In this episode of the McKinsey Future of Asia Podcast, two authors of McKinsey Global Institute’s recent report, Pixels of Progress: A granular look at human development around the world, talk about the report’s findings, particularly with regard to Asia. Senior partners and directors of McKinsey Global Institute, Lola Woetzel and Chris Bradley, highlight how taking a microregional perspective reveals the incredible growth that the region has experienced in the past two decades in terms of income and life expectancy. An edited version of the conversation follows.
Gautam Kumra: I am Gautam Kumra, chairman of McKinsey Asia, and you’re listening to the Future of Asia Podcast series. The Asian century has begun. The region is now the world’s largest economy. As Asia’s economies evolve further, the region has the potential to fuel and shape the next normal. In each episode, we are going to feature conversations with leaders from across the region to discuss what Asia’s rise means for businesses across the globe. Join us.
Angela Buensuceso: Hello, and welcome to the Future of Asia Podcast. Today, we’ll be discussing a recent McKinsey Global Institute report, Pixels of Progress, which shares the findings of a bespoke MGI dataset that breaks the world down into more than 40,000 microregions—a view 230 times more granular than a country perspective. This microregional perspective provides a much more nuanced view of development, enhancing our understanding of global progress in ways that can help businesses and governments make better, more targeted decisions.
We are joined by two of the report’s authors, Dr. Lola Woetzel and Chris Bradley, both of whom are senior partners and directors at the McKinsey Global Institute. Welcome to both of you. Before we delve into the findings, perhaps we could start with a more general overview of what was uncovered through this research. Chris, would you like to share?
Chris Bradley: What we uncovered was a startling picture of human progress. The averages look great—for example, income across the world increased by nearly $6,000 and life expectancy by 9.3 years. However, it is only when you look at the picture at a granular level that you can see just how stunning the progress is. So, let me bring that to life for you. In our 40,000 microregions, we chose a zone called the Blue Zone. This comprised places that were—by the standards of the year 2000—in the top 30 percent for both income and life expectancy. In other words you had to have above $8,300 income and a life expectancy of 72.5 years. These are places where humans were flourishing. In the year 2000, there were 1.3 billion people in these Blue Zones. But by the year 2019, there were 3.5 billion people. The world had moved from 21 percent to 34 percent of people living at that standard. This is absolutely astounding progress.
On the corollary, at what we call the Orange Lines (or Zones), we look at people who were in the bottom 30 percent for those variables in the year 2000. They had to live fewer than 65.5 years and have an income of no more than $2,400. There were 1.1 billion people in the Orange Zones in the year 2000, but just 400 million in the year 2019, despite population growth. It went from 19 percent of people in the world in that zone to just 7 percent. So, what we saw was a mass migration of humanity to higher levels of well-being. It wasn’t a geographical migration, it was a migration to a better place of human flourishing.
Angela Buensuceso: Could you tell us more about the advantages of a microregional perspective when looking at human and economic development as compared to a country-level analysis?
Lola Woetzel: Let me jump in for a second, Angela, because I think that of the growth we have seen globally, a fair chunk of it is in Asia. There are thousands of dispersed microregions over Asia that have been untold stories and we think this research brings them to life. There tend to be misclassifications, for example, of India.
There are literally a 100 million Indians that we miss when we generalize and perceive India still to be a developing country. Of course, it is overall on average. But, in our research, we found 100 million Indians who should be in the Blue Zone. That’s an astonishing fact. It’s not just India, of course; there are plenty of places across Asia where we see this dynamic. So, this granular view really comes to life when we start looking at regions in the world. That granularity of growth is something we should celebrate as a distinctive feature of Asia.
Chris Bradley: In fact, if you look at the Blue Zone, 2.2 billion more people enjoyed life there in 2019 than they did in 2000. Yes, 1.1 billion of those were from China, but there are 320 million other people in Asia who were in that class—10 percent of Indians, for example. From 0.1 percent in the Blue Zone in India in 2000 to 10 percent in 2019. These are literally first-world living standards that we are talking about. So, if there were a country that had 140 million people in it living in the Blue Zone, we’d be celebrating this economic miracle—but because it’s hidden inside a much bigger country, we don’t really notice it. And we can’t underplay the importance of Indonesia, Thailand, and Vietnam—they added 130 million people into the Blue Zone as well.
We must not forget that it is not just about income, but about longevity as well—quality of life as measured by GDP per capita and life expectancy. The results were just astounding there. We’ve talked about the journey to the Blue Zone, but let me talk about what’s equally important, which is the journey out of the Orange Zone. This is ultimately the first task of development, to alleviate human suffering and poverty that happens at that level, so the greatest goal is for people to leave the Orange Zone. I’ve already described how in 2000, there were 1.1 billion people in the Orange Zone, and, in fact, 43 percent of them were in India.
If we followed the normal population growth predictions in those microregions, there would be 1.6 billion people today. But we don’t have 1.6 billion, we have 0.4 billion. We have one-quarter of the projected figure. In other words, three-quarters of those people left the Orange Zone. Here’s the miracle: India was 43 percent of the Orange Zone and now it is zero percent. India does not have any Orange Zones. In fact, 95 percent of the remaining 400 million people are in Sub-Saharan Africa. So, 650 million people in India are no longer in the Orange Zone, as well as 220 million people in other parts of emerging Asia. Have they all, like China, traversed the path to the Blue Zone? No, not yet, but they can if they get the energy, infrastructure, capital, and urbanization that they need.
Angela Buensuceso: A key notion from the report is that economic progress is not uniform across regions and even within countries. In fact, growth rates are highly dependent upon local conditions. So, what are the implications of this, especially for stakeholders like governments and businesses?
Lola Woetzel: The implication is, first of all, that local matters. What you do locally really does have a disproportionate impact on both your economic and your social well-being, or life expectancy. We saw that the quality of local performance really drove outcomes relative to the importance of national performance. This is what is called subsidiarity in political science—the idea that you should devolve decision making to the lowest level that you can to get the best outcomes. Our research would tend to support that. For corporations, it’s about understanding that situation and being able to tailor their approaches, both in terms of knowing where exactly their opportunity is and their market or supply chain. How would they think about it going forward, and what approaches might work best for them going to market or investing, and so forth?
Pixels of Progress: A granular look at human development around the world
Chris Bradley: We did a regression to see how much of the income growth in a microregion you could explain just with the country’s GDP. The answer is really low. You can only explain 20 percent of the variation with the country. In other words, 80 percent of the answer is local. To Lola’s point, I think it really matters to how policy’s set. Let me try to bring it to life by using two Asian countries that border each other: Cambodia and Laos. Life expectancy in in Cambodia is 69.8 years and in Laos is about 67.9 years—it looks like they’re two years apart. But, if we break it down into all of the microregions, the difference is from 61.4 years to 74.6 years; 13 years.
You begin to see that there’s not a hard border between these countries; there are microregions everywhere. It is being close to a city that really matters. You start to see basic local impacts, for example, the availability of doctors. Something we would recommend all governments do—as well as companies, for that matter—is look for the bright spots, at those places that are getting it right and have had an outsized development. Then try to learn from those places and apply the lessons more broadly.
Lola Woetzel: One of the really interesting findings came from when we looked at maps. When we looked at national borders, and we looked at the proximity of both outperforming microregions, we discovered that national borders don’t matter as much as you might think. In fact, it’s much more important to be close to another outperforming microregion than to be part of a country. Simple proximity to other successful microregions makes a difference; perhaps those artificial lines in the sand that were drawn 100 or 120 years ago may not be as important as we thought.
It’s true that in some environments this impact really stands out. But I think there’s a lot to be said for focusing on the quality of the local environment and learning from those around us, building up a virtual cycle of economic development and investment productivity. It was quite striking when we tried to overlay the national lines on these clusters and we discovered that they don’t matter that much.
Chris Bradley: For example, coasts really matter, probably more than which country you’re in. These attributes are fundamentally important.
Angela Buensuceso: Taking this a step further, can this level of granular analysis be applied to examine other issues like carbon emissions, educational achievements, and sustainable development? And if it does, what would that entail exactly?
Chris Bradley: In places like India, the alleviation of energy, poverty, and access to basic heating, cooling, and mechanization are very clearly on the map. In well-developed countries, you get about one in 50 people who work in agriculture, while in India, it is still 55 to 60 percent. Part of the progress of humanity is urbanization. China had a massive urbanization journey, and India is only halfway through its one. That’s going to bring extraordinary changes, particularly to the patterns of energy use. It is going to be astounding to watch.
Let’s go back to one of the core facts of our report, which is that 50 percent of all economic growth happened on one percent of the Earth’s surface. So, this is about getting things right in very few places. It’s going to be very focused places that absorb the most people and experience the most growth.
Lola Woetzel: Our methodology to identify economic points is literally points of light. We used light from outer space to see where activity was. We fact-checked, of course, but it was almost poetic to see the lights come on across the world as an indication of what we, as a species, are doing. It’s very widespread. But we want to get underneath that, of course. We want to understand why the lights came on and which piece of the local puzzle was the thing that unlocked the growth. We have an aspiration to understand more, whether it’s the availability of resources or a governance issue.
There could be a bunch of reasons why a local play starts to get better. I can speak from my experiences in China. China has a logical situation—you can see growth down the coast and up the rivers, and so forth. If you look at a map of India, however, you don’t see that. You just see a patchwork quilt or, as we sometimes call it, multipolar urban development (MUD), because that’s what it looks like—a patch of mud and splatters on the wall. So where is the rhyme and reason there? I think it’s a really important question because we want to look beyond the income effects. Income is very important and we spend a lot of time talking about it, but we need to look at other things, too.
That’s why we also considered the impact on life expectancy, and we have seen a huge improvement. Nine years median life expectancy over the life of this study. That’s amazing. Where did that come from? We found that 50 percent came from income, but the other 50 percent came from what we’ll call innovation, which is essentially changing the relationship between life expectancy and income. We got more life expectancy for our income buck, but how did that happen? What innovations took place? What policies? What happened? We now observe it and see it as a global phenomenon, which then leads us to think about things like transmission effects.
How do these flows happen? They’re very important because we’re so widely distributed. If we can’t figure out how we manage to simultaneously improve life expectancy through innovation around the entire world, we run certain risks of not being able to do it anymore, if we do something to the system that enabled it to happen. We need to understand why something happened and how we keep it happening.
Chris Bradley: I love your point, Lola, about luminosity. All of this is the correlation we look for when we’re trying to see economic changes—how bright the place is at night. We have a world that’s getting brighter and brighter and more evenly so. When we started this study, the world was a two-humped camel, in terms of income distribution and life-expectancy distribution. By the end of the study, we’re all on the same curve. So, we’re increasingly moving to a world where we’re in it together. The old notions of Third World and First World, frankly, don’t work anymore. We’re on a curve and our human project is about bringing prosperity and longevity to all people. And, in fact, nothing was more encouraging to us in the report than the fact that the life expectancy gains in the bottom decile of income were three to four times faster than they were in the top decile of income. We’re seeing a real coming together of the world.
There’s a lot of talk about inequality; it’s a popular topic. One thing we found in our study is that when you measure inequality at a global level—you take away the country’s borders— it massively reduces. It has almost halved since the 1980s. When we look at a world without borders, we see a world that’s more together, more unified, more energized, longer lived, and hopefully happier.
Angela Buensuceso: Thanks so much, Chris and Lola, for highlighting the key findings from the Pixels of Progress report. It’s clear that in a world that is increasingly global and local at the same time, untethering from a country or national level perspective (which a microregional perspective allows us to do), will aid in dealing with increasingly transnational issues.
Gautam Kumra: You have been listening to the Future of Asia Podcast by McKinsey & Company. To learn more about McKinsey, our people, and our latest thinking, visit us at McKinsey.com/FutureOfAsia, or find us on LinkedIn, Twitter, and Facebook.
