Part I. “The Tide of Innovation: 1700-Present”

Chapter 1:
The Industrial Revolution was a Great Tide

Two centuries ago the world's economy stood at the present level of Chad or Bangladesh. In those good old days of 1800, further, on past form the average person in Norway or Japan would have had less rational hope than a Chadian or Bangladeshi does nowadays of seeing in a couple of generations the end of such poverty. In 1800 the average human consumed in modern-day prices, fully corrected for exchange rates, roughly $3 a day, give or take a dollar or two.2 That's $3 a day in present money to live now in, say, Los Angeles. The only people much better off than the $3 average were lords or bishops or some few of the merchants. It had been this way for all of history, and for that matter all of pre-history. With her $3 the typical denizen of the earth could eat a few pound of potatoes, a little milk, very occasionally a scrap of meat. A wool shawl. A year or two of elementary education, if exceptionally lucky. At birth she had a 50-50 chance of dying before she was 30 years old. Perhaps she was a cheerful sort, and was “happy” with illiteracy, disease, superstition, periodic starvation, and lack of prospects. After all, she had her family and faith and community, which interfered with every choice she made. But anyway she was desperately poor, and narrowly limited in human scope.

Two centuries later the world supports more than six-and-half times more people. Yet contrary to a pessimistic Malthusian expectation that population growth would be the big problem, the average person today earns and consumes almost ten times more goods and services than in 1800. Real income per person in the world has recently been doubling every generation, and is accelerating. Starvation worldwide therefore is at an all-time low, and falling. Literacy and life expectancy are at all-time highs, and rising. Liberty is spreading. Slavery is retreating, as is a patriarchy enslaving of women. In the richer countries, such as Norway, the average person earns fully 45 times more than in 1800, a startling $137 a day. The environment—a concern of a well-to-do bourgeoisie—is in such rich places improving.

True, some whole countries, and many people even in rapidly growing places like India remain terribly poor. The constitute a “bottom billion,” thankfully shrinking, condemned for the present to the $3 that had been the human condition since the African savannah. Some hundreds of millions live on a bare dollar. 3 And many are literal slaves, or women held in slavish ignorance. But the share of the terribly poor and the terribly unfree in world population is now falling faster than at any time in history. World population growth has in fact been decelerating since the 1970s, and in a generation or so will start falling. 4 In fifty years, if things go as they have since 1800, the terribly poor will have become adequately nourished. Slaves and women will be free. And the ordinarily person worldwide will have become bourgeois.

In a good deal of the world it has already happened. Marx was vexed by the bourgeois character of the American working class. But it turned out that the prosperous Americans were merely showing the way for the British and the French and the Japanese. The universal class into which we are merging is not the revolutionary proletariat but the innovative bourgeoisie. Bring to mind, oh dear bourgeois-by-education reader, the poverty of your own ancestors a few generations back. In 2007 the economist Paul Collier observed that for decades “the development challenge has [been thought of as] a rich world of one billion people facing a poor world of five billion people. . . . It will be apparent that this way of conceptualizing development has become outdated. Most of the five billion, about 80 percent, live in counties that are indeed developing, often at amazing speed.” That's right. Witness China and India nowadays, growing in real income per head at amazing, unprecedented speeds, twice or three times faster than other countries — 7 to 10 percent per year, implying a quadrupling of human scope every 20 or 14 years. The fact provides some scientific ideas about what to do for the bottom billion or so. But Collier also says that “since 1980 world poverty has been falling for the first time in history.” That's wrong (though perhaps he means the sheer numbers of poor people). Certainly as a share of all the world's population the world's poverty has been falling not for two decades but for two centuries. Witness Norway and Japan, once $3 poor. The two centuries of history provides some scientific ideas about how we got here and where we are going. 5

The last two centuries favored the ordinary person, and especially a person who lived in a bourgeois country. Consider a third cousin once removed of mine, 35-year old Hedda Stuland, in Dimelsvik on the Hardanger Fjord of western Norway. In 1800 our mutual ancestors had been miserably poor. See Chad. Yet by now the honest, oil-rich, and educated Norwegians have the second highest average income in the world. Expressed in American prices of 2006 it is fully $50,000 a year per head. (Tiny Luxembourg ranks first out of 209 countries at $60,000 a head; closed-citizenship Kuwait ranks third at $48,000; and the big U.S.A. lumbers along at merely fourth, $44,000 a head—which is nonetheless a stunning increase over 1900 or 1950.) 6 Fru Stuland consumes with her $137 a day a good deal of Belgian chocolate and a nice little Audi and a summer home in the mountains. She and the rest of the Norwegians work fewer hours per year than the citizens of other OECD countries, and many fewer hours than the workaholics in Japan or the USA. At birth she could have expected to live to age 85. Her own two children will probably live even longer, and certainly will be even better off financially than she is, unless they decide on careers in fine arts or charitable works—in which case the satisfactions from such sacred careers amount to income. 7 Norway contributes more to international, governmental charities per capita than any other country. Hedda supports non-violent, democratic institutions. She graduated from the University of Bergen, studying mathematics. She works as an actuary in an insurance company, getting six weeks of paid vacation a year in Sicily or Florida. Her husband Olaf (who is by no means her lord and master) worked as a diver on the oil rigs for a few years, but now is desk-bound at the oil company's regional office. As a girl at school Hedda read many of the works of Ibsen in Norwegian, and some even of Shakespeare in English. She's been pleased to attend performances of both at the National Theatre in Oslo over the mountains. Her home resonates with the music of Edvard Grieg, who in fact was a not-so-distant relative on her mother's side. 8

Why did it happen? How did average income in the world move from $3 to $30 a day? How did Norwegians move from being poor and sick and marginally free and largely ignorant to being rich and healthy and entirely free and largely educated?

The main point of this book is that the leaps, such as Norway's from $3 to $137, with its cultural and political accompaniments, did not happen mainly because of the usual economics. That is, they did not happen because of Dutch investments or European trade or British imperialism or the exploitation of sailors on Norwegian ships. Economics did matter in shaping the pattern. It usually does. Exactly who benefited and exactly what was produced, and exactly when and where, was indeed a matter of economics. If the historians don't know the economics they will not understand the pattern of modern history. The pattern was shaped by the trade in cotton and the investments in seaports, by the supply of steam engines and the demand for elementary education, by the cost of iron and the benefit of railways, by the plantation exploitation of slaves and the market participation of women. Economics of a material sort can surely explain why Americans burned wood and charcoal longer than did the forest-poor and coal-rich people of inner northwestern Europe, or why education was a bad investment for a British parlor maid in 1840, or why the United States rather than Egypt supplied most of the raw cotton to Manchester, or why indeed the cotton growers of the present-day African Sahel are damaged by protection for American cotton. Economics can explain why comparative advantage in making cotton cloth shifted from India to England and then back to India.

But economics can't explain the rise in the whole world's (absolute) advantage from $3 to $30 a day. It can’t explain the onset or the continuation, in its magnitude as against its pattern, of the uniquely modern—the coming of elections, computers, tolerance, antibiotics, frozen pizza, central heating, and higher education for the masses, such as for you and me and Hedda. If the economists don’t know the history they will not understand this most important of modern historical events. That is, economics of a conventional sort does not account for the great size and egalitarian spread of the benefit from growth, as against the fine details of its pattern. Material, economic forces were not the original and sustaining causes of the modern rise, 1800 to the present, accelerating after 1980. Economics does most elegantly explain how the rising tide expressed itself in micro-geographical detail, channeled into this or that inlet, mixing with the river just so far upstream, lapping the dock to such-and-such a height. But the tide itself had other causes.

What then? I argue here, and in complementary ways in the two volumes to follow, that talk and ethics and ideas caused the Industrial Revolution. Ethical talk runs the world. One-quarter of national income is earned from sweet talk in markets and management.9 Rhetoric matters. Perhaps economics and its many good friends should acknowledge the fact. When they don’t they get into trouble, as when they inspire banks to ignore professional talk and fiduciary ethics and to use only silent and monetary incentives (executive compensation, say).

In particular, three centuries ago in places like Holland and England the talk about the middle class began to alter. That was the big change. (Unfortunately it didn’t alter at the same time in China or India or the Ottoman Empire.) The North-Sea talk at length radically altered the culture and the politics and the economy. In northwestern Europe around 1700 the general opinion shifted, rather suddenly as such things go. There was a big change in what Alexis de Tocqueville called “habits of the mind”—or more exactly, habits of the lip. People stopped sneering at market innovativeness and other bourgeois virtues exercised far from the traditional places of honor at St. Peter’s or Versailles or the First Battle of Breitenfeld.

(To speak for a moment to my economist colleagues, economists save their models in the face of such a radical alteration by speaking of “nonlinearities” or “economies of scale” or “multiple equilibria.” I am claiming that the economy exploded because the forms of speech about enterprise and invention suddenly changed, for various good and interesting reasons. Speech, not material changes in foreign trade or domestic investment, caused the non-linearities. We know this in part because trade or investment were ancient routines, but the new dignity and liberty for ordinary people were unique to the age.)

The change was of greater importance for explaining the modern world than the clerical Reformation in Germany after 1517, or even the aristocratic Renaissance during and after the Tuscan Trecento, though both of these influenced it, as did a third great R-shift of late medieval and early modern times, the political Revolts and Revolutions which shook Holland and Britain and America and finally France. But the point here is that in a fourth great and uniquely European R-shift — the “Bourgeois Revaluation” in Holland and Britain—an old class began to acquire a new and higher standing in the way people talked about it, in their rhetoric.

Faith is the virtue of backward looking, of having an identity. Dignity encourages faith. You are dignified in standing. Hope by contrast is the virtue of forward looking, of having a project. 10 Liberty encourages hope. You are free to venture. The claim is that the dignity to stand in ones place and the liberty to venture made the modern world. Both were new and necessary. My libertarian friends want liberty alone to suffice. But it seems that it did not. Both dignity and liberty were necessary — though of course the one normally supports the other. Liberty without dignity makes for activity without faithful self-esteem, the eager but lowly and self-despising niggling of the marketplace. And dignity without liberty makes for status without hope, merely another version of the hierarchy of olden times. The Revaluation of the honorable transcendent, no longer confined to heroism or saintliness or courtly grace, was a change in sociology and politics. By contrast, what Tocqueville called the psychological “habits of the heart” did not change much. The important change was not psychological (as for example Max Weber argued in 1905), or economic (as Marx argued in 1848), but sociological and political. Only by consequence were they economic.

Around 1600, that is, on a big scale in pioneering Holland, and then around 1700 on a bigger scale in innovating Britain, some of the elite began to Revalue the town and its vulgar and corrosive if liberty-using creativity. By the 1660s the Dutch cloth merchant Pieter de la Court was declaring that “a power of using their natural rights and properties for their own safety . . . will be to the commonalty. . . an earthly paradise: for the liberty of a man’s own mind, especially about matters wherein all his welfare consists, is to such a one as acceptable as an empire or kingdom.”11 No aristocratic empires or kingdoms, please. In 1690 an English merchant to the Ottomans, Dudley North (himself from an aristocratic family), wrote in a more modern and economistic way that “there can be no trade unprofitable to the public, for if any prove so, men leave it off; and wherever the traders thrive, the public, of which they are a part, thrives also.” 12

Such pro-market opinions were never universal. The British elite took a century or more to begin speaking of commercial creativity as O.K., acceptable, not-to-be-sneered-at. And anti-commercial snobbery in Britain did not entirely end, ever. The liberty half of the Revaluation was equally (and more famously) slow in coming. And therefore the domination of British politics by an Establishment did not entirely end, ever. As the historian Margaret Jacob argued long ago, and as Jonathan Israel has confirmed lately in the history of ideas, the free-market and free-voting “radical Enlightenment” of people like the Levellers, de la Court, Spinoza, Mandeville, Paine, and the well-named Freemasons was undercut by the more conservative and monarchical Enlightenment of Locke, Newton, Voltaire, and the rest, in the utter liberty of trade that the radicals sometimes favored among others matters. 13 We continue to fight such battles. And at the time both the radical and the conservative Enlightenment of course were fiercely opposed by the reactionary powers, with galley and with rope.

The historian of technology Christine MacLeod dates the final apotheosis of the inventor in Britain to the early nineteenth century. Certainly the shift in rhetoric beginning in the seventeenth century needed constant tending, as ideologies do. MacLeod tells for example of the remarkable campaign to put by 1834 a big statue of the inventor James Watt (in Westminster Abbey, in among the kings and priests and poets. A contemporary asked in vexation “what this vast figure represents, what class of interests before unknown [well, hardly ‘unknown'], what revolution in the whole framework of modern society.” 14 He was behind the curve. MacLeod notes that the Times as early as April 22, 1826 had declared that inventors were “the elect of the human race.”15 She detects during the 1830s “a marked alteration in the attitudes of judges and juries towards patentees. . . . The balance of success in litigation shifted towards prosecutors of infringements, as patentees began to be regarded less as grasping monopolists [of Elizabethan date, for example], and more as national benefactors,” sixty years after Adam Smith had fully articulated the case. 16

Such dignity for innovation and liberty for enterprise are sometimes still opposed—which along with a bad climate and a bad start is why some countries remain poor. True, if supporters of subsidies to American cotton growers were capable of shame, eastern Burkina Faso and the rest of the Sahel would do better. Ethical failures in the global North contribute in part to keeping such places poor. Yet even with a bad climate and a bad start and an unethical policy in the North of protecting its own rich farmers, such places do not have to remain poor. When a stable though tyrannical country like China or a turbulent though law-governed country like India started to revalue markets and innovation, and to give a partial liberty to commerce, the food and housing and education for the average person began doubling every 10 to 7 years. In a couple of generations China and India will have Hedda’s standard of living. They have already entered Collier’s Top 5½ Billions. An internal ethical change allowed it, beginning in northwestern Europe after 1700.

It wasn’t “capitalism” that was new in 1700. Markets and non-agricultural property and a town-living middle class to manage them are very old. The market economy, contrary to what you might have heard, has existed since the caves. The invention of full language around 50,000 B.C.E. shows up archaeologically for example in a big and sudden increase in the distance traveled by stone for tools, such as flint or obsidian, scores of miles in trade instead of the former few. So it went, for millennia. “Back at least as far as the third millennium B.C.E.,” writes the economic historian George Grantham, “farmers on some islands in the Aegean Sea were producing olive oil and wine in amounts greatly exceeding domestic consumption requirements.” 17 Walled towns arose with the invention of agriculture, since 8000 B.C.E. in Jericho for example. For millennia afterwards the towns proliferated, with their markets and bourgeoisies and enterprises. From the beginning the townsfolk appear to have had pretty much the same psychological makeup as the modern bourgeoisie—they wanted profits, they believed that arranging for monopolies by corrupting the government was the best way to attain them, but they were willing to innovate if forced by competition and enabled by cooperation. They only awaited the sociological and political Bourgeois Revaluation in northwestern Europe to commence innovating on an immense scale.

Nor of course was innovation entirely novel in 1700. People had always been creative in making arrowheads or wooden ships. An Upper Paleolithic burst of creativity in making tools and ornaments and musical instruments is another sign of the invention of fully modern language.18 The Taiwanese natives, originally from China, appear to have invented the outrigger canoe around 3500 B.C.E., and went on to populate the Pacific. The Indo-Europeans of Ukraine appear to have domesticated the horse around 4000 B.C.E., and went on to conquer or repopulate or inspire Europe, Iran, and much of South Asia. But until 1800 C.E. the innovation had allowed expansion of humans merely in numbers and ecological range, or the replacement of one culture by another. For Malthusian reasons it had done nothing to change the $3-day life. Nothing at all. The anthropologist Marshall Sahlins argued long ago, and persuasively, that the “stone-age economics” of hunter-gatherers allowed people to work many fewer hours than agriculture did. 19 Yet cultivating fields of grain did bring cities and temples and then literacy. It was a tradeoff, sparsely populated hunting grounds traded off for dense cities. But either choice left the scope of the average human unchanged—for most people: poor, illiterate, short-lived. What was different after 1800, and with unstoppable force after 1900, was a novel and immense and sustained, almost lunatic, scale of innovation, breaking the Malthusian curse. For the first time the innovations made ordinary people far richer than the ancient standard of hunter-gatherer or nomadic herder or settled farmer, and allowed the moderns to have smaller families. Think about your ancestors, and compare.

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