A Farewell to Alms: A Brief Economic History of the World Draft, 1 October 2006 Forthcoming, Princeton University Press, 2007 He is a benefactor of mankind who contracts the great rules of life into short sentences, that may be easily impressed on the memory, and so recur habitually to the mind --Samuel Johnson Gregory Clark University of California Davis, CA 95616 ([email protected]) 1. Introduction…………………………………….. 1-13 The Malthusian Trap: Economic Life to 1800 2. The Logic of the Malthusian Economy…………. 15-39 3. Material Living Standards……………………….. 40-76 4. Fertility………………………………………….. 78-99 5. Mortality………………………………………… 100-131 6. Malthus and Darwin: Survival of the Richest……. 132-152 7. Technological Advance…………………………..153-179 8. Preference Changes………………………………180-207 The Industrial Revolution 9. Modern Growth: the Wealth of Nations………… 208-227 10. The Problem of the Industrial Revolution……….. 228-256 11. The Industrial Revolution in Britain, 1760-1860…. 257-293 12 Social Consequences of the Industrial Revolution.. 294-330 The Great Divergence 13. The Great Divergence: World Growth since 1800.. 331-364 14. The Proximate Sources of Divergence…………... 365-394 15. Why Isn’t the Whole World Developed?.................. 395-420 16. Conclusion: Strange New World………………… 421-422 Technical Appendix……………………………... 423-427 References……………………………………….. 428-451 ii 1 Introduction The basic outline of world economic history is surprisingly simple. Indeed it can be summarized in one diagram: figure 1.1. Before 1800 income per person – the food, clothing, heat, light, housing, and furnishings available per head - varied across socie- ties and epochs. But there was no upward trend. A simple but powerful mechanism explained in this book, the Malthusian Trap, kept incomes within a range narrow by modern standards. Thus the average inhabitant in the world of 1800 was no bet- ter off than the average person of 100,000 BC. Indeed, most likely, consumption per person declined as we approached 1800. The lucky denizens of wealthy societies such as eighteenth century England or the Netherlands managed a material life style equiva- lent to the Neolithic. But the vast swath of humanity in East and South Asia, particularly in Japan and in China, eked out a living in conditions that seem to have been significantly poorer than those of cavemen. The quality of life quality also failed to improve on any other observable dimension. Life expectancy was the same in 1800 as for the original foragers of the African savannah, 30-35 years at birth. Stature, a measure both of the quality of the diet, and of children’s exposure to disease, was higher in the Neolithic than in 1800. And while foragers likely satisfied their material wants with small amounts of work, the modest comforts of the English in 1800 were purchased only through a life of unrelenting drudg- ery. Nor did the variety of their material consumption improve. The average forager had a diet, and a work life, much more varied than the typical English worker of 1800 even though the English table by them included such exotics as tea, pepper, and sugar. 1 Figure 1.1 World Economic History in One Picture Finally hunter-gatherer societies are egalitarian. Material con- sumption varies little across the members. In contrast great inequality was a pervasive feature of the agrarian economies that dominated the world of 1800. The riches of a few dwarfed the pinched allocation of the masses. Considering even the broadest definition of material life, the trend, if anything, was downward from the Stone Age to 1800. And for the poor of 1800, those who lived on unskilled wages alone, the hunter-gatherer life would have been a clear improve- ment. Some will object that material living conditions, even includ- ing life expectancy and work efforts, give little impression of the other dimensions by which life changed between the Neolithic and 1800: dimensions such as security, stability, and personal 2 safety. But we shall see below that however broadly we picture living conditions, things do not improve before 1800. Thus the great span of human history - from the arrival of anatomically modern man through Confucius, Plato, Aristotle, Michelangelo, Shakespeare, Beethoven, and all the way to Jane Austen indeed - was lived in societies caught in the Malthusian Trap. Jane Austen may have written about refined conversations over tea served in China cups. But for the mass of the English population as late as 1813 material conditions were no better than their naked ancestors of the African savannah. The Darcys were few, the poor plentiful. The Industrial Revolution, a mere 200 years ago, changed forever the possibilities for material comfort. Incomes per person began a sustained growth in a favored group of countries around 1820. Now in the richest of the modern economies living stan- dards are 10-20 times better than was average in the world of 1800. Further the biggest beneficiary of the Industrial Revolution has so far been the poor and the unskilled, not the typically wealthy owners of land or capital, or the educated. Within the rich economies of our world there is not only more for everyone, but lots more for the bottom strata. But prosperity has not come to all societies. Material con- sumption standards in some countries, mainly those of sub- Saharan Africa, are now well below the average pre-industrial society. These countries, such as Malawi or Tanzania, might be better off had they never had contact with the industrialized world, and instead continued in their pre-industrial state. Modern medicine, airplanes, gasoline, computers, the whole technological cornucopia of the last 200 years, have succeeded mainly in pro- ducing material living standards that are likely the lowest ever experienced by any people in world history. Just as the Industrial 3 Revolution has reduced income inequalities within societies, it has increased them between societies. There lives now both the richest people who ever walked the earth, and the poorest. This divergence in regional and national fortunes since the Industrial Revolution has recently been labeled the Great Divergence. Thus world economic history poses three interconnected problems: the long persistence of the Malthusian trap, the escape from that trap in the Industrial Revolution, and the consequent Great Divergence. The Malthusian Trap – Economic Life to 1800 The first third of the book is devoted to a simple model of the economic logic of all societies before 1800, and to showing how this accords with a wide variety of historical evidence. This model requires only three basic assumptions, can be explained graphically, and explains why technological advance improved material living conditions only after 1800. The crucial factor was the rate of technological advance. As long as technology improved slowly material conditions could not permanently improve, even while there was cumulatively signifi- cant gain in the technologies. In this model the economy of humans in the years before 1800 turns out to be just the natural economy of all animal species, with the same kinds of factors determining the living conditions of animals and humans. This is called the Malthusian Trap because the vital insight un- derlying the Malthusian model was that of the Reverend Thomas Robert Malthus, who in 1798 in An Essay on a Principle of Population took the initial steps towards understanding the logic of this economy. 4 In the Malthusian Economy before 1800 the world of eco- nomic policy was upside down: vice now was virtue then, and virtue vice. Those scourges of failed modern states - war, vio- lence, disorder, harvest failures, collapsed public infrastructures, bad sanitation – were the friends of mankind before 1800. In contrast policies beloved of the World Bank and the U.N. now – peace, stability, order, public health, transfers to the poor – were the enemies of prosperity. At first sight the claim of no material advance before 1800 seems absurd. Figure 1.2 shows a Nukak hunter gatherer family of the modern Amazonian rain forest, naked, with a simplicity of possessions. Figure 1.3 in contrast shows an upper class English family, the Braddylls, painted in all their finery by Sir Joshua Reynolds in 1789. How is it possible to claim that material living conditions were on average the same across all these societies? But the logic of the Malthusian model matches by the empirical evidence for the pre-industrial world. While even long before the Industrial Revolution small elites had an opulent life style, the average person in 1800 was no better off than their ancestors of the Paleolithic or Neolithic. The Malthusian logic developed below also reveals the crucial importance of fertility control to material conditions before 1800. All pre-industrial societies for which we have sufficient records to reveal fertility levels had some limitation on fertility, though the mechanisms varied widely. Most societies before 1800 conse- quently lived well above the bare subsistence limit. That is why there was room for living standards in much of Africa to fall since the Industrial Revolution. Mortality conditions also mattered, and here Europeans were lucky to be a filthy people who squatted happily above their own feces stored in their basement cesspits in cities such as London. 5 Figure 1.2 The Nukak, a surviving hunter gatherer society in the Colombian rain forest. ©Gustavo Pollitis/Survival International Poor hygiene combined with high urbanization rates kept incomes high in eighteenth century England and the Netherlands. The Japanese, with a developed sense of cleanliness, were able to subsist accordingly on a much more limited income. Since the economic laws governing human society were those that govern all animal societies, mankind was subject to natural selection throughout the Malthusian Era, even after the arrival of settled agrarian societies with the Neolithic Revolution. The Darwinian struggle that shaped human nature did not end with the Neolithic Revolution that transformation of hunter-gatherers into settled agriculturalists, but continued indeed right up till the Industrial Revolution.