In his 2012 lectures at Gresham College, London, Professor Douglas McWilliams described the last two or three decades as the "greatest ever economic event" – greater in consequence than both the industrial revolution and the “so-called discovery of the Americas”. In the 500 years before the discovery of America he noted that world GDP had been increasing by an average of 15% per century (or 0.15% per year). We didn't have Offices for National Statistics in those times so no one can be quite sure!

In the century after Columbus’ great voyage the rate of growth doubled – to something like 33% per century. GDP per head of population also rose – at about half the speed. Then came the Industrial Revolution: “between 1700 and 1820 world GDP nearly doubled, increasing by 87%. And there was a further increase of 60% in the 50 years between 1820 and 1970.” But then, for McWilliams, came the extraordinary events of the last few decades:

“If we take the more recent period since East Asia other than Japan started to industrialise, from 1970 to 2008 world GDP rose by 270% and world GDP per capita rose by 104%. This is an order of magnitude different from the scale of economic growth after the discovery of the Americas and during the industrial revolution. GDP per capita in China, the most important of the fast growing economies, rose by just under 8 times between 1970 and 2008. Over this period, world GDP rose at an average annual rate of 3.5%.”

Capitalism’s extraordinary global achievements were recorded in Matt Ridley’s 2010 book, The Rational Optimist. They are recorded on Twitter on an almost daily basis by Max Roser – a researcher at Nuffield College, Oxford University. At the time of writing, his Twitter feed records the imminence of a polio-free world; the collapse of extreme poverty; the decline of conflict; the steady decline in rates of child labour and the spread of that great fuel for living - electricity.

But guess what? Most people in the developed world have not only missed this great age of progress – they actually think that things are getting worse. They might have spent too much time reading the downbeat speculative fiction of the kind documented by Jane Hu. Perhaps we’re too influenced by the endlessly negative advertising of international development charities – and their heart-tugging images of malnourished children? Perhaps the real travails of the developed world economies have caused us to become myopic. Whatever the reason we are hugely ignorant of the world beyond our immediate shores. According to the “Ignorance Survey” - a project of the Gapminder organisation – the populations of developed world countries don’t just consistently underestimate what the progress that is being made across the globe, they’re sure that things are getting worse. For example:

· A Gapminder survey in the United States of America found that 66% of people believe that extreme poverty has “almost doubled” over the last twenty years. 29% think it has stayed more or less the same. Only 5% think it has almost halved but the 5% are correct. The British people were nearly as inaccurate and downbeat. 58% thought global poverty had increased. 33% thought it had more or less stayed the same. Only 10% correctly thought it had dropped. University-educated Britons were not significantly better informed than the non-university educated. Another survey in Sweden found a more informed population but even in this Scandinavian nation only 23% were correct about the retreat of global poverty. 39% of Swedes thought poverty had doubled and 38% thought that there had been no change. The United Nations notes that “the proportion of people living on less than $1.25 a day fell from 47% in 1990 to 22% in 2010 - five years ahead of schedule” (with the schedule set out in the ambitious millennium development goals). And the progress has not just occurred in China – where progress has been particularly spectacular. Extreme poverty has fallen in every single developing world region. There is plenty of work still to do, of course. Although the percentage of under-nourished people fell from 23.2% in 1992 to 14.9% in 2012 that still leaves a humbling 870 million people who are not adequately fed.

· People in Germany were asked slightly different questions by Gapminder but similar levels of pessimism – and ignorance - were found. 54% of Germans thought that the number of people dying in natural disasters has “more than doubled”. 40% thought the death toll had stayed about the same. Only 6% got the correct answer – that the death toll had decreased to less than half. People consistently underestimate the power of technologies – particularly sophisticated early warning systems – to protect people from Mother Nature. Matthew Kahn, the environmental economist, has found that the deaths caused by an earthquake, for example, fall by 5.3% for every 10% increase in a country’s GDP. Interestingly, Kahn could not find any significant correlation between deaths caused by natural disaster and democracy. The rule of law, absence of corruption and regulatory quality were all more important.


· 75% of those surveyed thought most of the world’s population were at the bottom end of the income scale – even though the reality is that most of us are in the middle – living on the equivalent of $10 per day.

· 80% of all adults can read and write but 78% of those surveyed thought the percentage was much lower.

· Women aged 25 to 34 have spent an average of seven years in school but 76% guessed that the actual number was more likely just three or five years.

· Only 17% correctly told the “Ignorance Survey” that 80% of the world’s population has been vaccinated against measles.


During this year the global advertising industry will spend an estimated $600 billion advertising the products of the free enterprise system to consumers. That’s about $90 per person in the key markets of the world. The $500 billion will include $189 billion in America, $73 billion in China, $40 billion in Japan, $28 billion in Germany and $25 billion in Britain. The biggest single advertising sector is personal care with Procter & Gamble Co., Unilever and L'Oréal the biggest three individual corporate spenders. It is amazing that capitalists as individuals and as corporate entities are so attuned to the need to sell their particular products but so neglectful of the need to sell the free market system as a whole. Next time the great and the good gather at the World Economic Forum in Davos they should consider how they might organise themselves a little better. They could begin by throwing a million or two in Max Roser’s direction and his World In Data project. Capitalism doesn’t just have a marketing problem – it has more fundamental challenges too – but ignorance of its great achievements is testament to the failings of its supporters and the persistence of its critics.

Friends of business organisations like the CBI (formerly the Confederation of British Industry) in Britain need to update the ways in which they operate. Their spokesmen often appear self-serving. They are nearly always arguing for what is best for their members. On the face of it that is fair enough but they might be more likely to succeed in their aims if they were seen to be less self-interested and, instead, backed policies that would create jobs and higher incomes and exports. Put it this way: who are you most likely to listen to on TV and radio programmes? The pinstriped representative of the Roundtable of Amalgamated Corporations or the spokeswoman for the Campaign to End Youth Unemployment? Both could be arguing for the same free enterprise policies but one would undoubtedly be much more potent – especially with swing voters. There’s far too little investment from Britain’s businesses in think tanks, campaigning organisations and academic positions that promote a business-friendly culture. Why do organisations like London’s Reform think tank, the Centre for Policy Studies and the TaxPayers’ Alliance have a handful of staff when they should have a hundred? Where, in particular, is the moral campaign for free enterprise? Who talks today as Lord Hailsham talked in 1992:

“The great advances which have been made in human happiness have been just as much due to the spinning jenny, the internal combustion engine, and the generation of steam as to the moral sublimity of a Shaftesbury, a Florence Nightingale, an Elizabeth Fry, or a Mother Teresa.”



Let us end this chapter where we began – with Douglas McWilliams. His observation that we have lived through the greatest ever economic change is perhaps not his most important one. More important is his expectation that the changes are to continue for another fifty or so years. There are, after all, still large parts of the world that are barely part of the world economy: notably Africa, most of the India’s huge population, hundreds of millions of Chinese, and also much of Latin America. Predictions are of course perilous. Edgar R Fiedler’s warning that "he who lives by the crystal ball soon learns to eat ground glass" is just one of a long list of humorous jibes at the prophecy business. Nonetheless, McWilliams’ basic view that reforms much more ambitious than even those pursued by Margaret Thatcher will be necessary if advanced nations like Britain and America are to stay competitive will frighten many who have unhappy memories of the “Thatcherism” and “Reaganomics” of the 1980s. The sections in this report on social strength, corporate responsibility, middle class entitlement reform, investment in infrastructure and the new nature of free trade agreements point to how we might flourish in the new world economy envisaged by McWilliams.

In the next chapter, however - some thoughts on what Adam Smith would make of the kind of capitalism that is operating 225 years after his death.

Go to the homepage of the Prosperity for All report.

Go to the homepage of the Legatum Institute.