Economics Index and Qualifications
By Richard Bruce BA, MA, and PhC in Economics
Former Instructor St. John's University, New York City

With 1/2 of 1% of GDP
High Income Nations
Can Pull Low Income Nations
into Middle Income

Bill Gates famously claimed that the low income nation category will be all but eliminated by 2035. He was widely criticized as delusional. I argued on another web page that his estimates were solid.

The market is rapidly pulling the low income nations up and by 2035 the low income nation category will be all but empty. This is simply an extension of the rapid progress we have been making already. Sixty percent of the world's population lived in low income nations in 1998 and in 2016 it was between eight and nine percent. Outside of Sub-Saharan Africa only a little more than one and a half percent of the population lives in low income countries.

But if the high income nations were willing to give about half of one percent of their income to the poor in foreign aid we could raise the low income countries to middle income now.

Definitions

Well technically,this is not exactly right. Aid is not included by the World Bank in determining income, and therefore which countries fit into the low and lower middle income categories is not affected by aid.

Furthermore, workers remittances which people working abroad send home to their families are also not counted. If foreign aid and workers remittances were included Haiti would be rise above the low income category into the lower middle, but officially Haiti is a low income nation, the only one in the Americas, and one of four with more than a million population outside of Sub-Sahara Africa. So we can not officially pull countries out of the low income category through more generous aid or letting their workers work in First World counties.

But setting the offical definions aside, and ignoring any adverse or positive effects that the aid might have on the local productivity, theoretically the combination of their current local productive activity and the aid would put them over the threshold between low income and lower middle income countries which in 2016 was $1,005.

In determining which category a nation fits into the World Bank uses gross national income per person as measured by the Atlas method. The Atlas method uses regular exchange rates as opposed to purchasing power parity which adjusts for differences in prices. Figures are normally reported as per capita, which simply means per person.

The Statistics

The latest relevant statistics from the World Bank are for 2016. The population of the low income countries was 659 million. The combined gross national income was 405 billion US dollars, or 614 dollars per capita. Once again the threshold between the low and middle income categories is 1005 dollars.

Therefore, there was a shortfall of 391 dollars per capita between the threshold and the mean average gross income per capita. As there were 659 million people in the low income nations the total sum that must be covered by aid was 258 billion.

The combined gross national income of the high income countries was about 49 trillion dollars. Half of one percent of that is 249 billion, almost enough to make the difference between the gross income per capita of the low income nations and threshold beteen low and middle income countries.

The major reason that the high income countries could theoretically pull the low income countries into the middle income category with such a small portion of their income is that they are much richer per person. The average, mean, income of the high income countries was 41,150 dollars in 2016, compared with 614 dollars for the low income countries. Therefore, the per person income of the high income countries was 67 times higher.

Another major reason is that there are many more people in the high income countries, 1,190 million versus 659 million in the low income countries. So the combined population of the high income countries outnumbers the low income countries combined population by more than 80%. This number will rapidly incerease as more countries move from low income to lower middle income thus reducing the population of the low income countries and from upper middle income to high income thus increasing the population of the high income countries.

Not a Policy Proposal

This web page is not actually intended to be a policy proposal. Instead I wish to give the reader some feel for the statistics and the relationship between high and low income countries. The challenge of low income countries is not an overwhelming one.

The people of high income countries both through voting, political participation, and the foreign aid of their governments, and through private charitalble giving can make a difference in the low income countries.


How will the 3rd world develop? This popular web page lays out the growth path.

Here is an index to my other pages on economics, and a short review of my qualifications in this field.

Tell me what you think. Here is my contact info.

Last updated before July 1, 2018

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