For the past 60 years one of the main preoccupations of well-meaning people and organisations in the West has been their concern over Third World poverty and their determination to promote a more equal distribution of planetary wealth.

The vehicle they usually chose to achieve this worthy goal was foreign aid. Developed countries set themselves a foreign aid target of 0.7% of GDP and - over the decades - channelled hundreds of billions of dollars to Third World countries. In general the results of foreign aid were disappointing - and in some instances were clearly counter-productive.
Too often, foreign aid created a culture of dependency in recipient governments. In 2003 official development aid accounted for a whopping 18.6% of sub-Saharan Africa’s GDP and represented, for example, more than half the total Tanzanian budget. Foreign funds were frequently siphoned off by ruling elites and ironically landed back in bank accounts in Europe.
It transpires that much more beneficial outcomes could have been achieved if Western countries - instead of channelling aid to developing countries - had simply suspended the enormous subsidies that they paid to their own farmers. Western agricultural subsidies amounted to US $356 billion per annum during the early years of the new millennium compared with foreign aid flows of only US $60 billion. The subsidies frequently made it impossible for farmers in Asia, Latin America and Africa to compete in the one area where they had an advantage: in agricultural production.

Nevertheless - and for quite different reasons - there have been enormous shifts in the distribution of planetary wealth during the past 35 years.
Much of this change has been brought about - not by the West and foreign aid - but by the phenomenal growth of what are termed ‘emerging markets’.
There is no generally accepted definition of exactly what emerging markets are and which countries qualify to be included in their number. In general, they comprise the principal countries in the world that have in recent decades progressed from repressive or moribund economic systems to achieve significantly higher growth rates.
The 15 countries most generally included in the lists of emerging economies are: Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Malaysia, Mexico, Peru, the Philippines, the Russian Federation, my own country - South Africa, Thailand and Turkey.


These countries comprise 53% of the world’s population and nearly all of them have experienced impressive growth during the past three decades.
At the core of the emerging markets are the so-called BRICS countries - Brazil, Russia, India, China and South Africa. Together they comprise 42% of the world’s population and 21% of global GDP.

In 1980 the 15 emerging markets countries listed above accounted for only 15.5% of world GDP - compared with the 25.6% share of the United States and the 34.6% share of the European Union.
Today, they produce 27.6% of the world’s GDP - while the shares of the United States and the EU have fallen to 22.2% and 23.7% respectively. The big winner has been the emerging markets and the big loser has been the EU - despite its significant expansion since 1980.
All this has had a very positive impact on the lives of billions of people.

If ever there was a golden age in the long and troubled history of mankind it is now: if ever there was a time when we could stop, look back and survey the progress that we have made, it is our time. At no period in the great and often tragic sweep of human experience have so many people lived in such relative prosperity, security and freedom as they do today.
For most of our existence as a species life for the vast majority of human beings was insecure, miserable and brief. Thomas Hobbes’ description of the state of nature in fact applied to most human life. For most people there was
“... no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.”

Few people lived beyond their thirties. The course of their lives was determined largely by the gender, class and country into which they were born. They enjoyed few or no basic rights. They were subject to the arbitrary power of capricious rulers. They were frequently caught up in brutal wars in the course of which they were subjected to unimaginable cruelty. They were the victims of disease and recurrent plagues and famine. They lived their lives beneath a pall of ignorance and terrifying superstitions. The great majority also subsisted in the deepest poverty and died leaving only a handful of wretched possessions.

The 14 years since the beginning of the millennium have - despite the current conflicts in the Middle East - been the most peaceful period in human history. Conflict deaths have dropped from 300 per hundred thousand during World War II, to about three per hundred thousand now. There have hardly been any wars between countries during the past decade: nearly all the conflict now takes places between religious, ethnic or linguistic communities within the same countries.


Between 1950 and 2011, global life expectancy rose from 47 to 70 years. Infant and maternal deaths, and deaths from tuberculosis dropped by half.
All of this has been reflected in steady gains throughout the world in the United Nations Human Development Index - which measures broad human progress in terms of income, education and health levels.
The fastest progress was achieved in East and South Asia, followed by Latin America and the Caribbean, and with Sub-Saharan Africa bringing up the rear. These dry facts might not sound very significant - but they translate into substantial improvements in the longevity and quality of life of billions of people.
Similar progress has also been made in combating poverty. The percentage of people living in absolute poverty - defined as an income of one dollar twenty-five cents a day in constant dollars - declined from 40% in 1980, to only 14% in 2010.

The only region that bucked the trend was sub-Saharan Africa. Although the percentage of the population living in absolute poverty diminished from 51% in 1990 to 48% in 2010, the number of people involved more than doubled from 204 million to 413 million - because of the rapid population growth during this period.
Progress has also been made in combating global poverty at higher poverty levels. The percentage of people living on less than two dollars a day dropped from 57% in 1981, to 34% in 2010 - but the actual numbers living at this level of poverty have fallen only from 2.6 billion to 2.4 billion - so a third of the world’s population still lives in poverty.
A great deal of this progress has been brought about by rapid economic growth in the emerging markets - and by the globalisation of the world economy.
Major factors in the achievement of success have included the abandonment of repressive and moribund economic approaches - particularly in China and India - globalisation, and in the expansion of economic freedom.

After four decades of stagnation in the dead-end street of Maoist communism, the Chinese leadership finally noticed that their countrymen in Hong Kong and Taiwan were out- performing most of the rest of the world in achieving spectacular economic growth.
They must have seen that Hong Kong had one of the freest economies in the world with minimal state interference and maximum decision-making in the hands of producers and consumers. They must also have noted that although it was economically free, Hong Kong was not politically free. It was still a British Colony. So maybe it would be possible for the Chinese Communist Party to stay in control while liberalising the economy at the same time? The rest is history.


During the past 25 years we have seen how Deng Xiao Peng’s introduction of greater economic freedom in China has led to the most spectacular enrichment of the largest number of people in the shortest period in history. More than 400 million people - more than the entire US population - have migrated from rural poverty to relative urban affluence in this period. And there are hundreds of millions waiting in the rural areas to join them.
Similarly, at the end of the 80s, after three decades of independence, India finally managed to break free from the straightjacket of Congress socialism. It is also reaping the benefits of rapid economic growth.
More and more countries throughout the world have accepted the following requirements for social and economic progress:
• The first requirement is the protection of the lives and property of people. Governments must ensure that people can go about their daily lives secure in the knowledge that their persons and their property will be safe. This requires peace and the establishment of effective policing and justice systems.
• Secondly, governments should establish sound systems of law presided over by independent courts - to protect the fundamental civil, political and property rights of citizens. Everyone should be equally protected by, and subject to, the Rule of Law.
• Thirdly, governments must create the circumstances in which free markets can flourish. Economic growth requires an environment in which people can go about their business, practise their professions and make daily choices with the least unnecessary interference. To achieve this, governments should ensure free competition, a fair and open labour market and whatever reasonable regulation might be necessary for the protection of society.
• The fourth requirement is sound governance, based on accountability, integrity and responsiveness, the elimination of corruption and the limitation of the powers of bureaucrats.
• Fifthly, governments should be responsible for the provision of cost-effective services. They must provide the education and social services required for a skilled, well-informed and healthy population. They must build and maintain the public infrastructure that is necessary for economic activity and growth. They must provide reasonable care for those who cannot care for themselves.
• Sixthly, they should adopt sound fiscal and economic policies. In particular, they should balance their budgets. They should ensure that companies and individuals are allowed to retain as much of their legitimate earnings as possible by maintaining reasonable tax rates and by limiting the size of government.
• Seventhly, governments should encourage free and open international trade by reducing tariffs and artificial barriers.
• Finally, governments must be accountable to the people through open institutions, free media and regular elections.
There is an absolute correlation between societies that take this approach and positive economic and social outcomes.


• According to the Heritage Foundation’s annual Index of Economic Freedom, the top 20% of countries that best promote economic freedom have per capita incomes seven times greater than the bottom 20%.
• They have significantly higher Human Development Indexes than the countries that least promote economic freedom.
• They are also freer. According to Freedom House in New York virtually all the countries that have the freest economies also have the freest political systems - while countries with the least free economies and are also the least free in terms of political and civil rights.
• Interestingly enough, states that best promote economic freedom are also the most equal. The top 20% of states in terms of economic freedom are significantly more equal than the bottom 20%.

Despite the success of free markets in generating wealth there has - in the wake of the 2009 global financial crisis - been a tendency to downplay the role of free markets and to call for greater government control in directing and regulating economic development.
However, the simple and indisputable truth is that free markets - and not government bureaucracies - produce wealth. Free markets are by far the best vehicle for the generation of economic growth and technological innovation - but this does not mean that they cannot be driven recklessly - as was undoubtedly the case before 2009.
Governments have a crucial role in enforcing financial traffic rules and in ensuring that the free market vehicle is driven responsibly. However, in the run-up to the 2009 crisis, instead of enforcing the rules, governments and financial regulators were actively encouraging reckless financiers to break the speed limit by guaranteeing worthless sub-prime bonds. After the inevitable crash, they failed to enforce the normal penalty in terms of which irresponsible banks should have gone out of business.
The basic formula for success and for the combating of poverty remains pretty clear: it includes free markets, the Rule of Law, and sound governance free from corruption and bureaucratic over-reach.

The dramatic changes that have taken place in the distribution of global wealth have occurred because emerging markets have broadly adopted this approach by liberalising their economies.
Even so, many of them still have a long way to go. Most emerging markets do not fare particularly well in the World Economic Forum’s annual Global Competitiveness Survey. The most competitive country in the emerging markets group is Malaysia at 20th position out of the 144 countries that were surveyed. The worst performer was Egypt at 119th position. The average ranking was a fairly mediocre 52nd place.


Emerging markets are also not free from the vagaries of economic cycles. Economic growth this year in Russia, Turkey and South Africa will be less than 1.5%. In South Africa’s case most of the damage is self-inflicted and has its roots in fiscal indiscipline, labour market turmoil, excessive state interference and growing threats to property rights.
Nevertheless, we can expect that the clear trends that have been set by emerging markets will continue during the coming decades: their share in global GDP will continue to rise until it reflects much more closely the percentage of the world’s population that they represent.
In the 17th and 18th centuries - at the very time when it was conquering much of the rest of the world - Europe produced only 12% of the global GDP compared with the more than 45% generated by China and India.

By 1913 - following Europe’s emergence from the industrial revolution - its share of global GDP had risen to almost 30% while the combined share of China and India had dropped to only 15%. By 1950 India and China produced only 8% of world GDP - compared with 43% for Europe and the United States.

However, by 2011 the European share had shrunk to only 17% - and the OECD predicts that it will decline further to 11% by 2030 and only 8% by 2060.
Of course, this does not necessarily mean that Europeans will become poorer: it means that the rest of the world will become richer. By 2060 China and India will once again account for more than 45% of global product and will have resumed the preeminent role in the world economy that they occupied for most of the last two thousand years.

All this is presenting the United States and Europe with a seminal challenge: will they able to compete with the challenge from the emerging economies? If not - what will the consequences be? If the West decides to take on the challenge, what will it have to do to ensure success? It is unlikely that there will be any painless solution. The question is: will Western democracies be able to take the pain of competing with the new emerging economic giants?

Now - in 2015 - it is clear that great progress is being made in achieving the West’s goal of promoting greater planetary equality: however, this has not occurred as a result of Western foreign aid - but as a result of globalisation and the liberalisation of the emerging market giants. In future decades the West’s primary concern may no longer lie in its magnanimous desire to promote global equality - but in a desperate struggle to retain its own diminishing share in the global economy.