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Sources of Progress
When it comes to global standards of living, human history resembles a hockey stick resting on its side, with a long straight shaft and an upward facing blade. For most of our existence, progress was painfully slow (resembling that long straight shaft). At the start of the 19th century, however, the speed of human progress rapidly accelerated (resembling that upward facing blade). What was responsible for that acceleration? Many books have been written on this subject and it is beyond the scope of this essay to provide a full answer. That said, few scholars deny the central role played by two forces that are routinely demonized: industrialization and globalization.
First, let us look at the industrial revolution. According to the Encyclopedia Britannica, the industrial revolution was “the process of change from an agrarian, handicraft economy to one dominated by industry and machine manufacture.” It started in Great Britain in the 18th century and then spread to other parts of the world.
The technological changes included the following: the use of new basic materials, chiefly iron and steel, the use of new energy sources, including both fuels and motive power, such as coal, the steam engine, electricity, petroleum, and the internal-combustion engine, the invention of new machines, such as the spinning jenny and the power loom that permitted increased production with a smaller expenditure of human energy, a new organization of work known as the factory system, which entailed increased division of labor and specialization of function…. These technological changes made possible a tremendously increased use of natural resources and the mass production of manufactured goods…. There were also many new developments in nonindustrial spheres, including the following: agricultural improvements that made possible the provision of food for a larger nonagricultural population, economic changes that resulted in a wider distribution of wealth, the decline of land as a source of wealth in the face of rising industrial production, and increased international trade, political changes reflecting the shift in economic power, as well as new state policies corresponding to the needs of an industrialized society, sweeping social changes, including the growth of cities, the development of working-class movements, and the emergence of new patterns of authority, and cultural transformations of a broad order.
The Industrial Revolution had many contemporary critics. Observers like Charles Dickens commented on the squalor of 19th-century cities and the backbreaking labor of the people, including children, in the factories in much the same way that our journalists today comment on the squalor of the rapidly industrializing Indian cities and backbreaking labor of people, including children, in Bangladeshi factories.
But things should be kept in a proper perspective. Life on an 18th-century farm was extremely difficult, and the city offered the former country dwellers higher wages and new opportunities. In time, sanitation, healthcare and other benefits of civilized life caught up with the cities’ rising population, giving us the modern metropolis. In a similar vein, legislation caught up with rising standards of living and codified in law what was happening already in practice—as productivity increased and wages rose, fewer children were needed to supplement their parents’ incomes. Increased productivity of workers led to greater competition for workers, and factory owners started taking better care of their employees. Working conditions improved and work injuries declined.
Another major criticism of the industrial revolution concerns the spoliation of the environment and exploitation of natural resources. Who can forget William Blake’s condemnation of industrialization in his 1808 poem Jerusalem?
And did those feet in ancient time
Walk upon England's mountains green?
And was the holy Lamb of God
And did the Countenance Divine
Shine forth upon our clouded hills?
And was Jerusalem builded here
Among these dark Satanic mills?
Blake’s “satanic mills” refer to factories that in his view pockmarked the bucolic face of the English countryside. As was the case with other writers of the Romantic era, Blake’s description of pre-industrial society was highly idealized. The reality, alas, was much less appealing. Most pre-industrial societies, Great Britain included, were heavily dependent on agricultural output. Agricultural production was labor intensive, but productivity was very low. Before the arrival of machines powered by steam and combustion engines, agriculture depended on much less efficient human and animal labor. People and animals had to be fed, which meant that most of the calories produced on the farm were immediately consumed by the laborers. Prior to the industrial revolution, there were no synthetic fertilizers, such as nitrogen, and crop yields were much lower than what they are today. As a consequence, more land was required to feed people and pack animals. Land clearing was usually accomplished by burning of forests. Yet more trees were cut down to heat houses and cook food. Environmental damage aside, a major reason for switching from wood to coal was the simple fact that there were very few trees left. Thanks to the use of fossil fuels, global forest coverage has stabilized and is expanding in the world’s richest and most industrialized countries.
Second, let us consider globalization, which the Organization for Economic Cooperation and Development (OECD) defines as “an increasing internationalization of markets for goods and services, the means of production, financial systems, competition, corporations, technology and industries. Amongst other things this gives rise to increased mobility of capital, faster propagation of technological innovations and an increasing interdependency and uniformity of national markets.”
Contrary to the common misperception, globalization is not a new phenomenon. The trade links between the Sumer and Indus Valley civilizations go back to the third millennium BC. Later, tere was the Silk Road between Europe and Asia, and European voyages into India and the Americas. Clearly, trade has been fundamental to the process of globalization from antiquity. But why do people trade?
Trade delivers goods and services to people who value them most. An additional ton of corn produced in Kansas may be of little importance to the people in the American Midwest, but it can be crucial to the people living in the drought-stricken East Africa. Trade, to use economic jargon, improves efficiency in the allocation of scarce resources. Another reason for trade is the principle of comparative advantage. As the Nobel Prize-winning economist Paul Samuelson noted,
The gains from trade follow from allowing an economy to specialize. If a country is relatively better at making wine than wool, it makes sense to put more resources into wine, and to export some of the wine to pay for imports of wool. This is even true if that country is the world’s best wool producer, since the country will have more of both wool and wine than it would have without trade. A country does not have to be best at anything to gain from trade. The gains follow from specializing in those activities which, at world prices, the country is relatively better at, even though it may not have an absolute advantage in them. Because it is relative advantage that matters, it is meaningless to say a country has a comparative advantage in nothing. The term is one of the most misunderstood ideas in economics, and is often wrongly assumed to mean an absolute advantage compared with other countries.