We are all taught in secondary school that the world started getting rich two centuries ago because the Industrial Revolution started. What we are NOT told is why did the Industrial Revolution take place 200 years ago rather than at any other point in human history. We are not also told why did the Industrial Revolution sustain rather than fizzle out after a few decades. Dylan Mathews says in his introduction to this interview that: “For a long time, there was no one book that could explain, compare, and evaluate these theories for non-experts. That’s changed: How the World Became Rich, by Chapman University’s Jared Rubin and George Mason University’s Mark Koyama, provides a comprehensive look at what, exactly, changed when sustained economic growth began, what factors help explain its beginning, and which theories do the best job of making sense of the new stage of life that humans have been experiencing for a couple brief centuries….
What today we’d characterize as extreme poverty was until a few centuries ago the condition of almost every human on Earth. In 1820, some 94 percent of humans lived on less than $2 a day. Over the next two centuries, extreme poverty fell dramatically; in 2018, the World Bank estimated that 8.6 percent of people lived on less than $1.90 a day. And the gains were not solely economic. Before 1800, average lifespans didn’t exceed 40 years anywhere in the world. Today, the average human life expectancy is more like 73. Deaths in childhood have plunged, and adult heights have surged as malnutrition decreased.
The big question is what drove this transformation.”
Basis this interview given by the authors, here are a few factors which seemed to have been responsible for the revolution: “The simplest answer is that economic growth occurred only after the rate of technological innovation became highly sustained. Without sustained technological innovation, any one-off economic improvement will not lead to sustained growth. Incomes will rise in the short run, but over time people will have more babies and those babies will eat up all the economic surplus. This is known as the “Malthusian trap,” after Thomas Malthus, a British clergyman of the late 18th century. This Malthusian logic explains the pre-industrial world pretty well.
Although there were ebbs and flows in pre-industrial economic growth, no society ever broke through and achieved sustained economic growth. This happened only after the overall rate of technological progress became high enough to more than offset the downward pressure imposed by population growth.
The question is why it took so long for the rate of technological innovation to grow as it did. This is one of the central questions we attempt to answer in this book. And there is not one “silver bullet” answer. For one, sustained innovation requires institutions that limit confiscation by the government (and protect other property rights more generally). But most societies in world history were weak on this dimension.
Sustained innovation also requires cultural values that support innovation and encourage understanding of how the world works. Societies in which work is looked down upon are unlikely to experience sustained innovation.
Ultimately (and this matters for the acceleration in growth we observe from the late 19th to the 20th centuries), it also helps if families limit the number of children they have. This does not necessarily contribute to innovation, but it does mean that innovation will more quickly translate into growth.
Most societies in world history had none of these features, let alone all of them. It took a while for all of these preconditions to coalesce in one nation. But once it did, economic growth took off.”
The authors also deal with another question that causes much angst in modern day India – does growth benefit everybody or a tiny privileged class of capitalists: “How did growth go from something primarily benefiting capitalists to something that could broadly benefit humanity?…
One reason is institutional: Groups like labor unions played a key role in redistributing income more broadly. Another is demographic. During Britain’s early period of industrialization, its population grew rapidly enough to keep wages down. It was only as places went through a “demographic transition” (the movement from large families and high birth and death rates to smaller families with lower birth and death rates) that productivity gains began to be translated into major increases in real wages.
A third has to do with education. Many of the innovations of the first Industrial Revolution were not science-based and thus did not require a highly skilled workforce. Beginning in the middle of the 19th century, science became more important, and a better-educated workforce was desired. States began spending more on education, leading to a better educated workforce. Higher education typically leads to greater income. None of these causes explain why income became more broadly distributed by themselves; it was a combination of these factors that mattered.”
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