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How societies prospered in the last 1,000 years

Appeared in the Calgary Herald
Authors:
Release Date: January 16, 2011
One thousand years ago, one-third of all babies died before their first birthday while those who made it past that marker could expect to live only 24 years, and with hunger and disease as their constant companion. Today, the average person lives to age 66 and in vastly improved health.

Such progress—uneven as it still is depending on one’s locale—came even as the world’s population rose 22-fold. That’s because per capita income increased 13-fold and the world economy grew nearly 300-fold during the past millennium. In other words, growth in real income outpaced even explosive population growth. That had tremendous knock-off benefits. For example, extra wealth made it possible to pay people to spend their life in a lab, this to study how to advance medical technology. That was and is of no small benefit to improving and lengthening our lives.

Such facts are courtesy of a 2001 book from the late Angus Maddison, a Dutch scholar on economic growth and development, who wrote a magnum opus for the OECD that looked at wealth creation dating back to A.D. 1000.  Professor Maddison’s findings, updated annually at the University of Groningen (www.ggdc.net), help us understand which societies prospered historically and why.

Maddison found that much of the world economy’s advances took place after 1820, though not exclusively. The Dutch, for example, prospered early in part because they “created a modern nation state which protected property rights of merchants and entrepreneurs, promoted secular education and promoted religious tolerance.”

Similarly, Britain had faster growth in per capita income in the 17th century when compared with other European countries. Credit an improvement in banking, fiscal institutions and in agriculture among other factors.

Scholars such as Maddison and others who study human progress find time and again that open trade, entrepreneurs, secure property rights, toleration, moderate taxation and limited and predictable government go a long way to helping everyone in a society prosper in a variety of ways. Such ingredients also provide the revenues necessary for governments to carry out essential functions.

But you’d never know such factors matter from reading some recent headlines that play up a supposed growing inequality between the rich and the rest of us. Some have gone so far as to assert such differences in income levels contribute to higher infant mortality, more crime and other maladies.

I’m the last person to defend privilege. Anyone who reads my work on corporate welfare or sports subsidies would know I relentlessly critique taxpayer subsidies to business; such transfers are not useful nor the point of taxation and redistribution. (I do heartily defend competition because it creates wealth and helps spread such wealth around.)

As for the inequality obsession of some, as if Canada in 2011 was 15th-century France or 17th-century Russia, consider the work of economist Chris Sarlo at the University of Nipissing, who precisely defines poverty and inequality: In 2009, Sarlo looked at two of the best measurements here: adult equivalent incomes and average equivalent consumption. (The former takes into account households of different sizes; the latter reveals how people may have government income or under-reported income.) Sarlo found inequality has barely budged in 35 years.

In addition, Canada has one of the highest levels of intergenerational mobility in the developed world. It is consistent with Scandinavian nations and trumps even Sweden. And Statistics Canada studies show that most of us who started with low incomes don’t stay poor.

Those who assert that an obvious fact—some earn more money than the rest of us—is then a cause of higher rates of sickness or crime, make a classic correlation-causation mistake.

According to that logic, even if prices stayed the same and the richest Canadians saw their income and wealth triple while the rest of us saw our incomes and wealth only double, social problems and pathologies would increase. It’s a ludicrous association. It simplifies complex reasons for poverty, crime, and sickness, important matters that ought to be soberly addressed.  

Thoughtful politicians such as John F. Kennedy and provincial governments like Saskatchewan’s former NDP government saw the value of the private sector. It’s why before each left office, they reduced taxes—not the only aspect of prosperity promotion to be sure, but a critical factor depending on pre-existing tax levels. They understood flourishing economies help combat poverty through the creation of opportunity. Such politicians are the mainstream political practitioners of what Maddison observed worked in the past 1,000 years, but especially during the past two centuries.


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