Gary North
March 30, 2011
The economic historian Gregory Clark summarizes a remarkable fact.
. . . there is no sign of any improvement in material conditions for settled agrarian societies as we approach 1800. There was no gain between 1800 BC and AD 1800 — a period of 3,600 years. Indeed the wages for east and south Asia and southern Europe for 1800 stand out by their low level compared to those for ancient Babylonia, ancient Greece, or Roman Egypt.
Then, around 1800, this all changed. Economic growth began: about 2% per annum, compounded. That brought our world into existence.
We are the great beneficiaries of a process that few people understand. No one has explained cogently how it came into existence. A rate of growth so slow that no one could perceive it at the time has created a world that would have been inconceivable in 1800.
This change has taken a mere three generations. This is simply inconceivable.
My daughter gave me a great Christmas present in 2010. She scheduled an appointment for me to interview a man in her church. His name is Lyon Tyler. My daughter grew up in a city named after his grandfather: Tyler, Texas. His grandfather was John Tyler, the tenth President of the United States. He signed the law that admitted Texas into the Union in 1845.
John Tyler was born in 1790, the first full year of Washington’s Presidency.
Lyon Tyler’s younger brother, also alive, uses the ultimate one-upsmanship one-liner I have ever heard. After chatting for a while with a stranger, he springs it on him.
“As my grandfather once said to Thomas Jefferson. . . .”
You can try to top that one. You won’t succeed.
In 1889, the first volume of Henry Adams’ history of the administrations of Jefferson and Madison appeared. Adams was the grandson of President John Quincy Adams. He began his book with this paragraph.
According to the census of 1800, the United States of America contained 5,308,483 persons. In the same year the British Islands contained upwards of fifteen millions; the French Republic, more than twenty-seven millions. Nearly one fifth of the American people were negro slaves; the true political population consisted of four and a half million free white or less than one million able-bodied males, on whose shoulders fell the burden of a continent. Even after two centuries of struggle the land was still untamed; forest covered every portion, except here and there a strip of cultivated soil; the minerals lay undisturbed in their rocky beds, and more than two thirds of the people clung to the seaboard within fifty miles of tide-water, where alone the wants of civilized life could be supplied. The centre of population rested within eighteen miles of Baltimore, north and east of Washington. Except in political arrangement, the interior was little more civilized than in 1750, and was not much easier to penetrate than when La Salle and Hennepin found their way to the Mississippi more than a century before.
The world of 1800 would have been recognizable to Socrates, except for the printed book. In contrast, the world of 1889 would not have been recognizable to the young John Tyler.
By 1889, these post-1800 inventions had arrived: gas lighting, electric lighting (arc light), the steam powered ship, the tin can, the macadamized road, photography, the railroad, portland cement, the reaper, anesthesia, the typewriter, the sewing machine, the Colt revolver, the telegraph, the wrench, the safety pin, mass-produced newspapers, pasteurization, vulcanized rubber, barbed wire, petroleum-based industry, dynamite, the telephone, Carnegie’s steel mills, the skyscraper, the internal combustion engine, the automobile, and commercial electricity.
So, as I move toward the day when I am a footnote rather than a participant, I propose a thesis. One unanswered question above all others constitutes the most important historical question in recorded history. Here it is:
What happened around the year 1800 in Great Britain that led to approximately 2% per annum economic growth for the next two centuries?
Some economic historians think this began around 1780. Others, most notably Angus Maddison, believe it began in 1820. The year 1800 is a good middle-ground position.
THEN AND NOW
Our world is not even remotely like the world of 1800. In contrast, 1800 was recognizably similar A.D. 1. Clark points out that in the Roman Empire in A.D. 1, information traveled at about one mile per hour. In 1800, this had increased to about 1.4 miles per hour. Compare that with the speed of light: 186,000 miles per second. That was what the telegraph did.
The world of 1876 was not remotely like 1800. Yet compare 1876 with today. A child in 1876 who read a newspaper account of Custer’s Last Stand lived long enough to see Neil Armstrong walk on the moon in 1969.
In 1967, I took a graduate seminar in economic history from Hugh Aitken. I had studied this subject as an undergraduate with him in 1962. Aitken was a great teacher. He is not famous, but several years after I took that seminar, he became the editor of The Journal of Economic History, one of the two major academic English-language journals in the field. In one session, he said this. “There is no agreement on what happened around 1800 to launch the Industrial Revolution.” There is still no agreement.
Here are the questions: (1) Why 1800? (2) Why in in the northern tier of northern Europe?
In a two-volume series, scheduled to go to six volumes, Prof. Deirdre McCloskey has surveyed the field. McCloskey argues that the fundamental change that made possible the industrial and agricultural revolutions was in the area of society. The age-old hostility to the entrepreneur changed in seventeenth-century Holland and spread to Great Britain. It was a change in ideas that mattered, not a change in property rights or technology.
The second volume, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010), is a cogently argued case against all of the arguments from economic efficiency alone. These economic changes were not sufficient to create the transformation.
The problem is this: the first two volumes do not come close to proving McCloskey’s thesis, a thesis that I have wanted to see proved for 40 years, namely, that seventeenth-century Protestantism changed the minds of people in the pews and on court benches regarding the ethical legitimacy of profits and the pursuit of economic self-interest. I wrote my Ph.D dissertation on this topic as it applied in Puritan New England. Maybe the next four volumes will do this through a careful survey of sermons, catechisms, and theological treatises of Dutch Calvinists and their imitators in Scotland and England. I hope so. But this will not be easy to prove.
[Note to Dr. McCloskey: take a look at the answers to the questions in the Westminster Larger Catechism (1646) on the fifth commandment: questions 126-33. See if they differ from the Lutheran interpretations a century earlier. They promote a hierarchical, status-based society that is hostile to “uppity” people of the lower sorts who start moving up.]
Dr. Clark has written a good book on the difference that 2% per annum has made, A Farewell to Alms (2006). He offers page after page of examples of how bad things were in 1800. He also offers suggestions regarding why the change took place. Dr. McCloskey challenges all of them.
And so it goes. The origin of most important transformation of human society in the last 4,000 years has no cogent, plausible, carefully documented explanation.
It had to do with liberty. But the legal foundations of liberty stretch back into European history. It had to do with technology. But men have always been inventive. Why 1800? Why Great Britain and North America?
We want this process to continue. It looks as though it will continue. We are future-oriented people. We like to think that tomorrow will be better than yesterday.
The creativity of billions of people are being coordinated by market processes that we do not understand. As Leonard E. Read wrote in 1958, no one knows how to make a pencil.
We do not know how the process began where it did and when it did, but with the failure of socialism in our era, we now know how to maintain it: through liberty of choice, by allowing people to retain the fruits of their labor, their risk-taking, and their confidence in the future.
The petty restraints imposed by politicians and bureaucrats will not thwart the growth process for long. The promise of liberty is too widespread today. While the government can and will continue to attempt to appropriate individuals’ wealth in the name of the poor, to be administered by upper middle class bureaucrats, the effort will not succeed. The wealth formula is now known. It is simple. “Get the state out of the way of future-oriented people.”
CONCLUSION
Ludwig von Mises argued in 1922 that the greatest strength of the socialists was their belief in the inevitability of victory. But they were wrong. They lost the war on two battlefields: theory and practice.
This is why, in the long run, the most effective tool in the market for liberty is confidence that individual creativity will produce a better world, as long as people keep their hands off each other’s property. “Thou shalt not steal” is a good place to start. “Thou shalt not covet” is the foundation of “thou shalt not steal.”
The battle is not technological. It is ethical. The good guys will win. That is the lesson of the free market. The free market links personal responsibility with ownership. This is the key to prosperity.
From Gary North, here.
