Growth has transformed our lives relative to our forefathers
Our modern era of economic growth is historically exceptional. There is simply no other period in history that has seen sustained growth at the rates seen since the first Industrial Revolution. This has enabled unparalleled technological advances, and standards of living across the world have never been higher than they are today.
The following graphs show that until we entered the Industrial Revolution era, for much of human history, there was frequent or continuous economic stagnation.
Before the first Industrial Revolution, generation after generation of people could expect to live a life very similar to that of their predecessors – in terms of their standard of living as well as their lifespan. Figure 4 shows long-term life expectancy over time. In particular, it shows that longevity grew considerably after the second Industrial Revolution – when improvements in sanitation and medicine began to eliminate basic diseases. Of course, these developments would not have been possible without the advancements made during the first Industrial Revolution.
As the graph shows, UK life expectancy hardly changed between the mid-1500s and the mid- to late 1800s. Some people reading this report likely had grandparents or great grandparents that at birth were expected to live little longer than their forefathers several hundred years before. Yet since then, life expectancy has roughly doubled. There is little doubt that economic growth helped facilitate this.
It is difficult to measure health over the very long run, but a good proxy is to look at average heights through history. Figure 5 shows that over the last 200 years, males have grown 10-15cm. This contrasts with the preceding centuries, with an analysis by Köpke and Baten (2003) finding that heights were broadly constant over the two thousand years before that. So once the spoils of the first two Industrial Revolutions spread, humans saw huge health and life expectancy benefits.
As economic growth boosted quality of life and health, a self-reinforcing cycle was established that boosted economic growth further as populations surged around the globe. Infant mortality collapsed (Figure 6) and the world population (Figure 7) started to increase notably in the nineteenth century relative to the earlier years of the prior millennium. However, the real population explosion was in the twentieth century as these economic and health gains spread around the globe and compounded in an exponential manner.
Related to improved health outcomes is the increase in safety. Indeed, countries with stagnant growth are far more likely to have higher homicide rates compared with countries with higher growth. This suggests that people are more likely to try to increase their share of a static pie by taking from others and eliminating their competition for scarce resources.
Poverty and inequality
It has not just been since the first Industrial Revolution that a selective proportion of the global population has benefited economically. Figure 8 shows that global poverty measures have declined from almost universal levels 200 years ago to today’s relatively low levels.
If anything, global poverty has collapsed at the fastest pace in history over the last 40 years. It is no coincidence that this was the period during which growth spread most widely across the globe. This globalisation has also been a catalyst for reducing inequality. In fact, in a world with a growing population, growth is a vital way to reduce inequality. That is because if there are more people striving to be successful, they can achieve their goals only if the overall pie is expanding.
Another way to see the benefits of economic growth is to look at what happens without it. Just one recent example is Venezuela. With an economy heavily leveraged to the price of oil, the collapse in the price of crude in 2014 exposed the lack of economic development elsewhere and put the brakes on economic growth. Populist government policies, including price controls and expropriations, disincentivised business growth and worsened the effects of a lack of growth. The result was hyperinflation and widespread social chaos. In 2019, the country experienced its sixth consecutive year of economic contraction – the IMF’s World Economic Outlook in October showed a one-third contraction in 2019. The country can expect a further ten per cent contraction in 2020. Tragically, Venezuela also has one of the highest homicide rates in the world, with the UN Office on Drugs and Crime putting the rate in 2016 at 56 per 100,000 people.