Growth Miracles, Disasters, and Rates

Growth Miracles

• the US is one of the world’s wealthiest countries because it grew slowly but consistently for over 200 years
• from 1950 to 1970, Japan grew 8.5% per year
  • now it’s one of the richest countries in the world
• in 1950, South Korea had a GDP per capita that was about the same as that of Nigeria
  • from 1970 to 1990, it grew at a rate of 7.2% per year
  • today, South Korea is on par with many European economies
• Argentina had double the standard of living of Japan
  • Japan now doubles them today
  • have a standard of living 10 times higher than the one it had in 1950
  • Japan is the growth miracle
• Italy became fully integrated int European trade and took an increasingly active in Middle Eastern oil exploration and engineering development
  • had industrial growth rates of more than 8 percent per year

Growth Disasters

• Nigeria has really grown since 1950
  • it was poorer in 2005 than in 1974 when high oil prices briefly bumped up its per capita GDP
• in 1900, Argentina was one of the richest countries in the world, with GDP per capita almost as large as the US
  • by 1950, Argentina’s per capita GDP had fallen to half that of the US
  • by 2000, Argentina’s per capita GDP was less than 1/3 of that of the US

Summary

• most of the world is poor
• more than 1 billion people live on incomes of less than $3 per day
  • these people have greatly reduced prospects for health, happiness, and peace
• the good news:
  • despite being recent, economic growth has transformed the world
  • it has raised the standard of living of most people in developed nations many times above historical norms
  • understanding the wealth of nations is critical if we are to improve human conditions

A Primer on Growth Rates

• economic growth: measured as growth rate of real GDP per capita
• even slow growth, sustained over time, produces big differences in welath
• growth builds on top of growth through”compounding” or “exponential growth”

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