Everybody should be impressed when comparing the effects of the 18th-19th-century Industrial Revolution with the previous world depicted by, say, 15th-century poet François Villon. This world was one of dire and hopeless poverty for ordinary people, with few exceptions. Villon imagined that, if he had any money, he would make a bequest to “three naked little children” (trois petits enfants tout nus) who might not otherwise survive the winter, and to remark:

II n’est tresor que de vivre à son aise.
(The only treasure is to live comfortably.)

In the wake of the Enlightenment, the Industrial Revolution produced the Great Enrichment, realizing the dream of comfort and wealth for ordinary people, as illustrated on my chart below. The great increase in productivity benefited all industries, not only manufacturing.

My chart is built on the basis of long-term estimates of economic growth by the Maddison Project, which updates the pioneering work of Angus Maddison (1926-2010). The standard of living over time is measured with gross domestic product (or income) per capita. Many caveats are of course in order regarding historical estimates of the complex concept of gross domestic product developed in the 20th century. But the broad trends drawn by the Maddison estimates are consistent with how other historical sources depict the former epochs of mankind.

To keep the chart readable, I start it at the beginning of the 18th century and graph only two countries, the United States and Switzerland, as representative of the effects of the Industrial Revolution. This momentous event actually started in the United Kingdom and the Low Countries, and most Western countries rapidly followed. For many territories corresponding to today’s countries, the Maddison Project (like Maddison’s original estimates) provide some data points back to year 1 CE. Extending my chart backward in time would show that there was generally no economic growth between year 1 and the 17th century, that is, we would see a long visually flat line at roughly the level of the American standard of living in 1650 (i.e. $897). For example, the GDP per capita of the inhabitants of current Switzerland is estimated to have been $956 in year 1. (The Maddison Project does not provide estimates where no recorded history exists at all.)

It is generally recognized that the unprecedented growth unleashed by the Industrial Revolution finds its source the in economic, political, and social institutions that protected property rights and allowed or promoted free enterprise and free markets. I have a bit more to say about this in the forthcoming issue of Regulation.

Another phenomenon the chart emphasizes is the interrupted industrial revolutions of some countries. For example, consider Argentina, whose economy seemed to be taking off along with other Western countries until the end of the 19th century. But then, with one authoritarian or populist regime after another, economic growth slowed down. As a consequence, real GDP per capita in Argentina is now barely more than one-third of the US level. Or consider Venezuela, whose industrial revolution started only in the mid-20th century and stopped a few decades later. Helped by higher oil prices, GDP per capita increased a bit under the elected dictatorship of Hugo Chavez (from 1999 to 2013), but plunged dramatically under that of Nicolas Maduro (2013 to now). Venezuela’s GDP per capita is now only 20% of America’s. (For perspective, China’s GDP per capita is one fourth of the American level.)

The unresolved question is whether and under which conditions the prosperous civilization built by the Industrial Revolution could crash and bring mankind back to the the Middle Ages or Antiquity, as Jose Ortega y Gasset feared (see my review of his The Revolt of the Masses in the forthcoming issue of Regulation). Nobel prize-winning economic historian Douglass North expressed somewhat similar fears (see his Understanding the Process of Economic Change [Princeton University Press, 2005], pp. 77-78):

The long run economic success of western economies has induced a widespread belief that economic growth now is built into the system, in contrast to the experience of the previous ten millenia [sic] when growth was episodic and frequently non-existent. … It is still an open question whether in fact that supposition is correct. It is important to understand that experiencing economic growth for fifteen or twenty years is not a guarantee that it is built into the system.