The graph above is an economic history of the world, after 1 AD, from a research letter written by Michael Cembalest, chairman of market and investment strategy at JP Morgan. I posted it yesterday with this summary: "Everything to the left of 1800 is an approximation of population
distribution around the world and everything to the right of 1800 is a
demonstration of productivity divergences around the world."
But that's not exactly right. The Industrial Revolution that occurred in Western Europe around 1800 did dramatically raise productivity and personal income far above what any country had seen in the previous millennia. But in fact, GDP per capita -- an approximation for productivity and income -- started to diverge centuries before the steam engine.
What follows is a deeper -- but still shallow -- dive into 2000 years of economic history, this time through the lens of GDP per capita around the world. This metric helps us identify where growth in wealth occurred, as opposed to just growth in population (e.g.: India and China had thee-quarters of world GDP in 1 AD because they had three-quarters of the world's population).
The first graph is a good picture of what we call the Malthusian Trap. For the vast majority of human history, the most important determinant of wages was births and deaths. With too many births, income fell. After a plague, a roughly stable supply of food and goods shared among a smaller number of people made everybody richer. That is, until births rose, and incomes fell again.