There is no evidence that God ever intended the U.S. to have a higher per capita income than the rest of the world for eternity.
—Robert Solow, Financial Times, January 15, 2011
Half a lifetime ago, when I was a Yank at Oxford, I wondered why my English contemporaries were not all packing their bags to leave the country. In those days, before Margaret Thatcher, maximum tax rates on incomes above £20,000 were 98 percent. It seemed to me then that having been born in the United States at mid-century was a terrific advantage.
At that time, it probably was. But just because an economy is rich when you are born does not guarantee that it will stay that way. In 1901, when Queen Victoria died, Great Britain had the world’s highest per capita GDP, more than $4,600 in 1990 dollars, 10 percent higher than the United States at that time, and four times that of Japan, the second-biggest economy at the end of the twentieth century. But after the UK was dethroned as the world’s dominant economy, real growth rates slowed to a crawl—just 0.8 percent from World War I through 1950. By that year, British per capita GDP had gone up less than 50 percent from Queen Victoria’s time, while U.S. GDP per capita had surged by more than 230 percent over the same period.
Much of the great accumulation of British capital that financed world growth in the nineteenth century was dissipated in wars, nationalized, and taxed away, contributing to stagnation that ...