CAMBRIDGE – The promise that each generation will be better off than the last is a fundamental tenet of modern society. By and large, most advanced economies have fulfilled this promise, with living standards rising over recent generations, despite setbacks from wars and financial crises.
In the developing world, too, the vast majority of people have started to experience sustained improvement in living standards and are rapidly developing similar growth expectations. But will future generations, particularly in advanced economies, realize such expectations? Though the likely answer is yes, the downside risks seem higher than they did a few decades ago.
So far, every prediction in the modern era that mankind’s lot will worsen, from Thomas Malthus to Karl Marx, has turned out to be spectacularly wrong. Technological progress has trumped obstacles to economic growth. Periodic political rebalancing, sometimes peaceful, sometimes not, has ensured that the vast majority of people have benefited, albeit some far more than others.
As a result, Malthus’s concerns about mass starvation have failed to materialize in any peaceful capitalist economy. And, despite a disconcerting fall in labor’s share of income in recent decades, the long-run picture still defies Marx’s prediction that capitalism would prove immiserating for workers. Living standards around the world continue to rise.