5/22/13 - 2.5 million years of economic history in a nutshell

In today's selection -- almost all of the increase in the world's per capita income -- an astonishing 37-fold increase -- has happened in the last 250 years:

"In terms of the total economic history of our species, the world of the [stone-tool-making hunter-gather tribe such as Brazil's] Yanomamö is the very, very recent past. If we use the appearance of the first tools as our starting point, it took about 2,485,000 years, or 99.4 percent, of our economic history to go from the first tools to the hunter-gatherer level of economic and social sophistication typified by the Yanomamö [see the chart below]. It then took only 0.6 percent of human history to leap from the $90 per capita ... economy of the Yanomamö, to the $36,000 per capita ... economy of [today's] New Yorkers.

"Zooming in for a more granular look into the past 15,000 years reveals something even more surprising. The economic journey between the hunter-gatherer world and the modern world was also very slow over most of the 15,000-year period, and then progress exploded in the last 250 years. According to data compiled by Berkeley economist J. Bradford DeLong, it took 12,000 years to inch from the $90 per-person hunter-gatherer economy to the roughly $150 per-person economy of the Ancient Greeks in 1000 BC. It wasn't until 1750 AD, when world gross domestic product (GDP) per person reached around $180, that the figure had finally managed to double from our hunter-gatherer days 15,000 years ago. Then in the mid-eighteenth century, something extraordinary happened -- world GDP per person increased 37-fold in an incredibly short 250 years to its current level of $6,600, with the richest societies, such as the New Yorkers, climbing well above that. Global wealth rocketed onto a nearly vertical curve that we are still climbing today.

"To summarize 2.5 million years of economic history in brief: for a very, very, very long time not much happened; then all of a sudden, all hell broke loose. It took 99.4 percent of economic history to reach the wealth levels of the Yanomamö, 0.59 percent to double that level by 1750, and then just 0.01 percent for global wealth to leap to the levels of the modern world. Another way to think of it is that over 97 percent of humanity's wealth was created in just the last 0.01 percent of our history. As the economic historian David Landes describes it, 'the Englishman of 1750 was closer in material things to Caesar's legionnaires than to his own great-grand-children.' "


Eric D. Beinhocker


The Origin of Wealth


Harvard Business Review Press


Copyright 2006, 2007 McKinsey & Company, Inc.


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