By MoneyMorning.com.au
For the ordinary person, life didn’t change a jot from pre-history to around 1800.
It didn’t matter whether you were born in bucolic 17th century England or a Stone Age cave. Your lot in life would be hardscrabble toil, a cramped dirt-floor home and a swift death at the age of around 30. It would be the same life as your grandparents and your grandchildren.
Why didn’t 10,000 years of civilisation improve people’s living conditions? Because wealth comes from work per person, and work per person comes from innovation. And the process of innovation back then was agonisingly slow. Hundreds and thousands of years separated breakthroughs like stone tools, agriculture, iron ploughs and sailing ships.
Slow progress would never be enough to improve man’s lot because something else instantly pulled down average living standards – children. Bigger families and bigger populations kept humanity at starvation level for thousands of years. So even though we gradually built great civilisations and towering cathedrals, the ordinary person fought a constant battle for his family’s survival.
So the rate of technological advance was the crucial factor. When technology improved slowly, general living standards couldn’t rise. Before 1800 the economy was like any other ecological habitat. Any improvement in conditions could only be temporary, because more mouths pulled living standards back to subsistence level in the long run. The stock of new ideas grew, but it grew too slowly. It couldn’t outrun the birth rate. Better farms led to bigger farm families, and not idle farmers.
Mankind was caught in a trap. To escape infant mortality and dirt floors, we needed new ideas. We needed to speed up the adoption of new technologies, new rules and new values.
The change finally came in Britain, at around 1800. It was the crucial turning point in human history. That’s where the ‘birth rate’ of new ideas passed population growth. Ideas are like families: they propagate and they proliferate. They spark off each other to form newer ideas, and those ideas do the same, and on and on exponentially.
From 1800 on, new ideas created wealth faster than population growth could take it away. Ideas had the momentum on their side, and since then new technologies and rules and values have created wealth at an accelerating pace. Before 1800, wealth per person stayed more or less static. Now we’re ten to 20 times better off than before, and our wealth doubles every generation or two. Humanity has sprung the trap.
But why Britain? And why then?
There are plenty of theories. But one writer – Deirdre McCloskey – thinks it all comes down to cultural values.
McCloskey is a scholar of economic history, and she believes that the revolution in living standards ultimately stemmed from a change in attitude towards commerce and the pursuit of wealth.
Economists think in terms of what’s calculable: trade volumes; average height; tonnes of grain. McCloskey is trying to move the economic conversation towards, well, human conversation. She argues that words and values are badly under appreciated by economic historians. Culture and attitudes are a powerful force, she says, and they shape how individuals choose to live their lives.
Why does McCloskey believe that causation ran from rhetoric to wealth, rather than the other way around? She reaches her answer by carefully dismissing the other explanations offered, leaving her culture story as the last man standing.
It wasn’t down to property rights – these had been around for hundreds of years. It wasn’t about the empire either – imperialism wasn’t a new development, it didn’t enrich the ‘mother country’, and also the timing was wrong. Foreign trade was too small and it was prevalent everywhere.
As for religion, Catholics prospered alongside Protestants in bourgeois societies. And science? British science was, if anything, behind China and Arabia’s. “In short,” says McCloskey, “the Europeans were not economically special until about 1700.”
So that just leaves a change in attitudes. The pre-industrial world’s hostility towards and scorn for commerce cannot be underestimated. Status came from the royal court, the battlefield or the church. Dealing and trading was seen as vulgar. To buy and sell for profit was to take advantage of others – in the same way that usury was strictly banned by canon law.
In France or Spain at the time, a nobleman caught engaging in commerce could be stripped of his rank. In Confucian China, merchants were the fourth and lowest of the social classes.
Trading was seen as a threat to the old order. Thomas More typified 1516′s view of merchants: “They think up… all ways and means… of keeping what they have heaped up through underhanded deals, and then taking advantage of the poor by buying their labour and toil as cheaply as possible… these depraved creatures.”
It wasn’t until the 18th and 19th centuries, that Dutch and then British culture began to treat merchants and townspeople with respect for the very first time. There came to be a new dignity in making, building, inventing, and profiting where there was none before.
At around that time the first texts in ‘political economy’ were published, mainly in England and Scotland. Adam Smith’s ‘The Wealth of Nations’ in 1776 could be seen as a manifesto for the new bourgeois order. It explained clearly for the first time how grubby traders improve the nation while they enrich themselves. Economics was the new philosophy of a confident merchant society.
Even the language changed. In Shakespeare’s plays, the only bourgeois characters are fools or worse, like Antonio or Shylock. They don’t even feature in Jane Austen’s rarefied worlds. When Shakespeare wrote the word ‘honest’ he meant noble, in an aristocratic sense. By the 18th century in Britain it came to mean truth-telling – the merchant’s virtue of reliability.
British society was learning the first lesson of economics: trade can be a ‘positive sum game’. As McCloskey puts it, “By the new, pro-bourgeois talk, the positive-sum game was freed partly from zero-sum politics.”
The novel idea that decent people could make profits took root. Aristocratic cultural dominance was coming to an end. That freed both landed gentry and lowly artisans. With the stigma removed, people ‘broke rank’ and came together to pursue opportunities and ideas, which led to further inventions and further opportunities.
Cultural barriers had kept innovation hemmed in. When these dissolved, ideas were finally free to proliferate. So the new culture made all the difference between ideas forming slowly and in isolation; or quickly, and together.
In return, the merchants made Britain stunningly rich. The newly respectable middle class bought and sold and invented a new type of economy. They built machines and cities and they made Britain the centre of the world.
Their values spread and eventually destroyed the feudal order from Tokyo to New England. French bourgeois, German burghers and American freeholders took control of their nations. And the gentry didn’t stand a chance against the inventive, trading, scheming, prospering townsfolk.
Napoleon sneered that Britain was “a nation of shopkeepers”, and he was right. But British shopkeepers could innovate and trade their way to a better life. It might be that British culture harnessed the potential of ordinary people, and invented a new world in the process.
Séan Keyes
Contributing Editor, MoneyWeek (UK)
Publisher’s Note: This article originally appeared in MoneyWeek (UK)
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