Arquivo de etiquetas: Revolução Industrial

Lectures / Readings

A Short History of Economic Development II

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The Industrial Revolution Starts in England

Modern economic growth began in England. It’s strange. We know it. We can watch it. This unique phenomenon in human history after millennia where living standards did not change very much. When suddenly population and output per person began to soar. Started in a particular place on the planet. It didn’t start in five places, it didn’t start in eight places. It wasn’t separate discoveries. It started in England. We can watch it. And therefore we can understand how this came about. I sometimes feel it’s a little bit like a biologist being able to watch the start of life. The first bit of life that emerges that gives rise to all the rest. What’s so interesting about life and one of the reasons why I view it as an analogy for an economy is that we know that every kind of life on this planet shares some basic metabolism and DNA structure. And so the biologists have said life appeared once and from there it has evolved and it has created a biosphere, a world of millions and millions of species. It all started, presumably, from a cell. Modern economic growth also has a kind of DNA. It also came together from a number of different materials and viola, something took off. Also, in a way, a living property because a growing economy gave rise to forces that continued the economic growth once it took off. If it were so easy to create economic life, it would’ve happened many places. We would have records of long economic growth in China, long economic growth in different parts of the world. But as John Maynard Keynes rightly pointed out, we did not see that in human history. So what happened in the Industrial Revolution as we call it, in the middle of the 18th century in England, in my view was a unique coming together of various forces, that allowed life in the economic sense to take off. That first cell of a modern economy that became replicating and that eventually spread to the entire world economy took off. Well what is it about the Industrial Revolution? I think let’s take a hint from the word, industry itself. For the first time a society moved beyond agriculture as the base, to one in which industry was the base. This required a fundamental change of know-how, of technology, of technical advance. But just like life itself requires a lot of interaction of the components of the cell, so too the life of an economy requires many things to come together. Technology is certainly a core part but connecting the different parts of the economy, the rural area where people are growing food, the factory towns where workers are working in factories producing textile goods, steel new output, those interconnections are needed as well. The food has to get to the city. The manufactured goods, the shirts and clothing are sold back to the farmers. That requires transport, that requires a market, that requires exchange. And so for the Industrial Revolution to come together in England in the 18th century many things had to be present. First agricultural productivity starts to rise. I wouldn’t call it yet scientific farming, but I would call it very systematic and evidence-based farming. Farmers learning, better rotations for crops, how to replenish the soil nutrients. There was more urbanization, more trade, a market economy taking hold, property rights, rule of law beginning to take hold. Of course, there was the wonder of the scientific revolution. Isaac Newton had shown that our world in physical terms is governed by natural laws. This opened up a completely new way of understanding things and it opened up new avenues of practical exploration as well. One of the great breakthroughs came from 1712, even before the Industrial Revolution but maybe you can say it was the start of it. The invention of a steam engine by Thomas Newcomen. The first steam engine, burning coal to create motive force, was used to pump water out of the shafts of mines. It was the beginning of the revolution of steam engines and of, of technology. And then came a, wonderfully creative targeted genius who working in a university lab in Glasgow in, in Scotland realized that Newcomen had made a couple of design mistakes even though it was a great breakthrough. James Watt looking for profit as well as for glory, said, I can improve on that steam engine and the Watt steam engine in 1776 came to life. I think it’s fair to say this was the breakthrough from a technological point of view of the industrial era. And in a way, it was the technological trigger of all that followed. Because now it was possible to harness massive amounts of energy efficiently, economically, effectively, to make profits. These are the components that come together in England uniquely. But of course, we have to understand always that without nature playing its helpful role, it would have been impossible for all of the genius of Newcomen and, and Watt if there were no coal in England. And there never would have been a steam engine or Industrial Revolution. Coal, iron ore deposits that could be turned into a modern iron and steel industry. Wonderful transport conditions on rivers on flat land the proximity of the coal fields to London. The ability to build canals to connect the coal fields with the, the new factory towns and allow for low-cost barge traffic. All of this is an example of the very special conditions in which nature and nurture, you could say, the human ingenuity, the spur of profits, the patent law, the rule of law, the market economy came together to make possible this industrial revolution. Have a look at the first individual who gave a modern description of this even though he did not mention industry itself all that much especially not the steam engine because it was occurring exactly the same year he published his wonderful work. You’re looking at Adam Smith, the author of The Wealth of Nations. I think rightly called the father of modern economics. Think James Watt produces the modern steam engine in 1776. Adam Smith publishes The Wealth of Nations in 1776. The American colonies declare their independence and the inalienable right to life, liberty, and the pursuit of happiness in 1776. Quite a year for a takeoff. Putting together the concepts of a modern economy governed by market institutions, technological advance, the availability of crucial natural resources, making possible the birth of a new kind of economic life. Adam Smith explained the workings of a modern economy. He gave us the idea of the invisible hand of market forces helping to spur inventors, manufacturers, farmers so that working together, not through literal cooperation but by trading in the market place, could bring about a modern market economy. And one of Adam Smith’s wonderful lines from The Wealth of Nations explains, and I quote, it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, but to their self-love. And never talk to them of our necessities but of their advantages. In other words we buy from the baker, the brewer, the butcher. It is through market transactions that have them producing their products, buying from the farmers. It is from the manufacturers selling their goods,earning and looking for profits that make the modern world economy work. And we know the images of that early modern era. James Watts, steam engine. The new factory towns with the coal burning and, and the smoke coming out of the high chimneys. The new modern form of transport in the early 19th century, the steam engine pulling railroads and transforming transportation around the world. The steam ship and the new factories that are now powered by not human or animal traction as was before people pulling and pushing machines or animals pulling plows, but now steam providing a massive, unprecedented amount of energy. To drive the new industry to make possible an unprecedented rise of a modern world economy combining the natural resource base, the technological knowhow and a spreading market economy. Now one of the stunned observers of this, one of the critics of of some of the harshness of early industrialization of course was none other than Karl Marx. And Marx and his co-author Friedrich Engels wrote in the Communist Manifesto in 1848 a kind of ironic tribute to the power of this new, modern economy driven by these breakthroughs in technology, changing the world in a unique way. They caught that mood, even if they didn’t like it or fully understand of course what would evolve. And even if they rightly pointed out some of the harsh downsides, especially in that era, it’s worth listening to Marx and Engels, how they describe this new world in 1848. And I quote. Modern industry has established the world market, for which the discovery of America paved the way. This market has given an immense development to commerce, to navigation, to communication by land. This development has in its turn reacted on the extension of industry and in proportion as industry, commerce, navigation, railways extended in the same proportion, the bourgeoisie, the new capitalist class developed, increased its capital and pushed into the background every class handed down from the Middle Ages. A new world indeed had arrived. The Industrial Revolution had brought form, forth a new kind of economic life indeed. A unique form that created the modern era of economic growth.

Bilhetes, Lectures / Readings

A Short History of Economic Development I

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Economic Development is New, Starting Around 1750

The world we’ve seen is divided, is startlingly so, between some very rich countries and some very, very poor countries. A billion people roughly live in the high income world. Another billion, roughly, that live in the poor countries, the low income world. And then another 5 billion, 5 7ths of humanity are in between, in the middle income countries. How did this vast difference unfold? How is it that we have countries like the United States, or some even richer at $50,000.00 per person, per year of income or higher? And some countries like Mali, or Malawi, or Niger at under $500.00 per person per year, less than 100th the income levels of the high income countries? We certainly didn’t start this way a couple of centuries ago. If you look back to the period just before the great take off of modern economic growth, just before what we call the industrial revolution, the world was fairly equal. Equal in poverty. Just about every part of the world was rural. Just about every part of the world had its population and its workforce engage in trying to stay alive as peasant farmers. Small herd of farmers eking out a survival. When it was a bad season, bad rains, heat wave, drought people not only suffered, they died. And that kind of extreme poverty was pervasive. It was everywhere in the world. It was in Europe, as well as in Africa. The world was in a condition of not complete but nearly complete equality but equality of poverty. The story of today’s inequality therefore is also the story of modern economic development what has been called the era of modern economic growth. That’s the period since the start of the Industrial Revolution when some parts of the world were able to experience sustained increases of gross domestic product per person. So much so that they transformed themselves from rural to urban, from peasant agriculture to modern industry and, increasingly these days, to a modern, high tech, knowledge intensive, information and communications technology intensive, service economy. How did this happen? And why did it happen in some places in the world, but obviously not in all parts of the world? In such a way that by now, we have these vast inequalities. What it means is not that, today’s poor countries got poorer over time. From two centuries ago they started poor and by and large, they remained poor. Other parts of the world started poor and by today are very rich. We need to understand the nature of that economic growth. And of course why it has varied so much across the world. And what can be done to unlock that economic growth in today’s low income and especially today’s least developed countries. All this takeoff of modern economic growth, the Industrial Revolution and all that followed, is a new event from the point of view of human history. Humanity, our species, best guess, we’re 150,000 years as Homo sapiens. We are about 10,000 years as civilized Homo sapiens, meaning living in communities dependent on sedentary agriculture rather than as nomads hunting and gathering. So the neolithic revolution which brought us agriculture is about 10,000 years ago. But for a very long time, from the advent of agriculture into the Industrial Revolution itself, progress was very, very gradual, almost imperceptible. We see that very starkly in the depiction, as best it can be estimated, of the growth of the world economy. Have a look at this graph. The line of the world output is essentially flat, nearly at zero, for thousands of years. We show it from 1 AD. Until a take off and when you look at that graph you see the takeoff turn up just begins around 1750. And then it shoots up if we are looking at the total production for the world til today. And that vertical line continues because world economy continues to grow very, very strongly today even if as we have come to expect at different rates in different parts of the world. When you think about the total output of the world, which is the sum of the gross domestic product in each country, we can think of that as having two parts. One is the output per person in the world times the number of people in the world. And so when we ask the question, why did the world economy take off around 1750? Was it due to rising output per person, or was it due to a rise in the number of people? We can say yes. What do I mean by yes? I mean both. Both factors have played a huge role, and strangely enough, nearly simultaneously. The world population went up and down by small amounts for 2,000 years, roughly half a billion people, on the planet. In bad periods like The Black Death the numbers would come down. In good periods the population would increase. But it was very stable, fluctuating around a narrow range. Starting in the middle of the 18th century just like the picture for the total world output when we’d look at the picture for the world population, it just turns steeply upward. Well, it’s obviously related to the fact that because of changes in the economy, changes of know how, more people could be supported because more food could be grown. There was more output per person as well rising productivity. Economic growth in the sense of a rise of gross product per person. We see it again nearly flat imperceptible changes for century after century. Starting around the middle of the 18th century, just as with the population and with the size of the overall world economy, that graph shoots upward. Suddenly, the world shows a sustained and significant increase decade after decade in the output per person. Of course I have to caution, these are estimates, from various kinds of evidence, of what the world looked like before 1750. But it was not a world of economic growth. It was not a world of wealth and poverty. It was a world of poverty. It was a world that could produce great monuments beautiful treasures for human history. Like Notre Dame Cathedral and so many splendid architectural triumphs around the world. The Great Wall of China or Hagia Sophia in Constantinople today’s Istanbul. But it was a world in which most people lived difficult lives, scratching out an existence, trying to grow enough food to survive season by season. One of the greatest economists of a modern history one of the leading thinkers of the 20th century, John Maynard Keynes, wrote a quite remarkable description of this long, long period of near stasis. Near stability and unchanging technology from the time of the Roman Empire until the onset of the Industrial Revolution. And I’d like to quote from one of his great essays, Economic Possibilities for our Grandchildren, written in the great depression of the last century, saying how powerful technology can be to help humankind improve its lot. Keynes wrote, and I’m quoting, from the earliest times of which we have the record, back say to 2,000 years before Christ, down to the beginning of the 18th century there was no very great change in the standard of life of the average man living in the civilized centers of the earth. Ups and downs, certainly. Visitations of plagues, famine and war, golden intervals. But no progressive violent change. This slow rate of progress or lack of progress was due to two reasons, to the remarkable absence of important technical improvements and to the failure of capital to accumulate. The absence of important technical inventions between the pre-historic age and the comparatively modern times is truly remarkable. Almost everything which really matters and which the world possessed at the commencement of the modern age was already known to man at the dawn of history. Language, fire, the same domestic animals which we have today. Wheat, barley, the vine and the olive, the plow, the wheel, the oar, the sail, leather, linens and cloth, bricks and pots, gold and silver, copper, tin and lead, and iron was added to the list before 1000 BC. Banking, statecraft, mathematics, astronomy, and religion. Keynes’s point is technology is crucial. And for a very long period technology was relatively unchanging to the point that one could have taken a farmer from Roman times, and if possible through a time machine, put them down in England at the beginning of the 17th century. And they would have felt pretty much at home. [SOUND] Same techniques, similar living standards a world that would have looked quite the same over a span of 17 centuries. But then dramatically everything changes and that is our next subject. To understand the Industrial Revolution, how it began and how it changed human history and human destiny.

 

Lectures / Readings

A Short History of Economic Development III

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The Great Waves of Technological Change

The Industrial Revolution had occurred. The new era of modern economic growth was underway. And, markets drove this process. Technological advance drove this process. First in a highly uneven way where just a few parts of the world were party to this new form of industrial economy and eventually to nearly the entire world. This is the period that the great economic historian and great conceptualizer of economic growth Simon Kuznets called the Era of Modern Growth. It is a unique period of human history. Now, we have defined economic growth as the sustained increase of gross domestic product per person. Or if we look at the whole world, we can call it the gross world product, which is the sum of the gross domestic products of all countries, divided by the world population. And in the era of modern economic growth, the period studied by Simon Kuznets, that world output per capita has increased on a sustained basis for more than 200 years now, in a very very uneven way, however. Some places have achieved marked economic growth for nearly two centuries.

Other places, not so much. Some remained poor, almost until the current day and some very particular places in the world, the world’s poorest of course, are places that have not yet achieved that takeoff of modern economic growth. We need to understand that process, and in order to do so we need to make a quite basic distinction of two kinds of economic growth. Each one is characterized by a sustained increase of output per person. But they really have a very different underlying dynamic to them.

One kind of growth, is the growth of the technological leaders in the world. In the early 19th century that was certainly England. This is where the Industrial Revolution occurred. In the middle of the 19th century and towards the end of the 19th century, Germany and the United States became the great technological leaders, even overtaking Great Britain in that role. In the 20th century, the United States was by far the most technologically dynamic part of the entire world. Though a number of other countries, certainly inventors in different parts of the world contributed to the worldwide stock of technological knowledge. But for those leaders there’s a very particular kind of economic growth, driven by technological advance. By new discoveries, innovations, new ways to do things thatthen spread and give an impulse of sustained growth to the economy. That’s what happened after James Watt invented his improved steam engine in 1776. It was taken up in factories, it was taken up in mines, in the locomotives of steam engines, in steamships and in many other technologies. And that gave a wave of economic growth of the technological leaders, those that invented those new breakthroughs. There’s a second kind of economic growth. That’s the economic growth of a country, that for whatever reason of history and geography. Perhaps resource based, perhaps just bad luck or bad policy. Stayed back, as those leaders charged ahead.

And so, a country like China, for example, did not industrialize in the 19th century, where England and the United States and Germany and other countries partook of the Industrial Revolution, and developed industrial economies. At some point, countries like China and we could say any of the emerging economies today. Looked out and saw examples of other countries far in front of them in technological lead, and with far higher income levels and typically as we know therefore much different conditions of life. Urban, generally longer life expectancy, generally healthier lives, generally more education, more public services, more opportunities and so forth. And those laggard countries had to solve a problem: how do we catch up? And that gave rise to a different kind of growth, and that is the kind of economic growth where a country that is lagging in technology and in income per capita, makes a tremendous advance quite rapidly, in narrowing the technological gap with the leader. These two different mechanisms of growth, the first one based on continuing innovation, and the second one based on closing a gap that has opened up by taking on the technologies of those advanced countries that have already been able to use them. Form the two major ways that economic growth proceeds in the world. The failure to understand these differences leads to all sorts of confusion in the discussion of economic development, because the kinds of institutions that countries need to innovate, for example, to have that first kind of growth. Endogenous growth, meaning growth from within the system itself where technological advance gives rise to more technological advance, those institutions are quite different from the catching up institutions. Those kinds of institutions, where the goal is to close the gap as fast as possible with the countries in the lead. For those institutions a stronger role of government, for example, can often be a major spur to a rapid, rapid push of economic growth. To close the gap that is already opened up. You don’t need so much innovation, but you do need widespread investments, development of infrastructure, the ability to bring in technology from abroad to close the gap. And so understanding the two kinds of growth, and therefore the two kinds of institutions that are needed to solve the growth problem is tremendously important. I want to focus first on endogenous growth, the growth of the technological leaders. It’s the kind of growth where one good thing leads to the next. Economists sometimes call this an increasing returns to scale process, and you get an ongoing process out of that that can be very dynamic. Clearly, in the case of modern technology, going back to the onset of the Industrial Revolution, there have been waves of technological breakthroughs. There have been many theorists of those waves: Kondratieff, the Russian technology historian was one of them with great influence in thinking from his writings until now. And one can think about the era of modern economic growth from the middle of the 18th century till now, having a series of waves, some people say three waves of Industrial Revolution. Others date them as four waves. But the notion is that these waves of technological change in the leading countries are the drivers of this process of endogenous economic growth. One classification says that there have been five waves until now. I think it’s a worth while idea for us to look at. The first of these Kondratieff waves in this particular classification, puts the stream engine at the core from 1780 to 1830 roughly from the time of James Watt’s invention to its wide spread application. The second of these waves is the great burst of railway and steel. And even if the technological roots of railways and steel come before 1830 the take off of those industries could be dated roughly to that time. The third of these waves is the age of electricity. Again, the discoveries of electricity date back to Benjamin Franklin, flying the kite and understanding electricity in the atmosphere, static electricity, to Michael Faraday and the discovery of induction and the beginning of the understanding of electromagnetism. In the first half of the 19th century, but then Edison and others applying the new knowledge of electricity to give us electric lighting, incandescent bulbs, city streets with electricity. And then of course, moving electricity into the homes and into the factories towards the end of the 19th century. After the Age of Electricity which is put 1880 to 1930 is a fourth wave led in this classification by automobiles and petrochemicals. Plastics and new polymers and new materials industries and much more. One could add, of course, the age of modern aviation. Again, the underlying technologies for the automobile date to the end of the 19th century, the internal  combustion engine which powers automobiles till today. But the economic, dramatic application began in the early years of the 20th century with the Model T. With Henry Ford’s inventions of modern production processes on the factory line. And with the mass production of automobiles which absolutely transformed the way we live, where we live, how we produce and of course, how we trade in the economy. The fifth wave in this classification dates to around 1970 but again with roots that go back much earlier. This is the knowledge economy, the age of computers, the great advent first of the huge mainframe computers in the 1930s and 1940s, much spurred by World War Two and the immediate aftermath of World War Two. And then the discovery of the transistor at the end of the 1940s and the invention of the integrated circuit which gave rise to the modern computing age, mobile phones and all the rest of industry that has been made possible by Moore’s Law. Moore’s Law you’ll recall is the fact that roughly every 18 to 24 months the number of transistors that can be put onto an integrated circuit has doubled. This means that the ability to process, to store, to transmit data has roughly doubled, or the cost of doing so has roughly fallen by half every 18 to 24 months. Well, you do that over a period of more than 50 years and you arrive at roughly a billion time improvement in the ability to process, store, and transmit information. And we know that is revolutionizing the world in this great fifth wave of the information and communications technology driven era. Will there be a sixth wave of technological change? The one we really need now, a wave of sustainable technologies. Ways to produce energy, ways to mobilize energy, ways to transport ourselves, and transport goods that take the massive pressures and the destructive forces off of our ecosystems. This is the great challenge. We’ve had now 250 years of modern economic growth. We’ve had waves of great technological change and we need to enter a new era. A new wave of technology, of sustainable development technologies in the way we live. The way we protect the planet. And at least we can take confidence from the past. And also grab on to some of the great scientific and technological insights that we have at hand. To give us hope and confidence, and determination to move forward to that next great wave of endogenous growth. This one based on protecting the planet and achieving sustainable development.