What is History 11: World Economic History

Breadtag Sagas ©: Author Tony, 4 May 2020

My what is history series somewhat naively perhaps looks at history from the broad perspective of what processes an intelligent naked ape might go through to develop civilisation.

From that perspective the study of human history should also consider the external forces, including geography, environment, disease and natural disasters that have shaped the development of humanity. At the present time climate change makes this approach both pertinent and urgent.

The approach is not meant to replace mainstream histories, merely in the new era of big data, storage and retrieval to add to them. And, to perhaps provide a different flavour to the study of humanity.

The articles in the What is History? series are: 1 Introduction, 2 Sleep Patterns, 3 The Medieval Mind, 4 Love,  5  EH Carr Historians & their facts, 6  Religion, 7 EH Carr Causation in History, 8 EH Carr History as Progress, 9 Guns, Germs and Steel: Overview, 10 Polynesia A Natural Experiment of History, 11 World Economic History, 12 References from Guns, Germs and Steel and 13 World History and Big History with other articles to come.

What is History 11: World Economic History to 1990

What is History: Richard Baldwin The Great Convergence 2016

Introduction

I was planning to write the next Jared Diamond Guns, Germs and Steel articles following on from 9 Guns, Germs and Steel: Overview and 10 Polynesia A Natural Experiment of History and I will soon. I accidentally picked up a second hand copy of The Great Convergence by Richard Baldwin 2016 from Canty’s bookshop and decided that it had important information that couldn’t wait.

I usually don’t have much time for macroeconomists and rarely read economics books. But, at least Baldwin is interested in economic history and covers a period from 200,000 years ago to the present, which is extraordinary, certainly a much longer period than most economists ever think about. He has some quite important things to say about the early history of humankind and on the development of world economics up to the modern era.

I had been introduced to Kondratiev cycles (or waves) some time ago by Fred Emery (See Future Predicting and Q Research methods). Fred was interested in the modern modifications of the cycles (see Wikipedia below). He was also interested in the energy implications of the following:

• Industrial Revolution (1771)
• Age of Steam and Railways (1829)
• Age of Steel and Heavy Engineering (1875)
• Age of Oil, Electricity, the Automobile and Mass Production (1908)
• Age of Information and Telecommunications (1971)

(Wikipedia, Kondratiev Wave)

But, Fred thought the new forms of energy or ways of using new technologies were still intricately tied up in the Kondratiev idea of 40-60 year cycles of expansion, stagnation and recession, with their impacts on labour, production and prosperity.

Richard Baldwin is also interested in phases (cycles) in economic history but not wedded to equal time periods. Phase 1 Humanising the globe is from 200,000 years ago to around 12,000 years ago. Phase 2 Agriculture and the first bundling is from 12,000 years ago to around 200 years ago. Phase 3 is from around 1820 to 1990, the industrial revolution, the age of steam, railways etc., and globalisation’s first unbundling. Phase 4 is from 1990 and begins with the ICT revolution (information, communications technology) and is the second unbundling.

Richard Baldwin The Great Convergence 2016

Some of this is complex stuff and Baldwin’s main interest as an economist is what happened from 1990 onwards and why. And, what the implications are for future economic policy. From my point of view as a non-economist, while the overview of phase 4 is fascinating, I’m not particularly interested in the nitty gritty or in developing economic theory on what happens next in terms of economic policy implications.

First, although I am interested in the future and predicting the future in a generalist sense, economics is not my focus. Second, in the context of my what is history series I am much more interested in events pre-1990 and earlier, particularly much earlier. And, third I do not think I have the competence to judge Baldwin’s economic theory ideas on what we should do next in the twenty-first century.

Therefore, I am only interested in the early chapters of Baldwin’s book and leave the rest to those more competent to evaluate the complex economic theory of the remainder of the book.

Nevertheless, I don’t want to leave you in the lurch should you wish to pursue this further and provide a video of Baldwin discussing his book and answering questions from other economists in the Further Information section as a resource. I found the video fascinating and recommend it to you.

Overview of The Great Convergence

Baldwin’s thesis of what happened from 1820 to 1990 and post-1990 is shown in figure one. The critical period is from 1820 to today. Economists have sound reasons to date the industrial revolution from 1820, though of course elements began earlier and historians would probably date the beginnings earlier too.

Between 1820 and 1990 he defines as the industrial revolution the period where the G7 nations gained most over the rest of the world in economic growth. He calls this the great divergence or the first unbundling and the first stage of globalisation. I won’t go into bundling and unbundling as it is technical and not necessary to the overview.

He says that there are three binding (or cascading constraints) that prevented economic growth and globalisation pre-the steam age, which meant that production and consumption were limited to local regions. These are as shown in Diagram 1:

1. High trade costs,
2. High ICT costs (information & communication),
3. High face-to-face costs.

Baldwin 2016 Diagram 1

During the industrial revolution and up to 1990 two of these three constraints prevented world economic growth, but from 1820 trade costs dropped in a continuous trend to today. ICT costs had dropped a little before 1990, but from 1990 they accelerated, whereas face-to-face costs remained high and still are.

Baldwin’s Figure 1 shows this. The shocking drop in the G7 countries share of world income was picked up by just six industrialising nations the I6, which include China, Korea, India, Poland, Indonesia and Thailand. The reason certain countries have benefited while others have not depends partly on distance from certain G7 countries because face-to-face costs remain high. For example, it is much easier for a German engineer to fly to Poland than say to South America. Similarly, it is much easier for an American to fly to Mexico than to South America.

Baldwin 2016 Figure 1

These I6 countries, however, have mainly benefitted from or through value adding chains. These are where corporations in rich countries moved their factories to poorer countries where wage costs are lower, but in doing so they also provided information or knowledge to these countries which previously was tightly held by the rich countries.

Figure 2 also shows this in a slightly different way.

Baldwin 2016 Figure 2

Let’s move on to the elements of Baldwin’s book that relate to our topic of What is History?

Climate change in the last 200,000 years

Baldwin’s Figure 4 is a fascinating and scientifically sourced graph that shows the global average temperature in terms of changes of units of plus ten to minus fifteen degrees difference from today.

Baldwin 2016 Figure 4

Humans Homo sapiens evolved more than 200,000 years ago, but the last 200,000 years represent important stages in the development of modern humans. Look at the shape of the curve. Temperatures declined slowly then jagged up quickly around 128,000 years ago. They dropped quickly again to around 107,000 years ago then drifted slowly down for 80,000 years to about 18,000 years ago.

Baldwin’s phase 1 the humanisation of the globe began when modern humans left Africa for the last time around 83,000 years ago and gradually populated the globe. Temperatures rose again to roughly the level of today about 12,000 years ago or at the beginnings of agriculture.

Agriculture did not begin as progress — a leap forward for ignorant hunter gatherers — as often suggested by 19th century imperialists in the UK. Hunter gathers were far from ignorant as shown, for example, by Richard Evans Schultes throughout his career. Modern theory on the beginnings of agriculture whilst still debated tends to suggest that agriculture, where it began uniquely in several locations, but especially in the fertile crescent probably began in times of local scarcity where other food resources had disappeared. In other words agriculture tended to be taken up by necessity rather than choice.

The most interesting thing to me in the graph in Figure 4 is that from 12,000 BCE to today temperatures while fluctuating remained remarkably consistent for the whole period that humans have engaged in agriculture.

The tiny blip at the tail end of the graph represents human induced climate change. (I hate the word anthropocentric as confusing and unnecessary jargon.) Humanity relies on a very limited series of grain crops for the bulk of our food, which is another reason why we should be extremely worried about climate change.

Where Civilisations Began

Baldwin’s Figure 6 shows that the earliest civilisations arose in areas favourable to agriculture and in river valleys. Mesoamerican civilisations arose similarly but later.

Baldwin 2016 Figure 6

Figure 8 Shows that the global economy was based on production/consumption clusters that were initially separate but by 500 BCE expansions bought three of the hubs (Egypt, the Middle East and India/Pakistan) together.

Baldwin 2016 Figure 8

Figure 9 Shows cities with a population of over 100,000 from 1000 BCE To 1000 CE. Apart from the Greek and Roman civilisations at 500 BCE and some European cities in 1000 CE, the five time periods are dominated by Asia and the Middle East. It must be remembered that from early history until very recently large cities were unhealthy places whose population needed to be constantly replenished from the countryside.

Baldwin 2016 Figure 9

Trade

Figure 10 shows the trade routes across Eurasia both land and sea from 200 CE to 1300 CE. Although there was international trade the goods needed to be luxuries because transport was very expensive.

Baldwin 2016 Figure 10

The rise of Europe

In the article on Guns, Germs and Steel an Overview both John McNeill and I said that Diamond’s chapter on why Europe became the dominant player in terms of wealth and power was untenable. (John McNeil also made the point that it was not the east-west axis of Eurasia that was important geographically but that from the beginnings of agriculture Eurasia was the greatest concentration of population on Earth.)

I think that Baldwin has a better answer also though it is conventional and incomplete. One part of the answer not mentioned by Baldwin was the transmission of Greek Classics into Europe in the Middle Ages from the Arab and Muslim world, which stimulated science and learning. Baldwin mentions the Renaissance and the Enlightenment, voyages of discovery via the Atlantic and the Columbian Exchange. But, even these are indicators rather than quite sufficient in themselves.

The Black Death

In this time of coronavirus or Covid-19, I still haven’t got around to the impacts of disease on history mainly because it is so difficult. For example, with the plague of Athens 430 BCE there is no general agreement on the disease involved or on the historical impact. With the Justinian Plague 541-2 CE, it was discovered in 2013 from DNA studies that the plague was indeed the Plague or Black Death, Yersinia pestis but the broader historical impact is also difficult to define. Even the impact of the 1918/19 influenza pandemic is shrouded with difficulty despite several excellent books on the topic.

Baldwin contends that the shock of the Plague in the fourteenth century could have helped the West but hindered the Middle East. He says one explanation is that Western Europe had been stagnating in an equilibrium dominated by rural nobles, while Islamic civilisation was flourishing.

Baldwin 2016 Figure 11

Figure 11 shows the impact of the Plague on British incomes (not mirrored, for example in France). English living standards progressed modestly rising by 26 percent over three hundred years — the period that the Plague continued recurrent in Europe. This modest gradual rise may have stimulated the greater 13 percent rise from 1670 to 1820. Before 1350 incomes stagnated at near subsistence levels for thousands of years.

Baldwin’s idea is interesting but hardly definitive. His data in other figures above are more impressive to my mind. However, in context of his other figures in this account one should mention that there were key periods in human history when new diseases became important.

Tuberculosis for example may have pre-dated agriculture and been present in cave dwelling humans. After the beginnings of agriculture new diseases, particularly zoonoses (transmission from animals to humans) emerged, because of animal-husbandry, close association of herdsmen and their charges and crowding of humans in settlements. As world trade routes developed so did the transmission of epidemic diseases and finally pandemic diseases along those trade routes. Finally, overpopulation and the entry of humans into new areas (such as forests in Africa and Asia) and the massive increase in air travel have seen the development of new diseases and their transmission world-wide in the decades before and after the second millennium.

The World Economy before the Industrial Revolution

Baldwin states that incomes in most of the world were at near starvation levels for most of history. Before 1000 CE only the ancient civilisations enjoyed income above this level and even then not by much.

Figure 12 shows world output and population shares in 1500. Per capita incomes were not radically different across the globe. Asia especially China and India dominated the world economy and world population.

Baldwin 2016 Figure 12

Figure 15 shows the same information as Figure 12 for the year 1820. The situation hasn’t changed much, except that Western Europe’s share of the world economy has grown markedly, while its population hasn’t. But, Asia particularly India and China still dominate the world economy. China has experienced a demographic boom, so its per capita income is declining.

Baldwin 2016 Figure 15

Comment

The climate change information in figure 4 is perhaps the clearest information I’ve yet seen of how climate has impacted humanity over human history. The flat average temperatures with minor fluctuations, throughout the history of human agriculture make the temperature blip at the end of the graph chilling. The blip is unquestionably and definitively caused by human induced climate change.

The remainder of the information is also fascinating and gives us pause in understanding global history. For the past two hundred years historians in the West have tended to be massively Euro-centric probably because of the hubris and economic divergence from the rest of the world produced by the industrial revolution. There is more to world history and to world economic history than the rise of Europe.

In What is History 1: An Introduction I introduced at least three ideas that are frequently ignored in the mainstream discipline of history:

1. The biological evolution of humanity is essential to understand history.
2. Environment (including disease) shaped history in major ways too.
3. Specialist historical approaches also shed light on conventional history.

For the third idea, I used Daniel Yergin’s history of oil and its impact on the twentieth century and Niall Ferguson’s financial history of the world (the ascent of money) as two examples, which provide some economic perspective on world history.

Economic analysis of the course of history is important too. Many people have noted this in many books but I think Richard Baldwin does a fairly good job with his Phase 1 and Phase 2 analysis of economic history from 200,000 BCE to 1820 CE. Phase 1 was the humanisation of the globe up to the beginnings of agriculture around 10,000 BCE (I’d say 12,000 BCE). Phase 2 was localising the human economy from 10,000 BCE to 1820. Phase two in brief summary according to Baldwin consists of:

1. The rise of Asia (10,000 to 200 BCE)
2. Eurasian Integration (200 BCE to 1350)
3. The rise of Europe (1350 to 1820)

Richard Baldwin is primarily a macroeconomist (though one who does not ignore economic history) and his primary aim is to develop a theory of the world economy particularly for Phase 3 globalising local economies (1820 to about 1990) and Phase 4 globalising factories (1990 to the present).

Nevertheless, his analysis of Phase 1 and Phase 2 provides us with an excellent context for adding the background, with a strong theoretical input of economics to our other external factors, which have had a major impact upon human history.

I think Baldwin’s ideas fit well into the framework of What is History? that I am developing, which tries to provide an integrated overview of all the elements that make up world history from the rise of an intelligent ape. An intelligent ape that was perhaps thrust onto the world stage by accident, an asteroid, that brought the the age of the dinosaurs to an unpleasant end.

Key Words: What is History, Richard Baldwin, the great convergence, economic history, world economic history, Kondratiev cycles, industrial revolution, age of steam and railways, age of steel and heavy engineering, age of oil, electricity, the automobile, mass production, age of information and telecommunications, rise of Asia, rise of Europe, humanising the globe, the beginnings of agriculture, the plague, the black death, new diseases, constraints, costs, transport, communication, face-to-face, G7 countries, I6 countries, globalisation, climate change, civilisations, cities, incomes, production, trade

Further Information

Kondratiev Cycles

Wikipedia on Kondratiev Waves

Richard Baldwin Talks about his book and his theories

Launch of The Great Convergence Petersen Institute for International Economics 15 November 2016 (1h 15 min).

Although it appears long Baldwin talks for only about half an hour and presents his theory as an expanded summary. Well worth watching.

Reference Materials

Baldwin provides reference information in the text accompanying his figures. Most of my comments are about general things which are easy to look up.

I did have a quick look on my bookshelf for books on the Plague, influenza and disease in general. There were quite a number — too many to write down. I also have an encyclopedia on pestilence somewhere and a couple of others. The books are all worth reading but I’d recommend Marriott, Barry and Kolata on the Plague and flu, respectively.

Disease Books on my Bookshelf

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