Saturday, January 31, 2009

Long term growth

Here is an interesting chart on the long term growth in real per capita GDP, real stock price returns and real earnings taken from an article by Brad Cornell and Rob Arnott published in CFA Institute Magazine in Nov/Dec 2008. The authors mention that over the past 25, 50 and 100 years, annual real per capita GDP growth averaged 1.4%, 1.7% and 1.9% respectively.
Over the same periods real per share earnings grew 3.2%, 2.0% and 1.5% annually while the S&P500 increased by 5.1%, 2.7% and 1.9% per year above inflation. Very interesting to see how over the longest period (100 years) these measures grew at very similar paces.

Brad DeLong has an excellent little paper on economic growth here. It shows that the numbers above are just so much larger than before the industrial revolution.

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