Conclusions: Technology, growth, and the rise of the Occident

In economic history, more so perhaps than in other disciplines, everything is a matter of degree, and there are no absolutes. The arguments made in this survey represent an interpretation that is by no means generally accepted.

Revolution; agricultural productivity may have been as high in 1290 as it was in 1700; factory-like settings can be found in earlier periods). Others are based on misapprehen­sions (the aeolipiles built by Hero of Alexandria were not atmospheric steam engines). In the end, the debate on continuity can only be settled if we accept a criterion by which to judge the degree of continuity. If the criterion is economic growth, the continuity fac­tion in the end will have to concede defeat, even if the victory is one in overtime. The era of the Industrial Revolution itself was not a period of rapid economic growth, but it is clear beyond question that it set into motion an economic process that by the middle of the nineteenth century created a material world that followed a dynamic not hitherto experienced.

Not only was growth faster and more geographically dispersed (covering by 1914 most of Europe, North America, other European offshoots, and Japan) than had been experienced by any economy before, it was sustainable. Unlike previous episodes, it kept rolling through the twentieth century. A moment of reflection will underline the enormity of this achievement. The twentieth century was in many ways a very bad cen­tury for the Western world: two horrid World Wars, a hugely costly depression, the collapse of international trade after 1914, the disastrous collectivist experiment in Rus­sia extended to all of Eastern Europe in 1945, and the loss of its Colonial Empires - all of these should have pointed to catastrophe, misery, and a return to economic barbarism for the Abendland.

Social scientists and historians discussing this issue are often accused of “triumphal­ism” and “teleologies”, which are paired with “Eurocentricity” or “Western-centricity”. Whether the scholars who make such accusations actually mean to argue that the gap in income and living standards is imaginary (or ephemeral), or whether they just feel that it is unjust and unfair, is sometimes hard to tell.^[118] Yet it seems otiose to gainsay the importance of the topic. Whether or not the rest of the world is to eventually enjoy the material comforts available to most people in the West or not, we should not give up on our attempt to understand “how the West did it”.

If we want to understand why the West did what it did we should ask questions about the when. The consensus is that by 1750, the gap between the twin peaks was much smaller than it is today. If Europe was richer than the rest of the world, it was so by a margin that looks thin by comparision. The so-called “California School” has been ar­guing indeed that living standards and measurable indicators of economic performance between China and Europe were not all that different by 1750.^[119] If this is accepted, and if we are willing to take the Yang-Zhi delta as indicative of economic conditions of the non-European world, the current gap between rich and poor is largely the result of the Industrial Revolution and the events that followed it.

94

The question of “when” is important because it makes geographical explanations that explain Europe’s success by its milder climate or conveniently located coal reserves less powerful, because these differences are time-invariant. Something had changed in Europe before the Industrial Revolution that destabilized the economic dynamic in the West, but not elsewhere. The question of “where” is also important. Britain was not “Europe”, and even today there are some European regions that clearly are not part of the Western economic development pattern or else are very recent arrivals. On the other hand, a number of non-European nations have been able to join the “convergence club”.

There are two alternative scenarios of the emergence of the gap. One is that, regard­less of living standards and income in 1750, Europe at that time was already deeply dif­ferent from the rest of the world in many respects. In their different ways, David Landes (1998), Eric Jones (1981, 1988), Avner Greif (2005) and Angus Maddison (1998) sub­scribe to this view. By 1750 Europe had already had Calvin and Newton, Spinoza and Galileo, Bacon and Descartes. It had a commercial capitalism thriving especially in Atlantic Ports, an institutional structure that supported long-distance trade, a well­functioning monetary system, and the ability of rulers to tax their subjects and suppress nonconformists and heretics had been constrained in complex but comparatively effec­tive ways.

95

The alternative school emphasizes that many of these European features could be found in other societies, especially in China and Japan, and that when Europe and the Orient differed, the difference was not always necessarily conducive to economic growth. Ch’ing China may not have been an open economy, but it had law and order, a meritocratic bureaucracy, peace, effective property rights, and a great deal of medium- and long-distance trade within its borders. We need to be wary of the logical fallacy that all initial differences between Europe and China contributed to the outcome. Some of the initial difference may have actually worked the other way; the Great Divergence took place despite them. Others were ambiguous in their effect.^[120] In order to understand what triggered Europe’s economic miracle, we need to identify an event that happened before the Industrial Revolution, happened in the right areas, and which can be logically connected to subsequent growth.

I have identified this event as “the Industrial Enlightenment” and have attempted to show how it affected the two central elements of the Industrial Revolution, technol­ogy and institutions, and further how these two elements then affected one another. Not everything that is normally included in the historians’ idea of the Enlightenment mattered, and not everything that mattered could be attributed to the Industrial Enlight­enment. John Stuart Mill’s reflection that “the great danger in the study of history is not so much mistaking falsehood for truth, as to mistake a part for the whole” is pertinent here.

The emphasis on the Enlightenment illustrates how economists should think about culture and cultural beliefs as discussed in great length by Greif (2005). Culture mat­tered to economic development - how could it not? But we have to show the exact ways in which it mattered and through which channels it operated. I have argued that cultural beliefs changed in the eighteenth century. Beyond Greif’s notion of beliefs about other people’s behavior, I would include the metaphysical beliefs that people held about their environment and the natural world, and their attitudes toward the relationship between production and useful knowledge. It should also include their cultural beliefs about the possibility and desirability of progress and their notions of economic freedom, property, and novelty.

In that sense, at least, the Enlightenment may constitute the missing link that eco­nomic historians have hitherto missed. Greif (2005, Chapter 13) points out that many of the institutional elements of modern Europe were already in place in the late Mid­dle Ages: individualism, man-made formal law, corporatism, self governance, and rules that were determined through a legislative process in which those who were subject to them could be heard and had an input. Yet these elements did not trigger modern growth at that time, and it bears reflecting why not. The technological constraints were too confining, and the negative feedbacks too strong.

The story of the growth of the West is the story of the dissolution of these constraints. The Baconian belief that the universe is logical and understandable, that the under­standing of nature leads to its control, and that control of nature is the surest route to increased wealth, was the background of a movement that, although it affected but a minute percentage of Europe’s population, played a pivotal role in the emergence of modern growth. If culture mattered, it did so because the prevailing ideology of knowl­edge among those who mattered started to change in a way it did not elsewhere. The eighteenth century Enlightenment, moreover, brought back many of the institutional elements of an orderly and civil society, together with the growing realization, most eloquently expressed by Adam Smith, that economic activity was not a zero-sum game and that redistributive institutions and rent-seeking are costly to society.

All the same, ideological changes and cultural developments are not the entire story. A desire for improvement and even the “right” kind of institutions by themselves do not produce sustained growth unless society produces new useful knowledge, and unless the growth of knowledge can be sustained over time. Useful knowledge grows because in each society there are people who are creative and original, and are motivated by some combination of greed, ambition, curiosity, and altruism. All four of those motives can be seen to be operating among the people who helped make the Industrial Revolution, often in the same people. Given that the generation of innovations was not yet dominated by large corporations, the relative weight of “greed” may have been smaller than in the twentieth-first century, and that of curiosity and altruism correspondingly higher, though these motives are hard to gauge. Yet in order to be translated from personal predilections to facts on the ground, and from there to economic growth, an environment that produced the correct incentives and the proper access to knowledge had to exist. The uniqueness of the European Enlightenment was that it created that kind of environment in addition to the useful knowledge that revolutionized production.

The experience of the past two centuries in the western world supports the view that useful knowledge and its application to production went through a phase transition, in which it entered a critical region where equilibrium concepts may no longer apply. This means that as far as future technological progress and economic growth are concerned, not even the sky is the limit. Science Fiction writers have known this all along.