Tag: institutions

“You try to explain two broad things about sustained economic growth: why it started when it did (in the mid-18th century) and why it started where it did (England). Let’s start with the when. What took so long? Humans invented agriculture maybe 10,000 years ago. Why did it take 9,800 years or so for that to lead to real economic growth?”

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“This is one of the key questions in all of economics. Its answer is central to why some countries grew rich while others have not. 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.”

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“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.”

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“[In our view], the decisive break responsible for industrialization rests on developments that seem to be only indirectly connected to the story of colonial exploitation. But future work might change my opinion on this subject.”

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“On the one hand, the sugar economy boomed in the 17th and 18th centuries, and cotton was the major input into the textile factories at the center of Britain’s industrialization. These crops were produced with slave and coerced labor.

On the other hand, the evidence is fairly weak of a connection between the products of exploited labor and the innovations that were central to the onset of modern economic growth. This is not to deny a connection between the two, and reasonable people disagree over the relevant counterfactuals. Had there been no slave labor in the New World, would the Lancashire factories have been able to get enough cheap cotton to make innovation worthwhile? Would innovation have been possible with more expensive cotton of different quality from other parts of the world?

Our book leads to the conclusion that there is no silver bullet explanation for why the world became rich. Colonization likely played some role, and it likely played a much greater role in keeping large parts of the formerly colonized world poor. But there are many key features of the onset of growth that cannot really be accounted for by colonization. Most importantly, explaining how the world became rich requires an explanation for why the rate of technological change rose so rapidly. Colonization may have played an indirect role in this process, but there are many other causes we highlight that were much more direct and relevant.”