Published by EH.Net (July 2022).

Mark Koyama and Jared Rubin. How the World Became Rich: The Historical Origins of Economic Growth. Cambridge, UK: Polity Press. x + 259 pp. $24.95 (paperback), ISBN 978-1509540235.

Reviewed for EH.Net by Joel Mokyr, Departments of Economics and History, Northwestern University.

Full disclosure: this reviewer’s name appears on the back cover of this book having written an endorsement, known as a blurb. Given that in the 40 words of an endorsement one can say very little, this book merits a more detailed discussion.

Any scholar teaching economic history and wishing for an up-to-date survey of a large and important literature will find it useful to read this book to bone up on the recent research listed in the long and encompassing list of references. Furthermore, they should seriously consider having their students read it for their class. The book is a wide-ranging yet remarkably complete and accessible survey of the Great Enrichment, the emergence of modern and prosperous economies that provide us with a material standard of living that our ancestors could not have dreamed of. How and why modern economic growth occurred when and where it did, and how economists have tried to understand this phenomenon, is the theme of this book. It is written by two of the finest young senior scholars in our field, both with important contributions to the subject matter of this book.

Many of the issues this book raises are highly contentious in our profession, and for good reason: these are hard questions on which learned scholars can disagree and interpret the evidence in different ways. How much did institutions really matter? What was the role of culture in economic growth? Was geography destiny? What was the role of craft guilds in the economic development of early modern Europe? How to think about the role of imperialism and slavery in the Industrial Revolution and the subsequent growth of industrial powers? Were high wages good or bad for technological progress? Was war a positive factor in economic growth? Was the European Marriage Pattern a positive factor in the economic development of the Continent?

The ecumenical and balanced approach the authors take to these questions is much like the Rabbi in a famous Jewish story. According to the legend, a rabbi is holding court in front of a large audience of his pupils. A husband and wife appear before the rabbi, to discuss their troubled domestic life. First the husband gets to lay out his case, and he lists all the sins and vices of his wife. The Rabbi listens carefully and pronounces his verdict: the husband is in the right. Then his pupils appeal to him: you should hear the wife’s case as well. The Rabbi consents and listens to the woman lays out her powerful case against her lazy and violent husband. He then announces his second verdict: the wife is in the right. His best pupil protests: but Rabbi, how can they both be in the right? The Rabbi listens and pronounces: the pupil is right too.

Rubin and Koyama present balanced and fair surveys of made in the literature, but they are reluctant to take strong positions. Such an ecumenical approach sets them apart from Clark’s Farewell to Alms and McCloskey’s Bourgeois Dignity, where the authors take up similar issues but in a much stronger opinionated mode. That thoughtful and measured approach of the survey, its elegant and crystal-clear style, and the authors’ impressive knowledge of a large and complex literature make this book nothing short of ideal for teaching advanced courses on global economic history to economics students.

It is especially refreshing to see a book such as this that pays explicit attention to institutions and culture, two themes that until not so long ago were taboo in our field but now seem to play increasingly central roles. The book contains full chapters on each, and while the discussion is naturally far from exhaustive, the authors do an excellent job summarizing some of the best work in these areas. What remains, of course, unsolved is why different nations develop different institutions and how and why such institutions change over time and how exactly cultural beliefs help determine the institutions that society ends up with.

The one issue on which the book takes a relatively strong position is on the issue of European imperialism and the importance of slavery and the slave trade to the Industrial Revolution and the origins of Western technological leadership (chapter 6). In recent years the “new history of capitalism,” in its zeal to blame the West and Capitalism for all the ills of the world, has argued that the West grew rich largely at the expense of the Africans and Asians whom Europeans mercilessly enslaved, sold, and exploited. As more sophisticated and economically literate scholarship has shown, the famous thesis by Eric Williams and recent proponents (e.g., Berg and Hudson, 2021) that somehow the Industrial Revolution depended on European imperialism and the Atlantic slave trade cannot be seriously defended. While Atlantic ports have been shown to have been crucial for subsequent economic development (Acemoglu, Johnson and Robinson, 2005), the exact causal chains are still unclear, and Koyama and Rubin stress sensibly that without institutional support for technological progress, without a rule of law and constraints on the executive, and without a comparatively inclusive society, no amount of colonialism and oppression of non-Europeans would have triggered modern economic growth.

The insight that economists have brought to this literature is that economic growth is fundamentally a positive-sum game: on a global level, the economic success of the West did not — on average — impoverish the Rest. In the long haul it made the entire world much richer than before — just not quite as rich as Europe and its offshoots (with some major exceptions such as Japan and Singapore). The causality is more complex. Whatever it was that made Europe learn to control energy and materials as well as run their economic systems better, also allowed them to manipulate and exploit Asians and Africans. But if anything was causal here, it was not that Imperialism caused the Industrial Revolution but the reverse: as Daniel Headrick in his classic work on the topic (1981) showed decades ago, what made western Imperialism possible above all was better technology (see also Hoffman, 2015).

Moreover, it is striking how poorly the historical fit between Imperialism of any kind and economic growth really is. The Roman Empire was the mother of all predatory empires, yet it did not industrialize and experienced only limited technological change. Eighteenth century China and Russia both added enormous stretches of land to their realms, with no noticeable effects on economic growth. The British Industrial Revolution coincided with the loss of the North American thirteen colonies. While Britain was a successful commercial and maritime nation, the Smithian gains from trade with its Empire — as Deirdre McCloskey (2010) has persuasively argued — were by themselves never enough to trigger the Industrial Revolution, much less create the Great Enrichment. In per capita terms, one of the largest colonial empires was the Dutch one in the East Indies, yet it did not help the Dutch industrialize until late in the nineteenth century. Belgium initiated its lamentable adventure in the Congo only after it had industrialized. Perhaps most strikingly, the European imperial venture collapsed after World War II, yet those were exactly the years during which economic growth in Europe was most rapid — with the exception of Russia (which maintained its colonial empire until 1991). In short, Koyama and Rubin conclude that colonialism and the slave trade “played a large role in the making of modern world” (a suitably vague statement) but that evidence is “mixed” on whether it was responsible for the world becoming rich (a polite pronouncement of a Scottish verdict: not proven).

Where the book truly shines is pointing out why the Great Enrichment was relatively late in coming and why the pre-1750 world — with a few exceptions — remained poor. The authors admirably survey the consensus that has emerged on the subject. Three major factors held the economies back. First, as neo-Malthusians such as Galor and Clark have maintained, before 1750 population growth in many cases wiped out the fruits of productivity growth, such as they were. Second, predators of various kinds and extractive institutions (North-Wallis-Weingast’s “natural state”) not only pillaged and plundered the riches of the few places that had been economically successful, they extinguished incentives to invest and innovate. Finally, until institutions had been established to govern and control the accumulation and dissemination of useful knowledge, the opportunities for sustained technological progress remained too limited. As the authors point out in admirable detail, the Industrial Revolution meant that these three brakes on economic progress slowly dissolved to create the Great Enrichment, first in a few economies in the West, then in more and more places around the world.

At the end of the day, as the authors sum up in chapter 11, in 2022 “the world is rich.” Almost anywhere one lives in this world, material life is in all likelihood better that it was a century, let alone a millennium, ago. A rising tide lifted most ships on the planet, but rather unequally, and while global poverty and famine are a fraction of what they were in 1800, they are still with us — mostly because of incompetent or tyrannical governance. What is perhaps worth noting, however, is that while technology keeps advancing, with novel breakthroughs opening new horizons in material sciences, molecular genetics, energy physics, and much more, there seems to be little if any long-term progress in the institutions that underlay the economic miracles of the past two centuries. Not only do countries with weak institutions such as Russia seem to lack the capability to adopt more inclusive and open governance, but even in nations long committed to the Enlightenment visions of freedom, human rights, and democracy, the institutions that helped make us rich seem ever more fragile. The conflict between ever-more powerful technology and the brittle polities that deploy it may be the greatest challenge to our future.

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2005. “The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth.” The American Economic Review 95 (2005), pp. 546-579.

Berg, Maxine, and Pat Hudson. 2021. “Slavery, Atlantic Trade and Skills: a Response to Mokyr’s ‘Holy Land of Industrialism’” Journal of the British Academy, Vol. 9, pp. 259–281.

Clark, Gregory. 2007. A Farewell to Alms. Princeton, NJ: Princeton University Press.

Galor, Oded. 2011. Unified Growth Theory. Princeton, NJ: Princeton University Press.

Headrick, Daniel R. 1981. The Tools of Empire. New York: Oxford University Press.

Hoffman, Philip T. 2015. Why Did Europe Conquer the World? Princeton, NJ: Princeton University Press.

McCloskey, Deirdre. 2010. Bourgeois Dignity: Why Economics Can’t Explain the Modern World. Chicago: University of Chicago Press.

North, Douglass C., John Joseph Wallis, and Barry Weingast. 2009. Violence and Social Orders. Cambridge: Cambridge University Press.

Joel Mokyr is the Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History at Northwestern University, and Sackler Professor, (by special appointment) at the Eitan Berglas School of Economics, Tel Aviv University. His most recent book is A Culture of Growth (Princeton University Press, 2017).

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