A Potted History of Growth from the Stone Age to the Present
Economic history used to be simple. Until relatively recently, we used to look back at the past and make two grand and sweeping assumptions: that nothing much of interest happened until the British Industrial Revolution, and that the West has always been best.1 However, as historians have opened their eyes – as economic history has ‘gone global’ and as we have penetrated further back in time – we have learnt to become much more humble. We have been forced to admit that western dominance has in fact been the exception and not the rule. Only in the last two hundred years has the West firmly managed to climb the global ladder. Before this time, all the interesting action was taking place outside. And not just for a short while – for millennia.
The reality is that for thousands of years, all of the major technological advances took place outside Europe. Whether it's the first time we began to settle down in one place and farm the land, the invention of the first manufacturing technologies, the construction of the first urban settlements or the first time we put pen to paper (or, rather, stylus to clay tablet), it was civilizations outside of the West that dazzled. Whilst they were becoming ‘civilized’, many Europeans were still running around practically barefoot, chasing wild animals.
Three regions stand out: the part of the Middle East historically known as Mesopotamia, between the Tigris and Euphrates rivers (an area sometimes referred to as the fertile crescent); the Yellow River Valley in China; and the Indus Valley, which is in modern-day Pakistan and India. In each of these regions, farming became established between 10,000‒6,500 BC, with Africa's southern Eastern Sahara not far behind.2 It took up to another two thousand years for this ‘Neolithic’ revolution to reach the western outskirts of Europe.
With farming came manufacturing. Before humans first settled down, we were regularly on the move, following the migration patterns of animals. Possessing anything other than the most basic goods would have made life cumbersome. With the birth of farming, we ‘put down roots’, which meant we could become ever more acquisitive. We could, quite simply, own ‘stuff’. Hence it is in the areas where agriculture first developed – outside of Europe – where we also find the first manufacturing activity, including the production of textiles, pottery and metal ware. That included bronze.
The Bronze Age, which dates to around 3,500 BC, stimulated long-distance trade between the East and the West. Europe became the natural resource heap for merchants from the Middle East and beyond. Copper and tin mines – the two substances needed to produce bronze – sprung up in some of the furthest (and coldest) reaches of the continent, including Cornwall and Wales. Britain's (and indeed Europe's) first international economic transactions were, to say the least, primitive.
Where farming and manufacturing first developed, urban settlements also began to sprout. Jericho is one of the first such towns, dating to around 7,000 BC. Also located in the Middle East was what is often thought to be the first human civilization, Sumeria, with its historic city of Ur. A united Egypt had formed by 3,000 BC, and the Purple People of the Lebanese Coast operated trading routes between the two regions. Known to us today as the Phoenicians, they pioneered developments in shipping and commerce that later diffused to the ancient Greeks.
With urban developments and trade came a need for the written word ‒ and for arithmetic. Administration of towns would have been near impossible without it, as was trade beyond anything other than meagre levels. As with the earlier technological revolutions, this revolution also first took place in the Middle East, Pakistan and China. The revolution in writing in turn enabled the development of intellectual thought, whilst the development of mathematics enabled the design and construction of buildings and, ultimately, laid the foundations for modern science.
The fact that, despite its many centuries of ‘underdevelopment’, the West managed not only to catch up with but overtake the rest of the world is nothing short of astonishing. Although historians have in the past emphasized the achievements of ancient Greece and Rome, we now know just how much they had to thank the earlier civilizations for their success. The roots of ancient Greece are to be found in small groups of traders who rose to challenge the Phoenicians. They adopted the writing and commercial techniques of not only the Purple People but also the Lydians and the Babylonians, including coinage, the joint stock company, banking, insurance and the alphabet. In many respects, Europe first began to make its mark not as an innovator but as an assimilator. By the time the Romans were marching across Europe and, as former master of my own Cambridge college Joseph Needham revealed decades ago, China was still well ahead. And, rather than being the poorest part of the world, Africa was instead pretty average, globally speaking, albeit with ‘significant heterogeneity’.3 Europe was firmly on the back ‒ not front ‒ foot.
As the Roman Empire fell into decline, Europe entered a period which has traditionally been known as the Dark Ages. Recent history has shed more light on this period of darkness, but it was nonetheless an unsettling time for the continent. Europe became highly fragmented and had to begin the process of rebuilding trade and political institutions from the bottom up, rather than relying on a strong top-down state. By medieval times, Italy had become Europe's seat of prosperity, and much of its wealth was built on the back of connections to the still much more prosperous East.
For other Europeans, Italy provided the only seemingly attainable model of growth. Looking on in envy, they reasoned that, if they were to compete with cities such as Venice, they needed to forge their own connections eastwards, breaking the Italian monopoly on long-distance trade. The royal courts of Spain and Portugal, and later England, sent out explorers and navigators to open the door to the East, hoping for a piece of the action. Vasco da Gama sailed under the southern cape of Africa and out into the Indian Ocean, establishing new trade routes for Portugal. Christopher Columbus took a different tack. Thinking outside of the box, he sailed westwards, hoping to find a back door to China. Without knowing it, he stumbled on the Americas.
What followed was one of the darkest periods of Europe's engagement with the world: the exploitation and elimination of indigenous peoples, and the slave trade – the buying and selling of individual human life as if it were little different to the tobacco, sugar and raw cotton that those very same lives were being bought and sold to produce. And not just on a small scale but on a massive scale: the total number of Africans shipped to the Americas stands at between 11 and 12.5 million.4
It was, of course, through the riches they acquired in the Americas that Europeans were able to get their hands on more and more of the sophisticated manufactured goods of the Far East, including silks and porcelains, along with exotic spices. Europeans now had something real to trade with the East, something for which the East had a great appetite: silver. From Europe's point of view, this was the first era of globalization. The growth of world trade in the first half of the sixteenth century (at 2.4% p.a.) was not far from that in the twentieth century (3.44% p.a.).5
Ultimately, though, it wasn't Spain or Portugal – the first big traders and of course colonialists – that went on to industrialize and provoke sustained economic growth. Neither was it Holland that played host to the first Industrial Revolution, a country that had carved out a place for itself not only in international trade but as the merchant serving the rest of Europe, connecting the Baltic Sea with the Mediterranean. ‘Why the West?’ cannot be answered by simply pointing to European trading and political activities abroad, however destructive and violent those activities were for the people involved.6 Otherwise, the Industrial Revolution would have occurred more widely – and earlier in time. No one, but no one, would have predicted that Britain, not Italy, Spain or Holland, would move centre stage.
By the time the British Industrial Revolution was operating at full steam in the late eighteenth and early nineteenth centuries, the tables finally began to turn between East and West.7 Whilst the West progressed, the East regres
sed. Other ‘reversals of fortune’ came alongside: between the Mediterranean and north-western Europe, between Africa and the Americas, and between the northern and southern Americas. Whether by the same or by very different forces, the whole globe was being reshaped.
When seen in this longer-term and more global perspective, understanding why Europe was home to an industrial revolution that ushered in sustained economic growth – sustained for a sufficiently long enough period of time and at a sufficiently high enough level to bring about a rapid transformation of our standard of living in the last two hundred years ‒ becomes even more difficult to explain. And, in light of the re-emergence of the Far East and the recent slowdown in economic growth in the West, it is an ever more pressing question. Does the West really have what it takes to continue its advance? The answers to such questions will hang crucially on what we identify as being the causes of the rise of the West, causes that could either have been fortuitous and superficial or deep and long lasting. Not to mention benign or malign.
Five Lessons
Economic historians are still getting to grips with the past, and debates on the causes of economic growth continue, but there are five important takeaway lessons that I myself draw from existing research on the rise of the West. Although condensing down an immense literature to just five key findings is inevitably gung-ho, it nevertheless helps us to see the wood for the trees, to see where we are at. Each of the five lessons has something important to offer us – something that helps us answer the question of ‘how the West got rich’. However, taken together, these lessons also reveal something else: the sidelining of women throughout our thinking about how we got to where we are today. Women's freedom is the elephant in the room. It is, quite simply, and as we will see in the chapter that follows, impossible to properly understand ‘why the West?’ – and why Britain first ‒ without zooming in on women's freedom.
History Lesson 1: markets are necessary but not sufficient for economic prosperity
Since Adam Smith published his Wealth of Nations in 1776, economists have been obsessed with markets, so much so that at the time of writing his face appears on the reverse side of the British £20 note. The market-based approach has attracted extensive criticism, particularly in light of the global financial crisis.8 At its root, the market view of growth is one that places faith in us as individuals. It is bottom-up as opposed to top-down: rather than seeing growth as something created by the actions of the state, it places emphasis on our own individual efforts. It favours giving individuals freedom to engage with one another, to start new businesses, to search out new technologies and to create new products. It values the diversity offered by millions of different people, each with their own thoughts and ideas, seeing all of these numerous individual efforts as the cause of human progress. It also points to the way in which markets provide opportunities for people to escape alternative systems, such as serfdom, enslavement and patriarchal family forms that lock women inside the home.
But whether or not one buys into markets, history suggests that they are simply not enough by themselves. Looking at evidence from as far back as ancient Babylonia and through to medieval, early-modern and modern Europe, my own research, along with that of other economic historians, has built a picture of the evolution of markets across the long span of human history.9 If the market-based view of growth is correct, the picture revealed should be straightforward: that markets were poorly developed until the eve of the rise of the West. Instead, we find that markets were certainly not a ‘modern’ invention, and neither were they a purely ‘western’ one.10 Active markets in history can be found in the Middle East and Asia, and in parts of Africa.11 The extent of trade and market activity over the last two centuries has been on a different scale to that beforehand, but it has been as much a product of economic growth as it was a driver – the result of using new technologies, from the steam engine to the computer, which made the world smaller and flatter.
In sum, although markets are a common ingredient of successful economies, the fact that they have existed for much longer than has modern-day prosperity strongly suggests that they are not enough to create sustained economic growth.12 Something else was needed to light the fire. Key to identifying precisely ‘what’ may be looking not at who used markets but who did not: who, in other words, was excluded. Some chose to exclude themselves, viewing markets as beneath them, which, as Deirdre McCloskey argues, is not conducive to the creation of prosperity.13 Others were involuntarily excluded. And that, of course, often included a mere half of the population: women. As we will see in the next chapter, the benefits of including women in market activity are substantial ‒ and go above and beyond the benefits of market involvement for men. One of the things that most stands out about the part of Europe in which the Industrial Revolution began was that women faced relatively fewer restrictions on their engagement with the market compared with not only other parts of Europe but also much of the rest of the world.14
History Lesson 2: institutions matter
Markets do not exist in a vacuum; to bring out their best, they require supportive institutions. The economist Douglas North won a Nobel prize for bringing ‘institutions’ to the party, particularly institutions that uphold property rights, such as democracy and a competent legal framework.15 After all, without secure rights of ownership we have little incentive to work hard, to be entrepreneurial and to invest in the future: if the monarch or the mafia continually threaten to strip you of your wealth, it reduces your drive to create. And if institutions result in perverse incentives, such as incentives to prey on the efforts of others rather than to be creative, or act to exclude them, then our interactions with one another are unlikely to be productive from the point of view of the economy. That's why legal and political institutions matter for the creation of economic prosperity. Markets can only direct us along the right path – the path to prosperity ‒ if they are underpinned by the right kind of institutions.
But whilst institutions no doubt matter (after all, who wants bad ones), economists’ treatment of them can sometimes seem rather selective and superficial, selective because we seem to have ‘mined’ history for examples that best support our idea of what a ‘good’ institution is. In the case of political institutions, the British Glorious Revolution of 1688 has, for example, received a wealth of attention.16 Occurring a good century before the relatively better-known French Revolution, the Glorious Revolution shifted power away from an unelected monarch to an elected parliament, and the timing seems to work well for making the argument that democratic institutions gave birth to the British Industrial Revolution in the following century. However, it would be untrue to suppose that there was no democracy in Britain beforehand; medieval parliaments had, for example, been very active until the Tudors and Stuarts began to stamp on them.17 The Glorious Revolution was, in part, about parliament reasserting control.
In addition to rather selectively looking for favourable institutional turns in the history of the now prosperous economies, looking for historically ‘bad’ institutions in any modern-day poor country has similarly become a common pastime. Unsurprisingly, as the Bible tells us, ‘keep on seeking, and you will find’. Bad institutions are top billing when it comes to research on, for example, the relative decline of the Middle East (with Islamic law being a key target), Africa (both before and after colonization) and China (after the Mongol invasion).18 However, in such historical excursions, examples of where ‘good’ institutions existed and yet economic growth has not been sustained ‒ or where ‘bad’ institutions existed and yet prosperity still managed to take hold ‒ can easily be ignored or excused. The Dutch Republic was, for example, relatively democratic, and yet its economy did not play host to the first industrial revolution. And, though institutions are commonly seen as a factor that has held back Africa,19 it is important to note that parts of Africa were in fact home to what economists consider ‘good institutions’; the idea that Africa was filled with despots is, to say the
least, an exaggeration, one propagated by European explorers, colonialists and missionaries.20 Furthermore, China, an economy that has witnessed a more recent growth miracle, does not exactly fit the bill in terms of having the types of institutions that western economists see as favourable to growth. There is, inevitably, an extent to which good institutions may instead follow growth. Indeed, it may be possible to grow through one or two good policies – such as support for widespread education and skills ‒ with improvements in institutions following later on, as a by-product of growth.21
Not only can economists’ consideration of institutions sometimes be selective, it can also be superficial. ‘Institutions’ has become a catch-all term that captures more or less anything and everything that affects the incentives we face in our daily lives: incentives to (so long as institutions are ‘right’) behave in a way that, whether directly or indirectly, results in the best possible outcome for the economy. As Sheilagh Ogilvie and A. W. Carus have pointed out, this catch-all focus has resulted in economists being quite ‘vague’ and doing little more than stating the obvious.22 They note the tendency to see ‘institutions’ in a black-and-white fashion, ignoring their complexity, the way in which they can have both negative and positive effects and how they interact with one another. There can also be a presumption that ‘whatever is, is right’; that if an institution exists it must be because it was some ‘optimal solution’ to the problems that society faced. Economists, after all, like to think in terms of optimality.
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