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NORTH
EUROPE ASIA
AMERICA

AFRICA

SOUTH
AMERICA

AUSTRALIA

Middle-high income,
Low income ($899 or less)
greater than $5,000 ($5,000–10,999)
Middle-low income, High income ($11,000 or more)
less than $5,000 ($900–4,999)
figure 37.2
Incomes Around the World, 2008
Although the countries of Europe and North America—along with a few in East Asia—have high incomes, much
of the world is still very poor. Today, more than 50% of the world’s population lives in countries with a lower
standard of living than the United States had a century ago.
Source: International Monetary Fund.

fyi

India Takes Off
India achieved independence from Great Britain year, tripling between 1980 and 2008. India
in 1947, becoming the world’s most populous now has a large and rapidly growing middle
democracy—a status it has maintained to this class. And yes, the well - fed children of that mid-
day. For more than three decades after inde- dle class are much taller than their parents.
pendence, however, this happy political story What went right in India after 1980? Many
was partly overshadowed by economic disap- economists point to policy reforms. For
pointment. Despite ambitious economic devel- decades after independence, India had a tightly
opment plans, India’s performance was controlled, highly regulated economy. Today,
consistently sluggish. In 1980, India’s real GDP things are very different: a series of reforms
per capita was only about 50% higher than it opened the economy to international trade and Verity Steel/Alamy
had been in 1947; the gap between Indian liv- freed up domestic competition. Some econo-
ing standards and those in wealthy countries mists, however, argue that this can’t be the India’s high rate of economic growth since 1980
has raised living standards and led to the emer-
like the United States had been growing rather main story because the big policy reforms
gence of a rapidly growing middle class.
than shrinking. weren’t adopted until 1991, yet growth acceler-
Since then, however, India has done much ated around 1980. economic power—and allowed hundreds of mil-
better. As Figure 37.3 shows, real GDP per Regardless of the explanation, India’s eco- lions of people to have a much better life, better
capita has grown at an average rate of 4.1% a nomic rise has transformed it into a major new than their grandparents could have dreamed.

370 section 7 Economic Growth and Productivity