We live in a world that is increasingly noisy, and I’m not talking about the sound waves that eventually stimulate our cochlear hair cells. Our automobiles have better muffler systems than 50-years ago, but increasingly we’re not doing a very good job of creating quiet in the space between our ears. I’m referring to the reality of 24-hour news cycles, social media connectivity and endless cell phone scrolling. Because of that noise, we become accustomed to think that a week ago is a long time and we miss the big long-term trends that matter. One trend that matters a great deal – on both a personal and national level – is economic growth. To be helpful to your learning, I’m going to break this important subject matter into why, how and what.
“Why” it matters; This is the easy part. Why economic growth matters simply because you need economic growth to create private sector jobs. Jobs create production for the firm (whether goods or services), and generates needed income for the employee. If the company does well, it also creates enterprise income, and that income also gets taxed. Beyond the underappreciated deep psychological benefits of work to the individual (purpose, appreciation, mattering), earned income is the main source of government taxation. No economic growth, no jobs. No jobs, no income. No income, nothing to tax. No taxes collected, and governments collapse. I do not include government jobs here because no matter how you define it, a job created by the government is simply moving money from the tax-paying public to a government employed individual. There is no wealth creation, per se.
“How” this economic growth occurs took a leap in recognition in 2025 with the award of Noble Prize in Economics to three individuals who were recognized for their contributions to this field of study[i]. In particular, they were applauded for their operational explanation of innovation-driven economic growth. Models for growth prior to this time went back to a framework that Robert Solow of the Massachusetts Institute Of Technology (MIT) did in the 1950’s. In 2025, half of this $1.16 MM Nobel Prize award went to Joel Mokyr (Northwestern University and Tel Aviv University) when he focused his research on understanding why we observe this so-called “hockey stick of human prosperity”. He attributed it to not only having technical knowledge (what he calls prescriptive knowledge; think steam engine) but how to apply it (which he calls propositional knowledge; think industrial revolution). The other half of the award was split with two economists in Frenchman Philippe Aghion (College de France – Insead (Paris), and the London School of Economics) and Canadian Peter Howitt ((Brown University). All three economists embraced the importance of what Austian economist Jospeh Schumpeter’s defined as the concept of creative destruction, but they went further to quantify the impact. Rather than view technological change as an exogenous variable, Aghion and Howitt contributed to the body of research that quantified technological change as an endogenous variable. At its core, wealth creation will happen if there are economic incentives to propel risk taking. If you stand back, you can quite readily see that it explains why capitalism is practical in a free-exchange society.
As to “What” impact the above research embodies, hard evidence is easily documented if we look at the past 50-years to now. This five decades of time is a relatively short period in the economic annals of mankind, but far better than peering at yesterday’s Tik Tok mania. For historical context, in 1975 Margaret Thatcher had just become the first woman leader of Britain’s Conservative Party and in then unprecedented global geopolitics, an American and Soviet spacecraft linked up in orbit. Let’s look at that period until now, and insert one above half-way though for benchmark perspective, and calmly observe the remarkable impact economic growth has had in our lives by examining just 4 statistics[ii]:
In 1975
- The Global population was 4.1 billion, fully half of whom lived in extreme poverty
- U.S. population was 216 million
- U.S. Real GDP was $5.49 Trillion
- The S&P 500 closed the year at 90.19 (dividend yield was 5.65%[iii])
In 1995
- The Global population was 5.7 billion
- U.S. population was 266 million
- U.S. Real GDP was $10.28 Trillion
- The S&P 500 closed the year at 615.93 (dividend yield was 3.47%[iv])
In 2025
- The Global population was 7.29 billion, only one in ten of whom lived in extreme poverty (probably conservative given the poverty data is from 2015, and 2025 data will not be available for years)
- U.S. population was 322 million
- U.S. Real GDP was $24.03 Trillion[v]
- The S&P 500 closed the year at 6,845 (dividend yield was 1.49%[vi])
By the numbers above, it is abundantly clear that over this past five decades of innovation and ‘creative destruction’ the U.S. consumer has been well-served, and investors fared well too. In summary:
- Global population nearly doubled with extreme poverty reduced from one human being for every two to one in every 10
- The United States population grew just shy of 60% while real GDP went up over 400%
- $100,000 left to compound at 10.54% (9.05% S&P 500 index growth plus a far understated 1.49% of dividends when the average was 3.54%) would have turned into just a fraction shy of $15 Million dollars
These staggeringly impressive numbers are caused by the interaction of two megatrends operating in a virtuous cycle:
- The spread of free markets vanquishing communism and the extreme iterations of socialism
- An exponential progression in information technology (tidbit: a middle school child today carries more computing power in her smartphone than all the computing power of IBM mainframes operating on the planet in 1970)
In spite of these abundant hard-number facts of human progress, in a recent survey 67% of college student respondents say they hold a positive or neutral association with the word “socialism”, compared with 40% on the word “capitalism”.[vii] You don’t see any Nobel Prizes being awarded for economic or free speech protection in socialist countries. I’m not saying we could not improve on affordability issues, but if you think the solution is socialism, then as George Strait sang it: “I have some ocean front property for you in Arizona”.
In this 250th anniversary year of these United States, we need to celebrate many things. However, unleashing the power of human ingenuity in a system that rewards success and punishes failure is what made this country the destination for millions of immigrants. Unbridled capitalism is not a panacea, and regulations are needed to preclude abuse. But, if we think government involvement or central systems create the economic growth (wealth) that raises the necessary taxes to support a society that comprises only 4% of world population and yet represents 65% of the total stock market values in the world, then shame on us. We should not be smug about these achievements, be we should certainly be smart and teach our youth what truthfully raises living standards.
It remains my deep and distinct honor to serve you well.
Patrick Zumbusch
Founder and CEO
[i] “The Nobel Nods At Economic Growth” (David Henderson, Wall Street Journal, October 13, 2025)
[ii] “A Story Of Five Decades” (Nick Murray Interactive, January 2026)
[iii] “S&P 500 Return Details” (Slickcharts.com, January 27, 2026)
[iv] -ditto-
[v] “GDP Update” (3rd Quarter 2025 estimate, United States Congress, Joint Economic Committee, January 26, 2026)
[vi] “S&P 500 Return Details” (Slickcharts.com, January 27, 2026)
[vii] “Poll: College Students Prefer Socialism To Capitalism” (Erica Pandey and Margaret Talev, Axios, November 1, 2025)
