Economic growth is a miracle cure.
For the last 50 years real income per person in the United States has been growing at a rate of about 2.3% per year. Although that may not sound like such a big deal, that small increase adds up year after year. So much so that real incomes will actually double every 31 years. If we think of the average year for child birth as being close to age 31, then income will double for every generation.
Let's assume you are in an average income family earning about $50,000 a year. If your children also earn an average income, by the time they grow up and reach your age they will be earning $100,000 a year — and that's in current dollars. If your grandchildren follow the same trajectory, by the time they reach your age they will be earning $200,000. That's what Barrack Obama calls rich. Your great grandchildren will earn $400,000 — which is enough to put them in the top 1% of the income distribution, were they alive today!
Provided our descendants don't do dumb things and stop this miracle from continuing to produce its bounty, the future just gets better and better. As Stephen Landsberg has noted:
…[I]f that 2.3 percent growth rate continues, then in fewer than four hundred years, your descendants will earn about $1 million per day — a little less than Bill Gates's current income, but at least in the ballpark. I want to make clear that these are not some future inflation-ravaged dollars we're talking about; they're the equivalent of a million of today's dollars.
What about poverty? If we roughly define the poverty level as a family with 50% of the average income, then the poverty level for the great grandchildren of today's poor will be $200,000. In other words, if tomorrow's poor have a poverty level income they will be rich. And, of course, 400 years from now they will be fabulously wealthy.
Now here is something that may surprise you: The economic growth that you and I take for granted is in fact very rare. For almost all of the history of human existence, there was no growth at all.
Landsberg puts the beginning of the modern human race at about 100,000 years ago. If so, then for 99,800 of those years all of mankind was living at the subsistence level. People in the Middle Ages were living no better than people at the time of Ancient Rome. And people in Roman times were living no better than people were living 10,000 years earlier — before the agriculture revolution. Civilizations rose and fell; there were wars, technological innovations and even international trade.
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