Our articles and data visualizations rely on work from many different people and organizations. When citing this entry, please also cite the underlying data sources. This entry can be cited as: Max Roser - "Economic Growth". Published online at OurWorldInData. More precisely, it is the monetary value of all goods and services produced within a country or region in a specific time period.
While the definition of GDP is straightforward, accurately measuring it is a surprisingly difficult undertaking. Moreover, any attempts to make comparisons over time and across borders are complicated by price, quality and currency differences. This article covers the basics of GDP data and highlights many of the pitfalls associated with intertemporal and spatial comparisons. From the long-term perspective of social history, we know that economic prosperity and lasting economic growth is a very recent achievement for humanity.
In this section we will look at this more recent time and will also study the inequality between different regions - both in respect to the unequal levels of prosperity today and the unequal economic starting points for leaving the poverty of the pre-growth past.
This entry shows that the current experience of economic growth is an absolute exception in the very long-run perspective of social history. The UK over the long run The UK is particularly interesting as it was the first economy that achieved sustained economic growth and thereby previously unimaginable prosperity for the majority of the population.
Economic history is a very simple story. It is a story that has only two parts: The first part is the very long time in which the average person was very poor and human societies achieved no economic growth to change this.
Incomes remained almost unchanged over a period of several centuries when compared to the increase in incomes over the last 2 centuries. Life too changed remarkably little. What people used as shelter, food, clothing, energy supply, their light source stayed very similar for a very long time. Almost all that ordinary people used and consumed in the 17th century would have been very familiar to people living a thousand or even a couple of thousand years earlier.
This means an average person in the UK today has a higher income in two weeks than an average person in the past had in an entire year. Since the total sum of incomes is the total sum of production this also means that the production of the average person in two weeks today is equivalent to the production of the average person in an entire year in the past. There is just one truly important event in the economic history of the world, the onset of economic growth.
This is the one transformation that changed everything. As this chart of total GDP in the England over seven centuries shows, the increase of the total output of the UK economy grew by even larger extent, because not only average incomes increased since the onset of the Industrial Revolution, but the number of people in the country increased as well.
The Malthusian trap The pre-growth economy was a zero-sum-game: Living standards were determined by the size of the population In the previous chart we saw that it was only after that living standards in the UK did start to increase for a sustained period. Before the modern era of economic growth the economy worked very differently.
Not technological progress, but the size of the population determined the standards of living. If you go back to the chart of GDP per capita in the England you see that early in the 14th century there was a substantial spike in the level of incomes.
Incomes increased by around a third in a period of just a few years. This is the effect that the plague — the Black Death — had on the incomes of the English. The plague killed almost half! The population declined from 8 million to 4. We even see it in the chart for the world population.
But those that survived the epidemic were materially much better off afterwards. The economy was a brutal zero-sum game and the death of your neighbour was to the benefit for those that did survive. This happened primarily because farmers now achieved an higher output. While farmers before the plague had to use agricultural land that was less suited for farming, after the population decline they could farm on the most productive areas of the island.
In the very long time in which humanity was trapped in the Malthusian economy it was births and deaths that determined incomes. More births, lower incomes. More deaths, higher incomes. We see this coupling of income and population in the chart below that plots the size of the population on the x-axis against the total output of the English economy top panel and against the income per person bottom panel.
Looking at the bottom panel we see the spike of incomes that was associated with the killing of half of the population in the Black Death. After this the population and the income per person stagnate until around It is only after that the English economy breaks out of the Malthusian Trap and that incomes are not determined by the size of the population anymore.
For the period after we see that both the population and the income per person are growing. The economy is not a zero-sum game anymore; economic growth made it a positive-sum game.
When Malthus raised the concerns about population growth in 1 he was wrong about his time and the future, but he was indeed right in his diagnosis of the dynamics of his past. The world before Malthus was Malthusian and population increases were associated with declining nutrition, declining health, and declining incomes. The world after Malthus became increasingly less Malthusian. What Malthus did not foresee was that the increasing output of the economy will decouple from the change of the population so that the output available for all will increase over a long period.
This decoupling of income and population is shown in the chart. Technological change in the pre-growth economy Technological innovation that increases productivity is the key to increased prosperity.
But there were technological breakthroughs before the 17th century. Windmills, irrigation technology, and also non-technical novelties especially the new crops from the New World.
Why did these not lead to sustained economic growth? What happened as a consequence of these innovations were indeed increases in productivity, and the output increases led to increased prosperity.
But only for a short time. Improvements in technology had a different effect in the Malthusian pre-growth economy. They raised living standards only temporarily and instead raised the size of the population permanently.
The economic historian Gregory Clark sums it up crisply: If this analysis of the pre-growth economy is true than we would expect to see a positive correlation between productivity and the density of the population. Ashraf and Galor 3 studied the Malthusian economy theoretically and empirically in a paper published in the American Economic Review. The chart below is taken from their publication and confirms the theoretical prediction for the pre-growth economies in the year Incomes were not flat - History saw several episodes of growth which were not sustained Throughout history there were several episodes in which certain economies achieved economic growth, but in contrast to the sustained growth since the Industrial Revolution these episodes were all short-lived.
What is new about modern times is that the growth of incomes lasted for a very long time — until today — and that this growth did not only increase the incomes in one economy, but instead spread to other economies as well. The origin of this transformation is North-Western Europe.
It was in England and Holland in the early 17th century where it became first possible to grow incomes over a sustained period of time. The chart shows this.
By incomes have doubled? GDP per capita in European economies 5 Rising output by industry The visualization below shows the rising output of the economy by industry. Each time-series is indexed to the year so that the focus here is on the change over time as all changes are relative to that year. The rising output of key industrial and service sectors is shown here. These reconstructions are arguably very uncertain. Here I have included one reconstruction of global GDP over the very long run: I have used recent data from the World Bank for the period from onward and for the historical estimates before I rely on the historical estimates constructed by the economic historian Angus Maddison.
What we learn from this chart is that on average the people of the past were many times poorer than we are today. Prosperity is a very recent achievement that distinguishes the last 10 or 20 generations from all of their ancestors. If we compare the economic prosperity of every region in with any earlier time we see that every single region is richer than ever before in its history. Though some regions are more productive than others, every region is doing better than ever before, much better.
We deal study this aspect in more detail in our entry on global income inequality. From the data that we have discussed previously, we know that with respect to economic growth all the action really just happened very recently. It is true that in the pre-growth era some people were very well off — but this was the tiny elite of the tribal leaders, pharaohs, kings and religious leaders.
The economic inequality in pre-modern societies was extremely high and the average person was living in conditions that we would call extreme poverty today. The destitution of the common man only changed with the onset of economic growth. The time when this change happened in various countries is depicted in the following graph.
Economic prosperity was only achieved over the last couple of hundred years. In fact, it was mostly achieved over the second half of the last hundred years. The rise of global average incomes — global GDP per capita — shows when the world economy has become a positive-sum-game. This made it possible that when people in one place became richer, other people in other places could become richer at the same time. The Maddison data with a single benchmark is similar to the World Bank data while the Maddison data with multiple benchmarks is less similar.
Economic growth at the technological frontier — growth in the USA The following chart shows economic growth in the USA adjusted for inflation. This means that the output per person in one year in the past was less than the output of the average person in two weeks today. It is remarkable how steady economic growth was over this very long period. From to GDP per person in the U. It is now covering more than countries and data is available from onwards. The database is produced by a group of researchers from around the world and published by the 'Groningen Growth and Development Centre' at the University of Groningen — the website is here.
The World Bank data in constant international-dollars is available from onwards.