History of the World
Princeton University Press, 2007, 420 pp., $29.95
Gregory Clark thinks that most economic historians, and virtually all economists, have been pretty hopeless at solving the really big puzzles of the modern world. He aims, he says, at producing a big history, in the tradition of Adam Smith’s Wealth of Nations or Karl Marx’s Das Kapital, whose purpose is to lay out a universal interpretation of the course of economic development that is both simple and compelling.
The central question around which Clark’s ambition rotates is this: Why, about two centuries ago, did some countries break out of a relatively low- or no-growth environment and begin to experience very fast rates of economic growth? This phenomenon, often referred to as modern economic growth, can more easily be described and quantified than actually explained. A related puzzle that occupies Clark is why, when this dramatic growth was taking place, did more countries not try to imitate it, and thus themselves experience continually advancing prosperity? What particular policies or institutions separated countries experiencing “modern economic growth” from those that did not or could not?
Clark is not the first person to ask such questions, and indeed, his own analysis pushes off on its journey by discussing the views of two very great minds who were present at the creation of modern economic growth. One was a Scottish philosopher, probably an atheist, whom almost everyone today would still recognize as the world’s greatest economist, Adam Smith. Smith thought in terms of incentives that could be provided by good institutions and, on the other hand, that could be and often were blocked by inefficient and corrupt rule. Prosperity required good policy, in particular the combating of monopolies in order to allow competition to provide the right stimuli for entrepreneurship. Clark thinks that Smith set out a quite irrational set of beliefs on the foundation of which a “priestly cast” (sic) formulated a new and destructive faith that was to be, and still is, propagated by institutions such as the World Bank and the International Monetary Fund.
There was an alternative to Smith, however: the Anglican clergyman Thomas Malthus, who set out to fight the prevailing progressivist theories of the Enlightenment. It is Malthus, most agree, who made economics into a truly “dismal science”, and it is Malthus who is usually ridiculed for a prognosis about population growth that by the 19th century looked quite wrong. There is no doubt about the intellectual importance of Malthus’ contribution, or of its power as a model of pre-modern economic behavior. But Clark wants to hold Malthus up as a much better guide to the modern world than Smith.
Malthus’ 1798 Essay on the Principle of Population takes us into a perverse universe where well-intentioned policies usually make people worse off instead of better off. This was because of a basic human response to affluence, at least in the world as Malthus (accurately) observed it. Two basic mechanisms frustrated all the policy dreams of the Enlightened thinkers: Population rose in response to affluence, and rising population put increased pressure on land and food such that incomes fell.
In this perverse world, war and plague made people more prosperous because they reduced population. So did the onerous taxes imposed by vainglorious rulers who sought to accumulate vast armies or build extravagant palaces such as Versailles. Why? Because bad news reduced the incentives of the extorted population to have more children, and thus to make themselves poorer. Similarly, if governments thought that they had a duty to help the poor, the availability of what was called poor relief would make for higher population growth and thus more poverty, as in the famous case of the English Poor Laws. Even innovations that appeared to bring some benefit in the end only made everything worse. Take the potato, for example, which became a powerful symbol of the Enlightenment: Its introduction allowed peasant families to feed themselves adequately on less land, but as population rose and wages fell, the beneficiaries turned out to be worse off, both economically and nutritionally. They were also, of course, vulnerable to dramatic crop failures such as those causing the Irish potato famine.
This mechanism was not, as Clark presents it, even a peculiarly human one. It was the common response of animal or plant populations to challenges, opportunities and limitations, as well. It was only after 1800 that humans liberated themselves from nature, and they did so not because of incentives and institutions of the Smithian sort, but because some humans (especially in Europe) had been genetically selected for entrepreneurship as a result of having been long subjected to the constraints of the Malthusian world.
Clark thinks that the modern, very nearly universal triumph of Smithian thinking, which “permeates contemporary economics, from the practical councils of the International Monetary Fund and the World Bank to the theorists of university economics departments”, is based on a fundamental intellectual error. A Farewell to Alms offers an alternative view, derived from the power of the Malthusian paradox, which in his eyes means that, oddly enough, we—particularly “we” economic historians—know much more about the world before 1800, and much less about the modern economy, than we think. As Clark puts it: “[O]ur ability to describe and predict the economic world reached a peak around 1800.”
A Farewell to Alms is, as the punning title suggests, an exposition of the Malthusian logic with an interesting twist. In essence, Clark tries to explain the post-1800 or post-Malthus development of the world in Malthusian terms. This is accomplished in the first of two sections of his book, called “The Malthusian Trap: Economic Life to 1900.” Some of Clark’s chapter titles give a taste of his approach: “Living Standards”, “Fertility”, “Life Expectancy”, “Technological Advance”, “Institutions and Growth” and, ultimately, “The Emergence of Modern Man.”
The burden of all this, to put it succinctly, is that England did well not because of any Adam Smith-like institutional reform: Clark has no time for the modern version of the old Whig interpretation of British history—as elaborated by Douglass North, John Wallis and Barry Weingast—according to which it was the Glorious Revolution itself that brought political stability, low government debt, currency stability and economic takeoff.1 England may have had the right type of institutions by 1688, but those institutions also existed long before anything remotely like modern economic growth occurred: “By 1200 societies such as England already had all the institutional prerequisites for economic growth emphasized today by the World Bank and the International Monetary Fund.” Later on, Clark is even more dramatic:
Indeed if we were to score medieval England using the criteria typically applied by the International Monetary Fund and the World Bank to evaluate the strength of economic incentives, it would rank much higher than all modern high-income economies—including modern England.
Very clever, but is it true? Clark rather cavalierly uses asset price stability as a measure of secure property rights, when today we are used to incredible market gyrations in a world that has much greater protection against the political abuse of power. And some of the comparisons between pre-modern and modern seem designed merely to shock, irritate or provoke, as when Clark tells us that modern European tax systems “intrude just as shockingly into the lives of its citizens” as the Inquisition at the time of Galileo. Nor did technical and intellectual change, of which there was plenty throughout the Middle Ages (and even more after the Renaissance) bring any great advances of living standards. As Clark sees it, neither the telescope, nor the discovery of circulation of the blood, nor the invention of movable type were any more relevant to human prosperity or well-being than the plays of William Shakespeare.
Maybe Clark’s imprecision about what institutions actually do is deliberate, as institutions are generally irrelevant in the picture he draws. What did matter—indeed pretty much all that mattered—was reproductive behavior. It was England that gradually evolved the basis for a post-Malthusian economy, Clark argues, because the Malthusian constraints affected England more severely than it did other nations. China by contrast had land for expansion, and Japan could raise its rice production. England felt the Malthusian pressures especially dramatically, above all, in the century before the Black Death (1348) and in the 16th and 17th centuries. As a consequence, it was only the very talented and the very industrious who became more prosperous. In China and Japan prosperity was more widely distributed and, as Malthus would have said, the eventual result was more misery. In England, basic cultural attitudes changed. Malthusian pressures, Clark argues, fueled “forces leading to a more patient, less violent, harder-working, more literate, and more thoughtful society.” Moreover (and this is a key to his argument), because of these new habits of mind, the successful entrepreneurial merchant and gentry and prosperous yeoman farmer groups were rewarded by having more children, with the result that their particular entrepreneurial characteristics were selected in a process of evolutionary Darwinism. A massively entrepreneurial population thus made the Industrial Revolution: Britain’s industrial takeoff was the result of a population bred by happenstance more than anything else to take advantage of opportunities in a bleak Malthusian world.
One of the most impressive empirical parts of A Farewell to Alms is the demonstration that better-off Englishmen indeed had more children. Unfortunately, the other side of the demonstration of the English peculiarity in the Industrial Revolution is largely missing, because good population data for Asia is much scarcer. Clark does show that the Chinese and Japanese nobility were of below-average effectiveness as breeders, but this cannot really serve as a demonstration of his major thesis, since the English aristocracy were also relatively poor breeders. In part, this may have been because they were too selective of marriage partners, so that breeding characteristics played a merely subsidiary role in how many entrepreneurial children were produced. But in large measure it was because the English nobility, like that of Europe or Japan’s samurai, spent a great deal of their time killing each other. There is, on the other hand, no data at all (at least as far as either Clark or I am aware of) on the reproductive success of Japanese and Chinese merchants and well-off farmers. We do know that there was widespread concubinage in China and polygamy in the Islamic world, and that wealthier men had more concubines or wives and probably therefore more children. If Clark’s logic were valid, China and the Islamic world should have had a more entrepreneurial and dynamic population than Europe, which was constricted by Christian monogamy.
The causal logic of just how a genetic mechanism can account for the widespread transmission of entrepreneurial attitudes is also somewhat unclear. Clark thinks that the many non-first-born children of successful and rich merchants and farmers who could not inherit the family business slid down the scale of social mobility, only to have their genetic talent quietly brew and then prosper in a proletarian setting. This seems unlikely in the light of massive evidence that English culture did not like money-making. Rather, the children of the successful moved—according to the dynamic made famous in Buddenbrooks, Thomas Mann’s 1901 novel of the “decline of a family”—into artistic, clerical or military (especially naval) occupations. Clark’s central notion here depends on an analogy with animal evolution:
Evidence from animal populations shows that, in cases in which a trait has previously been neutral in terms of survival, so that it exists in varying frequencies in populations, strong selection pressures can change the characteristics of the population within a few generations.
But Englishmen in the 17th century were not mere animals, and the idea that entrepreneurialism is akin to, say, phototropism in plants or even adapted feeding patterns in animals is quite a stretch.
The second part of the book, called “The Industrial Revolution”, leaves the Malthusian world in order to explain why all societies are not growing quickly and becoming more prosperous. Clark is contemptuous of the idea that there might be an institutional fix, whereby distortions to a market economy are removed and entrepreneurial forces are unleashed. He consequently does not attempt to explain the modern success stories of South Korea after 1960, China after 1979 or India after 1991, since they cannot be fitted into his picture.
Instead, he has a very neat and simple explanation, one based on his earlier work on labor productivity in cotton spinning, where he took data from enterprises all over the world that were using the same spinning machines. He discards the notion that differences may be due to poor management because, in the 19th-century examples, the managers of the spinning mills around the world were largely British, and might be assumed to be more or less equally capable. Instead, there is simply a cultural proclivity to be less productive: Clark gives data on Indian workers taking time off during working hours, bringing their children to the workplace, eating, smoking and so forth. Slapdash working was common in the pre-industrial economy, where it was not so harmful, but the much more complicated production processes of the industrial world were less tolerant of incompetence.
Clark’s assumption that differences in productivity amount to differences in culture is deeply problematic. The evidence of dramatic shifts after economic reforms instead would suggest that the institutional explanations really are quite powerful. One of the 19th-century examples Clark gives is of the poor performance of Polish peasants threshing grain. In the late 1980s, I remember seeing Polish farmers working on a state farm lying in a drunken stupor by the side of the field. After the economy was transformed into a market economy in 1989–90, this type of behavior simply disappeared. Incentives really do make a difference.
Clark’s ferociously systematic expounding of an alternative to the institutional explanation does, however, provide many delightful insights, large and small, along the way. Some of the observations in this very well-written book do make for nice dinner party anecdotes. The most powerful interpretative innovation, deeply counterintuitive like all the others Clark offers, is that average incomes in Britain and Europe on the eve of the Industrial Revolution in 1800 were lower than those of much earlier and apparently more “primitive” peoples. This is effectively corroborated by evidence of height, which has become widely used as a good reflection of nutrition and living standards, especially for children. But this means of cross-cultural comparison zeroes out any possible influence of genetic differences on stature. This seems rather unreasonable.
My favorite smaller nugget is the subsidiary argument about why England did better around 1800 than China or India: The English spent less time and effort on personal health, with the result that their personal filthiness made for higher mortality and, in the Malthusian logic, greater prosperity; the Chinese and Japanese did poorly because their personal habits were too clean. There was then not so much an evolutionary selection of the fittest, but rather the genetic survival of the dirtiest and most unhygienic. Here, indeed, is a book whose pages runneth over with delights for anyone who revels in wild paradoxes.
Unfortunately, Clark’s overall argument on the Malthusian roots of modern industrial success is not just counterintuitive; it is wrong, and it is not adequately supported by the demographic data. In the final pages, Clark’s passion for Malthusian paradoxes leads him to some rather fanciful arguments, although they are ones that resonate with analysts who still dislike the Smithian message. Since recent empirical evidence demonstrates that economic growth does not make us happy, and that some poor countries have as much self-reported happiness as rich countries, Clark suggests that wasteful government expenditure, large armies, prestige projects—even imperialism itself—are actually not that harmful, since they do not reduce measured happiness. There is, however, massive empirical evidence of the harm done by modern imitators of Louis XIV, such as Zaire’s Mobutu Sese Seko and a great many others.
Many contemporary economists are rightly disillusioned with the idea that the simple transfer of financial resources through “foreign aid” can effectively or single-handedly promote development. However, transferring skepticism about aid to the whole area of institutional reform and the creation of appropriate incentives is to throw the baby of structural change out with the financial bath water.
There are clearly profound and important policy dimensions to the debate over the character and causes of modern economic growth, but they are altogether missed in an account that takes as its starting point the dismissal of any type of institutional argument. In many cases, what passes as a policy recommendation, as a consequence of Clark’s desire to reapply the insights of Malthus in a mostly non-Malthusian world, seem simply inhumane, as when he tells us: “Given the continued heavy dependence of many sub-Saharan African countries on farming, and a fixed supply of agricultural land, health care improvements are not an unmitigated blessing, but exact a cost in terms of lower material incomes.” A combination of technology and practical knowledge about what makes for effective reform can, and has, produced dramatic shifts. And an essential component to this is, as has frequently been emphasized by many observers, the improvement of health, since much empirical evidence shows that low-intensity endemic disease is often a cause of low labor productivity in poor countries.
Clark has presented an ingenious but misguided case against Adam Smith. The new alternative is supposed to be all very simple, in some ways like the older alternative, that of Karl Marx. Clark is certainly Marxian in that he thinks economics the ultimate source of everything social: “Ideologies are themselves also the expression of fundamental attitudes in part derived from the economic sphere.” This enables him to claim that
understanding why and how economies grow would seem to require years of study and Ph.D.-level training. But in fact understanding the essential nature of modern growth, and the huge intellectual puzzles it poses, requires no more than basic arithmetic and elementary economic reasoning.
This statement is as tantalizing to some as it is outrageous to others. It is also, as such statements are wont to be, self-contradictory, for some pages later Clark tells us that we cannot really understand the world after 1800 at all.
Malthus had a powerful insight into the old world, but it is not a good guide to the new one. Malthus cannot really be blamed for this, as he wrote in 1798. But Gregory Clark is writing in 2007, and he should know better.
North, Wallis and Weingast, “A Conceptual Framework for Interpreting Recorded Human History” (World Bank, December 2006).