Economic forecasts are really boring. Yes, people get terribly excited that the exchange rate might move by a few Takas, or interest rates up half a percent, GDP growth be 5.5% instead of 5%. These are, in reality, very minor changes around the dominant trend. The true economic forecast is that, barring really very surprising events — an asteroid strike, electing a socialist government, that sort of thing — tomorrow is going to be much like today. Next year will be very much like this year, plus or minus 1% or 2% perhaps.
The same is true of rates of change. The Bangladeshi economy will be about the same size next year as this, plus or minus a few percent. The rate of growth of the Bangladeshi economy will be about the same as this year plus or minus a couple of percentage points.
The best economic forecasts are that the near future will be pretty much the same, both in levels and rates of change, as today and the recent past. Which is, as I say, really very boring.
But over the long term these rates of change really, really, matter. Take where we think that — hope that — Bangladesh will be in 100 years’ time. If the growth rate is around the 5% per year per person of the past couple of decades say? Yes, this bounces up and down a bit given the vagaries of the global economy and so on. But we’ve clearly got something right with the basic structure of the economy. That’s a faster — much faster — growth rate than the UK or US had in their climbs to their current levels of wealth.
What we expect to happen is that, after that century, Bangladesh will be some 130 times richer than it is today. That’s not quite right because we’d have to adjust for inflation but it is roughly right. We’d expect Bangladesh to be richer than the rich countries of today in fact — substantially richer. So, we’ve just got to carry on doing what we’re doing and we’ll all be rich.
Which is good.
There’s more to it as well. The only large-scale attempt at predicting what the global economy is going to be like in a century was in the Special Report on Emissions Scenarios. This is part of the investigation into climate change. If we want to know what the climate will be we need to know emissions, to know emissions we’ve got to know — or estimate — the amount of people, how rich they are, and which technologies they use. So, that was done.
The result was interesting for us in two ways. The first is that the poorer countries were assumed to grow faster than the already rich countries. As has been happening these past two decades, as Bangladesh has been doing. This means that inequality falls. In fact, the result becomes that the poor countries catch up, over that century, with the rich countries.
The second is that the method this happens through is laid out. If we go socialist this doesn’t happen. If we go local, stop doing international trade, it doesn’t happen. This really is built into those models. If we remain roughly capitalist and roughly globalist — for there are many little variations we can do within those basic ideas — then over the course of this century then all of humanity becomes rich. All become richer than the rich countries of today.
It’s also true that Bangladesh leads this process — simply because it has been true this past couple of decades and barring silly economic policies there’s no reason why it won’t continue.
True, this is also a boring economic forecast. Us reading this (and certainly me writing it) won’t be there to see it happen. But it really is true that as long as we don’t mess it up — as long as we continue with roughly what we’re doing — then Bengal will, once again, be what it once was: One of the richest places on Earth. Which is a comforting thought about our grandchildren even if not something we can quite take advantage of ourselves, right now.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
