Comments on the comparison of Iran and other countries
Dr. Ali Toosi, the second member of this blog (circle), has some comments on the previous posting, which I bring here with my wordings. Thanks to him.
He argues, correctly, that “I think the appropriate GDP figure to look at for comparison is per capita GDP (ppp)”. I agree. When the subject to compare is the welfare level, it is better to use the PPP per capita GDP. Based on this measure, oil producing Arab countries are doing better than Iran, but Turkey and especially Lebanon are behind Iran. Also the average of Latin America & Caribbean as well as central & East Europe are comparable with Iran and in the same range of $6000-$8000.
It would be interesting to compare these two measures. As a general observation, the difference between these two measures is less in richer countries. In high-income countries the PPP per capita income is less than the usual one. But when a person from high PPP gap (mostly poor) country wants to buy something from a low PPP gap country (mostly rich), the measure can not PPP per capita GDP. Here we want to compare the welfare level and as Ali said PPP is better measure (we leave it for future postings to compare these two measures).
The second point raised by Ali is about the negative growth rate of Saudi Arabia and Kuwait (and maybe Emirate and Qatar, I’ll try to find data on them). It might be, he argues, because of “Dutch disease” or “resource curse”. I leave it to him to find it out and I’ll try to figure out how was the structure of population and GDP in these countries.
The third point is the impression one gets when he sees the 2.1 percent growth rate. Ali propose something like this: "With 2.1 percent growth rate [between 1990-2003], it takes 34 years todouble the per capita income. Long time! Iran needs a growth ratecomparable to East Asia & Pacific ( in that case it would take about 13years to double its GDP) or if it can not realistically achieve that, atleast it should try to grow at a rate close to the average growth ratefor Middle Income countries ( in that case it would take about 28 yearsto double its GDP). "
This points are ture but let me look from the pessimistic point of view. Once one country fall behind, it is very hard to catch up. We need a growth rate even more than that of East Asia to have a prosperous situation in future. East Asia and Pacific grew with a rate of 5.9 percent for 28 years (during which Iran had a negative rate of – 0.3 percent). These countries had a growth rate of 5.4 percent during 1990-2003 (Iran had a 2.1 percent rate). It means it only takes 13 years to double per capita income. And remember in 28 years, 1975-2003 their per capita income has been multiplied by 5 (during the years that ours multiplied by 0.42!). Iran needs a higher growth rate than what it has for a long long time.
Let me add some optimistic points. The starting year of comparison is 1975, one of the years that Iran experienced a very high oil revenue (before recent sky rocketing of oil price). Based on the Human Development Report 2005, the highest value for per capita GDP of Iran was 8443 PPP US$ in year 1976. This makes the 1975-2003 worse than any other period for comparison. Also there was a revolution and a war in the first part of this period. Add to this the high growth rate for population (3.9 percent average annual rate for the decade 1976-1986) that changed the structure of the population. It increased the “consumers” without any increase in the “producers” and resulted in high dependency rate. (for sure I’ll post something on the population structure of Iran). Now the children borne on the first part of the period are in the age of production and let’s hope there will not be any war and revolution in foreseeable future. Then there are reasons for being optimistic.
He argues, correctly, that “I think the appropriate GDP figure to look at for comparison is per capita GDP (ppp)”. I agree. When the subject to compare is the welfare level, it is better to use the PPP per capita GDP. Based on this measure, oil producing Arab countries are doing better than Iran, but Turkey and especially Lebanon are behind Iran. Also the average of Latin America & Caribbean as well as central & East Europe are comparable with Iran and in the same range of $6000-$8000.
It would be interesting to compare these two measures. As a general observation, the difference between these two measures is less in richer countries. In high-income countries the PPP per capita income is less than the usual one. But when a person from high PPP gap (mostly poor) country wants to buy something from a low PPP gap country (mostly rich), the measure can not PPP per capita GDP. Here we want to compare the welfare level and as Ali said PPP is better measure (we leave it for future postings to compare these two measures).
The second point raised by Ali is about the negative growth rate of Saudi Arabia and Kuwait (and maybe Emirate and Qatar, I’ll try to find data on them). It might be, he argues, because of “Dutch disease” or “resource curse”. I leave it to him to find it out and I’ll try to figure out how was the structure of population and GDP in these countries.
The third point is the impression one gets when he sees the 2.1 percent growth rate. Ali propose something like this: "With 2.1 percent growth rate [between 1990-2003], it takes 34 years todouble the per capita income. Long time! Iran needs a growth ratecomparable to East Asia & Pacific ( in that case it would take about 13years to double its GDP) or if it can not realistically achieve that, atleast it should try to grow at a rate close to the average growth ratefor Middle Income countries ( in that case it would take about 28 yearsto double its GDP). "
This points are ture but let me look from the pessimistic point of view. Once one country fall behind, it is very hard to catch up. We need a growth rate even more than that of East Asia to have a prosperous situation in future. East Asia and Pacific grew with a rate of 5.9 percent for 28 years (during which Iran had a negative rate of – 0.3 percent). These countries had a growth rate of 5.4 percent during 1990-2003 (Iran had a 2.1 percent rate). It means it only takes 13 years to double per capita income. And remember in 28 years, 1975-2003 their per capita income has been multiplied by 5 (during the years that ours multiplied by 0.42!). Iran needs a higher growth rate than what it has for a long long time.
Let me add some optimistic points. The starting year of comparison is 1975, one of the years that Iran experienced a very high oil revenue (before recent sky rocketing of oil price). Based on the Human Development Report 2005, the highest value for per capita GDP of Iran was 8443 PPP US$ in year 1976. This makes the 1975-2003 worse than any other period for comparison. Also there was a revolution and a war in the first part of this period. Add to this the high growth rate for population (3.9 percent average annual rate for the decade 1976-1986) that changed the structure of the population. It increased the “consumers” without any increase in the “producers” and resulted in high dependency rate. (for sure I’ll post something on the population structure of Iran). Now the children borne on the first part of the period are in the age of production and let’s hope there will not be any war and revolution in foreseeable future. Then there are reasons for being optimistic.
posted by IRPD Member at
11:36 AM
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