Trump says SA is ‘rich’. He has a point

US President Donald Trump unleashed a flurry of criticism when he remarked that a lot of countries categorise themselves as developing countries “to avoid World Trade Organisation [WTO] rules to get special treatment”.

He clearly explained his trade policy to the world within the maximum number of characters that Twitter allows: “The WTO is BROKEN when the world’s RICHEST COUNTRIES claim to be developing countries to avoid WTO rules and get special treatment. NO more!!! Today I directed the US Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!”

That was some six months ago and last week America announced the outcome of a review of its list of countries that enjoy preferential trade terms. It said the previous list, dating from 1998, was obsolete.

The US trade department removed 25 countries from the list of least-developed countries, mentioning that investigations, whether nations are harming US industries with unfairly subsidised imports, are unnecessary.

Not surprisingly, China tops the list of countries Trump accuses of benefiting unfairly from trade terms designed to help poor countries.

He took to Twitter again last week to ensure that the world takes notice of the changes. “China is viewed as a developing nation. India is viewed as a developing nation. We’re not viewed as a developing nation. As far as I am concerned we are a developing nation too,” said Trump.

Trump is probably right. China established itself as the manufacturing and trade behemoth of the globe decades ago – all the while receiving criticism of its manufacturing processes ranging from environmental damage, unfair labour practices and low regard for human rights to shoddy safety concerns for workers and customers alike. Overall, its system of manufacturing and trade is skewed in its own favour by the blatant manipulation of its exchange rate.

What the figures say

Figures from the World Bank and the International Monetary Fund (IMF) bear out Trump’s arguments that China, at least, should not be allowed to demand preferential trade terms. In economic terms, China is second only to the US measured by its total gross domestic product (GDP) if one accepts that GDP figures and their variants are suitable measurements for wealth.

Read: Is GDP still a good measure of economies?

The IMF calculated China’s nominal GDP for 2019 at $14.1 trillion ($14 100 billion) compared to America’s $21.4 trillion. It estimates total world GDP at just above $82 trillion, meaning that China produced around 17% of the world’s good and services last year.

Basic economics teaches us that nobody will produce something that they can’t sell, and that production thus equals income. China, with an income of $14.2 trillion is indeed one of the world’s richest countries.

Trump also specifically mentioned India. The IMF ranking puts India in fifth place with a GDP of $2.9 trillion, just behind Germany and ahead of the UK, France and Italy.

Countries ranked by nominal GDP

Rank	Country	Nominal GDP ($bn)
	World GDP	87 265
1	United States	21 439
2	China	14 140*
3	Japan	5 154
4	Germany	3 863
5	India	2 936
6	United Kingdom	2 744
7	France	2 707
8	Italy	1 989
9	Brazil	1 847
10	Canada	1 731
11	Russia	1 638
12	South Korea	1 630
13	Spain	1 398
14	Australia	1 376
15	Mexico	1 274
16	Indonesia	1 112
17	Netherlands	902
18	Saudi Arabia	779
19	Turkey	744
20	Switzerland	715
–	Taiwan	586
21	Poland	566
22	Thailand	529
23	Sweden	529
24	Belgium	518
25	Iran	459
26	Austria	448
27	Nigeria	447
28	Argentina	445
29	Norway	418
30	United Arab Emirates	406
31	Israel	388
32	Ireland	385
–	Hong Kong	373
33	Malaysia	365
34	Singapore	363
35	South Africa	359
36	Philippines	357
37	Denmark	347
38	Colombia	328
39	Bangladesh	317
40	Egypt	302
41	Chile	294
42	Pakistan	284
43	Finland	270
44	Vietnam	262
45	Czech Republic	247
46	Romania	244
47	Portugal	236
48	Peru	229
49	Iraq	224
50	Greece	214
51	New Zealand	205
52	Qatar	192
53	Algeria	173
54	Hungary	170
55	Kazakhstan	170
56	Ukraine	150
57	Kuwait	138
58	Morocco	119
59	Ecuador	108
60	Slovakia	107
–	Puerto Rico	100
61	Kenya	98.6
62	Angola	91.5
63	Ethiopia	91.2
64	Dominican Republic	89.5
65	Sri Lanka	86.6
66	Guatemala	81.3
67	Oman	76.6
68	Venezuela	70.1
69	Luxembourg	69.5
70	Panama	68.5
71	Ghana	67.1
72	Bulgaria	66.3
73	Myanmar	66.0
74	Tanzania	62.2
75	Belarus	62.6
76	Costa Rica	61.0
77	Croatia	60.7
78	Uzbekistan	60.5
80	Uruguay	59.9
81	Lebanon	58.6
–	Macau	55.1
82	Slovenia	54.2
83	Lithuania	53.6
84	Serbia	51.5
85	DRC	49.0
86	Azerbaijan	47.2
87	Turkmenistan	46.7
88	Côte d’Ivoire	44.4
89	Jordan	44.2
90	Bolivia	42.4
91	Paraguay	40.7
92	Tunisia	38.7
93	Cameroon	38.6
94	Bahrain	38.2
95	Latvia	35.0
96	Libya	33.0
97	Estonia	31.0
98	Sudan	30.9
99	Uganda	30.7
100	Yemen	29.9
101	Nepal	29.8
102	El Salvador	26.9
103	Cambodia	26.7
104	Honduras	24.4
105	Cyprus	24.3
106	Zambia	23.9
107	Senegal	23.9
108	Iceland	23.9
109	Papua New Guinea	23.6
110	Trinidad and Tobago	22.6
111	Bosnia and Herzegovina	20.1
112	Laos	19.1
113	Afghanistan	18.7
114	Botswana	18.7
115	Mali	17.6
117	Gabon	16.9
116	Georgia	15.9
118	Jamaica	15.7
119	Albania	15.4
120	Mozambique	15.1
121	Malta	14.9
122	Burkina Faso	14.6
123	Mauritius	14.4
124	Benin	14.4
125	Namibia	14.4
126	Mongolia	13.6
127	Armenia	13.4
128	Guinea	13.4
129	Zimbabwe	12.8
130	North Macedonia	12.7
131	Bahamas. The	12.7
132	Madagascar	12.6
133	Nicaragua	12.5
134	Brunei	12.5
135	Equatorial Guinea	12.1
136	Moldova	11.7
137	Congo. Republic of the	11.6
138	Chad	11.0
139	Rwanda	10.2
140	Niger	9.44
141	Haiti	8.82
142	Kyrgyzstan	8.26
143	Tajikistan	8.15
–	Kosovo	8.00
144	Malawi	7.52
145	Maldives	5.79
146	Togo	5.50
147	Mauritania	5.65
148	Montenegro	5.42
149	Fiji	5.71
150	Barbados	5.19
151	Somalia	4.96
152	Eswatini	4.66
153	Sierra Leone	4.23
154	Guyana	4.12
155	Suriname	3.77
156	South Sudan	3.68
157	Burundi	3.57
158	Liberia	3.22
159	Djibouti	3.17
160	Timor-Leste	2.94
–	Aruba	2.90
161	Bhutan	2.84
162	Lesotho	2.74
163	Central African Republic	2.32
164	Eritrea	2.11
165	Belize	2.00
166	St Lucia	1.99
167	Gambia	1.77
168	Antigua and Barbuda	1.69
169	Seychelles	1.64
170	San Marino	1.59
171	Solomon Islands	1.44
172	Grenada	1.24
173	Comoros	1.18
174	St Kitts and Nevis	1.03
175	Vanuatu	0.95
176	Samoa	0.91
177	St Vincent and the Grenadines	0.86
178	Dominica	0.59
179	Tonga	0.49
180	São Tomé and Príncipe	0.43
181	Micronesia	0.38
182	Palau	0.29
183	Marshall Islands	0.22
184	Kiribati	0.18
185	Tuvalu	0.04

Source: IMF data as published by Wikipedia

* Figures exclude Taiwan and the special administrative regions of Hong Kong and Macau.

It made local headlines last week that the US – if not Trump personally – suddenly decided that SA is a rich country.

According to GDP figures, SA is not a “poor” country. It is ranked number 35 on the list of 185 countries. We are in the top 25% in the world in terms of nominal GDP.

‘One or the other’ inadequate

The effective reclassification of the 25 countries from developing countries to developed countries for purposes of trade concessions shows that classifying countries as either one or the other is totally inadequate.

Where would one draw the line between rich and poor on the above list of GDP figures? Drawing the line in the middle of the list would assume that all the countries listed to number 92 are rich and those from 93 to 185 are poor.

Tunisia is at 92 with a nominal GDP of $38.7 billion and Cameroon is at 93 with a GDP of $38.6 billion. That the figure of around $39 billion is equal to less than 0.2% of the GDP of the US clearly shows that it is simplistic to put the distinction between developing and developed countries in the middle of the list.

Putting it at the average number instead of the mean also yields a nonsensical answer.

That would result in only 24 countries in the world being classified as rich, with Belgium being regarded as the poorest of the rich with a GDP of $517 billion. Austria, Norway and the United Arab Emirates would then be considered poor.

However, the IMF mentions that comparing nominal GDP doesn’t take into account differences in the standard of living from country to country. One of the big shortcomings when using nominal GDP as a yardstick is that figures can change significantly from year to year due to changes in exchange rates.

Adapting raw GDP figures to reflect the purchasing power of a country’s currency and comparing purchasing power parity GDP figures (PPP GDP) tries to solve the problem of different currencies and variations in the cost of living between countries.

This ranking puts China way ahead of the US and moves India up to the third spot. but it still does not change the problem of where to draw the line between poor and rich.

Countries ranked highest by purchasing power parity GDP

Rank	Country	PPP GDP ($bn)
1	China	27 309
2	United States	21 439
3	India	11 326
4	Japan	5 747
5	Germany	4 444
6	Russia	4 349
7	Indonesia	3 737
8	Brazil	3 456
9	United Kingdom	3 131
10	France	3 061
11	Mexico	2 628
12	Italy	2 443
13	Turkey	2 347
14	South Korea	2 320
15	Spain	1 941
16	Canada	1 900
17	Saudi Arabia	1 899
18	Iran	1 471
19	Egypt	1 391
20	Thailand	1 383
21	Australia	1 365
–	Taiwan	1 300
22	Poland	1 287
23	Nigeria	1 217
24	Pakistan	1 202
25	Malaysia	1 079
26	Philippines	1 026
27	Netherlands	1 005
28	Argentina	904
29	Bangladesh	838
30	South Africa	809

Source: IMF data as published by Wikipedia

The list of the 30 richest countries based on PPP GDP still includes SA (number 30), as well as Brazil, Thailand and South Korea – which were all taken off the US list for special trade deals, along with China and India.

Read: Why Korea has first-world economy and developing-market currency

It is interesting (and clever) for Trump to refer to different countries and nations in his arguments and not to people. The richest countries are not necessarily home to the richest people, as analysis of GDP per capita shows.

Well-to-do countries with relatively small populations head the list when ranked by GDP per capita. Tiny Luxembourg is number one with a per capita GDP of $113 196, followed by Switzerland ($83 716) and Norway ($77 975). The US drops to number 7 with an average of $65 111, far behind Luxembourg. Their huge populations push China to number 65, Brazil to 72 and India to 139.

Once again, where should one draw the line between rich and poor? The mid-point is between SA with $6 100 and North Macedonia with $6 096. This line would rate SA citizens as rich, despite our average annual GDP per capita being less than 10% of that of our US counterparts

The world average of $11 355 indicates that there are only 60 countries on the list of 186 where per capita income is above average. India’s citizens are suddenly poor, with a per capita GDP of only $2 171.

Selection of countries ranked by GDP per capita

Rank	Country	GDP per capita
1	Luxembourg	113 196
2	Switzerland	83 716
3	Norway	77 975
4	Ireland	77 771
5	Qatar	69 687
6	Iceland	67 037
7	United States	65 111
8	Singapore	63 987
9	Denmark	59 795
10	Australia	53 825
11	Netherlands	52 367
12	Sweden	51 241
13	Austria	50 022
–	Hong Kong	49 334
14	Finland	48 868
15	San Marino	47 279
16	Germany	46 563
17	Canada	46 212
18	Belgium	45 175
19	Israel	42 823
20	France	41 760
21	United Kingdom	41 030
22	Japan	40 846
23	New Zealand	40 634
24	United Arab Emirates	37 749
25	The Bahamas	33 261
26	Italy	32 946
27	South Korea	31 430
28	Malta	30 650
29	Spain	29 961
30	Kuwait	29 266
31	Brunei	27 871
32	Cyprus	27 719
33	Slovenia	26 170
34	Bahrain	25 273
35	Taiwan	24 827
36	Estonia	23 523
37	Czech Republic	23 213
38	Portugal	23 030
39	Saudi Arabia	22 865
40	Greece	19 974
41	Slovakia	19 547
42	Lithuania	19 266
48	Hungary	17 463
49	Seychelles	17 052
55	Croatia	14 949
56	Poland	14 901
57	Romania	12 482
–	World GDP per capita	11 355
61	Russia	11 162
62	Malaysia	11 136
64	Mexico	10 118
65	China	10 098
66	Argentina	9 887
78	Botswana	7 859
89	South Africa	6 100
90	North Macedonia	6 096
91	Namibia	5 842
109	Indonesia	4 163
127	Angola	3 037
137	Ghana	2 223
138	Nigeria	2 222
139	India	2 171
140	Kenya	1 997
153	Lesotho	1 338
154	Zambia	1 307
166	Zimbabwe	859
167	Rwanda	824
178	Democratic Republic of Congo	500
179	Mozambique	484
183	Malawi	370
186	South Sudan	275

Source: IMF data as published by Wikipedia

The Swedish doctor and academic Hans Rosling wrote in his book Factfulness that one of the major misconceptions in the world is that people divide the world in two. “I’m talking about that irresistible temptation we have to divide all kinds of things into two distinct and often conflicting groups, with an imagined gap – a huge chasm of injustice – in between.

“It is about how the gap instinct creates a picture in people’s heads of a world split into two kinds of countries or two kinds of people: rich versus poor,” says Rosling in one of the first paragraphs in the first chapter.

Factfulness introduced a different way of looking at figures and a novel way to draw graphs to break down the temptation to see only two categories.

Its final analysis finds that the bulk of the world’s population falls right in the middle between rich and poor – in that gap that most people fail to recognise.

The book makes the point that this is the case when using any figures that measure development and living standards, including level of education, nutrition, infant and child mortality, access to clean water, household income, size of families, economic growth and life expectancy.

The graphs in the book show that the bulk of the world’s population is neither rich nor poor. Based on 2017 figures, the conclusion is that most of the world’s citizens fall within a per capita GDP range of around $2 500 to $25 000.

The minority fall outside this admittedly wide range. The poor minority reside mostly in Africa and the rich minority in Europe, America and Japan.

Rosling forecasts that life will get much better for the middle block by 2040 and that the poor minority will nearly halve in number to 600 million, while the population in the middle will remain the majority with some 6.8 billion people. The rich will number around 1.7 billion in 2040.

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