I first came across this graph on Greg Mankiw’s blog. Greg is a Professor of Economics at Harvard and he was referring an article written by Michael Milken (the former junk-bond king who fell into disgrace) in a recent issue of the Wall Street Journal. 

Milken is quoted as writing:

China and India combined to produce nearly half the world’s economic output in 1820 compared to just 1.8% for the U.S.

Our remarkable growth since 1820 has benefited from democratic institutions, a belief in capitalism, private property rights, an entrepreneurial culture, abundant resources, openness to foreign investment, the best universities, immigration and relatively transparent markets.

I would add that were it not for two centuries of colonial rule (and the ruthless economic exploitation tha accompanied it), the picture for India would have been somewhat different. I have talked about this previously, in this article: “Economic Exploitation & Drain of Wealth During British Raj“ and in these excerpts from Nick Robin’s essay: “Loot: In Search of East India Company“.

The source of the graph is Prof Angus Maddison who has also done a lot of research on the economic aspect of India’s colonial past. I have quoted from his research in my essay on Drain of Wealth.