question in the social sciences. A proper understanding of why certain parts of the world have become rich – and others have not (yet) – can help us tackle some of the biggest problems facing us in the present. As you read this book, it will soon become clear that there is no panacea to lift a country into riches. However, there are many factors that historically tend to be present alongside sustained economic growth. It is our goal to both highlight these factors and provide insight into when they do and do not contribute to growth.
Throughout this book, we draw on an immense and fast-growing scholarship in global economic history. The first half of our book is mostly meant to be an overview of what we consider to be the leading theories for how the world became rich. Our debts to this scholarship are evident throughout. Naturally, as this book is addressed to a broad audience, we have not been able to cite every piece of specialist research. We apologize in advance for any omissions. We do, however, direct the reader towards the relevant literature wherever possible.
Many people helped us along the way. We cannot possibly thank everyone without this Preface taking up half the book. Sascha Becker, Desiree Desierto, Anton Howes, Nathan Nunn, Tuan-Hwee Sng, Felipe Valencia Caicedo, and John Wallis read parts (or all!) of the book. Their insightful comments helped us significantly improve the manuscript. Our editor at Polity, George Owers, gave excellent guidance at each step of the process. Dan Bogart, Dave Donaldson, Erik Hornung, Noel Johnson, and Jonathan Schulz shared their data files so that we could produce some of the figures in this book. Mark thanks his many coauthors, from whom he has learned a tremendous amount over the years. Jared will always be indebted to Avner Greif, Timur Kuran, Larry Iannaccone, and Ran Abramitzky – the best mentors, coauthors, and friends he could hope for.
Much of this book was written while we were quarantined on opposite coasts of the US due to COVID-19. We would like to thank the people who helped us get through that time – without them, this book would not be possible. For Mark, these include his wife and frequent collaborator Desiree, his parents Ninette and Noboru, and his brother Jonathan. For Jared, these include his family – Thom, Debbie, and Tyler Rubin and Samantha and Ryan Sully – and friends Rob Ainsley, Ted Chang, Doug Haney, Matt Menefee, Travis Menefee, Scott Shumate, and JJ Singh. Most of all, Jared is indebted to his amazing wife Tina and their two beautiful children, Nadia and Sasha.
1 Why, When, and How Did the World Become Rich?
The world is rich. Certainly, some parts of the world are richer than others, and many millions still live in poverty. But the world is richer than it has ever been, and it continues to grow richer with each passing day.
Don’t believe us? Let’s compare income around the world today to some of the wealthiest countries in the past. Figure 1.1 maps all of the countries with greater per capita income in 2018 than the wealthiest country in the world in 1900: the United States. The average income in much of the world is now greater than the average income in the world’s richest country just over a century ago. The startling level of modern wealth comes into even clearer focus when compared to the wealthiest country in 1800: Great Britain (see Figure 1.2). Almost every nation in the world, with some exceptions, mostly in sub-Saharan Africa, has a greater average income than the world’s leading economy just two centuries ago.
Modern wealth of course extends well beyond average incomes. Even in many of the poorest parts of the world, we have luxuries that our ancestors could have only dreamed of. Forget about smartphones and flat-screen TVs – even our richest ancestors would have been jealous of our indoor plumbing, electricity, vaccinations, low child mortality, and long life expectancy.
Figure 1.1 Countries that were richer in 2018 (annual per capita income) than the US in 1900
Data source: Bolt and van Zanden (2020). Average income in the US in 1900 was $8,970 in 2011 USD.
Figure 1.2 Countries that were richer in 2018 (annual per capita income) than Great Britain in 1800
Data source: Bolt and van Zanden (2020). Average income in Great Britain in 1800 was $3,731 in 2011 USD.
Think about it: would you trade your current life for the life of a wealthy English baron in, say, 1200? Sure, you would have servants, and you’d have the social and political benefits that come with being a member of the upper crust. But you would also live in a drafty, uncomfortable castle, and you would likely have multiple children die in infancy. And let’s hope you didn’t get a bad bout of diarrhea (you probably wouldn’t survive). If you didn’t die young on the battlefield, odds are you would die of some now-curable disease such as dysentery (which killed English kings John [r. 1199–1216] and Henry V [r. 1413–22]), smallpox (which killed French king Louis XV [r. 1715–74] and English queen Mary II [r. 1689–94]), or plague. Some of us might trade our current lot for that of the baron, but many of us (including the authors of this book) would not.
We are not heartless. There is still a tremendous amount of extreme poverty in the world. We appreciate that the entire world is not actually “rich” by current or historical standards. But the fact of the matter is that extreme poverty is in rapid decline. This decline began two centuries ago and it has accelerated in recent decades. The trends, summarized in Figure 1.3, are striking. Just two centuries ago, 94% of the world lived on less than $2 a day (in 2016 prices), and 84% lived on less than $1 a day. By 2015, less than 10% of the world lived on less than $1.90 a day, and that number continues to decline. To be clear, 10% of the world is still a lot of people. But as the world continues to become richer, that number will dwindle all the more.
It’s not just that there has been a reduction in absolute poverty as the world has grown wealthier. More and more of the world has moved further from the edge of subsistence in the last century. Take, for instance, the relatively arbitrary milestone of $10 per day in 2018 USD. This is not much: $3,650 per year is hardly a king’s ransom. However, in most economies it is more than enough to afford the basics of life (food, shelter, clothing, etc.). This is even more true in relatively poor countries, where modest housing and food can be had cheaply. Figure 1.4 shows when each country reached this milestone. It represents a level of security unknown throughout most of human history.
Figure 1.3 People living in extreme poverty, 1820–2015
Data source: Roser (2021c). For the sake of this figure, extreme poverty is defined as less than $1.90 per day.
How did the world become rich? Why are some so rich and others so poor? This book provides some answers to these questions. The answers are by no means obvious, and they are the subject of much debate among economists, historians, and other academics. This is reflective of just how important the questions are. To alleviate poverty, we must understand wealth. We still do not have all the answers, but enough strides have been made that we can dedicate a book to answering the question: “What do we know about how the world became rich?”
What Is Economic Growth?
