Created: 1999-07-02
Last Modified: 1999-07-02
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Reading Notes for September 22, Nineteenth-Century Industrialization

Economics 210a, Fall 1999

Richard Easterlin (1981), "Why Isn't the Whole World Developed?" Journal of Economic History 41:1 (March), pp. 1-19.

This article is USC economic historian Richard Easterlin's Economic History Association Presidential Address--given now almost two decades ago. We have seen Easterlin on this reading list before, casting gloom on the idea that things will make us happy, and arguing that the causes of the revolution in living standards are fundamentally distinct from the causes of rising material prosperity. Here we see Easterlin trying to make sense of the enormous relative gap that opened between rich and poor countries during the nineteenth century--the restriction of nineteenth-century industrialization to "Europeans."

Easterlin's answer is that the whole world is not developed because back before World War II education was not developed--both in the sense that learning to use modern technology is a form of education, and in the sense that you need formal education (a lot of formal education) before you can begin thinking about how you might use modern technology. And "in 1850, little more than a century ago, virtually the entire population of the world outside of northwestern Europe and America had little or no exposure to formal schooling."

But today formal schooling--and thus the acquisition of the tools needed to comprehend and use modern industrial technologies--is common throughout the world. Hence Easterlin is (aside from some gloomy asides about how things won't make us happy) very optimistic about the future of world development.

Easterlin's paper also serves as a springboard for Gregory Clark, who reacts to and against it in the next article on the reading list...

Gregory Clark (1987), "Why Isn't the Whole World Developed?: Lessons from the Cotton Mills," Journal of Economic History 47:1 (March), pp. 141-74).

Another article that--as with Michael Kremer's--generates sharp divisions of opinion. Some think it a work of true genius, posing the dilemmas and puzzles of economic history with a unique sharpness and clarity of vision. Others see at as an intellectual mountebank's trick that (somehow) casts confusion and darkness on the subject.

I like it a lot.

The crux of Clark's argument is that in the cotton textile industry at the end of the nineteenth century, businesses in different countries:

  • used identical technologies
  • ran their machines at very similar speeds (hence very similar capital-output ratios)
  • faced widely divergents costs of labor
  • found in every case that the cost of labor was the principal component of costs

Yet cheap wages did not lead either to increased profits or to high market share--because countries in which labor was cheap were also countries in which labor was extremely unproductive.

As you read Clark's article, ask yourself:

  • why was labor so inefficient in low-wage countries?
  • what could be wrong with Clark's argument?

And--the kicker:

  • Why when you combined British-made machines and British-born workers in Fall River, Massachusetts did your textile factory produce twice as much output per man-hour as when you combined the British-made machines and British-born workers in Manchester?

Sidney Pollard (1981), Peaceful Conquest (Oxford: Oxford University Press), pp. 84-141, 191-251.

Why does Pollard make such a big deal about regions?

What do you think about the perennial British-French debate over which society handled industrialization better in the mid-nineteenth century?

Why did "outer Europe" have such a hard time copying the technological and institutional changes taking place in "inner Europe"?

How does Pollard characterize the attempts by European governments to manage economic change--"industrialization" and "globalization"--in the years before World War I?

D. McCloskey (1970), "Did Victorian Britain Fail?" Economic History Review (2nd series), 23:3 (December), pp. 446-59.

This is one of my favorite polemics. Yet at its end I still find myself unconvinced--or, rather, convinced that something went very wrong with the British economy and its growth around 1900.

But what, exactly, went wrong? Doesn't McCloskey have a good case?

David Landes (1958), Bankers and Pashas: International Finance and Economic Imperialism in Egypt (New York: Harper) SELECTIONS

During the American Civil War of the early 1860s, the price of cotton in Europe spiked as the spinning factories of northwest Europe found themselves way short of their necessary raw material. This boom in cotton prices was a tremendous source of revenue and wealth to cotton-growing Egypt.

Landes's Bankers and Pashas is a study of what happened to Egypt as a result of its cotton-boom wealth. The answer is: nothing good. Rapacious foreigners, corrupt officials, incompetent bureaucrats, a weak and dissipated ruler--practically everything you can think of to turn what should have been a national economic bonanza into a national economic disaster...

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Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
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