The basic outline of world economic history is surprisingly simple, so simple that it can be summarized by a chart: Figure 1.1. Before 1800 A.D., per capita income (clothing, food, housing, heat and light available to each person) varied from society to society or time, but the overall trend did not show an upward trend. By a simple but powerful effect-MalthusianTrap)-The shackles of technology and the short-term income increase brought about by technological progress will eventually be offset by the population increase.
Therefore, the life of the general public in 1800 AD was no better than that of the general public in 100,000 BC.More specifically, in 1800, most of the world’s population was even poorer than their ancient ancestors. People lucky enough to be born in rich societies, such as Britain or Holland in the 18th century, have roughly the same material standard of living as those in the Stone Age. However, a large number of residents in East and South Asia,In particular, the Chinese, Japanese and Indians can barely make ends meet, and the conditions in all aspects may not be as good as those in Neanderthals.
No matter from which aspect, there has been no progress in the quality of life. The average life expectancy in 1800 was no longer than that during the hunting and gathering period: only 30 to 35 years old. Stone Age humans are even taller than 1800. Stone Age collectors could meet their material needs with a small amount of work, while the British in the 1800s had to work hard all their lives to buy the minimum comfort. The types of material consumption have not increased either. The diet and working life of ordinary collectors are far more colorful than those of typical British workers in 1800-although there were more foreign products such as tea, pepper and sugar on the British table at that time.
JaneAusten may have described the elegant dialogue of ladies when they enjoyed afternoon tea, but for the British public in 1813, the living conditions were not better than their naked ancestors on the African grasslands. The Darcy family is only a minority, and most families live in poverty. Darcy is a noble family in Jane Austen’s Pride and Prejudice. )
Pride and Prejudice
Thus, in the broadest sense of the material standard of living,The average well-being of the people did not even advance or retreat from the Stone Age to 1800.
The Industrial Revolution, which began nearly 200 years ago, permanently changed the possibility of material consumption. The per capita income of a group of beneficiary countries began to grow continuously. Today’s richest modern economy is 10 to 20 times richer on average than in 1800. In addition, by far, the biggest beneficiaries of the industrial revolution have been low-skilled workers. The landlords or capitalists who were already very rich, as well as the educated, certainly benefited greatly from it, but the greatest blessing of the industrialized economy was left to the poorest.
However, prosperity has not reached every society. Some countries (mainly distributed in sub-Saharan Africa) today have far lower material consumption than before the Industrial Revolution. Modern medicine, airplanes, petrol and computers-symbols of the abundance of science and technology in the past 200 years-have created almost the lowest material standard of living there in history. These African societies are still stuck in the Malthusian era: technological progress has increased the population and lowered the standard of living to a level that is only “subsistence”. However, modern medicine has reduced the minimum materials necessary for survival to well below the level of the Stone Age.The industrial revolution has narrowed the income inequality in society on the one hand, and widened the income gap between societies on the other. This process has recently been called “big diversion”. The income gap between countries is as high as 50: 1. On the earth at this moment, there are unprecedented affluence and poverty at the same time.
Therefore, the history of world economy raises three interrelated issues:Why did Malthus trap last so long? Why was Britain, a tiny island, the first to escape the trap in the era of the Industrial Revolution, and why was it in 1800? Why is there a big diversion?
01 Malthus Trap: Economic Life Before 1800 A.D.
This article will discuss a simple model, that is, the economic logic of all human society before 1800 A.D., and explain how this model is consistent with historical evidence.
The key factor lies in the speed of technological progress.As long as the speed of technological progress is slow, even if it has accumulated to a considerable extent, the material conditions cannot be improved forever.The rate of technological progress in Malthusian economy can be inferred from the population growth.Before 1800, the annual progress rate was less than 0.05%, which is one-thirtieth of the current rate.
In this model, the human economy before 1800 A.D. Was just the “natural” economy of all species, and the factors that determined the living conditions were the same as those of other animals. It is called Malthus Trap because its most important theoretical basis is the insight of Pastor Thomas Robert Malthus, who took the first step to understand this economic logic in “Population Theory” in 1798.
Malthus, On Population
The economic strategy in Malthusian economy runs counter to the present-the evil of today is the good of the past, and vice versa.The disasters of modern countries-wars, violent conflicts, chaos, poor harvests, dilapidated public infrastructure and poor sanitary conditions-were good friends of mankind before 1800 A.D. They can reduce population pressure and improve material living standards.In contrast, the policies that the World Bank and the United Nations love today-peace, stability, order, public health, helping the poor-are enemies of prosperity. They will promote population growth and make society destitute.
At first glance, the statement that “there was no material progress before 1800 A.D.” Is ridiculous. However, the logic of Malthus model conforms to the empirical study of the pre-industrial world. Although a few powerful people had lived a rich life long before the Industrial Revolution, in 1800, the life of ordinary people was not better than that of their Paleolithic or Neolithic ancestors.
Taking Britain as an example, we will present convincing evidence to show that among the categories that survived between 1250 and 1800, the economic achievements were strongly translated into reproductive achievements-the survival rate of children from rich families was twice that of poor families.In the Malthusian trap of Britain, the children of the poorest people were almost dead and the family was cut off.Therefore, pre-industrial Britain is a society that constantly “flows downward”.Due to the stagnant nature of Malthusian economy, the children of wealthy families usually have to leave the powerful groups and look for employment opportunities in the lower social strata. The son of a handicraft craftsman becomes a worker, the son of a big businessman becomes an insignificant peddler, and the son of a big landlord becomes a small landlord. These characteristics, which later created economic vitality-patience, diligence, ingenuity, innovation and education-were passed on to the entire British people through the process of inheritance and upbringing.
Just as human beings shape the economy, so does the economy of the pre-industrial era, at least culturally and perhaps genetically. The Neolithic Revolution created an agricultural society with the same capital intensity as modern society. At least in Britain, such a stable and capital-intensive economic system has created a society that rewards the values of the middle class with “handed down from generation to generation” reproductive results. This selection process was accompanied by a change in the economic characteristics of the former industry-mainly because the public adopted the preferences of the middle class. Interest rates have fallen, murder rates have fallen, working hours have increased, preference for violence has decreased, and computing and literacy skills have spread to lower social strata.
02 Industrial Revolution
The former industrial world, which is quiet but accounts for the vast majority of human history, was disintegrated by two seemingly unprecedented events in European society from 1760 to 1900.The first thing is the Industrial RevolutionKnowledge development improves production efficiency, and high production capacity drives unprecedented rapid economic growth.The second thing is the demographic transitionThe fertility rate began to decline from the upper class, and then the trend spread to the whole society.The demographic transformation has also made the industrial revolution no longer only produce more and more people who are still on the poverty line, but has surprisingly increased the per capita income after 1800 A.D.
The industrial revolution and the demographic transition associated with it constitute important questions in the following fields of economic history: Why is technological development so slow in all pre-industrial societies? Why is it that after 1800 AD, it is thousands of miles a day? Why is one of the by-products of technological development a decline in fertility? Finally, why not every society can share the fruitful fruits of the Industrial Revolution?
At present, there are only three established explanations for these puzzles.One is to place the industrial revolution outside the economic system.For example, the reform of the political system, especially the implementation of modern democracy.The second is that the pre-industrial society is trapped in a stable but stagnant balance. Some shocks ignite the power and lead the society to a completely new dynamic balance.。The last explanation holds that the industrial revolution is the product of the gradual evolution of the social environment in Malthus era: growth is endogenous). According to the first two theories, the Industrial Revolution may not happen at all or may be delayed for thousands of years.Only the third explanation implies that the industrial revolution is inevitable.
According to the description of classical scholars, the Industrial Revolution is an abrupt transitional period between the two economic systems. As shown in Figure 1.1, in a short period of 50 years, the growth rate of productivity has evolved from the level of the former industrial era to the level of modern times. If this statement is correct, then only the theory emphasizing external shocks or equilibrium transformation can explain the cause of the industrial revolution.
The classical description also implies that the driving force for growth during the Industrial Revolution was a major technological development at different economic levels, and once again pointed the finger at institutional changes or balanced shifts. This means that we should be able to find out the prerequisites for the Industrial Revolution by looking at the changes in the system or economic situation that took place in Britain before 1800 A.D. As a result, economists and economic historians who only have this explanation in mind have devoted themselves to this issue one after another, but in vain.
Why did the Industrial Revolution originate in Britain? Why not China, India or Japan? The bold answer in this book is:Britain’s advantages are not coal mines, colonies, religious reforms or the Enlightenment, but due to institutional stability and population opportunities.In particular, the British system has been surprisingly stable since 1200 at the latest. The population grew slowly between 1300 and 1760, while the fertility of the rich and economically successful was amazing. For these reasons, the values of the middle class were first embedded in British culture and even genes.
The trend of China and Japan from 1600 to 1800 was the same as that of Britain: towards a society that embodies the middle-class values of diligence, patience, honesty, rationality, thirst for knowledge and learning. Both countries also enjoy long-term institutional stability and private property rights. But they go slower than Britain. David Landers is right to say that “European culture is more conducive to economic growth”.
The reason why China and Japan cannot make as many miles a day as Britain is simple: the fertility rate in their upper class is only a little higher than that of the majority of the population. Therefore, there is no large number of children from the educated class in the two countries who flow downward.
Therefore, just as the chance of social customs defeated hygiene, marriage and breeding to become the main reason why Europeans were richer than Asians in Malthusian times, these factors also seem to provide Europe with stronger cultural impetus.
No matter what its causes are, the Industrial Revolution has had a profound impact on society. Based on two major forces-The Essence of Technological Development and Population Transformation-The growth of the capitalist economic system after the Industrial Revolution has greatly promoted equality. Despite the fear that human beings will be engulfed by machines, so far the biggest beneficiaries of the Industrial Revolution have been low-skilled labor.
Therefore,In the agricultural society of the pre-industrial era, more than half of the national income usually went into the pockets of landlords or capitalists, while in the modern industrialized society, their income accounted for less than a quarter.Some people may expect that technological development will drastically reduce the wages of low-skilled jobs. After all, the whole class could only supply physical strength in the pre-industrial economy era and was soon completely replaced by machinery. Even though there were still millions of horses serving human beings in the early 19th century, by 1914 most of them had disappeared from the British economy and were replaced by steam and internal combustion engines. Once the value they create is lower than the cost of raising, they will not escape the fate of slaughterhouses.
Similarly, there is no reason why capitalists or landlords should not increase their income proportion. The redistribution of national income to low-skilled labour has had far-reaching social consequences. But so far, behind these happy developments, there is nothing to ensure that modern economic growth will continue to have such a benign impact.
03 Great Diversion: The Secret of Hourly Wage
Why did the industrial revolution promote income equality within successful economies on the one hand, and at the same time lead to a large diversion of economic wealth in various countries? Why does it create a world in which a few countries enjoy unprecedented wealth while other countries have gone from bad to worse since the Industrial Revolution?This difference is reflected in the widening gap in hourly wages.For example, in 2002, Indian garment workers earned US $0.38 per hour, while US native workers charged US $9 (see figure 16.12). Does this mean that when the World Trade Organization (WTO) removes the remaining trade barriers in the world, advanced economies will stop all basic manufacturing activities? Will rich societies face “dystopia” in the future-will wages for low-skilled jobs fall to Third World levels?
This big diversion of income levels is a puzzle, as difficult as the industrial revolution itself. And it is a rigorous test of any theory that tries to explain the industrial revolution. Do these theories have any way to explain the ever-increasing diversion of the world economy?
Cotton was one of the few industries that developed in both rich and poor countries in the early days. An in-depth survey of the industry shows that the anatomical structure of the big diversion is complex and unexpected, and it is difficult to apply the explanations that economists like best-bad system, unfavorable balance and unfavorable development path.In fact, in underperforming economies, workers really pay very little labor for their work. For example, workers in modern cotton mills in India may only work 15 minutes per hour.Therefore, after considering the wage rate difference between rich and poor countries, the global hourly wage gap is actually much smaller than it seems.India’s hourly wage may be only US $0.38, but its real wage per unit of work is much higher.The threat of free trade with the Third World to the living standards of low-skilled workers in the United States is not as serious as hourly wages suggest. Although the new technologies brought about by the Industrial Revolution can be transferred to most parts of the world, and all parts of the world can also obtain high quality and low price production materials, there is one thing that is not so easy to copy or cannot be copied in large quantities, and that is the social environment that supports people’s production cooperation in those birthplaces of technologies.
The natural selection process we discussed earlier also helps to explain how the initial (or perhaps geographical) advantages of Europe, China and Japan in establishing settled agricultural societies can be transformed into long-term cultural advantages in later economic competitions. Societies that have not experienced long-term peace and stability in settled agricultural societies cannot immediately adopt more advanced economic systems and technologies because their culture has not yet adapted to the needs of high-productivity capitalism.
However, history also teaches us that even in a society with the same tradition and history, there will be regions and periods with abundant economic energy and regions and periods with stagnant economy. The economic wealth in the south and north of England reversed after the First World War. Ireland caught up after being significantly poorer than Britain for at least 200 years. Southern Germany has also surpassed northern Germany.
These changes in socio-economic vitality have been common since Malthusian times and continue to exist today. The difference is that in Malthusian times, the impact of these changes will be weakened by the economic system at that time. They mainly control the population density. For example, Polish farm workers in the early 19th century were said to be slovenly, lazy and good at drinking than British farm workers, but the standard of living in Britain was only a little higher than that in Poland, which had a very small population. Since the Industrial Revolution, this difference in economic environment has been reflected in the difference in income level.
However, this is not the case with modern production technologies developed in rich countries. These technologies are designed for a trained, conscientious and dedicated labor force. The product will pass through many hands, and each hand may destroy most of the value of the finished product. The error rate of individual workers must be kept as low as possible before the production process can be smooth. With the adoption of these techniques in Britain in the 19th century, the training of workers attracted much attention. Since workers in poor countries lack this kind of discipline and input quality, in order to minimize the error rate, modern production systems can only be implemented when there are no requirements for workers. This concept helps to explain why the efforts of textile workers in poor countries such as India are so low. It is better to hire lazy workers than to leave machines idle or produce defective products.
The Rise of Wealth and the Decline of Economics
Economics is regarded as a discipline research, which began in the decades before the end of Malthus era. Classical economics can indeed describe the world incisively at that time. However, the rapid increase in production capacity caused by the industrial revolution has not only widened the gap between rich and poor in various countries, but also damaged the ability of economic theories to explain this difference.
Therefore, there is an ironic phenomenon in the field of economic history. In most fields-astronomy, archaeology, paleontology, biology and history-as we walk out of our times, planets and societies, less and less knowledge remains. We already know that strange objects lurk in the distant fog: quasars, dwarf races, bacteria powered by hydrogen sulfide. But Malthusian economics, however eccentric, is a known world. The standard of living in the pre-industrial era can be estimated from information on diseases and the environment. The energy differences between societies were eliminated by the restrictions of Malthus era. Their impact on living standards is minimal. However,Since the beginning of the Industrial Revolution, we have entered a strange new world. We can hardly use economic theories to explain the income differences of various societies, nor can we predict the future income of any society.The gap between the rich and the poor will be magnified rather than suppressed by the economic system in the local social interaction, thus bringing about bumper harvest or famine.
The last surprising result of economic history-which has only surfaced in the past 30 years-is that material abundance, lower infant mortality, increased adult life expectancy and the elimination of inequality have not made us happier than our ancestors who lived in hunting and gathering.High incomes have profoundly shaped the way of life in modern developed countries.But wealth cannot bring happiness. This is another wrong fundamental assumption of economics.
In any society, the rich are happier than the poor.However, as we first saw in Richard Easterling’s 1974 study, since 1950,The rapid growth of per capita income in successful economies has not created greater happiness.Take Japan as an example. Between 1958 and 2004, the per capita income increased nearly sevenfold, but people’s self-reported happiness did not increase but decreased.This proves that our happiness does not depend entirely on our absolute happiness level, but on our relative level with the reference group.Everyone can make himself happier by earning more income, buying bigger houses and driving more expensive cars, but this happiness often harms the interests of those with low incomes, poor houses and dilapidated cars. Money can indeed buy happiness, but that happiness is transferred from others, not added on the overall level.
That is why although the gap between the rich and the poor in today’s societies is so huge, the people in the poorest societies are only slightly less happy, even if the people in poor countries can witness the prosperity of successful economies through television media. Therefore, income may not have an absolute influence on happiness, even for the lowest income groups. The people of 1800-when all societies were poorer and less closely communicated than they are now-may be as happy as the people of some of the richest countries today (such as the United States).
Since most of our ancestors were strivers who were more enterprising and economically successful than their peers in the pre-industrial world, perhaps the above research results also reflect another cultural or biological influence of Malthus era. Those who are satisfied may have been eliminated in the “Darwin Struggle” before 1800 A.D. The motivation of those who achieved success in Malthusian economies is likely to be to have more things than others to be happy.Modern people may never be satisfied. Jealous people have inherited the earth.
This article is excerpted from
Subtitle: A Brief History of World Economy
Translator: Hong Shimin
Publication year: 2020-7
Editor-in-Chief Wei Bingxin
Comments are closed here.