Wealth of Nations

What’s a rich country? It might seem an innocuously straightforward question. But it’s not. Rich enough to do what? If you define rich as being able to afford long-range missiles and nuclear weapons, then even poverty-plagued North Korea qualifies (as long as you aren’t too concerned about whether the missiles actually work). What about being rich enough to ensure a decent life for all your country’s citizens? Many in the United States and Europe would argue that even their developed countries, with the world’s highest standards of living, aren’t rich by that measure. Or what about being rich enough to be a good global citizen, providing aid to those in more desperate need?

The good news is that, by almost any definition, there are a lot more rich countries than there used to be. The number of countries classified by the World Bank as "low income" — at or below a national average of $1,005 per person per year — fell from 63 to 35 between 2000 and 2010. That means there are now more middle-income countries than ever, while still other countries have moved up from middle-income to high-income status. And because rich countries generally lead the charge when it comes to providing aid to other places that need it, a lot more countries could soon be contributing to the global general good. The rise of the nouveau riche could really help change the world.

The United Nations classification of "developed regions" currently comprises Australia, Canada, Japan, New Zealand, the United States, and Europe as far as Russia. It’s a group that basically includes the countries on top of the global income rankings; in other words, it’s all relative, indicating status in the world pecking order, not necessarily wealth itself. And it’s a definition that comes with obligations. The U.N. encourages these countries to provide 0.7 percent of their gross national product to foreign development assistance; 16 countries have pledged to meet the target by 2015, and Denmark, Luxembourg, the Netherlands, Norway, and Sweden have already surpassed it.

This generous spirit is a longstanding tradition. Fifty-two years ago, in March 1960, the first meeting of the Development Assistance Group was called to order in Washington by Italian U.N. Ambassador Egidio Ortona. Officials from Belgium, Britain, Canada, France, Germany, Italy, Portugal, and the United States discussed their assistance programs to less-developed countries. Within months, Japan and the Netherlands had been asked to join. All were already giving money to poorer countries spread across Africa, Asia, and Latin America — the idea was to encourage coordination and greater aid flows.

Yet, most strikingly, many of these donor countries were still reeling from World War II and were far from what we’d think of as rich today. Italy’s annual income per capita in 1961, according to the late economic historian Angus Maddison, was $6,373. That’s less than the average 2008 incomes in Brazil, China, Malaysia, Mexico, Russia, and Thailand (measured in constant dollars). And Italy, mind you, was twice as rich as Portugal was in 1961. By 2008, Egypt and South Africa were already considerably better off than Portugal was back then, while India was roughly on par — and it’s surely richer today.

According to Maddison’s data, about 28 percent of the world’s population in 1961 lived in countries richer than Portugal, the poorest of the Development Assistance Group members. By 2008, 61 percent of the world lived in countries richer than Portugal was in 1961. In 1961, 75 percent of the world’s GDP was produced by countries richer than Portugal. By 2008, that proportion had climbed to 89 percent. Here’s the point: Today, most people live in, and the vast majority of the world’s output is produced by, countries that would have been considered rich in 1961.

And it’s not just income. Countries usually considered "developing" today have far higher average education rates and better health indicators than countries considered "developed" back in the 1960s. Portugal’s life expectancy in 1961 was 63 years, according to World Bank data. That’s lower than the 2010 life expectancy in Bangladesh, Ghana, and India. In Brazil and China, people in 2010 lived a full 10 years longer than those in 1961 Portugal. In fact, the average Brazilian or Chinese today lives longer than the average Brit or American did in 1961. And the average citizen 15 or older in Bangladesh, Ghana, Zambia — or even Haiti — has spent more years in school than the average German or French adult had in 1970.

So perhaps we should ditch the "developing" label we often slap on countries like Brazil, China, and Russia. In historical terms, we’d call them something else: rich. And it seems only fair to ask them to start acting like rich countries — or at least like the ones from the 1960s.

To be fair, some already are. China’s aid program has been growing at nearly 30 percent a year. The assistance programs of Brazil, India, and Russia are also rapidly growing. Add in the longstanding programs from the Middle East (like Saudi Arabia’s $3 billion assistance program), and we’re talking real money coming from new donors.

Then again, Brazil, China, India, and Russia combined gave away somewhere less than $6.4 billion in foreign assistance in 2010. By contrast, Canada alone gave $5.2 billion, France gave $14.4 billion, and the United States gave more than twice that. And if you take low-end estimates of the combined aid outflow from Brazil, China, and India in 2009, they’re still considerably smaller than the aid those same countries collectively received. India, for one, gave aid worth about $488 million in 2009 and received aid worth about $2.5 billion.

So the BRICs — along with other nouveau-riche countries like Malaysia and Mexico — have some catching up to do. But if these new donors continue to expand their assistance programs at double-digit growth rates, they’ll soon become a real force for development. That’s especially important as traditional donor countries cut their aid budgets left and right. Austria and Belgium, for example, slashed their aid budgets more than 13 percent last year, and all signs point to the United States doing something similar this year.

Thankfully, there’s a dwindling pool of countries in desperate need of help. Between 2010 and 2025, the number of countries with an average income below $1,165 (the cutoff to receive extremely low-interest loans from the World Bank) could fall from 68 countries with a population of 2.8 billion to 31 countries with a population of less than 1 billion, according to research from the Center for Global Development. Of course, places where the average income is just $3 or $4 a day still qualify as very poor — and there’s a huge role for aid there — but the need will surely shrink in the coming decades. If aid budgets continue to rise at the same time, wiping out absolute poverty worldwide will become increasingly possible.

Telling Americans living on the poverty line of around $13 a day that they are 10 times richer than the vast majority of humankind throughout history is probably of limited comfort. But the absolute wealth of economies really does matter. It means there are more than enough rich countries to stop talking about the tradeoff between reducing poverty at home and helping the less fortunate abroad. They can afford to do both. Just ask Portugal.