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.
Read an Excerpt
THE BIRTH OF PLENTY
How the Prosperity of the Modern World Was Created
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 (Continues...)
Preface; Introduction;Section I - The Sources of Growth; Chapter 1. A Hypothesis of Wealth; Chapter 2. Property; Chapter 3. Reason; Chapter 4. Capital; Chapter 5. Power, Speed, and Light; Chapter 6. Synthesis of Growth; Section II: Nations; Chapter 7. The Winners-Holland and England; Chapter 8. Runners-Up; Chapter 9. The Last; Section III: Consequences; Chapter 10. God, Culture, Mammon, and the Hedonic Treadmill; Chapter 11. The Great Trade-Off; Chapter 12. Mammon and Mars; Chapter 13. The End of Growth?; Chapter 14. When, Where, and Whither
The Birth of Plenty: How the Prosperity of the Modern World Was Created 3.3 out of 5based on
More than 1 year ago
I wish those who wrote reviews would at least learn how to spell. Otherwise, rambling on while trying to impress us is not doing so! Great book!
More than 1 year ago
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.
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!
This illustrated guide shows prospective home buyers just how easy it is to design homes
to fit their exact needs and wants, while saving thousands of dollars in architectural fees. Covers choosing and using drafting tools, selecting energy-efficient materials, laying ...
Forty years ago Dr. Roger Williams, a University of Texas biochemist, published this groundbreaking work,
which is only now coming to be accepted and understood by the medical community. Until now, generalized dietary recommendations like the RDAs were the norm. ...
Channel coding lies at the heart of digital communication and data storage, and this detailed
introduction describes the core theory as well as decoding algorithms, implementation details, and performance analyses. Known for their writing clarity, Professors Ryan and Lin provide ...
While Confucian ideals continue to inspire thinkers and political actors, discussions of Confucian practices and
institutions appropriate for the modern era have been conspicuously absent. This volume discloses in meticulous detail the relevance of Confucianism to the contemporary world. Contributions ...
Although Peter Drucker, “The Father of Modern Management,” died in 2005, his timeless teachings are
studied and practiced by forward-thinking managers worldwide. His lessons and wisdom on the topic of leadership—the central element of management—are in constant demand, yet he ...
In an extended inquiry into the nature of the modern age, as well as a
historical, philosophical, and theological analysis of modernity's prospects in the next millennium, Guardini argues that human beings are responsible moral agents, possessed of free will ...
Make Every Business Day a Masterpiece“This fascinating book is a must-read for every leader or
individual that aspires to become one. It eloquently offers tips, examples, and analogies that help the reader focus effort and attention in that noble attempt ...
In Forging the Modern World: A History, authors James Carter and Richard Warren offer an
accessible explanation of key transformations in global economic, political, and ideological relationships since the sixteenth century. The book is distinct from most world history texts ...