Chapter Content
Okay, so, like, let's talk about globalization. You know, it's kind of a big topic.
So there was this guy, Thomas Robert Malthus, right? And he was, like, really not a fan of all this talk about democracy and reason and, uh, feminism and revolution. He thought it was all, like, totally misguided. So he wrote this essay to basically argue against it. He believed that, you know, what people *really* needed was, like, religious stuff, a king, and, you know, the father being in charge.
And why did he think this? Well, he thought that people, especially with, you know, "human sexuality," were just gonna, like, make babies and make babies and make babies. And if you didn't have, like, really strict rules, everyone would starve! Like, the population would just keep growing until there wasn't enough food, and then people would get, like, super skinny and weak and die from diseases.
His solution, and this is kind of wild, was to, you know, basically control women. He wanted them to stay virgins until they were, like, almost thirty, and even then, they couldn't, you know, do anything unless they were married. And religion was supposed to scare them into following the rules. Then, Malthus thought, maybe, *just maybe* the population could stay at a level where everyone had enough to eat.
Okay, so, like, Malthus wasn't totally wrong about how things used to be. I mean, if you go back to, like, ancient times, around, like, 6000 BCE, there were only a few million people on Earth. And they lived on, like, next to nothing, maybe a couple of bucks a day. And even thousands of years later, things hadn't really changed much. Like, technology got better, but people still lived pretty much in poverty. Why? Because as soon as things got a little better, more people were born, and everything evened out. It was like, a constant struggle just to survive.
You know, there's some data that shows construction workers' wages in England, and, like, they were the same in the 1200s as they were in the 1800s! Like, nothing changed for hundreds of years! Except, you know, maybe after the Black Plague killed off a bunch of people, things got a little better for a while, but then they went right back down.
So, Malthus's, like, ideas about, you know, monarchy and stuff? They didn't really solve the problem. By the late 1800s, things were a *little* better, at least in England, but some people were still skeptical. They weren't convinced that things had really changed for the better.
And, you know, they kind of had a point. Like, even with the Industrial Revolution, had life actually gotten that much easier for most people? Maybe not. Did living standards go up? A little. But it wasn't like a total transformation, and some people were worried that, you know, Malthus's predictions might still come true.
Think about it this way: when you're hungry, all you can think about is food. And for most of human history, people were hungry. From, like, 1000 BCE to 1500 CE, the population grew super slowly because people were starving. They had lots of kids, but not enough of them survived. So, for thousands of years, people spent most of their time and money just trying to get enough calories.
And, like, Malthus's whole idea, that population growth eats up any progress from new technology? That was pretty much what was happening. So, only the rich people really benefited.
Then something changed, right? Around 1500, we had the Industrial-Commercial Revolution. And suddenly, technology and stuff started improving faster. Like, four times faster than before! We got, like, better ships, printing presses, and ways to grow crops. But it still wasn't enough to escape what Malthus predicted. The population just kept growing along with everything else. So, globally, the rich got richer, but most people didn't see much benefit.
Then, in the late 1700s, we had the British Industrial Revolution. And that was another leap forward. The rate of technological growth went up again! Maybe even doubled in Britain! And, you know, we started seeing more amazing things like steam power and iron making and power looms. But even then, the population was growing fast.
It’s like, stories are cool, right? But, you know, individual stories, stories by themselves can only get you so far. They are *only* important if the people at the center of them are making choices that matter, which can only be figured out by, you know, *counting.* You’ve gotta, like, look at the big picture, see what’s actually happening.
Now, you know, all this didn't have to happen. It wasn't like it was inevitable. There are probably other universes out there where things went differently. But, like, that's not our universe.
And, I don't think that the Imperial-Commercial and British Industrial Revolutions were decisive, either.
Even with that faster technological growth, the population was still growing pretty fast. It wasn't enough to really contain Malthus’s Devil. So, in the 1870s, the world was still a pretty poor place. Most people were farmers, life expectancy wasn't much better than it used to be, and we weren't producing much stuff. Like, *way* less than we do today.
And, you know, people worried that it wouldn't last. That we would go back to where we were, and then…
Then, around 1870, things changed *again*. Like, a big change. The rate of technological growth went up fourfold! *Fourfold!* To, like, a couple percent per year. And that’s when technology *really* started outpacing population growth. And, you know what else? In the richest countries, the population started growing slower, too.
So, people got rich enough, and lived long enough, that they decided to have fewer kids.
The years between 1870 and 1914? They were, as John Maynard Keynes put it, a, you know, "economic El Dorado."
I mean, the world back then was a mix of old and new. You know, Britain burned a lot of coal, but railroads and airlines, also, were popular. Even still, a lot of power was held by, like, old-school landowners.
Compared to the past, it was almost utopia. The real wages of regular workers were higher than they'd been in a long time. Like, maybe even higher than before we even started farming!
So, the big question is: why did things suddenly start growing so fast after 1870? And how did this growth spread from Europe to the rest of the world?
Well, basically, it was all about the industrial research laboratory, big companies, and, like, globalization. These things all worked together to solve problems and make the economy grow faster. The lab and the corporation? That’s what allowed people like Thomas Edison and Nikola Tesla to become *inventors*. It made a huge difference.
Was it inevitable? No, not necessarily. But it was a lot of people working together over time, which made it *more* likely to happen. The spread of labs and corporations needed a boost though, and the biggest boost was globalization.
Back before 1700, trade was mostly, like, fancy stuff for rich people. Spices, silks, weapons, that sort of thing. It didn't really affect most people's lives, except for, you know, the people who were enslaved. Trade was only, like, a tiny part of the economy.
But things started to change after that. In the North Atlantic, the slave trade became, like, a really big deal, and Britain started building a big empire. But even then, trade was still a pretty small part of the overall economy.
Then cotton and textiles became important. They were imported into Britain and then exported to the rest of the world. But trade in the mid 1800s? Still just a small part.
Then, railroads, steamships, and telegraphs came along. Suddenly, you could communicate and transport goods across the world *super* fast. By the late 1800s, you could send a message from London to New Zealand and back!
And governments started getting rid of trade barriers. And the most important thing, people started moving. Millions of people moved to different continents.
The embrace of openness by world governments also meant the absence of legal barriers to trade, investment, and communication. As people moved, finance, machines, railroads, steamships, and the telegraph nerves of production and distribution networks followed, chasing abundant natural, physical, and biological resources. The proportion of global economic activity that was traded across today’s national borders rose from perhaps 9 percent in 1870 to perhaps 15 percent in 1914, as the revolutionary decreases in the cost of transport massively outstripped what were also that era’s revolutionary decreases and differentials in costs of production. Thus transportation made a huge difference.
Let's not forget, Henry David Thoreau, the, uh, intellectual, wasn't crazy about that whole idea.
Before railroads, you couldn’t transport stuff easily over land. Everything had to be made locally. But Thoreau? He liked that it took him a day to get to Boston. But that’s because he was rich, or, well, not family-poor.
So, the lab, the corporation, global transportation, global communication, and falling barriers to trade? That's what brought humans out of the Malthusian poverty trap. It made the world’s economy a single economy like it had never been before.
Perhaps the biggest change was the steamship. It made it much cheaper and faster to travel across the ocean. By the late 1800s, almost anyone could afford to travel to America. So, millions of people did.
This was like, a mass migration of people around the world. Never before or since have we seen anything like it.
My own ancestors, they came to America a while back, back when you had to be middle-class or enslaved. But my *wife's* ancestors? They all came during this big wave of globalization.
But it wasn't just a one-way trip. Some people moved back and forth across the ocean.
I think it’s important to note too, that that migration from Asia to Europe and other places was very strictly shut down. And even in our history, it’s littered with “what ifs” to show that our path to our present was not necessarily preordained.
So, these people started going other places to live and work in the plantations. Even though they were paid almost nothing by European standards, that wage was still way better than anything that China and India could offer at the time.
Ultimately, the people left behind, as well as the migrants, both benefited.
So, while the migrants came, what also followed was capital for infrastructure, for railroads, things like that.
All in all, the world was becoming much more integrated.
And it also meant the growth of this system where places sent materials and foods to Europe, and Europe sent manufactured products. This had a bad effect on the global South. Even though they provided the raw materials, they didn’t have much of a market for their own manufacturing.
Think about the British Empire. They had forts, docks, and gardens everywhere. That’s how they managed to bring the rubber plant from Brazil to Malaysia, and made it the world leader in rubber products by the end of World War 1. They made use of the periphery as best they could.
The ones who benefited from this the most were America, and we should, briefly, look forward into history as to why. By 1940, the US had over a hundred million citizens, more than the British Empire at the time. That was from immigration!
Every commodity that wasn’t crazy fragile or perishable could be sent port-to-port for cheaper than within most countries. That meant everything and everyone’s constraints and opportunities depended on what was happening in other economies.
Basically, the falling cost of transporting materials meant, according to economist Richard Baldwin, that production didn’t have to happen at the same spot as the consumers. That was a major thing!
That’s also not to say it “flattened the world.” Since more complicated transactions needed to be done in person, factories were grouped together.
So, because of the concentration, the North’s economy boomed! What was to become the global South, industrialized far less.
The social returns on the investments in technology and infrastructure that created this late nineteenth-century world economy were enormous. Consider just one example: economic historian Robert Fogel calculated that the social rate of return on the Union Pacific’s transcontinental railroad was some 30 percent per year.
This happened because of how comparative advantage played out. It was found that profits could be made, and enhanced societal well-being as well, by exporting relatively cheap goods.
Thus, one of the bigger consequences was that finance and trade followed labor! A high-investment economy happened, with 300,000 miles of railroad track.
So, everyone had access to something good: Investors in London helped with copper mines in Montana. Hamburg ate bread from Ukrainian wheat. State-funded entrepreneurs in Tokyo bought machinery made by German workers.
So that's how, by 1914, the middle and upper classes had access to luxuries that royalty couldn't even imagine years before. This led to upward mobility for a majority of the working classes. Since the standard of living was higher, there were now 5 people where once there were 4 from a generation before. Despite what Malthus said, the available resources kept up, and technology made sure of that.
Consider the ability to communicate.
Back then, around the early 1800s, it would take 7 months for someone from London to send a message to India. Conversations were difficult! A single question could take a *year* for a reply.
Then we had the telegraph.
Even though Henry David Thoreau wasn't a fan. He, of course, thought that communication wasn’t important.
That's also not to mention that one city, like, say, Chicago, would have some news that Texas needed to know. You know, since slavery had to be ended.
The thing is, it increased human intelligence as a collective! People were gossiping about what was going on in the world.
Since it was hard to set up, however, submarine telegraph cables were even better. They made it so you could know what was going on overseas the very same day, like your investments, and tell your bank to do something before lunch!
First, this process brought not just more information with which to make decisions; it also improved trust and security. Consider that 1871 saw thirty-four-year-old American financier J. Pierpont Morgan join forty-five-year-old American financier Anthony Drexel in an investment banking partnership to guide and profit from the flow of investment funds from capital-rich Britain to the resource- and land-abundant United States. Today’s J. P. Morgan Chase and Morgan Stanley are the children of that partnership. Second, this greatly aided technology transfer—the ability in one corner of the globe to use technologies and methods invented or in use in another corner of the globe. Third, this process was a handmaiden of empire. Where you could cheaply and reliably communicate and move goods and people, you could also command and move and supply armies. Thus conquest, or at least invasion and devastation, became things that any European great power could undertake in nearly any corner of the world. And the European powers did.
It's also why imperialism exploded. By 1914, the only countries that *weren't* controlled or owned by Westerners or the Japanese were China, Japan, Morocco, Ethiopia, Iran, Afghanistan, Nepal, Thailand, and Tibet.
With the quickened pace of information transfer, as well as transport and technology, everyone could use any technology from anywhere in the world.
That’s why we had textile factories popping up in cities like Shanghai, as well as cities like Manchester. The North Atlantic provided capital, labor, and demand. Before 1870, those luxury exports from the West? Those were very limited. But after 1870, suddenly you needed things like rubber tires and oil for engines. Plus, because people were now richer, demand for tropical products exploded as well! It should’ve drawn the world together.
But, according to economist W. Arthur Lewis, only 6 countries were on the “escalator” of growth by 1870.
To put things into perspective, one of the Egyptian leaders wanted to make sure his grandkids weren’t just puppets for foreign countries, and wanted to start textile manufacturing in Egypt. It failed, and his grandson *was* one of those puppets.
Now, there's a reason that the global South failed to produce commodities like the European colonies. They didn't have the agricultural productivity, and also the migration and the lowered wages didn't help either.
But the bigger puzzle is why industrialization was slow to happen in the global South. Especially since they could ship the equipment that the North Atlantic economies used for manufacturing!
Henry Ford was able to mass produce stuff with simple assembly lines, why couldn't others? Even though America’s standards of labor were crazy high.
Was it the political risks? The need to be nearby to machine suppliers and factories? All the things that can go wrong?
Even amongst economic historians, there are tons of puzzles, and one of them is why progress was slow to happen in the South.
Instead, what the “Peripheral” economies did was focus on plantation agriculture. But it's weird that they didn't manage to create a modern manufacturing sector.
So, why did this happen? The thing is, Britain, and later the US and Germany, had a massive cost advantage. What was needed were *huge* tariffs to protect industries. That's also to say that not every colonial government allowed that. Ideological things were holding them back from helping a few states and using an approach pioneered by someone like Alexander Hamilton.
A market economy only benefits those who own the property rights. These people want luxuries, and want to live higher. And in particular, don't want people trickling down to the lower classes. What they can do to profit is build more plantations. *Not* provide infrastructure for workers. So the market can’t see all the benefits to the people.
Basically, a wealthy country has its benefits due to its history of starting earlier. If managed, the skill and experience will become worth it. Unfortunately, the market economy has trouble doing that.
According to Robert Allen, imperialism was the dominant factor, since colonial governments were uninterested in adopting trade policies that could industrialize the locals. W. Arthur Lewis thought the lack of a prosperous middle class was the problem, preventing demand. Joel Mokyr thought that the intellectual habits of the Enlightenment was responsible for the power of the North Atlantic's industrial power. Raul Prebisch considered the aristocracies who didn't want the people to have good luxuries as the reason.
We don’t know enough to say. What we *don’t* know is what would have happened if our 20th century hadn’t happened the way it did.