread the report which said: "In 19 countries, the number of chronically hungry people declined by over 80 million between 1990-1992 and 1999-2001." The New York Times inserted the word "only" which is not in the report. It's not there for good reason. First the report ignores many countries in the world where hunger is not a problem. The impression given by the Times is that only 19 countries world-wide saw hunger decrease. That would imply that in the rest it increased or stayed the same. Either scenario would have been catastrophic.

     Where the Times claimed that "only 19 countries" reduced hunger the report's tables show a different story. And it is important to keep in mind that this report only covers 90 developing countries. The statistical tables clearly show that of these 90 nations 32 of them saw a reduction in the total numbers of undernourished people. In 60 nations, or two thirds of the developing world, the total numbers went up but when compared to the total population the percentage of those undernourished actually declined.

     The problem is that a few spots in the world are suffering badly. Hunger is up from 10 to 14 percent in the Near East; in Central Africa it was even worse. Hunger rates there went from 35 percent to 58 percent. By looking at the nations that saw dramatic shifts in undernourishment rates, either an improvement or a decline, we can start to pin-point some of the major causes of world hunger today.

     For instance pro market reforms in China are clearly having a positive effect. At the beginning of the last decade the number of undernourished there was 193 million. Even though the population increased by 105.5 million the number of undernourished declined almost 58 million – a raw total of 135.3 million. The percentage of undernourished dropped from 16 percent to 11 percent. On the other hand the hard-line socialist state of North Korea saw the opposite happen. During the base years 18 percent of North Koreans were undernourished but by the end of the decade this had increased to 34 percent.

     In Vietnam markets were liberalized and the number of undernourished dropped from 27 percent of the population to 19 percent. In Venezuela a "pro-poor" socialist government took over management of the country and the rate of undernourished jumped from 11 percent to 18 percent.

     It quickly becomes clear that world hunger today is not caused by a strain on the planet or an inability to produce food as many environmentalists have contended. Hunger today is primarily a politically induced problem. The FAO¹s Director General, Jacques Diouf, said: "Bluntly stated, the problem is not so much a lack of food as a lack of political will."

     Hunger is routinely caused by bad economic policies or armed political conflict. The cessation of armed conflict in Angola brought undernourishment rates down from 61 to 49 percent. In Mozambique the ending of the civil war saw a decline in undernourishment from 69 to 53 percent. In contrast the continuing conflict in the Congo increased the rate from 31 percent to 75 percent. The FAO report noted: "Eight countries suffered [food] emergencies during 15 or more years during 1986-2003. War or civil strife was a major factor in all eight."

     This doesn't meant that nature has no role to play. Many food insecure countries are still plagued by periodic droughts and/or flooding which limits their ability to grow food. On the other hand even these problems are exacerbated by local cultural and/or economic policies. Many African countries promote subsistence farming in the belief that a nation of farmers will never go hungry. But only a nation of farmers can starve to death since during natural disasters they have nothing else to trade so they can buy food. The report verifies this indirectly: "Throughout the developing world, agriculture accounts for around 9 percent of GDP and more than half of total employment. But its relative importance is far greater in those countries where hunger is most widespread. In countries where more than 34 percent of the population are undernourished, agriculture represents 30 percent of GDP, and nearly 70 percent of the people rely on agriculture for their livelihoods."

     In Zimbabwe Robert Mugabe forcibly redistributed land. He closed down commercial farms on the basis that they were owned by a minority of the population and turned them into communal farms instead. As this policy was just starting I wrote, "contrary to common perceptions, turning Zimbabwe into a country of peasant farmers is not a step in the right direction. Instead, it is a major means of ensuring hunger, disease and death." Unfortunately, as the world now knows, this is precisely what happened there.

     Various African nations still have state monopolies for the marketing of agricultural goods. And typically such marketing boards underpay farmers for and then sell the produce globally at market rates. The "profit" is used by the state or by various politicians for their own benefit. Increased globalization won¹t help here since domestic policies interfere. As the International Food Policy Research Institute noted, "for most African farmers, globalization of agricultural markets will make no significant difference to their livelihood opportunities until considerable improvements are made in infrastructure and marketing institutions."

     Today the West gets blamed for agricultural protectionist policies that keep out goods from the Third World. And a change in such policies is needed immediately. But such changes will only help Third World countries that have liberalized their domestic markets. Generally speaking those nations that have liberalised domestically are not the ones which are still suffering high rates of hunger. The nations that are starving are mainly the victims of local politics and intragovernmental warfare. The planet can well feed the numbers we have now and many, many more. The problem isn't one of unsustainable development or our ability to produce. It's more a problem of getting governments out of the way.