Throughout human history, the Industrial Revolution stands out somewhat. From millions of years of subsistence existence, a few thousand of basic civilisation with widespread poverty, suddenly an explosion of wealth that at first glance comes from nowhere. It is economic history’s ultimate child prodigy.
As a person, it would be the woollen jumper-clad, floppy-haired and bespectacled young individual who single-handedly makes Esperanto the world’s mother tongue, builds a time machine and solves Brexit all in the same evening. Or at least we think - time travel, remember.
Dr Stephen Davies’ latest book examines how this bright young thing came to be and how it created what we call ‘modernity’. So, what is ‘modernity’? Davies attempts to provide some clarity.
He makes clear that one of the defining characteristics of modernity is innovation, a familiar echo of the ideas espoused by the likes of economic historian Deirdre McCloskey. Nonetheless, he is quick to point out that while McCloskey claims it was a culture of entrepreneurship that brought about the Industrial Revolution, such high regard for business was not exclusive to 18th century Britain.
Exclusivity to 18th century Britain is a natural line of inquiry for anyone reading about this phenomenon and most history books on this topic are based on the question of why Britain and why the late 18th century.
His focus on the ruling class makes clear and reminds us that for most of history, those who ‘gain resources through predation of various kinds’ often rule over those who ‘gain resources through production or trade’. This distinction is seminal to the whole book.
Necessary, but not sufficient.
It is not an easy task to get one’s head around one of the most important historical phenomena in history, but by using the idea of the nuclear reactor The Wealth Explosion provides a rather accurate analogy.
Only once there is enough fuel will a chain reaction occur, and control rods exist within to manage the rate of reaction. This analogy can be extended to the Industrial Revolution insofar as fuels are the contributing factors, and the control rods are the various ‘checks’ which prevent sustained economic growth, a key tenet of the Industrial Revolution. But unlike a nuclear reactor, removing ‘control rods’ would not result in a nuclear meltdown. Instead, we would experience sustained economic growth which would be, well, rather nice actually. The reason why sustained economic growth was able to continue unchecked was because 18th century England did not suffer from these ‘checks’ that similar societies with the necessary conditions did.
You may be thinking, isn’t this tautological - surely sustained growth means there were no countervailing forces? While it is easy to think that the way things happened was the way they had to happen or at least that the actual outcome was the overwhelmingly likely one, this is not the case. Once we put aside metaphysical caveats, we realise that ‘what ifs’ are a large part of what history is all about.
What if other societies in another part of the world, at a different period in history, had the necessary conditions for sustained economic growth and at least started to make the revolutionary progress we did in the 18th century? Davies makes some claims of the necessary conditions (uranium in the nuclear reactor for example) that are required for a society to become something like the modern economy we have today. Among these are a sufficiently large population and density in a significant part of the planet, a system of trade and division of labour that covered a large enough portion of the planet, and a population with an integrated economic activity in that area.
Nonetheless, this is not sufficient. Strikingly, this is illustrated by the problematic case of 13th century Song China which, according to current historical evidence, was not so different from 18th century Britain.
Song China - a sweet, sweet tune.
12th century Song China had surprisingly sustained economic growth. Agricultural output more than doubled from 96 to 1260, surviving restaurant menus offered a wide range of cuisine. This was bolstered by peasants being given full property rights (including the right of sale) by the previous Taizu and Taizong rulers leading to specialisation in producing various cash crops and even eventual commercialisation of agriculture.
It was a monetised economy based on markets rather than subsistence, taxes were paid in money rather than forced labour. The number of coins minted per year went up more than sevenfold in 88 years and, since this was not accompanied by inflation, the assumption is that it was matched by an impressive increase in production.
Song China had rapid and sustained technological innovation (e.g. mechanical spinning of silk and an advanced windmill) centuries before the 18th century. Most remarkable was the scale of manufacturing; as early as 1078 China produced on average at least 127,000 tonnes of iron per year, a level that would not be reached anywhere else until 18th century Britain.
Internal and external trade was both extensive and intensive; the lifting of internal controls brought about economic integration and made it the largest market in the world at the time. Chinese merchants’ supreme naval fleets (mostly privately owned) were sophisticated well beyond anything in the world for several hundred years, which led to trade as far as Africa, India and the Middle East.
All this was made possible due to the fact that by 1190, the population of China was 73 million and urbanisation was rapid and extensive. More people meant more innovation, production and wealth, rather than just more mouths to feed.
Get checked, get rekt.
Why did this fail to continue in the long term? Davies explains that certain checks prevented the revolution of modernity. Confucianism's unmeritocratic, hierarchical limitations on social organisation, the lack of access to energy to fuel mechanisation and the worldwide slump in economic activity in the 14th century are reasons put forward by economic historians for the lack of progress. Another (rather unconvincing argument) is that Song China had reached a ‘high equilibrium trap’ where supply met demand and there was no incentive for further innovation. This would have been only likely for a small sliver of time from the 14th to the 18th century.
The most plausible, however, is that it was the invasion of the Mongols by Genghis Khan in c. 1205. This scarred the society in a material and psychological way. The entire way of life including the rapid and extensive growth of Song China was associated with defeat and a new set of rulers took power which sadly halted growth.
The Military Revolution and The European Divergence.
Perhaps surprisingly, Davies argues that it was the 16th century military revolution that changed international relations catalytically to produce the revolutionary growth of the 18th century. ‘Gunpowder’ empires, the increasing use of infantry, artillery, and decline of cavalry led to powerful empires and military powerhouses.
Hegemonic powers such as the Ottoman, Chinese, and Russian empires didn’t exist in Europe. The Habsburgs failed, the French started warring over religion and the Dutch revolted. No country in Europe gained a decisive advantage early enough so, through competition, the powers were broadly balanced.
Therefore, in Europe, the ruling classes were incentivised to acquire greater resources. Consequently, these states now had a powerful incentive to actually encourage innovation which was bolstered by the citizenry who benefitted from the increase in innovation.
In the 18th century the changing of incentives (to win wars and emerge victorious from conflicts with other ruling classes), as well as the looming Malthusian conundrum, encouraged - or at least allowed - innovation. Davies argues: ‘simultaneously powerful social interests that gained from innovation were able to win the intense political conflicts that this caused and so the process was not aborted but sustained’.
Other arguments for the supposed ‘European exceptionalism’ include slavery and institutional factors from the Glorious Revolution of 1688 which were conducive toward innovation. The former can be debunked by the fact that no more than 10 per cent of the capital invested in early industry came from the slave trade, trade with India was more important as a source of capital and most profits came from saved profits via domestic agriculture. The latter is an insufficient explanation since most of the institutions mentioned in the analysis have been around for hundreds of years prior. Such explanations are used more as political weapons for the left and right, respectively.
Are we still living in Western Civilisation?
Davies posits a question which is both relevant in the sweeping culture wars between the left and right and the more academic areas of philosophy, theology and, of course, history. Despite its fairly academic nature, The Wealth Explosion is highly relevant to the cultural debates which often litter contemporary magazines about western civilisation and its supposed ‘Judeo-Christian values’, sadly often equivocated with modernity.
Indeed, the world today may be profoundly different from the way it has been for most of recorded history but does this amount to another civilisation, starkly different to the world before the Enlightenment? Progress as we understand it in the context of modernity evidently does not necessitate religious values but that doesn’t mean modernity has brought with it an inescapable Faustian pact, as Davies points out. Though there are some inescapable costs.
It is a testament to Davies’ intellectual honesty that he concedes some forms of human good and excellence are lost forever as a result of the modern world and its nature, much unlike many contemporary optimists such as Steven Pinker.
Is modernity fundamentally incompatible with human nature? Some, such as those subscribers to the Olduvai Hypothesis (which argues that the conditions of life for humans will revert to what they have been for most of human history) take the extreme view that it does indeed. There is always the possibility that it will, but the exciting thing about history - and economic history in particular - is that we are are the subject of our own study. So it is up to us to continue the promising trajectory and welcome modernity wherever it may lead us, albeit with a pinch of salt.