A World of Change

• Author: M. Ayhan Kose and Ezgi O. Ozturk
• Position: Director of the Development Prospects Group of the World Bank and is Research Officer in the Research Department of the IMF.

Taking stock of the past half century

The slow one now

Will later be fast

As the present now

Will later be past

The order is rapidly fadin’

And the first one now will later be last

For the times they are a-changin’

From “The Times They Are a-Changin’” by Bob Dylan, 1964

When the inaugural issue of Finance & Development appeared in June 1964, the world economy was enjoying its best 10-year growth performance since World War II. The massive postwar reconstruction effort of the preceding decade led to vibrant growth in Europe and Asia. The U.S. economy, which accounted for almost one-third of world output during the 1960s, was experiencing its longest expansion to date.

In the same year, Bob Dylan’s timeless song captured the rapidly changing nature of the times. Although Dylan probably did not have global production in mind, the world economy witnessed some truly unimaginable changes during the ensuing half century. Some low-income countries with chronic development problems started growing much faster and eventually became major contributors to global growth. The world economic order went through a tectonic transformation, accompanied by, and in part caused by, groundbreaking advances in science and technology and the rise of globalization.

How has the global economy changed since 1964? We present an eclectic answer to this question by summarizing some major changes over the past 50 years. The progress the world economy experienced during this period has been impressive. There is still a glaring need for progress in many areas, but there is also cause for optimism.

New technologies

Had we written this article in 1964, we would have used typewriters, not computers, and might have relied for background research on hard copies of journals and books. It could have taken many weeks to assemble the related statistics and to translate them into the charts. It could, as well, have taken several weeks to ship printed issues of the magazine to readers around the world.

Thanks to many technological developments over the past half century, today we have instant access to a vast array of information sources and are able to share new knowledge with the rest of the world in seconds. Rapid progress in communication and transportation technologies has facilitated major innovation in many other fields, radically changed how we work, raised productivity, and led to stronger international trade and financial links.

How we communicate has changed the most, as advances in computers and mobile technologies have revolutionized all mediums of communication. In 1965, the first commercially successful minicomputer had an inflation-adjusted price tag of $135,470. It was able to undertake basic computations, such as addition and multiplication. Its capacity was about 4,000 words of 12 bits. Today’s typical smartphone has a capacity 3 million times larger and costs less than $600.

The introduction of the Internet to the public in 1991 started a new era in communication. The tremendous increase in Internet access has brought people, businesses, and countries closer, while mobile communication has become cheaper and more accessible. In 1965, the first commercial communications satellite was launched from the United States, providing 240 two-way telephone circuits. Today, there are about 400 commercial communication satellites processing and transmitting information across the world, with a capacity that dwarfs 1965. In 1980, there were five mobile phone subscriptions for every million people; today there are more than 90 for every 100 people (see Chart 1). New technologies have been making earlier modes of communication obsolete. With the rapid rise of wireless communication, landlines, for example, have declined during the past decade.

The transportation sector has also gone through a major change over the past 50 years. Today, we can...