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Wednesday, September 04, 2013

'Lighting the Rocket of Growth and Lightening the Toil of Work'

Brad DeLong:

Lighting the Rocket of Growth and Lightening the Toil of Work: Another Outtake from My "Slouching Towards Utopia" Ms…: John Stuart Mill’s claim--that even as late as 1871 the First Industrial Revolution had not yet really begun to matter very much--will probably strike you as surprising, even bizarre, especially if you have taken a course in economic or technological history. Was not the steam engine invented by Thomas Newcomen in 1712? Was not the spinning jenny invented by Thomas Hargreaves in 1764? Was not the first cotton mill built in 1771? Was not the thirty-five mile Liverpool and Manchester Railroad opened in Britain on September 15, 1830? ... Were there not 20,000 miles of railroads worldwide by 1850? Were there not 25,000 miles of telegraph wires in the United States alone by 1850? ...
Didn’t all this matter? The answer is: yes it did matter for population, and no it did not matter--or it barely mattered--for living standards. ...
John Stuart Mill was largely right even if not completely right insofar as England itself was concerned. The inventions since 1712 and perhaps since 1640 had in fact lightened the toil and boosted the real incomes of England’s working class. But the pace was very slow: an average annual growth rate of working-class real wages of only 0.2% per year from 1640-1800, and only 0.4% per year from 1800-1870. Each generation had, on average, a real wage level 10% higher than its predecessor. Contrast that with us today, where we expect real incomes to rise by 10% in five years—or with China today where 10% is the real income growth of a year and a half.
The pace of improvement was slow because higher living standards meant faster population growth and because the pace of invention was slow. The pace of invention was relatively slow because science was not yet hooked to invention and invention and innovation were not yet hooked together to business, industrial research, and profit. Things did not change that much even in the age of the first Industrial Revolution. ...
In 1870 nearly all human beings still earned their bread out of the earth by the sweat of their brow. Most human beings could not read. Most human beings had not seen a steam engine up close, or travelled in a railway train, or spoken on a telephone, or lived in a city. For most human beings life expectancy was still low—little higher than it had been in most parts of the world since the neolithic revolution. ...
Even in Great Britain the veneer of modernity was little more than a veneer..., a quarter of Britons were still illiterate as late as 1870. Primary school enrollment did not become universal until the eve of World War I. Life expectancy at birth was still less than fifty years or less. Less than five percent of the population went to secondary school. And Britain was by far the most advanced and industrialized of the world’s economies.
In the United States, and in Europe outside of Britain, farmers still made up the largest single occupational group. More than half the population still lived in the country, farming the land or providing the basic goods and services that farmers needed. Agriculture was still a very substantial share of GDP in the late-nineteenth century. ...
John Stuart Mill was depressed about the past but optimistic about the future--about those “those great changes in human destiny” that he expected to follow not from productivity revolution but from moral, cultural, and political uplift. He died in 1873, just as the pace of invention and innovation and the rate of increase in productivity and living standards took a sudden, discrete, large upward jump throughout the North Atlantic. Before, from 1800-1870, we see living standards and labor productivity levels grow at 0.4% per year. After, from 1870-1950, we see 1.2% per year. (And then 1.9% per year from 1950-present). The pace of economic growth in living standards and productivity levels triples as we move across 1870.
Lightspeed communications and capital flows across the globe was the first. Cheap world trade in staple commodities was the second inflection point. The invention of the process of continual invention was the third, and the biggest. That is when technological progress and rising incomes become something standard and routine and fast, rather than something extraordinary and haphazard and glacial.
To put it another way: In 1870 the daily wages of an unskilled worker in London would have bought him (not her: women were paid less) about 5,000 calories worth of bread--5,000 wheat calories, about 2½ times what you need to live (if you are willing to have your teeth fall out and your nutritionist glower at you). In 1800 the daily wages would have bought him about 3,500 calories, and in 1600 2,500 calories. ... Continue that for another two seventy-year periods, and we would today be at 10,000 calories per unskilled worker in the North Atlantic today per day.
Today the daily wages of an unskilled worker in London would buy him or her 2,400,000 wheat calories.
Not 10,000. 2,400,000.
That is the most important fact to grasp about the world economy of 1870. The economy then belonged, even for the richest countries, much more to its past of the Middle Ages than to its future of--well, of you reading this. Compared to the pace of economic growth since 1870 and even more so since 1950, all other centuries--even the first-half of the nineteenth century that so impressed Karl Marx--were all but standing still.
That is why there is a very good case that it is 1870 that is the most important historical axis on which the wheel of economic modernity, modern economic growth, the modern economy--whatever you choose to call it--turns.

    Posted by on Wednesday, September 4, 2013 at 02:07 AM in Economics | Permalink  Comments (11)


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