Education is hugely important, as the skills developed in school lead to higher productivity and thus higher incomes. Compare Pakistan and South Korea, for example. They started with about the same level of education and income in 1950. Today, Koreans have an average of 12 years of education, whereas Pakistanis have not yet reached an average of six years. Korea’s per-capita income has grown 23-fold versus Pakistan’s three-fold growth.
6. Gender Inequality
In 2012, women's lower salaries and exclusion from the workplace cost the global economy 7 percent of GDP, the difference between boom and bust. How did we get that figure? We looked at how much more women could have contributed to GDP if they had worked as much as men and with the same pay. Today, women earn only 60 percent as much as men and make up just 40 percent of the workforce—a significant improvement from 15 percent in 1900, but still a ways off from gender parity. Even by 2050 the gender ratio will not yet be even, and women will still earn 30 percent less than men.
Our research acknowledges that these gender dynamics may stem in part from personal choices rather than discrimination. The losses in 1900 from lack of gender inequality were a substantial 17 percent of GDP. Today, the loss is a much lower, though still substantial, 7 percent of global GDP. Projecting forward to 2050, realistic estimates suggest a 4 percent loss to the world economy.
7. Human Health
Humans have made great strides in healthcare. In economic terms, the cost of poor health at the outset of the 20th century was a staggering 32 percent of global GDP. Today, it is down to about 11 percent, and by 2050 it will be half that.
One manifestation of this trend is that we are all living far longer. In 1900, the average person lived 32 years; today it’s 69 years, and by 2050 it will be 76. Advances are so rapid that for every month you live, medical science adds a week to your life expectancy.
The biggest factor in health improvements is the fall in infant mortality. In 1970, only about 5 percent of infants were vaccinated against diseases such as measles, whooping cough, and polio. By 2000, it was 85 percent, saving about 3 million lives a year. Childhood mortality is still high in Sub-Saharan Africa. But in 2008, child mortality rates in the region were only one-third the level that they were in Liverpool in 1870, even though Liverpool then was richer than Africa is today. Overall, child mortality is likely to drop by another 50 percent by 2050.
Hunger is one of mankind’s oldest afflictions and one of the most visible signs of poverty. And improved nutrition is associated with higher productivity: Better-nourished individuals are more productive workers, and better-nourished children develop stronger cognitive skills that translate into higher productivity as adults.
The good news is hunger is relenting. As the graph above shows, the cost of malnutrition has almost halved from 11 percent of GDP in 1900 to 6 percent today, and should fall to 5 percent in 2050. We measured this progress according to the average heights of male adults. In developing countries, we’ve seen an increase of four centimeters, from 5 feet, 4.5 inches to 5 feet, 6 inches (164 centimeters to 168 centimeters). The researchers estimate that even this small increase means 1.5 million fewer children dying each year from malnutrition.
9. Trade Barriers
Most people wouldn’t list free trade as a top humanitarian concern, but the fact is that the choice between building trade barriers or liberalizing trade deeply affects economies. Our findings show liberalization has had a tremendous effect on alleviating poverty. For example, trade-driven growth has played a major part in allowing China to lift 680 million people out of poverty over the last 30 years.
The early part of the 20th century saw relatively free trade—the total cost of trade restrictions was perhaps 3 to 4 percent of GDP. But during the 1930s economic crisis, trade barriers multiplied and the costs escalated beyond 10 percent of GDP.
Since then, freer trade has rebounded mostly in the developed world, with the cost of barriers falling to 2 percent of GDP. The developing world has been much slower in reducing trade barriers, which translates into a cost of 4 percent of GDP for this region today. Freer trade in the future would help cut our annual losses to 2.4 percent of global GDP. But if we don’t embrace freer trade, global costs could climb to almost 6 percent of GDP. Our research also reveals that more than half the cost of trade barriers to developing countries comes from their own policies.
10. Water & Sanitation
Diseases associated with poor water, sanitation, and hygiene comprise on average 6 to 7 percent of the deaths in developing countries each year. However, many interventions such as building community taps and hand pumps, providing household filters, and ensuring on-site sanitation can now be delivered at low cost, though adoption remains low.
Even so, the death rate related to water and sanitation per 1,000 people in developing countries has fallen to 0.4 today from 1.5 in 1950. It should fall to 0.2 by mid-century. Yet absolute numbers remain high: Deaths by 2050 will likely still be around 1.7 million, mostly in Sub-Saharan Africa, though that figure will be down from 2.3 million today and 2.7 million for a much smaller population in 1950. It is great progress, but much more is still needed.
Measuring the impact of poor water and sanitation in economic terms is not only about disease and death. This year, collecting water will take people—mostly women—74 billion hours, making up one-third of water and sanitation’s total cost to the world economy. In all, the economic loss from poor water and sanitation has already fallen from some 2 percent of developing world GDP in 1950 to 0.13 percent in 2013. By mid-century, losses will be down to just 0.02 percent.