[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Chapter 36
DEVELOPMENT
AND TRANSITION
∂
Every year, thousands of Mexicans risk their lives to cross into the United
States. The reason is simple: they seek a way out of their poverty. In the
United States, a family of four is said to be in poverty—to have insufficient
income for a minimal standard of living—if its income is less than $18,811. This income
is about equal to that of the average family of four in Mexico! The average income
per capita in Mexico is one-sixth of that in the United States. The minimum wage in
the United States is now more than $5 an hour. In many developing countries, workers
receive a mere $1 a day. Figure 36.1 shows the huge differences in income per
capita between developed countries such as the United States and Italy and lessdeveloped
countries such as Ethiopia and Nigeria. These less-developed countries
sometimes are referred to as the third world and sometimes as developing countries.
Unfortunately, many of these low-income countries have not been developing—some
have even been declining, with income per capita falling. Today, three-fourths of the
world’s population live in these developing countries.
Another group of countries also differs markedly from the advanced industrial
countries. These are the so-called economies in transition—in transition from communism
to a market economy. Figure 36.2 shows how these countries, the most
important of which is Russia, have fared since the ending of communism. In many
cases the transitions to market economies have yet to bear fruit, and in some cases
the results have been disastrous.
There have been exceptions to this picture: countries such as Hungary and
Poland have recently joined the European Union, signaling closer economic integration
with western Europe, and China, the most populous country in the world
and a half century ago one of the poorest, has grown rapidly. In the past two decades,
incomes in China have soared, and the poverty rate has fallen from 80 percent to
5 percent.
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