Economic Growth and The Worlds Largest Economies

“How difficult a thing it is to persuade a man to reason against his own interest, though he is convinced that equity is against him.”
– John Trusler

Let´s make a journey in time. Looking back 114 years, in 1900 we had no airplanes, no computers, no mobile phones, no internet. We had only early versions of cars, trucks, telephones and cameras.

But in the last century, 1900 to 2000, as Stephen Moore and Julian L. Simon wrote in their book , It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years, real per capita GDP in the United States increased nearly seven times, meaning the American standard of living grew by that much as well. The authors explain:

“It is hard for us to imagine, for example, that in 1900 less than one in five homes had running water, flush toilets, a vacuum cleaner, or gas or electric heat. As of 1950 fewer than 20 percent of homes had air conditioning, a dishwasher, or a microwave oven. Today between 80 and 100 percent of American homes have all of these modern conveniences.”

Two other authors, Michael Cox and Richard Alm, wrote in their book Myths of Rich and Poor that as a result of the economic growth until today, “Homes aren’t just larger. They’re also much more likely to be equipped with central air conditioning, decks and patios, swimming pools, hot tubs, ceiling fans, and built in kitchen appliances. Fewer than half of the homes built in 1970 had two or more bathrooms; by 1997, nine out of ten did.

The accumulated economic growth in the advanced economies has produced dramatic improvements in personal health as well. Throughout most of human history, a typical lifespan was 25 to 30 years, as Moore and Simon writes. But “from the mid-18th century to today, life spans in the advanced countries jumped from less than 30 years to about 75 years.

Average life expectancy in the advanced economies has grown by more than 50% since 1900, something I very much appreciate as I have surpassed the average life expectancy of people in those times.

In United States infant mortality declined from 1 in 10 back then to 1 in 150 today. Children under 15 are at least 10 times less likely to die, as one in four did during the 19th century, with their death rate reduced by 95%. The maternal death rate from pregnancy and childbirth was also 100 times greater back then than today.

Moore and Simon further recount, “Just three infectious diseases – tuberculosis, pneumonia, and diarrhea – accounted for almost half of all deaths in 1900.” Today, we have virtually eliminated or drastically reduced these and other scourges of infectious disease that have killed or crippled billions throughout human history, such as typhoid fever, cholera, typhus, plague, smallpox, diphtheria, polio, influenza, bronchitis, whooping cough, malaria, and others.

Besides the advances in the development and application of modern healthcare, this has resulted from the drastic reduction in filthy and unsanitary living conditions that economic growth has made possible as well. More recently, great progress is being made against heart disease and cancer.

Lort-SverigeIn my native Sweden the radio producer and author Ludvig Nordström made an odyssey through the country in 1938 and broadcasted a radio series in ten episodes and also wrote a book about the filth he encountered on his journey, with lack of hygiene and an abundance of sanitary problems and people who showered or took a bath once a month or even less frequently. Only a few decades later it was considered filthy to not shower several times per day.

Such times seems to be in a distant past to us in modern society, however the same or worse conditions exist in many of the poor countries of the world today. For them, economic growth is a blessing that can change peoples lives very quickly. It is economic growth that has provided the resources which enables us to dramatically reduce pollution and improve the environment, without trashing our standard of living.

It is also economic growth that will allow us to make the investments required to move toward a more environmentally friendly economy. Think about how it used to be. Moore and Simon write that at the beginning of the last century, “Industrial cities typically were enveloped in clouds of black soot and smoke. At this stage of the industrial revolution, factories belched poisons into the air—and this was proudly regarded as a sign of prosperity and progress. Streets were smelly and garbage-filled before the era of modern sewage systems and plumbing.”

Green worldToday we are on track to develop a sustainable economy with increasingly green technologies. Not any of these truly dramatic advances in environmentally more friendly techs and better living standards for the poor, working people and the middle class could have been achieved by redistribution from the rich.

Only economic growth could achieve these results.

imageWe live in a dynamic world where the financial crises has been pivotal for where in the world we have economic growth, as we have written about earlier this year. The shift in the balance of global economic power is profound. It is also a trend that economists expect to continue. By 2018, the International Monetary Fund projects emerging markets’ share of world output will have risen to 55 per cent, making the term “emerging” increasingly irrelevant.

CNN Money have created a page where the viewer can track development of the worlds largest economies by size and growth from 2002 to 2019 (estimated). Here is a link to the site, and below, for you dear reader to digest and ponder, the top ten of each list in 2002, 2014 and the 2019 estimate.

Economies by size


Note the drastic, seven fold increase of the Chinese economy between 2002 and 2014, which is due to close to or above ten percent economic growth per year, and of course also currency exchange rate fluctuations. image


Economies by growth


What is important to consider with economic growth is the cumulative effect. High growth year after year leads to very large accumulated changes in gross national product over time.

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