"To make money you have to work hard-to live your life in a certain way. The Atlantans all live that way, it's part of their culture."
—Neal Stephenson, The Diamond Age
How is it that in the 19th century, England came to have dominion over so many lands and so many peoples? Though he uses modern quantitative methods, economic historian Gregory Clark reverts to a Victorian answer: the superiority of what Winston Churchill was fond of calling "our island race."
Clark is a Scottish-born professor at the University of California, Davis. He describes the Industrial Revolution as an escape from the Malthusian trap of slow innovation dissipated by growth in population. His core thesis is that this escape took place first in England because there the more industrious among the population were relatively more successful at reproducing during the period leading up to 1800. As he puts it,
there is very good evidence of differential survival of types in preindustrial England in the years 1250-1800. In particular economic success translated powerfully into reproductive success, with the richest individuals having more than twice the number of surviving children at death as the poorest.
Clark offers data to bolster his claim that in other countries this cultural Darwinist mechanism was less powerful. As a result, by 1800 a relatively large proportion of its population of the English population was literate, numerate, self-controlled, disciplined, and reliable. These characteristics were needed in order to exploit the efficiencies of the factory system and thereby achieve modern prosperity. In short, England industrialized first because its people were highly industrious.
Clark writes that
in the most dramatic example, Indian raw cotton was exported through Bombay over 6,800 miles to Lancashire mills, where workers paid four to five times the daily wages of mill operators in Bombay manufactured it into cloth, which was then shipped back over 6,800 miles through Bombay to be sold back to the cultivators of the raw cotton.
Had an unskilled worker in India been as industrious as an unskilled worker in England, such a round trip would have been an economic absurdity. But it took several times as many Indian workers as it did English workers to work a given number of cotton looms. At the English mills, "workers, even those who were on piece rates, were expected to appear at opening time each morning, to work all the hours the mill was open, to stay at their own machines, and to refrain from socializing at work." Indian mills were by comparison undisciplined: "A substantial fraction of workers were absent on any given day, and those at work were often able to come and go from the mill at their pleasure to eat or smoke." Had productivity been equal, England would not have exported finished cotton products to India.
From the Meadow to the Food Court
Clark divides economic history into two eras. During the pre-industrial era (up to roughly 1800), there was no improvement in the average standard of living. Since then, incomes have been rising by one or two percent a year, cumulating in a spectacular level of wealth in the developed world. This rough chronology is accepted by many quantitative economic historians.
Clark describes pre-industrial economies as Malthusian. Think of the pre-industrial economy as a meadow and humanity as a herd, grazing upon it. The expansion and contraction of the herd is governed by the availability of grass.
One of Clark's main points is that each person's consumption varies inversely with the density of the herd. When the herd is thinned by plagues, war, or bad government, the survivors actually live rather well. Peace and good public health, on the other hand, are bad for prosperity. The herd is large, and per capita consumption is low.
There are differences between a population of humans and a herd of cattle. The humans are able to spare some time for art, science, and mechanical innovation. But these activities do little to improve living standards, which depend almost entirely on the availability of food.
Some innovations did improve the human herd's efficiency of grazing. However, this improvement was gradual, and in particular it was not rapid enough to outpace population growth. Innovation did not raise average living standards, although it permitted gradual expansion of the herd. Thus, during the era of the meadow, the human herd increased in size from less than 10 million in 10,000 BC to over 750 million in AD 1750.
What the herd could not do was work in a coordinated, disciplined fashion. Before 1800, people were largely unmanageable. Clark gathers evidence that people were generally illiterate, innumerate, impulsive, bloodthirsty, and unreliable.
It occurred to me, reading Clark's description of man in this era, that one would not have wanted to fashion an army out of this undisciplined herd. Indeed, this may help explain some puzzling episodes of military history. There are cases, such as that of the Conquistadores in Mexico and Peru, where badly-outnumbered armies were victorious, even without automatic weapons. Not until Napoleon do we see successful mass armies. This would tend to support Clark's thesis.
Clark makes the interesting argument that the machines of the nineteenth and early twentieth centuries did not replace unskilled human labor, as many people feared. Instead,
there was a type of employee whose job and livelihood largely vanished in the early twentieth century. This was the horse...unlike horses, people have attributes that machines so far cannot replace, or can only replace at too high a cost. People supply not just power but also dexterity. We are very good at identifying objects and manipulating them in space, and machines are still surprisingly poor at these tasks.
The foregoing is reinforced by "China Makes, the World Takes," James Fallows's cover story in the July-August 2007 issue of the Atlantic Monthly. Fallows describes China's labor-intensive fabrication firms as having the ability to adjust to produce new products in an environment of rapid innovation. In contrast, robotic assembly plants only are economical for a given, fixed product.
Clark, along with many modern economists, believes that the significance of machines in the Industrial Revolution has been overstated. Economic growth was not driven by the accumulation of capital (heavy equipment and industrial plants). Instead, most economic growth is accounted for by innovation.
This leads to my metaphor for a modern economy: the food court. There are many recipes for transforming the raw materials of the earth into satisfying foods. There are also recipes for constructing ovens, recipes for creating organizations for serving food, and so on.
The most important thing to recognize about the food court economy is that the value is in the recipes, not in the ingredients. This creates the opposite of a Malthusian economy. The Law of Diminishing Returns does not apply: my use of a recipe does not deprive you of the ability to use it. The supply of recipes has no physical limits-it is only constrained by our imagination and our state of knowledge. Paul Romer, a leading theorist of modern economic growth, was the first to articulate this point. (See David Warsh, Knowledge and the Wealth of Nations.)
Why, then, is not the whole world prosperous? Clark argues that the underdeveloped parts of the world are still in the meadow economy stage. People there lack the discipline and behavioral traits to be employable in the food court economy.
Given that people in the underdeveloped world are not a modern labor force, the well-meaning actions of Westerners can have the effect of lowering the standard of living in poor countries. For example, better medicine and public health enlarge the herd, reducing average income.
Clark's Formidable Opponents
Gregory Clark eschews racism and Social Darwinism. However, the views he espouses are quite close to those disreputable theories, putting him at odds with a venerable tradition in economics and elsewhere.
For example, Clark takes on a popular historian:
In Guns Germs and Steel Jared Diamond suggested that geography, botany, and zoology were destiny.... But there is a gaping lacuna in his argument. In a modern world in which the path to riches lies through industrialization, why are bad-tempered zebras and hippos the barrier to economic growth in sub-Saharan Africa? Why didn't the Industrial Revolution free Africa, New Guinea, and South America from their old geographic disadvantages, rather than accentuate their backwardness? And why did the takeover of Australia by the British propel a part of the world that had not developed any settled agriculture by 1800 into the first rank among developed economies?
Among economists, Clark's opponents are, if anything, even more formidable. David M. Levy and Sandra J. Peart have written that classical economists such as John Stuart Mill were in the forefront of attacks on racism:
Carlyle attacked Mill, not for supporting Malthus's predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact-that economics assumed that people were basically all the same, and thus all entitled to liberty-that led Carlyle to label economics ‘the dismal science.'
Thomas Carlyle, who coined the phrase "dismal science," did so in the context of making a pro-slavery argument about the inferiority of the black race. Classical economists argued against racial theories. Levy and Peart go on to say that
this idea, that people are just people, can be traced from Mill back to Adam Smith's Wealth of Nations. In it, Smith put forward the hard rational choice doctrine that there are no natural differences among people. There are no natural masters; there are no natural slaves. All human differences can be explained by incentives, history, and luck.
Adam Smith and modern successors such as Douglass North argue that differences between human beings are minor. More important are the incentives provided by the institutional arrangements in society. As North put it in his lecture accepting the Nobel Prize in 1993,
if the institutional framework rewards piracy then piratical organizations will come into existence; and if the institutional framework rewards productive activities then organizations-firms-will come into existence to engage in productive activities.
Clark challenges the new institutional economics. He writes,
Economic institutions, being just a set of rules about who owns what and how ownership is determined, can be changed at little cost in terms of resources.... If an institution impeded the production of the maximum potential output from a society, there would be pressure to change it into one promoting greater efficiency.... Thus institutions vary across time and place mainly because differences in technology, relative prices, and people's consumption desires make different social arrangements efficient. [emphasis added]
Clark is not arguing against the view that institutions matter. However, he is arguing against the view that institutional change is a historical causal force rather than the outcome of natural evolutionary developments.
Clark offers mixed evidence on the role of institutions versus the role of cultural differences. For example, he points out that Indian cotton mill managers tried tinkering with the incentive structure for workers in an attempt to reduce absenteeism, but with little effect. This illustrates the failure of institutional incentives to overcome cultural traits.
On the other hand, Clark writes,
migrants, particularly those from very-low-income countries, have been able to achieve enormous gains through migration. Aid to the Third World may disappear into the pockets of Western consultants and the corrupt rulers of these societies. But each extra migrant admitted to the emerald cities of the advanced world is one more person guaranteed a better material lifestyle.
This observation is much more consistent with the theory that institutions are important than with a theory of inherent cultural differences. Implicitly, Clark is suggesting that institutional change in underdeveloped countries is very costly-indeed, so costly that we have no reliable way by which it can be accomplished. On the other hand, taking people out of the underdeveloped world seems to enable them to quickly shed their backwardness. This would seem to belie the notion that industriousness arises only from a gradual process of selective breeding.
In conclusion, Gregory Clark has given us a provocative work. It is economic history, but it has strong implications for contemporary problems. His quantitative techniques for demonstrating such phenomena as the innumeracy of pre-industrial humanity and the evolution of the speed of information flows are clever. However, the contest between institutional accounts of economic performance and Clark's cultural explanation is probably best resolved through a synthesis. Clark's attempt at a winner-take-all for cultural Darwinism falls short.