A Farewell to Alms

A Brief Economic History of the World

Gregory Clark
Princeton UP © 2007
432 pages
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Rating Take-Aways

10
8 Importance • Neolithic and 18th-century living standards were comparable.
10 Innovation • European living standards rose only after the Industrial Revolution.
9 Style
• Before that time, all societies were stuck in a “Malthusian trap.”
• In this Malthusian world, technological change was extremely slow.
 
Focus • Perversely, anything that increased mortality also increased living standards.

• The Industrial Revolution, when it came, was not a sharp break with the past.
Leadership & Management
Strategy • Nineteenth century economic growth was due mostly to the reproductive success of
Sales & Marketing
the rich.
Finance • “Middle class” cultural traits consequently spread throughout society.
Human Resources
IT, Production & Logistics • Because of this, the West has triumphed in terms of living standards.
Career & Self-Development
• But material prosperity does not bring happiness.
Small Business
Economics & Politics
Industries
Global Business
Concepts & Trends

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getabstract

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Relevance
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What You Will Learn
In this summary, you will learn:r1) Why there was little economic progress before the Industrial Revolution; 2) What
caused the tremendous economic growth in 19th-century Europe; and 3) Why some countries are now so rich while
others remain so poor.
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Review
The topic of this thrilling book, 20 years in the making, is nothing less than the history of civilization, from the
Neolithic Revolution to the Industrial Revolution to today. Rather than relating history as a story of kings, Caesars,
popes, prelates and presidents, Gregory Clark tells the story through economic data, much of which is the result of his
own analysis of documentary evidence. Almost every other page contains a beautiful graph, table or chart illuminating
some dimly lit bit of history. And Clark’s detours are almost as wonderful as his main argument. His writing is
elegant and clear, his sense of humor present but not annoying. While this book has outraged some commentators,
it’s hard to see why, given the caution with which Clark presents his conclusions. Most likely, the flash point is
his stress on culture as enabling and retarding economic growth – views that sometimes get wrongly equated with
racism. getAbstract recommends this book to anyone who wants to quantitatively enhance his or her conception of
human history.
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Summary
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Romantic Age or Stone Age?
Imagine for a moment life in 18th-century England. Perhaps such scenes come to mind
as the one Sir Joshua Reynolds depicted in 1789 in his painting, The Braddyll Family. A
woman in a flounced skirt sits with her lapdog on an ornate chair. Her husband, standing
getabstract behind her in a powdered wig and red riding jacket, looks out toward the viewer, and
“As long as technology
improved slowly, the couple’s son, reclining languidly against a piece of statuary, holds his hat and gloves,
material conditions apparently ready to stroll around the family’s estate once this tiresome business of posing
could not permanently
improve.”
is finished.
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Now imagine what life was like for humanity’s hunter-gatherer forebears. It probably
resembled the current lives of the Nukak, an indigenous people living in the Amazonian
rain forest. A recent picture of a typical Nukak family shows two almost entirely naked
women with few possessions squatting over a crude bowl in which they have gathered food
(perhaps nuts). Their babies cling to them, suckling while the women work. Their shelter
is a rough-thatched roof. Their life looks anything but easy.
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“Since the Industrial With these two pictures in mind, consider which world you would rather inhabit – that of
Revolution...we 18th-century England or that of the Nukak. Most would say the former. And yet, recent
have entered a
strange new world data show that the living standard of the average person at the end of the 18th century in
in which economic England was no higher than that of the average Nukak today.
theory is of little use
in understanding
differences in income While some fabulously rich people were immortalized in paintings such as The Braddyll
across societies.” Family, Englishmen living in the Romantic Age were, on average, no better off than hunter-
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gatherers living in 10,000 B.C.E. In fact, those in the Stone Age may have been better off.
Their society was almost certainly more egalitarian.

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 The “Malthusian Trap”
The explanation for this stunning lack of progress is the Malthusian Trap, named after
Reverend Thomas Robert Malthus. In An Essay on the Principle of Population, published
in 1798, Malthus looked at the relationship between population and living standards, and
getabstract came up with a simple, appealing economic model of the 18th century economy around him.
“Primitive man ate well Malthus’s model requires only three basic assumptions: Each society has a birth rate, each
compared with one of
the richest societies in society has a death rate and, as population increases, material living standards decline since,
the world in 1800.” essentially, this pattern leads to too many people chasing too few resources. Another piece
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of the Malthusian model concerns technology: Each society has a certain level of output at
any given time and this output varies with the society’s level of technological sophistication.

A Malthusian economy is the default economy of all animals, whether hummingbirds or

humans. It is truly the natural economy, but it is a strange state of affairs, at least to modern
readers. For instance, in such an economy, virtue is vice and vice is virtue. Traditionally,
war, violence, crop failures, poor hygiene, poor sanitation and natural disasters haven’t
been considered good things. But they do have one nice side effect in a Malthusian world:
getabstract They increase the death rate, which thus increases average living standards. Similarly, in
“Foraging and shifting
cultivation societies such a world, the usual virtues, such as peace, redistribution of wealth to the needy, public
had a form of ‘primitive health initiatives and a stable society, are bad because they decrease the death rate and
affluence’...measured
in the abundance of probably increase the birth rate, making everyone in the society worse off. Perverse but,
leisure as opposed to unfortunately, true.
goods.”
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From the Neolithic Revolution – perhaps 10,000 to 12,000 years ago, when human
beings started farming – until the 19th century, this static Malthusian economy trapped
human beings and kept them from escaping to significantly higher living standards. Some
technological change occurred, but very little. The annual rate of technological advance
prior to 1800 was less than 0.05%. Today, the annual rate of change is 30 times that amount.
And yet, even without significant technological progress, human society in Europe was
changing slowly in ways that would set the stage for the Industrial Revolution, in part
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“The plague was not because of filthiness. Before the Industrial Revolution, for instance, it was common in
the harsh judgment of a London to use one’s basement as a cesspit. People rarely bathed. High urban population
vengeful Old Testament
God on a sinful Europe,
densities and disgusting conditions increased the mortality rate, as did another “helpful”
but merely a mild agent of social change: the Black Death.
reproof by a beneficent
New Age-style deity.”
getabstract Natural selection was also at work, as it is in all animal societies. For one thing, increased
reproductive success rewarded the traits that made someone a good middle-class farmer or
shopkeeper. The nonviolent, hard-working, literate and numerate among the pre-Industrials
had more babies, and those babies survived in spite of the filth and disease. For another
thing, data show that the rich were outbreeding and outliving the poor. The richest men had
double the number of children that poor men had. And because the economy was static, the
children of the rich couldn’t sit around idly. They had to take jobs “beneath their stations.”
getabstract The son of a man with a lot of land might end up as a small landholder; the son of a
“Given the static nature
of the economy and
craftsman might become a mere laborer. Through these mechanisms, bourgeois cultural
of the opportunities it attributes, such as patience, hard work and ingenuity, spread and thus formed the foundation
afforded, the abundant for the next revolution. Interestingly, more than culture may have been at work. It is possible
children of the rich
had to, on average, (though unlikely) that human nature was being tinkered with on the genetic level.
move down the social
hierarchy.”
getabstract The Industrial Revolution
In some ways, the Industrial Revolution wasn’t so revolutionary. Despite common wisdom
to the contrary, it wasn’t a sharp break with the past after which European economies
grew rapidly because of higher labor productivity. Rather, it was an acceleration of a long-

A Farewell to Alms                                                                                                                                                                   getAbstract © 2015 3 of 5

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 term trend. The march of technological progress was already under way well before 1800.
Progress was gradual and varied a great deal over time. In fact, even finding a date for the
Industrial Revolution is hard. It could be 1800, but dividing lines could also be drawn at
1860, 1600 or even 1200. Moreover, the rise in income per person since 1800, which truly
getabstract is dramatic, was the result not only of technological advances but also of declining fertility.
“There is, in fact, Starting with the upper classes and then cascading downward, couples had fewer children.
nothing inherently
industrial about the
Industrial Revolution.” Traditional explanations of the Industrial Revolution don’t fit the data. Some economic
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historians claim the Industrial Revolution resulted from shocks outside the economic
system. Typically, these shocks would have included occurrences such as changes in
political institutions and the rise of democratic forms of government. But, in societies
like England’s, most of the institutions necessary for economic growth existed by 1200.
The incentives to work hard and invest were actually better at that time than during the
modern age. Other historians claim that preindustrial human societies remained caught in
a stable equilibrium and that something moved preindustrial economies out of this stasis to
a dynamic equilibrium. For years, economists have examined the period just before 1800
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“The increased rate of for the agent of such a change. Coal? Colonies? Sadly, this approach has failed to find
innovation in Industrial convincing supporting data.
Revolution England
was the result not of
unusual rewards but One of the more puzzling questions about the Industrial Revolution is why it occurred
of a greater supply
of innovation, still in Europe, and not in China, Japan or India. The answer is that the Industrial Revolution
modestly rewarded.” in Europe was an accident of history, largely the result of European social customs. For
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example, England was a stable society and had been since around 1200. Its population
growth started to slow around 1300. Stable economies and lower birth rates were both
necessary for economic growth. But China and Japan had stable societies that exemplified
the middle-class values of thrift, hard work, honesty and education, just like English society.
China and Japan were on their way to accelerating economic growth, but they lacked one
getabstract factor: an increasingly fecund upper class and the consequent distribution of middle-class
“Poor countries used
the same technology values (or habits) down the social hierarchy. In Japan during the Tokugawa era, for instance,
as rich ones. They the rich had so few children that those offspring could remain in jobs appropriate to their
achieved the same
levels of output per unit “station.” Good for them, but not for the economy as a whole.
of capital. But in doing
so they employed so
much more labor per
The “Great Divergence”
machine that they lost If you had stood in Alexandria, Bombay or Shanghai in 1900 and looked around, you
most of the labor cost would have seen cities that were well-integrated into the British economy. In these cities,
advantages with which
they began.” the cost of transportation, access to capital, and cultural and governmental institutions were
getabstract comparable to those in Britain. Gazing into your crystal ball, you would likely have foreseen
a rosy future for these cities as well as others in what’s now called the “developing world.”

But that’s not the way things worked out. Instead, a few countries became spectacularly
rich while many countries stayed poor or, like some African nations, became poorer. Living
standards in England circa 1800 may have been as much as two-and-a-half times better
getabstract than living standards in Malawi today. This great divergence between the rich and the poor
“Societies subject to
Malthusian constraints countries is evident in wage differentials. An hour of an Indian apparel worker’s time is
were not necessarily now worth 38 cents; an hour of a United States apparel worker’s time is worth $9.
particularly poor, even
by the standards of
today.” You can find part of the answer to this puzzle by looking at data from the cotton textile
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industry. It is indicative, mostly because cotton textile manufacturing provided a good
natural experiment: It appeared in the early years of the Industrial Revolution in both rich
and poor countries. Workers in England and India used the same machines and the same
material. The result? Output in India was far lower than output in England. Indian textile

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 workers at the dawn of the Industrial Revolution supplied very little labor compared to
English workers. (Even today, Indian textile workers actually work for as little as 15 minutes
an hour.) The same pattern emerges from 19th-century data on the railway industry in rich
and poor countries. Poor countries had the same machinery – the same locomotives and
tracks. But productivity was shockingly low and economic growth suffered.
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“High incomes
profoundly shape Was this because of poor government institutions or geography? Possibly both played a
lifestyles in the modern
developed world. role, but a more plausible answer lies in the social environment. English cultural traits
But wealth has not had not yet become widespread in many poor countries. English workers were simply
brought happiness.
Another foundational
more conscientious and disciplined than Indian workers, and the great divergence followed.
assumption of Unfortunately, the great divergence remains. Today’s world contains people richer than
economics is any in history. It also contains human beings who are poorer than people have been
incorrect.”
getabstract for millennia.

The even worse news is that contemporary manufacturing requires ever more
conscientiousness and discipline, since an error in the production chain can often entirely
destroy a day’s products. Crucially, though, all this emphatically does not mean that the poor
world is “destined” to stay poor. Human societies are remarkably adaptive. Historically,
northern Germany was economically dominant over the south, but that situation is now
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“People in reversed. Shortly after World War I, the north of England traded places with the south in
contemporary countries terms of economic energy. And Ireland, which was desperately poor for more than 200
as poor as those of the
world before 1800 on years, has recently become as rich as England, its traditional economic superior. After all,
average report little who standing in the England of, say, 300 A.D. would have predicted that a small island
difference in happiness
from those in very rich
nation centered there would extend its empire around the world? And recall those “middle
countries, such as the class” values that could have allowed the Industrial Revolution to occur in China. These
United States.” seeds have lately bloomed. Not even some 30 years of communism could destroy the
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cultural basis for economic growth in China. Japan, though obviously never communist,
has recovered remarkably from its own calamity, World War II.

The Triumph of the West?

An examination of economic history, it seems, shows again and again the “triumph” of the
West since the early 1800s. After all, in the West income has steadily risen, child mortality
has declined, people now live longer and inequality has diminished. But that triumph brings
in its train a couple of ugly ironies.
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“Modern man might
not be designed for The first is that economics as a science peaked around 1800 with the classical Malthusian
contentment. The
envious have inherited models. Since then the field has lost its ability to predict and describe why countries are rich
the earth.” or poor. Consequently, it also has lost its ability to prescribe solutions to poverty and other
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economic ills. The second is that the unparalleled wealth of developed nations today does
not buy happiness. In Japan, for instance, income per person has risen almost sevenfold
since 1958, while happiness has slightly declined.

Modern man, it seems, is the descendant of strivers who were never satisfied and prudently
kept trying to improve their station. The satisfied are dead, and buried with them, it seems,
is hope for human contentment.
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About the Author
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Gregory Clark, an economic historian, is chair of the economics department at the University of California, Davis.

A Farewell to Alms                                                                                                                                                                   getAbstract © 2015 5 of 5

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