Two Examples

There is something hidden in the definition of economic growth as a "sustained" increase in gross domestic product per capita. Because the increase is "sustained," its impact is cumulative over time. As we have just seen, the yearly growth is compounded. This accumulation over time is what gives economic growth its power to transform societies.

Here are two examples of economic growth in the latter half of the 20th century. In the figure, we see Gross Domestic Product per capita for the United States and the Republic of Korea, from data in the Penn World Tables. The U. S. data are shown with the vertically barred green line, and the Korean data by the solid blue line.

Figure 1. RGDP per capita in the U. S. and Korea

The diagram shows that, between 1950 and 1992, the amount of marketed goods and services the average American could buy almost doubled. The increase over that period was 97%. For Korea, which in 1953 was a less-developed country devastated by war but by 1991 had become a Newly-Industrializing Country (NIC), the increase was over seven times.