20  BIS central bankers’ speeches  Chart 5: Capital accumulation in the UK since 1850 Capital per head, 2006 prices £  50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000  0  5,000  10,000  15,000  0 25,000  20,000  GDP per head, 2006 prices £ Source: Hills, Thomas and Dimsdale (2010). Chart 6: Capital accumulation across countries since 1980 Capital per head, 2005 prices $ 140,000 Japan 120,000 Germany 100,000  Italy  80,000 South Korea 60,000 India  US  China  40,000  UK  Urban China  0  5,000  20,000  10,000  15,000  20,000  25,000  30,000  35,000  40,000  0 45,000  GDP per head, 2005 prices $ Source: McKinsey Global Institute (2010). BIS central bankers’ speeches  21  Chart 7: Literacy rates in Western Europe Netherlands  Great Britain  Sweden  Germany  France  Italy  Literacy rate, percent 100 90 80 70 60 50 40 30 20 10  1400  1500  1600  1700  1800  1900  0  2000  Source: OurWorldinData.org, based on Buringh and Van Zanden (2009) and Broadberry and O’Rourke (2010). Chart 8: Average years of schooling of the population aged 15+ Percent  Developing economies  12  World  10  Advanced economies 8 6 4 2  1950  1960  1970  1980  1990  2000  2010  0  Source: Barro and Lee (2013).
These well-being measures suggest global living standards plateaued for the majority of the past 3000 years, before rocketing over the past 300. Prior to the Industrial Revolution, income was locked at close to subsistence levels. In line with Thomas Malthus’s predictions, they were sufficient to sustain the population, but no more. 16 For that reason, some have called this the Malthusian era. 17 If you think that’s sounds grim, the picture further back in history is, if anything, even less optimistic. Rather remarkably, estimates of global GDP have been constructed back to 1 million BC, the dawn of man. 18 Statistical agencies were thinly staffed back then, so these statistics need to be treated with an even greater than usual pinch of salt. Table 1 considers growth rates in per capita GDP and population over that longer sample. For much of the history of mankind, there was effectively no rise in either living standards or  13  Clark (2009). 14  For example, Clark (2009). 15  For example, Morris (2011). 16  Malthus (1798). 17  For example, Clark (2009). 18  DeLong (1998). BIS central bankers’ speeches  3  population. It is possible the most gradual of advances in living standards began tens of thousands of years ago, around the time modern man (homo sapiens) emerged and Neanderthal man (homo Neanderthalensis) disappeared. So the short history (the Golden era) and the long history (the Malthusian era) of growth could not be more different. Secular innovation followed a lengthy period of secular stagnation.