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• In the last several decades, total GDP and GDP per capita increased in OECD* countries, and in non OECD Eastern Europe and Asia. In contrast, there has been little overall growth in Africa and the Middle East.

• Service Sector

• Since 1970, the majority of economic activity has been in the service sector; 41% in developing countries and 58% in developed countries.

• By 2001,  52% of economic activity among developing countries was in service, and 72% of economic activity among developed countries.

• Industry

• The pattern for industry is complex:
  

• Mainly decline since 1980 in the developed world.
  
• Slight declines in the developing countries of Africa and America, and recent increases in Asia and Oceania.
  

• Agriculture

• In 2001, Agriculture was only 11% of economic activity in developing countries, and only 2% in developed countries.

• However, agriculture is a very large part of the labor force, particularly in the developing countries, where it accounted for two thirds of the labor force in 1980 and still over one half in 2001.

• Agriculture, as an economic activity and in the labor force, is particularly significant in Sub Saharan Africa and Oceania.

• Agricultural productivity was very low in less developed countries. This explains why a large part of the labor force was in agriculture but only a small part of the GDP was in agriculture.
  

• According to World Bank estimates, there has been an increase in the number of people in poverty in Europe, Central Asia, Latin America and Africa. In contrast, East and South Asia has seen a decline in the number of people in poverty (using $1 a day).

• The percent of people in poverty has also increased in Europe, Central Asia, the Middle East and Africa, while the percent in poverty declined in East and South Asia and Latin America.

• More recent data estimate that, in the last several years, the percent of people in poverty has declined in Europe, Central Asia, the Middle East and Africa.

• However, poverty is one of the most difficult indicators to measure. Thus, there is no universal agreement on poverty definitions or trends. This report will include an overview of the issues, in section III below.

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There is considerable debate around global trends in poverty and inequality (Ravallion, 2003). For example, there is disagreement about the amount of decline, and a few argue that the data are insufficient to determine whether poverty levels have changed (Reddy and Pogge, 2003).

As described above, according to World Bank estimates, there has been an increase in the number of people in poverty in Europe, Central Asia, Latin America and Africa. In contrast, East and South Asia has seen a decline in the number of people in poverty (using $1 a day). Also,the percent of people in poverty has also increased in Europe and Central Asia, and the Middle East and Africa, while the percent in poverty declined in other areas.

Reddy and Pogge (2003) criticize the World Bank estimates, and argue for a better measure. According to Reddy and Pogge (2003), the main problems with the World Bank estimates are, "The Bank uses an arbitrary international poverty line unrelated to any clear conception of poverty. It employs a misleading and inaccurate measure of purchasing power "equivalence" that creates serious and irreparable difficulties for international and inter-temporal comparisons of income poverty. It extrapolates incorrectly from limited data and thereby creates an appearance of precision that masks the high probable error of its estimates. The systematic distortion introduced by these three flaws may have led to an understatement of the extent of global income poverty and to an incorrect inference that it has declined"  (Reddy and Pogge, 2003, abstract).

The issue of poverty measurement has not yet been solved, and continues to be examined (see list of recent conferences).

• GDP only measures products and services that are bought or sold, so in some economies where things are bartered or traded with neighbors, friends, relatives, etc, these things are not counted in GDP (Doepke, 2003; Schenk, 2004).

• Official measures of GDP also often do not measure the "underground economy", which is economic activity not reported to the government (Braguinsky, 2005; Doepke, 2003; Schenk, 2004). For example, people working for cash who don't report this income are part of the underground economy, but are not counted in GDP.

• GDP also does not include leisure, housework, and child care that aren't in the market system (Ireland, 2008).

• GDP does not account for changes in quality of products. For example when computers become more powerful, they are still counted as the same product, even though they can do much more. Thus, economic growth is often underestimated (Doepke, 2003).

• The underground economy could  be as large as the officially measured economy in some countries (US Department of State, 2004)
  

Prepared by gene shackman, wang xun and ya-lin liu
First Copyright January 2005.  May be freely used provided proper citation is given.

Cite as

Shackman, Gene, Ya-Lin Liu and Xun Wang. 2005. Brief review of world economic trends.  Available at
http://gsociology.icaap.org/report/econ/econsum.html