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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.
ISBN: 978-0-07-174704-2
Excerpt
CHAPTER 1
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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Excerpted from THE BIRTH OF PLENTY by WILLIAM J. BERNSTEIN. Copyright © 2004 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
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