What does per capita gdp measure

what does per capita gdp measure

Mar 06, 2008

Charting Historical Global Per Capita GDP

Writing in his recent book Contours of the World Economy, 1-2030 AD: Essays in Macro-Economic History. Angus Madison, Professor of Economic Growth, makes these observations:

… From the year 1000 to 1820, growth was predominately extensive. Most of the GDP increase went to accommodate a four-fold increase in population. The advance in per capita income was a slow crawl – the world average increased by half over a period of eight centuries.

In the year 1000, the average infant could expect to live about 24 years. A third died in the firs year of life. Hunger and epidemic disease ravaged the survivors. By 1820, life expectation had risen to 36 years in the west, with only marginal improvement elsewhere.

After 1820, world development became much more dynamic. By 2003, income per head had risen nearly ten-fold, population six-fold. Per capita income rose 1.2 per cent a year: 24 times as fast as in 1000-8120. Population grew about 1 per cent a year: six times as fast as in 1000-1820. Life expectation increased to 76 years in the west and 63 in the rest of the world. (69)

Maddison would place global per capita income at about 400 International Dollars (a purchasing power parity (PPP) measure) for most societies in ancient history. Brad DeLong, another prominent economist who has done some work in this field, believes that Maddison’s work does not sufficiently account for technological innovations. He writes:

“A large proportion of our high standard of living today derives not just from our ability to more cheaply and productively manufacture the commodities of 1800, but from our ability to manufacture whole new types of commodities, some of which do a better job of meeting needs that we knew we had back in 1800, and some of which meet needs that were unimagined back in 1800.” (Source )

He places per capita income at about I$90 in ancient eras. Here

are Maddison’s and DeLong’s estimates plotted on the same graph showing estimates back to 10,000 BCE. (Maddison only presents data back to beginning of the Current Era.)

Worldgdp10000_2003_2

Whichever economist you choose, the vertical spike at the end of the chart is astonishing.  Slow steady improvements in technology, science, and economic standards in Europe sparked a major agricultural revolution about 1700. Those changes and improvements paved the way for the Industrial Revolution, which Maddison pegs as starting about 1820 in England, a few decades later than some historians might suggest. (While many inventions came into being in the late eighteenth century, Maddison believes noticeable economic impact can not be observed until around 1820.) Agricultural abundance, combined with rise of machine power, made it feasible for agricultural workers to leave the country for the factory jobs in the city. Here is a chart showing the changes from 1600-2003:

Worldgdp1600_2003_2

This economic growth has not been evenly spread but all regions of the world have benefited to some degree. Here is a chart showing eight regions of the world:

Worldgdpregion_3

Maddison’s book does a fascinating job of delineating the factors that have influenced the performance of these regions over the millennia. The least touched by recent growth is Africa, which showed signs of accelerating growth in the 1950-1980 era but has since stagnated and even declined in some locales. AIDs is an enormous factor, especially in sub-Saharan Africa, but so are unstable governments, disease, and a troubled history with economic development efforts. The former Soviet countries dipped in their economic status in the 1990s but many of them are now beginning to see economic growth.

The challenge of our age is how to nurture the emergence of dynamic and productive economies in struggling nations. The percentage of people living on less than $1 a day was 39% in 1970. Today it is 15-20% and falling. From the perspective of millennia, recent economic developments are just astounding.

Source: www.krusekronicle.com

Category: Bank

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