Industry in the bedroom, productivity in the mills

A Farewell to Alms
September 7, 2007

Howard Davies ponders an intriguing theory of economic growth

My first paid employment was in a Lancashire cotton mill at the bottom of our road. The mill straddled the river Irk, which lived down to its name. At 16, I was engaged for two shillings and five pence an hour in what was misleadingly called "conveyancing". That amounted to pushing elderly trucks built like railway wagons and loaded with curtain fabric from one part of the mill to another. It was back-breaking work, but thankfully intermittent as the superannuated machinery often stopped. The mill itself, a remarkable survivor into the early 1970s, closed a few years later.

So, for me, the Industrial Revolution does not seem a remote phenomenon. The consequences, for good and ill, were all around in my childhood. Today, they are everywhere in the world: dead fish float through Harbin in northern China or São Paulo in Brazil, just as they did through north Manchester. Manchester's entrepreneurs, and subsequently its liberal economists, have a lot to answer for.

Why did this revolution begin among the dark satanic mills in and around my home town, which is now more famous for football and nightclubs? That is the question Gregory Clark seeks to answer in A Farewell to Alms , modestly subtitled "A Brief Economic History of the World".

In fact, Clark turns the question on its head. For him, the issue is rather why the Industrial Revolution did not happen earlier. Indeed, he argues that "the mystery of why the Industrial Revolution was delayed until around 1800 is the great and enduring puzzle of human history".

This is a rather grandiose claim, and there are a few other historical puzzles that have detained historians from time to time, but let that pass. What is his answer to the examination question he has set himself?

His first point is that the Industrial Revolution is misnamed. The productivity acceleration that characterised it applied to the agricultural sector just as much as it did to manufacturing. So he sees the challenge as being to explain why and how, from about 1780, England achieved productivity gains, associated with population increases, that allowed it to break out of the Malthusian trap in which other societies languished for so long.

Clark briefly and aggressively dismisses three conventional explanations. He rejects exogenous growth theories on the grounds that there were no obvious changes in legal institutions around the time of the Industrial Revolution.

He dismisses multiple equilibrium and endogenous growth theories. He argues that none of these explanations is adequate to distinguish English societies in the late 18th century from other societies at different points in history where plausible combinations of economic inputs and stable institutions were similarly in place.

The answer to the conundrum that he posits is not presented as punchily as the question. The shortest summary he offers is that "millennia of living in stable societies, under tight Malthusian pressures that rewarded effort, accumulation and fertility limitation, encouraged the development of cultural forms - in terms of work inputs, time preference and family formation - which facilitated modern economic growth". He argues that the dramatic acceleration in economic growth that occurred in England from 1780 was the result of a kind of Darwinian process of natural selection. He produces evidence that prosperous families in England were systematically more successful than others at reproducing themselves. And, crucially, they passed down through the generations attitudes to hard work, saving and deferred consumption that were the essential prerequisites of a productivity breakthrough.

He acknowledges that particular inventions that made manufacturing processes more efficient were significant, but he argues that population growth was just as important: "The appearance of dramatic discontinuity in the Industrial Revolution comes from the coincidence of productivity growth in England and an unexpected and unrelated explosion in the English population in the years 1750 to 1870. Britain's rise to world dominance was thus a product more of the bedroom labours of British workers than of their factory toil."

This is a provocative thesis, and Clark goes out of his way to attack economic historians associated with rival explanations. His work will, therefore, not go without challenge. Critics may identify some inconsistency between his Darwinian explanations of natural selection, buttressed by statistics on the fertility rate of upper and professional classes, and the sentence quoted above about the reproductive efforts of the workers.

Others may argue that his own theory, like those he debunks, finds it difficult to distinguish precisely the unique characteristics of late 18th century England along the dimensions he considers important.

But Clark writes entertainingly, and much of the charm of the book lies in his eclectic data. He shows that more people in England were aware of their true age than in other comparable societies, suggesting a greater consciousness of the significance of future consumption. He argues that the English had a lower discount rate than was typical in other apparently comparable societies. (He notes that American teenagers have a phenomenally high discount rate, which may explain in part the disappearance of household savings in the US).

The last section of the book, which is perhaps less successful than the earlier ones, attempts to explain why economic growth has not spread so easily to many developing countries. Clark's main comparison is between England and British India, where he sees systematic over-manning, which prevents the productivity gains from new machinery being realised in practice. Development economists will, I think, regard this as a partial assessment.

And, in a final short paragraph designed to eliminate such remaining friends in the economic profession as he may have, Clark argues that "the deluge of economics journal articles, working papers and books - devoted to technically detailed studies... serves more to obscure than illuminate... the great engines of economic life in the sweep of history seem uncoupled from these quotidian economic concerns". As a result, academic economists are now, he believes, systematically overpaid. I shall keep A Farewell to Alms beside me at the next meeting of the London School of Economic's professorial salary committee.

Howard Davies is director, London School of Economics.

A Farewell to Alms: A Brief Economic History of the World

Author - Gregory Clark
Publisher - Princeton University Press
Pages - 440
Price - £17.95
ISBN - 9780691121352

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