Analysis

National
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UK
Deficit

Current
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Spending
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What is the Great Enrichment?

In the last 200 years, according to American economist Deirdre McCloskey, per capita income in the capitalist countries has grown from $1-3 per person per day to over $100 per person per day, in real US dollars. There has been nothing like it, ever.

For more, see here, here and here.

The Great Enrichment

This page shows the trend of per-capita daily income in the United Kingdom since 1700.

Great
Enrichment

The Story of the Great Enrichment

Chart E.01: Per Capita Income Since 1800

Back in 1700, the per capita income per day in the United Kingdom was just under £3 per person per day. In 2005 pounds. That includes everyone, workers, housewives, babies, and the elderly. By 2020, using projected population and GDP forecasts, the daily per-capita income should be just over £80 per person per day. So in 220 years, the real income of the average person in the United Kingdom will be over 27 times higher than back in 1800.

Notice the most notable notches in the curve in Fig E.01. They occur at the Great Depression in the 1930s and World War II.

Chart E.02: Per Capita Income in Log Scale

But the exponential curve in Fig E.01 does not give us the growth rate. To do that we need a logarithmic curve. In a log curve, a constant growth rate in per capita income would appear as a straight line. You can see that in the log chart in Fig E.02 the growth rate starts out negative, with the per-capita income dropping from £2.9 per day in 1700 to £2.5 by the 1750s. Then it increases a little before flattening out until Britain won the Napoleonic Wars at the Battle of Waterloo.

Only then does the UK experience a solid and consistent growth rate in the 1820s that lasts until a flat period in the 1870s, followed by resumed, if slower growth, right through until the Great Depression of the 1930s. Then per-capita growth starts a new ascent that lasts for decades after World War II. The slow growth since the financial troubles of 2008 is pretty clear. We may hope that it resumes its upward trend.

You can compare the British experience of the Great Enrichment with the rather similar experience in the United States here.

The Global Great Enrichment

Chart E.03: Global Per Capita Income in Linear Scale

Chart E.03 shows the UK Great Enrichment against the other great nations of the world. You can see that in the 1820s countries like Germany, Russia, India, China, and Japan were essentially agricultural with an income of about $600 per capita per year in 1990 dollars. But each of these nations eventually began a takeoff into Enrichment. Notice the dips; each of these represents an episode of unimaginable human misery.

Chart E.04: Global Per Capita Income in Log Scale

Data from Table E.04: GDP per capita in selected countries, 1820-2010 in Bolt, jutta, Marcel Timmer and Jan Luiten van Zanden (2014), “GDP per capita since 1820”, in Jan Luiten van Zanden, et al. (eds.), How Was Life?: Global Well-being since 1820, OECD Publishing. link

Data since 2010 from international data series at St. Louis FRED.

Analysis

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But What Does It Mean?

The great question of the modern era is: what did it? How did human society transform itself so remarkably from the agricultural society that obtained for the last ten thousand years into the modern industrial and post-industrial world of today? There are, of course, many answers on offer. Here are just a few.

The answer from the American economist Deirdre McCloskey is “trade-tested betterment.” She means by this the process of middle-class people offering onto the market ideas, products, and services for improvement in physical and social living standards, and then abiding by the verdict of the market. McCloskey develops this idea in her “Bourgeois Era” books.

Another answer is “capital accumulation,” most recently argued in Capital in the Twenty First Century by the French Thomas Piketty. This represents modern prosperity as the result of people saving their income and thus accumulating capital.

Many people believe that it was the Enlightenment, a new birth of reason that flowered in the 17th century and replaced in human minds the superstitions of the Medieval Era.

In his book The Protestant Ethic and the Spirit of Capitalism, Max Weber famously argued that the Protestant ethic that emerged out of the Reformation encouraged people to engage in work in the secular world and accumulate wealth for investment.

In the narrative established by Marxism, the welfare of the working class depends on revolution to break the natural tendency of capitalism to lead to the immiseration and exploitation of the workers and the petit-bourgeoisie as market competition squeezes capitalist profits and thus the wages of the workers.

In the narrative of social democracy the welfare of the workers depends upon the rise of a political party to enact beneficial social legislation to protect workers from the laisser faire of individualism, so that, in the words of Fabian Essays in Socialism, “anything whatever in the nature of laisser faire goes by the board.”

In the environmentalist narrative our modern prosperity rides on the back of a reckless use of non-renewable fossil fuels that has despoiled the Earth and risks a catastrophic anthropogenic global warming from a buildup of carbon dioxide in the atmosphere.

In a technological narrative the Great Enrichment is the result of several technological revolutions, starting with steam power in the 19th century, the development of electric energy in the early 20th century, the internal combustion engine throughout the 20th century, and the electronics and information revolutions of the late 20th century.

Needless to say, there are many competing theories out there that attempt to explain our extraordinary age. It would probably be a good idea if we can come to some kind of loose agreement about What Did It.