Executive summary

Are we better off than our ancestors? Did quality of life improve over historical times? And, if so, did the tide of progress lift all boats? The Industrial Revolution was a critical break in human history that reshaped societies and initiated a new era of economic growth. According to the international estimates of Gross Domestic Product (GDP) produced by Simon Kuznets, Angus Maddison and their followers, material living standards have increased substantially since the adaptation of the steam engine and other path-breaking techniques that truly reshaped the world. The latest historical estimates of GDP presented in this book show that per capita GDP in the world economy expanded 13-fold between 1820 and 2016. The average human now is undoubtedly much richer than her or his counterpart two centuries ago.

However, GDP per capita provides an incomplete picture of the way societies evolve. Two limitations stand out. First, GDP accounts for the market value of goods and services produced in an economy. It captures the material aspect of human experience, but not other aspects essential for quality of life such as their health, skills or happiness. Moreover, although in poor societies, any increase in the availability of material goods is directly beneficial to the inhabitants’ living conditions, in rich countries the relationship between material abundance and all-round prosperity is less clear. These and other concerns have long been voiced by economists and other social scientists. The “Beyond GDP” initiative aims to complement the picture based on GDP with a range of other well-being indicators such as poverty, resource depletion, health and quality of life. The How Was Life? report published by the OECD in 2014 was a first step towards building a more holistic picture of the global economy in the past 200 years, by presenting evidence on secular changes in educational attainment, personal security and health status, among others (van Zanden et al.[1]). This book continues this task by presenting historical evidence on other well-being dimensions such as working time and more.

The second limitation of GDP per capita as an overarching measure of development is that it represents the economic output available to the “average” citizen. It does not account for how that output is distributed within the population nor does it indicate how representative the identified average is for the total population. The issue of inequality has always been at the core of political economy, and has featured prominently in the public debate thanks to the works of, among others, Joseph Stiglitz, Angus Deaton, Thomas Piketty and Branko Milanović. Inequality can be describe either between or within countries. With reference to the former, while GDP per capita has increased everywhere around the world since 1820, some societies benefited from this expansion more than others. In particular, the 19th century has been described as the period of the “Great Divergence” between prosperous Western countries and the rest of the global economy. Much less is known about inequality within countries. While the How Was Life? previous volume presented evidence on historical income inequality within countries, this book moves “Beyond Income” to account for disparities in a range of well-being aspects within countries.

Economic historians and social scientists have been producing estimates of inequality in non-material dimensions of well-being for some years but, so far, these estimates have not been compared systematically over time and space. This report aims to fill this gap. It presents evidence on long-term trends in inequality in other dimensions of well-being, such as longevity and educational attainment across the global economy since 1820, providing estimates for a large number of countries. Where applicable, trends are charted for 25 countries, eight world regions and the world economy as a whole. This report presents, collects, harmonises and documents the estimates developed through the Clio-Infra and Maddison Projects, presenting the data, discussing sources and their limitations, providing an overview of trends and suggesting avenues for further research.

The report opens with new estimates of GDP per capita that form the backdrop of the analysis. Second, it presents two new indicators of average well-being in a country, namely, the average working week in manufacturing and social transfers. Third, it presents estimates of three types of within-country inequality, namely, disparities in wealth, in life expectancy and in educational attainment, as well as gender inequality. Lastly, the report presents new measures of extreme poverty and biodiversity loss.

This book provides evidence of historical trends in nine different dimensions of well-being and inequality. For some of these dimensions, the statistical correlation with the increase in the GDP per capita is high. The global average GDP per capita increased by a factor of 13 between the 1820s and the 2010s; in other terms, as the total population increased seven-fold, total GDP went up by a factor of 90. But this growth was spread very unevenly over the globe. Until about 1950, the rich countries grew faster than the poor ones, resulting in a huge increase in international income disparities. This does not mean that the poor countries did not grow economically. In 1950, the global extreme poverty rate, based on the inability to purchase a near-subsistence basket, was 53%. By 1990, the rate had dropped to 31%. Broadly speaking, economic expansion, especially in rich countries, also led to a better work-and-life balance. Amongst OECD countries, the length of the working week in manufacturing has declined dramatically since the 19th century. Full-time workers in manufacturing worked between 60-90 hours per week in the 19th century. Today they work roughly 40 hours. Economic expansion had environmental costs, however. Biodiversity has declined at least since 1500, and probably for the better part of the Holocene. A case study reconstructing biodiversity change in the Netherlands from 1900 onwards shows a long-term decline in biodiversity until 1970, followed by a partial recovery since then.

Economic expansion was associated with changes in inequality. In general, within-country wealth inequality increased in the 19th century, and continued to grow during the first decade of the 20th century. In the West, this tendency was stopped by World War I and II and by the troubled times in-between. However, there is no clear correlation between the level of GDP per capita and wealth inequality. This could partly reflect the development of the “welfare state”. Public spending on social transfers was tiny or non-existent until political developments assigned more and more of these tasks to the government in the last hundred years. In 1900, no national government transferred more than 3% of the country’s GDP via social programmes. This has increased gradually in most countries, rising to levels of between 15 and 30% today. Provision of public goods by the government links up with within-country inequality of educational achievement and life expectancy, which fell significantly over the 19th and 20th centuries.

A composite measure combining the average well-being measures of each country presented in the current and previous volumes shows that adding the new measures included in this book does not fundamentally change the global picture drawn in 2014: average well-being increased significantly throughout the 1820-2010 period, and these gains were more evenly distributed across countries than in the case of GDP per capita. When considering inequalities, the long-term declines of inequality in educational attainment and life expectancy as well as of gender inequality mean that this composite measure declined continuously in many parts of the world since 1820, more than offsetting episodes of rising income inequality. The 20th century therefore featured both large improvements of average levels of well-being and massive reductions in well-being inequality in the areas of life expectancy, educational attainment and gender relations. These results show the importance of trying to get the full picture of inequality within societies.

Overall, this book collects, summarises and critically discusses our current knowledge on long-term trends in global well-being and inequality over the past two centuries. While it provides a better view than one based on GDP per capita and income inequality alone, weak spots remain in our knowledge, in particular, concerning developments in Africa before 1950 and in major Asian countries in the 19th century. It is hoped that this book will stimulate further research into these areas.

References

[3] Stiglitz, J., J. Fitoussi and M. Durand (2018), Beyond GDP: Measuring What Counts for Economic and Social Performance, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264307292-en.

[4] Stiglitz, J., J. Fitoussi and M. Durand (eds.) (2018), For Good Measure: Advancing Research on Well-being Metrics Beyond GDP, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264307278-en.

[2] Stiglitz, J., A. Sen and J. Fitoussi (2009), Report by the Commission on the Measurement of Economic Performance and Social Progress, https://www.economie.gouv.fr/files/finances/presse/dossiers_de_presse/090914mesure_perf_eco_progres_social/synthese_ang.pdf (accessed on 4 February 2021).

[1] van Zanden, J. et al. (eds.) (2014), How Was Life?: Global Well-being since 1820, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264214262-en.

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