Improving Our Standard of Living (Wattpad Edition)

Chapter 15: GDP and Poverty

Standard of living is the same as resources and opportunities. That's why making more goods and services—growing the GDP—improves a nation's quality of life. Exciting things are more likely to happen in a society that has more tools and where people are free to pursue their goals.

For an analogy, imagine a game of Minecraft in survival mode. If you're by yourself, your accomplishments are limited. But a Minecraft world with hundreds of people in it will create more interesting things. Your own activities and creations will far exceed what you could have ever dreamed of by yourself.

Adding more people and more "stuff" in a Minecraft world is analogous to a nation that raises its GDP.

A larger population isn't strictly necessary. Access to more tools is what really matters. For instance, suppose the player activates creative mode in Minecraft. (It's an option that gives more tools and capabilities to the player.) Going from survival mode to creative mode is analogous to a huge jump in GDP. You can do a lot more in creative mode.

Adding more wealth to a society creates an emergent property. Interesting things can happen that wouldn't have been possible otherwise.

This applies to the environment as well. Newer and better forms of renewable energy, improved ways of growing food, better ways of turning ocean water into drinking water, nanotechnology, new types of materials, advanced forms of recycling, asteroid mining, virtual reality, vertical farms, artificial intelligence, self-driving cars, etc., will be invented and implemented on a broad scale by the wealthiest countries. The faster world GDP grows, the sooner humanity will accomplish these feats.

The more obvious benefit of increasing GDP is poverty reduction. After the adoption of many of Adam Smith's recommended policies in the 1800s, the GDP grew so much that, according to the Cato Institute, "living standards tripled in Europe and quadrupled in the United States." [1]

In the early 1800s, more than 90% of the world lived in extreme poverty—less than a couple dollars per day adjusted for inflation. By 1981, the extreme poverty rate fell to 44% according to the World Bank [2]. Today it's 10% [3]. By 2030, extreme poverty will be eliminated worldwide.

This is an important point, and I don't want the reader to miss it. So I'll elaborate.

Below is a list of years, followed by the extreme poverty rate of the global population. Extreme poverty means living on less than $2.00 per day. This number is adjusted for inflation.

Year: 1820

Extreme poverty rate: 94%

Year: 1850

Extreme poverty rate: 93%

Year: 1870

Extreme poverty rate: 89%

Year: 1890

Extreme poverty rate: 85%

Year: 1910

Extreme poverty rate: 82%

Year: 1929

Extreme poverty rate: 76%

Year: 1950

Extreme poverty rate: 72%

Year: 1960

Extreme poverty rate: 64%