The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor

by David S. Landes

  The Wealth and Poverty of Nations

  Why Some Are So Rich and Some So Poor

  DAVID S. LANDES

  W. W. NORTON & COMPANY

  New York London

  Copyright © 1999, 1998 by David S. Landes

  All rights reserved

  First published as a Norton 1999

  For information about permission to reproduce selections from this book, write to Permissions, W. W. Norton & Company, Inc., 500 Fifth Avenue, New York, NY 10110.

  Library of Congress Cataloging-in-Publication Data

  Landes, David S.

  The wealth and poverty of nations: why some are so rich and some

  so poor / by David S. Landes.

  p. cm.

  Includes bibliographical references.

  ISBN: 978-0-393-04017-3

  1. Wealth—Europe—History. 2. Wealth—History. 3. Poverty—

  Europe—History. 4. Poverty—History. 5. Regional economic

  disparities—History. 6. Economic history. 7. Economic

  development—Social aspects. I. Title.

  HC240.Z9W45 1998

  330.1’6—dc21 97-27508

  CIP

  W. W. Norton & Company, Inc.

  500 Fifth Avenue, New York, N.Y. 10110

  www.wwnorton.com

  W. W. Norton & Company Ltd.

  Castle House, 75/76 Wells Street, London WIT 3QT

  Praise for

  The Wealth and Poverty of Nations

  “Truly wonderful. No question that this will establish David Landes as preeminent in his field and in his time.”

  —John Kenneth Galbraith

  “David Landes’s new historical study of the emergence of the current distribution of wealth and poverty among the nations of the world is a picture of enormous sweep and brilliant insight. The sense of historical contingency does not detract from the emergence of repeated themes in the encounters which led to European economic leadership. The incredible wealth of learning is embodied in a light and vigorous prose which carries the reader along irresistibly.”

  —Kenneth Arrow

  “David Landes has written a masterly survey of the great successes and failures among the world’s historic economies. He does it with verve, broad vision, and a whole series of sharp opinions that he is not shy about stating plainly. Anyone who thinks that a society’s economic success is independent of its moral and cultural imperatives obviously has another think coming.”

  —Robert Solow

  “Mr. Landes writes with verve and gusto…. This is indeed good history.”

  —Douglass C. North, Wall Street Journal

  “You cannot even begin to think about problems of economic development and convergence without knowing the story that Landes tells…. I know of no better place to start thinking about the wealth and poverty of nations.”

  —J. Bradford DeLong, Washington Post

  “Enormously erudite and provocative…. Never less than scintillating, witty, and brilliant.”

  —Kirkus Reviews

  Also by DAVID S. LANDES

  BANKERS AND PASHAS

  THE UNBOUND PROMETHEUS

  REVOLUTION IN TIME

  For my children and grandchildren, with love.

  …the causes of the wealth and poverty of nations—the grand object of all enquiries in Political Economy.

  —Malthus to Ricardo, letter of 26 January 1817*

  Contents

  PREFACE AND ACKNOWLEDGMENTS

  INTRODUCTION

  1. Nature’s Inequalities

  2. Answers to Geography: Europe and China

  3. European Exceptionalism: A Different Path

  4. The Invention of Invention

  5. The Great Opening

  6. Eastward Ho!

  7. From Discoveries to Empire

  8. Bittersweet Isles

  9. Empire in the East

  10. For Love of Gain

  11. Golconda

  12. Winners and Losers: The Balance Sheet of Empire

  13. The Nature of Industrial Revolution

  14. Why Europe? Why Then?

  15. Britain and the Others

  16. Pursuit of Albion

  17. You Need Money to Make Money

  18. The Wealth of Knowledge

  19. Frontiers

  20. The South American Way

  21. Celestial Empire: Stasis and Retreat

  22. Japan: And the Last Shall Be First

  23. The Meiji Restoration

  24. History Gone Wrong?

  25. Empire and After

  26. Loss of Leadership

  27. Winners and…

  28. Losers

  29. How Did We Get Here? Where Are We Going?

  EPILOGUE 1999

  NOTES

  BIBLIOGRAPHY

  Preface and Acknowledgments

  My aim in writing this book is to do world history. Not, however, in the multicultural, anthropological sense of intrinsic parity: all peoples are equal and the historian tries to attend to them all. Rather, I thought to trace and understand the main stream of economic advance and modernization: how have we come to where and what we are, in the sense of making, getting, and spending. That goal allows for more focus and less coverage. Even so, this is a very big task, long in the preparing, and at best represents a first approximation. Such a task would be impossible without the input and advice of others—colleagues, friends, students, journalists, witnesses to history, dead and alive.

  My first debt is to students and colleagues in courses at Columbia University, the University of California at Berkeley, Harvard University, and other places of shorter stays. In particular, I have learned from working and teaching in Harvard’s undergraduate programs in Social Studies and the Core Curriculum. In both of these, teachers come into contact with students and assistants from the full range of concentrations and other faculties and have to field challenges from bright, contentious, independent people, unintimidated by differences in age, rank, and experience.

  Second, thanks largely to the sympathetic understanding of Dr. Alberta Arthurs, this work received early support from the Rockefeller Foundation, which funded research and writing and brought a number of scholars together for inspiration and intellectual exchange in its beautiful Villa Serbelloni in Bellagio, Italy—there where the younger Pliny once reconciled beauty, work, and leisure on the shores of Lake Como. Easy to succumb. The meeting led to publication of Favorites of Fortune (eds. Patrice Higonnet, Henry Rosovsky, and myself) and gave me the opportunity to write a first essay on the recent econometric historiography of European growth. Among the people who helped me then and on other occasions, my two co-editors, Higonnet and Roskovsky; also Robert Fogel, Paul David, Rudolf Braun, Wolfram Fischer, Paul Bairoch, Joel Mokyr, Robert Allen, Francois Crouzet, William Lazonick, Jonathan Hughes, Francois Jequier, Peter Temin, Jeff Williamson, Walt Rostow, Al Chandler, Anne Krueger, Irma Adelman, and Claudia Goldin.

  The Rockefeller Foundation also supported two thematic conferences—one on Latin America in 1988 and another on the role of gender in economic activity and development the following year. Among those who contributed to these stimulating dialogues, exercises in rapid-fire instruction, I want to cite David Rock, Jack Womack, John Coatsworth, David Felix, Steve Haber, Wilson Suzigan, Juan Dominguez, Werner Baer, Claudia Goldin, Alberta Arthurs, and Judith Vichniac.

  I also owe a debt of gratitude to Armand Clesse and the Luxembourg Institute for European and International Studies. Mr. Clesse has become one of the key figures in the mobilization of schol
ars and intellectuals for the discussion and analysis of contemporary political, social, and economic problems. His main theme is the “vitality of nations,” which has been interpreted broadly to mean just about anything relevant to national performance. The product has been a series of conferences, which have not only yielded associated volumes but promoted a growing and invaluable network of personal contacts among scholars and specialists. A Clesse conference is a wonderful mixture of debate and sociability—a usually friendly exercise in agreement and disagreement. In 1996, Mr. Clesse organized just such a meeting to deal with the unfinished manuscript of this book. Among those present: William McNeill, global historian and successor in omniscience to that earlier historian of Greece, Arnold Toynbee; Stanley Engerman, America’s economic history reader and critic extraordinary; Walt Rostow, perhaps the only scholar to return to original scholarship after government service; Rondo Cameron, lone crusader against the concept and term of Industrial Revolution; Paul Bairoch and Angus Maddison, collectors and calculators of the numbers of growth and productivity.

  A similar meeting, on “The Singularity of European Civilization,” was held in June 1996 in Israel, under the sponsorship of the Yad Ha-Nadiv Rothschild Foundation (Guy Stroumsa, coordinator), bringing some of the same people plus another team, medieval and other: Patricia Crone, Ron Bartlett, Emanuel Sivan, Esther Cohen, Yaacov Metzer, Miriam Eliav-Feldon, Richard Landes, Gadi Algazi, et al.

  Other venues where I was able to try out some of this material were meetings in Ferrara and Milan (Bocconi University) in 1991; the III Curso de Historia de la Técnica in the Universidad de Salamanca in 1992 (organizers Julio Sanchez Gomez and Guillermo Mira); a Convegno in 1993 of the Società Italiana degli Storici dell’Economia (Vera Zamagni, secretary) on the theme of “Innovazione e Sviluppo” several sessions of the Economic History Workshop at Harvard; the “Jornadas Bancarias” of the Asociación de Bancos de la República Argentina in Buenos Aires in 1993 on “Las Estrategias del Desarrollo” a congress in Hull, England, in 1993 (Economic History Society, Tawney Lecture); a conference in Cambridge University on “Technological Change and Economic Growth” (Emma Rothschild, organizer) in 1993; Jacques Marseille and Maurice Levy-Lcboyer’s colloquium (Institut d’Histoire économique, Paris, 1993) on “Les performances des entreprises françaises au XXe siècle” a conference on “Convergence or Decline in British and American Economic History” at Notre Dame University in 1994 (Edward Lorenz and Philip Mirowski organizers, Donald McCloskey promoter); a session on the Industrial Revolution (John Komlos organizer) at the Eleventh International Economic History Congress in Milan in 1994; and a session at the Social Science History Association in Atlanta in 1994.

  Also lectures in the universities of Oslo and Bergen in 1995 (Kristine Bruland and Fritz Hodne, organizers); a symposium in Paris in 1995 on the work of Alain Peyrefitte (“Valeurs, Comportements, Développement, Modernité,” Raymond Boudon organizer) dealing inter alia with regional differences in European economic development; further symposia in 1995 on “The Wealth and Poverty of Nations” in Reggio Emilia and the Bocconi University in Milan (Franco Amatori, organizer).

  Also a conference in the University of Oslo in 1996 on “Technological Revolutions in Europe, 1760-1860” under the direction of Kristine Bruland and Maxine Berg; in 1996, too, at the Fondazione Eni Enrico Mattei in Milan on “Technology, Environment, Economy and Society” (Michele Salvati and Domenico Siniscalco, organizers). And in 1997, a planning meeting in Madrid for the forthcoming Twelfth International Economic History Congress on the theme “Economic Consequences of Empire 1492-1989” (Leandro Prados de la Escosura and Patrick K. O’Brien, organizers).

  Each of these encounters, needless to say, focused on those points of particular interest to the participants, with gains to my understanding of both the larger theme and its special aspects.

  Given the multiplicity of these meetings plus a large number of personal conversations and consultations, it is not easy to pull together a comprehensive list of those who have helped me on these and other occasions. My teachers first, whose lessons and example have stayed with me: A. P. Usher, M. M. Postan, Donald C. McKay, Arthur H. Cole. Also my colleagues in departments of economics and history in Columbia University (Carter Goodrich, Fritz Stern, Albert Hart, and George Stigler especially); in the University of California at Berkeley (Kenneth Stampp, Hans Rosenberg, Richard Herr, Carlo Cipolla, Henry Rosovsky, and Albert Fishlow especially); and at Harvard (Simon Kuznets, C. Crane Brinton, Alexander Gerschenkron, Richard Pipes, David and Aida Donald, Benjamin Schwartz, Harvey Leibenstein, Robert Fogel, Zvi Griliches, Dale Jorgensen, Amartya Sen, Ray Vernon, Robert Barro, Jeff Sachs, Jess Williamson, Claudia Goldin, Daniel Bell, Nathan Glazer, Talcott Parsons, Brad DeLong, Patrice Higonnet, Martin Peretz, Judith Vichniac, Stephen Marglin, Winnie Rothenberg).

  Nor should I forget the extraordinary stimulation I received from a year at the Center for Advanced Study in the Behavioral Sciences in Palo Alto. This was in 1957-58, and I was the beneficiary of a banner crop of economists: Kenneth Arrow, Milton Friedman, George Stigler, Robert Solow (four future winners of the Nobel Prize!). Get a paper past them, and one was ready for any audience.

  And then, in addition to those colleagues mentioned above, others at home and abroad. In the United States: William Parker, Roberto Lopez, Charles Kindleberger, Liah Greenfield, Bernard Lewis, Leila Fawaz, Alfred Chandler, Peter Temin, Mancur Olson, William Lazonick, Richard Sylla, Ivan Berend, D. N. McCloskey, Robert Brenner, Patricia Seed, Margaret Jacob, William H. McNeill, Andrew Kamarck, Tibor Scitovsky, Bob Summers, Morton and Phyllis Keller, John Kautsky, Richard Landes, Tosun Aricanh. In Britain: M. M. Postan, Lance Beales, Hrothgar John Habakkuk, Peter Mathias, Barry Supple, Berrick Saul, Charles Feinstein, Maxine Berg, Patrick K. O’Brien, P. C. Barker, Partha Dasguppa, Emma Rothschild, Andrew Shonfìeld. In France: Francois Crouzet, Maurice Levy-Leboyer, Claude Fohlen, Bertrand Gille, Emmanuel Leroy-Ladurie, Francois Furet, Jacques LeGoff, Joseph Goy, Rémy Leveau, François Caron, Albert Broder, Pierre Nora, Pierre Chaunu, Rémy Prudhomme, Riva Kastoryano, Jean-Pierre Dormois. In Germany: Wolfram Fischer, Hans Ulrich Wehler, Jürgen Kocka, John Komlos. In Switzerland: Paul Bairoch, Rudolf Braun, J.-F. Bergier, Jean Batou, Francois Jequier. In Italy: Franco Amatori, Aldo de Madalena, Ester Fano, Roby Davico, Vera Zamagni, Stefano Fenoaltea, Carlo Poni, Gianni Toniolo, Peter Hertner. In Japan: Akira Hayami, Akio Ishizaka, Heita Kawakatsu, Isao Sut, Eisuke Dait. In Israel: Shmuel Eisenstadt, Don Patinkin, Yehoshua Arieli, Eytan Shishinsky, Jacob Metzer, Nahum Gross, Elise Brezis. And elsewhere: Herman van der Wee, Francis Sejersted, Erik Reinert, H. Floris Cohen, Dharma Kumar, Gabriel Tortella, Leandro Prados de la Escosura, Kristof Glamann. To all these and others I owe suggestions, criticisms, data, insights. We have not always agreed, but so much the better.

  I want to give special thanks to my extraordinary editor, Edwin Barber, who not only challenged and improved the text but taught me a few things about writing. It’s never too late to learn.

  Finally, I want to thank my wife, Sonia, who has sweetly put up with years of heaping books, offprints, papers, letters, and other debris. Even multiple work studies have not been big enough, and only the computer has saved the day. Now for the cleanup.

  Introduction

  No new light has been thrown on the reason why poor countries are poor and rich countries are rich.

  —PAUL SAMUELSON, in 19761

  In June of 1836, Nathan Rothschild left London for Frankfurt to attend the wedding of his son Lionel to his niece (Lionel’s cousin Charlotte), and to discuss with his brothers the entry of Nathan’s children into the family business. Nathan was probably the richest man in the world, at least in liquid assets. He could, needless to say, afford whatever he pleased.

  Then fifty-nine years old, Nathan was in good health if somewhat portly, a bundle of energy, untiring in his devotion to work and indomitable of temperament. When he left London, however, he was suffering from an inflammation on his lower back, tow
ard the base of his spine. (A German physician diagnosed it as a boil, but it may have been an abscess.)2 In spite of medical treatment, this festered and grew painful. No matter: Nathan got up from his sickbed and attended the wedding. Had he been bedridden, the wedding would have been celebrated in the hotel. For all his suffering, Nathan continued to deal with business matters, with his wife taking dictation. Meanwhile the great Dr. Travers was summoned from London, and when he could not cure the problem, a leading German surgeon was called in, presumably to open and clean the wound. Nothing availed; the poison spread; and on 28 July 1836, Nathan died. We are told that the Rothschild pigeon post took the message back to London: Il est mort.

  Nathan Rothschild died probably of staphylococcus or streptococcus septicemia—what used to be called blood poisoning. In the absence of more detailed information, it is hard to say whether the boil (abscess) killed him or secondary contamination from the surgeons’ knives. This was before the germ theory existed, hence before any notion of the importance of cleanliness. No bactericides then, much less antibiotics. And so the man who could buy anything died, of a routine infection easily cured today for anyone who could find his way to a doctor or a hospital, even a pharmacy.