Why Does 1% of History Have 99% of the Wealth?

For nearly all of human history, most people were very, very poor. But something happened after 1800. Average wages began to rise. For example, in the past 200 years, the average wage in the United States has gone from $3.00 per day to over $120.00 per day—and that’s adjusted for inflation. Why the sudden change? Prof. Deirdre McCloskey explains her theory. Source: Learn Liberty YouTube channel.

(see video below transcript)

Transcript:

Deirdre McCloskey: The most important thing to understand about, about the modern world actually, is that once people were very poor and now they are very rich. In 1800 the average person in the world made three dollars a day. I mean the modern equivalent of three dollars a day, so the goods and services the stuff you could buy in the amount of three dollars a day. So three quarters of a Cappuccino per day. Nothing else.

In the last thirty years the percentage of people who were that badly off in the world has fallen by half. It has been halved. So things are going very well and for we in places like the United States where they have gone exceptionally well since 1800. We are making, now hear this, $130 a day and what a transformation, it is just incredible. Now, we had earned the three dollars a day forever so there was in history, if you want a short economic history, since the beginning of time it was three dollars a day going along like this and then right here, which is 1800 it goes schwoosh, it goes up like mad and there is this fantastic transformation of the condition of ordinary folks.

Why did it happen? One old explanation is exploitation. You hear this a lot, we are rich because there are a bunch of poor people elsewhere in the world who are poor. That is not true. There has always been exploitation in history and it didn’t cause economic growth, so it can't be modern exploitation nor can it be to think of a more conservative way of looking at it, investment. It is not investment it is not piling bricks on bricks or BAs on BAs, it’s new ideas. It is innovation. The fantastic number of changes in machinery, and materials, and organizational ideas, such as the modern university, or reinforced concrete, it is just amazing that caused the schwoosh, this hockey stick, the blade of the hockey stick.

Why did this happen? Two changes in Holland and England in the 1600s and 1700s which was a rise of economic liberty and social honor for inventors, merchants, manufacturers. Before, these were dishonored occupations and then they became honored, And out of that came a tremendous burst of innovation that had been earlier discouraged, because they weren’t free and they weren’t honored.

Translated by: Jadranko Brkic