Book Reviews, Charles, Great Divergence, Political Economy
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A Farewell to Alms: A Brief Economic History of the World (Gregory Clark)

This book is part of the sub-genre that might be titled, if being honest, “Why Are All Today’s Rich People Europeans, Actually or Honorary”? It’s fascinating, though ultimately has, if not holes, lacunae that still need to be filled in before the argument becomes compelling.

Clark’s basic thesis is that certain desirable social traits arising in the English upper and upper-middle classes spread through the larger population, thereby allowing technological changes (which otherwise would not have done so) to accelerate per capita income in a way never before possible. A basic corollary of his thesis, which he attempts to demonstrate with fairly limited data, is that even today in non-Western societies, even with the technology produced by the West, most societies are incapable of sustained advances in their per capita standard of living (i.e., technological advancement by itself is inadequate to accelerate per capita income). The reason for this, which he implies in passing he believes but shrinks from stating, is that those non-Western cultures are bad and/or the people in them are less intelligent.

Clark’s initial focus is on the Malthusian Trap, and Ricardo’s Iron Law of Wages—in short, that until the Industrial Revolution in England, no society could sustain an increase in per capita national income, because as income per capita increased, population increased as well, and due to diminishing returns, the per capita national income was forced back down to equilibrium. He does an excellent job of explaining this using various microeconomics-type graphs and the like. The concept is that any increase in per capita income, whether caused by technology, harder work, or any other cause, only increases population in the long term, not per capita income. (Malthus is typically remembered for a variation on this, the idea that as incomes increase linearly, population increases exponentially, leading to “corrections.” Malthus, of course, is mostly laughed at for this nowadays, because he had the misfortune, or fortune, of writing immediately before in his country this became no longer true. But it’s still true in much of the world.)

Clark’s next focus is on why eighteenth-century England escaped the Malthusian trap—i.e., why the Industrial Revolution steadily increased per capita income, vastly faster than population growth, and that increase in per capita income has continued to this day. He rejects various rationales—he demonstrates that in England property rights were no more stable than in the past; that technology did not increase rewards to inventors or adopters; and so forth.

Clark demonstrates pretty convincingly that until late 18th-century England, no society on average lived above a subsistence level, and, indeed, that a Paleolithic hunter-gatherer lived better than a 16th-century Englishman. (This is actually pretty well known, that an Englishman of 1000 A.D. was much better fed and healthy than an Englishman of 1500—but normally the declining health is chalked up to the Industrial Revolution, whereas Clark demonstrates the opposite. Clark also doubtless offends the politically correct by pointing out that in the supposed pre-contact paradise of Polynesia, between two-thirds and three-quarters of all children were killed immediately on birth, thus keeping per capita income high in a society that otherwise would have had low mortality.) He also demonstrates that most pre-modern societies, historically and today, are filled with lazy people with characteristics not conducive to long-term gain. Or, as he puts it, “Based on the observation of modern forager and shifting cultivation societies we would expect that the early agriculturalists were impulsive, violent, innumerate, illiterate and lazy. Ethnographies of such groups emphasize high rates of time preference, high levels of interpersonal violence, and low work inputs. Abstract reasoning abilities were limited.” Not for Clark the idea that all societies are basically filled with intelligent strivers, merely limited by their circumstances.

Clark then posits that the people of England changed, due to various “modern” characteristics, such as prudence, delayed gratification, consistent excellent work, and so on, first coming to dominate the rich, who then had more children, who (because they could not all share equally in the inheritance), moved down the social ladder, but taking their characteristics with them. He repeatedly and strongly implies he thinks these people changed genetically to embody these characteristics, but doesn’t pursue it. This change, combined with “enhanced production of knowledge capital,” or increased technology, together meant escape from the Malthusian Trap.

Of course, this means that the traditional economic libertarian belief that if we merely have the right structures, all peoples can be equally satisfied, doesn’t work. The people themselves have to change. It also means that the belief that the poor peoples of the world are poor is not only not the fault of colonialism, or (pace Jared Diamond) their geography, or some other external cause, but their own fault.

Clark says very little about Europeans other than the English, even though many of the characteristics he attributes to the English were certainly prevalent in other European nations (such as the Dutch). Maybe there’s no data—he certainly leans heavily on what seems to be a unique English set of data going back to 1200 A.D. or so. He does not really address the question why, if the unique English characteristics filtered throughout the population for reasons mostly found in England, why other European nations also quickly escaped the Malthusian Trap. He implies, but does not state, that other European nations shared in the benefits of the Industrial Revolution because their cultures were willing and able to immediately adapt to take advantage of the technological changes provided by England. Clark also claims explicitly, with some data, that the reason China and Japan did not follow the same trajectory independently as England prior to England is because rich men did not have many more children than poorer men, unlike in England. Presumably, China and Japan ultimately followed and are following the same path as the rest of Europe—using the technology developed in England, combined with adapting their cultures, to accelerate per capita income. Plausible, but not really demonstrated.

Also, Clark’s data on inferior work abilities of modern non-rich countries is limited to (very good and detailed) data about Indian textile workers. He points out how inefficient they and all other Third World workers are (by which he largely means simple incompetence) even today, and how hand weaving is still a huge part of Indian textile production. Clark generally posits that most global workers have low efficiency, and because growth is essentially wholly explained by efficiency, they will be poor as long as they have low efficiency. This is why, other than in China, low-wage economies have generally not been able to exploit their advantages. But there’s probably a lot more that needs to be demonstrated with hard data.

Finally, Clark does not address the role of bad institutions and culture in non-growth countries (other than demonstrating that in Indian textiles bad management has nothing to do with inefficiency). He proves that England did not have worse institutions prior to the Industrial Revolution, and therefore England’s success was not due to a change in institutions. But that proves nothing about other countries, particularly those with highly pernicious cultures and institutions such as most of Africa and Asia—it is entirely possible those bad characteristics explain in whole or in part the inefficiencies, even if they are irrelevant to the European historical analysis. That explanation, though, would somewhat undercut Clark’s main thesis that a change, probably genetic, in people in England was what made European growth possible.


  1. max says

    Gary North:

    Origin of Modern Economic Growth

    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?

    If McCloskey is correct, then it was one main idea, not investment capital, that created modern economic growth and therefore the modern world. The idea was this: entrepreneurial wealth is morally legitimate. The rich man was finally acknowledged to have dignity. All men are equal before the law. “All men have a go at great wealth.” The transformation began in early seventeenth-century Netherlands. It was the preaching of Calvinist ministers that began this change.

    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.

  2. Craken says

    Excepting those few countries with major natural resource windfalls (eg, Kuwait or Botswana in our time, Argentina 100 years ago), average national IQ puts a ceiling on per capita national income. However, average national IQ does not put a floor on per capita income. Ukraine has an IQ of about 100, typical of N. European countries. Yet, it is impoverished due to its inheritance of bad institutions and its terrible geopolitical position. N. Korea is an even clearer example that IQ does not furnish a floor. It’s no accident, though, that they can build nukes, ballistic missiles, and inflict cyber attacks on major powers. No African country is currently capable of these feats, though South Africa once was.

    Clark’s thesis, that downward mobility facilitated the inheritance of economically valuable traits, may be demonstrable very soon due to advances in the field of paleo-genetics. I saw a paper a few years ago that analyzed English DNA from 2,000 years ago and found that certain traits had been selected for, including blond hair and wider hips in women. They did not look at cognitive of psychological traits. We have now over 1,000 genetic markers confirmed for educational attainment; the database behind that paper could provide some answers on the historical selection pattern of these SNPs. We also have markers for traits like conscientiousness.

    All economic growth ultimately arises from innovation. Efficiency is one of the goals at which innovators aim, but not the only one. Part of Clark’s point, which he delicately declined to stress, is that nations unable to imitate First World industrial practices are actually two steps behind: the first step is to innovate the industrial system into existence, the second to sustain it.

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