Relative Prosperity

In our constantly changing world day after day new economic terms and concepts appear, the already existing calculation formula get processed and improved. The picture of poverty, one of the most important problems in the world economy, is also different depending on the choice of the calculation method.

Although in many countries across the world the struggle against the poverty has achieved significant results (in the last 10 years more than one billion people were able to find a way out of poverty), however it is still considered to be a problem which is hard to tackle for all (around 760 million people in the world continue to live in poverty, with 1,9 dollars a day).

It was perhaps for offering a solution to this international problem that the UN introduced the “Declaration of the Millenium” which is directed to the solution of the poverty problem across the world. According to the declaration, both the rich and the poor countries assist the poverty reduction, as the problem is international. Besides, the main goal of the declaration was the reinforcement of the sense of dignity in people, the achievement of peace and equality for creating favorable conditions.

Countries, like people, according to the level of wealth, are divided into two big “poles”- rich and poor. To denote the mentioned polarity, the economists frequently make use of the Gini Coefficient and the Lorenz curve, which show how gross income is distributed across different layers of population. Taking into consideration the logic of the Gini Coefficient, the closer the Gini Coefficient gets to 1, the more the disproportion of the distribution of the gross income in a given country is reduced, and vice versa: the closer it gets to 0, the greater the deviation becomes. In particular, in 2014 the Gini Coefficient in the RA for incomes comprised 0.373, and 0.277 for consumption. Hence, in Armenia the population inequality is deeper for the rate of incomes compared to the consumption rate: the smaller the number, the less is the polarity. Nevertheless, the poverty level, according to the World Bank data, in 2016 comprised 23.9% in the RA compared to 22.6% in 2015. Currently, the government of Armenia follows the “2014-2015 long-term development of the RA” program to overcome the poverty. According to that program, the poverty level in 2017 is anticipated to reach 24%, and the level of extreme poverty to 2.4%.

In the course of time the parameters by which the poverty level of a country is evaluated, have been changed, supplemented, and even in this case they have remained relative. In particular, previously an imprecise definition of poverty based on the level of income and consumption only was accepted. Currently, a complex definition is applied which takes into account such factors as Healthcare, education, a person’s participation in political and social issues, a person’s freedom and safety, etc. And besides, the application of the complex parameter introduced by the UN and the World Bank contributes to the process of taking into consideration the idiosyncrasies of certain countries. The surveys being carried out are of independent nature, do not contain governmental control, as in the 1960-80s.

The GDP (Gross Domestic Product) continues to remain the main parameter for poverty evaluation. The GDP (Gross Domestic Product) is a form of measure of the income and investment in a given country, the market value of the final goods and services produced in an economic system within a year.

According to the data of the World Bank, in 2017 the highest GDP was that of the USA (19,417.144 billion US dollars), the second is China (11,795.297 billion US dollars), then comes Japan (4,841.221 billion US dollars). The list of the leaders is suggested below.

Tuvalu has recorded the lowest GDP (0.036 billion US dollars), taking into account the fact that the there is no data about Syria. The RA holds the 133th position in this list: 10.741 billion US dollars. It is worth mentioning that the RA was the 131th (10,75 billion US dollars) by the outcomes of 2016.

The GDP of the whole world has comprised 77,988 trillion dollars, which compared to 2015 has increased by 3,988 trillion dollars. In the last 50 years this index has increased about 55 times. This growth has been conditioned by several factors: growth of the world population, due to which the volume of the goods produced all over the world has increased, technological progress and naturally, the growth of consumer prices.

More frequently, the real picture of the quality of life of a certain country’s resident is obtained with the usage of the GDP parameter per capita, which is calculated by dividing the GDP of a country in the number of the country’s population (residents). With this index, however, the loan scale reflects a different picture. Particularly, with the GDP per capita index the leader is Luxembourg (101,715 thousand US dollars), then comes Switzerland (78,245 thousand US dollars), Norway (73,450 US dollars). The list of the leading countries is suggested below.

The RA is the 117th in this table with the rate of 3,591 US dollars. Among the poorest are Malawi, the Central African Republic (about 322 US dollars). It is worth mentioning that this rate is also general and often does not fully reflect the real picture. For example, in the countries where the polarity rate between the poor and the rich is high, it is “equated” with the residents, taking into account the average number of the latter. The indexes presented up to now were quantitative and did not involve such concepts as volunteering, non-recorded sales, etc. Taking this circumstance into consideration, in 1990 the UN Published another index, “Human Development Index (HDI)”, which reflects the longevity of the resident: the anticipated duration of life is counted at the moment of birth, the average duration of education, quality of life, etc. The RA, by this index, is the 84th (number 0,743), and so is Ukraine. The top 10 of leaders is suggested below.

This index also includes the gender inequality and poverty level, as a result of which the Republic of Armenia stands the 84th in the line of 188 countries. Thus, along with the development of economies, the number of those economic parameters increase, which fully describe the quality of life, compare them by countries; and large international organizations in their turn process programs, declarations, etc., according to which the poverty reduction and the provision of equal finances is not an issue for only the poor, but also and specifically for the rich, as with the assistance of the latter foundations, funds, various international structures are established, which aim at suppressing and reducing the influence on the world economy of the phenomena that are considered inevitable.

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Author: Anahit Zurabyan. ©All rights are reserved.

Translator: Lilit Maghakyan