Why 2022 was the year of global economic history
A review of 'How the World Became Rich'
For many, 2022 was a year to forget. But, paradoxically, it was a great year for the most optimistic of sciences: global economic history. Perhaps because of the economic malaise of the year, economic historians found it necessary to remind us that we are living at levels of unprecedented prosperity.
The one which made the biggest splash was undoubtedly Brad de Long’s Slouching Towards Utopia. De Long delivers a tour de force, engagingly covering twentieth-century economic thought and events. Although I received an advance copy, it was only the last month that I could dive deep - and discover his references to the Boer War and Jan Smuts, for example.
Oded Galor’s The Journey of Humanity offers a sweeping narrative of humanity fight against the Malthusian trap. Informed by Galor’s own research, the book is best at linking the historical evidence to how economists think about economic growth.
Most economists would agree that GDP is, at best, a limited measure of our progress. Some, like me, might argue that it is still a useful measure, especially for countries, like South Africa, that still have high levels of poverty. In Human Development and the Path to Freedom, Leandro Prado de la Escosura makes the case that health, access to knowledge, standards of living, and civil and political freedom can substitute for GDP per head as more accurate measures of our well-being. A thought-provoking and important book.
And how could I not mention Our Long Walk to Economic Freedom, my own attempt at offering an accessible (and perhaps even entertaining) introduction to global economic history, written from a South African perspective? (If I may have one criticism of the other books, with Human Development perhaps the exception, it is the invisibility of Africa and Latin America.) Although Our Long Walk was first published in 2021 in South Africa, I added substantial revisions and improvements to the original version, including an additional chapter for this Cambridge University Press issue. The happy news for Afrikaans readers is that it will soon be available as Skatryk: Waarom ons beter leef as ons voorgeslagte. More on that later.
But my favourite global economic history book of 2022 was undoubtedly How the World Became Rich by Mark Koyama and Jared Rubin. I was lucky to again get an early copy, with a request to review the book for The Economic History Review, and as the review below reveals (now with footnotes), I enjoyed it thoroughly. For those interested in what the latest economic history research teaches us about our remarkable prosperity, How the World Became Rich should be first on your reading list.
There were several other texts that had a more regional or topic focus. I enjoyed Ran Ambramitzky and Leah Boustan’s Streets of Gold which told the story of immigrant success in the United States. Although I haven’t yet read it, Alan Blinder’s A Monetary and Fiscal History of the United States has attracted impressive reviews. Leigh Gardner’s Sovereignty without Power asks why Liberia struggled to benefit from its independence. Here’s what I wrote as a blurb:
Liberia is an enigma, an African country founded on the promise of economic freedom. Leigh Gardner again shows why she is one of the most intuitive and resourceful economic historians of Africa, tackling the big question of why Liberia has not yet delivered on the promise. In answering this big question, we learn much about migration, infrastructure investment and failed government policies, lessons of relevance to many other developing countries today.
History, of course, doesn’t end, and neither does the writing of it. There are already excellent (economic) history books published in 2023 - just see Maarten Prak and Jan Luiten van Zanden’s Pioneers of Capitalism. And there are some fascinating new ones on the way: Simon Sebag Montefiore’s The World: A Family History of Humanity or Peter Frankopan’s The Earth Transformed: An Untold History, for example. But it will be difficult to match the class of 2022, even if I’m somewhat biased.
A review of How the World Became Rich
That we live longer, more prosperous lives today than any previous generation would not come as a surprise to an economic historian. But, for a variety of reasons, many outside the field find this deadpan fact hard to believe. A cluster of recent books have tried to convince the non-believers: Hans Rosling’s Factfulness or Steven Pinker’s Enlightenment Now, to name just two. And accessibility to long-run data, like the wonderful Our World in Data website, has helped to turn pessimists into optimists.
Yet what many of these books and resources do not do, is explain to its readers why we live so much better lives than our ancestors. That is the purpose of Mark Koyama and Jared Rubin’s How the World Became Rich. Koyama and Rubin are the perfect candidates to write such a book. Both have contributed to the revolution within the field of economic history over the last two decades – the emergence of a burgeoning literature that has been called the New Historical Economics[1] – using innovative tools and techniques to answer the simple but powerful question: why is it that some countries are rich and others not (yet)? How the World Became Rich offers a fitting synopsis of the progress economic historians have made in answering this question.
Koyama and Rubin chose to divide their book into two sections: the first half spells out the leading theories of how the world became rich, the second half applies these theories to why it was Britain that first experienced an industrial revolution and its propagation across the globe afterwards. In five chapters – on geography, institutions, culture, demography and colonialism – they do a fine job of distilling the most compelling explanations at a level that is accessible to a general (or undergraduate) audience. What is more impressive is that they manage to do so without giving up on comprehensiveness. I will add that despite the claim that the five explanations are discussed without favour, their own preferences, notably the cultural explanation, do shine through. Colonialism (I would have preferred ‘exploitation’) could also have been given a more balanced treatment (even if I share the authors’ sentiments on its relative importance in explaining the wealth of nations). It is useful to keep in mind that another set of authors would probably attach different weights to these explanations.
The magic happens in the second part though. Here the authors use the theories they discussed in the first part to explain why it was Britain that experienced an industrial revolution. To do so, they first discuss why it was Europe that experienced a divergence from the rest, then why it was northwestern Europe that diverged from the rest of Europe, and then why England and not Holland. Institutions play an important role, but so, too, does culture. It is not that the other explanations do not matter; it is that they all interact in a positive way with institutions and culture. The success of the places that follow in Britain’s footsteps hinges on their ability to adopt the appropriate institutional reforms, but there is no template: as the authors argue, these reforms ‘will always be context-dependent and politically constrained’. The point is: it is not an easy thing to adopt policies that result in economic growth. If it was easy, we would all live like the Swiss.
Although there is much to recommend, there are also some areas for improvement. I will focus on two, one about structure and one more substantive.
I understand why the authors chose to write the book in two parts, dividing it roughly into a theory and applied section. But this creates confusion. Several times in the first section the authors interrupt their own argument, saying this will be addressed in the second section. And several times in the second section the authors have to remind the reader that this was covered in the first section. To put a number on this: the word ‘chapter’ appears more than 150 times after the introduction. There is also a practical concern: this book has great potential as a textbook, but such cross-referencing makes prescribing only certain chapters awkward.
A more substantive concern is that the book is largely a story about northwestern Europe and its miraculous economic take-off. This is partly by design, of course. If you wish to explain the miracle, it helps to carefully study the place where it emerges first. But a more accurate title may have been: ‘How Britain became rich, and how the rest followed’. A book that purports to distil the lessons from global economic history can do more to include lessons from outside the European continent. ‘Europe’, for example, is mentioned more often than ‘Africa’, ‘Asia’ or ‘America’ combined. Or take an example from the region I call home: of the 23 African countries south of the equator, only three are mentioned, two of them only once (Burundi, Botswana and DRC). How do I explain to my students that their region is not part of the story of how the world became rich? Is it because the lessons from these countries are simply not generally applicable?
One way, perhaps, to present an externally valid, global perspective is to cite papers published outside the top economics journals and by scholars outside the top departments. The authors have strong selection preferences when they discuss the global periphery: the DRC is included because of the prominent work by a team of Harvard economists. Peru is mentioned because of Melissa Dell. So, too, Indonesia. But perhaps more can be done to include the fascinating (and all of them prize-winning) work on Chile[2], Ghana[3], Uganda[4], French Africa[5], Zimbabwe[6], or Thailand[7], often by authors based in those countries.
How the World Became Rich is a timely, consolidated and refreshingly succinct answer to one of the biggest questions in the social sciences: why is it that we are so much better off than our ancestors? I learned a lot, especially on a second reading. It is likely to be a seminal text for years to come. Hopefully its lessons will ripple through the social sciences, so that those tackling another big question – what can we do today to make the world a more prosperous place? – have more concrete answers at hand.
[1] Bisin, Alberto, and Giovanni Federico, eds. The handbook of historical economics. Academic Press, 2021.
[2] González, Felipe, Mounu Prem, and Francisco Urzúa. "The privatization origins of political corporations: Evidence from the Pinochet regime." The Journal of Economic History 80, no. 2 (2020): 417-456.
[3] Aboagye, Prince Young. "Inequality of education in colonial Ghana: European influences and African responses." Economic History of Developing Regions 36, no. 3 (2021): 367-391.
[4] De Haas, Michiel. "Measuring rural welfare in colonial Africa: did Uganda's smallholders thrive?" The Economic History Review 70, no. 2 (2017): 605-631.
[5] Tadei, Federico. "Measuring extractive institutions: colonial trade and price gaps in French Africa." European Review of Economic History 24, no. 1 (2020): 1-23.
[6] Chingozha, Tawanda, and Dieter von Fintel. "The complementarity between property rights and market access for crop cultivation in Southern Rhodesia: evidence from historical satellite data." Economic History of Developing Regions 34, no. 2 (2019): 132-155.
[7] Chankrajang, Thanyaporn, and Jessica Vechbanyongratana. "Canals and orchards: the impact of transport network access on agricultural productivity in nineteenth-century Bangkok." The Journal of Economic History 80, no. 4 (2020): 996-1030.
This review was commissioned by and published in The Economic History Review. Photo by Daria Nepriakhina 🇺🇦 on Unsplash.