According to official data, British real GDP grew by about 250% between 1965 and 2025. Despite a 28% rise in population numbers, the average person was vastly (about 175%) better off last year than his or her equivalent had been sixty years earlier.
Put the other way around, British people were drastically poorer back in the 1960s than they are today, a statistical story which also holds true for every other Western country. Things must have been almost unbearably tough in those days.
What was it like, then, trying to cope with such extreme poverty?
Well – and as you may know, either anecdotally or through recollection – it was commonplace back in those “much poorer” 1960s for British couples to start families in their early twenties, either buying a home with a mortgage or renting a property from their local authority.
Car ownership, though increasing rapidly, was a lot lower back then – but cars were actually owned rather than, as now, almost always acquired by taking on the burden of lease commitments.
There don’t appear to have been many problems with long waiting lists for health care in those days. Far fewer young people had the benefits of higher education, but that fortunate few did not emerge from universities carrying very large amounts of debt into a severely over-supplied graduate jobs market.
Median or “ordinary” people, then, could buy or rent a home, start a family, take holidays and run a car, and could do this with a modest mortgage, and with little or no other debt. Most remarkably, a majority did this on the income from a single wage-earner.
In the more prosperous United States, people probably started to enjoy the equivalent of these British experiences of the 1960s in the previous decade.
Perhaps the subtext of MAGA is ‘make America affordable again’?
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Al Stewart’s A Child’s View of the Eisenhower Years is a great song, but the purpose of the foregoing isn’t to indulge in nostalgia, but to question the meaningfulness of the concept of “growth”.
An alternative way to look at this is to ask how easy – or how difficult – it has been to attain certain goals in different eras. How better or worse off have people become in terms of finding somewhere to live, starting a family, obtaining the necessities, affording luxuries, and having access to high-quality health care and education?
Furthermore, how has their sense of assuredness – their job security, their indebtedness, their trust in institutions – changed over time?
The ‘easy’ answer to this turns out to be fallacious. This ‘easy’ answer is that aggregate wealth has indeed improved dramatically over the decades, but the vast majority of these gains have been pocketed by a small minority, to the detriment of everyone else.
The snag with this ‘explanation’ is that almost all contemporary wealth exists only on paper. Even the wealthiest are only one market crash, one banking collapse or one currency failure away from losing almost everything.
All that the wealthiest really have is a large stack of paper claims, which can’t be monetized in the aggregate, and are, in the broad scheme of things, only “good until cancelled” by events.
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In short, we have an extremely important conundrum to address.
Based on per capita GDP, Westerners seem to be far “better off” now than they were in, say, the 1950s and the 1960s.
But their quality of life certainly hasn’t improved in that proportion, and might very well have got worse.
Some more recent statistical information helps shed some light on this situation. Fig. 1A compares trends in real GDP, debt and estimated financial assets since 1980.
Although not reported in full, the latter are very important because, as the “assets” of the financial system, they are claims on the non-financial economy of governments, households and PNFCs (private non-financial corporations).
This category includes the assets of banks, non-bank financial intermediaries (the “shadow banking system”), central banks and public financial institutions.
Since 2005, reported global real GDP has grown by 94%, or $102 trillion PPP at constant 2025 values. Over that same period, though, debt has expanded by almost $300tn, and broader financial claims by not less than $800tn.
This means that each dollar of reported “growth” in GDP has been accompanied by almost $3 of net new debt within an increase of at least $8 in broader financial claims.
The world’s average person may have enjoyed a $26,000 (56%) real terms increase in his or her share of GDP since 2005. But this average person’s share of debt and broader claims have increased, respectively, by $59,000 and about $150,000.
Fig. 1
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It’s at this point that we need to remind ourselves what GDP actually is.
Contrary to an extremely widespread misconception, gross domestic product is not a measure of the amount of material economic value – in the form of goods and services – supplied by the economy in any given period. Rather, GDP is a monetary measure of transactional activity in the system.
In essence, most of the growth reported since 2005 has been nothing more substantial than the spending of huge and growing amounts of borrowed money.
We can calculate that fully 65% of all global “growth” reported over the past twenty years falls into this cosmetic category. On this basis, the material economic prosperity of the average person hasn’t increased at all since 2005 – but his or her burden of debts and quasi-debts undoubtedly has.
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The final chart in Fig. 1 looks at another aspect of this statistical sleight-of-hand. It compares reported real GDP growth in the United States since 2005 with net borrowing by government, with both metrics stated on the common basis of percentages of previous year GDP. The mathematical average of American economic growth during that period was 2.1% but, on average, government borrowed and spent 6.9% of GDP through those years.
Many observers seem to have been impressed by the comparative strength of the American economy in recent times, but some of the more perceptive have also become increasingly concerned about the relentless rise in what has been called “Uncle Sam’s bar-tab”.
If an economy – not just the government, but the private sector as well – borrows and spends huge amounts of money, the ultimate destination is the seemingly paradoxical condition of affluent bankruptcy.
Affluence, measured not just as GDP but as aggregate asset values as well, carries on growing until the economy slumps into the bankruptcy of having more debt than it can ever be expected to honour.
At its most extreme, this culminates in a collapse in the purchasing power value of the currency, at which point GDP becomes meaningless, and asset values crash.
We are, simply stated, likely to be at our point of maximum recorded affluence at the moment when the financial economy vanishes into a black hole.
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It’s to address these kinds of conundrums and paradoxes that certain precepts have been proposed and applied by the Surplus Energy Economics project.
As you may know, the SEE thesis is based on (a) the economic primacy of energy and (b) the principle of money as claim. The latter states that “money, having no intrinsic worth, commands value only as an exercisable claim on those material things for which it can be exchanged”.
Ultimately, if money is a “claim on goods and services” it is, in reality, a claim on the energy required to make these things available. Likewise, debt, as ‘claim on future money’, is in fact a claim on future energy.
This makes clear the need to think in terms of the parallel two economies of the material and the monetary.
To benchmark the financial against the physical, we need to understand the “real” economy of material products and services as a system which uses energy to convert other raw materials into goods, artefacts and infrastructures, as part of a continuous process of creation, consumption, relinquishment and replacement.
Beyond the total amount of energy used in the economy, the critical parameters here are the rate at which the use of energy converts into material economic value, and the proportionate cost of putting energy to use.
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Applying these precepts to modern times delivers some pretty sobering results. As depletion of the non-energy resource base gradually erodes conversion ratios, relentless rises in the proportionate Energy Cost of Energy have been driving a widening wedge between top-line economic output and ex-cost prosperity.
This can best be illustrated using two sets of charts.
In the first, we look at how, by backing out the distortionary effects of super-rapid credit expansion, we can arrive at a measure of underlying or “clean” economic output, known in SEEDS terminology as C-GDP.
Fig. 2
In Fig. 3A, we then compare this measure of “clean” economic output with the consumption of energy, enabling us to calculate the rate at which energy converts into the supply of economic value (Fig. 3B).
The introduction of the Energy Cost of Energy, which has been rising exponentially, enables us to distinguish between total and ex-ECoE surplus energy (Fig. 3C). These patterns, intermediated by the value conversion ratio, identify trends in material economic output and prosperity, as shown in Fig. 3D.
Fig. 3
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What this demonstrates is that, in the years since 1980, growth in aggregate prosperity (+87%) has barely exceeded increases in world population numbers (+84%). This means that the average person was only about 1.4% materially more prosperous in 2025 than he or she had been back in 1980.
With this statistic available to us, we can readily see why the imposition of a combination of worsening inequality, rapidly increasing debt burdens and rises in the real costs of necessities has led to a widening sense of hardship, insecurity and resentment.
This necessarily poses two questions. First, what has really been happening to material economic prosperity in modern times?
Second, can we extend this analysis backwards before 1980, to get a sense of long-run trends through the industrial era?
If we can accomplish the latter, we might begin to understand why so many people, certainly in the West, seem to have seen no real benefit from all the “growth” reported since the apparent prosperity surge of the 1950s and the 1960s
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Where modern times are concerned, what we’ve been experiencing has been the ending and reversal of growth in material economic prosperity as the impetus initially imparted to the economy by the harnessing of fossil fuel energy fades out.
We’ve been here before, in the inter-war years, when the coal impetus deteriorated, but back then we had oil (and, latterly, natural gas as well) waiting in the wings as replacements. Had oil and gas not existed as successors to coal, the Great Depression might have become permanent, and recovery from the Wall Street Crash, which in any case took 25 years, might not have happened at all.
The big difference between now and then is that, despite outlandish claims made for renewables and nuclear power, no such ready-and-waiting successor to hydrocarbons exists today, and we’re about to discover that infinite, exponential economic growth on a finite planet really is the preserve of ‘madmen and economists’.
We’ve been trying – and, of necessity, failing – to reinvigorate the material economy using monetary tools. The result can only be a financial crash, as denial over the ending of growth culminates in that combination of shock and grief that we have called the post-growth derangement syndrome.
Almost nobody is ready to admit any of this, of course, but observational evidence is abundant. Worsening domestic hardship and insecurity is taking its toll of Western social and political stability. Geopolitical relationships are deteriorating into bare-knuckle fights for control of scarce and dwindling natural resources.
The soundtrack to these processes is a cacophony of drivel about monetary innovation and technological miracles. Monetary “innovation” actually comes down to creating ever more credit, and embracing ever greater complexity risk, in the faint and forlorn hope that this might alter the material economic trajectory.
Technology, meanwhile, has done far more to financialise the economy than to improve living conditions.
As we know, the potential of technology, far from being “limitless”, is bounded by the characteristics of materials and the laws of physics.
It also seems that technology advances in inverse proportion to the importance of the activity in question. Speed-of-light progress in digital communication doesn’t actually put more food on the table, and tends to use far more energy than any that it might help supply.
By contrast, the techniques used today in really important activities – like farming, extracting and refining ores, pumping water, producing oil and gas – would be readily recognisable to a time-traveller from 1926.
Arguably the most significant technological advances of the 1960s were the Moon landings and the advent of supersonic airliners. We can reasonably infer that the average person back then neither gained nor suffered in any significant way from these technological achievements.
Then-premier Harold Wilson promised that British prosperity would advance rapidly in the “white heat” of a new “technological revolution”. But he also said that “the pound in your pocket” would not lose purchasing power through devaluation.
Then, like now, it seems, political leaders had no real grasp of the realities of money, energy and the material. In Britain, the equivalent “technological revolution” today involves building huge data centres to consume energy and water that the United Kingdom doesn’t actually possess.
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It’s been a long-standing ambition here to extend our analysis far back beyond the SEEDS start-date of 1980.
It’s true, needless to say, that data gets increasingly sparse as we scroll back in time. But we do have very useful stats about real GDP and population numbers going back to the early 1800s, thanks in very large part to the economic researches pioneered by Angus Maddison, and continued by the Groningen Growth and Development Centre. Their tables extend back as far as 1820, a period of time for which data on energy use is available from other sources.
We don’t have ECoE data going back that far, of course, but we do have ways of proxying the earlier history of the Energy Cost of Energy. We know, through an examination of the drivers of ECoE, that these proportionate costs have followed a parabolic shape, and we can be confident that the low-point on this parabola occurred in the quarter-century following the Second World War.
The big problem turns out to lie, not in obtaining data for long-ago periods, but in adjusting for the extraordinary financial gimmickry of modern times. Since these excesses appear to have had no precedent in earlier years, the safest approach seems to be to splice post-1980 “clean” C-GDP onto the earlier GDP series.
The results thus far must, of course, be treated as tentative at this point, though further investigation is undoubtedly merited. It’s been said that a society without a history is as handicapped as a person without a memory, and economic conditions are an essential framework for the understanding of history.
But what this project does seem to show, at this early stage, are some drastic differences between two different eras of interest – the years between 1945 and 1970, and between 1980 and 2025.
In the earlier period, indications are that material economic prosperity expanded by about 170%, far out-stripping population growth of 55% to leave the world’s average person twice as prosperous in 1970 than he or she had been back in 1945.
In the (longer) period between 1980 and 2025, prosperity carried on increasing, but at a rate (+87%) barely ahead of growth in population numbers (+84%). Having seen his or her prosperity double between 1945 and 1970, our ‘average’ person has seen no progress at all in a latter period characterised by cosmetic “growth”, and a worsening of indicators such as housing accessibility, financial insecurity and the burden of debt.
It’s unlikely that we’ll be able to quantify pre-1980 trends at the national or regional level, but we do know that emerging market economies have out-performed the West in modern times. If, then, global average prosperity per person has barely improved at all, the likelihood is that Westerners have become materially poorer.
Perhaps we may eventually make sense of the conundrum which arises whenever we try to relate statistical economic growth to changes in the quality of life between the 1950s and 1960s and the world of today?Clio the cat, ?July 1997-1 May 2016 Kira the cat, ??2010-3 August 2018 Jasper the Ruffian cat ???-4 November 2021 Georgina the cat ?2006-4 December 2025 Toni the cat ?2005-25 March 2026
Superb article. Anyone interested in Hudson and Wolfet al should give it a read. Nm
on June 7, 2026, 7:02 pm