October 7, 2013
Nathan Rothschild was the richest man in Britain in 1836. His wealth was enormous. He financed the British Army in its war against Napoleon and legend has it that his private system of carrier pigeons got word back to him that the British had actually won at Waterloo when the mainstream report suggested the opposite. This knowledge prompted him to buy up all British government debt when the rest of London’s financiers were selling on misinformation.
The rest is history. He was a man at the height of his financial powers in the 1830s. There was nothing he couldn’t buy and yet he died of a complication which today would not kill a poor man in this country with access to a public hospital.
How could the richest man in the world be felled by a stomach abscess, which today would involve a basic procedure and a course of antibiotics, available to anyone on the health service?
What the story reveals are the huge strides made in basic health provision for everyone over the past two hundred years. Amazingly, the standard of living of the average person hardly budged between the time Jesus walked into the desert and the time Napolean marched on Moscow.
Thereafter, the industrial revolution changed everything.
The massive increases in productivity driven by energy and inventions, drove up living standards so quickly that they doubled almost every generation so that a poor man could be cured of a disease that killed the richest man in the world a few generations before that.
This is the miracle of productivity and it explains why countries can catch up with others.
As we look around the world today, have we any reason to believe that, over time, the emerging markets of Africa will not catch up and overtake the West?
In maths, there is a concept called the 7 per cent rule. It explains exponential growth and why a quantity can grow experientially when its increase is proportional to what is already there. So for example, think about compound interest, where €100 invested at 7 per cent per year annual compound interest will double in ten years to €200, double in another ten years to approximately €400 and double again in the next ten years to approximately €800.
The same happens to economies and living standards. If an economy starts to take off, its living standards can double very quickly, if that growth rate is sustained.
Historically, the key to growth is technology and discovery.
In contrast, once the industrial revolution took off, the living standards in Britain and much of industrial Europe doubled every few decades. Now with technology widely available to the huge emerging markets of the world, there is a possibility that living standards in Africa will double every generation.
At the Global Irish Forum this weekend, it was suggested by a well-known businessman that – based on what we know about technology and how it changes hands rapidly – Africa is going to be a major economic growth region in the very near future.
Looking at the numbers we can see that he is right. Africa is growing already. Six of the world’s ten fastest growing economies of the past decade are in sub-Saharan Africa. Many have enjoyed growth in income per head of more than 5%.
Can you imagine what could happen if they kept growing at this pace? Living standards would double in a generation and then double again. This would lead to a massive reduction in disease.
This is already happening because as was the case with Rothschild, once a country gets richer and medicine becomes more and more available, the things that used to kill the rich don’t even kill the poor with access to a modicum of heath services.
The recent facts about global health are truly startling – in a good way, all of which points to an ongoing growth period in Africa.
Since 2000, 8 million more people with AIDs are receiving anti-retroviral drugs meaning mothers won’t pass the disease onto their children. Since 2000 death rates from malaria in the eight most stricken countries in Africa are down by 75%. Child mortality in the poorest countries in the world has fallen by 2.6 million a year since the turn of the century. That means that 7,256 fewer children a day are dying because of enormous strides in medical care for the poorest people in the world.
These improvements are happening all over the world and they are startling. At a time when so much media focuses on the problems of our rich world, the trends in the poorest parts of the world are strikingly positive.
In 1990, 43% of the world’s population lives on $1.25 a day. This is grinding poverty. In 2000, that figure had fallen to 33% and this year the figure of people living in horrific poverty was 21%. So the amount of people living in absolute poverty has halved since the year Nelson Mandela walked free.
This is extraordinary and shows what is actually happening in our world. If these trends continue, absolute poverty will continue to reduce. (If you want to see more of these positive trends see Bono’s excellent recent TED talk on You Tube)
Now consider the Irish businessman’s lament about Irish exporting companies not taking Africa seriously enough. He stated that due to the missionaries – which is only a generation ago – Ireland and our brand has a special position in Africa, which is more positive than that of other European countries. Also because the rest of the world hasn’t twigged what is going on down there, there is less competition.
The other factor that might work in Ireland’s favour in the years ahead is the growth of the country’s African population. Up to now these Africans – who understand the culture, have the contacts and are constantly going back and forth – are seen as immigrants. Why not see them more positively as ambassadors for their countries and regard them essential middlemen in a trading system that will grow between Ireland, Europe and Africa in this century? After all this too is a Diaspora. In fact, the African Diaspora may become increasingly important in future global trade and investment patterns.
Where the nuns and priests led, Irish business should follow. In the commercial world, where growth is moving from the rich countries to the poor ones, stranger things have happened.