Part I –Economic Growth in the 19th and 20th Centuries

We shall start by looking at how much the economy has grown since capitalism took its first steps, i.e. when the so-called Industrial Revolution first got under way early in the 19th century.

The graph below shows how the overall economy¹ has grown since the 19th century, in order to get things into perspective – we start with a few dispersed data in 1820².

Graph 1

*Based on OECD figures, using Geary-Khamis measure for real dollars

By 1890, British and Indian GDPs were roughly equal (not shown in the graph above³) and they and the rest of Britain’s foreign territories were therefore far greater than the United States in terms of GDP⁴ (as well as in terms of land and population). India, “the jewel in the crown” of the British Empire –nothing approaches it in terms of GDP within Britain’s colonial and dominion territories in the 19th century, although Russia and China rival it in size. Meanwhile, Japan sought to catch up with Italy at the close of the 19th century. However, after 1870 US GDP, which had been lower than Britain’s in 1850, grew much faster than any other and by 1890 exceeded any other single country except China’s GDP⁵. The next largest was France, but it was growing as slowly as Britain, and Germany was outpacing it, especially towards the end of the 19th century.

Graph 2

*Based on OECD figures, using Geary-Khamis measure for real dollars

The 20th century was a far more volatile period than the 19th century, one in which abundance asserts itself in much faster growth-rates especially in the United States, whose economy outpaces all other countries in size. And around 1910 the United States became a net exporter of manufactures for the first time in its history⁶. However, after the Second World War, and especially from the 1960s, the GDP growth-rates of several countries begin to rival that of the United States, and China’s growth (and economic size), especially since the 1970s, stands out –it is now expected to overtake the US economy in size by about 2025⁷.

Graphs 1+2 (showing how GDP growth shifted up significantly during the 20th century)

*Based on OECD figures, using Geary-Khamis measure for real dollars

It is necessary to make something very clear here. Many people have adopted the view that economic growth has been exceeded by population growth. Nothing could be further from the truth. While it is true that the distribution of humanity’s growing abundance has been increasingly unequal (see Part 3 of Abundance, Poverty and Power, Section XI, Social Polarization, Notes 33, 34 and 35), official estimates of population and economic growth since the 19th century show that the second has grown far more rapidly than the first. The following data are based on Angus Maddison’s work:

Item	1820	1992	Growth
World population in millions	1068	5441	409%
World GDP (US$ 1990)	695	27995	3928%
Per capita GDP (US$ 1990)	651	5145	690%
World exports (US$ 1990)	7	3786	53,985%

World GDP grew nearly ten times as fast as world population over this period.

Taking the United States on its own, per capita GDP in international dollars was as follows:

Year	1820	1870	1900	1913	1950	1973	1992
Per capita GDP (US$)	1,287	2,457	4,096	5,307	9,573	16,607	21,558
Yr-on-yr growth	——	90.9%	66.71%	29.57%	80.38%	73.48%	29.81%

It can be seen from this that U.S. per capita GDP growth has been particularly great since the Second World War -bear in mind that the periods between the years 1950, 1973 and 1992 are shorter than the periods shown for the 19th century.

N.B. This is a continuing project. We welcome comments, corrections, suggestions, criticisms from readers.

NOTES

¹ Using Gross Domestic Product, a measure of a country’s total output each year, measured in real (i.e. inflation-adjusted) dollars.

² Thanks to Angus Maddison’s: “The World Economy, 1820-1992”, OECD.

³ According to the data Maddison uses, the UK’s GDP in that year was equivalent to US$ 143.477 billion, while India’s was US$ 142.525 billion.

⁴ America’s GDP in 1890 totaled US$ 214.966 billion.

⁵ Maddison estimates China’s GDP in 1890 at 233.517 billion. By 1900, China’s GDP was US$ 260.6 billion, and America had overtaken it, rising to US$ 312.855 billion.

⁶ Explaining America’s Surge in Manufactured Exports, 1890-1913” by Douglas A. Irwin, The Review of Economics and Statistics, May, 2003.

⁷ China is the world’s most populous nation, and is Asia’s fastest-growing major economy, with GDP growing at about 10% p.a. in 2003 and 2004. In 2005, China’s GDP probably became the 4th or 5th largest in the world –measured by purchasing power parity, China’s GDP was second only to the United States in 2004 (World Bank: World Development Indicators data base, 15th July, 2005). In 2005, China’s trade with the rest of the world exceeded US$ 1.4 trillion, making it the third largest trader in the world after the United States and Germany (International Herald Tribune, January 11th, 2006).