Chapter Content
Okay, so, like, buckle up, 'cause I'm gonna tell you this, like, *huge* story. It's the story of how we got where we are today, and, well, it all starts around 1870.
See, that's when a bunch of stuff kinda happened all at once, right? Like, globalization, the rise of these industrial research labs, and modern corporations… and these things together, they started pulling the world out of this, like, *deep* poverty that, honestly, humans had been stuck in since, like, forever. I mean, since we discovered farming, basically.
And, like, the story *ends* around 2010. Why 2010? Because, around that time, these rich countries, mostly around the North Atlantic, they were *still* dealing with the aftershocks of the Great Recession from 2008. And, like, they just couldn't seem to get back to the same kind of growth they'd been used to since, well, since 1870.
And the years *after* 2010, wow, what a mess, right? Huge waves of anger, all different groups, all mad for, like, different reasons, but everyone felt like the system wasn't working for them the way it was *supposed* to.
But get this, the time in between all of that, from 1870 to 2010? I mean, sure, there were some *really* awful things, like, *really* bad. But compared to the rest of human history? Like, it was amazing, actually. I mean, *really* amazing. I seriously think those 140 years were, like, the *most* important years *ever*. And for the first time, the biggest story was actually about *economics*, because we finally, finally started to get rid of that extreme poverty.
Now, some people, like this historian Eric Hobsbawm, they talk about a "short twentieth century," from World War I to the fall of the Soviet Union, like, 1914 to 1991. They see the 1800s as this, like, build-up of democracy and capitalism, and their "short" century as all about socialism and fascism, shaking things up. But, for me, focusing on those years? It misses the bigger picture. It misses this *massive* story about escaping poverty and then, like, struggling to keep that momentum going.
So, that's what I wanna tell you about. It's my, like, grand narrative, my take on the most important part of twentieth-century history. And, yeah, it's mostly about economics, and yeah, it starts around 1870, and, yep, it ends, in my view, around 2010.
Okay, so this philosopher, Hayek, he talked about how the market economy, like, crowdsources solutions. It incentivizes, you know, and coordinates people at the ground level to solve problems. And before 1870, we just didn't have the technology or the organizations to really let the market economy tackle the problem of how to make *everyone* rich, right? Markets could only really cater to the rich and the middle class, making their lives better.
But starting around 1870, everything shifted. We got, like, the right organizations, we got industrial research and the technologies. I mean, globalization, the research lab, and the corporation. *Those* were the keys. They, like, unlocked the door that had kept everyone in poverty. Now, the market could *actually* work on making everyone rich. And, bam, suddenly, like, utopia was in sight.
And, for a while, things *did* get good, like *really* good.
I'd say the average growth rate of useful ideas, you know, like, about technology, about organizing humans, stuff that actually got used in the economy? It jumped from, like, 0.45 percent *per year* before 1870 to 2.1 percent *after*! Like, *huge*! That growth rate meant that for 140 years between 1870 and 2010, things had been multiplied by 21.5.
That was a good thing, right? Because it meant more power to create wealth, to have better necessities, conveniences, luxuries, all that stuff. But, and there's a big "but" here, it *doesn't* mean everyone in 2010 was 21.5 times richer than in 1870. Because, you know, there were *way* more people! Like, six times as many! Which meant more competition for resources. So, a rough guess? Average world income in 2010 was maybe 8.8 times what it was in 1870. That's like, maybe $11,000 a year, per person.
Okay, so 8.8 times richer is pretty good, right? But don't forget, that wealth was *way* more unevenly spread out in 2010 than it was back in 1870.
That growth rate, the 2.1 percent per year? That's a doubling every thirty-three years. Which means that in 1903, the economy was *completely* different than it was in 1870. It was about industry and globalization, not just farming. And again in 1936, the mass-production underpinnings were different from 1903, at least in the industrial parts of the world. Then in 1969 it changed to mass consumption, which was followed by the information age in 2002. A revolution every generation, well, it's gonna *totally* change society and politics. And governments trying to keep up? They're gonna be *seriously* stressed.
So, yeah, lots of good stuff came out of all that. But also, lots of *bad* stuff. People use technology to exploit, to dominate, to be tyrannical, right? And that century had some of the *worst* tyrannies we've ever seen.
And, well, everything was changing, constantly. Almost nothing in the economy in 2010 was done the same way it was in 1870. And even if you were doing the *same* thing, someone else was gonna pay a lot less for it. As the economy was revolutionized, like, every generation, society and politics, and culture… they *all* changed too.
Imagine going back to 1870 and telling people how rich we'd be in 2010. They'd probably think it was paradise, right? With so much wealth and power, surely we'd have solved almost *all* the problems.
Well, here we are, not quite a utopia. We're still on the path, but honestly, you can't even see where we're going.
So, what went wrong?
Hayek, that philosopher I mentioned? Smart guy, *but* he also thought the market could do it all. He wanted us to just believe in this, like, system that humans couldn't fully understand. "The market giveth, the market taketh away," that kind of thing. But, people objected, right? The market solved its own problems, but people wanted it to solve *other* problems, problems that the market didn't care about.
This other philosopher, Polanyi, he said that the market economy just focuses on property rights. It solves the problem of giving people with property what *they* want. If you have no property? Well, you have no rights.
But people think they have *other* rights, right? Like, people without property should still have a voice. Their needs should matter. Maybe the market *does* satisfy those needs, but only if it happens to make a profit. The market just focuses on giving the *rich* more of what they want.
So, people looked at what the market was delivering and said, "Wait, did we *ask* for this?" And they demanded something different. Hayek just called it "social justice" and said forget about it. The market can't deliver that, and trying to make it deliver that will just ruin everything.
"Social justice" here just meant what different groups *wanted*, not anything based on some, like, universal principle, it wasn't that everyone should be equal. The market economy couldn't deliver any other kind of justice except the justice that the rich wanted. And, the market, while powerful, isn't perfect. It can't by itself provide enough research, protect the environment, or even keep everyone employed.
"The market giveth, the market taketh away" wasn't gonna work as the foundation of society. It had to be something like, "The market was made for man, not man for the market." But *who* counts as "man?" And how do you decide?
So, a lot of people, throughout the 20th century, they tried to come up with solutions. Karl Polanyi, Theodore Roosevelt, John Maynard Keynes… They all disagreed with Hayek's idea that things in society, economy and polity should stand in the years after 1870. They thought that the market should do less, or do something different, and that other organizations should do more. Maybe the closest we got was this weird mix of Hayek and Polanyi, blessed by Keynes, in the form of, like, post-World War II social democracy. But even *that* didn't last. So, we're still on the path, still slouching toward utopia.
Okay, so, I said that the twentieth century was the first century where the *economic* story was the most important one. Sounds kind of crazy, right? I mean, we had world wars, the Holocaust, the Soviet Union, all of that stuff. How can I say that it's *all* just part of the economic story?
Well, we *have* to tell these big stories if we want to think at all, right? These grand narratives are "nonsense," according to Wittgenstein, this twentieth-century philosopher. But, like, *all* human thought is kinda nonsense, right? It's fuzzy, it's confusing, it can lead us astray. But it's also the *only* way we *can* think. If we're lucky, we can realize that our thoughts *are* nonsense, and then use them as steps to get to a better understanding.
So, I'm telling you this story, this grand narrative, hoping we can get past the nonsense and see things a little more clearly. That's why I'm saying that the economic story is the *most* important one.
Before 1870, over and over again, technology just couldn't keep up with population growth. More people, less resources, slow innovation meant most people just couldn't be sure they'd have enough to eat or a roof over their heads. Those who *did* have it good? They usually got it by taking from others.
Things *were* starting to change before 1870. Between 1770 and 1870, technology made some advances. But Mill, a philosopher from that time, even said that "it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being.” It took a generation *after* 1870 for things to really get better for everyone.
Now, imagine telling someone from before the long twentieth century about our wealth and technology today. They'd probably think we'd built a utopia.
And, actually, people *did* think that way back then. A popular novel, *Looking Backward*, imagined a utopia in the year 2000. The author dreamed of a society where the government owned everything, competition was gone, and everyone worked together for the good of all. Technology would create abundance.
In the story, the main character travels from 1887 to 2000 and is amazed by this perfect society. One day, he asks to hear some music, and he assumes his host will play the piano. This alone would show a huge leap forward. If you wanted to listen to music back around 1900, you needed an instrument and someone to play it. It would've cost the average worker, like, a year's worth of wages to buy a good piano.
But, the narrator is blown away when his host doesn't sit down at the piano. Instead, she just touches a few buttons, and the room fills with music. "Grand!" he says. "Bach must be at the keys of that organ; but where is the organ?”
He learns that she's called up a live orchestra on her landline and put it on speakerphone. In this utopia, you can just dial up an orchestra and listen to it play! And it gets better. She could dial up *one of four* orchestras!
The narrator's reaction? "If we [in the 1800s] could have devised an arrangement for providing everybody with music in their homes, perfect in quality, unlimited in quantity, suited to every mood, and beginning and ceasing at will, we should have considered the limit of human felicity already attained.” Like, the *limit* of human felicity!
Utopias are supposed to be perfect, right? But a lot of the worst stuff in history has come from people trying to create these perfect societies.
This philosopher, Berlin, said that we can never make anything straight out of the crooked timber of humanity, so there's no perfect solution to human problems. Trying to create one? It's just gonna lead to suffering and failure. And that's why I think the long twentieth century is so important from an *economic* point of view. Despite all its problems, it *did* work miracles.
Today, less than 9 percent of people live in extreme poverty, down from 70 percent in 1870. And even *they* often have access to things like public health and cell phones. The richest countries are, like, twenty times richer than they were in 1870. And there's every reason to think things will keep getting better. People today have powers of communication, mobility, creation, destruction… that would've seemed like magic in the past. Even the poor people in the global south live on closer to $15 a day, instead of two or three.
So many things that used to be rare luxuries are now just normal parts of our lives. We take them for granted so much that we don't even think about how amazing they are. We're so used to our daily lives that we forget how lucky we are. For the first time in history, there's *more than enough* for everyone.
There are enough calories, so no one needs to be hungry.
There's enough shelter, so no one needs to be wet.
There's enough clothing, so no one needs to be cold.
And there's enough stuff being produced, so no one needs to feel like they're lacking something necessary.
We're not in "the realm of necessity" anymore. So, you'd think we'd be in some kind of utopia, right? But we can't accept that. And that's because we're living in the middle of economic history. While history fueled by utopia is all or nothing, economic history’s successes and failures are most often experienced in the margins.
That's why we can't just celebrate the long twentieth century without looking at the problems of the 2010s, with the US stepping back from its leadership role, and the rise of these political movements that reject democratic politics. Madeleine Albright even called them "fascist," and who am I to disagree? Any celebratory story falls apart when you look at the failures of the global economy.
Yeah, technology outran population growth. Yeah, we got richer and triumphed over resource scarcity. But wealth is distributed *unevenly*. And wealth doesn't make people happy when politicians are finding ways to make them *unhappy*. So, the history of the long twentieth century isn't a triumphant march toward utopia. It's a, well, a slouch, at best.
Part of the reason is that it's all driven by the market economy, right? That "Mammon of Unrighteousness." The market lets us coordinate eight billion people in a super-productive system. But it *only* cares about the rights of property owners. And those rights only matter if they help produce things that the rich want to buy. That's not just.
Hayek warned against trying to seek justice instead of just focusing on productivity and wealth. He said that interfering in the market, even with good intentions, would just make things worse. But Polanyi said that was impossible. People believe they have *other* rights, rights to a community, to a decent income, to economic stability. And when the market tries to take those rights away, people will react.
Slouching is better than standing still, though, right? Humans have always been inventive. Technology has rarely stopped advancing.
Let's look at my crude index of useful ideas, our "technology," as economists call it. To calculate it, I assume that each 1 percent increase in typical human living standards worldwide tells us that the value of our useful ideas has risen by 1 percent. Also, I assume that each 1 percent increase in the human population at a constant typical living standard tells us that the value of useful ideas has risen by 0.5 percent.
Let's set this index equal to 1 in 1870. Way back in 8000 BCE, when we started farming, the index was at 0.04. Roughly, it would take twenty-five workers in 8000 BCE to do what one worker could do in 1870. By the year 1, eight thousand years later, the index was 0.25. Typical workers were now more than six times as productive as at the beginning of the Agrarian Age but only one-quarter as productive as a worker in 1870. By the year 1500, the index stood at 0.43.
These are impressive changes, but this growth took place over an enormous amount of time: technology crawled ahead at only 0.036 percent per year for the entire period between 1 and 1500.
Did it mean life was sweeter for a typical person in 1500? No. The human population grew at an average rate of 0.07 percent per year from year 1 to 1500, and this meant that more skillful work produced little, if any, additional net product on average. Ordinary people lived little or no better than their predecessors.
Humans were desperately poor. On average, 2.03 children per mother survived to reproduce. A typical woman would have spent perhaps twenty years eating for two: she would have had perhaps nine pregnancies, six live births, and three or four children surviving to age five, and the life expectancy of her children remained under, and perhaps well under, thirty.
Keeping your children from dying is the first and highest goal of every parent. Humanity in the Agrarian Age could not do so at all reliably.
In 1500 there were about three times as many people as there had been in year 1. As of 1500, advances in technological and organizational knowledge went to compensate for fewer natural resources per capita. Thus economic history remained a slowly changing background in front of which cultural, political, and social history took place.
The ice started to shift after 1500. Or perhaps a better metaphor is crossing a divide and entering a new watershed--you are now going downhill, and things are flowing in a new direction. Call this shift the coming of the age of the “Imperial-Commercial Revolution.” The pace of inventions and innovation sped up. And then, around 1770, the ice was cracking as we crossed into yet a different watershed, as far as the level of worldwide prosperity and the pace of global economic growth was concerned: call the century after 1770 the coming of the age of the “Industrial Revolution.” By 1870 the index of the value of knowledge stood at 1, more than twice as large as in 1500. It had taken 9,500 years to get the tenfold jump from 0.04 to 0.43--an average time-to-double of some 2,800 years--and then the next doubling took less than 370 years.
But did this mean a richer, more comfortable humanity in 1870? Not very much. There were then in 1870 1.3 billion people alive, 2.6 times as many as there had been in 1500. Farm sizes were only two-fifths as large, on average, as they had been in 1500, canceling out the overwhelming bulk of technological improvement, as far as typical human living standards were concerned.
Around 1870 we crossed over another divide into yet another new watershed: the age of "modern economic growth." During the period that would follow, the long twentieth century, there came an explosion.
The approximately seven billion people in 2010 had a global value of knowledge index of 21. Since 1870, the technological capability and material wealth of humankind had exploded beyond previous imagining. By 2010, the typical human family no longer faced as its most urgent and important problem the task of acquiring enough food, shelter, and clothing for the next year—or the next week.
From the techno-economic point of view, 1870–2010 was the age of the industrial research lab and the bureaucratic corporation. One gathered communities of engineering practice to supercharge economic growth, the other organized communities of competence to deploy the fruits of invention. It was only slightly less the age of globalization: cheap ocean and rail transport that destroyed distance as a cost factor and allowed humans in enormous numbers to seek better lives, along with communications links that allowed us to talk across the world in real time.
In 1870 the daily wages of an unskilled male worker in London would buy him and his family about 5,000 calories worth of bread. That was progress: in 1800, his daily wages would have bought him and his family perhaps 4,000 coarser-bread calories, and in 1600, some 3,000 calories, coarser still. Today, the daily wages of an unskilled male worker in London would buy him 2.4 million wheat calories: nearly five hundred times as much as in 1870.
From the biosociological point of view, this material progress meant that the typical woman no longer needed to spend twenty years eating for two—pregnant or breastfeeding. By 2010, it was more like four years. And it was also during this century that we became able, for the first time, to prevent more than half our babies from dying in miscarriages, stillbirths, and infancy—and to prevent more than a tenth of mothers from dying in childbirth.
From the nation-and-polity point of view, the wealth creation and distribution drove four things, of which the first was by far the most important: 1870–2010 was the century when the United States became a superpower. Second, it was during this period that the world came to be composed primarily of nations rather than empires. Third, the economy’s center of gravity came to consist of large oligopolistic firms ringmastering value chains. Finally, it made a world in which political orders would be primarily legitimated, at least notionally, by elections with universal suffrage—rather than the claims of plutocracy, tradition, “fitness,” leadership charisma, or knowledge of a secret key to historical destiny.
Much that our predecessors would have called “utopian” has been attained step by step, via economic improvements year by year, each of which is marginal, but which compound.
Yet, as of 1870, such an explosion was not foreseen, or not foreseen by many. Yes, 1770–1870 did see, for the first time, productive capability begin to outrun population growth and natural resource scarcity. By the last quarter of the nineteenth century, the average inhabitant of a leading economy had perhaps twice the material wealth and standard of living of the typical inhabitant of a preindustrial economy.
Was that enough to be a true watershed?
Back in the early 1870s, John Stuart Mill put the finishing touches on the final edition of his book that people seeking to understand economics then looked to. His book gave due attention and place to the 1770–1870 era of the British Industrial Revolution. But he looked out on what he saw around him and saw the world still poor and miserable. Far from lightening humanity’s daily toil, the era’s technology merely “enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes.”
One word of Mill’s stands out to me: “imprisonment.”
Yes, Mill saw a world with more and richer plutocrats and a larger middle class. But he also saw the world of 1871 as not just a world of drudgery—a world in which humans had to work long and tiring hours. He saw it as not just a world in which most people were close to the edge of being desperately hungry, not just a world of low literacy. The world Mill saw was a world in which humanity was imprisoned: in a dungeon, chained and fettered. And Mill saw only one way out: if the government were to take control of human fecundity and require child licenses.
And there were others who were much more pessimistic than even Mill. In 1865, then thirty-year-old British economist William Stanley Jevons made his reputation by prophesying doom for the British economy.
With so much pessimism circulating, the coming explosion in economic growth was far from expected.
Karl Marx and Friedrich Engels had in 1848 already seen science and technology as Promethean forces that would allow humanity to overthrow its old gods and give humanity itself the power of a god.
ENGELS SNARKED THAT IN overlooking the power of science, technology, and engineering, mere economists had demonstrated that they were little more than the paid hacks of the rich.
Their promise was utopia: each contributed “according to his ability”, and each drew on the common, abundant store “according to his needs”.
However, economic improvement, attained by slouch or gallop, matters.
How many of us today could usefully find our way around a kitchen of a century ago? Today few among us are gatherers, or hunters, or farmers.
What do modern people do instead? Increasingly, we push forward the body of technological and scientific knowledge. We educate each other. We doctor and nurse each other. We care for our young and our old. We entertain each other. We provide other services for each other so that we can all take advantage of the benefits of specialization. And we engage in complicated symbolic interactions that have the emergent effect of distributing status and power and coordinating the division of labor of today’s economy, which encompassed seven billion people in 2010.
Over the course of the long century we have crossed a great divide, between what we used to do in all of previous human history and what we do now. Utopia, it is true, this is not. I imagine Bellamy would be at once impressed and disappointed.
The economic historian Richard Easterlin helps explain why. The history of the ends humans pursue, he suggests, demonstrates that we are ill-suited for utopia. With our increasing wealth, what used to be necessities become matters of little concern. But conveniences turn into necessities. Luxuries turn into conveniences. And we humans envision and then create new luxuries.
Easterlin, bemused, puzzled over how “material concerns in the wealthiest nations today are as pressing as ever, and the pursuit of material needs as intense.” He saw humanity on a hedonic treadmill: “Generation after generation thinks it needs only another ten or twenty percent more income to be perfectly happy.… In the end, the triumph of economic growth is not a triumph of humanity over material wants; rather, it is the triumph of material wants over humanity.”
Nevertheless, getting off the treadmill looks grim. Only a fool would wittingly or ignorantly slouch or gallop backward to near-universal dire global poverty.
Let me remind you, again, that this is a grand narrative. In pursuit of big themes, details necessarily suffer. We cannot do other than think in narrative terms. What happened in 1500, say, had consequences for what happened in 1900. Details, gray areas, controversies, historical uncertainties—they suffer, they suffer greatly, but they suffer for a purpose. To date, we humans have failed to see the long twentieth century as fundamentally economic in its significance.
The source from which all else flows was the explosion of material wealth that surpassed all precedent: the long twentieth century saw those of us who belong to the upper-middle class, and who live in the industrial core of the world economy, become far richer than the theorists of previous centuries’ utopias could imagine. From this explosion flowed five important processes and sets of forces that will constitute the major themes of this book:
History became economic.
The world globalized.
The technological cornucopia was the driver.
Governments mismanaged, creating insecurity and dissatisfaction.
Tyrannies intensified.
I write this book to engrave these lessons on our collective memories. The only way I know how is to tell you the story, and the substories.
The place to start is in the year 1870, with humanity still ensorcelled, so that better technology meant not higher living standards for the typical human but rather more people and more resource scarcity that ate up nearly all, if not all, of the potential for material human betterment. Humanity was then still under the spell of a Devil: the Devil of Thomas Robert Malthus.