William Bernstein - The Birth of Plenty: How the Prosperity of the Modern World was Created

THE BIRTH OF PLENTY

How the Prosperity of the Modern World Was Created

WILLIAM J. BERNSTEIN

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WHEN MY WIFE BROUGHT P.J.ORourkes Eat the Rich home from the library a decade ago, a few years before McGraw-Hill published the 2002 hardcover edition of this book, I wasnt expecting much in the way of historical insight. Mr. ORourke aims to amuse, and his lighthearted romp through the worlds economic success and sob stories did not disappoint, most memorably his exposition of credit risk: A junk bond is a loan to your little brother; a high-quality bond is a loan to your little brother by the Gambino family.

Mr. ORourkes frothy prose hides painstaking legwork. Scattered among the quips are some well-researched passages, including one that briefly mentioned data assembled by an obscure Scottish economist named Angus Maddison, who found a startling discontinuity in world economic growth around 1820: Before that date, growth was essentially nonexistent; after that date, it was sustained and vigorous.

It took me a while to rustle up a copy of Maddisons summary work, Monitoring the World Economy, 18201992. The bound edition looks as dull and as daunting as the densest legal brief, but inside, Maddisons dry data lay out the greatest story ever told: the economic birth of the modern world. The finest written rendition of Japans Meiji Restoration and post-World War II prosperity does not do justice to the raw numbers presented in Maddisons book: six percent inflation-adjusted growth in Japanese per capita GDP, a doubling of average life span, a near-quadrupling of educational levels, and the rapid disappearance of illiteracy, all in the four decades before World War I.

I became fascinated with this sudden change in the Western worlds fortunes. Maddison himself made a half-hearted stab at explanation, briefly mentioning technologic progress; improvements in trade, finance, and human capital; and the exploitation of natural resourcesas well as referring to more obscure economic concepts such as growth accounting. None of these satisfied me. That belief that technologic change produces economic improvement explains nothing. Almost by definition, economic growth is the child of technological innovation. Were advances in electronics, transportation, and the sciences to suddenly cease, the only way to increase economic efficiency would be through improvements in the specialization of labor; beyond this, economic growth would stop.

The question gnawed at me: Why? Why did world economic growth, and the technologic progress underlying it, suddenly explode when it did? Why didnt the Florentines invent the steam engines and flying machines that da Vinci sketched? Why didnt the Romans, with their metallurgical skills, discover electricity and invent the telegraph? Why didnt the Greeks, with their expertise in mathematics, describe the laws of probability, without which modern capital markets cannot function? For that matter, why did the Athenians remain relatively poor for the century and a half between their defeat of the Persians and their envelopment by Alexander, when they possessed the commonly recognized conditions for economic growth: democracy, property rights, free markets, and a free middle class? Most important of all, why did Hobbess description of life in a state of nature as solitary, poor, nasty, brutish, and shortwords that perfectly captured what life was like for the majority of people until the nineteenth centurydisappear from Western Europe less than two centuries after it was set down on paper?

Paul Johnson comes as close as anyone to answering these questions in The Birth of the Modern. His description of the revolutions in the sciences, politics, literature, and the arts at the beginning of the nineteenth century is nonpareil, a wonderful prose counterpart to Maddisons workEarly Modern Developmental History for Poets, if you will. Johnson, however, remained silent on the ultimate question of why this most important of all historical Although Diamonds book provides a breathtaking overview of the biological and geographic players in human history, its answer to the tribesmans plaintive querythat geography, climate, and microbiological exposure determine historical dominancemakes little historical and economic sense. After all, geography and climate most certainly do not explain the radically different fortunes of North and South Korea. In the same vein, microbiology does not explain the European dominance of much of Asia after 1500, since, as first pointed out by historian William H. McNeill, the pathogen pools of Europe and Asia had largely equilibrated by the middle of the second millennium.