If we were to make a list of subjects ranked by the gap between the civilizational importance of the topic and the lack of serious literature devoted to it, historical acceleration of economic growth would be very near the top of the list. I wrote an article on the subject way back on January 29, 2006 (version 1.0), but now it is time for a much more substantial treatise.
To whet your appetite, read the article "Are You Acceleration Aware?", which is the critical piece of any attempt at Futurism.
In the modern age, we take for granted that the US will grow at 3.5% a year, and that the world economy grows at 4% to 4.5% a year. However, these are numbers that were unheard of in the 19th century, during which World GDP grew under 2% a year. Prior to the 19th century, annual World GDP growth was so little that changes from one generation to the next were virtually zero. Brad Delong has some data on World GDP from prehistoric times until 2000 AD.
If I put historical per-capita GDP through 2000 in a logarithmic timescale, we see the following :
The theme of acceleration readily presents itself here, and even disruptive events like the Greagt Depression still do not cause more than a temporary deviation from the long-term trendline. A different representation of the data would be to notice the shrinking intervals that it takes for per-capita World GDP to double.
10000 BC to 1500 : 11500 years without doubling
1500 to 1830 : 330 years
1830 to 1880 : 50 years
1880 to 1915 : 35 years
1915 to 1951 : 36 years (Great Depression and World Wars in this period)
1951 to 1975 : 24 years (recovery to trendline)
1975 to 2003 : 28 years
2003 to 2024-2027? : 21-24 years (on current trends)
This not only further reveals acceleration, but also indicates that massively disruptive world events still result in merely temporary deviations from the long-term trendline.
Additionally, we can take the more granular IMF data of recent World GDP growth, and plot a trendline on it. Both nominal and PPP growth rates are available, and are diverging due to the increasing size and growth rates of India and China. Unfortunately, the IMF data only goes back to 1980, and 28 years are not enough to plot an ideal trendline, but nonetheless, the upward slope is distinct, and recessions (which still do not push World GDP growth into negative territory) are invariably followed by steep recoveries.
It is also important to note that the standard deviation of the IMF data for World GDP growth rates is about 1% a year, for both the nominal and PPP series (1.07% and 1.14% respectively, to be exact). The rules of standard deviations dictate that 68% of the time, a data point will be within one standard deviation of the mean, 95% will be between two standard deviations, and 99.7% will be within three.
Thus, in a simple example, if the World GDP growth trendline is currently at 4% a year, there is a 68% chance that the next year will be between 3% and 5%, and there is only a 0.3% chance that the next year will be below 1% or above 7% growth. This means that a worldwide recession with a year of negative growth is extremely improbable, just as improbable as a year with stupendous 8% growth. There is not a single year in the 1980-2007 IMF data with negative GDP growth, and virtually none under 1% growth.
Pessimists like to say that "the Great Depression will happen again", but not only was the Great Depression at a time when the trendline was at a lower annual growth rate than today, but the Great Depression comprised of 6 years of GDP falling below the trendline, simply because it followed a period of many years where GDP was substantially above the trendline. Furthermore, this was for US GDP. World GDP's deviations may have been even less severe, as some nations, such as France, Japan, and China, were left relatively unscathed by the Great Depression.
Now, what happens if we project these trendlines through the 21st century? The dotted red line represents the median trend assuming that nominal and PPP growth rates converge at some intermediate level.
I can apply this trendline for World GDP growth, make assumptions of total world population to arrive at per capita World GDP growth, and add it back to the first graph. The assumed growth rates, by decade, in per capita income are :
2007-2020 : 3.5%
2020-2030 : 3.5-4.0%
2030-2040 : 4.0-5.0%
2040-2050 : 5.0-6.0%
This leads to estimates for per-capita GDP at PPP, in 2007 dollars, to be :
2007 : $10,000
2020 : $15,155
2030 : $22,400
2040 : $32,600 - $36,000
2050 : $53,200 - $64,500
Which, when plotted, provides the following :
Or, when a longer view is taken, in terms of logarithmic periods going back from the year 2050, we see :
Needless to say, this degree of acceleration in economic growth affects nearly every possible facet of the world in the 21st century. From a continually rising stock market to the proliferation of millionaires to the rapid upliftment of all metrics of human development, massive abundance is a certainty. The inevitable derivatives of wealth, such as the spread of democracy, the upliftment in the sophistication of human psychology, and thus a corresponding drop in warfare, will soon follow. Resolving current problems, such as reducing poverty in developing regions, to funding sophisticated healthcare technologies, to increasing literacy, to funding ambitious space exploration, are merely just a matter of time.
Inevitably, even the average citizen in the mid-21st century will have access to many material and psychological opportunities that even the wealthiest of today do not have. Turn that frown upside down, for you are in for an exciting time as you ride the tsunami of prosperity that is about to immerse you.
This article is the inaugural entry into a new category here at The Futurist titled "Core Articles". These are the articles which are designed to form the cornerstone of a comprehensive understanding of the future, and are suggested reading for anyone interested in the subject. Additional articles will be upgraded to "Core" status as augmentations to them accumulate.
Related :
The Stock Market is Exponentially Accelerating
The Psychology of Economic Progress
I just wish we were further along the curve. Having to wait so long for "takeoff" is aggravating.
Posted by: Saul Wall | July 13, 2007 at 10:15 AM
BTW, I just notices a typo on the "intervals that it takes for per-capita World GDP to double."
The forth line says: "1980 to 1915 : 35 years" instead of "1880..."
Other than that, it's a fine post.
Posted by: Saul Wall | July 13, 2007 at 10:19 AM
Doom and gloom does happen once and a while. History is littered with it: the Dark Ages, 100 year wars, end of civilizations, switching of the magnetic poles and depressions.
You can deny all you want.
The last empire to claim that the march of history would lead to paradise was the communist USSR.
Posted by: jeffolie | July 13, 2007 at 11:41 AM
You can deny all you want.
And after each disaster you mention, the economic growth has gotten right back to the trendline. The data supports that, without exception.
Even the Great Depression was erased by a return to the trendline. The dot-com bubble also exhibited the same.
It is you who are in denial that the economy always returns to the trendline.
Posted by: The Futurist | July 13, 2007 at 12:02 PM
Hmmmm.
Dark Ages lasted a long time.
End of civilizations last a long time.
Global warming may last a long time.
If a diaster happens (and one always comes along eventually), then the economy always returns to the trendline may take a long time.
Posted by: jeffolie | July 13, 2007 at 03:05 PM
In the last 150 years, no world event caused World GDP growth to be below the trendline for more than 6 years. The Great Depression, WW2, Dot-Com bubble, 1970s, etc. None were below the trendline more than 6 years.
No year since 1973 has had negative GDP growth. Very few have had even under 2% GDP growth, due to that being too many standard deviations from the mean.
A typical major slowdown today would comprise of 2-3 years of 1% growth, but is still growth. It would be followed by 2-3 years of 6%+ growth just to catch up to the trendline (think about dot-com bust and the subsequent 2003-present bull market).
Consider standard deviations and how often there is a statistical chance of being 1, 2, or 3 standard deviations from the mean.
Posted by: The Futurist | July 13, 2007 at 04:49 PM
The Futurist : Good post. BTW, don't accept that trash-talk about the so-called Dark Ages. I used to buy into that as well, but historical research reveals that the collapse (admittedly not pretty) of the classical world is what led to our modern world -- a gradual revolution that took over 1000 years to unfold.
Posted by: Peter Saint-Andre | July 13, 2007 at 07:54 PM
jeffolie,
Perhaps you should tell me, that if the trendline of World GDP Growth is about 4%, and the standard deviation for a year is 1%, then...
Q1) What is the probability that a given year will have negative GDP growth?
Q2) What is the probability of a 10-year stretch of negative GDP growth?
A1) 0.007%. This is also the probability of a year with high 8% growth
A2) Less than 10E-42.
Posted by: The Futurist | July 15, 2007 at 04:42 PM
Every generation has its naysayers predicting the end of human civlization due to lack of resources, climate change, end of the world type wars but the facts are we are great at sticking around and in the last century we have gotten amazing at it. Conflict and hardship only makes us tougher and better at doing our thing. Go human genius!
Posted by: HarshV | July 16, 2007 at 10:00 AM
Here in California, there is a huge earthquake on average every 300 years. We are in the window now. You would be very surprised how few have earthquake insurance. The mispreception is that we have not had one of those for the last hundred years so they must be a thing of the past.
You remind me of these, everything will be fine, I don't need stinking insurance idiots. The Japaneese built their biggest nuclear power plant new an earthquake fault and today an earthquake has leaked radioactive water, idiots.
Posted by: jeffolie | July 16, 2007 at 04:27 PM
jeffolie,
One has nothing to do with another.
Plus, even an Earthquake would not slow GDP growth in California (let alone the world) for more than 1 year. The Tsunami in Asia did not slow GDP growth of Indonesia, Thailand, Malaysia, etc.
You did not answer my two questions. If you are going to dispute the data, you will need to provide a rational, quantitative contrarian analysis, not just some "I want to be pessimistic, so there!" sentence.
For example, you said 18 months ago that the housing bubble would bring on a new Great Depression. I said that the housing bubble (which itself I do not dispute), will NOT drag down the broader US economy, let alone the world economy. Who turned out to be right?
To repeat :
Q1) What is the probability that a given year will have negative GDP growth?
Q2) What is the probability of a 10-year stretch of negative GDP growth?
You need to quantify your pessimism.
Posted by: The Futurist | July 16, 2007 at 04:36 PM
Btw, excellent post Futurist. I have more concrete ammo to fight the pessemism. Technology + rise and spread of Industrial Capitalism = sweet leisurely life for all humans
Posted by: HarshV | July 17, 2007 at 03:56 AM
The housing bust which you just now acknowlege is real. The peak in housing prices was in the summer of 2005. The bust is not over and may yet bring a depression. Over 950,000 houses were foreclosed in the first 6 months of 2007. About 100 subprime lenders have gone out of business.
The corrupt financial community has been covering up the decline in mortgage backed bonds. S&P and Moody's downgraded only about 1% of these bonds last week. The ABX derivatives on these have now declined 55% and some hedge funds have gone bust after recognizing Billions in losses because of the downgrading of just 1% of these bonds.
House prices declined for about 20 years in Japan and it still has deflation. Be patient, deflation takes time to work its black magic. Most depressions have been deflationary but some inflationary.
I need not dabble with your data. I have no knowlege of the the faulty assumptions you used to build the data.
Quantifying pessimism is stupid. It reminds me of the math of "average". If you put one hand in boiling water and the other in icy water, then on "average" you are feeling just great. The same "average" is used for "average" rainfall, average family, etc.
You may stay in your optimistic view and deny that bad events occur.
Posted by: jeffolie | July 17, 2007 at 07:32 AM
I love the article. Must take care of body so I can witness this rapid change!
Posted by: NRice | July 17, 2007 at 11:06 AM
The housing bust which you just now acknowlege is real.
Wrong. I have been talking about the housing bubble since April 2006, a thread you also commented on. Don't rewrite history.
Also, I said it would not cause a recession in the broader economy, and it has not, and it will not. After 15 months, I have been proven right.
I have no knowlege of the the faulty assumptions you used to build the data.
Then how do you know they are faulty? Failure to provide specifics erodes the credibility your claims. Anyway, all data is from declared, provided sources like the IMF.
Come on. I know you are not a Leftist. But this is what those anti-US leftists do in the political debates when they can't debate on facts. I don't want you to become like them.
It reminds me of the math of "average".
You are entirely avoiding the subject of standard deviations , and what are the probabilities of one datapoint being 1, 2, or 3 standard deviations from the mean. You have to show me that you are taking standard deviations into account, for me to take your subjective pessimism seriously.
You may stay in your optimistic view and deny that bad events occur.
All bad events, whether the GD, the 1970s, dot-com bust, Asian financial crisis, 2004 Tsunami, etc. are all followed by a recovery that gets the trendline right back to where it would have been without the event. You have yet to provide a single example otherwise.
Never in the last 200 years has GDP been below the trendline for more than 6 years.
There has been no year of negative GDP growth for the world econony since 1973.
I challenge you to prove either of these two statements wrong.
Posted by: The Futurist | July 17, 2007 at 12:59 PM
"Also, I said it would not cause a recession in the broader economy, and it has not, and it will not. After 15 months, I have been proven right, and you have been proven wrong."
"I challenge you to prove either of these two statements wrong."
Be patient, the bad times are coming.
Posted by: jeffolie | July 17, 2007 at 03:15 PM
jeffolie,
We'll see. You said that 18 months ago as well. Let us review in another 6 months.
In the meantime, always make note of where we are, relative to the trendline.
Posted by: The Futurist | July 17, 2007 at 07:16 PM
Miami Florida property crash: You may never see something like this again in your lifetime.
One of the ugliest housing / property crashes in the history of the US is happening in condo-crazed Miami Florida. As this Bloomberg headline story points out, in the middle of the crash, builders are still building. And there are no buyers.
Fuel to the fire my friends. Fuel to the fire. Summed up nicely with this realtor quote: ``This is dumbfounding to me,'' Rosser said. ``It's a building boom in the middle of a housing bust.''
Anyone want to guess the percent downfall from peak to trough? 20%? 30%? 50%? 80%?
When the dust settles, this dot-condo flameout will be a crash for the ages. Miami may see the worst fall - yes, even bigger than Vegas or Phoenix.
Well done Miami. Well done.
Miami Condo Glut Pushes Florida's Economy to Brink of Recession
July 20 (Bloomberg) -- In the middle of the biggest glut of condominiums in more than 30 years, Miami developers keep on building.
The oversupply will force prices down as much as 30 percent, the worst decline since the 1970s, and help push Florida's economy into recession as early as October, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody's Economy.com, who owns a home in Vero Beach, Florida.
``Florida is the epicenter for all the problems that exist in the housing industry,'' said Lewis Goodkin, president of Goodkin Consulting Corp. and a property adviser in Miami for the past 30 years, who also foresees a recession. ``The problems we have now are unprecedented and a lot of people will get burnt.''
Thirty-seven new high-rise condos and 20,000 new units are being built in Miami's 1,040-acre downtown, where sales fell almost 50 percent in May, according to the Florida Association of Realtors. The new units will join the 22,924 existing condos in Miami-Dade County that were for sale in April, according to Jack McCabe, chief executive officer of McCabe Research & Consulting LLC in Deerfield Beach, Florida. That's the most unsold units since McCabe began tracking sales in 2002.
While the housing industry is responsible for 10.6 percent of the nation's jobs, in Florida it accounts for 20 percent, Zandi said. Florida construction jobs fell 2.9 percent in May to 626,200 from the peak in June 2006, according to the U.S. Bureau of Labor Statistics.
``All those jobs are going away now, and we're seeing the trickle-down effect in declining sales in big-box retailers and home-furnishing manufacturers,'' McCabe said. ``Florida is headed to a recession.''
``The market is as close to a depression as Miami has seen in 30 years,'' Eichner said. ``There's a gargantuan supply of homes and the overwhelming preponderance were built for speculators, not for people who are living there.''
As much as half of those putting down deposits for Miami condos are speculators looking to flip units, or sell them quickly for a profit without living in them, said McCabe of McCabe Research.
With sale prices falling, McCabe said he expects up to 50 percent of them to walk away from their deposits in the next 18 months rather than complete the sales.
Many ``flippers'' closed on their units and now can't sell them, said Michael Cannon of Integra Realty Resources-Miami Inc., leaving completed condo towers with floors of dark windows and empty balconies.
The skyline of Miami is visible from Key Biscayne, the barrier island where John Rosser lives. Some nights the real estate broker scans the new buildings and sees more dark windows than lighted.
``This is dumbfounding to me,'' Rosser said. ``It's a building boom in the middle of a housing bust.''
http://housingpanic.blogspot.com/
Posted by: jeffolie | July 20, 2007 at 10:13 AM
jeffolie,
What's your point? The Dow reached 14,000 for the first time yesterday, and that is a far broader measure than condos in one city.
The housing bubble will not cause a recession in the total US economy, much less the world economy (the subject of this article). You have provided nothing to support the contrary.
Posted by: The Futurist | July 20, 2007 at 12:19 PM
So let me see if I get this. The effect of the deflating of the housing bubble is to provide lower cost housing for the solvent (the large majority of US citizens) and of course this is bad.
Why?
Even in a zero sum economy things like the crash of housing prices mean that the losers are helping the winners.
And we don't have a zero sum economy.
Posted by: M. Simon | May 14, 2008 at 06:03 PM
"Thus, in a simple example, if the World GDP growth trendline is currently at 4% a year, there is a 68% chance that the next year will be between 3% and 5%, and there is only a 0.3% chance that the next year will be below 1% or above 7% growth. This means that a worldwide recession with a year of negative growth is extremely improbable, just as improbable as a year with stupendous 8% growth."
That's a basic error. The standard deviation is wrt the accuracy of the measured data points. The trend-line is simply a statistical trend over the measured data points, it tells you precisely nothing about what will happen in the future - to apply the standard deviation to predictions about future events is a category error.
It's sort of funny to see such an apparently complex debate springing from such a glaring error.
Posted by: chekov | October 13, 2008 at 02:52 PM
How different the world looks in 2012 in the midst of the global economic crisis! The Bubble has burst.
I note that the Delong website you refer to has disappeared from the internet entirely.
I think this demonstrates the flaws in Neoclassical economics more clearly than any theoretical argument.
Posted by: Jayarava | August 18, 2012 at 02:17 AM
Javarava,
Not really. The same exponential growth has continued on a worldwide basis (mostly by China).
Posted by: The Futurist | August 18, 2012 at 08:30 PM
I look forward to be part of the process - as long as possible. Comparing my grandfathers experiences of change to what is ahead of us, makes it even more exciting.
Posted by: Stesch1967 | March 05, 2013 at 05:19 PM
I would like to get permission to republish your graph from this article: 'World GDP per Capita, 2007 Dollar'
Where should I send the request?
Thanks.
Posted by: Helen Bartlett | July 17, 2016 at 11:45 AM
Hi Helen,
Permission granted. But this article is old. You will really like my content in the associated website, which is more advanced and more recent :
http://atom.singularity2050.com/
This chapter is about accelerating economic growth :
http://atom.singularity2050.com/2-the-exponential-trendline-of-economic-growth.html
Posted by: Kartik Gada | July 17, 2016 at 03:39 PM
In 2003 GDP was $53 trillion. In 2019 it was $87 trillion. That's $2 trillion per year, assuming no acceleration. So it should take...9 more years to reach $106 trillion. So it will have taken around...25 years for this latest doubling. Probably a tad less Maybe 23-24 years.
So your prediction (21-24 years) looks like it is going to be spot on. That prediction was made 12 years ago.
And for those worried about COVID19 - don't. We will just grow faster, later. We always revert to trend.
Revisiting these old posts is illuminating - it shows that many aspects of the future are predictable, and maybe even inevitable.
Posted by: Geoman | April 28, 2020 at 05:28 PM
Geoman,
All true. But note that since this time, I have come to the conclusion that asset prices (equities in particular) are a more accurate measure of economic growth than GDP (and certainly 'real' GDP), for reasons we have discussed (and are in Chapter 2 of the ATOM).
In an advanced economy (particularly with a high average age), asset prices can decouple from GDP growth, and thus rising prosperity can exist amidst low GDP growth rates.
Asset prices also represent inequality, entrepreneurship, and central bank QE more accurately than GDP. Lastly, GDP can be propped up by deficit spending, but asset prices cannot beyond the short term.
Posted by: Kartik Gada | April 28, 2020 at 07:02 PM