Stock Market Fluctuations Are Mere Blips in World’s March to ‘Real’ Wealth
In October plunging stock prices destroyed more than a trillion dollars of wealth in a few days. But the loss of this paper wealth does not threaten the inexorable march of the world from traditional poverty to the real modern wealth that will soon make it possible for all people to live decent human lives.
Modern wealth comes from the spreading understanding that enables societies to change to become more productive. Wealth is the result of increased productivity--people’s ability to produce more value with an hour of their work. The world now produces nearly $15 trillion worth of goods and services each year.
Economic news today is dominated by the recent shake-up of financial markets around the world. But when we take a broader time perspective, the big news is that wealth is sweeping over the world--regardless of Wall Street.
For a longer perspective on global wealth we must begin by defining a “wealthy country” in a way that doesn’t change every generation. A wealthy country is one that has enough resources to provide decent living conditions for the great majority of its people.
It is startling to realize that there never was a single wealthy country before this century. Before 1900 no country was able to provide most of its citizens with a high school education and with conditions good enough so that they were able to live to see their grandchildren. Everywhere human life was dominated by the fight against nature.
Today about one-fourth of the world’s people live in wealthy countries. And the big story is that wealth is spreading so fast that by the end of the next century more than three-quarters of all the people of the world are likely to be living in wealthy countries.
India and China together hold about one-third the population of the world--and more than half of the poorest people. Therefore, we can say that the world as a whole will be wealthy when China and India have become wealthy.
Of course many smaller countries may continue to be poor for some time. But these countries, in Africa and elsewhere, will hold only a small fraction of the world’s people.
To become wealthy countries, China and India need to multiply their per-capita incomes by about five times. If the experience of the last 40 years is a reasonable guide, this will take them between 60 and 120 years.
An optimist would say it will take less than a century; a pessimist might say that it will take two centuries. But either one century or two centuries is short compared to the tens of thousands of years during which there were no wealthy societies at all.
There is virtually no way that shortages of raw materials could interfere with this passage to a human world. Getting raw materials from the ground takes an amazingly small part of human efforts. In the United States we now spend only $170 per capita for the cost of getting all the raw materials we use out of the ground. (This excludes food, which is a renewable resource, and energy, which can be renewable.) For example, our total cost for taking out of the ground all the metals we use is only $60 a year per capita.
The greatest liberation movement in history is the passage which the world is now making from poverty to wealth. In a few centuries we are liberating ourselves from the domination of nature and things.
We are creating a world in which people and ideas are the dominant influences on human life. This is a world in which countries can get rich by learning, not by taking--a very different world than most of us are used to thinking about.
Because people have a great capacity for evil, and to hurt each other by mistake, we cannot know whether the wealthy human world we are creating will be a better world than we have now. But we should keep our passage to that world in mind as we assess the significance of fluctuating stock prices.
