global economy importance essay

What is economic growth? And why is it so important?

The goods and services that we all need are not just there – they need to be produced – and growth means that their quality and quantity increase..

Good health, a place to live, access to education, nutrition, social connections, respect, peace, human rights, a healthy environment, and happiness. These are just some of the many aspects we care about in our lives.

At the heart of many of these aspects that we care about are needs for which we require particular goods and services . Think of those that are needed for the goals on the list above – the health services from nurses and doctors, the home you live in, or the teachers who provide education.

Poverty, prosperity, and growth are often measured in monetary terms, most commonly as people’s income. But while monetary measures have some important advantages, they have the big disadvantage that they are abstract. In the worst case, monetary measures – like GDP per capita – are so abstract that we forget what they are actually about: people’s access to goods and services.

The point of this text is to show why economic growth is important and how the abstract monetary measures tell us about the reality of people’s material living conditions around the world and throughout history:

• In the first part, I want to explain what economic growth is and why it is so difficult to measure.
• In the second part, I will discuss the advantages and disadvantages of several measures of growth, and you will find the latest data on several of these measures so that we can see what they tell us about how people’s material living conditions have changed.

What are these goods and services that I’m talking about?

Have a look around yourself right now. Many of the things you see are products that were produced by someone so that you can use them: the trousers you are wearing, the device you are reading this on, the electricity that powers it, the furniture around you, the toilet that is nearby, the sewage system it is connected to, the bus or car or bicycle you took to get where you are, the food you had this morning, the medications you will receive when you get sick, every window in your home, every shirt in your wardrobe, and every book on your shelf.

At some point in the past, many of these products were not available. The majority did not have access to the most basic goods and services they needed. A recent study on the history of global poverty estimates that just two centuries ago, roughly three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.” 1

Let’s look at the history of the last item on that list above, books.

A few centuries ago, the only way to produce a book was for a scribe to copy it word-for-word by hand. Book production was a slow process; it took a scribe about eight months of daily work to produce a single copy of the Bible. 2

It was so laborious that only very few books were produced. The chart shows the estimates of historians. 3

But then, in the 15th century, the goldsmith Johannes Gutenberg combined the idea of movable letters with the mechanism that he knew from the wine presses in his hometown. He developed the printing press. Gutenberg developed a new production technology, and it changed things dramatically. Instead of spending months to produce one book, a worker was now able to produce several books a day.

As the printing press spread across Europe, book production soared. Books, which were previously only available to a tiny elite, became available to more and more people.

This is one example of how growth is possible and what economic growth is : an increase in the production of goods and services that people produce for each other.

A list of goods and services that people produce for each other

Before we get to a more detailed definition of economic growth, it’s helpful to remind ourselves of the astonishingly wide range of goods and services that people produce. I think this is helpful because measures of economic output can easily become abstract. This abstraction means we easily lose the mental connection to the goods and services such measures actually talk about.

This list of goods and services isn’t meant as a definitive list, but it helped me to think about the relevance of poverty and growth: 4

At home: Light in your home at night; the sewage system; a shower; vacuum cleaner; fridge; heating; air conditioning; electricity; windows; a toilet – even a flush toilet; soap; a balcony or a garden; running water; warm water; cutlery and dishes; a hut – or even a warm apartment or house; an oven; sewing machine; a stove (that doesn’t poison you ); carpet; toilet paper; trash bags; music recordings or even online streaming of the world’s music and film; garbage collection; radio; television; a washing machine; 5 furniture; telephone; a comfortable bed, and a room for one’s own.

Food: The most fundamental need is to have enough food. For much of human history, a large share of people suffered from hunger , and millions still do .

But we also need to have a richer and more varied diet to get all of the nutrients we need. Unfortunately, billions still suffer from micronutrient deficiency .

Also, think of clean drinking water; reliable markets and stores with a wide range of available goods; food that rarely poisons you (pasteurized milk, for example); spices; tea and coffee; kitchen utensils and practical ingredients (from a bag of flour to canned soups or a yogurt); chocolate and sweets; fresh fruit and vegetables; bread; take-away food or the possibility to go to a restaurant; ways to protect your food from spoiling (from the cold chain that delivers the goods to the cellophane to wrap it with); wine or beer; fertilizer ( very important); and tractors to work the fields.

Knowledge: Education from primary up to university level; books; data that allows us to understand the world around us; newspapers; vocational training; kindergartens; and scientific knowledge to understand ourselves and the world around us.

Infrastructure: Public transportation with buses, subways, and trains; roads; paved roads; airplanes; bridges; financial services (including bank accounts, ATMs, and credit cards); cities; a network of competent workers that can help you to fix problems; postal services (that delivers fast); national parks; street cleaning; public swimming pools (even private pools); firefighters; parks; online shopping; weather forecasts; and a waste management system.

Tools and technologies: Pencils, ballpoint pens, and paper; lawnmowers; cars; car mechanics; bicycles; power tools like drills (even battery-powered ones); a watch; computers and laptops; smartphones (with GPS and a good camera); being able to stay in touch with distant friends or family members (or even visiting them); GPS; batteries; telephones and mobiles; video calls; WiFi; and the internet right here.

Social services: Caretakers for those who are disabled, sick, or elderly; protection from crime; non-profit organizations financed by the public, by donations or by philanthropies; insurance (against many different risks); and a legal system with judges and lawyers that implement the rule of law.

There is also a wide range of transfer payments, which in themselves are not services (they are transfers) but which become more affordable as a society becomes more prosperous: sick leave and disability benefits; unemployment benefits; and being able to help others with a regular donation of some of your income to an effective charity . 6

Life and free time : tents; travel and holidays; surfboards; skis; board games; hotels; playgrounds; children’s toys; courses to learn hobbies (from painting to musical instruments or courses on the environment around us); a football; pets; the cinema, theater or a music concert; clothes (even comfortable and good-looking ones that keep you warm and protect you from the rain); shoes (even shoes for different purposes); shoe repair; the contraceptive pill and the ability to choose if and when to have children; sports classes from rock climbing to pilates and yoga; cigarettes (not all goods that people produce for each other are good for them); 7 a musical instrument; a camera; and parties to celebrate life.

Health and staying well: Dentists; antibiotics; surgeries; anesthesia; mental health care from psychologists and psychiatrists; vaccines; public sewage; a haircut; a massage; midwives; ambulances; modern medicine; band-aids; pharmaceutical drugs; sanitary pads; toothbrushes; dental floss (some do floss); disinfectants; glasses; sunglasses; contact lenses; hearing aids; and hospitals – including very well-equipped, modern hospitals that offer CT scans, which include intensive care units and allow heart or brain surgery or organ transplants.

Specific needs and wishes: Most of the products listed above are generally helpful to people. But often, the goods and services that are most important to one individual are very specific.

As I’m writing this, I have a big cast on my left leg after I broke it. These days, I depend on products that I had no use for just three weeks ago. To move around, I need two long crutches, and to prevent thrombosis, I need to inject a blood thinner every day. After I broke my leg, I needed the service of nurses and doctors. They had to rely on a range of medical equipment, such as X-ray machines. To get back on my feet, I might need the service of physiotherapists.

We all have very specific needs or wishes for particular goods and services. Some needs arise from bad luck, like an injury. Others are due to a new phase in life – think of the specific goods and services you need when you have a baby or when you take care of an elderly person. And yet others are due to specific interests – think of the needs of a fisherman, or a pianist, or a painter.

All of these goods and services do not just magically appear. They need to be produced. At some point in the past, the production of most of them was zero, and even the most essential ones were extremely scarce. So, if you want to know what economic growth means for your life, look at the list above.

What is economic growth?

So, how can we define what economic growth is?

A definition that can be found in so many publications that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.”

The definition in the Oxford Dictionary is almost identical: “Economic growth is the increase in the production of goods and services per head of population over a stated period of time”. And the definition in the Cambridge Dictionary is similar. It defines growth as “an increase in the economy of a country or an area, especially of the value of goods and services the country or area produces.”

In the following footnote, you find more definitions. Bringing these definitions together and taking into account the economic literature more broadly, I suggest the following definition: Economic growth is an increase in the quantity and quality of the economic goods and services that a society produces.

I prefer a definition that is slightly longer than most others. If you want a shorter definition, you can speak of ‘products’ rather than ‘goods and services’, and you can speak of ‘value’ rather than mentioning both the quantity and quality aspects separately.

The most important change in quantity is from zero to one when a new product becomes available. Many of the most important changes in history became possible when new goods and services were developed; think of antibiotics, vaccines, computers, or the telephone.

You find more thoughts on the definition of growth in the footnote. 8

What are economic goods and services?

Many definitions of economic growth simply speak of the production of ‘goods and services’ collectively. This sidesteps a key difficulty in its definition and measurement. Economic growth is not concerned with all goods and services but with a subset of them: economic goods and services.

In everything we do – even in our most mundane activities – we continuously ‘produce’ goods and services in some form. Early in the morning, once we’ve brushed our teeth and made ourselves toast, we have already produced one service and one good. Should we count the tooth-brushing and the toast-making towards the economic production of the country we live in? The question of where to draw the line isn’t easy to answer. But we have to draw the line somewhere. If we don’t, we end up with a concept of production that is so broad that it becomes meaningless; we’d produce a service with every breath we take and every time we scratch our nose.

The line that we have to draw to define the economic goods and services is called the ‘production boundary’. The sketch illustrates the idea. The production boundary defines those goods and services that we consider when we speak about economic growth.

For a huge number of goods or services, there is no question that they are of the ‘economic’ type. But for some of them, it can be complicated to decide on which side of the production boundary they fall. One example is the question of whether the production of illegal goods should be included. Another is whether production within a household should be included – should we consider it as economic production if we grow tomatoes in our backyard and make soup from them? Different authors and different measurement frameworks have given different answers to these questions. 9

There are some characteristics that are helpful in deciding on which side of the boundary a particular product falls. 10 Economic goods and services are those that can be produced and that are scarce in relation to the demand for them. They stand in contrast to free goods, like sunlight, which are abundant, or those many important aspects in our lives that cannot be produced, like friendships. 11 Our everyday language has this right: we don’t refer to the sun or our friendships as a good or service that we ‘produce’.

An economic good or service is provided by people to each other as a solution to a problem they are faced with, and this means that they are considered useful by the person who demands it.

A last characteristic that helps decide whether you are looking at an economic product is “delegability”. An activity is considered to be production in an economic sense if it can be delegated to someone else. This would include many of the goods and services on that long list we considered earlier but would exclude your breathing, for example.

Because economic goods are scarce in relation to the demand for them, human effort is required to produce them. 12 A shorter way of defining growth is, therefore, to say that it is an increase in the production of those products that people produce for each other.

The majority of goods and services on that long list above are uncontroversially of the economic type – everything from the light bulbs and furniture in your home to the roads and bridges that connect your home with the rest of the world. They are scarce in relation to the demand for them and have to be produced by someone; their production is delegable, and they are considered useful by those who want them.

It’s worth recognizing that many of the difficulties in defining the production boundary arise from the effort to make measures of economic production as comparable as possible.

To give just one concrete example of the type of considerations that make the discussion about specific definitions so difficult, let’s look at how the production boundary is drawn in the housing sector.

Imagine two countries that are identical except for one aspect: home ownership. In Country A, everyone rents their homes, and the total sum of annual rent amounts to €2 billion per year. In Country B, everyone owns their own home, and no one pays rent. To provide housing is certainly an economic service, but if we only counted monetary transactions, then we would get the false impression that the value of goods and services in Country A is €2 billion higher than in Country B. To avoid such misjudgment, the production boundary includes the housing services that are provided without any monetary transactions. In National Accounts, statisticians take into account the “imputed rental value of owner-occupied housing” – those households who own their home get assigned an imputed rental value. In the imagined scenario, these imputed rents would amount to €2 billion in Country B so that the prosperity of people in these two countries would be judged to be identical.

It is the case more broadly that National Account figures (like GDP) do include important non-market goods and services that are not included in household survey measures of people’s income. GDP does not only include the housing services by owner-occupied housing but also the provision of most goods and services that are provided by the government or nonprofit institutions.

How can we measure economic growth?

Many discussions about economic growth are extraordinarily confusing. People often talk past one another.

I believe the key reason for this is that the discussion of what economic growth is gets muddled up with how it is measured .

While it is straightforward enough to define what growth is, measuring growth is very, very difficult.

In the worst cases, measures of growth are mixed up with a definition of growth. Growth is often measured as an increase in income or inflation-adjusted GDP per capita. But these measures are not the definition of it – just like life expectancy is a measure of population health but is certainly not the definition of population health.

To see how difficult it is to measure growth, take a moment to think about how you would measure it. How would you determine whether the quantity and quality of all economic goods and services produced by a society increased or decreased over time?

Finding a measure means that you have to find a way to express a huge amount of relevant information in a single metric. As the sketch shows, you have to first measure the quantity and quality of all the many, many goods and services that get produced and then find a way to aggregate all of these measurements into one summarizing metric. No matter what measure you propose for such a difficult task, there will always be problems and shortcomings in any proposal you might make.

In the following section, I will show four possible ways of measuring growth and present some data for each of them to see how they can inform us about the history of material living conditions.

Measuring economic growth by tracking access to particular goods and services

One possible way to measure growth is to make a list of some specific products that people want and to see what share of the population has access to them.

We do this very often at Our World in Data . The chart here shows the share of the world population that has access to four basic resources. All of these statistics measure some particular aspect of economic growth.

You can switch this chart to any country in the world via the “Change country” option. You will find that, judged by this metric, some countries achieved rapid growth – like Indonesia – while others only saw very little growth, like Chad.

The advantage of measuring growth in this way is that it is concrete. It makes clear what exactly is growing, and it’s clear which particular goods and services people gain access to.

The downside is that it only captures a small part of economic growth. There are many other goods and services that people want in addition to water, electricity, sanitation, and cooking technology. 13

You could, of course, expand this approach of measuring growth to many more goods and services, but this is usually not done for both practical and ethical considerations:

One practical reason is that a list of all the products that people value would be extremely long. Keeping lists that track people’s access to all products would be a daunting task: hundreds of different toothbrushes, thousands of different dentists, hundreds of thousands of different dishes in different restaurants, and many millions of different books. 14 If you wanted to measure growth across all goods and services in this way, you’d soon employ half the country in the statistical office.

In practice, any attempt to measure growth as access to particular products, therefore, means that you look only at a relatively small number of very particular goods and services that statisticians or economists are interested in. This is problematic for ethical reasons. It should not be up to the statisticians or economists to determine which few products should be considered valuable.

You might have realized this problem already when you read my list at the beginning of this text. You might have disagreed with the things that I put on that list and thought that some other goods and services were missing. This is why it is important to track incomes and not just access to particular goods: measuring people’s income is a way of measuring the options that they have rather than the choices that they make. It respects people’s judgment to decide for themselves what they find most important for their lives.

On our site, you find many more such metrics of growth that capture whether people have access to particular goods and services:

• This chart shows the share of US households having access to specific technologies.
• This chart shows the share that has health insurance.
• This chart shows access to schools.

Measuring economic growth by tracking the ratio between people’s income and the prices of particular goods and services

To measure the options that a person’s income represents, we have to compare their income with the prices of the goods and services that they want. We have to look at the ratio between income and prices.

The chart here does this for one particular product – books – and brings us back to the history of growth in the publishing sector that we started with. 15 Shown is the ratio between the average income that a worker receives and the price of a book. It shows how long the average worker had to work to buy one book. Note that this data is plotted on a logarithmic axis.

Before the invention of the printing press in the 15th century, the price was often as high as several months of work. The fact that books were unaffordable for almost everyone should not be surprising. It corresponds to what we’ve seen earlier that it took a scribe several months to produce a single book.

The chart also shows how this changed when the printing press increased the productivity of publishing. As the labor required to produce a book declined from many months of work to less than a day, the price fell from months of wages to mere hours.

This shows us how an innovation in technology raises productivity and how an increase in production makes it more affordable. How it increases the options that people have.

Global inequality: How do incomes compare in countries around the world?

In the previous section, we measured growth as the ratio between income and the price of one particular good. But of course, we could do the same for all the many goods and services that people want. This ratio – the ratio between the nominal income that people receive and the prices that people have to pay for goods and services – is called ‘real income’ . 16

Real income = Nominal income / price of goods and services

Real income grows when people’s nominal income increases or when the prices of goods and services decrease.

In contrast to many of the other metrics on Our World in Data, a person’s real income does not matter for its own sake but because it is a means to an end. A means to many ends, in fact.

Economic growth – measured as an increase in people’s real income – means that the ratio between people’s income and the prices of what they can buy is increasing: goods and services become more affordable, and people become less poor. It is because a person has more choices as their income grows that economists care so much about these monetary measures of prosperity.

The two most prominent measures of real income are GDP per capita and people’s incomes, as determined through household surveys.

They are shown in this chart.

Before we get back to the question of economic growth, let’s see what these measures of real income tell us about the economic inequality in the world today.

Both measures show that global inequality is very large. In a rich country like Denmark, an average person can purchase goods and services for $54 a day, while the average Ethiopian can only afford goods and services that cost $3 per day.

Both measures of real incomes in this chart are measured in international dollars, which means that they take into account the level of prices in each country (using purchasing power parity conversion factors). This price adjustment is done in such a way that one international-$ is equivalent to the purchasing power of one US-$ in the US . An income of int.-$3 in Ethiopia, for example, means that it allows you to purchase goods and services in Ethiopia that would cost US-$3 in the US . All dollar values in this text are given in international dollars, even though I often shorten it to just the $-sign.

If you are living in a rich country and you want to have a sense of what it means to live in a poor country – where incomes are 20 times lower – you can imagine that the prices for everything around you suddenly increase 20-fold. 17 If all the things you buy suddenly get 20-times more expensive your real income is 20-times lower. A loaf of bread doesn’t cost $2 but $40, a pair of jeans costs $400, and an old car costs $40,000. If you ask yourself how these price increases would change your daily consumption and your day-to-day life, you can get a sense of what it means to live in a poor country.

The two shown measures of real income differ:

• The data on the vertical axis is based on surveys in which researchers go from house to house and ask people about their economic situation. In some countries, people are asked about their income, while in other countries, people are asked about their expenditure – expenditure is income minus savings. In poor countries, these two measures are close to each other since poor people do not have the chance to save much.
• On the other hand, GDP per capita starts at the aggregate level and divides the income of the entire economy by the number of people in that country. GDP per capita is higher than per capita survey income because GDP is a more comprehensive measure of income. As we’ve discussed before, it includes an imputed rental value of owner-occupied housing and other differences, such as government expenditure.

Income as a measure of economic prosperity is much more abstract than the metrics we looked at previously. The comparison of incomes of people around the world in this scatterplot measures options, not choices. It shows us that the economic options for billions of people are very low. The majority of the world lives on very low incomes of less than $20, $10, or even $5 per day. In the next section, we’ll see how poverty has changed over time.

• GDP per capita vs. Daily income of the poorest 10%
• GDP per capita vs. Daily average income

Global poverty and growth: How have incomes changed around the world?

Economic growth, as we said before, is an increase in the production of the quantity and quality of the economic goods and services that a society produces. The total income in a society corresponds to the total sum of goods and services the society produces – everyone’s spending is someone else’s income. This means that the average income corresponds to the level of average production, so that the average income in a society increases when the production of goods and services increases.

Average production = average income

In this final section, let’s see how incomes have changed over time, first as documented in survey incomes and then via GDP per capita.

Measuring economic growth by tracking incomes as reported in household surveys

The chart shows the income of people around the world over time, as reported in household surveys. It shows the share of the world population that lives below different poverty lines: from extremely low poverty lines up to $30 per day, which corresponds to notions of poverty in high-income countries .

Many of the poorest people in the world rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians who produce these figures estimate the monetary value of their home production and add it to their income.

Again, the prices of goods and services are taken into account: these are measures of real incomes. As explained before, incomes are adjusted for price differences between countries, and they are also adjusted for inflation. As a consequence of these two adjustments, incomes are expressed in international dollars in 2017 prices, which means that these income measures express what you would have been able to buy with US dollars in the US in 201 7.

Global economic growth can be seen in this chart as an increasing share of the population living on higher incomes. In 2000 two thirds of the world lived on less than $6.85 per day. In the following 19 years, this share fell by 22 percentage points.

In 2020 and 2021 — during the economic recession that followed the pandemic — the size of the world economy declined, and the share of people in poverty increased . As soon as global data for this period is available, we will update this chart.

The data shows that global poverty has declined, no matter what poverty line you choose. It also shows that the majority of the world still lives on very low incomes. As we’ve seen, we can describe the same reality from the production side: the global production of the goods and services that people want has increased, but there is still not enough production of even very basic products. Most people in the world do not have access to them.

An advantage of household survey data over GDP per capita is that it captures the inequality of incomes within a country. You can explore this inequality with this chart by switching to see the data for an individual country via the ‘Change country’ button.

Measuring economic growth by tracking GDP per capita

GDP per capita is a broader measure of real income, and in contrast to survey income, it also takes government expenditures into account. A lot of thinking has gone into the construction of this very prominent metric so that it is comparable not only over time but also across countries. This makes it especially useful as a measure to understand the economic inequality in the world, as we’ve seen above. 18

Another advantage of this measure is that historians have reconstructed estimates of GDP per capita that go back many centuries. This historical research is an extremely laborious task , and researchers have dedicated many years of work to these reconstructions. The ‘Maddison Project’ brings together these long-run reconstructions from various researchers, and thanks to these efforts, we have a good understanding of how incomes have changed over time.

The chart shows how average incomes in different world regions have changed over the last two centuries. Looking at the latest data, you see again the very large inequality between different parts of the world today. You now also see the history of how we got here: small increases in production in some world regions and very large increases in those regions where people have the highest incomes today.

One of the very first countries to achieve sustained economic growth was the United Kingdom. In this chart, we see the reconstructions of GDP per capita in the UK over the last centuries.

It is no accident that the shape of this chart is very similar to the chart on book production at the beginning of this text – very low and almost flat for many generations and then quickly rising. Both of these developments are driven by changes in production.

Average income corresponds to average production, and societies around the world were able to produce very few goods and services in the past. There were no major exceptions to this reality. As we see in this chart, global inequality was much lower than today: the majority of people around the world were very poor.

To get a sense of what this means, you can again take the approach we’ve used to understand the inequality in the world today. When incomes in today’s rich countries were 20 times lower, it was as if all the prices around you today would suddenly increase 20-fold. But in addition to this, you have to consider that all the goods and services that were developed since then disappeared – no bicycle, no internet, no antibiotics. All that’s left for you are the goods and services of the 17th century, but all of them are 20 times more expensive than today. The majority of people around the world, including in today’s richest countries, live in deep poverty.

Just as we’ve seen in the history of book production, this changed once new production technologies were introduced. The printing press was an exceptionally early innovation in production technology; most innovations happened in the last 250 years. The starting point of this rise out of poverty is called the Industrial Revolution.

The printing press made it possible to produce more books. The many innovations that made up the Industrial Revolution made it possible to increase the production of many goods and services. Compare the effort that it takes for a farmer to reap corn with a scythe to the possibilities of a farmer with a tractor or a combined harvester, or think of the technologies that made overland travel faster – from walking on foot to traveling in a horse buggy to taking the train or car; or think of the effort it took to build those roads that the buggies once traveled on with the modern machinery that allows us to produce the corresponding public infrastructure today .

The production of a myriad of different goods and services followed trajectories very similar to the production of books – flat and low in the past and then steeply increasing. The rise in average income that we see in this chart is the result of the aggregation of all these production increases.

In the past, before societies achieved economic growth, the only way for anyone to become richer was for someone else to become poorer; the economy was a zero-sum game. In a society that achieves economic growth, this is no longer the case. When average incomes increase, it becomes possible for people to become richer without someone else becoming poorer.

This transition from a zero-sum to a positive-sum economy is the most important change in economic history (I wrote about it here ) and made it possible for entire societies to leave the extreme poverty of the past behind.

Conclusion: The history of global poverty reduction has just begun

The chart shows the global history of extreme poverty and economic growth.

In the top left panel, you can see how global poverty has declined as incomes increased; in the other eight panels, you see the same for all world regions separately. The starting point of each trajectory shows the data for 1820 and tells us that two centuries ago, the majority of people lived in extreme poverty, no matter where in the world they were at home.

Back then, it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. The trajectories show how incomes and poverty have changed in each world region. All regions achieved growth – the goods and services that people need saw their production and quality increase – and the share living in extreme poverty declined. 19

This historical research was done by Michail Moatsos and is based on the ‘cost of basic needs’-approach as suggested by Robert Allen (2017) and recommended by the late Tony Atkinson. 20 The name ‘extreme poverty’ is appropriate as this measure is based on an extremely low poverty threshold. It takes us back to what I mentioned at the very beginning; this historical research tells us – as the author puts it – that three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.”

Since then, all world regions have made progress against extreme poverty – some much earlier than others – but in particular, in Sub-Saharan Africa, the share of people living in deep poverty is still very high.

The last two centuries were the first time in human history that societies have achieved sustained economic growth, and the decline of global poverty is one of the most important achievements in history. But it is still a very long way to go.

This is what we see in this final chart. The red line shows the share of people living in extreme poverty that we just discussed. Additionally, you now also see the share living on less than $3.65, $6.85, and $30 per day. 21

The world today is very unequal, and the majority of the world still lives in poverty: 47% live on less than $6.85 per day, and 84% live on less than $30. Even after two centuries of progress, we are still in the early stages. The history of global poverty reduction has only just begun.

That the world has made substantial progress but nevertheless still has a long way to go is the case for many of the world’s very large problems. I’ve written before that all three statements are true at the same time: The world is much better, the world is awful, and the world can be much better. This is very much the case for global poverty. The world is much less poor than in the past, but it is still very poor, and it remains one of the largest problems we face.

Some writers suggest we can end poverty by simply reducing global inequality. This is not the case. I’m very much in favor of reducing global inequality, and I hope I do what I can to contribute to this. But it is important to be clear that a reduction of inequality alone would still mean that billions around the world would live in very poor conditions. Those who don’t see the importance of growth are not aware of the extent of global poverty. The production of many crucial goods and services has to increase if we want to end it. How much economic growth is needed to achieve this? This is the question I answered in this recent text .

To solve the problems we face, it is not enough to increase overall production. We also need to make good decisions about which goods and services we want to produce more of and which ones we want less of. Growth doesn’t just have a rate, it also has a direction, and the direction we choose matters – for our own happiness and for achieving a sustainable future .

I hope this text was helpful in making clear what economic growth is. It is necessary to remind ourselves of that because we mostly talk about poverty and growth in monetary terms. The monetary measures have the disadvantage that they are abstract, perhaps so abstract that we even forget what growth is actually about and why it is so important. The goods and services that we all need are not just there – they need to be produced – and economic growth means that the quality and quantity of these goods and services increase, from the food that we eat to the public infrastructure we rely on.

The history of economic growth is the history of how societies leave widespread poverty behind by finding ways to produce more of the goods and services that people need – all the very many goods and services that people produce for each other: look around you now.

Acknowledgments: I would like to thank Joe Hasell and Hannah Ritchie for very helpful comments on draft versions of this article.

Our World in Data presents the data and research to make progress against the world’s largest problems. This article draws on data and research discussed in our topic pages on Economic Inequality , Global Poverty , and Economic Growth .

Version history: In October 2023, I copy-edited this article; it was a minor update, and nothing substantial was changed.

Michail Moatsos (2021) – Global extreme poverty: Present and past since 1820. Published in OECD (2021), How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

At the time when material prosperity was so poor, living conditions were extremely poor in general; close to half of all children died .

Historian Gregory Clark reports the estimate that scribes were able to copy about 3,000 words of plain text per day.

See Clark (2007) – A Farewell to Alms: A Brief Economic History of the World. Clark (2007). In it, Clark quotes his earlier working paper with Patricia Levin as the source of these estimates. Gregory Clark and Patricia Levin (2001) – “How Different Was the Industrial Revolution? The Revolution in Printing, 1350–1869.”

There are about 760,000 words in the bible (it differs between various translations and languages; here is an overview of some translations).

This implies that the production of one copy of the Bible meant 253.3 days (8.3 months) of daily work.

Copying the text was not the only step in the production process for which productivity was low. The ink had to be made, parchment had to be produced and cut, and many other steps involved laborious work.

Wikipedia’s article about scribes reports sources that estimate that the production time per bible was even longer than 8 months.

Clark himself states in the same publication that “Prior to that innovation, books had to be copied by hand, with copyists on works with just plain text still only able to copy 3,000 words per day. Producing one copy of the Bible at this rate would take 136 man-days.” Since the product of 136 and 3000 is only 408,000, it is unclear to me how Clark has arrived at this estimate – 408,000 words are fewer words than in the Tanakh and other versions of the bible.

The data is taken from Eltjo Buringh and Jan Luiten Van Zanden (2009) – Charting the “Rise of the West”: Manuscripts and Printed Books in Europe, a Long-Term Perspective from the Sixth through Eighteenth Centuries. In The Journal of Economic History Vol. 69, No. 2 (June 2009), pp. 409-445. Online here .

Western Europe in this study is the area of today’s Great Britain, Ireland, France, Belgium, Netherlands, Germany, Switzerland, Italy, Spain, Sweden, and Poland.

On the history and economics of book production, see also the historical work of Jeremiah Dittmar.

I’ve relied on several sources to produce this list. One source was the simple descriptions of the consumption bundles that are relied upon for CPI measurement – like this one from Germany’s statistical office . And I have also relied on the national accounts themselves.

This list is also inspired partly by this list of Gwern and I’m also grateful for the feedback that I got via Twitter to earlier versions of this list. [ Here I shared the list on Twitter ]

This is Hans Rosling’s talk on the magic of the washing machine – worth watching if you haven’t seen it.

Of course all of these transfer payments have a service component to them, someone is managing the payment of the disability benefits etc.

Because smoking causes a large amount of suffering and death I do not find cigarettes valuable, but my opinion is not what matters for a list of goods and services that people produce for each other. Whether some good is considered to be part of the domestic product depends on whether it is a good that some people want, not whether you or I want it. More on this below.

Very similar to the definitions given above is the definition that Kimberly Amadeo gives: “Economic growth is an increase in the production of goods and services over a specific period.”

“Economic growth is an increase in the production of economic goods and services, compared from one period of time to another” is the definition at Investopedia .

Alternatively, to my definition, I think it can be useful to think of economic growth as not directly concerned with the output as such but with the capacity to produce this output. The NASDAQ’s glossary defines growth in that way: “An increase in the nation's capacity to produce goods and services.”

Wikipedia defines economic growth as follows: “Economic growth can be defined as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time.” Definitions that are based on how growth is measured strike me as wrong – just like life expectancy is a measure of population health and hardly the definition of population health. I will get back to this mistake further below in this text.

An aspect that I emphasize more explicitly than others is the quality of the goods and services. People obviously do just care about the number of goods, and in the literature on growth, the measurement of changes in quality is a central question. Many definitions speak more broadly about the ‘value’ of the goods and services that are produced, but I think it is worth emphasizing that growth is also concerned with a rise in the quality of goods and services.

OECD – Measuring the Non-Observed Economy: A Handbook .

The relevant numbers are not small. For the US alone, “illegal drugs add $108 billion to measured nominal GDP in 2017, illegal prostitution adds $10 billion, illegal gambling adds $4 billion, and theft from businesses adds $109 billion” if they were to be included in the US National Accounts. This is according to the report by Rachel Soloveichik (2019) – Including Illegal Activity in the U.S. National Economic Accounts . Published by the BEA.

Ironmonger (2001) – Household Production. In International Encyclopedia of the Social & Behavioral Sciences. Pages 6934-6939. https://doi.org/10.1016/B0-08-043076-7/03964-4

Or for some longer run data on the US: Danit Kanal and Joseph Ted Kornegay (2019) – Accounting for Household Production in the National Accounts: An Update, 1965–2017 . In the Survey of Current Business.

Helpful references that discuss how the production boundary is drawn (and how it changed over time) are: Lequiller and Blades – Understanding National Accounts (available in various editions) Diane Coyle (2016) – GDP: A Brief but Affectionate History https://press.princeton.edu/books/paperback/9780691169859/gdp

The definition of the production boundary by Statistics Finland

Itsuo Sakuma (2013) – The Production Boundary Reconsidered. In The Review of Income and Wealth. Volume 59, Issue 3; Pages 556-567.

Diane Coyle (2017) – Do-it-Yourself Digital: The Production Boundary and the Productivity Puzzle. ESCoE Discussion Paper 2017-01, Available at SSRN: http://dx.doi.org/10.2139/ssrn.2986725

A more general way of thinking about free goods and services is to consider them as those for which the supply is hugely greater than the demand.

Their production, therefore, has an opportunity cost, which means that if someone obtains an economic good, someone is giving up on something for it – this can either be the person themselves or society more broadly. Free goods, in contrast, are provided with zero opportunity cost to society.

It is also the case that the international statistics on these measures often have very low cutoffs for what it means ‘to have access’; this is, for example, the case for what it means to have access to energy.

10 years ago, Google counted there were 129,864,880 different books, and since then, the number has increased further by many thousands of new books every day.

This chart is from Jeremiah Dittmar and Skipper Seabold (2019) – New Media New Knowledge – How the printing press led to a transformation of European thought . I was unfortunately not able to find the raw data anywhere and could not redraw this chart; if someone knows where this (or comparable) data can be found, please let me know.

In the language of economists, the nominal value is measured in terms of money, whereas the real value is measured against goods or services. This means that the real income is the income adjusted for inflation (it is adjusted for the changes in prices of goods and services). Thereby, it allows comparisons that tell us the quantity and quality of the goods and services that people were able to purchase at different points in time.

I learned this way of thinking about it from Twitter user @Kirsten3531, who responded with this idea to a tweet of mine here https://twitter.com/Kirsten3531/status/1389553625308045317

We’ve discussed one such consideration that is crucial for comparability when we consider how to take into account the value of owner-occupied housing.

Whether economic growth translates into the reduction of poverty depends not only on the growth itself but also on how the distribution of income changes. The poverty metrics shown in this chart and in previous charts take both of these aspects – the average level of production/income and its distribution – into account.

Jutta Bolt and Jan Luiten van Zanden (2021) – The GDP data in the chart is taken from The Long View on Economic Growth: New Estimates of GDP, How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

The latest data point for the poverty data refers to 2018, while the latest data point for GDP per capita refers to 2016. In the chart, I have chosen the middle year (2017) as the reference year.

The ‘cost of basic needs’-approach was recommended by the ‘World Bank Commission on Global Poverty’, headed by Tony Atkinson, as a complementary method in measuring poverty.

The report for the ‘World Bank Commission on Global Poverty’ can be found here .

Tony Atkinson – and, after his death, his colleagues – turned this report into a book that was published as Anthony B. Atkinson (2019) – Measuring Poverty Around the World. You find more information on Atkinson’s website .

The CBN-approach Moatsos’ work is based on what was suggested by Allen in Robert Allen (2017) – Absolute poverty: When necessity displaces desire. In American Economic Review, Vol. 107/12, pp. 3690-3721, https://doi.org/10.1257/aer.20161080 .

Moatsos describes the methodology as follows: “In this approach, poverty lines are calculated for every year and country separately, rather than using a single global line. The second step is to gather the necessary data to operationalize this approach alongside imputation methods in cases where not all the necessary data are available. The third step is to devise a method for aggregating countries’ poverty estimates on a global scale to account for countries that lack some of the relevant data.” In his publication – linked above – you find much more detail on all of the shown poverty data. The speed at which extreme poverty declined increased over time, as the chart shows. Moatsos writes, “It took 136 years from 1820 for our global poverty rate to fall under 50%, then another 45 years to cut this rate in half again by 2001. In the early 21st century, global poverty reduction accelerated, and in 13 years, our global measure of extreme poverty was halved again by 2014.”

These are the same global poverty estimates – based on household surveys – we discussed above.

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The power of economics to explain and shape the world

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Nobel Prize-winning economist Esther Duflo sympathizes with students who have no interest in her field. She was such a student herself — until an undergraduate research post gave her the chance to learn first-hand that economists address many of the major issues facing human and planetary well-being. “Most people have a wrong view of what economics is. They just see economists on television discussing what’s going to happen to the stock market,” says Duflo, the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics. “But what people do in the field is very broad. Economists grapple with the real world and with the complexity that goes with it.”

That’s why this year Duflo has teamed up with Professor Abhijit Banerjee to offer 14.009 (Economics and Society’s Greatest Problems), a first-year discovery subject — a class type designed to give undergraduates a low-pressure, high-impact way to explore a field. In this case, they are exploring the range of issues that economists engage with every day: the economic dimensions of climate change, international trade, racism, justice, education, poverty, health care, social preferences, and economic growth are just a few of the topics the class covers. “We think it’s pretty important that the first exposure to economics is via issues,” Duflo says. “If you first get exposed to economics via models, these models necessarily have to be very simplified, and then students get the idea that economics is a simplistic view of the world that can’t explain much.” Arguably, Duflo and Banerjee have been disproving that view throughout their careers. In 2003, the pair founded MIT’s Abdul Latif Jameel Poverty Action Lab, a leading antipoverty research network that provides scientific evidence on what methods actually work to alleviate poverty — which enables governments and nongovernmental organizations to implement truly effective programs and social policies. And, in 2019 they won the Nobel Prize in economics (together with Michael Kremer of the University of Chicago) for their innovative work applying laboratory-style randomized, controlled trials to research a wide range of topics implicated in global poverty. “Super cool”

First-year Jean Billa, one of the students in 14.009, says, “Economics isn’t just about how money flows, but about how people react to certain events. That was an interesting discovery for me.”

It’s also precisely the lesson Banerjee and Duflo hoped students would take away from 14.009, a class that centers on weekly in-person discussions of the professors’ recorded lectures — many of which align with chapters in Banerjee and Duflo’s book “Good Economics for Hard Times” (Public Affairs, 2019). Classes typically start with a poll in which the roughly 100 enrolled students can register their views on that week’s topic. Then, students get to discuss the issue, says senior Dina Atia, teaching assistant for the class. Noting that she finds it “super cool” that Nobelists are teaching MIT’s first-year students, Atia points out that both Duflo and Banerjee have also made themselves available to chat with students after class. “They’re definitely extending themselves,” she says. “We want the students to get excited about economics so they want to know more,” says Banerjee, the Ford Foundation International Professor of Economics, “because this is a field that can help us address some of the biggest problems society faces.”   Using natural experiments to test theories

Early in the term, for example, the topic was migration. In the lecture, Duflo points out that migration policies are often impacted by the fear that unskilled migrants will overwhelm a region, taking jobs from residents and demanding social services. Yet, migrant flows in normal years represent just 3 percent of the world population. “There is no flood. There is no vast movement of migrants,” she says. Duflo then explains that economists were able to learn a lot about migration thanks to a “natural experiment,” the Mariel boat lift. This 1980 event brought roughly 125,000 unskilled Cubans to Florida over a matter a months, enabling economists to study the impacts of a sudden wave of migration. Duflo says a look at real wages before and after the migration showed no significant impacts. “It was interesting to see that most theories about immigrants were not justified,” Billa says. “That was a real-life situation, and the results showed that even a massive wave of immigration didn’t change work in the city [Miami].”

Question assumptions, find the facts in data Since this is a broad survey course, there is always more to unpack. The goal, faculty say, is simply to help students understand the power of economics to explain and shape the world. “We are going so fast from topic to topic, I don’t expect them to retain all the information,” Duflo says. Instead, students are expected to gain an appreciation for a way of thinking. “Economics is about questioning everything — questioning assumptions you don’t even know are assumptions and being sophisticated about looking at data to uncover the facts.” To add impact, Duflo says she and Banerjee tie lessons to current events and dive more deeply into a few economic studies. One class, for example, focused on the unequal burden the Covid-19 pandemic has placed on different demographic groups and referenced research by Harvard University professor Marcella Alsan, who won a MacArthur Fellowship this fall for her work studying the impact of racism on health disparities.

Duflo also revealed that at the beginning of the pandemic, she suspected that mistrust of the health-care system could prevent Black Americans from taking certain measures to protect themselves from the virus. What she discovered when she researched the topic, however, was that political considerations outweighed racial influences as a predictor of behavior. “The lesson for you is, it’s good to question your assumptions,” she told the class. “Students should ideally understand, by the end of class, why it’s important to ask questions and what they can teach us about the effectiveness of policy and economic theory,” Banerjee says. “We want people to discover the range of economics and to understand how economists look at problems.”

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Prof. Esther Duflo will present her research on poverty reduction and her “proposal for a global minimum tax on billionaires and increased corporate levies to G-20 finance chiefs,” reports Andrew Rosati for Bloomberg. “The plan calls for redistributing the revenues to low- and middle-income nations to compensate for lives lost due to a warming planet,” writes Rosati. “It also adds to growing calls to raise taxes on the world’s wealthiest to help its most needy.”

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5 things you should know about the state of the global economy

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Is this the year we overcome the global economic crisis caused by the pandemic? Are our jobs in danger? Who has lost the most in the crisis and what can be done to recover? As the UN Department of Social and Economic Affairs (DESA) prepares to launch the mid-year update of the 2021 World Economic Situation and Prospects (WESP) report, here are five things you need to know about the state of the global economy.

1) US and China bounce back, but a slow recovery for developing countries 

While economic output in the United States and China is expected to grow robustly and lift global growth, many developing economies are not expected to return to pre-pandemic output levels anytime soon. The pandemic is far from over for most developing countries where vaccination is advancing slowly, and fiscal pressures have intensified.

2) The situation of the most vulnerable has become even more precarious

Lockdowns and social distancing measures resulted in large job losses in contact-intensive and labour-intensive service sectors, which predominantly employ women. The pandemic has also exposed the vulnerability of informal employment, which is the main source of jobs in many countries and which offers less job security, social protection and access to healthcare.

3) Global trade recovery is strong, particularly in Asia

Merchandise trade has already surpassed pre-pandemic levels, buoyed by strong demand for electrical and electronic equipment, personal protective equipment (PPE) and other manufactured goods. Trade in services remains constrained by restrictions on international travel. While exports from Asian economies have soared, exports from Africa, Western Asia, and the Commonwealth of Independent States has stalled.

4) The COVID-19 crisis has inflicted more harm on women and girls

This crisis disproportionately affected women, who suffered significant job and income losses, contributing to the worsening of gender poverty gaps. Burdened by increased home care duties, many girls and women gave up on schools, and the workforce altogether. Returning to school and work might take longer or may not happen at all for many of them, further widening gender gaps in education, income and wealth.

5) Countries need to do more to address the uneven impact of the COVID-19 crisis

There is an urgent need for countries to formulate better targeted and gender-sensitive policies to drive a more resilient and inclusive recovery from the crisis. Though on the frontlines of the pandemic, women have been under-represented in pandemic related decision-making and economic policy responses. The severe and disproportionate impact of the pandemic on women and girls call for more targeted policy and support measures for women and girls, not only to accelerate the recovery but also to ensure that the recovery is inclusive and resilient.

A version of this article first  appeared in the May edition of the Department of Economic and Social Affairs newsletter, UN DESA Voice .   

Globalization in a Global Economy

Introduction.

It has been noted that, for economies to thrive successively in the current world market; they need to work as a group in order to help each other grow economically, socially and technologically. In this case therefore, world economies and societies have come together to work as a global economy by having common means of transportation, communication and marketing. On this basis, what is happening in one country is somehow common with what another country in the world is undertaking especially in terms of economics (Rodrik, 1997).

With this knowledge, we can define globalization as a process where by; world countries, cultures and societies have been incorporated through an international system of marketing, transportation and communication. Economically, the term globalization denotes the incorporation of nationwide countries into the worldwide financial system through marketing, overseas direct ventures, flow of resources, migration and spread of new forms of expertise. It should be noted that, globalization is commonly acknowledged as being brought about by an amalgamation of financial, industrial, socio-cultural, political and biological factors (Rodrik, 1997).

On the other hand, globalization as a term may be used to denote the intermediary flow of thoughts, languages or traditions through a process of acculturation. With this in mind, it can be argued that, globalization has led to development of economy, technology, traditions and trade world wide; as an invention in one country belongs to the whole world through their level of integration. Politically, globalization plays a major role as developed countries usually advise the less developed countries on steps to follow in order to reduce corruption; and even impose bans to make sure that corruption and dictatorships are completely done away with. It is of importance to note that; globalization is a process that makes all the undertakings done in any country become international matters. A good example here is the American 2008 general election when President Barrack Obama was elected. At this time, the whole world was eager to see what the world’s super power would portray as far as political matters are concerned (Rodrik, 1997).

A point worth noting is that, globalization has become a trend through which economies join together financially, academically, socially and politically and start considering themselves not only as national distinctiveness but as global entities. This is evident because, throughout the whole world; there are only few places an individual from whichever country cannot travel or get information from. On the basis of advanced modes of transport and communication, citizens of any country are more cognizant of the international matters; and as a result are influenced by other traditions in different and separate ways (Rodrik, 1997).

It is of importance to note that, globalization has been useful through a number of ways which include; reduction of poverty, promotion of technology access in less developed and developing countries, promotion of world peace, promotion of women and children’s rights and in raising life expectancy. In terms of reducing global poverty, globalization has promoted trade and marketing systems in nations and also has increased employment opportunities to many citizens all over the world. In this case, through globalization, developed countries have invested heavily in less developed countries in terms of industries and banks; hence providing employment opportunities to the citizens of these countries who work in these industries and banks. Additionally, when these industries are constructed in less developed countries, there is usually transfer of technology and expertise (Rodrik, 1997).

In terms of promoting trade and marketing systems, globalization has allowed any country to import or export its products either manufactured or raw to any country of choice. On this basis, as a result of free market economy, many countries have benefited by exporting and importing goods with less restrictions. Additionally, globalization has promoted communication and cooperativeness across countries whereby; countries can communicate through fax or internet which take the shortest time possible. A good example of country cooperativeness is Asia Pacific economic Cooperation, European Union, and African Union among others (Rodrik, 1997).

On the other hand, globalization has its shortcomings whereby it is rejected by countries that do not recognize trends in international society. A good example here is the case of Fundamentalist Islamic nations that view globalization as representing the desires of westernization. Moreover, globalization has allowed the developed to rule the less developed countries by dictating what is to be done like in the case of America and Iraq. (Rodrik,1997).

Another argument against globalization may come from less developed economies because they feel threatened by developed countries as the labor costs in developed countries are lower. This has made the less developed countries’ companies to loose to the less expensive foreign companies. Additionally, globalization has increased the gap between the most developed and the least developed economies resulting to the development of superior and 4 th world economies. Further, globalization has resulted to loss of cultural identity as many economies want to copy western way of life (Rodrik, 1997).

To wind up, despite the arguments against globalization, it has helped in many ways especially economically, academically and technologically. In this case, people from all over the world can learn and practice inventions of technology from any country within the least time possible. On this basis therefore, globalization has liberated developing countries in terms of political, social, cultural, economic, academic and technology.

Reference list

Rodrik, D. (1997). Has Globalization Gone Too Far? Institute for International Economics Publishers.

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Manufacturing PMI (Industrial PMI) in key developed and emerging economies from January 2020 to February 2024 (50 = no change)

Global consumer confidence index 2020-2023

Global consumer confidence in developed and emerging countries from January 2020 to December 2023

Consumer confidence in developed and emerging countries 2023

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Countries with the lowest estimated GDP per capita 2023

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Share of economic sectors in the global gross domestic product from 2012 to 2022

Share of economic sectors in the global gross domestic product (GDP) from 2012 to 2022

Share of economic sectors in the gross domestic product, by global regions 2022

Share of economic sectors in the gross domestic product (GDP) of selected global regions in 2022

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Proportions of economic sectors in the gross domestic product (GDP) in selected countries in 2022

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Growth of the global gross domestic product (GDP) 2028

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The 20 countries with the greatest decrease of the gross domestic product (GDP) in 2022 (compared to the previous year)

GDP growth in the leading industrial and emerging countries 2nd quarter 2023

Growth of the real gross domestic product (GDP) in the leading industrial and emerging countries from 2nd quarter 2021 to 2nd quarter 2023 (compared to the previous quarter)

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Number of unemployed persons worldwide 1991-2024

Number of unemployed persons worldwide from 1991 to 2024 (in millions)

Global unemployment rate 2004-2023

Global unemployment rate from 2004 to 2023 (as a share of the total labor force)

Unemployed persons in selected world regions 2024

Number of unemployed persons in selected world regions in 2021 and 2022, up to 2024 (in millions)

Unemployment rate in selected world regions 2022

Unemployment rate in selected world regions between 2017 and 2022

Youth unemployment rate in selected world regions 2022

Youth unemployment rate in selected world regions in 2000 to 2022

Monthly unemployment rate in industrial and emerging countries August 2023

Unemployment rate in the leading industrial and emerging countries from August 2022 to August 2023

Breakdown of unemployment rates in G20 countries 2023

Unemployment rate of G20 countries in 2023

Global trade

• Premium Statistic Monthly change in goods trade globally 2018-2023
• Basic Statistic Leading export countries worldwide 2023
• Premium Statistic Leading import countries worldwide 2022
• Premium Statistic The 20 countries with the highest trade surplus in 2022
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Monthly change in goods trade globally 2018-2023

Change in global goods trade volume from January 2018 to October 2023

Leading export countries worldwide in 2023 (in billion U.S. dollars)

Leading import countries worldwide 2022

Leading import countries worldwide in 2022 (in billion U.S. dollars)

The 20 countries with the highest trade surplus in 2022

The 20 countries with the highest trade surplus in 2022 (in billion U.S. dollars)

The 20 countries with the highest trade balance deficit in 2022

The 20 countries with the highest trade balance deficit in 2022 (in billion U.S. dollars)

Trade: export value worldwide 1950-2022

Trends in global export value of trade in goods from 1950 to 2022 (in billion U.S. dollars)

Global merchandise imports index 2019-2023, by region

Global merchandise imports index between January 2019 to November 2023, by region

Global merchandise exports index 2019-2023, by region

Global merchandise exports index from January 2019 to November 2023, by region

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Global inflation rate from 2000 to 2022, with forecasts until 2028 (percent change from previous year)

Inflation rate in selected global regions in 2022

Inflation rate in selected global regions in 2022 (compared to previous year)

Monthly inflation rates in developed and emerging countries 2021-2024

Monthly inflation rates in developed and emerging countries from January 2021 to January 2024 (compared to the same month of the previous year)

Inflation rate of the main industrialized and emerging countries 2022

Estimated inflation rate of the main industrialized and emerging countries in 2022 (compared to previous year)

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The 20 countries with the highest inflation rate in 2022 (compared to the previous year)

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How does the global economy work?

The global economy has changed significantly over the past few decades, in the way that it is organised and governed by collaborating nations. These changes have repercussions that not only affect the flow of goods and services between countries, but also the movement of people. As we’ve seen on occasions over the last century, too great a fluctuation in this international economic system can lead to a global economic crisis.

So what exactly is the global economy, how does it function, and how does it affect our lives? Here we take a closer look to help you understand the complexities of the force that governs the modern world!

What is a global economy?

The global economy refers to the interconnected worldwide economic activities that take place between multiple countries. These economic activities can have either a positive or negative impact on the countries involved.

The global economy comprises several characteristics, such as:

• Globalisation: Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration, and transportation. These developments led to the advent of the global economy. Due to the global economy and globalisation, domestic economies have become cohesive, leading to an improvement in their performances.
• International trade: International trade is considered to be an impact of globalisation . It refers to the exchange of goods and services between different countries, and it has also helped countries to specialise in products which they have a comparative advantage in. This is an economic theory that refers to an economy's ability to produce goods and services at a lower opportunity cost than its trade partners.
• International finance: Money can be transferred at a faster rate between countries compared to goods, services, and people; making international finance one of the primary features of a global economy. International finance consists of topics like currency exchange rates and monetary policy.
• Global investment: This refers to an investment strategy that is not constrained by geographical boundaries. Global investment mainly takes place via foreign direct investment (FDI).

Why is the global economy important?

We can understand the importance of the global economy by looking at it in relation to emerging markets:

• Economic importance at a micro and macro level: The increase in the world’s population has led to emerging markets growing economically, making them one of the primary engines of world economic growth. The growth and resilience shown by emerging markets is a good sign for the world economy . Before delving into the next point, you need to understand the concept of microeconomics. It refers to the study of the behaviour of households, individuals, and firms with respect to the allocation of resources and decision-making. In simpler terms, this branch of economics studies how people make decisions, what factors affect their decisions, and how these decisions affect the price, demand, and supply of goods in the market. Therefore, from the perspective of microeconomics, some of the largest firms with high market value and a few of the richest individuals in the world hail from these emerging markets, which has helped in the higher distribution of income in these countries. However, many of these emerging countries are still plagued by poverty, and work still needs to be done to work towards eradicating it.
• Long-term world economic outlook: According to financial and economic projections based on demographic trends and capital productivity models, the GDP in emerging market economies in 2019 are likely to keep increasing at a positive rate. According to an emerging markets economic forecast for 2019 conducted by Focus Economics , the economy is set to increase by 7.5% in India, 6.6% in Philippines, 6.3% in China, 5.3% in Indonesia, 5.1% in Egypt, 4.9% in Malaysia, 3.8% in Peru and 3.7% in Morocco.

Who controls the global economy?

Many people think that the global economy is controlled by governments of the largest economies in the world , but this a common misconception. Although governments do hold power over countries’ economies, it is the big banks and large corporations that control and essentially fund these governments. This means that the global economy is dominated by large financial institutions. According to world economic news , US banks participate in many traditional government businesses like power production, oil refining and distribution, and also the operating of public assets such as airports and train stations. This was proven when certain members of the US Congress sent a letter to the Federal Reserve Chairman Ben Bernanke. Here’s an excerpt from the letter:

“Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012. Goldman Sachs stores aluminium in vast warehouses in Detroit as well as serving as a commodities derivatives dealer. This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports. JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well.”

The functioning of the global economy can be explained through one word —transactions. International transactions taking place between top economies in the world help in the continuance of the global economy. These transactions mainly comprise trade taking place between different countries. International trade includes the exchange of a variety of products between countries. It ranges all the way from fruits and foods, to natural oil and weapons. Such transactions have a number of benefits including:

• Providing a foundation for worldwide economic growth, with the international economy set to grow by 4% in 2019 (source: World Trade Organisation );
• Encouraging competitiveness between countries in various markets;
• Raising productivity and efficiency across countries;
• Helping in the development of underdeveloped countries by allowing them to import capital goods (machinery and industrial raw materials) and export primary goods (natural resources and raw materials).

What are the effects of global economy?

Nearly every country in the world is in some way affected by things that happen in what may seem at times, like unrelated countries - due to the influence of the global economy. A good example of this is the economic impact that the Brexit vote will have other countries, not only in Europe, but across the globe. Brexit was referendum decision for the United Kingdom to withdraw from the European Union (EU).

The main cause of these effects is economics — based on the production and exchange of goods and services. Restrictions on the import and export of goods and services can potentially hamper the economic stability of countries who choose to impose too many.

The purpose of international trade is similar to that of trading within a country. However, international trade differs from domestic trade in two aspects:

• The currencies of at least two countries are involved in international trade, so they must be exchanged before goods and services can be exported or imported;
• Occasionally, countries enforce barriers on the international trade of certain goods or services which can disrupt the relations between two countries.

Countries usually specialise in those products that they can produce efficiently, which helps in reducing overall manufacturing costs. Then, countries trade these products with other countries, whose product specialisation is something else altogether. Having greater specialisation helps countries take advantage of economies of scale. Economies of scale refer to the proportionate saving in costs gained by an increased level of production. Manufacturers in these countries can focus all their efforts on building factories for specialised production, instead of spending additional money on the production of various types of goods.

Occasionally countries add barriers to international trade. Some of these barriers include trade tariffs (taxes on imports) and trade quotas (limitation on the number of products that can be imported into a country). Trade barriers often affect the economies of the trading countries, and in the long run, it becomes difficult to keep employing such barriers.

What are the benefits of global economy?

There are numerous benefits of a global economy, which include:

• Free trade : Free trade is an excellent method for countries to exchange goods and services. It also allows countries to specialise in the production of those goods in which they have a comparative advantage.
• Movement of labour: Increased migration of the labour force is advantageous for the recipient country as well as for the workers. If a country is going through a phase of high unemployment, workers can look for jobs in other countries. This also helps in reducing geographical inequality.
• Increased economies of scale : The specialisation of goods production in most countries has led to advantageous economic factors such as lower average costs and lower prices for customers.
• Increased investment: Due to the presence of global economy, it has become easier for countries to attract short-term and long-term investment. Investments in developing countries go a long way in improving their economies.

Factors affecting global economy

According to the latest economic news, here are some of the key factors that influence and affect how well the global economy works:

• Natural resources;
• Infrastructure;
• Population;
• Human capital;
• Technology;

If you are interested in learning more about the global economy and how it works, Edology offers a Certificate Course for Policy Issues in the Global Economy. Find out more here .

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Essay on Global Economy

Students are often asked to write an essay on Global Economy in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Global Economy

What is the global economy.

The global economy is like a big market where countries are like shops. Each country sells things it makes and buys things it needs. Just like in a neighborhood store, there are many different products, from toys to clothes. But in the global economy, these products travel across oceans and skies from one country to another.

Money in the Global Economy

Money is the key to buying and selling in the global economy. Different countries have different types of money, called currencies. They trade these currencies, which change in value, just like the price of ice cream might go up or down.

Trade Between Countries

Countries trade with each other to get what they don’t have. Imagine trading your sandwich for your friend’s apple at lunch. Countries do the same with products like oil, food, and cars. This trading can help countries be friends and work together.

Jobs in the Global Economy

The global economy creates jobs all over the world. When a company in one country makes something, it might need parts from another country. This creates jobs in both places. It’s like when your whole class helps to make a big art project together.

Challenges in the Global Economy

Sometimes the global economy faces problems. If one country has a tough time, like getting sick, it can affect other countries too. It’s important for countries to help each other, like friends do, to keep the global economy strong and healthy.

250 Words Essay on Global Economy

The global economy is like a big market where countries sell goods and services to each other. Imagine your school as a small world where students trade snacks, toys, or help with homework. Now, think bigger: countries trade things like cars, food, and technology. This trade makes the world’s economy.

Money Around the World

In this market, countries use money to buy and sell, but not all money is the same. Each country has its own type of money, like dollars or euros. They swap these to trade. It’s like when you trade cards; some are worth more than others. This is called exchange rates.

Rich and Poor Countries

Some countries have lots of money and resources; we call them rich. Others have less, and we call them poor or developing. Rich countries often make more things and have better jobs. Poor countries may not have as much, but they are important too because they might grow food or have materials that rich countries need.

Jobs and Companies

Companies create jobs, making things or providing services. They can be in one country or many. When they are in many countries, they are called multinational companies. These companies help the global economy by giving people jobs and making things we all use.

The global economy can face problems. If one country has trouble, it can affect others. Like if a friend can’t trade snacks anymore, it changes what everyone else trades. Countries work together to solve these problems so that the global economy stays healthy.

In short, the global economy is how countries share what they make and what they have with the whole world. It’s important because it connects us all, just like friends in a schoolyard.

500 Words Essay on Global Economy

The global economy is a way to describe how the world’s countries are linked through buying and selling things to one another. Imagine it like a giant web where each thread connects countries, businesses, and people, allowing them to trade things like toys, clothes, food, and services. This web is very important because it helps countries grow by giving them a chance to sell what they are good at making and buy what they need from others.

Money is the main tool used in the global economy. Different countries use different types of money, like dollars, euros, or yen. When they trade with each other, they agree on how much one type of money is worth compared to another. This is called the exchange rate. The exchange rate changes all the time, which can make things cheaper or more expensive for different countries.

Trade is when countries sell and buy goods and services from each other. Some countries have lots of natural resources, like oil or wood, which they can sell to other countries that might not have as much. Other countries might be really good at making cars or electronics and sell these to places where making these items is harder. This buying and selling help countries make money and provide jobs for people.

Big Organizations

There are big groups that help manage the global economy. The World Bank and the International Monetary Fund (IMF) are two examples. They give advice and money to countries to help them develop and keep their economies stable. They also try to make sure that trade is fair and that poorer countries get a chance to grow.

The global economy faces many challenges. Sometimes countries disagree on trade rules, which can lead to fights or tariffs, which are special taxes on imported goods. This can make things more expensive. Also, if one country’s economy has problems, it can affect other countries. For example, if a big country like the United States or China slows down in buying things, other countries that sell to them might also struggle.

Technology and the Future

Technology is changing the global economy fast. With the internet, businesses can sell things to people all over the world. This makes it easier for even small businesses to be part of the global economy. In the future, technology will keep making the world’s economies more connected, which can lead to more growth and new jobs.

In conclusion, the global economy is like a big game where each country has a role to play. By understanding how money, trade, big organizations, challenges, and technology fit into this game, we can see how the world works together to make and sell things. It’s important for us to learn about the global economy because it affects our lives in many ways, from the price of the things we buy to the jobs that are available in our countries.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Inequality
• Essay on Global Citizenship
• Essay on Indian Tourism

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Global Economy: Trade

The global economy is innately tied to trade; it allows countries around the world to obtain any resource they may want, whether or not it is produced on the home front. This availability of resources is facilitated through trade. The global economy allows us to eat the foods we want all year round and buy clothing and gadgets at lower prices. During times of peace, it is beneficial in a global economy, to see other nations succeed. On the other hand, during times of unrest, dependence on outside nations, in a global economy, may seem scary. Due to globalization and other factors, it is impossible for large industrialized nations to exit the global economy without devastating effects.

These resources will help to teach students more about the global economy and the central role that trade plays.

Social Studies, Economics, Human Geography, Geography, World History

Home — Essay Samples — Economics — World Economy — Understanding the Global Economy

Understanding The Global Economy

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Published: Jan 15, 2019

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Labor and Work Importance in the Global Economy Essay

Introduction, united kingdom.

Employment relations in many of the EU states are increasingly affected by the developments associated with the EU. For instance, UK has established statutory consultation rights for the British workers for the first time in history. The U.S. can also decide to establish such statutory bodies to enhance its labor relations. Evidently, the U.S. labor unions, businesses, and governments can learn a lot about industrial relations practices in other countries such as United Kingdom, France, Germany, China, and South. Labor unions provide a credible example of how Human Resource Management can be established and embraced in an environment that is less friendly. The U.S. deals with the issues of its employees internally. It regards government regulations, which are weak when considered critically (Wails, Bamber & Lansbury, 2011). As such, most employees are denied their rights even as they struggle through unions. Through technological ratification, enhanced communication, amplified economic competition ( Bamber, Lansbury and Wailes, 2011) and partaking of internationally accepted labour standards; the U.S. is in a inimitable position to enact change at home.

U.K. has credible trade Unions; however, their labor-management relations have been volatile. The U.S. labor unions, businesses, and governments can learn a lot about industrial relations practices in the UK. Even though strategies and processes adopted by the U.S. show some similarities to UK, there are also differences. This occurs due to differences in culture and labor regulations governing employment in numerous industries. For instance, the culture in the United States is characterized by self-centeredness and meritocracy. Therefore, employees working in the U.S. should be given proper support as it happens in UK (Porritt, 2005). As compared to the U.S and UK, the number of employees in the labor unions is far much low. Much of this is contributed by the fact that most of workers are from the indigenous minorities and economic immigrants, usually from Eastern Europe and Asia (Wails, Bamber & Lansbury, 2011). The labour unions in the UK have the right to organize and to select their own leadership. The U.S. can adopt such trends to enhance its labor relations system.

The French labour union movements constitute pluralism and fragmentation in that there are several layers of representation. For instance, there are 5 National Union confederations in France, which ensure that labour interests are protected. They also regulate the functioning of the confederated organizations affiliated to them. The U.S. can also learn from these provisions. The U.S. companies have opted to employ young people. Even though individuals who applied for work at the corporations included all kinds of people, the company believed that younger employees were more suited (Wails, Bamber & Lansbury, 2011). Their view was that younger employees could certainly adopt the values of the company better as compared to older employees. The Public Sector Unions in France cover over 5 million public sector workforces and influence the Private Sector Unions for pay purposes. This is not relevant in the U.S. but the country can learn from it.

Issues affecting workers including daily working hours and breaks, pay system, and holiday provisions are provided by the German law for all employers employing more than 5 workers (Wails, Bamber & Lansbury, 2011). The U.S. can adopt this provision successfully. In all these countries, labor unions in all industries are submissive. This implies that (in most cases) employees should work exemplarily so as to avoid risking their jobs by being inquisitive about how they are managed. In other cases, they become submissive since they lack earlier experience and therefore do not know anything. Or they just not like involving themselves in critiquing their management since they will soon leave for another job. The U.S. can actually learn and adopt these trends into their labor relations systems (Porritt, 2005). In addition, they are only given an office space and small amount of money for carrying out their operations. In spite of the union’s acknowledgement, there has never been any agreement on the terms of employment and work conditions. The U.S. can truly learn and adopt these trends into their labor relations systems.

Korea has established unions with substantial autonomy in their management and collective bargaining. This occurs at the firm level (Wails, Bamber & Lansbury, 2011). Employment relations relate to the size of the company. In most cases, labor unions are aware that no any fruitful negotiation will ever be reached in signing the contract. The influence of the union towards this will decrease leaving it weak and unsatisfactory (Christensen, 1993). Actually, even the partial victories of the union in Korea are only achieved by the involvement of the institutions of the state. Definitely, the labor regulations enacted in the Korea are so feeble that there have never been any conflicts experienced. The concerned unions are controlled by robust social traditions of democracy. The U.S. can actually learn and adopt these trends into their labor relations systems. Labor unions are aware that no any profitable negotiation will ever be reached in signing the contract (Wails, Bamber & Lansbury, 2011). The pressure of the union towards this will decrease leaving it weak and unsatisfactory. The repression of industrial relations in Korea was neither socially stable nor economically productive.

China has the biggest workforce in the world. It has many labour unions; however, it is the least like the U.S. The country has the least desired industrial/labor relations model. There are numerous lessons that the labor unions and other business sectors in the U.S. can learn from this comparison. It is important o establish and embrace workable international human resource provisions in U.S. as it happens in China (Porritt, 2005). It is crucial to comprehend various aspects of HR regulations that might affect the performance of employees in various contexts. Even though, most corporations can learn human resource management from China (Wails, Bamber & Lansbury, 2011). They do not uphold the standards of international labor union provisions (Sims, 2002). The U.S. can actually learn and adopt these trends into their labor relations systems. In reality, even the partial victories of the union in China and other countries are only achieved.

The U.S. labor unions, businesses, and governments can learn a lot about industrial relations practices in other countries such as United Kingdom, France, Germany, China, and South. As indicated before, employment relations in many of the EU states are increasingly affected by the developments associated with the EU. For instance, UK has established statutory consultation rights for the British workers for the first time in history. The U.S. can also decide to establish such statutory bodies to enhance its labor relations. The U.S. deals with the issues of its employees internally. It regards government regulations, which are weak when considered critically. As such, most employees are denied their rights even as they struggle through unions. Nevertheless, the greatest lesson learnt is that corporations in the all countries should treat their employees with dignity. The U.S. can truly learn and adopt these trends into their labor relations systems.

Porritt, J. (2005). Capitalism: As if the world matters . London: Earthscan.

Shaffer, H. (1999). American capitalism and the changing role of government . Westport, CT: Praeger.

Wails, N., Bamber, G. & Lansbury, R. (2011). International and comparative employment relations: Globalisation and the developed market economies 5 th Ed . London: SAGE Publications.

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IvyPanda. (2020, June 23). Labor and Work Importance in the Global Economy. https://ivypanda.com/essays/labor-and-work-importance-in-the-global-economy/

"Labor and Work Importance in the Global Economy." IvyPanda , 23 June 2020, ivypanda.com/essays/labor-and-work-importance-in-the-global-economy/.

IvyPanda . (2020) 'Labor and Work Importance in the Global Economy'. 23 June.

IvyPanda . 2020. "Labor and Work Importance in the Global Economy." June 23, 2020. https://ivypanda.com/essays/labor-and-work-importance-in-the-global-economy/.

1. IvyPanda . "Labor and Work Importance in the Global Economy." June 23, 2020. https://ivypanda.com/essays/labor-and-work-importance-in-the-global-economy/.

Bibliography

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International Edition

How Indigenous expertise is empowering climate action: A case study from Oceania

Indigenous Peoples are the world's foremost experts on preserving the climate and biodiversity — listening to them is the key to protecting our planet. Image:  REUTERS/Dylan Martinez

.chakra .wef-1c7l3mo{-webkit-transition:all 0.15s ease-out;transition:all 0.15s ease-out;cursor:pointer;-webkit-text-decoration:none;text-decoration:none;outline:none;color:inherit;}.chakra .wef-1c7l3mo:hover,.chakra .wef-1c7l3mo[data-hover]{-webkit-text-decoration:underline;text-decoration:underline;}.chakra .wef-1c7l3mo:focus,.chakra .wef-1c7l3mo[data-focus]{box-shadow:0 0 0 3px rgba(168,203,251,0.5);} Amanda Young

Ginelle greene-dewasmes.

.chakra .wef-1nk5u5d{margin-top:16px;margin-bottom:16px;line-height:1.388;color:#2846F8;font-size:1.25rem;}@media screen and (min-width:56.5rem){.chakra .wef-1nk5u5d{font-size:1.125rem;}} Get involved .chakra .wef-9dduvl{margin-top:16px;margin-bottom:16px;line-height:1.388;font-size:1.25rem;}@media screen and (min-width:56.5rem){.chakra .wef-9dduvl{font-size:1.125rem;}} with our crowdsourced digital platform to deliver impact at scale

• Industrial-scale capitalism and mass urbanization have accelerated environmental degradation, necessitating a reconnection with nature and Indigenous expertise.
• Indigenous knowledge systems offer holistic approaches to environmental sustainability and are increasingly recognized for their value in climate action.
• Examples like traditional fire management and innovative applications of Indigenous knowledge demonstrate the potential for collaboration and cross-pollination between Indigenous and other practices to address climate and ecological challenges.

On Monday 15 April 2024 , the largest global annual gathering of Indigenous Peoples kicked off at the United Nations Headquarters in New York, with participants calling for greater efforts to close financial gaps for Indigenous Peoples. Next month, Sydney Climate Action Week during May 13-19 will take place in Australia, a series of community-led events across Sydney from all aspects of the climate action ecosystem.

Such a coming together of stakeholders presents a prime opportunity to explore how traditional regional innovation models can contribute global solutions under a more inclusive climate agenda.

Have you read?

Renewables projects must respect indigenous peoples and local communities. here's how, indigenous leaders bringing their knowledge to davos 2024, 5 ways indigenous people are protecting the planet, disconnection from nature is exacerbating climate change.

Industrial-scale capitalism has accelerated the erosion of climate and ecological systems. Mass urbanization has driven economic growth and extractive industries on scales previously unimaginable. Sadly, these trends are increasing. Around 2007, the United Nations estimated , we had reached a tipping point in the world: more people were living in urban than rural areas. By 2022, 57% of all humans became urban based. In developed nations, a whopping 80% of citizens are urban. Both of these trends are predicted to increase .

This is reflected in how we are responding to the climate emergency. We are rapidly losing our connection to nature, with scarce nature feedback loops in citified life. This skews our perceptions and worldviews. Our academies are urban, our scientists are trained and our businesspeople, financiers, teachers, politicians are upskilled in mostly urban landscapes. Atrophied natural knowledge leaves us unequipped for dealing with the complexity of ecosystems. We need to humbly acknowledge the true experts in nature, Indigenous people, and ask for their guidance, meeting with our resources to activate this expertise.

Indigenous knowledge in climate action

“The planet’s ill health has largely come about because humans have forgotten their relationship and responsibility to country. Imagine if we could tap into the way First Nations cultures focus on deep, holistic connections to the environment to help us rethink environmental and health policies.”

Although Indigenous knowledge systems have been built on millennia of lived experience, iteration and adaptation, they have too often been ignored.

Today, however, there is growing interest in the value of Indigenous knowledge systems in the wake of environmental and climate challenges. In contrast to non-indigenous value systems, indigenous value systems focus on environmental sustainability as an end in itself that is required for cultural, social and economic well-being. The knowledge we have lost is still very much alive in Indigenous worlds, built through millennia of observation and ecological management.

The world needs to reframe both the role and deep knowledge of Indigenous people as experts. Signs of this shift are already emerging. In carbon and emerging biodiversity markets , any project involving, run by or partnered with Indigenous people attracts a premium carbon credit price in recognition of the deeper integrity, provenance and permanence Indigenous people bring that mitigate greenwashing claims.

Harnessing Indigenous expertise for modern global impact

An example of superior Indigenous technology is found in traditional fire management . Western fuel reduction strategies have triggered catastrophic fires when containment lines are broken, but Indigenous people have practiced for millennia “cool burning” that allows time for biodiversity to move to safety. This knowledge is needed across Europe and North America, both of which have experienced staggering brush fires. According to Firesticks , the not-for-profit Indigenous network, “aboriginal fire management has become a priority for community, cultural, social and environmental wellbeing”. This awareness showcases an example of the acknowledged inter-relatedness of knowledge, land, culture and identity — and the prioritization of environmental wellbeing alongside the community and culture.

Alongside ancient practices sit novel applications of Indigenous knowledge. Rainstick, a novel biotech company that was inspired by the traditions of the Maiawali People of central west Queensland, Australia, has built on a 10,000-year-old practice that acknowledges the influence of lightning on how plants grow. The resulting approach combines ancient expertise with modern technology to show that indigenous knowledge is ever-changing and can be applied in new and novel ways for climate action. Another example can be found in Savimbo fair trade credits , which is Indigenous at its core — removing intermediaries to ensure Indigenous experts can attract capital to resist further incursion into precious Indigenous-managed lands by developers.

Indigenous people are also sharing their profound knowledge with each other to manage and fix the problem of climate change. In the Ampliseed network, Indigenous people managing lands as diverse as the snow-covered Boreal Forest in Canada, World Heritage Listed Coral Reefs, tropical rainforest in the Peruvian Amazon, Mediterranean habitat in Chile and Australia’s 10 vast central deserts are cross-pollinating their knowledge, navigating the climate disaster and creating global impact at the Climate and Biodiversity CoPs .

Next steps for applying Indigenous expertise

Given that 80% of remaining biodiversity is on Indigenous lands and in Indigenous hands, it is clear with the emerging biodiversity markets that Indigenous people are the primary market actors. Therefore, financing models need to evolve in order to safeguard and invest in the role of Indigenous people as stewards and equity owners of the conservation of the precious remaining biodiversity. Similarly, financing all other opportunities to cross-pollinate Western and Indigenous knowledge systems is essential.

The growing body of evidence reveals a simple truth: Indigenous people hold a key to our collective response to climate and ecological challenges.

Indigenous-led organizations are thriving by sharing this knowledge, and people and the planet are benefiting in turn.

With contributions from Harry Guinness, Head of Net Zero Strategy, Greenhouse.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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