Five Decades of Global Growth Deceleration

(17 September 2021) Data from international organizations such as the U.N. and the International Monetary Fund shows that in the last five decades global economic growth decelerated by almost 50%—from an average 3.9% growth per year in the 1970s to an average 2.3% growth in the 2010s.

Current trends in labor, capital, and productivity—the major drivers of economic growth—suggest deceleration will continue long term.

• Data from the U.N. shows that the global annual growth of population ages 15–64 (which constitutes the labor force) decelerated from 2.2% in 1970 to less than 1% in 2020. And according to U.N. projections, in the next few decades labor force growth will decelerate even further.
• The impact of capital on global growth can be indirectly estimated through the share of fixed capital investment in world GDP. According to the World Bank, between 1970 and 2019 share of investment in world GDP declined from 25.5% to 23.8%. Typically, the lower the investment to GDP ratio, the slower the economic growth, since the volume of resources allocated for the creation of new production capacities is decreasing relative to final consumption.
• Global productivity growth has also been declining since 1970. In the 1980s and 1990s the decline of productivity in developed countries was counterbalanced by rising productivity in emerging economies (mainly in China) as result of industrialization, but in the 2010s growth of productivity in China slowed down as well, now that basic infrastructure and industries have been built. There is still potential for productivity gains in India, but India is unlikely to make up for the slowdown in productivity growth in both developed countries and China.