20 Century

Created 1/24/1997
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Slouching Towards Utopia?: The Economic History of the Twentieth Century


I Introduction


J. Bradford DeLong
University of California at Berkeley and NBER

March 1997, draft 2.00


J. Bradford DeLong is an associate professor of economics at the University of California at Berkeley, the co-editor of the Journal of Economic Perspectives, a research associate of the National Bureau of Economic Research. He has also served the U.S. government as deputy assistant secretary for economic policy in the Department of the Treasury.

The Millennial Perspective:

Three thousand years from now--to pick a number out of the air--world history survey courses will spend at most a single session on the twentieth century. And in that single session the teacher will try frantically and hastily to cover five points:

Let me expand these five points:

Other centuries have other kinds of history. The history of the 1750-1850 century is primarily political: the American and French Revolutions and their consequences. The history of the fifteenth century is primarily cultural: in Europe the Renaissance, in China the flourishing under the Ming Dynasty. The history of the seventh century is primarily religious: the birth of Islam.

But the history of the twentieth century is primarily economic.

In the past humanity's economy--how people make, distribute, and consume the necessities and conveniences of their lives--changed at a glacial pace from decade to decade or century to century. The economic level of human activity provided the background for the rest of history. Perhaps in the very long run the economy was the material base on which the rest depended. But more that was interesting seemed to happen in political, cultural, religious, or intellectual history, where changes moved at a more rapid pace.

In the twentieth century, however, 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--was the driving force behind a single century's history.

There had been much technological progress before the industrial revolution of the eighteenth and nineteenth centuries. The windmills, dikes, fields, crops, and animals of Holland in 1700 were very different 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 raised the numbers of the human race, not its material standard of living. And the pace of technological change was relatively slow. Historians write of the centuries that it took the horse collar, or the heavy plough, to diffuse throughout western Europe.

The eighteenth and nineteenth centuries saw change. For the first time technological capability outran population growth and natural resource scarcity. Manufacturing overtook agriculture as the major location of employment. For the first time ever food production made up less than half of total economic porduct. And 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.

Thus standards of living did rise in the eighteenth and nineteenth centuries. But they did ont rise by much. Economic historians today debate whether the average British worker in 1850 was 75% better off than in 1750, or only 25% better off.

However, 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 seven minutes: 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 a calculation is a substantial underestimate of the boost to productivity and material prosperity of the past century. We today are better at making the goods of a century ago, but we also have the 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--would be--enormously impoverished if our incomes and prices remained the same, but if we were forbidden to use any commodity not produced in 1890. This expansion in the range of what we can make 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 of the late nineteenth century?

The magnitude of the growth in material wealth has been so great as to make it nearly impossible to measure. If you want a single number for the twentieth century, a thirty-fold increase--a 3000% increase, compared to the 25% to 75% increase in standards of living in the century around 1800--will do. But the qualitative gap is so great that the quantitative question hardly has meaning.

This explosion of material wealth is the most important piece of the history of the twentieth century. Toward the end of the nineteenth century the British historian Thomas Babington Macaulay could look back on previous centuries in which:

noblemen were destitute of the comforts the want of which would be intolerable to a modern footman... farmers and shopkeepers breakfasted on loaves the very sight of which would raise a riot in a modern workhouse... to have a clean shirt once a week was a privilege reserved for the higher class of gentry... men died faster in the purest country air than now die in the most pestilential lanes...

Today we look back on the era of Thomas Babington Macaulay--and the gulf that separates our material wealth and comfort from that of his age is greater than the gulf that separated him from any previous human community since the discovery of fire.

In this century governments and their soldiers have killed perhaps forty million people in war: either soldiers 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: Ghenghis 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.

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 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, with the story of how people produced, distributed, and consumed the commodities needed and desired for their material well-being?

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 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 killed each other over theology: eternal paradise or damnation. Before the twentieth century people killed 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.

Fidel Castro rules in Havana whether or not farmers are allowed to sell their crops in roadside stands: his suppression of small-scale private markets in agriculture has nothing to do with the maintenance of his own power or improving the efficiency of production, and everything to do with ideology. In a similar way, collective power, personal status, or eternal salvation had little to do with such disastrous 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 in ways that their particular ideologies dictated--never mind that the ideologies never made much (substantive) sense as blueprints for economic organization, and served to do little more than to create and provide the excuse for creating yet more human misery.

Other twentieth century disasters had equally strong roots in economic ideology: it is hard to imagine how World War II could have come about in the absence of Adolf Hitler's insane idee fixe that the Germans needed more "living space" if they were to be a strong nation. Hitler was in deadly earnest when he wrote in his autobiography, My Struggle, that Germany could only be strong and prosperous if it had a better land-labor ratio: that it needed more "land for the German plough" to grow food for the Germany nation.

As Aleksandr Solzhenitsyn has written:

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.

Those economies that were relatively richer than most of the world 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: we live today in the most unequal world ever. Half full: 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, from the millennial perspective.

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.

The existence, persistence, and increasing size of large gaps in productivity levels and living standards across nations is, in a word, bizarre. You can understand why pre-industrial civilizations had different levels of technology and prosperity: different civilizations had different exploitable nature resources, and the diffusion of new ideas from civilization to civilization was very slow.

But understanding why gaps in relative productivity persist and grow is more difficult. 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 property. Most of it is accessible to anyone who can read, and 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" is another important aspect: 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.

The century has seen the century-long economic disaster of communism, and the quarter-century-long disaster of fascism.

But even governments that have avoided the mistakes of communism, or of fascist-inspired central planning, have often been inept as well at managing their economies: inept at coping with depressions, inept at coping with unemployment, inept at nurturing foreign trade, or inept at keeping inflation from turning into hyperinflation.

Some of this ineptness has arisen because often twentieth century economists did not know what to prescribe: the history of economic policy doctrines reads like alchemy, not chemistry. Often proposed remedies made economic problems worse. Take a representative respected economist on an average day and his advice is likely to have been bad--for three examples discussed below, consider Nobel Prize winner Friedrich Hayek during the Great Depression, Nobel Prize winner Milton Friedman in the mid-1980s, or Kennedy-Johnson stalwart Arthur Okun at the end of the 1960s

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--those who would give advice that would be more politically pleasing and palatable to follow.

The twentieth century economy has been a tremendously powerful, efficient, and productive social mechanism--the market system. Yet few, or few have those in power, have known how to operate or fix it. The inescapable image is of an ocean liner crewed and steered by chimpanzees. Thus another important facet of twentieth century economic history is the story of economic policy: how governments have managed or mismanaged their economies, and how knowledge of how the economic system works has been painfully gained and painfully lost.

Other Themes:

There are other important themes as well: shifts in the distribution of relative wealth and economic power from rich to middle-class and back again, as the wave of social democracy sloshes across the industrial economies in the twentieth century; the Great Depression, the defining moment of twentieth century economic history; the rise and fall of the economic preeminence of the United States.

But from the perspective of a millennium, the most important aspects of twentieth century economic history are those outlined above: the dominance of economic events in twentieth century history; the tremendous surge of material prosperity; the coupling of productive power and economic ideology with mass murder; the bizarrely uneven distribution of economic growth and prosperity around the world; and the failure of economic policy to advance from the stage of alchemy to chemistry.

The first part of this book tries to take such a millennial perspective: a chapter on each of the principal themes of the economic history of the twentieth century.

Only afterwards do I drop back into narrative: beginning with the state of the world economy at the end of the nineteenth century; skating over developments up through World War I; discussing attempts to rebuild and reorganize the world economy in the aftermath of World War I; tracing the causes, progress, and consequences--economic and political--of the disaster that was the Great Depression; analyzing the economic consequences of World War II; marveling at the job of reconstruction done in the aftermath of Adolf Hitler's war and at the pace of the subsequent Great Keynesian Boom of the generation after World War II; and last focusing on the more troubled economic period since 1973 or so.

The Focus

The focus throughout is on the industrial core of the world economy: the rich nations, originally grouped around the North Atlantic Ocean, that have been at the leading edge of economic development, structural change, and technological advance in this century. But I hope that I have paid due attention to the economic history of the rest of the world as well.

The level of analysis attempts to be neither "history from above" nor "history from below" but rather "history from beside."

History from above tells of the doings of kings, princes, and general secretaries in marble-floored buildings. History from below tells of what ordinary people ate and wore and thought. Neither is fully adequate. The focus on the Duke of This or the Earl of That found in "history from above" is a trivially small part of the history. How did people try to get enough to eat? Were people well enough nourished for young women to easily reach puberty? How did patterns of daily life change? The answers to these questions tell us more about the history and are intrinsically at least as interesting as are stories of assassinations and intrigue at the courts of Tiberius Claudius Nero Caesar Germanicus (the Roman Emperor Claudius) or of Josef Vissarionovich Djugashvili (the Soviet General Secretary Stalin).

But the patterns of daily life of the general population and how they change make little sense if they are divorced from any consideration of high politics and changing technology. For high politics and changing technology shape and change how real people live.

It is a commonplace that each generation writes its own history: each generation is interested in different facets of the past, and a given work of history often tells as much about its own present in which it was written as about the past that it purports to analyze.

This commonplace is not completely true. One reason to write history is that it is entertaining: the stories of what people actually did and suffered that historians tell are some of the greatest stories on earth. The twentieth century has more than its share of such narratives. A second reason for history is simply to gratify curiosity, which may or may not be related to the circumstances of the writer's or the reader's era.

Yet the search for lessons of the past for the present and the future is a third powerful motive. Today, in the wealthy and industrialized countries of the world, our principal concerns are with the creation and maintenance of liberty and prosperity. Other audiences in other places and other times have had different concerns: how to ensure the triumph of the "true" theology, how to conquer one's neighbors, or how elites can maintain politial power or economic and social dominance. This history is written from our particular turn-of-the-twenty-first-century viewpoint: it tells the story of the twentieth century as the story of liberty and prosperity--the partial escapes from (and at time and places the falls back down into) servitude and poverty.

I think that this is the most interesting take on the history of the twentieth century. Others can disagree. One of the glories of the history of the twentieth century is that its story has a (relatively) happy ending: this is a (relatively) free country, and a (compared to the past) relatively free world, in which people can disagree. It might easily have been otherwise.

from "The Second Coming"

by W.B. Yeats

...Things fall apart; the center cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand...
The Second Coming!...
... now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

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20 Century

Created 1/24/1997
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Brad DeLong's Home Page

Associate Professor of Economics Brad DeLong, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax