The Birth of Plenty: How the Prosperity of the Modern World Was Createdby William J. Bernstein
FROM THE BESTSELLING AUTHOR OF THE INTELLIGENT ASSET ALLOCATOR
A daring look at the development of human prosperity--how it was created, and where it's headed
In the breakthrough spirit of Against the Gods, William Bernstein's The Birth of Plenty has the topical uniqueness and storytelling panache to literally create its own/i>/i>/i>/i>/i>
FROM THE BESTSELLING AUTHOR OF THE INTELLIGENT ASSET ALLOCATOR
A daring look at the development of human prosperity--how it was created, and where it's headed
In the breakthrough spirit of Against the Gods, William Bernstein's The Birth of Plenty has the topical uniqueness and storytelling panache to literally create its own category and reader. Based upon the premise that mankind experienced virtually zero economic growth from the dawn of time until 1820, this provocative, bigpicture book identifies the four conditions necessary for sustained economic progress--property rights, scientific rationalism, capital markets, and communications and transportation technology-- and then analyzes their gradual appearance and impact throughout every corner of the globe. Filled with bestselling author William Bernstein's trademark meticulous research and page-turning writing style, The Birth of Plenty explores:
- Where the world economy could be headed next
- Implications of the book's thesis for today's society
- How the absence of one or more of the conditions continues to threaten beleaguered regions
Rare is the book that proposes an entirely new premise, validates that premise with inarguable research and analysis, and then explains beyond question both the relevance and the implications of its premise to the reader and the world at large. The Birth of Plenty is just such a book. From its unique, topical subject matter to its tremendous review potential, this insightful book will be one of the most talked-about volumes of the publishing season.
In an effort to uncover the cultural and historical factors that converged during the early 1800s and ignited the great economic boom of the modern world, historian and author William Bernstein has written The Birth of Plenty. Bernstein rises to the occasion of explaining how the world and its economy reached its present state while keeping readers absorbed - providing them with a framework that explains why any nation is rich or poor, democratic or totalitarian, weak or powerful, and whether or not citizens are satisfied with their lives.
Bernstein divides The Birth of Plenty into three parts: why, how and whither. First, he defines economic growth's ultimate sources; then he describes how these factors played out in various nations. He then focuses on the sociological, political and military consequences of the modern world's explosive economic growth.
By exploring the sources of economic growth, he provides insights into many of the questions that people seek about themselves, including:
- What is happening to the overall well-being and satisfaction of the average person in a world that is becoming not only more wealthy but also more complex, fast-paced and stressful?
- What is the relationship between wealth and democratic development?
- What does economic progress, and the growing inequality of wealth among nations, hold in store for the world's political future?
- What are the prospects for successfully exporting democracy to countries like Iraq and Afghanistan?
- How has the evolution of modern prosperity affected the current balance of power in the world?
- Is the military ascendency of the United States a historical accident, and can it be expected to continue?
- How effectively can non-Westerners, particularly in the Moslem world, wield political and military power?
While digging into the story of world economic growth, Bernstein ventures into the fields of law, history, philosophy, celestial mechanics, theology, public policy, sociology and economics. By bringing together these disparate fields into a single story that tackles some of the largest questions people can ask, the author paints a vivid picture of the past that gives readers deeper insight into the future to which they are headed. Bernstein synthesizes numerous issues into specific and understandable theories about why world economic growth - and the technological progress that fueled it - suddenly exploded when it did. At the root of his question is why life in the 18th century, described by one author as "solitary, poor, nasty, brutish, and short," changed so drastically in less than two centuries.
To describe how technological progress has actually been slowing since 1850, not accelerating, Bernstein writes that the average inhabitant of the Western world alive in 1950 would have no trouble grasping the technology of the year 2000, but "a citizen from 1800 would have been completely disoriented by everyday life 50 years later." As an example, the author points out that in 1801, nothing moved faster than the speed of a horse. But, he writes, the invention of the telegraph and instantaneous communication in 1837 "abruptly altered the face of economic, military, and political affairs in ways that dwarf the changes wrought in this century by the airplane and the computer."
According to Bernstein, there are four factors that are essential ingredients for igniting and sustaining economic growth and human progress: property rights, scientific rationalism, capital markets, and improvements in transport and communication. Bernstein first examines the nature, causes and consequences of the transformation in human well-being that began to unfold shortly after 1820, and identifies the points in both time and space where economic growth bloomed after thousands of years of dormancy.
Next, Bernstein describes how and when those four factors came into play, from Holland and England, to the rest of Europe and East Asia. The Birth of Plenty describes the sociological, political, economic and military consequences of the discrepancies in personal and national wealth that have risen from this birth of plenty, and their present and future implications.
Why We Like This Book
Bernstein's rich examination of the effects of economic growth are made even more relevant by his additional insight into the role this growth has played in various peoples' lives. By seeking to learn more about how our world prospered when and where it did, Bernstein provides us with a better idea of where we are all heading. Copyright © 2004 Soundview Executive Book Summaries
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THE BIRTH OF PLENTY
How the Prosperity of the Modern World Was Created
By WILLIAM J. BERNSTEIN
The McGraw-Hill Companies, Inc.Copyright © 2004The McGraw-Hill Companies, Inc.
All rights reserved.
A Hypothesis of Wealth
The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.
—Karl Marx, Manifesto of the Communist Party
It's all too tempting to lament the state of the world, particularly when you focus on the melodramas of mankind—violent conflicts, large-scale malfeasance and failure, and the latest installments in the age-old racial and religious hatreds that permeate the human story.
A paragon of such fashionable pessimism has been journalist Anthony Lewis, who, at the end of a long and distinguished career, was asked whether the world had gotten to be a better place since he had begun covering it a half century earlier:
I have lost my faith in the ideal of progress. I mean that in the sense that it was used at the beginning of the twentieth century, that mankind is getting wiser and better and all—how, how can you think that after Rwanda and Bosnia and a dozen other places where these horrors have occurred?
Mr. Lewis' problem is that his subjective criterion—that mankind has not achieved moral perfection as defined in Ivy League universities and the editorial suites of the New York Times—sets the bar too high. Mr. Lewis seems unaware that we can measure the welfare of mankind; in fact, we can do it superbly. Contrary to his gloomy impressions, the second half of the twentieth century was far less murderous than the first. Further, the proportion of the world's population subjected to totalitarianism, genocide, starvation, war, and pestilence has been steadily decreasing over the past two centuries, with most of the improvement coming in the half century that so depressed Mr. Lewis.
Consider that from 1950 to 1999, average life expectancy in the developed world increased from 66 years to 78 years; in the developing world, it increased from 44 years to 64 years. The nearly universal Western outcome of living to old age, rather than resulting from the rare stroke of luck, may be the greatest accomplishment of the past fifty years. Or consider that over the same period, the world's real per capita gross domestic product (GDP)—the amount of goods and services produced by the average person, adjusted for inflation—nearly tripled. Or that by the year 2000, real per capita GDP in Mexico was significantly greater than that of the world leader in 1900, Great Britain. And if you're not impressed with mankind's material progress in the last fifty years, as measured in dollars and cents, you should at least note that almost any measure of social progress you wish to examine—infant mortality, literacy and mortality rates, or educational levels—has dramatically improved in all but a few still-benighted corners of the planet.
ESCAPING THE TRAP
The modern world seems to stagger under the load of ever-increasing population, with each year adding scores of millions of new mouths to feed. At the birth of Christ, Earth supported slightly more than 250 million people, by 1600, about a half billion. Sometime around 1800, the one billion mark was reached, the second billion was added by 1920, and the third attained in 1960. Presently, there are in excess of six billion souls on our planet. The increasing congestion of urban life, particularly in the third world, gives the impression that the world's population is growing far faster than the 1.85% annual rate of the past half-century.
Overcrowding on our planet is a recent phenomenon, an artifact of the world's newfound prosperity. Before the modern era, famine, disease, and war more often than not overwhelmed the human inclination to procreate. Over the first two million years of human history, population growth did not greatly exceed 0.001% per year. After the advent of agriculture 10,000 years ago, the rate of population growth increased to approximately 0.036% per year, and in the first century A.D., to 0.056% per year. After 1750 the growth rate climbed to 0.5% per year, passing 1% only in the early twentieth century.
In modern times, the dismal economics of increasing population is virtually synonymous with Thomas Malthus. Born of local gentry in 1766, he graduated from Cambridge with honors in 1788. Like many bright young university men of the time in England and Scotland, he fell under the sway of Adam Smith's new science of "political economy" and devoted his life to the quantitative study of humankind.
The England of the aspiring economist's formative years seemed as Hobbesian as Smithian—a time of worsening food shortages and not a little famine, particularly in neighboring Ireland. In 1795–96 and 1799–1801, war and poor harvests combined to cause food riots in England. The root cause of the shortage was obvious to Malthus: "The power of population is infinitely greater than the power of the earth to produce subsistence for men." Humans can reproduce rapidly, whereas agriculture is subject to the law of diminishing returns. The natural tendency, then, is for humanity to outrun its food supply. (The common conception of Malthus's thesis is that population increases geometrically, while the food supply increases arithmetically.)
Malthus's infamous "positive checks" were not limited to the classic fama, pestis, et bellum (famine, plague, and war), but also included a host of lesser evils: unhealthy working conditions, backbreaking labor, overcrowded and unsanitary housing, and poor child rearing. If, for a brief moment, food became plentiful, population would rise rapidly. Soon enough, though, the increased supply of workers would drive down wages. This would make food less affordable and, discouraging marriage, would slow population growth. Low wages would then induce farmers to hire more workers, which would, in turn, bring more land into production, starting the whole process again at a slightly higher level of population and food production—the notorious "Malthusian Cycle."
In Malthus's harsh world, a nation's food supply—and its population—grew slowly, if at all, so the standard of living was inversely proportional to the number of mouths to feed. Were population to increase, there would not be food enough to go around. Prices would rise, while wages, and the standard of living in general, would fall. If, on the other hand, the population were suddenly to plunge, as happened during the Black Death of the mid-fourteenth century, the survivors' food supply, wages, and standard of living would rise dramatically.
Malthus had observed firsthand the late-eighteenth century famines, which burned this sequence of events into his consciousness. Figure 1–1 plots the per capita GDP of England from 1265 to 1595 versus population size. The thin, crescent-shaped distribution of the data points depicts the "Malthusian Trap." Historian Phyllis Deane neatly summarizes the concept:
When population rose in pre-industrial England, product per head fell: and, if for some reason (a new technique of production or the discovery of a new resource, for example, or the opening up of a new market), output rose, population was not slow in following and eventually leveling out the original gain in incomes per head.
In this eternal cycle, agricultural production might rise, but population followed in lockstep, dooming mankind to a near-subsistence-level existence.
Paradoxically, soon after Malthus immortalized this grim state of affairs in 1798 with his Essay on the Principle of Population, it abruptly came to an end in Western Europe. Figure 1–2 shows that a bulge developed in the cr
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Meet the Author
About the Authors
William J. Bernstein is the editor of the quarterly asset allocation journal Efficient Frontier, founder of the popular website EfficientFrontier.com, and a principal in Efficient Frontier Advisors. He is often quoted in national publications, including The Wall Street Journal, Barron's, Money, and Forbes.
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We read for many reasons, all of which pertain to enjoyment. Beyond the good laugh, or a thoughtful provocation wrapped in satire, we also expect to become a bit more enjoyably educated for having read. Then there's the notion of polemic: we also frequently read in order to glean arguments that support pre-conceived ideas. This is called 'ideology', and aptly describes both Bernstein's project and his readership's intent. In the first paragraph or so, one finds a sneering remark towards Ivy League and New York Times. These, to return barb for barb, are all-too-familiar tropes of the quasi-fascist amerikan right. bbllharrisccvc Having pronounced upon these, the author declares his mission to create a bizness community version of history--far from both the ivy tower and the madding crowd of pointy-headed coastal intellectualism. Well, not. Sensibility demands that we accept diverse opinion from other sensible individuals. Moreover, we should read contrary to our beliefs in order to challenge them, which is why I jumped into this particular project. But the author doesn't deliver. Nothing could be more off-putting than to label Aristotelian science 'totalitarain'. And why would he slaver over Cambridge, the birthplace of Keynesian socialism that stated, in so many words, that economic success is dictated by government policy? In any case, his main guy, the Cambridge-educated Angus Maddison, is both mis-used and cited in highly-debated circumstance. Working for the OECD, Maddison remarkably developed a set of indicators thast might predict GDP/PC growth amomg developed nations. These, in extenso, might arguably be employed to facilitate growth in developing nations, the most salient examople being China. Now assuming access to labor, resources, and money, no one denies that the ancilliary factors of applied intellect and infrastructure are important, too. How all of these work themselves out to offer the optimal return is what 'the Maddison group' is all about. That the devil is in the details of the formula, is far, far above the head of our neurologist turned ideologue. Or to return the favor in his own field: "In neurology we study axions, dendrites, and electrochemical impulses. How this electro-chemical stuff works is really complicated. So maybe you should just go see a chiropractor." In passing, I might also mention that Nobel Laureates such as Krugman write PhD thesis that emphasize the role of trade in establishing incremental GDP growth. But there I go again--citing both NY Times and Columbia U in the same breath! Maddison also went on to figuratively apply his method to long-scale 'One-AD' tendencies of growth. This, regrettably is where both his peer-reviewed credibility stops and the narration of Bernstein begins. So in reality, Bernstein is exploiting the name of Maddison, much as to say that the universe is invinite because Einstein said so. A quantitative account of personal wealth is impossible without a consistent unit of measure; anthropology informs us that we write ethnographic accounts becausse there is no said common measure. In any case, no one denies that around 1820, there was an ecomonic explosion of sorts, and how it precisely happened is an interesting story. Yet we dervive absolutely no insight by stating that pre-1820 was nothing but an impovershed, two thousand year-old mess. To his credit, Maddison looked long and hard for the 'seeds' that spawned this remarkable spurt. To his shame, Bernstein cites nothing but a version the businessman's credo. In this bowlderized account, there was no transition from wool to cotton based upon the exploitation of India, thereby secured by opium trade from China. There was no virtual enslavement of the Scots population after 1710, thereby offering both the mills and coal mines a cheep source of labor. America did not exist: no slaves to produce the cotton, nor grow the rice that enabled an inexpensive food source. Of course, the native injuns were all to happy to fairly contract away their mineral resources such as high-grade iron ore, copper, tin, nickel,gold and silver... No, all we have is the fallacious creation of prop-tee laws (hardly an English invention!) fused with (state constructed) transport, combined with engineering (applied science), and credit (backed up by Spanish-American gold). And voila! 'Not bad for a neurologist turned invester. And if I were to cite that this book lacks peer-review interest, the response, doubtless, would be. "indeed". Rather, his motivation was to create a vision of history adequate for bar and cocktail party-- high-sounding chit-chat-- of the like-minded. Corporate-believers of the world unite! You have only your soul to lose, and money to gain! BH
Birth of Plenty is a bad book. It is too superflous and staccato. The prose is crip but curt at places and the picture it paints not worth the canvas. I saw some reviews here and most agree with this perspective, except they then go on and give a positive rating anyway. I do not. John Steele Gordon's Empire of Wealth rocks. I think it is sold on BN.com as well. Very competent history very well told.
Gertrude Stein called Ezra Pound, 'a village explainer,' and said that was fine if one happened to be a village. Author and historian William J. Bernstein is an explainer, so put on your village thinking cap. This sprawling book skips over a broad surface of economic history, theology, sociology, engineering, politics and mechanics, like a flat pebble over a smooth pond. Readers with scant grounding in these disciplines can still have a good time as they gaze slightly slack-jawed at this colorful, fast-moving assemblage of facts, theories and prejudices, all mixed, mingled and as surprising as a carnival parade. Readers who know these subjects, on the other hand, will relish the sweep of Bernstein's saga even if they balk at the inevitable simplifications, exaggerations, contradictions and foggy facts that result from compressing world economic history into 400 pages. Bernstein arranges his history around the four pillars that, he says, support continual economic growth: property rights, the scientific method, capital markets and communications. Given that framework, his presentation is logical and lively. We liked this entertaining read, which is imbued with a history buff's excitement.
Normally, I read histories, but not economic books. This one first caught my attention with its title and then its cover. From the very beginning I was seduced by the clarity of the prose and the unique perspective this book offers on our past development and future prospects. Bernstein explains his theories and illustrates them with case studies of Holland, England, Spain, France, and Japan, followed by the Ottoman Empire and an overview of Latin America. Essentially this book explains why we, the United States and other English speaking countries, have wealth and so many other countries do not. Not content to rest there, Bernstein discusses if this wealth makes us happy and its relationship to democracy. While this is much to absorb, the writing style flows smoothly and the historical sweep is dazzling.
I rushed to the local bookstore to pick up a copy of Birth Of Plenty, heralded by publicity of its entirely new premise and potential to create an altogether new category of books. Needless to say after my rating of two stars that I am disappointed by how old and repetitive most of the arguments in the book were. The four reasons for economic progress did not coincide on that date but were put in place slowly over a millenium as human progress could not be held back any longer. Columbus and Vasco De Gama set sail in the sixteenth century not the nineteenth century, and thats the problem with the book's so-called new reasoning. The Tulipomania was over by 1636, about the most sophisticated evidence of property rights one can find to date. First, it is obvious that no economic historian of note has been shown the book, certainly none with independence. For any good economist could tell you that Economic History 101 has always talked about the turning point of 1820-which is not a new premise at all. Angus Madison remains one of the most celebrated economic historians for precisely this finding. So does Charles Kindleberger. They do a better job revealing the acceleration of human progress into the nineteenth century rather than the epochal moment put forth by William Bernstein. Second, and most disappointing were the four reasons why economic progress took off. None were really created around 1820 and the four did not come together for the first time in 1820 either. Certainly all four existed in sufficient amount for the maritime discovery of the world. Is there anything more epochal than those moments? Indeed, property rights were in existence long before the nineteenth century. And most of the reforms in property rights (including bankruptcy reforms and security asset innovation) LAGGED economic progress rather than caused it. A second reason cited is scientific progress. Here is a classic chicken and egg reasoning in a book that purports to resolve that dilemma. A third reason was securities market innovation but the book ignores the fact that virtually all securities innovation came decades after it should have been due. And certainly the stock markets and IPO were innovated in 1602 not 1820. Then the book relies on the transportation revolution. It has to of course because 1820 marks the advent of the Century of Railroads. Here again is a chicken and egg problem. It also does not acknowledge how James Watts' watching his mom's kettle ties into any macro issue it cites. All in all, the book is interesting to someone who has not studied Law 101, Economic History 101, the stories of colonization or the thousands of books on the ascent of Western Civilization. For those who have, this has to be the most repetitive and pretentious book in recent memory.