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The Millennial Perspective

J. Bradford DeLong

University of California at Berkeley, and
National Bureau of Economic Research

http://www.j-bradford-delong.net
delong@econ.berkeley.edu

March, 1998


Two or three thousand years from now history as we know it will have been boiled down to its bare core. History courses--if they even have history courses, if they even have universities--will spend little time on what we know as history.

They will have at most a single session to spend on the twentieth century. And in that one single session, teachers will try to hastily and cursorily make five points:

  • That the history of the twentieth century was overwhelmingly economic history: the economy was the dominant arena of events and change, and economic changes were the driving force behind other changes in a way rarely--if ever--seen before.
  • That the twentieth century saw the material wealth of humankind explode beyond all previous imagining: we--at least those of us who belong to the upper middle class and live in the industrial core of the world economy--are now far richer than the writers of previous centuries' utopias could imagine.
  • That the twentieth century's tyrannies were more brutal and more barbaric than in any previous century. And--astonishingly--they had their origins in economic discontents and economic ideologies. People killed each other in large numbers over questions of how the economy should be organized, which had not been a major source of massacre in previous centuries.
  • That the twentieth century saw the relative economic gulf between different economies grow at an astonishingly rapid pace. Region by region and nation by nation, the world became more unequal in relative material prosperity than ever before.
  • That economic policy--the management of economies by governments--in the twentieth century was at best inept. Little was known about how to manage a market economy. Lessons learned from experience were often forgotten quickly. There was an extraordinary disjunction between the power of twentieth-century economies as social-calculating and behavior-conditioning mechanisms and the ineptness with which these economies were managed.

Each of these themes deserves restatement at greater length:


1. That the history of the twentieth century was overwhelmingly economic history

For most centuries the core of history--the most interesting and important parts--is only tangentially related to economic factors. The core of their history is, instead, intellectual or religious or political. The history of the fourth, seventh, and sixteenth centuries is primarily religious: the consolidation of Christianity in the Roman Empire, the spread of Islam, and the Protestant Reformation absorbed the attention of their respective ages. The history of the fifteenth century is primarily cultural: in Europe the Renaissance, in China the cultural flourishing during the Ming Dynasty. The history of the late eighteenth and early nineteenth centuries is primarily political: the American and French Revolutions and their consequences.

The core of history was only tangentially related to economic factors because economic factors changed only slowly: the structure and functioning of the economy at the end of any given century was pretty close to what it had been at the beginning. The economy was more like the background against which the action of a play takes place than like a dynamic foreground character, because changes in humanity's economy--how people made, distributed, and consumed the material necessities and conveniences of their lives--required long exposures to become visible.

For the past century things have been different.

In the twentieth century the pace of economic change has been so great as to shake the rest of history to its foundation. For perhaps the first time the making and using the necessities and conveniences of daily life--and how production, distribution, and consumption changed--has been the driving force behind a single century's history.


2. That the twentieth century has seen the material wealth of humankind explode beyond all previous imagining

There had been much technological progress before the industrial revolution, before the eighteenth and nineteenth century age of the spinning jenny, power loom, steam engine, coal mine, and iron works. For example, the windmills, dikes, fields, crops, and animals of Holland in 1700 made its economy very, very different indeed from the marshes of 700; the ships that docked at the Chinese port of Canton had much greater range and the commodities loaded on and off them had much greater value in 1700 than in 700. But pre-industrial technological progress led to little improvement in the standard of living of the average human: improvements in technology and productive power by and large raised the numbers of the human race, not its material standard of living.

The eighteenth and nineteenth centuries saw a faster change and a different kind of change. For the first time technological capability outran population growth and natural resource scarcity. By the last quarter of the nineteenth century the average inhabitant of a leading economies--a Briton, a Belgian, a Netherlander, an American, a Canadian, or an Australian--had perhaps three times the material wealth and standard of living of the typical inhabitant of a pre-industrial economy. The standards of living of the bulk of the population underwent a substantial, sustained, and unreversed rise in the eighteenth and nineteenth centuries--for perhaps the first time in a thousand, if not in seven thousand years.

Standards of living have exploded in the twentieth century.

What took a worker in 1890 an hour to produce takes an a worker in a leading economy today only about seven minutes to produce: by this measure we today have some eight times the material prosperity of our counterparts of a little more than a century ago. But such calculations substantially understate the boost to productivity and material prosperity that the past century has seen. We today are not just better at making the goods of a century ago. We today also have the new and powerful technological capability to make an enormously expanded range of goods and services: from videocassettes and antibiotics to airplane flights and plastic bottles.

We today would feel--we would be--enormously impoverished if by some mischance our money incomes and the prices of commodities remained the same, but if we were at the same time forbidden to use any commodity not produced in 1890.

This expansion in the range of what we can produce is an enormous additional multiplier of material well-being. Are we sixteen? thirty-two? sixty-four times as rich in a material sense as our predecessors in today's developed industrialized democracies were toward the end of the nineteenth century? The magnitude of the growth in material wealth has been so great as to make it nearly impossible to measure.

This is the most important piece of the history of the twentieth century. As far as its ability to produce material goods is concerned, in the twentieth century the human race passed from the realm of necessity--where providing basic food, clothing, and shelter took up the lion's share of economic productive potential--to the realm of freedom: in which our collective production is no longer made up largely of the necessities of survival, but of conveniences and luxuries.


3. That the twentieth century has seen more brutal and more barbaric tyrannies--tyrannies that had their origins in economic discontents and economic ideologies--than any previous century

In this century governments and their soldiers have killed perhaps forty million people in war: either soldiers (most of them unlucky enough to have been drafted into the mass armies of the twentieth century) or civilians killed in the course of what could be called military operations.

But wars have caused only about a fifth of this century's violent death toll.

Governments and their police have killed perhaps one hundred and sixty million people in time of peace: class enemies, race enemies, political enemies, economic enemies, imagined enemies. You name them, governments have killed them on a scale that could not previously have been imagined. If the twentieth century has seen the growth of material wealth on a previously-inconceivable scale, it has also seen human slaughter at a previously-unimaginable rate.

Call those political leaders whose followers and supporters have slaughtered more than ten million of their fellow humans "members of the Ten-Million Club." All pre-twentieth century history may (but may not) have seen two members of the Ten-Million Club: Genghis Khan, ruler of the twelfth century Mongols, launcher of bloody invasions of Central Asia and China, and founder of China's Yuan Dynasty; and Hong Xiuquan, the mid-nineteenth-century Chinese intellectual whose visions convinced him that he was Jesus Christ's younger brother and who launched the Taiping Rebellion that turned south-central China into a slaughterhouse for decades in the middle of the nineteenth century. Others do not make the list. Napoleon does not make it, and neither does Alexander the Great or Julius Caesar.

By contrast the twentieth century has seen perhaps five people join the Ten Million Club: Adolf Hitler, Chiang Kaishek, Vladimir Lenin, Joseph Stalin, and Mao Zedong. Hitler, Stalin, and Mao have credentials that may well make them the charter members of the Thirty Million Club as well--perhaps the Fifty Million Club. A regime whose hands are as bloody as those of the late Suharto regime in Indonesia--with perhaps 450,000 communists, suspected communists, and others in the wrong place at the wrong time dead at its creation in 1965, and perhaps 150,000 inhabitants of East Timor dead since the Indonesian annexation in the mid-1970s--barely makes the twentieth century's top twenty list of civilian-massacring regimes.

What does this--bloody--political and secret police history have to do with economic history? It seems at first glance that, while deplorable, it has little to do with the story of how people produced, distributed, and consumed the commodities needed and desired for their material well-being.

But it is not possible to write economic history without taking the bloody hands of twentieth century governments into account. First, the possibility that the secret police will knock at your door and drag you off for torture and death is a serious threat to your material well-being. The seventeenth-century political philosopher Thomas Hobbes wrote that people are motivated by sticks and carrots: "the fear of violent death, and the desire for commodious living." In a century where the chance that a randomly-selected person will be shot or starved to death by his or her own government approaches two percent, the fact of large-scale political murder becomes a very important aspect of everyday life and material well being.

Second, the shooting or starvation was often part of the government's "management" of its economy: the stick used to compel the people to perform service or labor as the government wished. The economies of the Soviet Union in the 1930s and of China in the 1960s cannot be understood without understanding how mass terror was used as a worker discipline device.

Third, the twentieth century is unique in that its wars, purges, massacres, and executions have been largely the result of economic ideologies. Before the twentieth century people slaughtered each other for the other reasons. People slaughtered each other over theology: eternal paradise or damnation. People slaughtered each other over power: who gets to be top dog, and to command the material resources of society. But only in the twentieth century have people killed each other on a large scale in disputes over the economic organization of society.

When you think about it, killing people on a large scale over what social mechanisms should coordinate economic activity is profoundly stupid: we want social mechanisms that will work in the sense of delivering prosperity, progress, and a reasonably egalitarian distribution of income. Combinations of mechanisms that fail to accomplish this should be rejected; combinations that succeed should be approved; but the stakes are not overwhelmingly large.

Moreover, the power of tyrants and leaders does not depend on the balance of command or market mechanisms in the economies that they govern. Fidel Castro would rule in Havana whether farmers are allowed to sell their crops in roadside stands, or whether they are prohibited from doing so--forced to sell to government monopoly bureaucracies. The power or personal status of leaders or the eternal salvation of peoples had little to do with twentieth century episodes as the Soviet collectivization of agriculture, the Cuban suppression of farmers' markets, the Khmer Rouge's forced emptying of Cambodia's cities, or the disaster of Mao's Great Leap Forward. All were in large part attempts to guide and shift the economy along the lines dictated by ideology. Other twentieth century disasters had equally strong roots in economic ideology: it is hard to see World War II in the absence of Adolf Hitler's insane idee fixe that the Germans needed a better land-labor ratio--more "living space"--if they were to be a strong nation.

The last word should be Aleksandr Solzhenitsyn's:

The imagination and inner force of Shakespeare's villains stopped short at ten or so cadavers, because they had no ideology.... It is thanks to ideology that it fell to the lot of the twentieth century to experience villainy on the scale of millions.


4. That the twentieth century has seen a vast and growing relative economic gulf between national economies

Those economies relatively rich at the start of the twentieth century have by and large seen their material wealth and prosperity explode. Those nations and economies that were relatively poor have grown richer, but for the most part slowly. The relative gulf between rich and poor economies has grown steadily over the past century. Today it is larger than at any time in humanity's previous experience, or at least larger than at any time since only some tribes knew how to use fire.

This glass can be viewed either as half empty or as half full: half empty because we live today in the most unequal world ever; half full because most of the world has already made the transition to sustained economic growth; most people live in economies that (while far poorer than the leading-edge post-industrial nations of the world's economic core) have successfully climbed onto the escalator of economic growth and thus the escalator to modernity. The economic transformation of most of the world is less than a century behind the of the leading-edge economies--only an eyeblink behind, at least from the millennial perspective (even though the millennial perspective is one that human beings can adopt only when contemplating the long-dead past).

On the other hand, one and a half billion people live in economies that have not made the transition to economic growth, and have not climbed onto the escalator to modernity. It is hard to argue that the median inhabitant of Africa is better off in material terms than his or her counterpart of a generation ago.

From an economist's point of view, the existence, persistence, and increasing size of large gaps in productivity levels and living standards across nations seems bizarre. We can understand why pre-industrial civilizations had different levels of technology and prosperity: they had different exploitable nature resources, and the diffusion of new ideas from civilization to civilization could be very slow. Such explanations do not apply to the world today.

The source of the material prosperity seen today in leading-edge economies is no secret: it is the storehouse of technological capabilities that have been invented since the beginning of the industrial revolution. This storehouse is no one's private property. Most of it is accessible to anyone who can read. Almost all of the rest is accessible to anyone who can obtain an M.S. in Engineering.

Because of modern telecommunications, ideas today spread at the speed of light. Governments, entrepreneurs, and individuals in poor economies should be straining every muscle--should in fact have long ago strained every muscle--to do what Japan began to do in the mid-nineteenth century: acquire and apply everything in humanity's storehouse of technological capabilities.

This "divergence" in living standards and productivity levels is another key aspect of twentieth century economic history: economies are, by almost every measure, less alike today than a century ago in spite of a century's worth of revolutions in transportation and communication.

Moreover, there seems to be every reason to fear that this "divergence" in living standards and productivity levels will continue to grow in the future. A number of factors have kept economic growth slow in today's poor countries in the past: high rates of population growth that restrict growth in the capital-output ratio, high relative prices of capital goods that constrain investment, governments that (like most governments throughout history) take the short view in an attempt to maximize chances of survival and the perquisites of office, and traditional elites (religious and cultural) that fear what they will lose from a richer country more integrated into the twenty-first century world. These factors are still operating today, and likely to operate in the future as well.

This is a potential source of great danger, because today's world is sufficiently interdependent--politically, militarily, ecologically--that the passage to a truly human world requires that we all get there at roughly the same time.


5. That economic policy in the twentieth century has been inept; few lessons are successfully learned from the past, and those that are learned are in constant danger of being forgotten

The twentieth century has seen the century-long economic disaster of communism, and the quarter-century-long disaster of fascism. It has also seen many governments that appear singularly inept at managing market economies: inept at coping with economic shocks that threaten to cause mass unemployment or raging hyperinflation. Some of it is because twentieth century economists did not know what to prescribe: the history of economic policy reads like alchemy, not chemistry. Often proposed remedies made economic problems worse.

Some of it is that politicians did not like to follow their economists' advice, or at least sought for a more complaisant set of economists who would give advice that would be more politically pleasing and palatable to follow. Some of it is that those who do not remember the past are condemned to repeat it--and the rest of us are condemned to repeat it with them.

The twentieth century economy has been a tremendously powerful, efficient, and productive social mechanism--the market system. Yet few, or few of those in power, have known how to operate or fix it. Moreover, learning does not appear to take place--or if it does take place, it does not take place at more than a glacial pace. The inescapable image is of an ocean liner crewed and steered by chimpanzees.

The failures and half-successes of economic policy together make up another key facet of twentieth century economic history: how governments have managed or mismanaged their economies, and how knowledge of how the economic system works has been painfully gained and then painfully lost.


Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

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