ISBN: 0691141282

In A Farewell To Alms, economist Gregory Clark attempts to present the reasons for the industrial revolution taking place and why all of the world’s countries were not equally affected by it. Two hundred years after the industrial revolution, some countries see untold wealth while others are actually living worse off than before it took place. He looks into the economic answers to this problem.

The book starts off by examining how life was for the common man before the industrial revolution (the Malthusian era). During this time, any increase in population would mean a direct decrease in living standards. This check prevented runaway population growth.

Any increase in birth rates in the Malthusian world drives down real incomes. Conversely anything which limits birth rates drives up real income . Since life expectancy at birth in the Malthusian era was just the inverse of the birth rate, as long as birth rates remained high, life expectancy had to be low. Preindustrial society could thus raise both material living standards and life expectancy by limiting births.

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This Malthusian world thus exhibits a counterintuitive logic. Anything that raised the death rate schedule— war, disorder, disease, poor sanitary practices, or abandoning breast feeding— increased material living standards. Anything that reduced the death rate schedule —advances in medical technology, better personal hygiene, improved public sanitation, public provision for harvest failures, peace and order— reduced material living standards.

Technological advancement during the Malthusian era would result in more people, but not necessarily higher income for those people.

In the preindustrial world sporadic technological advance produced people, not wealth.

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Since preindustrial living standards were determined solely by fertility and mortality, the only way living standards could be higher in 1800 would be if either mortality rates were greater at a given real income or fertility was lower.

More people can live on lower incomes than in the past, especially thanks to medical advances, so population explosions can co-exist with abject poverty. The income needed to merely survive today is much lower than in the past, so there is no “punishment” for having a lot of children even if you can’t afford it (the likelihood is high that they will all survive). In the past, only the rich could have many children, but now we’re seeing an inverse situation where poor people pop them out while rich people delay birth.

If the great majority of income was spent on food then there was also little surplus for producing “culture” in terms of buildings, clothing, objects, entertainments, and spectacles. As long as the Malthusian Trap dominated, the great priority of all societies was food production.

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…between 10,000 BC and AD 1800, real living conditions probably declined with the arrival of settled agriculture because of the longer work hours of these societies. The Neolithic Revolution did not bring more leisure, it brought more work for no greater material reward.

To keep birth rates low and living standards high, many cultures invented various social customs that limited births—a sort of societal birth control. Modern medicinal birth control simply duplicates what was already going on in the Malthusian era, so attributing low birth rates to birth control or feminism, for example, fails to look into the complete history. Birth rates already declined greatly before the pill was introduced. Modern life introduced by the industrial revolution is argued to be the biggest contributor to birth decline.

Could the rich of the preindustrial world actually have wanted fewer children, but been unable to achieve that desire because of a lack of effective contraception? No. Figure 14.6 shows that most of the decline toward levels of gross fertility characteristic of modern developed economies had been accomplished in England (and indeed elsewhere in Europe) by the 1920s, long before modern condoms, hormonal contraceptive pills, legalized abortion, or vasectomies.

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In these societies violence was a way of gaining more resources and hence more reproductive success. Thus Napoleon Chagnon, in a famous study of the warlike Yanomamo society, found that a major predictor of reproductive success was having killed someone. Male Yanomamo sired more children at a given age if they had murdered someone than if they had not.

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…in the preindustrial era cities such as London were deadly places in which the population could not reproduce itself and had to be constantly replenished by rural migrants. Nearly 60 percent of London testators left no son . Thus the craft, merchant, legal, and administrative classes of London were constantly restocked by socially mobile recruits from the countryside.

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The New World after the Neolithic Revolution offered economic success to a different kind of agent than had been typical in hunter -gatherer society: Those with patience, who could wait to enjoy greater consumption in the future. Those who liked to work long hours. And those who could perform formal calculations in a world of many types of inputs and outputs— of what crop to profitably produce, how many inputs to devote to it, what land to profitably invest in.

The industrial revolution completely changed how human societies live, with aftershocks that are still taking place today. The author tries to explain why this happened.

Around 1800, in northwestern Europe and North America, man’s long sojourn in the Malthusian world ended. The iron link between population and living standards, through which any increase in population caused an immediate decline in wages, was decisively broken. Between 1770 and 1860, for example, English population tripled. Yet real incomes, instead of plummeting, rose . A new era dawned.

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The model reveals that there is one simple and decisive factor driving modern growth. Growth is generated overwhelmingly by investments in expanding the stock of production knowledge in societies.

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Thus, despite all the complexities of economies since the Industrial Revolution, the persistent growth we have witnessed since 1800 can be the result of only two changes: more capital per worker and greater efficiency of the production process. At the proximate level all modern growth in income per person is that simple!

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Enhanced production of knowledge capital, seemingly starting around 1800, generated great external benefits throughout the economy. This increased the measured efficiency of the economy , and with it the stock of physical and human capital. Thus the path to explaining the vital event in the economic history of the world, the Industrial Revolution, is clear. All we need explain is why in the millennia before 1800 there was in all societies—warlike, peaceful, monotheist, polytheist— such limited investment in the expansion of useful knowledge, and why this circumstance changed for the first time in Britain some time around 1800. Then we will understand the history of mankind.

The British population tripled in 120 years but their farm output didn’t increase since land was limited, so they had to import food. To import food you need a product to export. In this case it was manufactured goods. Britain quickly became the workshop of the world.

The classic Industrial Revolution, with its reliance on coal and iron, was the first step toward an economy that relied less and less on current sustained production through plants and animals, and more on mining stores of energy and minerals.

In one word, the industrial revolution created massive wealth because of efficiency:

In a world where capital flowed easily between economies, capital itself responded to differences in country efficiency levels. Inefficient countries ended up with small capital stocks and efficient ones large amounts of capital . And efficiency differences explain almost all variations between countries in income levels.

Differences in efficiency could stem from discrepancies in access to the latest technologies, from economies of scale, or from failures to utilize imported technologies appropriately.

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Poor economies since the Industrial Revolution have been characterized mainly by inefficiency in production. Their problem, however, was typically not in gaining access to new technologies. The problem, it turns out, was in using these new technologies effectively.

The book finally arrives to the money shot in answering why some countries are poor and some are rich: the rich countries have the greatest efficiency in maximizing output per worker based on the same inputs.

[Poor countries] were inefficient in the use of labor, not in the use of capital. Even though they were using the same machines as the high-wage economies, they employed many more workers per machine, without obtaining any additional output from the machines . Thus in ring spinning one worker in the northern United States tended 900 spindles, while one worker in China tended only 170. On plain looms a worker in the northern United States managed eight looms at a time, in China only one or two.

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Poor countries used the same technology as rich ones. They achieved the same levels of output per unit of capital. But in doing so they employed so much more labor per machine that they lost most of the labor cost advantages with which they began.

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Thus the crucial variable in explaining the success or failure of economies in the years 1800– 2000 is the efficiency of the production process within the economy. Inefficiencies in poor countries took a very specific form: the employment of extra production workers per machine without any corresponding gain in output per unit of capital.

So now you’re probably wondering why is the labor in Africa or Pakistan worse than the labor in Britain or America. In the past, “labor quality” was looked into as the reason, which to me seems like a politically correct euphemism for intelligence.

Although the disparities in performance across countries remained unchanged, the “labor quality” explanation disappeared from the economics literature after World War II. Most economists now attribute the poor performance of industry in underdeveloped economies not to labor problems but to a generalized failure by management to productively employ all the inputs in production— capital and raw materials as well as labor.

The nineteenth-century view blamed these on the quality of workers, whereas the twentieth-century view tried to say the problem lay in managerial failings. But since many western managers were exported to work in foreign countries, there is little evidence that the management theory explains the wide disparity in efficiency levels. So we have this amusing let down:

Regarding the underlying cause of the differences in labor quality, there is no satisfactory theory.

The difference in wealth between nations in due to efficiency, which the author gives compelling evidence for. The difference in efficiency can only be due to labor quality, but we have no academic answer as to why the labor is different.

Another interesting piece of knowledge you’ll learn here is that technological and knowledge decline has happened many times in human history where a society has simply lost a capability that the previous generations had. Don’t ever assume that progress happens on a straight upward line, and we can argue that today we’re seeing a cultural decline where collective progressive beliefs become further estranged from scientific reality.

One major complaint I have is that this book is dry and academic, meant for college students. It’s a good book to read before going to bed because it’ll put you to sleep, but at the same time it gives great information in explaining how the wealth of societies came about. The end was unsatisfying, as it will leave you with unanswered questions, but thankfully it answers a few along the way. If you were victim to an American public school education, you probably think that the industrial revolution happened solely because of the steam engine. This book will rid you of such a primitive notion.

Read More: “A Farewell To Alms” on Amazon