tech-gdp-growth

For an economics geek like me this little chart is an interesting illustration of the different effects we get by the simple increase in wealth and various advances in technological capabilities:

vox-life-expectancy-chart

What we’ve got there is the increase of life expectancy at birth over time compared with the GDP per capita of the different nations. And yes, we have already adjusted for inflation. As Angus Deaton points out:

The arrow points in the direction of progress, where both per capita incomes and life expectancy increase over time. The 2010 line is above the 1960 line so that, for a typical country, life expectancy has increased by more than would have been expected given a movement along the 1960 line. Preston suggested that movement along the curve was the effect of income on health, while the upward movement of the line could perhaps be attributed to technical progress.

I am, given that I am a froth-at-the-mouth free marketeer and globaliser, going to claim that that movement along the curve is as a result of the application of those free market and globalising policies. After all, we neoliberals (which means something more like “libertarian” but not quite in American, and doesn’t mean the same as neoliberal does in American) are usually blamed for everything that has gone wrong in the past 50 years so I’ll happily take the credit for some of the good things on my fellows’ behalf. All that Washington Consensus and free trade n’stuff has had an effect.

But that’s just political posturing which isn’t quite what you’re here for. And I think everyone’s aware that better technology is going to have an effect on lifespans. Blood pressure drugs, simple vaccinations… as these roll out of course we expect to see people living longer lives. But there’s an area where there’s an interplay between these two things — technology and economic growth — that rather turbocharges the changes we are seeing.

My example comes from the telecoms industry, specifically it’s a finding about the impact of the mobile phone. Sadly, the smartphone is simply too new for us to have research findings detailing these sorts of effect but we’d expect them to be similar, for the original introduction of landline networks also had similar effects. And that finding is something that really was remarkable.

In a country that doesn’t have a landline network, a rise of 10 in 100 adults, or 10% of the population, that gains access to a mobile phone leads to a 0.5% increase in the growth of GDP in that country (sadly this paper isn’t online, too old). This isn’t that whatever GDP growth would have been, 2% or 3% say, then increases by one half of one percent of that 3%.

No, it’s saying that the former growth rate of 3% becomes 3.5%. This effect also persists for a number of years. In the annals of economic growth this is a huge effect. Simply vast for the introduction of just one technology. And, to make the important point, as the chart above shows an increase in the GDP growth rate produces longer lives for all. Alleviates a rather large amount of human misery in fact. So, to youse guys doing the tech work that leads to these sorts of technology congratulations, organise yourself a free back rub and lashings of ginger beer all round. People around the world are living longer as a result of what you do.

At which point I come back to my prejudices about markets and globalisation and all that. You’ll have noted that that mobile telecoms industry is ruthlessly competitive. You’ll also have noted that it is relentlessly globalised. And the mobile phone was the fastest adopted technology in all of human history, a record it managed to hold until the smartphone came along. And that same paper that noted the effect of mobiles on GDP also noted that countries, at the same level of income, which had competitive markets for the acquisition of phones and service also had higher levels of mobile service penetration.

I can’t, of course, claim any of the glory for the effects of the voluntary cooperation that markets both allow and foster but I can continually keep noting it.

[Featured illustration by Brad Jonas for Pando, chart graphic via voxeu.org]