The case for progress | Deloitte UK has been saved
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Is the world getting worse? 71% of Britons polled by You Gov last year thought so. Only 5% thought it is improving. News headlines tend to confirm the impression of a world that is riven with conflict, poverty and danger. Most Britons and Americans think world poverty is rising; in fact it has halved in the last 20 years. When we think about the risks of flying we tend to think of recent air crashes. Few of us know that since the 1970s the number of passengers has risen ten fold and the number of accidents and fatalities has halved.
Swedish economic historian Johan Norberg's latest book, 'Progress' provides a persuasive antidote to the fashionable consensus of doom and decline.
Norberg argues that unconscious biases mean that we tend to overestimate risks and underestimate progress. We assess risks not on statistics but on how easy it is to recall examples from memory. Negative events tend to be etched into our minds deeper than positive ones. We focus on problems as a way of signalling our concern and altruism, what he calls the psychology of moralisation. And since time immemorial humans have held to the golden age fallacy, the nostalgic notion of a lost past of contentment and security. I once found a seventeenth-century gaming token in our garden. It was inscribed with the words, "In memory of the good old days". Those were the days when life expectancy at birth in England was under 40 years and poverty, hunger and destitution were the norm.
Norberg deploys a dizzying array of data to demonstrate that, contrary to what we may feel much of the time, the world is getting better.
Despite the perennial human longing for some imagined past, material progress has been scarcely perceptible for most of human existence. In the seventeen centuries between 100AD and 1820 the economic historian Angus Maddison estimates that GDP per head rose by just 50%. In 1820 the average person in Western Europe had the same income in real terms as the average person in Haiti or Liberia today. 40 to 50% of the population lived in what is now called extreme poverty, managing on less than the equivalent of about $2 a day. In the early nineteenth century between 10 and 20% of Western Europe's population were officially classified as "paupers and vagrants".
Since then per capita GDP in the Western world has risen fifteen fold. Extreme poverty has been eliminated, the working week has fallen by one third and life expectancy has doubled.
The same process started later in the developing world and the progress has been even faster. The proportion of the world's population living in extreme poverty fell from 44% in 1981 to 9.6% in 2015. In the West the Global Financial Crisis of 2008-09 has generated even greater pessimism and angst about the future. Meanwhile poverty has continued to retreat. Extreme poverty has fallen by 42% since 2010 and far faster in Asia.
Life expectancy and health have improved in tandem with the explosion in incomes. In prehistoric times the average hunter gatherer lived to around 20 to 30 years. Until the eighteenth century life expectancy at birth was still in the 30s in most western European countries. The nineteenth and twentieth centuries saw the transformation of life expectancy. Indeed, the bulk of the reduction in human mortality has been crammed into the last four of the roughly 8,000 generations of human existence.
The gains are not just in the length of life but the quality of life. In the US chronic diseases, such as arthritis and heart disease, are less severe than a hundred years ago and occur, on average, ten years later in life.
Today innovation is widely seen as the key to faster economic growth. The great inventions of the last, such as the internal combustion engine or electricity, have certainly been huge drivers of prosperity. But human progress depends on belief systems too. They determine whether new thinking is welcomed or suppressed.
In sixteenth-century Europe the Reformation promoted the translation of the bible from Latin or Ancient Greek and spread the revolutionary notion that people could directly interpret the bible without the aid of priests. The Enlightenment of the seventeenth and eighteenth centuries emphasised reason and individualism over conformity and tradition. In doing so it helped spur scientific, economic and political change which drove the Industrial Revolution.
Knowledge is cumulative and can be shared. Much of this welfare-enhancing knowledge is freely available.
Norberg observes that water shortages in the developing world are often related to the under-pricing, and sometime zero pricing, of water. As the UN Development Programme observes, "if markets delivered Porsche cars at give-away prices, they too would be in short supply". Proper pricing of water, especially for agriculture, could make a significant difference to improving water security.
The disastrous experience of agricultural collectivisation in China's Cultural Revolution led to a collapse in food production and widespread starvation. As collectivisation broke down and individual ownership spread from the late 1970s food production soared. This was not a product of great innovation in terms of technology or ideas. It was the application of an old idea – that incentives drive outcomes – that transformed Chinese agricultural production.
'Progress' takes issue with the widespread notion that the world has become a more dangerous and violent place. Murder rates have, in fact, fallen sharply over the last 500 years. The incidence of war among the "Great Powers"– the dominant economic and military powers of the day – have declined dramatically.
We suffer from historical myopia and lack reference points for judging conflict; so the conflicts of today seem unique. We observe the destruction in the Middle East today but tend to forget the terrible death toll in, for instance, the Vietnam or Korean wars or the Algerian war of independence. Terrorism appears especially threatening today, but for Western European nations the death toll was higher in the 1970s in the era of the IRA, ETA and the Red Brigades. Norberg observes that more Europeans drown in the bath than die in terrorist violence and ten times as many die falling down stairs.
Of course human progress has hardly been linear. But ultimately society has the capacity to learn and correct mistakes and excesses. Despite an expanding population and higher living standards, output of the six leading air pollutants in the UK has fallen by two thirds since 1970. I grew up at a time when major oil spillages at sea, such as the Torry Canyon or the Amoco Cadiz, were commonplace. Since 1970 the quantity of oil spilt has been reduced by 99%. China turned its back on the Cultural Revolution and, in doing so, ushered in what has been the most rapid and widespread transformation in human welfare in history. Norbert argues that innovations in farming and crops may well mean that the world is close to reaching "peak farmland". By extracting increased yields we may be able to start returning cultivated land to nature.
'Progress' makes a powerful case for optimism about the future. In doing so it offers a timely counter to the pessimism of much of today's commentary.
Ian Stewart is a Partner and Chief Economist at Deloitte where he advises Boards and companies on macroeconomics. Ian devised the Deloitte Survey of Chief Financial Officers and writes a popular weekly economics blog, the Monday Briefing. His previous roles include Chief Economist for Europe at Merrill Lynch, Head of Economics in the Conservative Research Department and Special Adviser to the Secretary of State for Work and Pensions. Ian was educated at the London School of Economics.