A Farewell to Alms: A Brief Economic History of the World (The Princeton Economic History of the Western World)

In A Farewell to Alms, Gregory Clark takes us on a fascinating journey, revealing the roots of the Industrial Revolution in Europe back to 1200AD. Then he documents just how the IR created modern affluence and why it was nurtured in Northern Europe and flourished in the uniquely fertile culture of 19thC. England. A most welcome element in his approach is his assertion that economic theory cannot explain why some nations rise and others stagnate or fall. Instead. he builds a strong case that economic advances have always come from superior "labor efficiencies," and those are primarily determined within any given population by an empowering combination of culture and genetics.

To understand his position one must recognize that Genetic differences do exist between people, but it is important to recognize that these are based on ancestry, not race. The visual differences we see tell us nothing about a person's fundamental qualities. This is because human variation is non-concordant--that is most traits are inherited independently, not based on race or ethnicity. Group racial characteristics are irrelevant, but the variations within every group are important. And when circumstances have concentrated above average capabilities in a supporting culture there has usually been above average results. As Benjamin M. Friedland explained in the NYT Book Review, "Let's hope that the human traits to which he attributes economic progress are acquired, not genetic, and that the countries that grow in population over the next 50 years turn out to be good at imparting them. Alternatively, we can simply hope he's wrong."

Although Clark concentrates on the impact of the IR from the early 1800's to present days, he explains how that European success was built on a gradual evolution from 1200 to 1800 that advanced in baby steps enabled by many causative factors. But, he concludes near the end of the book that "The West has no model of economic development to offer the still-poor countries. . no simple economic medicine that will guarantee growth. ." That statement, however, belies many of his repeated references to the primary contributing factors of England's success. In brief, he suggests that 1.) the people of a society are its Ultimate Resource (a la Julian Simon); 2.) that the existence of stable and supportive social customs and legal/financial institutions can create an environment in which those citizens are free to act (a la Hernando deSoto); and 3.) that the population's genetic/cultural heritage can further empower their productivity(a la James R. Flynn). But he explains how the first two, merely having people, and empowering legal and political institutions, is not enough--many nations have had that combination, but without a high proportion of people with drive and talent, the Western experience has proven hard to replicate. Modern machinery and a free economy is useless unless the culture and attitudes of the people make efficient use of those advantages. He cites examples of how this factor makes most aid to developing nations problematic, and renders any attempt to solve their problems beyond the expertise of today's economists.

Part of Clark's argument is that the Industrial Revolution was the gradual result of natural selection during the harsh struggle for existence in Medieval times. Before the widespread safety net became a part of Western democracies, economically successful families were also more reproductively successful. They passed on to their children a culture, and perhaps winning genes, that possessed such productive attitudes as thrift and devotion to hard work. This positive fertility effect he refers to as "downward mobility" because it expanded the Middle Class with its successful attitudes and aptitudes. This thesis, which dismisses rival explanations based on natural resources, luck, and good geography makes short shrift of Jared Diamond's and Kenneth Pomerantz' recent popular, politically correct, and totally unsatisfactory explanations for the Rise and Fall of Nations.

I would like to have had more exposition on how this same people-based explanation applies to some of history's most spectacular earlier success stories. In ancient Phoenicia, Venice, and Holland, as well as the original American colonies we have seen the success of wilderness outposts that were "started from scratch" by a voluntary migration of self-selecting individuals seeking freedom and opportunity. Such an economic force of a populace's attitude supporting hard work, private property, and self-reliance can be traced all the way back to the original Greek scientists and philosopher Hesiod around 800AD. The great poet's parents had migrated to a rocky barren land near Ascra, and probably lived on waste land, under pioneer conditions, similar to the rugged individualists who settled New England 2,400 years later! Victor Davis Hanson writes in The Other Greeks how the rise of this "successful independent class of agrarians explains the peculiar Greek approach to politics, war, and the economy, which would form the later core foundations of Western civilization itself." In those days we can safely assume that the survival of the fittest was in full operation. Because Hesiod and most later Greek states only granted full citizenship to the more successful citizens, it appears likely that a positive fertility factor expanded the number of people with the traits that lead to success, the same beneficent social force that Clark points to in explaining England's rapid success in the 19th C.

A great feature of Clark's book is that he uses the lessons of history to address today's problems: Based on that view, he believes that America faces a future burdened by persistent inequalities because the history of American immigration has created a society of wide socio-economic divisions of ability and status. Clark's studies of the history of surname social mobility (another of his books) suggests that we will experience a magnification of the existing class divisions in the U.S. He realistically, but pessimistically, indicates the need to consider how to mitigate the consequences of these forces. Government policies to promote social mobility can help only marginally. So, he posits, we must face the need to accommodate such persistent divergence of fortunes.

He argues that a low rate of social mobility is in itself not a social tragedy. It depends on what is causing the high correlation of status between parents and children--if driven by environmental deprivation, discrimination, or connections, then it would indeed be a disgrace. But he is quick to assert that there is considerable evidence that the biological inheritance of talent and drive is what underlies most of the correlation between the social status of parents and children. Under any social system, be it China or England, families of greater social competence will manage to achieve the higher social positions. This reminded me of the old theory that if we divided all the nation's wealth evenly to everyone, after 40 years roughly the same people would have most of it that had enjoyed it before its redistribution! He suggests we accept these social mobility facts, and seek to provide equal opportunity for everyone and limit the rewards that come from mere social status.

If we project Clark's line of thought, it sheds light also on the eventual decline of history's successful nations-- as caused by a gradually declining contribution from the more productive segment of their population as their portion of the population becomes smaller and becomes suppressed by a populist majority. For example. the recent dysgenic trend in Western democracies represents the exact opposite of the "downward mobility" Clark shows to have helped England's past success. Because we have advanced beyond the harsh reality of survival of the fittest, those individuals with the most positive "attitudes and inherited traits" could become a smaller and less influential group, which illustrates Benjamin Friedland's dire observation noted above.

This book explores a vast and interesting subject for those who have any intellectual curiosity about where did we come from and where are we going. It is written in simple language free of the usual economists' dismal and mind boggling mathematical abstractions. (I obviously enjoyed it, writing the longest review in history!) Clark is more a historian than an economist which is good because economics is not a science and yet most academics seem to believe it is and therefore claim knowledge comparable to the real "scientists" like Pythagorus, Newton and Einstein! Yet, here we find out why economists have not been able to even explain the rise and fall of nations!

A Farwell to Alms, by economics professor Gregory Clark, combines interesting insights with assertions that strike me as implausible.

On page 41 Professor Clark has a chart that demonstrates that from 1300 to 1450 real wages for English laborers more than doubled. The reason was not an increase in productivity or a strong labor movement. The reason was that during the fourteenth century bubonic plague had killed an estimated half of the English population. With fewer people competing for jobs, wages increased. With fewer people buying stuff, prices declined.

But it did not last. With a higher standard of living more English got married. They got married earlier. They had more children. When the English population rose to what it had been before the bubonic plague epidemic, real wages declined to nearly what they had been in 1300.

Prior to the industrial revolution the world was in what Professor Clark calls a “Malthusian trap.” The economy was stagnant, so most people experienced a subsistence standard of living. They worked longer and ate less well than their Paleolithic ancestors had ten thousand years earlier.

Contrary to what I have believed most of my life, there was a fairly high degree of social mobility in pre industrial England. However, most of the mobility was downward. The rich had many more children who survived and reproduced than the poor. In a stagnant economy there was limited room at the top, so most of the children of the rich became less rich as adults. Nevertheless, it was possible for exceptional individuals to rise.

Upward mobility was not based on fighting ability, but on characteristics that correlate with intelligence, such as the ability to read and write, and perform mathematics, the ability to plan ahead, and the willingness to defer gratification.

Professor Clark discusses genetic changes in the English nation from 1200 to 1800. These changes, he claims, made England ready for the industrial revolution. At the beginning of this period knights had a high death rate because they often fought. Successful merchants and professionals had a low death rate. As time went on the upper class became more peaceful and more inclined to obey the law. As the descendants of the upper class declined economically and socially, qualities that made for upward mobility spread throughout the population. The English population became more law abiding, more intelligent, and more willing to work hard, save money, and so on.

A similar process was happening in China. Here I have to disagree with Professor Clark. For nearly two thousand years young Chinese men who could pass the Imperial Exams entered the Scholar Gentry. They were given large incomes, and expected to have more than one wife and many children.

Nevertheless, Professor Clark claims on the basis of insufficient information that in China the upper class was less prolific than in England, and that this is the reason the industrial revolution did not begin in China.

In his book Guns, Germs, and Steel, Jared Diamond presents a more plausible explanation for the fact that the industrial revolution did not begin in China.
https://smile.amazon.com/Guns-Germs-Steel-Fates-Societies/dp/0393317552

Professor Diamond pointed out that in the fourteenth century China was experimenting with inventions that could have begun the industrial revolution then and there. These included a water driven spinning machine, an industrial clock, and a printing press, among others. However, the Chinese government for reasons of its own did not like these inventions, so it suppressed them. The Chinese government also put an end to overseas exploration.

The British government lacked the power and inclination to behave that way in 1800. Also, as Professor Diamond points out, if the British government had tried to suppress the inventions which in 1800 made the industrial revolution possible in England, other European countries would have adopted them anyway. Eventually England would have had the incentive to catch up. The Chinese did not have that incentive until the nineteenth century, when they were outclassed by European military forces.

The Chinese imperial exams had a paradoxical effect on the development of the Chinese nation. On one hand, they promoted more social mobility than anywhere else in the world. Upward mobility was based on intelligence. On the other hand, the exams were based on Chinese classics written before the time of Christ. Thus the attention of the most intelligent Chinese was directed to the past, rather than to new scientific discoveries and inventions.

Moreover, success in the exams was based on rote memory and conventional understandings of what the Chinese called “the Four Books and the Five Classics,” rather than on original insights into those books. Currently Chinese throughout the world excel in learning what others have discovered. They have not yet demonstrated the creativity that has enabled Europeans and descendants of Europeans elsewhere in the world to produce inventions like the telegraph, the radio, air planes, televisions, computers, and so on.

Nevertheless, industrialization has spread to China, Taiwan, Singapore, South Korea, and Japan. It has not spread as well or at all to the third world, for reasons Professor Clark somewhat tepidly suggests are biological.

A Farewell to Alms was written right before the Great Recession began. Professor Clark suggests that endless increases in prosperity are possible for the first world. Since the beginning of the Great Recession stagnant or declining economies in the first world suggest that the Malthusian trap still exists; only it is higher off of the ground. Population growth should always be regarded as a factor that keeps the average standard of living lower than it would otherwise be. The relationship between population and standard of living can be illustrated by an equation:
(natural resources x level of technology) / human population = average standard of living