March 13, 2018

Small Differences in Rates of GDP Growth Have Huge Impacts on Living Standards

Small differences in GDP growth rates have monumental impacts on average living standards in America over time. In the United States, real GDP per person has risen from around $1,000 per person in 1700 to more than $60,000 per person in 2017.

The following charts illustrate how the living standards of average Americans would be greatly diminished today if GDP growth, starting in 1700, had been less robust. The chart compares actual GDP-per-person growth since 1700, a hypothetical growth rate of 1 percent per year since 1700, and a growth rate held constant from the year 1700.

 

If GDP per person had grown at 1 percent a year since 1700, then GDP per person in the United States today would be less than $22,000, roughly the same as the per-person GDP of Bulgaria. However, if per-person growth had remained at 1700 levels, GDP per person in the United States today would be less than $2,500, roughly the same as the per-person GDP of Chad or Senegal, or just 4 percent of actual per-person GDP in the United States today.