Ity Emerged Since the Late Eighteenth Century, Following on the Tails of the Industrial Revolution. Not Only Were Gaps in Prospe

48 • WHY NATIONS FAIL ity emerged since the late eighteenth century, following on the tails of the Industrial Revolution. Not only were gaps in prosperity much smaller as late as the middle of the eighteenth century, but the rank- ings which have been so stable since then are not the same when we go further back in history. In the Americas, for example, the ranking we see for the last hundred and fifty years was completely different five hundred years ago. Second, many nations have experienced several decades of rapid growth, such as much of East Asia since the Second World War and, more recently, China. Many of these subsequently saw that growth go into reverse. Argentina, for example, grew rapidly for five decades up until 1920, becoming one of the richest countries in the world, but then started a long slide. The Soviet Union is an even more noteworthy example, growing rapidly between 1930 and 1970, but subsequently experiencing a rapid collapse. What explains these major differences in poverty and prosperity and the patterns of growth?Why did Western European nations and their colonial offshoots filled with European settlers start growing in the nineteenth century, scarcely looking back? What explains the persistent ranking of inequality within the Americas? Why have sub- Saharan African and Middle Eastern nations failed to achieve the type of economic growth seen in Western Europe, while much of East Asia has experienced breakneck rates of economic growth? One might think that the fact that world inequality is so huge and consequential and has such sharply drawn patterns would mean that it would have a well-accepted explanation. Not so. Most hypotheses that social scientists have proposed for the origins of poverty and prosperity just don't work and fail to convincingly explain the lay of the land.

THE GEOGRAPHY HYPOTHESIS

One widely accepted theory of the causes of world inequality is the geography hypothesis, which claims that the great divide between rich and poor countries is created by geographical differences. Many poor countries, such as those of Africa, Central America, and South Asia, are between the tropics of Cancer and Capricorn. Rich nations, THEORIES THAT DON'T WORK. 49 in contrast, tend to be in temperate latitudes. This geographic concentration of poverty and prosperity gives a superficial appeal to the geography hypothesis, which is the starting point of the theories and views of many social scientists and pundits alike. But this doesn't make it any less wrong. As early as the' late eighteenth century, the great French political philosopher Montesquieu noted the geographic concentration of prosperity and poverty, and proposed an explanation for it. He argued that people in tropical climates tended to be lazy and to lack inquisitiveness. As a consequence, they didn't work hard and were not innovative, and this was the reason why they were poor. Montes- quieu also speculated that lazy people tended to be ruled by despots, suggesting that a tropical location could explain not just poverty but also some of the political phenomena associated with economic failure, such as dictatorship. The theory that hot countries are intrinsically poor, though contra- dicted by the recent rapid economic advance of countries such as Singapore, Malaysia, and Botswana, is still forcefully advocated by some, such as the economist Jeffrey Sachs. The modern version of this view emphasizes not the direct effects of climate on work effort or thought processes, but two additional arguments: first, that tropical diseases, particularly malaria, have very adverse consequences for health and therefore labor productivity; and second, that tropical soils do not allow for productive agriculture. The conclusion, though, is the same: temperate climates have a relative advantage over tropical and semitropical areas. World inequality, however, cannot be explained by climate or diseases, or any version of the geography hypothesis. Just think of Nogales. What separates the two parts is not climate, geography, or disease environment, but the U.S.-Mexico border. If the geography hypothesis cannot explain differences between the north and south of Nogales, or North and South Korea, or those between East and West Germany before the fall of the Berlin Wall, could it still be a useful theory for explaining differences between orth and South America? Between Europe and Africa? Simply, no. History illustrates that there is no simple or enduring connection 50 • WHY NATIONS FAIL

between climate or geography and economic success. For instance, it is not true that the tropics have always been poorer than temperate latitudes. As we saw in the last chapter, at the time of the conquest of the Americas by Columbus, the areas south of the Tropic of Cancer and north of the Tropic of Capricorn, which today include Mexico, Central America, Peru, and Bolivia, held the great Aztec and Inca civilizations. These empires were politically centralized and complex, built roads, and provided famine relief. The Aztecs had both money and writing, and the Incas, even though they lacked both these two key technologies, recorded vast amounts of information on knotted ropes called quipus. In sharp contrast, at the time of the Aztecs and Incas, the north and south of the area inhabited by the Aztecs and Incas, which today includes the United States,Canada, Argentina, and Chile, were mostly inhabited by Stone Age civilizations lacking , these technologies. The tropics in the Americas were thus much richer than the temperate zones, suggesting that the "obvious fact" of tropical poverty is neither obvious nor a fact. Instead, the greater riches in the United States and Canada represent a stark reversal of fortune relative to what was there when the Europeans arrived. This reversal clearly had nothing to do with geography and, as we have already seen, something to do with the way these areas were colonized. This reversal was not confined to the Americas. People in South Asia, especially the Indian subcontinent, and in China were more prosperous than those in many other parts of Asia and certainly more than the peoples inhabiting Australia and New Zealand. This, too, was reversed, with South Korea, Singapore, and Japan emerging as the richest nations in Asia, and Australia and New Zealand surpass- ing almost all of Asia in terms of prosperity. Even within sub-Saharan Africa there was a similar reversal. More recently, before the start of intense European contact with Africa, the southern Africa region was the most sparsely settled and the farthest from having developed states with any kind of control over their territories. Yet South Africa is now one of the most prosperous nations in sub-Saharan Africa. Further back in history we again see much prosperity in the tropics; some of the great premodern civilizations, such as Angkor in modern Cambodia, Vijayanagara in southern India, and Aksum in Ethiopia, THEORIES THAT DON'T WORK. 51 flourished in the tropics, as did the great Indus Valley civilizations of Mohenjo Daro and Harappa in modern Pakistan.History thus leaves little doubt that there is no simple connection between a tropicalloca- tion and economic success. Tropical diseases obviously cause much suffering and high rates of infant mortality in Africa, but they are not the reason Africa is poor. Disease is largely a consequence of poverty and of governments being unable or unwilling to undertake the public health measures necessary to eradicate them. England in the nineteenth century was also a very unhealthy place, but the government gradually invested in clean water, in the proper treatmen:t of sewage and effluent, and, eventually, in an effective health service. Improved health and life expectancy were not the cause of England's economic success but one of the fruits of its previous political and economic changes. The same is true for Nogales, Arizona. The other part of the geography hypothesis is that the tropics are poor because tropical agriculture is intrinsically unproductive. Tropi- cal soils are thin and unable to maintain nutrients, the argument goes, and emphasizes how quickly these soils are eroded by torrential rains. There certainly is some merit in this argument, but as we'll show, the prime determinant of why agricultural productivity- agricultural output per acre-is so low in many poor countries, particularly in sub-Saharan Africa, has little to do with soil quality. Rather, it is a consequence of the ownership structure of the land and the incentives that are created for farmers by the governments and institutions under which they live. We will also show that world inequality cannot be explained by differences in agricultural productivity. The great inequality of the modern world that emerged in the nineteenth century was caused by the uneven dissemination of industrial technologies and manufacturing production. It was not caused by divergence in agricultural performance. Another influential version of the geography hypothesis is advanced by the ecologist and evolutionary biologist Jared Diamond. He argues that the origins of intercontinental inequality at the start of the modern period, five hundred years ago, rested in different historical endowments of plant and animal species, which subsequently 52 • WHY NATIONS FAIL influenced agricultural productivity. In some places, such as the Fer- tile Crescent in the modern Middle East, there were a large number of species that could be domesticated by humans. Elsewhere, such as the Americas, there were not. Having many species capable of being domesticated made it very attractive for societies to make the transition from a hunter-gatherer to a farming lifestyle. As a consequence, 1\ farming developed earlier in the Fertile Crescent than in the Americas. Population density grew, allowing specialization of labor, trade, urbanization, and political development. Crucially, in places where farming dominated, technological innovation took place much more rapidly than in other parts of the world. Thus, according to Diamond, the differential availability of animal and plant species created differential intensities of farming, which led to different paths of technological change and prosperity across different continents. Though Diamond's thesis is a powerful approach to the puzzle on which he focuses, it cannot be extended to explain modern world inequality. For example, Diamond argues that the Spanish were able to dominate the civilizations of the Americas because of their longer history of farming and consequent superior technology. But we now need to explain why the Mexicans and Peruvians inhabiting the for- mer lands of the Aztecs and Incas are poor. While having access to wheat, barley, and horses might have made the Spanish richer than the Incas, the gap in incomes between the two was not very large. The average income of a Spaniard was probably less than double that of a citizen of the Inca Empire. Diamond's thesis implies that once the Incas had been exposed to all the species and resulting technologies that they had not been able to develop themselves, they ought quickly to have attained the living standards of the Spanish. Yet nothing of the sort happened. On the contrary, in the nineteenth and twentieth centuries, a much larger gap in incomes between Spain and Peru emerged. Today the average Spaniard is more than six times richer than the average Peruvian. This gap in incomes is closely connected to the uneven dissemination of modern industrial technologies, but this has little to do either with the potential for animal and plant domestication or with intrinsic agricultural productivity differences between Spain and Peru. THEORIES THAT DON'T WORK. 53

While Spain, albeit with a lag, adopted the technologies of steam power, railroads, electricity, mechanization, and factory production, Peru did not, or at best did so very slowly and imperfectly. This technological gap persists today and reproduces itself on a bigger scale as .new technologies, in particular those related to information technology, fuel further growth in many developed and some rapidly developing nations. Diamond's thesis does not tell us why these crucial technologies are not diffusing and equalizing incomes across the world and does not explain why the northern half of Nogales is so much richer than its twin just to the south of the fence, even though both were part of the same civilization five hundred years ago. The story of Nogales highlights another major problem in adapting Diamond's thesis: as we have already seen, whatever the drawbacks of the Inca and Aztec empires were in 1532, Peru and Mexico were undoubtedly more prosperous than those parts of the Americas that went on to become the United States and Canada. North America became more prosperous precisely because it enthusiastically adopted the technologies and advances of the Industrial Revolution. The population became educated and railways spread out across the Great Plains in stark contrast to what happened in South America. This cannot be explained by pointing to differential geographic endowments of Iorth and South America, which! if anything, favored South America. Inequality in the modern world largely results from the uneven dissemination and adoption of technologies, and Diamond's thesis I I , , does include important arguments about this. For instance, he argues, following the historian William McNeill, that the east-west orientation of Eurasia enabled crops, animals, and innovations to spread from the Fertile Crescent into Western Europe, while the north-south orientation of the Americas accounts for why writing systems, which were created in Mexico, did not spread to the Andes or North America. Yet the orientation of continents cannot provide an explanation for today's world inequality. Consider Africa. Though the Sahara Desert did present a Significant barrier to the movement of goods and i~eas from the north to sub-Saharan Africa, this was not insurmountable. The Portuguese, and then other Europeans, sailed around the coast and 54 • WHY NATIONS FAIL eliminated differences in knowledge at a time when gaps in incomes were very small compared with what they are today. Since then, Af- rica has not caught up with Europe; on the contrary, there is now a much larger income gap between most African and European countries. It should also be clear that Diamond's argument, which is about continental inequality, is not well equipped to explain variation within continents-an essential part of modern world inequality. For example, while the orientation of the Eurasian landmass might explain how England managed to benefit from the innovations of the Middle East without having to reinvent them. it doe n't explain why the Indu trial Revolution happened in England rather than, ay, Moldova. In addition, as Diamond himself points out. China and India benefited greatly from very rich suites of animal and plants and from the orientation of Eurasia. But most of the poor people of the world today are in those two countries. In fact, the best way to see the cope of Diamond's thesis is in terms of his own explanatory variables.Map 4 (opposite) shows data on the distribution of Sus scrofa, the ancestor of the modern pig, and the aurochs, ancestor of the modern cow. Both species were widely distributed throughout Eurasia and even orth Africa.Map 5 (page 56) shows the distribution of some of the wild ancestors of modern do-- mesticated crops, such as Oryza sativa, the ancestor of Asian culti- vated rice, and the ancestors of modern wheat and barley. It demonstrates that the wild ancestor of rice was distributed widely across south and southeast Asia, while the ancestors of barley and wheat were distributed along a long arc from the Levant, reaching through Iran and into Afghanistan and the cluster of "stans" (Turk- menistan, Tajikistan, and Krgyzistan). These ancestral species are present in much of Eurasia. But their wide distribution suggests that inequality within Eurasia cannot be explained by a theory based on the incidence of the species. The geography hypothesis is not only unhelpful for explaining the origins of prosperity throughout history, and mostly incorrect in its emphasis, but also unable to account for the lay of the land we started this chapter with. One might argue that any persistent pattern, such as THEORIES THAT DON'T WORK. 55

~'- -~-." -

'. 1\

•\·D :e;'. •fK .,: •• ," ~~'", ~ • '<>.

~ Distribution of wild cattle 9 Distribution of wild pigs D Modem boundaries

Map 4: The historical distribution of wild cattle and pigs the hierarchy of incomes within the Americas or the sharp and long- ranging differences between Europe and the Middle East, can be explained by unchanging geography. But this is not so. We have already seen that the patterns within the Americas are highly unlikely to have been driven by geographical factors.Before 1492 it was the civilizations in the central valley of Mexico, Central America, and the Andes that had superior technology and living standards to North America or places such as Argentina and Chile. While the geography stayed the same, the institutions imposed by European colonists created a "reversal of fortune." Geography is also unlikely to explain the poverty of the Middle East for similar reasons. After all, the Middle East led the world in the Neolithic Revolution, and the first towns developed in modern Iraq. Iron was first smelted in Turkey, and as late as the Middle Ages the Middle East was technologically dynamic. It was not the geography of the Middle East that made the eolithic Revolution S6 • WHY NATIONS FAIL

G Rice:area of origin -Rice:distribution of wild relatives i"2'l Wheat: area of origin • Wheat: distribution of wild relatives ~ Barley: area of origin • Barley: distribution of wild relatives D Modem boundaries

Map 5: The historical distribution of wild rice, wheat, and barley

flourish in that part of the world, as we will see in chapter 5, and it was, again, not geography that made the Middle East poor. Instead, .it was the expansion and consolidation of the Ottoman Empire, and ~ it is the institutional legacy of this empire that keeps the Middle East poor today. Finally, geographic factors are unhelpful for explaining not only the differences we see across various parts of the world today but also why many nations such as Japan or China stagnate for long periods and then start a rapid growth process. We need another, better theory.

THE CULTURE HYPOTHESIS

The second widely accepted theory, the culture hypothesis, relates prosperity to culture. The culture hypothesis, just like the geography hypothesis, has a distinguished lineage, going back at least to the Society for History Education

The World According to Jared Diamond Author(s): J.R. McNeill Source: The History Teacher, Vol. 34, No. 2 (Feb., 2001), pp. 165-174 Published by: Society for History Education Stable URL: http://www.jstor.org/stable/3054276 . Accessed: 25/07/2013 22:57

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This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions The WorldAccording to JaredDiamond

J.R. McNeill Georgetown University

IN ITS SHORTCAREER, Jared Diamond's Guns, Germs, and Steel' has enjoyedremarkable success for a book not muchconcerned with diets,cats, or how to get richquick. It has appearedon best-sellerlists andas a selection for several book clubs, won a PulitzerPrize, and accompaniedPresident Clintonon his 1999 vacationon Martha'sVineyard. Not bad for an amateur historian.But whatclinches the standingof the book for me is thatfor three straightyears it has been voted the most popularreading assignment by my freshmenand international relations graduate students alike. Not badfor any 427-page book. Here I will arguethat the success is well-deservedfor the first nineteenchapters--excepting a few passages-but that the twentieth chaptercarries the argumentbeyond the breakingpoint, and excepting a few paragraphs,is not an intellectualsuccess. The argumentof the book is that the distributionof wealth and power among societies aroundthe world has been powerfully shapedby biogeographic factors and that environmentalendowment has sharply favored some societies, indeed some continents, over others. This has made it highly probable (if never fully certain) that these lucky ones would in time prevail over the unlucky. Those partsof the world fortunateenough to have a large suite of potentially domesticableplants and animals, and located so as to favor the migrationand diffusion of domesticatedplants and animals, enjoyed great advantages.They developed farming,metal- The History Teacher Volume 34 Number2 February2001 @ Society for History Education

This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions 166 J.R. McNeill lurgy, writing, states, and a few otheruseful things earlierthan did other societies. They also had earlierexposure to "crowddiseases," and thereby earneda wider portfolio of immunitiesto lethal infections earlier.These, the proximate causes of success in history, are in shorthandthe "guns, germs, and steel" of the title. But behind them lay the ultimatecauses of success: a favorableenvironmental endowment. Success, I note in passing, seems to be defined in terms of survival and spatial spread,a more- or-less darwinianview of how societies relate to one another Diamond's book is very distinctive in several respects. First, it takes on the very big picture, treating the human experience as a whole. Professional historiansare very averse to doing this themselves, trained as they are to consult documentsand tease out their meanings. Even the growing cadre of world historians only rarely produces a bold soul willing to venture onto ground where his or her expertise is inevitably paper thin. It is a strikingfact that most of the big picturehistories have been writtenby people not trainedas historians.Diamond's background is in physiology and evolutionarybiology. Another distinction is that Diamond's book argues for the possibility of a genuinely scientific history. Historians are divided as to whether their craft ought to be classified as an art or a social science. Diamond thinks historycan be a science in roughlythe same way thatevolutionary biology or astronomy are sciences. Experiments are impossible in all these fields (as opposed to physics or chemistry), but so-called natural experiments are possible. In these one can compare developments in similarhistorical cases thatare made differentby the presenceor absence of a potentiallykey variable.Methodologies developed in paleontology, ecology, and epidemiology, he says, can help historians make their inquiriesmore scientific. Diamondbelieves he has done this by compar- ing the long-termdestinies of the continents. Diamond's methods apply best to long-term and large-scale inquiry. As he puts it, he can predict with a high degree of accuracy that of the next 1,000 babies born at University of California-Los Angeles Medical Center,between 480 and 520 will be boys. But he could not predictwith any confidence that his own two children would be boys. Similarly, he says, one could safely predict the outcome of competition between Europeansand Native Americans in North America, but one could not have confidentlypredicted the outcome of the 1960 presidentialelection. Hence, Diamond seems to say, his methods work best on the largest scale, where he has chosen to apply them in this book. By Diamond's logic of scientific history, then, one can see why the most powerful societies in world history all had roots in Eurasia, but it is harder to explain why, for example, the most powerful in 1850 was GreatBritain.

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This argument has more to be said for it than this crude summary might suggest. It is, in my view, persuasiveas an answerto why Eurasian societies dominated those of Austronesia and the Americas after the requisite intercontinentalcontacts were forged. Eurasianshad the guns, germs and steel and others did not. The argumentworks for sub-Saharan Africa, although less well I think. The book is even more persuasive on the systematic edge that food-producers,wherever they are found, enjoyed (and enjoy) over food-collectors. It is very persuasive on the usefulness of looking at the very big picture, at broad comparisons, and ultimate causes. It is very persuasive on the possibilities of history as a science, and on the value of stepping outside the usual disciplinary boundariesand into the realm of the naturalsciences. And it is provoca- tive because it melds Austronesiaand Polynesia into world history and indeed takes New Guinea as its startingpoint and in some cases as its frame of reference.This is, I expect, unique among world histories. Please rememberthese words of praise,because I will now proceed to criticize the book although I accept much of its major argument and admirethe book greatly. Some of the criticismsthat follow, I should say, have as their ultimate cause studentcomments or papers. Look at the chartthat appears on p.87, showing the ultimatecauses and proximatecauses of the broadestpatterns in history, which is Diamond's way of saying the competitive success of some societies at the expense of others. What ultimately counts, it seems, is the availabilityof potentially domesticable species and a geography conducive to the easy spread of useful species. As it happened,Eurasia enjoyed an edge in both depart- ments. It had far more in the way of domesticablespecies than any other continent, and its predominantlyEast-West axis made for easier and faster diffusion of species.2 These are interestingthoughts, new to historians, and they go a long way towards explaining the formidability of some Eurasiansocieties vis-a-vis those elsewhere. But the fact thatEurasia spawned the world's most formidablesocieties does not pose a trulyvexing question.3 Eurasiaaccounted for some eighty percentof humankindover the past 3,000 years, and probablywell before that.Even if formidabilitywere randomlydistributed (which I do not suggest it was), one would expect to find it more often in Eurasiansocieties than elsewhere.Indeed because greater population ordinarily means greater inter- action, more intense intersocietalcompetition, and the faster and more thoroughacquisition of a broaderarray of disease immunities,the probabil- ity would be even higherthan eighty percent that Eurasia should at any given moment have producedhistory's most formidablesocieties. The deck was stackedeven withoutDiamond's biogeographical factors. So Diamondhas proposedsome excellentnew answersto a less-than-perplexingquestion.

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Factors Underlying the Broadest Pattern of History

ULTIMATE east/west axis FACTORS

many suitable ease of species wild species spreading

many domesticated plant and animal species

food surpluses, food storage

large, dense, sedentary, stratifiedsocieties

I LI technology

PROXIMATE FACTORS horses guns, ocean- political epidemic steel going organization, diseases swords ships writing

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A more vexing question, and one more familiar to historians,is why Europe?Why, among Eurasiansocieties, was it those of western Europe that in the past 500 years (or only the past 200 accordingto some recent scholarship4) emerged to dominate the rest of the planet? Diamond devotes a good chunk of his final chapter to this question, leaving biogeography and domesticability behind, but retaining his focus on geography. He argues that Europe's topographyled to political fragmentation, encouragingsharp competition among states, and eliminating the possibility that a single rulercould preventsome innovationor discovery from taking hold. China, on the other hand, was predisposed towards unity by its relatively homogeneous geography, by its lack of difficult mountains, by its "connectedness"to use Diamond's term. He uses the argument that Columbus in 1492 successfully found a backer despite several rejections,whereas Admiral Cheng Ho's oceanic voyaging ceased in 1433 by imperialcommand; this is to show how Chinese unity stunted Chinese development whereas European fragmentationlet a hundred flowers bloom. The Fertile Crescent,Diamond says, committedecologi- cal suicide and thereforehad no chance to emerge as the world's domi- nant region. (India does not get to the startingline in this chapter.)That Europe's advantage lay in its geography and environmentis not a new idea: E.L. Jones in 1981 made that argumentin great detail, and others did it-if less thoughtfully-before him.5 Even if Diamondhas his geographyright, it is not a sufficientexplanation. Indeedit is logicallyimpossible to explaina temporaryphenomenon, such as the dominanceof Europein certaincenturies (or of Chinain earlierones) by referenceto more or less permanentconditions, such as the topographyof Europeand China.Europe may or may not have a geographythat encour- ages greaterfragmentation than does China's (and I think this is open to questionif one leaves out the GrandCanal, a man-madelink). But conceding thatfor the moment,political fragmentation is not necessarilyan advantage, indeed in some circumstances,such as the presence of a powerful and aggressiveneighbor, it is a weakness.The West Africanforest zone has been politicallyfragmented for as farback as we can tell, yet this has not helpedits societies in relationto those of the savannato the north,or, after 1450, to those of Europe.India has been politicallyfragmented for most of its long recordedhistory, and has been repeatedlyinvaded and conquered by outsid- ers. Its fragmentationdid not generatehighly efficient states and technologically precocious societies bent on expansion and conquest. (The Mughal Empire,while bent on conquest,was not technologicallyprecocious, and only occasionallyhighly efficient;it was also CentralAsian in origin, not At left: From page 87, Guns, Germs, and Steel: The Fates of Human Societies by Jared Diamond (New York, London:W.W. Norton & Company, 1999).

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Indian.)Indeed Europe itself was politicallyfragmented in the 7th, 8th and 9th centuriesyet showednone of the formidabilityit acquireda millennium later.So, using Diamond'smethods of comparisonacross time and space, I concludethat geographical fragmentation even if genuinelymore characteristic of Europe than elsewhere, is far from sufficientexplanation for the question"Why Europe." I will not attemptto answerthe questionhere,6 but will claim that one needs to look for clusters of conditionsand circumstances, some of which may be permanentfeatures but others of which necessarilymust not be, in orderto explaintemporary phenomena such as the emergenceof Europe.These conditionsand circumstancesform syner- gistic combinationsthat, for a time, allow one society or one region to become moreformidable than others. This soundscomplex, as it must. In sum, then, I believe Diamond has pushed the argumenttoo far in trying to answer"Why Europe" with an answerso rootedin geographical comparison.What is sufficient for the question, "WhyEurasia" does not suffice for the more demandingquestion "Why Europe." Eurasia's dominance is essentially a permanentphenomenon, if one allows, as Diamond does, heirs and descendants of Eurasiansocieties to count, and so it is plausible to explain it by referenceto geographicalendowment. In the final chapterDiamond acknowledges that his analysis invites the charge of geographicaldeterminism. He does not refute the charge, but says that the fears associated with it are unfounded, that human creativity and individuality do matter, that our futures are not pro- grammed by biogeography, but, merely, that environmentalconditions provided better startingpoints for some societies than for others. This disclaimer undersells the book's power, because the argument is that some environmentswere much, much betterthan others, and it was well- nigh impossible thatNew Guineansshould have become world conquer- ors. IndeedI thinkDiamond's book is geographicaldeterminism, the best entry in that category I have ever seen. But I think Diamond's argumentis overdone, even considering the disclaimers in the final chapter. I have already argued that Europe's emergence in modem centuriescannot be put down to geography. Con- sider Egypt. It did not commit ecological suicide, but maintained the world's largest-scalesustainable society based on a very durableecologi- cal system. This system lasted from Pharaonictimes until the completion of the Aswan High Dam (1971). Great interannualvariability existed in the flood waters and silt subsidy broughtby the Nile, but over the long haul, Egypt's environmentwas virtuallythe same. Yet Egypt's fortunes fluctuated wildly. It experienced long periods of power and regional dominance, and other periods of weakness and domination by others. Perhaps Egypt, as prominentas it is, amounts to too small a canvas in

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Diamond's analysis, too small a sample size from which to draw conclu- sions. But if so, this merely points to the limits of Diamond's scientific method as well as the limits of geographicaldeterminism. Diamond's argumentexceeds its limits on anotherpoint as well, that of the "tiltingaxes." Throughoutthe book Diamond argues that the East- West axis of Eurasia provided an advantage in the dispersal of useful, mainly domesticated, plants and animals. The chart on p. 87 identifies this as the most ultimateof ultimatefactors. With respectto the lengths of days and the importance thereof for flowering plants, the argument makes fine sense. Maize's spreadnorthward from Mexico was, Diamond persuasively argues, slowed by the necessity of genetic adaptationto. different day lengths at different latitudes. Maize could spread much more easily East-West than it could North-South. But with respect to animals the argumentmust be made in more general climatic and ecological terms, and here it gets weaker.Eurasia's East-West axis could not have been much help in the spreadof cattle or goats. Its extreme variety of climatic conditions, its high mountains, deserts, and tropical forests posed a considerable challenge for the spread of most animals (and I should think, plants). From the Gulf Stream-inducedequability of western Europe, to the continental climate extremes of Kazakhstan,to the monsoon rhythms of Korea, temperatureand moisture regimes show tremendous variation. A given line of latitude within Eurasia might ? ? i' L 0. oil:

I., Cal:

4 NO 14? . 7 : ..... 7". ~ ...,r -r?A : '?E ra i "? ?; v"- owe A-ot KIP 1.C~r'Uzi.,;

Figure 10.1: Major axes of the continents.From page 177, Guns, Germs, and Steel: The Fates of Human Societies by Jared Diamond (New York, London: W.W. Norton & Company, 1999).

This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions 172 J.R. McNeill embraceconditions as diverse as those of Shanghai,Lhasa, Delhi, Basra, and Marrakesh,all of which are very close to thirtydegrees north(North Africa counts for most of Diamond'spurposes as partof Eurasia[p. 161]). Beyond this, since North Africa counts as part of Eurasia,then Africa deserves an East-Westaxis like Eurasia's,because it is much fartherfrom Dakar to Cape Gardafuithan it is from the Cape of Good Hope to the Sahara. And Australia,which does not get an axis on the map, extends furtherEast-West than North-South.In Australia,I should think rainfall isohyets would correspondbetter to the migrationhistory of plants and animals than do lines of latitude and longitude. All this, I think, casts some doubt on the explanatorypower of the axis argument. Indeed, the successful spread of crops and livestock (not to mention the writing, wheels and other inventions that Diamond mentions in this argument)is surely determinedin largepart by factorsother than geography, and the role of geography is much more complex than the axes suggest. The role of othergeographical factors I alludedto in referenceto Eurasia. But the spread of useful species was usually a conscious act (weeds were different). They could not, of course, flourish where ecological conditions did not permit,but where they went when was largely a humanaffair, determined by tradelinks, migrationroutes, and happen- stance. Coffee, an Ethiopiannative, eventually made its greatestimpact in southernBrazil, not at Ethiopianlatitudes within Africa. Cattledomes- tication spread from its point of origin (in southwest Asia) to South Africa and Sweden, flourishingin between in circumstancesas diverse as Sudan's and Switzerland's. Along the East-West axis of Eurasia,cattle became importantin Europe,fundamental in India,yet inconsequentialin China.This is not because Chinese environmentalconditions were inhos- pitable to cattle, but because Chinese social and economic conditions were. The diffusion of cattle as of AD 1000 was along a North-Southaxis more than an East-West one, partly because cattle can cope with both heat and cold, but also because cattle-raisingfit in with the ideological, cultural, social, and economic systems of some societies better than others, regardlessof geography. For these reasons I think Diamond has oversold geography as an explanationfor history.I find the best partof his geographicdeterminism to be the biogeographic part. The business about the distribution of potentiallydomesticable species was new to me, and I think to historians generally,and I accept the importanceof these facts. The differentialease of plant and animal diffusion as determinedby continentalaxes strikes me as less persuasive. But that, on Diamond's scale, may be only a quibble. However the spread of useful species was governed, who had them and got them first was indeed important.

This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions The World According to JaredDiamond 173

There are otherquibbles I might pursuebut will only list in the interest of brevity. First, Diamond's organization of the world into competing continents seems at times conceptually dubious.' Whateversocial units might genuinelycompete-kin groups,states, firms in the modem world- continents do not. Diamond uses the continents as units of analysis in broadhistorical comparison and does not imagine thatthey were actually consciously competing with one another.Nonetheless, this arrangement needs a more explicit justification and ought not to stand unexamined. Second, Diamond assumes that all societies seek wealth and power, much as evolutionary biologists tell us individuals of enduring species seek to maximize their genetic footprint upon the future. No doubt societies do, but surely to varying degrees, which might mattereven on large scales. Some societies sought to maximize their formidability, while others aimed for internalharmony or spiritualgrace as well; and of course these commitmentsmight vary within a given society over time. Thirdly, people help shape their environments, a fact Diamond recog- nizes in claiming the Fertile Crescentcommitted ecological suicide, and in suggesting thatpotential domesticates might have been killed off in the Americas and Australia if the "overkill hypothesis"of late Pleistocene extinctions is correct. But in general-perhaps my perspective as an environmentalhistorian makes me oversensitive here-it seems to me that Diamond's geography and environment are too fixed whereas I preferto see society and environmentlocked in co-evolutionaryembrace. These, I emphasize, are quibbles when viewed on the scale Diamond chooses. And I want to emphasize as well that Diamond is right to insist that this scale is a useful one for historians,an essential antidote,or more charitably, a counterpart,to the detailed, narrowly-boundedwork that professional historiansare trainedto do in graduateschool. Conclusion

Finally, I wish to draw attention to an implication of Diamond's argument.Here I will not carp or criticize, but merely observe. Econo- mists and policy wonks normallybelieve that prosperitylies ahead if one only gets the policies right. Modernizationtheorists used to think that with the right programsand policies, one could, over time measured in years or decades, recast a society and put it on the road to prosperity, stability and other good things. The World Bank lends billions in this faith. But Diamond says that "the hand of history's course as of 8,000 B.C. lies heavily on us" (p. 417). He notes thateven in this modem age of microchips and telecoms, the most powerful and wealthiest societies are the heirs of Eurasian predecessors who pioneered domestication and

This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions 174 J.R. McNeill reapedthe benefits. Japanor the United States might flourishfor a while, like Europe or China, but not, to repeathis examples, Paraguayor Zaire (now Congo). Some twentypercent of humanity,although created equal- Diamond is militantly anti-racistthroughout-is thus permanentlyrel- egated to the minor leagues. The die was cast long ago, and most of Austronesia,Africa, and the Americas rolled snake eyes. Fatalistic, perhaps, but probablytrue for the foreseeable future. While I have sung its praises only in passing and dwelt on its faults, I want to repeatthat overall I admirethe book for its scope, for its clarity, for its eruditionacross severaldisciplines, for the stimulusit provides, for its improbablesuccess in making students of internationalrelations believe thatprehistory is worththeir attention, and, not least, for its compel- ling illustrationthat humanhistory is embedded in the largerweb of life on earth.

Notes

1. JaredDiamond, Guns, Germs,and Steel: The Fates of Human Societies (New York: W.W. Norton, 1997). This essay is based on a presentationgiven at the annual meeting of the American HistoricalAssociation in Chicago (January,2000). I thankmy fellow panelists PatriciaGalloway and JaredDiamond for the bracingdiscussion. 2. For expample, of the world's 148 large herbivorousmammals, only 14 have been successfully domesticated. Thirteen of those 14 existed naturallyin Eurasia (the llama did not). See pp.157-75. 3. When I made this case at the American Historical Association meeting in January2000, at a session devoted to Diamond's book, Prof. Diamond arguedvigorously that I was wrong on this point, that this is a vexing question. 4. KennethPomeranz, The Great Divergence: Europe, China and the Making of the ModernWorld Economy (Princeton: Princeton University Press, 2000); AndreGunder Frank,ReOrient: The Global Economyin the Asian Age (Berkeley:University of Califor- nia Press, 1998). 5. The EuropeanMiracle (Cambridge:Cambridge University Press, 1981). 6. I would, if trying, insist on the importanceof ideological factors in explaining China's traditionof unity (since the 3rd century BC) and Europe's disunity. With the gradual adoption of Confucian ideals, Chinese elites regarded unity as normal and desirable, an outlook that Europeanslacked. The efforts of Charlemagne,Napoleon and Hitler ran against the grain, not with it. The example of Rome, never a pan-European empirein the first place, spoke only to some Europeans,and by the fifteenthcentury many of those came to see the competingGreek city-states rather than the RomanEmpire as the legitimate model for internationalsociety. 7. See M. Lewis and K. Wigen, The Myth of Continents(Berkeley: University of CaliforniaPress, 1997).

This content downloaded from 130.191.17.38 on Thu, 25 Jul 2013 22:57:43 PM All use subject to JSTOR Terms and Conditions Culture Makes Almost All the Difltrence

couregerather than suppresseconomic development,the imbalance between 1 Chineseperformance at home and abroad is disappearing,as China sustains the phenomenalgrowth rates that propelled the Clonfucian"dragons" from the Third !ilorld to the First.) An economistfriend, a masterof political-economictherapies, solves the CultureMakes Almost earlier,perhaps now obsoleteparadox by denving any connection with culture. Culture, he says,does not permit him to predictoutcomes. I disagree. One could have foreseenthe postwar economic successof Japan and Ger- All the Difference manv by taking account of culture. The same with South Korea versus Turkey, Indonesiaversus Nigeria. On the other hand, culturedoes not standalone. Economic analysis cher- ishesthe illusion that one good reason should be enough, but the determi- DAVID LANDES nants of complex processesare invariably plural and interrelated. Monocausal explanationswill not work. The samevalues thwarted by "bad government" at home can find opportunity elsewhere,as in the case of China. Hence the specialsuccess of emigrant enterprise.The ancient Greeks, as usual, had a word for it: Thesemetics, alien residents,were the leavenof societiesthat sneeredat money and crafts (hencethe peiorative senseof the Greek-rootedword "banausic"-of an artisan,dull, pedestrian).So strangers found and sold the goods and made the money. Becauseculture and economic performanceare linked, changesin one will Max $7eber was right. If we learn anvthing from the historv of economic de- work back on the other. In Thailand, all good young men used to spend velopment, it is that culture makes almost all the clifference.Witness the en- years undergoing a religious apprenticeshipin Buddhist monasteries.This terprise of expatriate minorities-the Chinese in East and Southeasr Asia. periodof ripeningwas good for the spirit and soul;it alsosuited the somno- Indians in East Africa, Lebanesein Viest Africa. and (lalvinists through- Jews lent pace of traditional economic activity and employment. That was then. out much of Europe. and on and on. \et culture, in the senseof the rnncr val- Todav,Thailand movesfaster; commerce thrives; business calls. As a result, ues and attitudes that guide a population, frightens scholars. It has a su.lfuric younB men spiritualize for a few weeks-time enough to learn some prayers odor of race and inheritance, an air of immutabilitv. ln thoughtful moments, and rituals and get back to the real, material world. Time, which everyone economists lnd other social scientists recognizc that thrs is not true, and in- knows is money, has changedin relative value. One could not have imposed deed they salute examples of cultrrral change for the better while deploring this change, short of revolution. The Thais have voluntarily adjusted their changes ior the u'orse. But applauding or deploring imphes the passivrn'of priorities.(It should be noted in passingthat the Chineseminority led the the viewer-an inability ro use knor,r'ledgeto shape people and things. The charge.) technician would rather change interest and exchange rates, free up trade, al- The Thai story illustratesculture's responseto economic growth and op- ter political institutions, manage. Besides,criticisms oi culture cur close to portuniry. The reverseis also possible-culture may shift against enterprise. the ego and injure identity and self-esteern.Coming from orrtsidcrs,such ani- We have the Russiancase, where seventy-fiveyears of anti-market, anti- madvcrsions, however tactful and indirect, stink of condescension. Berrevo- profit schooling and insider privilege have planted and frozen anti-entrepre- lent improvers have learned to steer clear. neurial attitudes. Even after the regime has fallen, people fear the But if culture does so much, why does it not q.ork consistentlvl F-.cono- uncertaintiesof the market and yearn for the safe tedium of state employ- mists are not alone in asking whv some people-the Chinesc. sav-hlvc long ment. Or they yearn for equality in povertv, a common feature of peasant heen so unproductive at home yet so enterprising au'av. If culture nl.ltters, culturesaround the world. As the Russianjoke has it, peasantIvan is iealous why didn't it change C--hina?(V/e should note that ',r,ithpolicies thrt non'en of neighbor Boris becauseBoris has a goat. A fairy comes along and offers c tiLl-u R l, \1,\T'I t,Rs

In the ntnctcenth et'trturr', a .listineuishccl;\rge ntttle' Jt:en llautista Aibtrdi, Ivan a single u'ish. What does he u'ish for? That Bons s goat should drop u'orried about thc spint ()f nati\.c enterprise. In I ll 52. he u'rote. in worcls that dead. anticipated what lvlar \{Ieher n'ould rl'ritc fiftl vexrs liltcr, F,rrtunately. not all Russians think that wirv. The collapse of .itlarxist pro- hibitions ancl inhibirions has led to a nrsh of husiness activitv, the hest ot ir Rrspectthr .rltarof evcr. [.elref. \f,errish Amcrtea, iirnitr-c1 to (.etholicisnrto thc linked to inside deals, some of it crinrinal, much of it the work of non-Rus- trcirrsrolroi arr! othcr religiorr,rc.cmblc-s r s,llitan'ancjstlcnt c()llvcnt rlf nttns sian mrnorities (Armenians. Georgians. etc.). The leaven is there, irnd ohen . . . Tt' erclu.lcdiil'erent reliqions in SouthAmericir ts to cxeludethe [inglish,the thar suffices: the inrtiative of an enterprising,.different feu'. In the meantin)c. (iernrans^the Srv;ss.thc \r,rth .\nrrricrtns,s'hich is to r.tr'the yerv pcoplethis old habits remain, corrr.lption and crime are rampant, culturc sar rrges- contincnt tn()stnecd\. To brine thenr rvith,rut thcir rtligron is 1o brinq thent elections hang on thcse issues,and the outconle is not certain. q'ithout the aqcntthat makcsthem u'hat they arc.l

DEPENDENCYTHEORY, ARGENTINA, AND Some have attributcd Argcnrina's kxv rrte of savings to rapid popuirrtion FERNANDO HENRIQUE CARDOSO'SMETAMORPHOSIS gro\l'th end high rates of immigration-to rvhich I would add bad habits ,rf conspicuous consumpti()n. In anr cvent, foreign capital florvs depcndcd as Dependencv tbcorv w:ts a comforting alternative to cultural explanations of much on supply contlitrons :rbroad as on Argentine opportrtnities. During underdevelopment. Latin American scholars and outside svmpathizers cx- \\brld \Var I, the Brrtish neerled mone,v and had to litluidete foreign assets. plained the failure of Latin American development, all the worse bv contrast .\lthough rernaining Argentina's biggest creciitol, thev no longcr playcd the u,ith North America. as the consequenceof the misdeeds of stronger. richer 'l gr()\\'th-pronr()ting role ,rf earlier decades. hc l,lnitcd States picked up s()me nations. Note that the dependen

tn prilatiza- clependencvtheorl counseled has lreen dismantled a welter of JAPAN'SMEIJI RESTORATION- tions. iVlerrco, once the horne of somc of the most strident tlependettcistas, COUNTERPOISETO DEPENDENCY THEORY has rleveloped e hroad national consensust svnrbolized bv NAFTA, that its interests are best served b1'cconomic intimacv with thc Unitcd States and Ilernarcl [-eu'is once ol.serveclthar "rvhen pcople realizc thet thrngs are going Canada. I'he lamh has leapt rnto the m()uth of the lion and eppearst() ha\c s'rong. thert'lre t\\'o questions ther can ask. L)ne is,'\ihat did rve dcr benefited from thc enc()unter. urong?'and the ()theris'V'ho did this to us?'The l:rtterleads to conspirircv For vear:. Fernando Henrique Cardoso u'as a leading figure of the l,:rtin theories and paranoia. Thc first (luestion leacisto enother line of thinking: 'How American depcndencvschool. In the 1960s and 1970s,the sociologist(.ar do \re put it right?"" In the seconclhalf of thc twentleth centur\'. Latiil closo r.vroteor cdited s()rnet$ient\' lrooks on the sLrbject.Some of them be- Anrerrca chose conspiracv theories and paranoi:r. In the second half of the camr- the standlrd texts that shaped a generatl()n of students. Perhaps the nineteenth centur)-.Japan asked itseli. "How'do we put it nght?" best kncrwn was Dependeno, and Det'elopment in Latin Antertca.ln rts Eng- Japan had a revolution in 1867-.186ti. Thc feudal shogunate was over- lish versron, it ended vn'itha turgid, less-than-stirringcredo: thrown-reallv it collapsed-and control oi the state returned t() the emperor in Kyoto. So ended a quarter millennium of Tokugawa rule. But the Japanese The effectiyebamle . . . is benveentechnocratic elitism and a visionot the torma call this overturn a restoration rather than a revolution becausethey prefer to tive processof a rnassindustrial societvwhich can offer *'hat is populirr;rs see it as a return to normalcv. Also, revolutions are for China. The Chinese specrfrcallr,nationaland uhich succecdsin transformrngthe demandfor a more have dvnasties-.fapan has t-'neroyal familv, going back to the heginning. developedeconomv and lor a democraticsocretv into a statethat expressesthe The sl'mbols of national unitv rvere alreadl' present; the idcals of national vitalrryof trulv popular forces.capable of seekingsocialist forms for the social pnde, alreadv defined. This saved a lot of turrloil. Rcvolutions, like civil ore.anrzari,'nof the futurc. wars, can be devastating to order and national efficac-v.The NIeiii Restora- tion had its dissensionsand drssents,often violent. Thc final years of the old. Tl-ren.in I99.1, Cardoso became Rrazil's minister of finance. He found a the first of the neu,, were stained with the blood of assassinations,of peasant countrl walln of economic inferiority, and lr>ok how far it had come. C)kubo was q'cre g,,ringback to thc davs ,rf r',rr.. lnsteacl, ther found thenrselvt. crrught much impressed bv the German people he met. [{e found thenr thriftv, Lrpin fonrorrow. in e 'nvilvr'of rnodernization. hecausethitt $es the onlv r.r'lr' hardworking, "unpretentlous"-like Japanesecommoners, one imagrnes. to defr-at the barh:rrians. \ou westerners h:rve the gr-rns.All right. one dar And he found their leaders to be realists and pragmatisrs: Focus. thcy said, u,e'll hale them too. -fhe on building national por,,'er.The,v were the mercantilists of the nineteenth .[apaneseq'ent alrout nrodernization wlth characteristic intensrtl :rnd centurv. Okubo came back and gave a German orientation to the Japanese svstenr.-I-hc1'q.erereadv for it-ht'virtue oi a tradition (recollectionlof et- bureaucracv. fectivc government. by their high levelsof literacr'.bv their trght tamill struc- First came those tasks ordinary to government: a postal service,a new time trrre. irv therr rvork ethic antl self-discipline. by their scnse of nattonal standard, public education (for boys and then for girls as well), universal mil- idenrrrl and inherentsuperrorin. it:rrv sen'ice. Cieneral schooling diffused kno*'ledge: that is what schools llre That rvas the heart of it:-fht'.f:rprrnese knen thev wcre supt'rior. and hc- tor. But it also instilled discipline, obediencc, punctualitl', and a worshipful (:rrusethe)'kner,r'it. thcy were ablc to recognize the supcriorrtres 0f others. respect for the emperor. This was the kev to the development of a we/they Ituildirrg on earlier nroves under Tokugawa, thev hired iorr'tgn experts and national identitv rranscending the parochral loyalties nurturecl by the ieudal technicrans r',,hilesenclin!:.|apanese agents abr()aclto bring back elew'itness shogunate. The arm."-and navv conrpleted the job. Beneath the samenessof accoLtlts oi Fiurope:rnand Anrerican u'avs. This bodv of inteiligence laid the the uniform and the discipline, universal militarv service wiped our distinc- basis tor choices, reflecting careful and supple consideration of comparative trons of class and place. It nurtured nationalist pride and democratized the merit. Thus the first militarr-nrodel rvas the French armv; bur after the ilefcat violent virtues of manhood-an end to the samurai monopol,v of arms. of France bl'Prussia in lil70-lll?1, the fapancset.lecided thrt (iernranv had N{carnrvhile,srate and societ.i'went about rhe husinessof business:how t

The .fapanesedetermined to go beyondconsumer goods. If thev rvereto ONWEBER havea modern economy,thev had to masrerthe heavy work: to build ma- \ler Vtber. q'ho l'cgan as a lristorian of the ancient world but grew into a chinesand engines,ships and locomotives,rarlroads and ports and ship- rvonder r.ltdiversifrcd \()cial \cience. published in 1904-t90-5 one of the most yards.The governmentplayed a critical role here,financing reconnaissance intluentrai ;1nd pr()\'o.atile cssavs er,er written: "Thc Protest:rnt Ethic and abroad,bringing in foreign experts,building installations,and subsidizing the Sprrit ot Cepit.rlism." Flis thesis:that Proresranrism-more specifically its commercialventures. But more importantwere the talent and determination (,;rli inist br:rnches-promotccl the rise of modern capiralism; that is, the in- of Japanesepatriots. ready to changecareers rn the national cause,and the .lustrial capitalisnr he knew- frorn his native (ierrnany. Protesranrisrndid this, qualitv of Japaneseworkers, especiall-v artisans, with skills honed and attr- he said. nrrr frl g.qi,r* or ahaid can help but, like r,r'indfallwealth, can also hurt. It can discourage effort and plant a crippling sense of incapacirv. As the Airican saying has it, The hand that receivesis alwavs under the hand that gives. No, u'hat counts rs work. thrift, honesry patience. renaciry. To people haunted bv misery and hungeq that may add up ro selfish indifference. But irt bottom, no empowerment is so effective as self-empowerment. The Primacy of Institutions (and what this does and does not mean)

Dani Rodrik and Arvind Subramanian

XPLAINING the huge difference in average see how these theories would fare when tested simultane- incomes between the world’s richest and poorest ously against each other. Using regression analysis, we came nations is one of the most fundamental issues in up with some sharp and striking results that have broad E development economics. How did this vast gulf implications for development conditionality, discussed emerge, and can anything be done to reduce it? below. Our results indicate that the quality of institutions To answer these questions, we can seek guidance from overrides everything else. Controlling for institutions, geog- three strands of thought. First, there is a long and distin- raphy has, at best, weak direct effects on incomes, although it guished line of theorizing that assigns a preeminent role to has a strong indirect effect through institutions by influenc- geography.Geography is the key determinant of climate and ing their quality. Similarly, trade has a significant effect on of natural resource endowments, and it can also play a fun- institutional quality, but it has no direct positive effect on damental role in the disease burden, transport costs, and income. How did we arrive at these findings? extent of diffusion of technology from more advanced areas that societies experience. It therefore exerts a strong influ- Complex causality ence on agricultural productivity and the quality of human Devising a reasonable empirical strategy for ascertaining how resources. Recent writings by Jared Diamond and Jeffrey much of the variation in income levels between countries Sachs (see page 38 in this issue) are among the more notable these three deep determinants can explain and whether they works in this tradition. are all equally important is not straightforward. The difficulty A second view emphasizes the role of international trade lies in disentangling the complex web of causality involving as a driver of productivity change and income growth. We these factors and income levels, as Chart 1 illustrates. call this the integration view because it gives participation in Geography is the only one of these deep determinants that the larger global economy—and impediments to participa- can be treated as exogenous or not influenced by income. As tion—a starring role in fostering economic convergence Chart 1 shows, geography can affect income directly (by between rich and poor regions of the world. The globaliza- determining, say, agricultural productivity) as well as indi- tion debate, of course, is to a large extent about the merits of rectly, through its impact on the extent of market integration this integration view. or on the quality of institutions. With trade integration and Finally, a third view centers on institutions—in particular, institutions, however, causality can run both ways. Integration the role of property rights and the rule of law. In this view, can raise incomes, but it is equally possible for trade to be the what matters are the rules of the game in a society, as defined result of increased productivity in an economy. And, while by prevailing explicit and implicit behavioral norms and better institutions and better protection of property rights their ability to create appropriate incentives for desirable increase investment and foster technological progress, thereby economic behavior. This view, associated perhaps most raising income levels, better institutions can also be the out- strongly with Nobel Prize winner Douglass North, has come of economic development, not least because the recently been the subject of a number of econometric stud- demand for better institutions rises as countries and their citi- ies, in particular by Daron Acemoglu (see page 27 in this zens become wealthier. issue), Simon Johnson, and James Robinson. In our research, we adopted a simple yet general research The idea that one, or even all, of the above deep determi- strategy that allowed us to estimate the elements shown in nants can adequately explain the large variations in income Chart 1 simultaneously while taking account of the complex levels between countries may seem, on the face of it, prepos- structure of causality. In econometric terms, using an terous. But economists like parsimony, and we were keen to instrumental variables approach, we estimated a series of

Finance & Development June 2003 31 Chart 1 statistical terms, the difference between the qual- The “deep determinants” of income ity of institutions measured in Bolivia and Korea Development and its determinants are related in multiple and complex ways, is equivalent to one standard deviation, or a 6.4- making the task of determining and quantifying causality difficult. fold difference. In other words, if Bolivia were somehow to acquire institutions of the quality of Korea’s, its GDP would be close to $18,000 rather Income level than its current level of $2,700. Not coinciden- Demand for good institutions tally, this is roughly the income difference Property rights and rule of law between the two countries.

Efficiency and Demand for foreign Functions of institutions dissemination goods and services of technology Most of the recent work on institutions and economic growth has focused on the importance of Openness and a particular set of institutions, namely, those that transparency protect property rights and ensure that contracts Integration Institutions Capacity to trade are enforced. We might call them market-creating institutions since, in their absence, markets either do not exist or perform very poorly. But long-run economic development requires more Health of population and agricultural productivity than just a boost to investment and entrepre- Distance from markets Natural resources and institutions neurship. It also requires effort to build three

Geography other types of institutions to sustain the growth momentum, build resilience to shocks, and facilitate socially acceptable burden sharing in regressions relating income levels to measures of geography, response to such shocks. These institutions might be called integration, and institutions. In particular, we employed • market regulating—namely, those that deal with exter- instruments for the two endogenous determinants—institu- nalities, economies of scale, and imperfect information. tions and integration—drawing upon the 2001 work of Examples include regulatory agencies in telecommunica- Acemoglu, Johnson, and Robinson and the 1999 study by tions, transport, and financial services. Jeffrey Frankel and David Romer, respectively. These instru- • market stabilizing—namely, those that ensure low infla- ments allow us to capture the variation in the determinant tion, minimize macroeconomic volatility, and avert financial that is exogenous. crises. Examples include central banks, exchange rate Our results, illustrated in Chart 2, show that the quality of regimes, and budgetary and fiscal rules. institutions (as measured by a composite indicator of a num- • market legitimizing—namely, those that provide social ber of elements that capture the protection afforded to prop- protection and insurance, involve redistribution, and man- erty rights as well as the strength of the rule of law) is the age conflict. Examples include pension systems, unemploy- only positive and significant determinant of income levels. ment insurance schemes, and other social funds. Once institutions are controlled for, integration has no direct Evidence of some of the stabilizing and legitimizing func- effect on incomes, while geography has at best weak direct tions of institutions comes from a study, published by Rodrik effects. These results are very robust. They remain in 1999, of the experiences of a number of sub-Saharan unchanged within a large range of reasonable alterations in African countries. No fewer than 15 such countries grew at our core econometric specification (different samples, alter- rates exceeding 2.5 percent a year before 1973. But, because native measures of geography and integration, different of weak domestic institutions, few of them, if any, were able instruments, and additional covariates, among other things). to withstand the effects of the oil price increases and other On the relationship between the determinants, we found macroeconomic shocks in the 1970s, so growth declined that institutional quality always has a positive and significant sharply in the subsequent period. Macroeconomic responses effect on integration, while integration also has a (positive) to such shocks entail serious distributional implications. For impact on institutional quality—suggesting that trade can example, in response to a balance of payments crisis, coun- have an indirect effect on incomes by improving institutional tries need to reduce aggregate demand by tightening fiscal quality. Our results also tend to confirm the 2002 findings of policies. But which ones, and how? Should fiscal tightening William Easterly and Ross Levine, who found geography to take the form of tax increases or expenditure reductions? If be an important determinant of the quality of institutions. the latter, should spending cuts fall on defense, capital, By how much can good institutions boost incomes? Our health, or education? Robust domestic institutions, especially estimates indicate that an increase in institutional quality can those that provide for wide participation, allow these con- produce large increases in income per capita. For example, in flicts to be handled at the least possible cost and prevent

32 Finance & Development June 2003 domestic social and political conflicts from magnifying the How then should institutional choices be made? While initial economic shock. economic analysis can help by identifying the incentive effects of alternative arrangements and the relevant trade- But form doesn’t follow function offs, there is a very large role for public deliberation and col- Institutions are thus critical to the development process. But lective choice within societies. In fact, political democracy for each of the functions performed by institutions, there is can be thought of as a metainstitution that helps societies an array of choices about their specific form. What type of make choices about the institutions they want. Indeed, while legal regime should a country adopt—common law, civil law, measures of democracy do not always explain which coun- or some hybrid? What is the right balance between competi- tries grow faster or slower over selected periods of time, they tion and regulation in overcoming some of the standard do explain long-term income levels. That is, while it is possi- market failures? What is the appropriate size of the public ble that growth spurts can be achieved with different politi- sector? How much discretion and how much flexibility cal institutional arrangements, as the experience after World should there be in arrangements for the conduct of fiscal, War II confirms, it appears that sustaining such spurts and monetary, and exchange rate policies? transforming them into consistently higher standards of liv- Unfortunately, economic analysis provides surprisingly lit- ing are facilitated by democracy. tle guidance in answering these questions. Indeed, there is growing evidence that desirable institutional arrangements Are development outcomes predetermined? have a large element of context specificity arising from dif- Does the strong role of history and geography in shaping ferences in historical trajectories, geography, political econ- institutions mean that current policies have little impact and omy, and other initial conditions. This could help explain the trajectory of human development is predetermined? why successful developing countries have almost always Some researchers say yes. Easterly and Levine, for example, combined unorthodox elements with orthodox policies. East insist that policies have no impact on income levels once Asia combined outward orientation with industrial interven- institutions are controlled for. But nothing in our work lends tion. China grafted a market system on a planned economy support to such a predestinarian view. Indeed, we would rather than eliminate central planning altogether. Mauritius argue that the framework employed in recent published carved out export-processing zones rather than liberalize research is not really appropriate for testing whether or not across the board. Even Chile combined capital controls with policies have an impact. What is explained—levels of otherwise quite orthodox economic arrangements. Such income—is a very long term phenomenon, the result of variations could also account for why major institutional dif- cumulative actions for centuries or longer. To expect that ferences—in the role of the public sector, the nature of the policies, measured over shorter periods, could explain such a legal systems, corporate governance, financial markets, labor long-term phenomenon is unreasonable. markets, and social insurance mechanisms, among others— Moreover, although institutions change slowly, they do persist among the advanced countries of North America, change. For example, between the 1970s and the 1990s, there Western Europe, and Japan. Moreover, institutional solutions were some notable changes in the quality of institutions. One that perform well in one setting may be inappropriate in a indicator of institutional quality is the index measuring the setting without the supporting norms and complementary constraint on the executive branch of government. Twenty institutions. In other words, institutional innovations do not countries improved their institutional quality ratings by necessarily travel well. more than 40 percent. Of course, how institutional change

Chart 2 Institutional quality scores high Institutional quality can boost income significantly, while global integration and geography, on their own, do not. As institutional quality rises, so does income ... but increases in integration may not help ... nor does a more benign geographic location. 2.65 –0.57 1.65 1 1 1 Log GDP Log GDP Log GDP per capita per capita per capita

–3.47 –4.08 –2.69 –1.38 1.26 2.98 5.14 0 45 Institutional quality Integration Geography Source: Authors Note: The graphs capture the causal impact of each of the determinants on income, after controlling for the impact of the others. The indicators of integration and geography used are the ratio of trade to GDP and distance from the equator, respectively. For further details, see Rodrik, Subramanian, and Trebbi (2002). 1Expressed in terms of purchasing power parity, 1995.

Finance & Development June 2003 33 can be effected is a difficult question—perhaps at the core of recent move—exemplified by the United States’ Millennium many current debates about growth and development—but Challenge account and, to some extent, by the IMF’s poverty that institutions can change and that they have a lasting reduction strategy paper (PRSP) process—of exploring new impact on development should not be in doubt. ways of achieving aid effectiveness. A shift from current conditionality would have other Implications for development lending advantages. Micro, outcome-based conditionality can be Our findings should raise serious questions about how the IMF inconsistent with the spirit of ownership, which, properly and the World Bank set conditions for loans, so-called condi- defined, necessarily involves allowing countries a certain tionality. If institutional change is slow, the time horizons for measure of freedom to find their own institutional and pol- structural adjustment programs need to reflect this. icy solutions to development problems. Adjustment that would sustainably Of course, identifying the appropriate improve development prospects simply institutional preconditions to ensure the cannot happen over three or five years— The need is to find effectiveness of development assistance is the typical duration of these programs. To the right institutional challenging. One possibility is to create a believe and plan otherwise risks the near list of countries that would be certified as certainty of expectations being unrealized. preconditions rather eligible for development assistance based Less obviously, if institutions are indeed on their fulfilling the requirements for a the deep determinants of development, than to micromanage basic institutional framework: rule of law, then we cannot evaluate traditional poli- independent judiciary, free press, and par- cies—fiscal, monetary, exchange rates, outcomes. ticipatory politics. But such a list would structural reforms—simply by looking at raise a number of difficult questions. How their intended effects. When the underlying institutions are should these requirements be measured? Can they be reason- not being changed in the appropriate way, conditionality on ably objective? What about countries that fail some of these policies is often ineffective. Therefore, the exclusive focus in requirements—as Chile, China, Korea, and Uganda would conditionality on getting policies right needs to be rethought. surely have done in the early stages of their growth? Then Take Nigeria, where the policy exhortation to prudently save there is the converse problem. Would today’s Nigeria and oil revenues has been systematically ignored. Was it ever realis- Indonesia, which would formally meet the requirements of a tic to expect Nigeria to meet fiscal policy targets involving the basic institutional framework, really provide assurances that smoothing of expenditure of oil revenues? development assistance would be well spent? Recent cross- The norm in conditionality over the years has been to set country studies on the determinants of development are just a what might be called micro targets relating to policies and beginning that point us in the right direction, and a wide open outcomes. But in countries where the institutional precondi- and exciting area of research lies ahead. tions were missing, conditionality was less likely to succeed. And where the institutional underpinnings existed, micro- conditionality was, in principle, superfluous. It is this recog- Dani Rodrik is Professor of International Political Economy at nition of the need to find the right institutional preconditions Harvard University, and Arvind Subramanian is an Advisor in rather than to micromanage outcomes that is reflected in the the IMF’s Research Department.

This article draws upon “Institutions Rule: The Primacy of Institutions International Economics). over Geography and Integration in Economic Development,” by Dani Frankel, Jeffrey, and David Romer, 1999, “Does Trade Cause Rodrik, Arvind Subramanian, and Francesco Trebbi, NBER Working Growth?” American Economic Review, Vol. 89 (June), pp. 379–99. Paper 9305, October 2002 (Cambridge, Massachusetts: National Bureau North, Douglass C., 1990, Institutions, Institutional Change and of Economic Research). Economic Performance (New York: Cambridge University Press). References: Rodrik, Dani, 1999, “Where Did All the Growth Go? External Shocks, Acemoglu, Daron, Simon Johnson, and James A. Robinson, 2001, Social Conflict, and Growth Collapses,” Journal of Economic Growth, “The Colonial Origins of Comparative Development: An Empirical Vol. 4, No. 4, pp. 385–412. Investigation,” American Economic Review, Vol. 91 (December), ———, 2003, “Institutions, Integration, and Geography: In Search of pp. 1369–1401. the Deep Determinants of Economic Growth,” in In Search of Prosperity: Diamond, Jared, 1997, Guns, Germs, and Steel (New York: W.W. Analytic Country Studies on Growth, ed. by Dani Rodrik, forthcoming Norton & Co). (Princeton, New Jersey: Princeton University Press). Easterly, William, and Ross Levine, 2002, “Tropics, Germs, and Sachs, Jeffrey D., 2001, “Tropical Underdevelopment,” NBER Crops: How Endowments Influence Economic Development” (unpub- Working Paper 8119 (Cambridge, Massachusetts: National Bureau of lished; Washington: Center for Global Development and Institute for Economic Research).

34 Finance & Development June 2003 'fHE SPREAD OF EI;ON0}1IC PROSPERTT\

'l- .t0 r:J \ ,t-.4,a J THE NO\TEI,TY OF MODERN ECONOMIC GROWTH '\^ [,n.[ ?ccr f"^"-tr-*d: lf u'e are to undelstand whv a vastgap between rich and poor existsto- F*" Two t-irslrt't 'l- da\', n'e must return to the ven recent period of human history when this diride emerged. The past nto centtrries,since around 1800,consti- tute a unique era in economic histon', a period the great economic his- THE SPREAD OF torian Simon Kuznets{amousll'termed the period of modern economic F-ro\\'th.Before then. indeecl fot thousands of vears,there had been vir- ECONOMIC PROSPE,RITY ttrallv no sustained economic gror'vth in the world, and only gradual increasesin the human population. The worlcl population hacl risen gracluallvfrorr around 230 million people at the start of the first millennium in -r.o. l, to perhaps 270 million by r.l. 1000, and 900 million people bl'r.o. 1800. Real lir.ing standardswere even slou,erto change. According to Nladdison,there \vasno discernible rise in living standards he move frorn universal povertt' to varying degrees of prosperin' on a global scaleduring the first millennium, and perhaps a 50 percent has happened rapidlv in the span of httman historr'.T\vo htrnclred yearsago the idea that rve could potentiallv achievethe eucl of extt'eme povert)'rvould have been trnimaginable. Just about el'e{bodv rvaspooq Figure l: World Population rvith the exceptiort of a vetl small nrinoritl' of lr.ilersand large laud- 7(X)0 owners. Life u'as as difficult in much of E,urope as it rvas in India or 6000 I China. Our great-great-grandparelltsn'ere. u'ith ven' fel' exceptions, n-lostlikell'poor-and lir,.ingon a farnr. Orte leadirls econotrlic histolian, 5{.}0{) Angus Maddison, puts the average inconre per person in \A'esterr-rEtr- E looo in 1820 at around 90 percent of the avc'raseincome of Afric:.lto- = rope > 3(X)0 da,v.Life expectanc,vin \festern Europe anclJapar-ras of 1800 tvasabout 2000 fortv years. ./ A fen' centuries ap;o,r'ast dirides in rvealth irncl pot'ern arouud the I {_X)|)

world did not exist. China, India, Europe, and.|apan all had similar in- l) come levelsat the time of Errropeandiscove ries of the searotttcs to Asia, Yeu Aliica, and the Arnericas.Marco Polo marlelecl at tl'resttt)lptLlotls 1\'ol1- \ouir: Dtta lntn .\Iald^t)il | 2t101 ). ders of China, not at its povertv. Cort6s irncl his conquistadores ex- prcssed astonishment at ttre riches of Tenochtitli.n, the c:rpital <.rfthe Aztecs.The earll' Portugrteseexplorers wcre impressed rvith the l'ell- increase in per-capita income in the eight-hundred-yearperiocl from ordered torvnsof\{est Africa. r.o. 1000to.q..n. 1800. In tl-reperiod of rnodem economic growth, however,both population and per capita incr>mecame unstuck, soaring at rates never before seenor even im:rgined.As shown on liglrre l, the global population rose more than sixfcrldin jrrst rrvocenturies, reaching an astounding 6.1 bil- ()t ()\o\II(. I II!] ll\l) ()t l'()\ t:R f\ r ul \PRl..\t) t.( PR()sl'uRr I \

()ne' liorr pcoplt'at tl)('stal'to1'thc thilrl Ittillt'rrrritrtrt.rr'ith 1;lcrrtl o{ rnorncn- r() . Sitrce all pat'ts ol thc l-or-ld had a roughlv compar:rble startirr{-{ Irrrrr for r-apirl poirrrlati()lt gr()\\'th still ahcncl. The rlorlci's ilver':l{rc per poirrt in 1,920(all vel'\'p()()l'bv currcnt starrdards), todav's vu.stinequal- 6npita irrcotrte r()sc clen firstct',sltorvtr itt fictrl-e 2, ipcleiisilra'by a16lpcl itics lellerct the lnct thart some pal'ts ol the rxrrlcl achier,erd nroclenr rrirrc linrcs b('t\\'cen 1820 ancl 2000. In toclar''slich cotrntlies. the cco- ccorrotttic gr'o\rth n.ltile otherrs dicl not. Todar''s vast inconlc inccltrali- norrric gr()\rth \\'2rseven lrorc astorrncline. fhe L'.S. per- capita ir.rconre ties illrrnrinirte t\\'o centurics oi'hiehlv llneven piltterns ol- econonric irrcrcascd irlnrost t\vclltrlivc-fol<1 durirrc this periocl, allcl \\'cstel'n Eu- gf( )\vtll. 'Ibt:rl l'()l)c's irtcrcasecl fiftecrr-fcrlcl. rvorlciwicle ftiocl procluction rnorcr thun kept up rvith thc Lloorning rvolld pol.nrlatior-r (thotrsh larse trtrur- Figure 3: GDP per Capita bv Region in 1820 ancl 1998 bers ol chronicnlh hru-rgr-r'pcople r-cn-r:rinuntil t()cla\').\ astlv ir-npror.ecl falrn vickls \\,crc achievecl on the basis oi tcchnoiogical aclr.ances. If lr )()( )ll t.;';\ rl-e conrbinc the increases irr rr'oricl poptrlation ancl rr'or.lcloutpur per lrl iOo Pel-sol1,ttc fincl an astolnclilg fbr-n.trilefirlcl ipcr-eascip t()tal ec9lo1ric activitv in the n,olld (the sross rr.orlcl procltrct, or-G\\'p) over rhe pasr I 80 r'ears. .2 i 1.,,,tt,, : Figrrre 2r \\'orld Average per Capita Income - l{)o{)o {i01){)

-)1 l{l( I I r-rtttXt L(l(r" tlr'7'i ) E ': l0r!l

l_:lIlll .\sia .\liica E 3000 Jrprn { r'rclncling

Japan )

00 lirli) ;r)(l soil 1r()()l0f){) lli)0 ll0lr lJr)()I lilr)l.-)r)il lr;r)0 };{n lsil) l1)rii).10il0 Yea

\1tutt This inequalitv is eviclent in the bar chart in fisrtre 3. The heisht of t: I )util li)il .\luldt\r)t | 2t)0 I ). the first bar inclicirtesthe level of per capita income in 1820,and the seconcl in 1998,rrsing \'Iadclison's estirnates. The ntrrnber in parenthesesat Thc etrlf betr\rcentocla\"s ricir and poor courltries is thereft)rea ne\\. the top o1'tl-resecond bar is the averirgeannnal grou,th rate ()f the re- phcnonrenon, ir 1,an'ninggap that operle cl clrrrin{rthe period of moclcrn eion (benveen1820 ancl 1998). Three main pointsstand out: cconornic sro\vth. ,ls of 1820, the biguest gap betl.ccn the rich and 1.roor'-specificallr',bctrveen the norlcl's leaclir-rseconorllv ol the clar',the . All resir)ns\vere poor in 1820 Unitecl Kinuclorn,and the rr,orlcl'spoorest region. Africa-las a ratio of . All regions experienced econornic pr()gress Iottt-to otlc in per capita income (cvcn aticr acliustinefor cliflcrelccs i1 lttrlchasinu pon'cr). 81' 1998, the eap betrveenthe richest econ()nr\.,the . Toclar''srich regions experienced by far the greatesteconornic Unitecl Statcs.ancl the pool'cst regiorr, Africil, hacl l.iclerneclto nventv progress ()t IIlI t\l) t'()\FRI\ IH[. \FRF..{t] L)} F(()\O}tt(: t'R()SPnRI.tl',

\{that clo I rnc:rrrLrv "highl' .r)c'er" ec.r'rrnric gro\rth acr()ssr.e- l-et rne dispose of one iclea right from tlre start. Many people as- sions bctrvc'cn l82f) alrcl l9!)tl? Er.en snrall clifferenccsir.r annrr:rl eco- \ur)re that the rich har.egotten riclt becrtusethe poor have gotten poor. nornic gl'()\\'thrirtes. if sustaint-m the poorest regions, :rnd thereby to grow capita !Inr5511xii6v11al pr-oclrrct oi the Unitccl .States,firr exirrnple.sre\\.ar rich. This interpr-etationof eventsrl'ould be platrsibleif grossn'orld prod- an annual rateof arouncl1.7 pcrccnt per veiu-duringthc periocllg20 to rLcthad renrained roughlv const2urt,with a rising share uoing to the pow- 199U.This lccl to:t tucntr.file-firlcl iucreasein living stitr)clarcls,u.ith per crfirl resions ancl a declining share going to the poorer regions. Holvever, capitai|rcornes lising fl-ornarorrncl S1,20() pcr per-sor)in lg20 to aretlrd thirt is not at all rvl-ratl'rappenecl. flross worlcl product rose nearly fifn $30,000toclar'(in l!)9()clollals).-fhe ker firr.thc L'niteclStares ro bc- fi'rlcl.Everl resion of the rvorld experienced solne econ()nricgror,vth (both conre thc u'o|lri's lichest major ecol)orn\ \ras llot spectacular.lr-fast irr terms of the overall size of the economl', ancl er,enrvhen measured per sro\\'th, srrch as chinii's recelrt achievcnrent of 8 percent g-ro\rrhper 1>erson),but some regions experiencedmuch rnore gro\\'th than others. lcar', brrt rathcr stt'ncl.r'eroh.tl)at a urrrch nror-enrocle.st 1.7 pcrcent ltcr Tlre kel fact o{'moclern times is not the lransftr of income lrom one re- Vear.The kevrvas cotrsistettcr', the fact that the Llnited St:rtcsrnaintainecl g.-iorrto another, bv fbrce or othenrise, but rather the overall inctcusetn gro\vth that incorrre ratc f or ahnost t\\-occl) turics. rtorld income, but at a diff'erentrate in different regions. By contrast, the ccrirrornicsof Ail'icir have gro\\'n ilt an aler-agcof This is not t() savthat the rich are innocent of the charge of having -fhis 0.7 pelcerrt per vear. cliflerence na., not seem like nrtrch conrpared exploited the poor. Ther surelv have, and the poor countries continue *'ith 1.7 percellt per vcar in thc Unitecl Stiltcs,but over a per-iodof to suffer as a result ir-rcountless n':rvs, including chronic problems of po- 180 r'carsa sntall diffi:rence itr ltnnnal g-r()\rthleacls to htrge differelces litical ir-rstabilin'.Horr'erer, the real ston' of ntodern econornic growth in incorne lclc'ls.\\'irh g-l-o\rthr:'l'0.7 pcrcent pcr al)nLlnr,.\fi-ica'.s initial has been the abilin' r>f'sorneresiorrs to achieve unprecedented long- (rouehlr'$400 income per c:rpita) increaseclbr. little nror.ethan thrce_ terrn increasesin total production to levels ner-erbefore seen in the fold, t. rorrshlr'$1,300pcr capitaas of rhc rear 1g98,conrpared u'ith an ir-orld,n'hile other regions stasnated,at least bv comparison. Technol- almost trveutr'fir,e-fblr'l irtcreasc in the L nitecl States.Todar.'s nver.rn-fold ogr has been the main force behincl the long-term increusesin incorne gap in itrcotne beftr'cctrther L'nitecl Stirrcsirrrc[ Afl-icit. therefbre, r.esllts in the rich rlorld, not exploiurtior-ro[ the poor. That nervsis r.ervgood fl-orna thlee-fblclgap asof 1820,u'hich rvasrrragnificd selen tinresbv the indeed becauseit suggeststhat all of the u,orld, including today's lag- difT'erencein annu:rl 54rorr,thratcs of 1.7 per-centin the unitccl States gard regions. has a reasonablehope of reaping the benefits of techno- vcrsus 0.7 percetrtin Afl-ica. lOgicaladraDce. EconoDric develOprnent is ll()l a zero-sumgame in The crtrcial prrzzle for .'clersta'dins toclar"s \-ast ineq*alities, n hich the rvinningsof sorneare inevitabll'mirrored b1'the lossesof oth- therefore, is to unclerrstallclwh\' difl'crent regions of the l-orld har.e ers.This garneis one that everyboclycan rvin. srowll at difl'crent ratesduring the period ol'rnoclern economic grorr.th. Ever'region bcgan tlrc period in extrcnrep()\'e rt\.. onlr'one sirth of the On theEt,e rf Thkeoff *'orld's popr-rlationachievcd high-incclmestatlls through consistentcco- nornic gr()\\'th. Another nvo thir-clshave riscn to miclclle-incone status Until the rnid-1700s,the rvorld'was remarkabll,poor bv any of today's rvith tnore nrt>destrates of econornicgro\rth. onc sixth of humanin, is stilndards. l-ife expectilncv was extremely lolv; chilclren died in vast sttrckirt extremc povcrt\',rvith 'cn lorvrates .f econonric gro\rth dtrring rttrmbersin the norv rich countries as well zrsthe poor countries. Many the u'h.lc peri.cl. First *'e m.st ''clerstand *l*'gro\rth ratesdifl'cr o'er u'ar-esof disease and epidemics, from the black death of Europe to l

mate fluct.uatiotts serntsocie ties critshittg. Tlrc risc ancl fall of'the Ronran tlli,tthaci nevel Lrelorebt'en uc:hicverl.l-ltc steartrettgittt'ttt:rtkecl 'f6r'1Lrcc, scule\ Empire, for fantcd tncntietlt-ccntun' histol-ian Alnolrl rvas rlrt,riecisivetttrning point o1'trtociertthistor\. B'r nr Economic historv had lons bcen one of ups irncl clon'ns, gror\.th rr'ith lol- rlrrctionof gooclsnrrd seniceson a st:irlebcxrrrrl tlic u'ilclcstclreattts oI lowed by cleclinc rather than sustainccl ecorrotrric )gl.r.s\. pr( rlre pleincltrstrial erir. \{ocler-rrcllerel lireleci everv aspcct of tltc eco- Malnarcl Kevnes u't-ote abotrt this John r-irttral stagnation of'hrrrlap riornic takeofl'.Foocl procitrction soarecl as firssilftrcl urtcrgvtvus ttsed tr.eal]r ch:rnge in the stnn_ conrrnrrrricationstechnologies, \rere po\\'eled bv erlcctritrt:ation,itsell'a clald of lir,ing of' the aler:rge man living in the c.ivilizcclr.enters oi breakthrotrgh of the fbssil-tirel:rge. the earth. Ups a'cl dorvrrs, ce.tainlr risitati.rs .l pl.grre. {a.irre .\s coal fireleclinclustn', so. too, illdustrl fireleclpolitical pou.cr'.The :rnd $'iar,golde' inter'als, but'ci p'.u.essi'e'i.le.t r.hu.ge. S.me Blitish Empire becarne the global politic:rl nr:uri{'estationof the Indtrs- periods perhaps fift' pe'cert better thir' otlrer-s..t the llt'()st .1 trial Rer.oltrtion.Brit:rin's indrrstrialbreaktllrotrsh. trrtiqtrein the tr,orld hundred percent better in the fo.r tlr,rrs:r.d'ear.s th't errlecl. sar. as of the earh' nineteenth centurr'.created a htrgc rnilitan' artclfinatrcial in e.n. 1700. advantagethzrt allor-ecl Britain to expartclits contr-olover one sixth ol humanin at the peak clf the empire cltrringthc- \'ictoriarr erir. He also pinpointecl technologv as the rc'ason firr-this long-terr1 stasis: \\'hv n-:rsBritzrin first? \\'hr.' not China. rvhich rras thc rvorlci'stechno- logical leacler for abotrt a thousand vears, betl-eerl .\.t). 500 ancl .r.n. The abse'ce of important tech'ological i'r'e'ti.'s betrvee, thc 1500?\\hv not ot.hercenters of pou'eron the Etrropeanc()ntinent ()r in prehistoric age and c''rparati'eh- 'rocler-r tir'es is tr.trh. r.er'ar.k- .\ia? This questionis rntrchdebated ainong ecorrorttichistolians, brtt a able. Almost eventhing rvhich reallr.nratter.s, anri rr.hichthe rr.orlcl fervgoocl ans\versare eviclent,and ther provide

r)ladc pi\'()talaclvances begilrnine in the Renaissancc.trIoclern phvsics attelnpts fioru the.\si:rn mainland. Incleed, rvith a ()lte-ccntlll-r'lag,.faparl emerged fronr the astronomical discoclproducecl bv f-cn'erpeople, rnillions of landless poor \\.entto North America. The cornbinirtionof nervindustrial technologies, coal po\\:er, :rnd mar- -fhe In his seminal 1776 u'ork, T'\rcl\'ealth rf \-ations, Adarn Smirh re- ket forcescreated the IncltrstrialRevolution. Ir-rcltrstr-ialRevoltrtion, ferred to Britain's nattrral adr-antaqes: i1 trrrn, led to the most revolution:rryeconort-tic events itr htttnatr iristort' siuce the start of agrictrlttrreten thousand rears earlier. Suddenlr',ect> l-neland.oll accorultof the naturalf'ertilitr of the soil,of the great nomies coulclgrorv bevond long-accustomedbttr.rnds rvithortt hitting the extent ol the sea-<''irstin proportio'to thnr.f the *hole col*tlr, biolclgical constraints of food ancl tirnber prodtlcti()n. Industrial pro- and .l the man'r'ra'icable ri'ers *'hich .rn through it ancl aliirr-ti duction grerv rapidlr', and the p()\ver of ecotromic gr()\\'th spillecl out the conYeniencYof $,atercarriage to some of the rnost inland parts fl'om Great Britain to all parts of the lr'orld. Societiesthe n'orld over of it' is perhzrpsas *ell fitted b'nat.re as a'r'large c.trnt^ ir Err u'ere ftrndamentallvchanged, oftett ttrmultr.tottslt'. rope t() lrt- the seat of lbreigD ('ommerce, of 'ran.facr.res for-dis- The Industrial Rer.olution,al)d the moclern econotnic grlorrnerrt, as ill tllc cuse of the vortng rvottlctt itt ltan ar-r,lrs.Tlrt.r'e:lre t\\'o ltasiC t-eaSortsU'hv eCottolttit gl'()\rtl) llllCl rhe apparel factories of'Dhaka. leirding thenr trltimatelv ton':rlcl social tulbarrizrtticlngo hirncl irr harrcl. Thc Iir-stis risirtg ltgt-icttlttrt'alpr'ocltrctir- rurclpolitical ctnporr'errrient. in.,\s Iirr>clpx)clitcti()lt pel f'arnrer lises. rirr cc()l)(rrttvt)ct'(is le\r('t'ltllcl Tlre ch;tnges in livins corrclitions :tncl econotnic lrctivities lead to f'ervcl firrnrel's t(l f'ec(l the olcrall ptiprrlution. Ar Iirocl pt'oclttctiott ltet' 1re\r realities lt funi\' stru(lut" rts n'ell. The irst of ttrarriase is tvpicirllv cl-ril- gr(-lller lirlrncl riscs,firocl ltr-icr<'sflll, inclrrcing filrnt't's an(l esl)('(ialh tlre'ir rlclaverl, ancl scxtral lelirtiorrs ale tlarrslirr-mecl,tr'itlt sexttltl free- drerr to seek eltplO\Ilcllt in lt()lil:lrltl ltctivitics. Tlit'sccotlcl is the'aci- ckrrn rntrch less ciirerctlv linkerl to cl-rilcl t'ear-irrg.Fencr genel'irtions of vantag(' o{ }righ-dcnsitl trr-ltanlif'e firr lno\t r)()nfhr'ltlecorl(}ltlic lrc tir itit's. flirnilr nrernber-slive rrrrder-one rool. And cnrci:illr', the desirecl nunrber' ()f csltccialh tht'fuce-tt>fnce rtenrantls of cortttttcr((' tlltd ()tltcl P:.irt\ the r>l childr-ern changes renrarkablv as farnilies rnove flortt t'rtral to ttrban sen'ice sect()r. Spalselr poprrlatccl rtlral ar('tiS lllake g()(ld ecollollllc settinqs. hr rtrrirl societies, lar-gefarnilics are altrtost alrvals the uorm. Itr sense rr'hcn each houscli 1>oncrl\rl.Br rpcci:rlizirrgin .jttst ottr ;11111 i11-q116lr :ts foorl t;risittq. lcxricirl change th:rt occrtr cluring rnodcrtl ccollolllic gr()\vth' irl rr'hich clothing production, or home constnrction-s26]1 \\'orker gair)s lnas- ()ccupati()ns and social roles shilt clralnaticallr.fr.otr one gcltcrati()rt t() terv over the particular acti\-it\'. Specialization makes sertse, horvever, the next, rather than bcing inherited bl sotts fiorn fatltel's all(1 (lalrgh- cinlv if the specialist clrn strbseqrrenth trade his rtr her ()utput u'ith the ters fl'otn nrothers. output of specialists in talfc'rtilin rute-the l1\clrtge tttttttlter possible to be a specialist l.rolne brrilclcr ot' clothitrs maker. since it o1'clrilclren pcr'\rollrlut-is fipicallv at lcast five, at'rcloften tnltclt hi-^her, rvould be necessan'to farrn firr one's ou'n srtn'ir':rl.f'hrrs Smith realized -frirciitionailv \volllen spcncl rnost

nineteetrthcentrtn ertcledtlP fttclitrli-it \.ltstEllropeatr etlrpire throtrqh- bv the abilitr to trltdc). u'het'eirsthe cxtent of the rrrarketis clcterntinecl tlrc Asia.AJI-ica, and the Atnericas. bv the degrce of spccializntion (and hence, procluctivitr'). orrt I inallr, the vastdifl'erences in porvercontribtrtecl to f:rtrltr.'socialthe- olies of these diff'erencestir:rt are sfill rvith rrs toclar'.\{'}rert ll societr is -f don'rirrant.it is eiisrfirr its membet'sto assun)etltat strclr HF, S}'READ O}'\1 ODERN.- r.conomicallv reflects a cleepersttperioritv-n'hether religiotrs,racial, ge- ECONON{IC T}RO\VTH clr>nrinance rretic,culturirl, or institutional-rather than irn accident of timine or gc- Thtrs the ineqrurlitr.of'porver and econortricsof thc nineteentlr N,Ioclelnecr>norrric gro\rth first emerseclin England becauseof the con- ographr'. of Etttt,l>c \\as acc()rrlparriecl bv tl-respreird of nen'tornts flrrelce of favorable conclitions. Horveler. these t-onditions n'ere not cel)turvin favor "ctrlturisn," l'hich offered psetrdoscientific.justificatiotrs uniquc to Engluncl,and ont:crthe Industrial Revolutiortrr-as under rvar', of r-acisrnancl tl'r:rtltacl oltened. These theories irl ttrrn jtrsti- thc same combination of moderrn techr.rologiesand social orsanization lirr the vast inequalities of the poor throLrghcokrnial nrle, dis- cotrld spread to other parts of the rvor-lcl.\\hat stalted in one corner of fieclbrutal fbrrns of exploitation the and l:rndsof the poor bl' the rich, and evelt Northcrn Europe rvotrld evcntuallr' reirch alrnost the entire planet. In possessionof properties cloing so, the forces of modern ccononric sro\\'rh prope lled a general siar-err-. basic trnclerlvinsfor<'es that pr-o- increasein global production of unprccedented dinrensions. Still, clespitethese ciifficulties,the w'ere replicnted else- ()n paper, the transition to rnodeln economic gro\\'th r-nightappear 1-relleclthe Indrrstrial Reroh-rtioucoltld be ancl rnrrltiple sitesof industrialization :rnd to be an unambistrolrs and straightfonlard benefit fcrr the rvorld. After rvhere. .\s ther rvere r-eplicated, reaction, the rnore placesthat all, nerv technologies enableclsocien' t() harnessenergl' and ideas that economic grolvth took hold. Like a chain lvith each other raisecllabor productivin' (economic olrtptrt per person) to lelels never rr'ereundergoing this change, the nrore thev intcracted lta.;esfor ret tttotcinttovl(irltts. Ittote ct'ontrmic befcrreirnaginecl. This proclrrctiritr bror-rshtabotrt a rise in liring stan- ltrtdtherehv ctc:tte(l the gronth, Britain'sindustrialization spread dards of unprecedented scale.\'et the transition \r'ltsmore tuntultuous and rlore technologicalactirin. rvavs: the demand for exports than not, ir-rvolvingvast social strr.rgulcsand often rvar.Before turning to to other markets in several bv stimrrlating those tradinu partnersrvith the historical record, it is rrrrrth consicleringfor a mornent.rr'hvthe tran- from Britain's trading parttrers,br strpplving (fc-rr sition rvasso clifficult in so nant places. British capital to make investrttentsir-t infi'astrttctule exirntl;le,porls fir-stpioneered in Britain. IIost in-rpor-tirnt,modertr econornic gro\\.th\\'as llot onlv a question and railroads),ancl bv spreadinutechr-rologies of modern economic gro\\'th occurred itr three main of "more" (ontput per person) but also "change." The transition to This difftrsion of the Inclustrial nroclcnr economic growth involr,ed urbanization, changing gender fcrrms.The first. and in sorne\\'avs, nrost direct spread its in North Arnelica, Atrstralia, roles, increascd social rnobilitr',changing farnilr stnlctLrre,and increas- Revolution rvasfrom Blitain to colouies regions are in ternperatezones rvith condi- inu specialization.Thcse \rerc difficult rransitions. int'olvins rnultiple and Nerv Zealand. All three for and econornic activitiessirnilar in matr-vwavs to r-rphear,alsin socialorsanization and in ctrltural beliefs.In addition, the tions farming other relativelvstraightforrvard to transplant spread of rnodcrn economic grou'th n'irsalso marked bv a svstenratic those of Britain. It was therefore aud repcated British technologies,food crops, and even legal institutiortsinto these confrontation bctrr,eenthe rr,orld'sncn'lv rich countries -fhese nen homes of rnodern economic gror,vtl'rrvere literalll' and the u'orld's still poor countries. Since modern economic gro\{th oc- new settings. "Net in of the North American seacoast,or a "\{rest- crtrrcclat such clifferent ratesin different places,it created an extent of :r England," the case Angus N{addison.Icle

fi-ern tlrcil lancls.l-nglnncl's nel-colonizels luclecl iI lluge exp:rttsion of r prrfl-tl1tuti91 bctu't'crr tlrese rlifJ'er-elttsocictic\. ec()r)()llies, arrcl crrl- gt-otr'th L.r'erirvhe'rr it laised liiing stancl:rlcls.nroclern cc()norllic grorvth llolrtrl:rtiott anrl sttbsctluclrI cc()lr,rttic of Nolth -{nret'icn atrcl lrilt's. ()c'errrtiir. l1'orrglrtfirrrclirrnen{al charrgc to social or-ganizatiorrancl painfttl clasites A seconcl firlrrr o1'clif1irsion took place rvitlrin Europc itself, broacllr, rritlr tlre niol e l)o\\'el'firlEtrr-opeans. in a process that larr florn \\ester-u Errrope to llastern Lru'ope irncl ft'om l'he corrll-ontutiorr betrr'een lich arrrl poor \vas verv stark becattse \orthcrrr E.rrropeto Sorrthelrr Eulope cluling thc rrineteentir ccntur\'. tlrt'-..ap of u'caltli illso lnelint tlic gitl>of porvct. atrcl pou'er cotrltl be trsed Northneste ln llur-opt' st:rltecl ir'itlr ccr-tairr a(hiurt:rges ove r Easterrt arrd lol exploitution. Ertt-ope'ssttpct-tor l)o\\el tvlisttscd retpcateclh'to ctoltt- Sor.rtherr-rrEtrrol>e. Fil'st, lrortll\\'estel'n L,rrlope is on the -\tlantic sicle of nt'l actiorrsbv tlie rveakcr societieson behalf of tlte richer ovcrlords. Etr glo\v the continent. arrcltlre r-clole lraclbcrrefitecl rriore thirn E:rstenr Etu'ope l-()l)eln irrrperial l)o\rers fblcccl '\liicarrs to cash crops tlrev chose. fiom tlre grelrt explosion of oceirn-l;asecl tlacle u-ith the Anreric:rs ancl (.olonirrl rlrrtllolities irnposecl ltcacl taxes, conrpellinu 'Vl'icans to \\'ork Asia. Seconcl, nolthrvestern Errrcipe generallv hacl rrtore J-avorablenatu- irr rriines ancl on pl:rrrtations.often huncireclsof tniles fi'otn their'lartti- r:rl resorrrces. inchrcling coal. timber-. rilels (for- rv:rter-pol-elecl rnills), lies arrclhornes. Errlopearr investors :ln(l governrnents crolrultandeered ancl lain{:ill. Thircl, north\\'cstel-n Errrope gencralll berncfiterclfl'orn a natru'ltl resources. irrclrrclirrs nrinelal l'eiilth ancl r':rst rvoocllancls in rnore benign cliseaseenvironment, less r-rrlnelable to tlopical ancl sub- -\tl'ica arrcl.\si:r. I)r'ir-ateEur-opcan cornl>nnies tnaintainecl pt-ivate arlries tropical

These rvares of teclrnological advance diffusecl arouncl the rvorld elterg] slslelns as \\'ell, fiorn lrvcllol)o\!er, r'el'edtllel)1. globul svstenr of European political leclt- Bv the carlv trr'entieth centun, Etrlope lirlgeh rlominatecl the rvorlcl. l)21relsect()l'.irnclrrerrteclr\iquestoptolv the teleelaph. l.hich offerecl the .\sia, anci loomecl larse in financing alrcl organizing I-atin Anrerica's 2lsrr'ell. This \\'as the first age of first iltstalttaneous telcctlnrnrLrnicaticrns arour)(l the rvorlcl. a Phenolre- 1r'rlcle elobalization. an er:r of global nnl breakthnugh in thc al;ilitr to cliflirse infcrt'tnatiott tlu a lnrge scirle. (r':rclc.zrn era of global conrrnrrnications tiver teleelal>lr lines. an era of Tlre scconcl technological rr'avealso incluclecl ocearl stearnels. slobal- llrilssproduction and ir-rdtrstrialization-in shrlrt, n,hut rr,otrld seelll to be scale trirdc, ancl trr-ohug-e infi-astrttctltre pr-oject.s:the Strez C)arlal,corn- ll) era of inevitable progress. Ancl it n'as globalization trnder European pleted in 1869, u'hiclr signific:rntlr shortettecl the tracle titlte befir'een clornination. It rvas vierveffice btrildinus. ancl fhc- so inter-cle1>enclent,so much part of a global division of labor',that tories br,u'ire, nhich n'as the defining nen'itrfl'astt-ttcttlre of the earlv \ril| amollg the econornic leaders had become uninrasinabl,vdestnrc- trventieth centur\'. The clerektpment of the intertrurl conrbrtstiotr ellgilte tir-e.\4hr, Aneell rvarned,\,\.ould so undermine the nettvork of interna- tvas also critical, as \\'as tlte pivotal adval)ce irr the chenical indtrstrr; tiorral trade th:rt no rnilitarr' \'eltture ltv a Europeun power against nrainlt in (lernranr'. n'ith tl'relle\\'process for-takirlg atrnosplreric nitltl- anotheL could cor-rceivabhlcad to econornic benefits firr the aggressor. gerr arrcl c()nverting it int

l'ire rertt' l9l4 bcgarr tl)c great rtll)trlre of the t\rentietl) cellttlr\'. even (,\t :ul(l ntost ltorr'c|ful ntOnarchs of 0tirer ages.The iD, 4'c rnoLe clr':lrluitica nl[)tule tltatt \\irllcl \\'al II rvotrld Prove to be. l.orck.rnt:orrlcl olcler- br tclcphorre,sipping his nror.ningteu , \\'lrv rr'as\\irllcl \\'irl I so clr-arrtatic:uttc[ so trartlnittic: It erlcled the erra thr'r'aliotrs ltrocltreirrrstntt's rrrrclel Sovict ckrrnination, Crrbir, \orth Korear, lul>roadto foreign quartcri, rritl:orrl knorvledseof their religion, ancl othcr-self-snlccl relolrrtionarv states alignecl rvith the Soviet L nion. langu:iger,or ( ustor))s,bcaring co ined uealth upon his person, and Another- great consequence of \\bt'lcl \\hr I rvas tl-re prolonged fi- l'otrlcl consicler-hirnse lf sreatlv ae 3-rierecL and rnrrchsurprised at the rranci:rl instalrilitv it createcl in Errrope nfier the *'ar. The'rr'ar created a Ieastinter'fclence.. [JLrt, nrost inrportarrr of all, he regarering of the Ottonratr and llnl>sltttrg etnpires atrcl thett' rest:rnclaklrs. irnrl tl oirlablc. plircenrr-nt br srn:rll, Lrnstable, ancl fetrclirrg successor states; zrnclthe Al- lierclclaints fbr r-eparati<)tlpa\Inellts fi-ortt Clermanr'. rvhich embittered .\s Kernes str-essecl,in a nress:rgefc,r our rinle, the encl of this era was the ne'xt generatiolr of (lertnirns aucl nrrs otre of the rallring poirtts for rini plv trrrinraginable: IJitler-'s rise to po\rer. The plojects and John -\lavn:rrd Kevnes rtnclcrstootl that tltc n'orlcl as Ite krtel'it had polirics of'nrili:ar-isrn.rnd inrperialisrr, of racial been brorrgltt to an eucl irfter \\bricl \\'ar I. ln tris larnotls esszl\'r-rr'lronrlile ofFcr-ccl,at a lorr'cost anclrr'ith tl-releast troul>le,con- clebts, slrnrrrke n tracle rr.ithin Etrrope, and overstretched budgets of the rcrricnces.conrlirrts. ln

fl16-olrlers of the cl:rr throttghottt the 1920s. The Ertt'opeirn cottrttries 1t('llts s\stct)tf ot' ittlerrt:rtional tritcie.1'he Eulopean crrn'encics becarne rrclrvorld. First. the countries alreadv industrialized irs of 1945-Europe, the \\-ere the tr-ue tlrird-rrav countries.'fhe ideas:rt tlte c()re of the thircl United States,Japan-reconstructed a nerv internirtional trading svstem rvorlcl rverc: "\\'e u'ill clevelop on ()rrr orvn. \\'e l'ill rrurt.ule inchrstrl', under U.S. political leadership. Step bv step, these countries reestab- sometinres throrrgh state o\vltersltip, sornetirnes bv givine srrbsiclic.sand lished currencv convertibiliq- (in rvhich businesses and individuals could Pl'otectiolt trt private brtsiness, but \\'e will clo it u,ithotrt firreign rnrrlti- buy and sell foreisn exchange at market rate) in order to create a pay- llationals. \\e rvill do it rvithout ()llelt intcrnationirl tlircle. \\'e clo r-rot 'Irrr: tx t\l) ()t l,o\uRI\ IIII \l'RU \l) Ol- laO\()\It(. I'R()Sl'1.Rt I l t!l tnlst the ()lrtsi(le\\'orl(1. \\'e x'ant t() sta\ rtottiilignerl. l'he filst rvorld rlrlrn it rlot'slil an irrcliviclrral."ln essetrce.()r)e ol rrrvlolcs fl'orrrthe nric[- c()ul)trl('s al'e llot otu lrt'r-oes:tltel let'e otu lirt'tttet'colorriltl l)()\rers. l1)$0sorrrralcl tr':istcl lrell; c:orrntriesto beconre sorerr-eigrrnrt'rrrLrcr-s o['a 'I-he secorrd nollrl lc'aclel'slirc r)()t to bt'tnrstecl eitlrcr'.\\-e clo n()t \\'ant rt'r, irrle'rniitiotral srstenr. I rel)('rltecllrrk'alt rvith three big rlrrestiorrs: the Soviet L-rriorr to sl-allorr rrs. l-lrt'r'efirle. politicallr lt' at'c tton- \\'lrat i-stlre best n'ar Llack t() inter'nrrtiolial tr-lrrle?FIorv ckr \\'e esc;rl)e " alisuc(I, an(i ec()n()lnicirllr\\'(' ar(' sclf-srrllicicrrt. llonr tlre barnacles of'bacl clebtsancl inefficierrt irrrlustn? Horvclo\\'e ne- 'I-hrrs, tlrt'post-\\or-lcl\\'ar-II lorlcl erolrecl ort tlrr-ce'tlircks.I'lre firn- gotiute ne$'t'ttles of tlre g:rrrrcto ensure that the erriergirrgglOltal t'con- clarnental ltloblerrrr.horverer'. \\'as that the seconclrvollcl:incl thir'rnent is real ancl l'iclespr-eacl.Tl.re extent of extrerne poverh'is the pagesaheacl, a good plan of action startsu'ith zrgoocl clifferential di- slrrinking, both in absolrrtenumbers and as ir proportion of the rvorld's agnosisof the specificf:rctors that haveshapecl the ecotromic conclitions poprrlation.Tirat fact is u'hv rvecan rezrlisticallvenvision a rvorld rvithout o{ a nation. e\trerne povertv assooll as2025. Preciselvbecause ecor-ronric cleveloprnent can ancl cloesnork iu so nranv parts of the rforlcl, it is all the more important to rtnclerstancland solve the problems of the placesn,here econornic developrnent is not rlor-king,rvirere people are still off the ladder of der"eloprnent,or are 'ftr stuck on its lorvestrungs. rrnclerstandu'hv ecortotnicglor'vth succeeds or fails, u-e fir'st neecl a concepttral fianren'ork that can account fbr ch:rngesover tirnerin C}DPper person. I have alreadl'cliscussedsome ot tlre f:r.ctor-stlrat pr-ornotelong-terrn cleveloprnent,llut here I address thern nrore svsteunaticallr',includins a discussionof rvhv the processof economic clevelopnrent breaks don,n in nrarn places, especially the l)oorestplaces. I)erhaps it rvorrlclbe clearestto begin rvittra very specific c:r.se:a single farrn hotrseholci.