Why small differences in growth rates lead to massive wealth gaps over time

A minor one percent difference in annual growth rates can fundamentally reshape a nation's economy over a century. This video explains how to apply the Rule of 70 to calculate the long-term impact of compounding growth on real GDP per capita.

The Rule of 70 is a practical tool for estimating how long it takes for a value to double based on its annual growth rate. By dividing 70 by the growth percentage, you can quickly determine the doubling time of an economy.

Instructional Designer Mary Clare Peate demonstrates this concept by comparing two hypothetical countries starting with identical real GDP per capita. While Country A grows at 2% annually, Country B grows at 3%. Over a span of 140 years, this seemingly small gap results in Country B reaching a significantly higher real GDP per capita than Country A.

Source: Office Hours: Rule of 70