How did the world become rich?

yousef2 March 2024Last Update : 5 months ago
How did the world become rich?

Why are some countries rich and others poor? Why is the world richer than it was in the past? These are arguably some of the most important questions in economics and policy making in general.

– If we really knew the answer, we could benefit from this information and develop policies capable of enriching the world, thus eradicating poverty, and solving most of the modern problems facing the world.

– In their book “How Did the World Get Rich?” Mark Koyama and Jared Rubin dive into several theories about why modern economic growth occurs.

Koyama and Rubin show that the past can provide a guide for countries to escape poverty. It is true that there are some basic requirements that all successful economies seem to have, but there is also no silver bullet.

– Any researcher who studies economic history and wishes to conduct an updated survey of the literature on economic growth and the wealth of nations will find reading this book useful to become acquainted with the recent research included in the long and comprehensive reference list.

The book is a wide-ranging but remarkably thorough survey of enrichment, the emergence of modern, prosperous economies that provide us with a material standard of living of which our ancestors could not have dreamed.

This thoughtful approach to the book, its elegant and crystal clear style, and the authors’ impressive knowledge of the literature, make this book ideal for teaching advanced courses on global economic history to economics students.

It is particularly impressive to see a book that pays explicit attention to institutions and culture, two topics that were until not long ago taboo in the field of economics but now seem to play increasingly pivotal roles.

The book contains entire chapters on each, and although the discussion is not naturally exhaustive, the authors do an excellent job of summarizing some of the best work in these areas.

The only issue on which the book takes a relatively strong position is that of European imperialism, the importance of slavery and the slave trade to the Industrial Revolution, and the origins of Western technological leadership (Chapter 6).

In recent years, the New History of Capitalism, in its zeal to blame the West and capitalism for all of the world’s ills, has claimed that the West became rich largely at the expense of Africans and Asians whom Europeans mercilessly enslaved and sold.

-As more sophisticated studies and economic culture have shown, the famous thesis of Eric Williams and recent supporters that the Industrial Revolution somehow depended on European imperialism and the transatlantic slave trade cannot be seriously defended.

Koyama and Rubin plausibly assert that without institutional support for technological progress, law and limits on executive power, and without a relatively inclusive society, no amount of colonization and oppression of non-Europeans would have led to modern economic growth.

The view that economists have brought to this literature is that economic growth is essentially a positive-sum game: at the global level, the economic success achieved by the West has not, on average, impoverished the rest of the world.

– And in the long run, it has made the entire world richer than before – but not as rich as Europe and its offshoots (with some major exceptions such as Japan and Singapore).

But if there is anything causal here, it is not that imperialism caused the Industrial Revolution; on the contrary, what made Western imperialism possible above all was better technology.

– Where the book really shines is in pointing out why the great enrichment was relatively late and why the pre-1750 world – with few exceptions – remained poor.

The authors mentioned three main factors that hampered economies:

First, before 1750, population growth in many cases wiped out the fruits of productivity growth, as it did.

Second: Not only did institutions of all kinds plunder the wealth of the few places that were economically successful, but they also extinguished the flame of creativity and investment incentives.

Finally: opportunities for sustainable technological progress remained very limited, until institutions were created to control and govern the accumulation and dissemination of useful knowledge.

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