Tuesday, August 9, 2011

Just really bad policy

At Oikonomeo, Jonathan writes:

Perhaps one of the most surprising things about economic growth is how unusual it is historically. Before 1800, consistent economic growth was essentially unheard of anywhere in the world. From 1800-1900, economic growth was restricted to a few countries in Western Europe and offshoots. It's only in the past 30 years that a majority of the world's population have lived in countries that have experienced sustained economic growth.

Before 1800, nothing. In England, a century-long buildup of public debt, the 1700s, and then an acceleration of economic growth. Perhaps after a while people got liking the idea of having some financial wealth, and it made them industrious. I think the awakening of growth in the early 1800s was the birth of capitalism.

Jonathan also says,

Given these facts, there's a natural tendency to move from viewing growth as a natural state of an economy to something rare and mysterious.

He rejects that notion. So do I.

...one wonders why the world went so long without enjoying economic growth. If growth of around 2% per year is possible with a fairly simple set of institutions, then why did it take so long for anyone to unlock its potential?

One potential answer may seem quite surprising -- perhaps economic policy was just really bad...

That's what I think. Jonathan doesn't end with a strong affirmation that bad policy is the problem. But I do.

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