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

434 Pages·2004·2.84 MB·English

by  William J. Bernstein

THE BIRTH OF PLENTY
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THE BIRTH OF PLENTY
How the Prosperity of the
Modern World Was Created
WILLIAM J. BERNSTEIN
McGraw-Hill
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DOI: 10.1036/007144291X
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Contents
Preface vii
Introduction 1
SECTIONI—THESOURCESOFGROWTH
Chapter One: A Hypothesis of Wealth 9
Chapter Two: Property 51
Chapter Three: Reason 91
Chapter Four: Capital 125
Chapter Five: Power, Speed, and Light 161
Chapter Six: Synthesis of Growth 189
SECTIONII—NATIONS
Chapter Seven: The Winners—Holland and England 195
Chapter Eight: Runners-Up 233
Chapter Nine: The Last 273
v
vi CONTENTS
SECTIONIII—CONSEQUENCES
Chapter Ten: God, Culture, Mammon,
and the Hedonic Treadmill 297
Chapter Eleven: The Great Trade-Off 335
Chapter Twelve: Mammon and Mars: The Winner’s Curse 349
Chapter Thirteen: The End of Growth? 373
Chapter Fourteen: When, Where, and Whither 379
Notes 387
Index 403
Preface
WHEN MY WIFE BROUGHT P. J. O’Rourke’s Eat the Rich home from
the library several years ago, I wasn’t expecting much in the way of his-
torical insight. Mr. O’Rourke aims to amuse, and his lighthearted romp
through the world’s 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. O’Rourke’s frothy prose hides painstaking legwork. Scattered
under the quips were 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, and after, sustained and vigorous.
It took me a while to rustle up a copy of Maddison’s summary work,
Monitoring the World Economy, 1820–1992. The bound edition looks as
dull and as daunting as the densest legal brief, but inside, Maddison’s dry
data lay out the greatest story ever told: the economic birth of the mod-
ern world. The finest written rendition of Japan’s Meiji Restoration and
post-World War II prosperity does not do justice to the raw numbers
presented in Maddison’s book: 6% inflation-adjusted growth in Japanese
per capita GDP, a doubling of average life span, a near-quadrupling of
vii
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viii PREFACE
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 world’s
fortunes. Maddison himself made a half-hearted stab at explanation,
briefly mentioning technologic progress, improvements in trade, finance,
and human capital, and exploitation of natural resources, as well as refer-
ring to more obscure economic concepts such as “growth accounting.”
None satisfied me. The commonplace belief that technologic change
produces economic improvement explains nothing. Almost by defini-
tion, economic growth is the child of technological innovation. Were
advances in electronics, transport, and the sciences to suddenly cease,
economic growth would almost automatically stop.
The question gnawed at me: Why? Why did world economic
growth, and the technologic progress underlying it, suddenly explode
when it did? Why didn’t the Florentines invent the steam engines and
flying machines that Da Vinci sketched? Why didn’t the Romans, with
their metallurgical skills, discover electricity and invent the telegraph?
Why didn’t the Greeks, with their expertise in mathematics, describe the
laws of probability, without which modern capital markets cannot func-
tion? For that matter, why did the Athenians remain desperately poor for
the two centuries between their defeat of the Persians and their envelop-
ment by Alexander, when they possessed the commonly recognized
conditions for economic growth: democracy, property rights, free mar-
kets, and a free middle class? Most important of all, why did Hobbes’s
description of life in a state of nature as “solitary, poor, nasty, brutish,
and short”—words that perfectly captured what life was like for the ma-
jority of people until the nineteenth century—disappear 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 sci-
ences, politics, literature, and the arts at the beginning of the nineteenth
century is nonpareil, a wonderful prose counterpart to Maddison’s
work—Early Modern Developmental History for Poets, if you will. Johnson,
however, remained silent on the ultimate question of why this most im-
portant of all historical transitions occurred exactly when it did. In a dif-
ferent vein, Jared Diamond’s Guns, Germs, and Steel asks “Yali’s