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What is the Great Enrichment?

In the last 200 years, according to economist Deirdre McCloskey, per capita income in the capitalist countries has grown from $1-3 per person per day to over $100 per person per day, in real dollars. There has been nothing like it, ever.

For more, see here, here and here.

The Great Enrichment

 

This page shows the trend of per-capita daily income in the United States since 1800.

The Story of the Great Enrichment

Chart E.01: Per Capita Income Since 1800

Chart E.02: Per Capita Income in Log Scale

Back in 1800, the per capita income per day in the United States was just over $4 per person per day. In 2009 dollars. That includes everyone, workers, housewives, babies, old folks. By 2020, using projected population and GDP forecasts, the daily per-capita income should hit $150 per person per day. So in 220 years, the real income of the average person in the United States will be over 37 times higher than back in 1800.

Notice the most notable notches in the curve in Fig E.01. They occur at the Great Depression in the 1930s and the Great Recession in 2009-2010.

But the exponential curve in Fig E.01 does not give us the growth rate. To do that we need a logarithmic curve. In a log curve, a constant growth rate in per capita income would appear as a straight line. You can see that in the log chart in Fig E.02 the growth rate starts out pretty low, then starts a solid and consistent growth rate in the 1840s that lasts until the Crash of 1907. Then per-capita growth slows up until after the Great Depression and World War II. Then from 1950 to 2008 growth in per-capita income is pretty solid and consistent. The slow growth since the Great Recession is pretty clear. We may hope that it resumes its upward trend.

You can compare the US experience of the Great Enrichment with the rather similar experience in Great Britain here.

  Topics   *** Includes FY19 Budget numbers. ***

National
Debt
2017
Deficit
2017
Actual
Social
Security
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But What Does It Mean?

The great question of the modern era is: what did it? How did human society transform itself so remarkably from the agricultural society that obtained for the last ten thousand years into the modern industrial and post-industrial world of today? There are, of course, many answers on offer. Here are just a few.

The answer from Deirdre McCloskey is “trade-tested betterment.” She means by this the process of middle-class people offering onto the market ideas, products, and services for improvement in physical and social living standards, and then abiding by the verdict of the market. McCloskey develops this idea in her “Bourgeois Era” books.

Another answer is “capital accumulation,” most recently argued in Capital in the Twenty First Century by Thomas Piketty. This represents modern prosperity as the result of people saving their income and thus accumulating capital.

Many people believe that it was the Enlightenment, a new birth of reason that flowered in the 17th century and replaced in human minds the superstitions of the Medieval Era.

In his book The Protestant Ethic and the Spirit of Capitalism, Max Weber famously argued that the Protestant ethic that emerged out of the Reformation encouraged people to engage in work in the secular world and accumulate wealth for investment.

In the narrative established by Marxism, the welfare of the working class depends on revolution to break the natural tendency of capitalism to lead to the immiseration and exploitation of the workers and the petit-bourgeoisie as market competition squeezes capitalist profits and thus the wages of the workers.

In the narrative of social democracy the welfare of the workers depends upon the rise of an enlightened elite of politicians and experts to enact beneficial social legislation to protect workers from the unhampered action of the labor market.

In the environmentalist narrative our modern prosperity rides on the back of a reckless use of non-renewable fossil fuels that has despoiled the Earth and risks a catastrophic anthropogenic global warming from a buildup of carbon dioxide in the atmosphere.

In a technological narrative the Great Enrichment is the result of several technological revolutions, starting with steam power in the 19th century, the development of electric energy in the early 20th century, the internal combustion engine throughout the 20th century, and the electronics and information revolutions of the late 20th century.

Needless to say, there are many competing theories out there that attempt to explain our extraordinary age. It would probably be a good idea if we can come to some kind of loose agreement about What Did It.

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State Finances for FY2016

On May 11, 2017 the US Census Bureau released data on state finances for FY 2015 here, including spending and revenue for each individual state and for all states combined.

On April 10, 2018 we updated state and local spending and revenue data for FY2016 through FY2023 as follows:
  1. We replaced "guesstimatedstate spending and revenue data for FY2016 using the new FY2016 data from the Census Bureau.
  2. We replaced "guesstimatedlocal spending and revenue data for FY 2016 with estimates for each spending and revenue category using the trends in state finances between FY 2015 and FY 2016.
  3. We replaced "guesstimatedstate revenue data for FY 2017 with data from the Census Bureau's quarterly state tax summary here.
  4. We replaced "guesstimatedlocal revenue data for FY 2016 with estimates for each category using trends for each category of state revenue between FY 2015 and FY 2016.
  5. We replaced "guesstimated" state and local spending and revenue for FY 2017 thru FY2023 with new guesstimates based on the latest Census Bureau data for FY 2016 state finances and FY 2017 quarterly tax data.

State Finances for FY2016
Estimate vs. Actual

$ billionGuesstimateActual
Spending$1,708$1,707
Revenue$1,604$1,499

We expect the Census Bureau to release local spending and revenue data for FY 2016 not earlier than Summer 2018.

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