The Wealth Explosion

Article excerpt

The Wealth Explosion [Bourgeois Dignity: Why Economics Can't Explain the Modern World, Deirdre H. McCloskey, University of Chicago, 571 pages]

FOR MOST OF HISTORY, existence was a grind, at least for the vast majority - though a short grind, for dying young was the norm. Food was scarce and rudimentary, work was drudgery, and the elements were a daily threat. Little changed: you could expect to do the same kinds of things that your greatgrandparents did and subsist on a miserable $3 a day. Then, around 200 years ago, beginning in the Netherlands and in Britain with the Industrial Revolution but swiftly spreading to other countries, and then to the four corners of the globe, life began to get better in breathtaking ways. Today, the average American consumes roughly $127 every day in nourishment, housing, energy, and countless amenities unimaginable in 1800. He typically lives until he's 80, not 40. His horizons are considerably more expansive than those of his ancestors.

What caused this historical mutation? In Bourgeois Dignity, the second of six planned volumes on the genesis and development of the modern capitalist world, Deirdre McCloskey, an economist at the University of Illinois at Chicago, argues that most traditional economic models - from expanding trade to capital accumulation - fail or provide at best a partial account of what happened. Much oí Bourgeois Dignity is about debunking these theories.

Pace Max Weber, for instance, thrift doesn't cut it. As McCloskey points out, human societies from "the Garden of Eden" on have been thrifty because survival required it. Pre-industrial Europe needed to be particularly frugal because of persistently lousy yields of wheat, barley, and oats. Further, as measured by savings rates, British thrift during the Industrial Revolution was actually a bit lower than the European average.

Foreign trade wasn't the engine of the West's spectacular growth, either. Trade may help economies expand, but it doesn't get you anywhere close to the 1 ,600 percent growth in need of explanation. Moreover, trade, like thrift, was nothing new. "Exports grew, sometimes explosively, in many other times and places - the Silk Road, for example, when political unity was established in central Asia," McCloskey observes. "Why not trade-powered industrialization, from Sumer on?"

The Marxist-Leninists were more wrong still in claiming that the wealth explosion was due to imperialism. Sure, individual British colonialists might have made a lot of money out of exploiting Indians or southern Africans. Few if any material benefits flowed to the British people from empire, however. "They got bananas on their kitchen tables ... that they would have got anyway by free trade ... or at a slightly higher cost if trade had not been entirely free," writes McCloskey. "They got employment for unemployable twits from minor public schools. Above all - to go beyond the material realm - they got the great joy of seeing a quarter of the land area on world maps and globes shaded in British imperial red." The financial cost to the British for such pride was in fact massive, burdening a public that "paid and paid and paid."

McCloskey takes particular relish in demolishing a more recent, muchdebated growth theory. Economist Gregory Clark's sociobiological hypothesis, articulated in his 2007 book Farewell to Alms, contended that as the British bourgeois multiplied the nation's poor and unsuccessful died off. The result: an elite race that spread economic vitality throughout Britain during the Industrial Revolution and then exported it to the world. Not only does Clark fail to give any quantitative evidence for his masterrace argument, but McCloskey shows that he also ignores the obvious fact that many non-English people have climbed aboard the wealth rocket, as the South Koreans and the Chinese have done over the last few decades.

Theory after theory of modern growth is examined and found wanting in Bourgeois Dignity. …