The Graph of the Millennium

I’ve been belatedly reading through a number of “the year in graphs” collections that came out toward the end of the year. As a push back to the rather overwhelming pessimism that comes through from these graphs selected by top economists, I want to offer up what I think is the single graph that best captures the millennium to date, and it’s an unambiguously positive story:

Source (PDF).

The graph shows real growth for advanced and developing economies from 1980-2015. While the crisis obviously shows up here, what’s really striking is the structural break in developing country growth; after bouncing along at around 3 percent for the 1980s and 1990s, a rate too slow to close in on advanced economies, in the new millennium developing country growth is now up around 7 percent.

Now I don’t want to oversell it, but I honestly believe this is pretty much the best thing to happen to humanity in the aggregate since the Enlightenment and the Industrial Revolution… Today more people in the world live in economies that are experiencing the transformative effect of rapid, sustained catch-up growth than ever before. Throughout history most people in the world have been poor. Soon, for the first time ever, most people in the world will be middle class, allowing them significantly increased opportunities to build better lives for themselves and their children. While there’s a lot of (mostly bland) talk out there about the rise of the BRICs, etc etc, I don’t think this fact – and the remarkable success/progress it entails – has yet been fully appreciated.

Of course things could still go off the rails. But for the most part the sources of success in developing economies today run pretty deep – good demographics, the spread of capitalism, and improved governance, all of which serve to turn potential convergence into realized convergence – so I’m pretty optimistic. And of course this success will bring its own challenges, particularly climate change and other resource pressures, which are politically difficult – through importantly by no means economically impossible – to tackle. (And whatever solution you happen to favor for these challenges, it’s pretty difficult to argue that “keeping poor people poor” should be a part of it.)

So if the daily news coverage of the economy (like today’s rumors of further downgrades in Europe) is getting you down, just remind yourself: from a longer perspective, for the world economy as a whole, these really are the best of times.

(As a side note, I’m in the process of co-authoring a book on these themes, of which my half is mostly done while colleagues drag their feet. But look out for it hopefully later this year…)