The story of the growth of prosperity in human history depicted in figure 8-1 is close to: nothing . . . nothing . . . nothing . . . (repeat for a few thousand years) . . . boom! A millennium after the year 1 CE, the world was barely richer than it was at the time of Jesus. It took another half-millennium for income to double. Some regions enjoyed spurts now and again, but they did not lead to sustained, cumulative growth. Starting in the 19th century, the increments turned into leaps and bounds. Between 1820 and 1900, the world’s income tripled. It tripled again in a bit more than fifty years. It took only twenty-five years for it to triple again, and another thirty-three years to triple yet another time. The Gross World Product today has grown almost a hundredfold since the Industrial Revolution was in place in 1820, and almost two hundredfold from the start of the Enlightenment in the 18th century. Debates on economic distribution and growth often contrast dividing a pie with baking a larger one (or as George W. Bush mangled it, “making the pie higher”). If the pie we were dividing in 1700 was baked in a standard nine-inch pan, then the one we have today would be more than ten feet in diameter. If we were to surgically carve out the teensiest slice imaginable—say, one that was two inches at its widest point—it would be the size of the entire pie in 1700.
Figure 8-1: Gross World Product, 1–2015
Source: Our World in Data, Roser 2016c, based on data from the World Bank and from Angus Maddison and Maddison Project 2014.
Indeed, the Gross World Product is a gross underestimate of the expansion of prosperity.6 How does one count units of currency, like pounds or dollars, across the centuries, so they can be plotted in a single line? Is one hundred dollars in the year 2000 more or less than one dollar in 1800? They’re just pieces of paper with numbers on them; their value depends on what people can buy with them at the time, which changes with inflation and revaluations. The only way to compare a dollar in 1800 with a dollar in 2000 is to look up how many one would have to fork over to buy a standard market basket of goods: a fixed amount of food, clothing, health care, fuel, and so on. That’s how the numbers in figure 8-1, and in other graphs denominated in dollars or pounds, are converted into a single scale such as “2011 international dollars.”
The problem is that the advance of technology confounds the very idea of an unchanging market basket. To start with, the quality of the goods in the basket improves over time. An item of “clothing” in 1800 might be a rain cape made of stiff, heavy, and leaky oilcloth; in 2000 it would be a zippered raincoat made of a light, breathable synthetic. “Dental care” in 1800 meant pliers and wooden dentures; in 2000 it meant Novocain and implants. It’s misleading, then, to say that the $300 it would take to buy a certain amount of clothing and medical care in 2000 can be equated with the $10 it would take to buy “the same amount” in 1800.
Also, technology doesn’t just improve old things; it invents new ones. How much did it cost in 1800 to purchase a refrigerator, a musical recording, a bicycle, a cell phone, Wikipedia, a photo of your child, a laptop and printer, a contraceptive pill, a dose of antibiotics? The answer is: no amount of money in the world. The combination of better products and new products makes it almost impossible to track material well-being across the decades and centuries.
Plunging prices add yet another complication. A refrigerator today costs around $500. How much would someone have to pay you to give up refrigeration? Surely far more than $500! Adam Smith called it the paradox of value: when an important good becomes plentiful, it costs far less than what people are willing to pay for it. The difference is called consumer surplus, and the explosion of this surplus over time is impossible to tabulate. Economists are the first to point out that their measures, like Oscar Wilde’s cynic, capture the price of everything but the value of nothing.7
This doesn’t mean that comparisons of wealth across times and places in currency adjusted for inflation and purchasing power are meaningless—they are better than ignorance, or guesstimates—but it does mean that they shortchange our accounting of progress. A person whose wallet contains the cash equivalent of a hundred 2011 international dollars today is fantastically richer than her ancestor with the equivalent wallet’s worth two hundred years ago. As we’ll see, this also affects our assessment of prosperity in the developing world (this chapter), of income inequality in the developed world (next chapter), and of the future of economic growth (chapter 20).
* * *
What launched the Great Escape? The most obvious cause was the application of science to the improvement of material life, leading to what the economic historian Joel Mokyr calls “the enlightened economy.”8 The machines and factories of the Industrial Revolution, the productive farms of the Agricultural Revolution, and the water pipes of the Public Health Revolution could deliver more clothes, tools, vehicles, books, furniture, calories, clean water, and other things that people want than the craftsmen and farmers of a century before. Many early innovations, such as in steam engines, looms, spinning frames, foundries, and mills, came out of the workshops and backyards of atheoretical tinkerers.9 But trial and error is a profusely branching tree of possibilities, most of which lead nowhere, and the tree can be pruned by the application of science, accelerating the rate of discovery. As Mokyr notes, “After 1750 the epistemic base of technology slowly began to expand. Not only did new products and techniques emerge; it became better understood why and how the old ones worked, and thus they could be refined, debugged, improved, combined with others in novel ways and adapted to new uses.”10 The invention of the barometer in 1643, which proved the existence of atmospheric pressure, eventually led to the invention of steam engines, known at the time as “atmospheric engines.” Other two-way streets between science and technology included the application of chemistry, facilitated by the invention of the battery, to synthesize fertilizer, and the application of the germ theory of disease, made possible by the microscope, to keep pathogens out of drinking water and off doctors’ hands and instruments.
The applied scientists would not have been motivated to apply their ingenuity to ease the pains of everyday life, and their gadgets would have remained in their labs and garages, were it not for two other innovations.
One was the development of institutions that lubricated the exchange of goods, services, and ideas—the dynamic singled out by Adam Smith as the generator of wealth. The economists Douglass North, John Wallis, and Barry Weingast argue that the most natural way for states to function, both in history and in many parts of the world today, is for elites to agree not to plunder and kill each other, in exchange for which they are awarded a fief, franchise, charter, monopoly, turf, or patronage network that allows them to control some sector of the economy and live off the rents (in the economist’s sense of income extracted from exclusive access to a resource).11 In 18th-century England this cronyism gave way to open economies in which anyone could sell anything to anyone, and their transactions were protected by the rule of law, property rights, enforceable contracts, and institutions like banks, corporations, and government agencies that run by fiduciary duties rather than personal connections. Now an enterprising person could introduce a new kind of product to the market, or undersell other merchants if he could provide a product at lower cost, or accept money now for something he would not deliver until later, or invest in equipment or land that might not return a profit for years. Today I take it for granted that if I want some milk, I can walk into a convenience store and a quart will be on the shelves, the milk won’t be diluted or tainted, it will be for sale at a price I can afford, and the owner will let me walk out with it after a swipe of a card, even though we have never met, may never see each other again, and have no friends in common who can testify to our bona fides. A few doors down and I could do the same with a pair of jeans, a power drill, a computer, or a car. A lot of institutions have to be in place for these and the millions of other anonymous transactions that make up a modern economy to be consummated so easily.
The third innovation, after science and institutions, was a change in values: an endorsement of what the economic historian Deirdre McCloskey calls bourgeois virtue.12 Aristocratic, religious, and martial cultures have always looked down on commerce as tawdry and venal. But in 18th-century England and the Netherlands, commerce came to be seen as moral and uplifting. Voltaire and other Enlightenment philosophes valorized the spirit of commerce for its ability to dissolve sectarian hatreds:
Take a view of the Royal Exchange in London, a place more venerable than many courts of justice, where the representatives of all nations meet for the benefit of mankind. There the Jew, the Mahometan, and the Christian transact together as tho’ they all profess’d the same religion, and give the name of Infidel to none but bankrupts. There the Presbyterian confides in the Anabaptist, and the Churchman depends on the Quaker’s word. And all are satisfied.13
Commenting on this passage, the historian Roy Porter noted that “by depicting men content, and content to be content—differing, but agreeing to differ—the philosophe pointed towards a rethinking of the summum bonum, a shift from God-fearingness to a selfhood more psychologically oriented. The Enlightenment thus translated the ultimate question ‘How can I be saved?’ into the pragmatic ‘How can I be happy?’—thereby heralding a new praxis of personal and social adjustment.”14 This praxis included norms of propriety, thrift, and self-restraint, an orientation toward the future rather than the past, and a conferral of dignity and prestige upon merchants and inventors rather than just on soldiers, priests, and courtiers. Napoleon, that exponent of martial glory, sniffed at England as “a nation of shopkeepers.” But at the time Britons earned 83 percent more than Frenchmen and enjoyed a third more calories, and we all know what happened at Waterloo.15
The Great Escape in Britain and the Netherlands was quickly followed by escapes in the Germanic states, the Nordic countries, and Britain’s colonial offshoots in Australia, New Zealand, Canada, and the United States. In a theory that could only have been thought up by an assimilated German Jew, the sociologist Max Weber proposed in 1905 that capitalism depended on a “Protestant ethic.” But the Catholic countries of Europe soon zoomed out of poverty too, and a succession of other escapes shown in figure 8-2 have put the lie to various theories explaining why Buddhism, Confucianism, Hinduism, or generic “Asian” or “Latin” values were incompatible with dynamic market economies.
Figure 8-2: GDP per capita, 1600–2015
Source: Our World in Data, Roser 2016c, based on data from the World Bank and from Maddison Project 2014.
The non-British curves in figure 8-2 tell of a second astonishing chapter in the story of prosperity: starting in the late 20th century, poor countries have been escaping from poverty in their turn. The Great Escape is becoming the Great Convergence.16 Countries that until recently were miserably poor have become comfortably rich, such as South Korea, Taiwan, and Singapore. (My Singaporean former mother-in-law recalls a childhood dinner at which her family split an egg four ways.) Since 1995, 30 of the world’s 109 developing countries, including countries as diverse as Bangladesh, El Salvador, Ethiopia, Georgia, Mongolia, Mozambique, Panama, Rwanda, Uzbekistan, and Vietnam, have enjoyed economic growth rates that amount to a doubling of income every eighteen years. Another 40 countries have had rates that would double income every thirty-five years, which is comparable to the historical growth rate of the United States.17 It’s remarkable enough to see that by 2008 China and India had the same per capita income that Sweden had in 1950 and 1920, respectively, but more remarkable still when we remember how many capitas this income was per: 1.3 and 1.2 billion people. By 2008 the world’s population, all 6.7 billion of them, had an average income equivalent to that of Western Europe in 1964. And no, it’s not just because the rich are getting even richer (though of course they are, a topic we will examine in the next chapter). Extreme poverty is being eradicated, and the world is becoming middle class.18
Figure 8-3: World income distribution, 1800, 1975, and 2015
Source: Gapminder, via Ola Rosling, http://www.gapminder.org/tools/mountain. The scale is in 2011 international dollars.
The statistician Ola Rosling (Hans’s son) has displayed the worldwide distribution of income as histograms, in which the height of the curve indicates the proportion of people at a given income level, for three historical periods (figure 8-3).19 In 1800, at the dawn of the Industrial Revolution, most people everywhere were poor. The average income was equivalent to that in the poorest countries in Africa today (about $500 a year in international dollars), and almost 95 percent of the world lived in what counts today as “extreme poverty” (less than $1.90 a day). By 1975, Europe and its offshoots had completed the Great Escape, leaving the rest of the world behind, with one-tenth their income, in the lower hump of a camel-shaped curve.20 In the 21st century the camel has become a dromedary, with a single hump shifted to the right and a much lower tail on the left: the world had become richer and more equal.21
The slices to the left of the dotted line deserve their own picture. Figure 8-4 shows the percentage of the world’s population that lives in “extreme poverty.” Admittedly, any cutoff for that condition must be arbitrary, but the United Nations and the World Bank do their best by combining the national poverty lines from a sample of developing countries, which are in turn based on the income of a typical family that manages to feed itself. In 1996 it was the alliterative “a dollar a day” per person; currently it’s set at $1.90 a day in 2011 international dollars.22 (Curves with more generous cutoffs are higher and shallower but also skitter downward.)23 Notice not just the shape of the curve but how low it has sunk—to 10 percent. In two hundred years the rate of extreme poverty in the world has tanked from 90 percent to 10, with almost half that decline occurring in the last thirty-five years.
Figure 8-4: Extreme poverty (proportion), 1820–2015
Sources: Our World in Data, Roser & Ortiz-Ospina 2017, based on data from Bourguignon & Morrison 2002 (1820–1992), averaging their “Extreme poverty” and “Poverty” percentages for commensurability with data on “Extreme poverty” for 1981–2015 from the World Bank 2016g.
The world’s progress can be appreciated in two ways. By one reckoning, the proportions and per capita rates I have been plotting are the morally relevant measure of progress, because they fit with John Rawls’s thought experiment for defining a just society: specify a world in which you would agree to be incarnated as a random citizen from behind a veil of ignorance as to that citizen’s circumstances.24 A world with a higher percentage of long-lived, healthy, well-fed, well-off people is a world in which one would prefer to play the lottery of birth. But by another reckoning, absolute numbers matter, too. Every additional long-lived, healthy, well-fed, well-off person is a sentient being capable of happiness, and the world is a better place for having more of them. Also, an increase in the number of people who can withstand the grind of entropy and the struggle of evolution is a testimonial to the sheer magnitude of the benevolent powers of science, markets, good government, and other modern institutions. In the stacked layer graph in figure 8-5, the thickness of the bottom slab represents the number of people living in extreme poverty, the thickness of the top slab represents the number not living in poverty, and the height of the stack represents the population of the world. It shows that the number of poor people declined just as the number of all people exploded, from 3.7 billion in 1970 to 7.3 billion in 2015. (Max Roser points out that if news outlets truly reported the changing state of the world, they could have run the headline NUMBER OF PEOPLE IN EXTREME POVERTY FELL BY 137,000 SINCE YESTERDAY every day for the last twenty-five years.) We live in a world not just with a smaller proportion of extremely poor people but with a smaller number of them, and with 6.6 billion people who are not extremely poor.
Figure 8-5: Extreme poverty (number), 1820–2015
Sources: Our World in Data, Roser & Ortiz-Ospina 2017, based on data from
Bourguignon & Morrison 2002 (1820–1992) and the World Bank 2016g (1981–2015).
Most surprises in history are unpleasant surprises, but this news came as a pleasant shock even to the optimists. In 2000 the United Nations laid out eight Millennium Development Goals, their starting lines backdated to 1990.25 At the time, cynical observers of that underperforming organization dismissed the targets as aspirational boilerplate. Cut the global poverty rate in half, lifting a billion people out of poverty, in twenty-five years? Yeah, yeah. But the world reached the goal five years ahead of schedule. Development experts are still rubbing their eyes. Deaton writes, “This is perhaps the most important fact about wellbeing in the world since World War II.”26 The economist Robert Lucas (like Deaton, a Nobel laureate) said, “The consequences for human welfare involved [in understanding rapid economic development] are simply staggering: once one starts to think about them, it is hard to think about anything else.”27
Let’s not stop thinking about tomorrow. Though it’s always dangerous to extrapolate a historical curve, what happens when we try? If we align a ruler with the World Bank data in figure 8-4, we find that it crosses the x-axis (indicating a poverty rate of 0) in 2026. The UN gave itself a cushion in its 2015 Sustainable Development Goals (the successor to its Millennium Development Goals) and set a target of “ending extreme poverty for all people everywhere” by 2030.28 Ending extreme poverty for all people everywhere! May I live to see the day. (Not even Jesus was that optimistic: he told a supplicant, “The poor you will always have with you.”)
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