Note: In 1990 Dollars, purchasing power parity.
Source: Data compiled by A. Maddison, University of Groningen. Updated with World Bank GDP figures.
Historically, the world’s balance of wealth (power) undertook two major shifts, one triggered by the industrial revolution (early 19th century) and the other, unfolding, triggered by globalization (late 20th century). Prior to the industrial revolution, the economic size of a nation was directly proportional to its population, which was dominantly rural. Agricultural surpluses permitted an initial division of labor and were used to support various crafts, administrative, and service activities. Therefore, the capacity to grow food was the foundation of the wealth of nations because the greater the food surplus, the larger the population base for non-agricultural activities. Since China and India mostly relied on rice cultivation (the most productive form of agriculture) supported by extensive irrigation systems, they achieved early in history the world’s largest populations and correspondingly the largest GDP. This weight endured for a long period of time; they jointly accounted for 50% of the world’s GDP up to the early 19th century.
The mechanization of production brought by the industrial revolution significantly changed the relationship between population and economic output. European countries and their offshoots (e.g. the United States), which historically had a modest share of the global GDP (the Roman Empire being a notable exception), were able to become the world’s dominant economies, some projecting this influence through colonial empires. This came to be known as the great divergence where western civilization undertook significant levels of economic, cultural, and social development that did not occur elsewhere. By 1900, five industrial nations accounted for about 45% of the world’s GDP (United States, Great Britain, Germany, France, Italy, and Japan), with the share of China and India collapsing to less than 20%. By the 1970s, China and India jointly accounted for less than 9% of the world’s GDP despite their surging populations, while the share of the United States peaked at 22% of the world’s GDP.
In the late 1980s and early 1990s, a rebalancing of the world’s GDP began. By undertaking their own industrial revolution within an integrated global economy, China and later India were able to gradually reclaim a share of the GDP more in line with their populations. It could be postulated that once this rebalancing is completed, the global economy will reach a new equilibrium where the economic output will be correlated with population, as it is was before the industrial revolution. This assumes an eventual homogeneity of living standards and income across the global population, which may not occur.