A Farewell to Alms

A Brief Economic History of the World

by Gregory Clark

Princeton UP © 2007
getAbstract © 2013

1/10
Take-Aways
Neolithic and 18th-century living standards were comparable.
European living standards rose only after the Industrial Revolution.
Before that time, all societies were stuck in a “Malthusian trap.”
In this Malthusian world, technological change was extremely slow.
Perversely, anything that increased mortality also increased living
standards.
The Industrial Revolution, when it came, was not a sharp break with the
past.
Nineteenth century economic growth was due mostly to the reproductive
success of the rich.
“Middle class” cultural traits consequently spread throughout society.
Because of this, the West has triumphed in terms of living standards.
But material prosperity does not bring happiness.

2/10
Recommendation
The topic of this thrilling book, 20 years in the making, is nothing less than the
history of civilization, from the Neolithic Revolution to the Industrial
Revolution to today. Rather than relating history as a story of kings, Caesars,
popes, prelates and presidents, Gregory Clark tells the story through economic
data, much of which is the result of his own analysis of documentary evidence.
Almost every other page contains a beautiful graph, table or chart illuminating
some dimly lit bit of history. And Clark’s detours are almost as wonderful as
his main argument. His writing is elegant and clear, his sense of humor present
but not annoying. While this book has outraged some commentators, it’s hard
to see why, given the caution with which Clark presents his conclusions. Most
likely, the flash point is his stress on culture as enabling and retarding
economic growth – views that sometimes get wrongly equated with racism.
getAbstract recommends this book to anyone who wants to quantitatively
enhance his or her conception of human history.

3/10
Summary

Romantic Age or Stone Age?

Imagine for a moment life in 18th-century England. Perhaps such scenes come
to mind as the one Sir Joshua Reynolds depicted in 1789 in his painting, The
Braddyll Family. A woman in a flounced skirt sits with her lapdog on an ornate
chair. Her husband, standing behind her in a powdered wig and red riding
jacket, looks out toward the viewer, and the couple’s son, reclining languidly
against a piece of statuary, holds his hat and gloves, apparently ready to stroll
around the family’s estate once this tiresome business of posing is finished.
Now imagine what life was like for humanity’s hunter-gatherer forebears. It
probably resembled the current lives of the Nukak, an indigenous people living
in the Amazonian rain forest. A recent picture of a typical Nukak family shows
two almost entirely naked women with few possessions squatting over a crude
bowl in which they have gathered food (perhaps nuts). Their babies cling to
them, suckling while the women work. Their shelter is a rough-thatched roof.
Their life looks anything but easy.
With these two pictures in mind, consider which world you would rather
inhabit – that of 18th-century England or that of the Nukak. Most would say
the former. And yet, recent data show that the living standard of the average
person at the end of the 18th century in England was no higher than that of the
average Nukak today. While some fabulously rich people were immortalized in
paintings such as The Braddyll Family, Englishmen living in the Romantic Age
were, on average, no better off than hunter-gatherers living in 10,000 B.C.E. In
fact, those in the Stone Age may have been better off. Their society was almost
certainly more egalitarian.

The “Malthusian Trap”

The explanation for this stunning lack of progress is the Malthusian Trap,
named after Reverend Thomas Robert Malthus. In An Essay on the Principle of
Population, published in 1798, Malthus looked at the relationship between
population and living standards, and came up with a simple, appealing
economic model of the 18th century economy around him. Malthus’s model
requires only three basic assumptions: Each society has a birth rate, each
society has a death rate and, as population increases, material living standards
decline since, essentially, this pattern leads to too many people chasing too few
resources. Another piece of the Malthusian model concerns technology: Each
society has a certain level of output at any given time and this output varies
with the society’s level of technological sophistication.
A Malthusian economy is the default economy of all animals, whether
4/10
hummingbirds or humans. It is truly the natural economy, but it is a strange
state of affairs, at least to modern readers. For instance, in such an economy,
virtue is vice and vice is virtue. Traditionally, war, violence, crop failures, poor
hygiene, poor sanitation and natural disasters haven’t been considered good
things. But they do have one nice side effect in a Malthusian world: They
increase the death rate, which thus increases average living standards.
Similarly, in such a world, the usual virtues, such as peace, redistribution of
wealth to the needy, public health initiatives and a stable society, are bad
because they decrease the death rate and probably increase the birth rate,
making everyone in the society worse off. Perverse but, unfortunately, true.
From the Neolithic Revolution – perhaps 10,000 to 12,000 years ago, when
human beings started farming – until the 19th century, this static Malthusian
economy trapped human beings and kept them from escaping to significantly
higher living standards. Some technological change occurred, but very little.
The annual rate of technological advance prior to 1800 was less than 0.05%.
Today, the annual rate of change is 30 times that amount. And yet, even
without significant technological progress, human society in Europe was
changing slowly in ways that would set the stage for the Industrial Revolution,
in part because of filthiness. Before the Industrial Revolution, for instance, it
was common in London to use one’s basement as a cesspit. People rarely
bathed. High urban population densities and disgusting conditions increased
the mortality rate, as did another “helpful” agent of social change: the Black
Death.
Natural selection was also at work, as it is in all animal societies. For one thing,
increased reproductive success rewarded the traits that made someone a good
middle-class farmer or shopkeeper. The nonviolent, hard-working, literate and
numerate among the pre-Industrials had more babies, and those babies survived
in spite of the filth and disease. For another thing, data show that the rich were
outbreeding and outliving the poor. The richest men had double the number of
children that poor men had. And because the economy was static, the children
of the rich couldn’t sit around idly. They had to take jobs “beneath their
stations.” The son of a man with a lot of land might end up as a small
landholder; the son of a craftsman might become a mere laborer. Through these
mechanisms, bourgeois cultural attributes, such as patience, hard work and
ingenuity, spread and thus formed the foundation for the next revolution.
Interestingly, more than culture may have been at work. It is possible (though
unlikely) that human nature was being tinkered with on the genetic level.

The Industrial Revolution

In some ways, the Industrial Revolution wasn’t so revolutionary. Despite
common wisdom to the contrary, it wasn’t a sharp break with the past after
which European economies grew rapidly because of higher labor productivity.

5/10
Rather, it was an acceleration of a long-term trend. The march of technological
progress was already under way well before 1800. Progress was gradual and
varied a great deal over time. In fact, even finding a date for the Industrial
Revolution is hard. It could be 1800, but dividing lines could also be drawn at
1860, 1600 or even 1200. Moreover, the rise in income per person since 1800,
which truly is dramatic, was the result not only of technological advances but
also of declining fertility. Starting with the upper classes and then cascading
downward, couples had fewer children.
Traditional explanations of the Industrial Revolution don’t fit the data. Some
economic historians claim the Industrial Revolution resulted from shocks
outside the economic system. Typically, these shocks would have included
occurrences such as changes in political institutions and the rise of democratic
forms of government. But, in societies like England’s, most of the institutions
necessary for economic growth existed by 1200. The incentives to work hard
and invest were actually better at that time than during the modern age. Other
historians claim that preindustrial human societies remained caught in a stable
equilibrium and that something moved preindustrial economies out of this
stasis to a dynamic equilibrium. For years, economists have examined the
period just before 1800 for the agent of such a change. Coal? Colonies? Sadly,
this approach has failed to find convincing supporting data.
One of the more puzzling questions about the Industrial Revolution is why it
occurred in Europe, and not in China, Japan or India. The answer is that the
Industrial Revolution in Europe was an accident of history, largely the result of
European social customs. For example, England was a stable society and had
been since around 1200. Its population growth started to slow around 1300.
Stable economies and lower birth rates were both necessary for economic
growth. But China and Japan had stable societies that exemplified the
middle-class values of thrift, hard work, honesty and education, just like
English society. China and Japan were on their way to accelerating economic
growth, but they lacked one factor: an increasingly fecund upper class and the
consequent distribution of middle-class values (or habits) down the social
hierarchy. In Japan during the Tokugawa era, for instance, the rich had so few
children that those offspring could remain in jobs appropriate to their “station.”
Good for them, but not for the economy as a whole.

The “Great Divergence”

If you had stood in Alexandria, Bombay or Shanghai in 1900 and looked
around, you would have seen cities that were well-integrated into the British
economy. In these cities, the cost of transportation, access to capital, and
cultural and governmental institutions were comparable to those in Britain.
Gazing into your crystal ball, you would likely have foreseen a rosy future for
these cities as well as others in what’s now called the “developing world.”

6/10
But that’s not the way things worked out. Instead, a few countries became
spectacularly rich while many countries stayed poor or, like some African
nations, became poorer. Living standards in England circa 1800 may have been
as much as two-and-a-half times better than living standards in Malawi today.
This great divergence between the rich and the poor countries is evident in
wage differentials. An hour of an Indian apparel worker’s time is now worth 38
cents; an hour of a United States apparel worker’s time is worth $9.
You can find part of the answer to this puzzle by looking at data from the
cotton textile industry. It is indicative, mostly because cotton textile
manufacturing provided a good natural experiment: It appeared in the early
years of the Industrial Revolution in both rich and poor countries. Workers in
England and India used the same machines and the same material. The result?
Output in India was far lower than output in England. Indian textile workers at
the dawn of the Industrial Revolution supplied very little labor compared to
English workers. (Even today, Indian textile workers actually work for as little
as 15 minutes an hour.) The same pattern emerges from 19th-century data on
the railway industry in rich and poor countries. Poor countries had the same
machinery – the same locomotives and tracks. But productivity was shockingly
low and economic growth suffered.
Was this because of poor government institutions or geography? Possibly both
played a role, but a more plausible answer lies in the social environment.
English cultural traits had not yet become widespread in many poor countries.
English workers were simply more conscientious and disciplined than Indian
workers, and the great divergence followed. Unfortunately, the great
divergence remains. Today’s world contains people richer than any in history.
It also contains human beings who are poorer than people have been for
millennia.
The even worse news is that contemporary manufacturing requires ever more
conscientiousness and discipline, since an error in the production chain can
often entirely destroy a day’s products. Crucially, though, all this emphatically
does not mean that the poor world is “destined” to stay poor. Human societies
are remarkably adaptive. Historically, northern Germany was economically
dominant over the south, but that situation is now reversed. Shortly after World
War I, the north of England traded places with the south in terms of economic
energy. And Ireland, which was desperately poor for more than 200 years, has
recently become as rich as England, its traditional economic superior. After all,
who standing in the England of, say, 300 A.D. would have predicted that a
small island nation centered there would extend its empire around the world?
And recall those “middle class” values that could have allowed the Industrial
Revolution to occur in China. These seeds have lately bloomed. Not even some

7/10
30 years of communism could destroy the cultural basis for economic growth
in China. Japan, though obviously never communist, has recovered remarkably
from its own calamity, World War II.

The Triumph of the West?

An examination of economic history, it seems, shows again and again the
“triumph” of the West since the early 1800s. After all, in the West income has
steadily risen, child mortality has declined, people now live longer and
inequality has diminished. But that triumph brings in its train a couple of ugly
ironies. The first is that economics as a science peaked around 1800 with the
classical Malthusian models. Since then the field has lost its ability to predict
and describe why countries are rich or poor. Consequently, it also has lost its
ability to prescribe solutions to poverty and other economic ills. The second is
that the unparalleled wealth of developed nations today does not buy
happiness. In Japan, for instance, income per person has risen almost sevenfold
since 1958, while happiness has slightly declined. Modern man, it seems, is the
descendant of strivers who were never satisfied and prudently kept trying to
improve their station. The satisfied are dead, and buried with them, it seems, is
hope for human contentment.

8/10
About the Author
Gregory Clark, an economic historian, is chair of the economics department at
the University of California, Davis.

9/10
Quotes
“As long as technology improved slowly, material conditions could not
permanently improve.”
“Since the Industrial Revolution...we have entered a strange new world in
which economic theory is of little use in understanding differences in income
across societies.”
“Primitive man ate well compared with one of the richest societies in the world
in 1800.”
“Foraging and shifting cultivation societies had a form of ‘primitive
affluence’...measured in the abundance of leisure as opposed to goods.”
“The plague was not the harsh judgment of a vengeful Old Testament God on a
sinful Europe, but merely a mild reproof by a beneficent New Age-style deity.”
“Given the static nature of the economy and of the opportunities it afforded, the
abundant children of the rich had to, on average, move down the social
hierarchy.”
“There is, in fact, nothing inherently industrial about the Industrial
Revolution.”
“The increased rate of innovation in Industrial Revolution England was the
result not of unusual rewards but of a greater supply of innovation, still
modestly rewarded.”
“Poor countries used the same technology as rich ones. They achieved the
same levels of output per unit of capital. But in doing so they employed so
much more labor per machine that they lost most of the labor cost advantages
with which they began.”
“Societies subject to Malthusian constraints were not necessarily particularly
poor, even by the standards of today.”
“High incomes profoundly shape lifestyles in the modern developed world. But
wealth has not brought happiness. Another foundational assumption of
economics is incorrect.”
“People in contemporary countries as poor as those of the world before 1800
on average report little difference in happiness from those in very rich
countries, such as the United States.”
“Modern man might not be designed for contentment. The envious have
inherited the earth.”

10/10