Growth Miracles and Growth Disasters

… a core concept in Macroeconomic Policy

Click for MRU video

Click for MRU video

Concept description

Comparable countries can differ in their determinants of growth producing dramatic differences in economic growth and national prosperity.

In introducing his video (reference below and link to right) Alex Tabarrok says:

“In previous videos, you learned two things. First, that there can be large disparities in economic wealth among different countries. And second, you learned that one key factor drives that disparity: growth rate. As we said, it changes everything.

“But just how transformative is a country’s growth rate? Take Argentina, for example. In 1950, the Argentine standard of living was similar to that of many Western European countries. Up until 1965, Argentina’s per capita income was ahead of many of its neighbors. On the other hand, Japan in 1950 was on the other end of the spectrum. Japan had been ravaged by war and was only just beginning to find its economic footing again. At that time, Japan’s standard of living was roughly the same as that of Mexico. It was quite poor, compared to the Argentina of the same era.

“But look at what’s happened in the past 65 years. Japan today is one of the world’s most prosperous countries. Since 1950, it has managed to double its living standards about every eight years. Argentina, on the other hand, has stagnated. Once, Argentina had double the standard of living of Japan. But Japan now doubles them today, with a standard of living 10 times higher than the one it had in 1950. In economic terms, Japan is what we would call a growth miracle. It’s in the same class as other growth success stories, like South Korea and China which have experienced the “hockey stick” of prosperity. (India seems like it may have started on this path as well.) These countries are proof of one thing: with the right factors, a poor country can not only grow, but it can do so quickly. It can catch up with developed countries at an astonishing rate. What took the United States two centuries of steady growth can now be achieved by other countries in about one-fifth the time. Catch-up can happen in 40 years – about the span of a generation or two. That’s the good news.

“The bad news is, while growth can skyrocket in some countries, growth isn’t guaranteed at all. Argentina is an example of this. It grew well for a time, and then it stalled. Even worse than Argentina, are countries like Niger, and Chad, which are the very worst of growth disasters. Not only are these countries in extreme poverty, but they also have little to no growth. More than that, these countries have never experienced substantial growth in the past. But why does that all matter? It matters because growth isn’t just about numbers. It’s not just about more goods and services.

“When a country grows, its citizens often end up with longer, healthier, and happier lives. Conversely, the countries that are growth disasters have citizens in poverty, with shorter and less happier lives. As bleak as this seems, it’s the plain truth: while growth miracles are possible, growth disasters are, too. Which leaves us with another question: what causes either state? What leads to growth, prosperity, health, and happiness? And then, what leads to the opposite situation? We’re excited to share the answer, but that’s a topic for future videos. For now, check out this video to get up to speed on growth miracles and growth disasters.”

MRU practice questions

See, accessed 22 April 2016.

  1. Which of the following countries’ economies fell further behind in the 20th century?


Alex Tabarrok, Growth Miracles and Growth Disasters, Marginal Revolution University, at, accessed 22 April 2016.

Atlas topic and subject

Wealth of Nations and Economic Growth (core topic) in Macroeconomic Policy.

Page created by: Ian Clark, last modified on 22 April 2016.

Image: Alex Tabarrok, Growth Miracles and Growth Disasters, Marginal Revolution University, at, accessed 22 April 2016.