6 - Modern Breakthrough

Summary

By all measures an overwhelming majority of mankind lived at the margin of subsistence up until mid-nineteenth century. Around 1820 about 95 percent of the world population earned less than the equivalent of two dollars (of 1990) per day. More than four-fifths had to survive with just one dollar per day. Mean life expectancy was slightly above twenty-six years (Bourguignon and Morrisson 2002). Such a state of generalized poverty was embedded in an economy characterized by minimal technological progress that, whenever it happened, was quickly absorbed by faster population growth, leaving per capita incomes mostly unchanged (Clark 2007; Ashraf and Galor 2011).

The Industrial Revolution changed that state of affairs drastically. The per capita income of 1820 – slightly above $1,700 in Britain and around $1,200 in other northwestern European economies and in the United States – doubled over the following sixty years in the north Atlantic region. By the eve of World War II it had more than doubled again. In 2008 per capita income in advanced countries was about twenty times larger than in the early nineteenth century (Maddison 2010). Over the same period of time average height increased by ten to twelve centimeters. Life expectancy almost doubled – mainly as the result of a reduction of infant mortality and the elimination of contagious diseases (Fogel 1994). Income growth was accompanied by a relative process of social equalization. Primary school coverage expanded from less than 30 percent of the population in France and England (twice as much in Germany, Scandinavia, and the United States) to everyone (Morrisson and Murtin 2009). Economic inequality declined – particularly during the first three-fourths of the twentieth century. The fraction of wealth in the hands of the top percentile of the population fell from 60 to 30 percent in Great Britain between 1900 and 1970 (Piketty and Saez 2006). The share of income in the hands of the top one decile declined to below 35 percent in advanced economies in 1970 – although that secular trend experienced a partial reversal in most rich countries afterward.