The world may be divided between the haves and the have-nots, or to put it differently, between the eaters and dieters on the one hand, and those who can’t get enough to eat on the other. This division reflects in turn a huge difference in productivity: the eaters and overeaters produce more (though they do not necessarily work harder) and get more; and this difference, if not growing (it depends on whose figures you believe), is not shrinking fast enough to suit the desires of the poor or the conscience of the rich.

This, put crudely, is the so-called North–South problem. A closer look reveals that on both sides of the great divide diversity is the rule. Britain, for example, once Workshop of the World, has grown more slowly than its European neighbors for a century now, so that northern Italy, once a picturesque stop on the Grand Tour, may have passed it by in income per head—much to the astonishment of Liverpool soccer fans who travel to Milan. Over this same period, the Japanese rise has been spectacular, so that our stereotypical images have become staccato in character—from the quaint, gowned figures of The Mikado and Madame Butterfly, to those sly purveyors of dime-store trash, to the brilliant innovators and unbeatable competitors of the electronic age. If trends continue, they will be well ahead of the United States (and own a lot of it) in another generation. We have now incorporated Japan into what we call the West.

In the so-called third world, the same diversity prevails, with oil-producing countries at the top, some of them enjoying incomes higher than those of the richest industrial nations (it’s their oil, but we gave it value); new industrializers such as Korea and Taiwan, poor in material resources but quick to learn modern technologies; old industrializers such as India. Brazil, and Argentina, rich in resources, material and human, but burdened with old ways, social contrasts and conflicts, political instability; would be industrializers that lack the human resources and capital and are running hard to stay in place (the more successful sub-Saharan countries are in this position); and a few backsliders, crippled by bad government, natural catastrophe, unfavorable geography, unhappy history (again Africa furnishes the most examples, but one could also point to postrevolutionary Cuba and long-suffering Haiti).

For all this diversity, the nations of the third world are determined to maintain their psychological and political solidarity vis-à-vis the fat cats of the North or West. In unity there is strength, and they have a common sense of grievance, justified by charges of exploitation and (neo-) colonialism, but resting at bottom on envy and resentment: Why should you be so rich, and we so poor? You so strong, and we so weak? Surely justice commands otherwise.

This sense of grievance has grown with exposure to Western goods and ideas. Where once these distant peoples were isolated, the revolution in communications (radio, film, cassettes, above all, television) and the ease of travel have brought them into our time. People who never thought of themselves as poor now think themselves deprived. They want things they never knew about, much less needed. This “demonstration effect,” moreover, has been exacerbated by a corresponding ideological awareness. The most successful Western export has been ideas—ideas of democracy, equality, freedom, and revolution. The ideas are far ahead of the reality: look at the appeal of Marxism in places that by pristine Karlist standards are utterly unprepared, indeed disqualified, for socialism.

In this arena of claims and counterclaims, history matters. It mattered to Karl Marx and it has mattered to his epigones and adversaries, not only because everyone wants history to be on his side (or to be on the side of history), but because the past must serve as justification and pretext for the future. So it is here: one’s understanding of the roots of the gap in wealth and well-being becomes both cause and effect of one’s position today. Tell me your history, and I’ll tell you your politics; tell me your politics, and I’ll tell you your history. (As a professional historian I deplore this linkage, but that’s the way it is.)

Studies of world economic history, then, may be very roughly grouped into two classes: those that emphasize the autonomy of the Western achievement; and those that attribute it to pillage and exploitation of the rest of the world. Rosenberg and Birdzell (whom I shall henceforth call R & B) fall in the former category. Their thoughts on this subject are matter-of-fact and succinct. “The forms of misconduct most commonly charged to Western economies,” they write, “are increased inequalities of income and wealth, exploitation of workers, colonialism and imperialism, and slavery.” None of these changes, they argue, stands up to scrutiny.


(1) Inequalities they dismiss, not because there are none, but because inequalities will not in themselves yield development and growth. There have been and are poor countries with far greater inequalities than we know in the West, and these haven’t done them any good. What matters is not concentration of wealth, but what one does with it.

(2) As for exploitation, it is true that capitalists are always looking for cheaper labor, which is especially abundant (by definition) in poor countries. Some would no doubt see that search as exploitative, but R & B reject the charge out of hand: “…to countries or regions whose principal economic resource is an abundance of unemployed labor, employment of that labor on the best terms available is likely to seem not only a reasonable path of economic development, but morally imperative.” Such workers, in other words, would clearly be worse off if they were not employed. (There remains the question, which R & B do not consider, of exploitation of workers at home. The Marxist definition makes such exploitation unavoidable: any difference between labor’s wage and the value of product constitutes surplus value, and surplus value is the measure of exploitation. All economic systems, including socialism, create and appropriate such a surplus, without which there is no accumulation of capital.)

(3) R & B reject the imperialism charge because, they say, history refutes it. The earliest overseas imperialists and in some ways the ones that made the biggest strikes, Spain and Portugal, benefited little if at all in the long run. Some would even say that too much good fortune led them into temptation and idleness. (Economists speak today of the Dutch disease: the adverse consequences of windfall wealth, namely the recent discovery and exploitation of North Sea gas. But any economic historian could have told them that the syndrome is far older and is better known as the Spanish disease.) Switzerland and Scandinavia, highly successful industrializers, had no empire. (But were they not part of a European regional trading system that benefited from empire?) Germany and the United States were belated imperialists; they were already industrial giants by the time they began acquisition of overseas territories. “The eighteenth- and nineteenth-century history of most imperialist countries makes their economic growth seem more a cause of imperialism, stimulating overseas political adventures in the irresponsible exercise of new found economic power, than its result.” And this is clearly so: it is inequalities of wealth and power that make for domination.

(4) The same for slavery: as an explanation for Western economic growth, “it suffers from a mismatch” between practice and consequences. What about sugar, chief product of slave labor, condiment turned dietary staple, raison d’être of Europe’s richest colonies? It was, say R & B, a consumption item rather than raw material for Europe’s factories. (True, but it was a new kind of fuel for people.) Cotton was more important, for it was the fiber that fed the Industrial Revolution. But economists would insist that the gain from cultivation of cotton by slaves in the American South has to be measured by the difference in cost between such cultivation and cotton grown by free labor in the South or by peasant labor in Egypt and India. That difference was probably small: “The rate of growth of the British textile industry might have been a little slower in the years up to 1861.”

This is not to say that these charges are worthless. As devices “for encouraging charitable giving, national and international, supporting social legislation, and for checking Western hubris,” such exercises in self-deprecation “have been very useful.” They improve us. But they simply won’t help poor people grow rich. “After all, exploitation has been pervasive outside the West, as well as in the ancient and medieval West itself, without duplicating the modern Western achievement.”

So what is the secret? How does a country grow rich? The answer R & B give seems at first reading circular and untestable: The West grew rich, that is, grew, because it developed a “growth system.” They try to give this system substance by defining it as one that gives effective play to “innovation”—whether in conceiving new products and methods, inventing new machines, or finding new ways to organize production and distribution. Such innovation they see as “virtually an additional factor of production.” But like Marx, and indeed like economists generally, they do not offer an explanation for the impulse or propensity to innovate. Apparently it is some kind of natural response to need and opportunity, a manifestation of homo faber. Remove the shackles, and the system will do the rest.

The point is to unleash innovation, and this is what the West did, and no one else. Where other societies looked upon innovation as socially subversive, where ecumenical, centralized empires could slow and stifle change, Europe, blessed by political fragmentation and multiple sovereignties, was incapable of hobbling novelty and enterprise. In a world of power rivalries, rulers could not afford to treat cavalierly (as would an arrogant nobleman) common merchants and craftsmen. They might not be of gentle birth and might not know how to fight, but they made money, for themselves and for the ruler, and money was power. It was only in Europe that autonomous cities (urban communes) developed as a political and economic institution: they were islands of commercial and industrial sovereignty in a sea of feudal, manorial, and ecclesiastical powers.


Equally important was a system of incentives and rewards. Here property rights were central, for without assurance of the enjoyment of the product of one’s work and wealth, there could be no effective saving and investment. In societies where property is held at the pleasure and whim of the ruler, one can hoard and hide, but visible wealth is an invitation to confiscation and pillage. So it was in China and Mogul India and Persia and Egypt. In the West, however, for reasons that go back to Jewish-Christian tradition, (as in Numbers 16:15; I Samuel 8: 10–17; 12:3–4), which was reinforced by Roman law and Germanic custom, the state found it politic and profitable to affirm and enforce the individual’s right to his land, his chattels, and his labor. He might transfer these things to others, but no one could take them without compensation. Taxes required consent; and even feudal-seignorial dues presumed a quid pro quo and came to be limited by contract and custom. It goes without saying that not every ruler behaved well in these matters. The temptation to seize wealth was sometimes hard to resist, so that some of the great battles for what we would call civil rights centered on issues of property. (We take these things so much for granted that we sometimes forget that our rights were in large part formed through such conflicts: witness Magna Charta.)

One important corollary of entrepreneurial autonomy and property rights was the development of a free, competitive market in which decisions could be taken without regard to custom and obligation. This freedom in turn implied an open economy, hospitable to a variety of business structures and activities.

Experimental adaptation to the inherent diversity of both human wants and the resources available for satisfying them involved self-reinforcing, two-way causation, for experiment created both additional human wants and additional resources, thereby inviting additional diversity in the system for satisfying them. This causal loop generated great diversity of sizes and types of both enterprises and markets. This diversity in the forms of economic life, like the diversity in biosystems, is important not only for its own sake but because it is an earmark of successful adaptation and full realization of the resources available.

When did all this begin? R&B place the emergence of innovation “as a significant factor of growth” as far back as the mid-fifteenth century, but as their own discussion of invention in the Middle Ages makes clear, that is not far enough. To understand the divergence of the West from the rest of humanity one has to go back at least to the Millennium, when Europe was a backward, peripheral region at the western end of the huge Eurasian land mass—the end of the line. Here was a society incapable of maintaining internal order or of protecting itself against outside marauders: Northmen coming down in a pincers movement, into Russia on the east, and on the west, down the Atlantic coast into the Mediterranean; Hungarians penetrating from the Danube valley deep into France and Italy; Saracens planting themselves in Alpine redoubts and plundering the key routes between the Mediterranean and the new Europe to the north. (These raids and invasions were an old story. The history of Europe from pre-Roman times, like that of the other regions on the perimeter of the great continent, had been one of a succession of mass migrations, wave upon wave: Celts driving to the western isles while leaving settlements and traces along the way, in Galatia in Asia Minor, Austrian Galicia, Spanish Galicia; Germans pounding and eventually dissolving the Roman Empire; and then Avars, Huns, Slavs, Bulgars, Hungarians, eventually Tartars and Mongols invading from the farthest Asian steppe.) And so poor and weak were the Europeans that they tried to balance their exchanges with the outside by selling slaves. There is no more unambiguous sign of economic incapacity.

Five hundred years later, at the time chosen by R&B for the emergence of an innovation system, the global balance of power had decisively altered. When the Portuguese sent their first fleet to India after the triumphal return of Vasco da Gama, they instructed the admiral not to look for trouble; but if trouble came, not to let the enemy close; instead, to blow him out of the water. These orders symbolized the superiority of Portuguese armament: only the strong can kill and win from afar; the weak have to rely on passion and white steel. By the year 1500 the West could plant itself anywhere in the globe within reach of naval guns.

This inversion of immemorial relations of power, moreover, rested on hundreds of years of Western technological advance while the rest of the world stood still or regressed. R&B provide us with some of this story (they are particularly strong on improvements in shipbuilding), but they could have done a lot more if they were not under the misapprehension that the Middle Ages and feudalism were hostile to change. In fact, the high Middle Ages (c. 1000–1350) was a period of extraordinary growth and innovation: in agriculture, hence in the ability to support a burgeoning population; in the use of such inanimate power engines as the windmill (irreplaceable in land drainage, especially in the Low Countries) and the water wheel (in textiles, metallurgy, and a host of other uses, sometimes in tandem to squeeze out the last bit of energy); in armaments (above all, corned gunpowder, far more powerful than the loose powder used in Asia); in marine transport and navigation (if you could sail the Atlantic you could make it anywhere); and in such apparently trivial matters as optics (eyeglasses were not only a convenience; for physiological reasons they just about doubled the working life of fine craftsmen, scribes, readers, and anyone else doing close work, and they remained a European monopoly for some five hundred years). Finally there was the mechanical clock, which made possible urban life as we know it, promoted new forms of industrial organization, and enabled individuals to order their life and work along rational, more productive lines. At the same time, clockmaking was at the forefront of developments in mechanical technique: if you could make clocks and, later on, watches, you could make anything. The clock too remained a European monopoly for five hundred years.

The early modern period (c. 1500–1800) was one of expansion, the creation of a global trading network, the consolidation and exploitation of imperial gains overseas. R & B do not make as much of these developments as they might in view of the spate of work on this subject, most recently by Fernand Braudel, Immanuel Wallerstein, and others who argue that a “core” of advanced European countries dominated the surrounding “periphery.” Rather they stress the contribution that wider markets made to a more complex division of labor (Adam Smith’s model) and to the invention of new forms and techniques of business enterprise.

But there are other aspects of the story that are worth mentioning. One should not take for granted, for example, the material success of European dominion. Conquest was only the beginning. The conqueror could, in imitation of immemorial patterns, hit, take, and use up: the Spanish empire in the Americas is an excellent example of this kill-and-grab imperialism. What the Europeans did thereafter, however, especially the Dutch, French, and English, was turn these holdings into working estates (plantations) and convert one-time plunder into annual income. This was in the long run a far more lucrative form of empire. In the New World, plantations required slaves; free or even indentured labor could not be held to the job in the presence of “free” land. In the East Indies, the Dutch forced the natives into cashcrop agriculture. In India, native middlemen could be relied on to collect and deliver the work of cottage spinners and weavers.

R & B point out that these overseas connections, profitable as they were, never generated more than a small fraction of the wealth produced and traded back home. They made some people—sugar planters and refiners, East Indian nabobs, shareholders in the chartered colonial companies—rich, sometimes enormously rich. But it was not these social climbers who made the Industrial Revolution and thereby widened the gap between rich and poor nations to the gulf we know today. That was the work of a multitude of merchants and manufacturers, mostly small or middling, who organized the production of commodities along more economical lines and thus lowered costs, widened markets, and set in train a dialectic of reciprocally reinforcing supply and demand. The key innovation here was not machines, but a new mode of production: dispersed cottage industry (rural “putting out”), which made it possible to incorporate far cheaper labor (peasants in the quiet seasons, women, children) into the industrial work force.

Along with this went the proliferation of a new kind of businessman, less adventurous and spectacular than the gamblers and buccaneers of international trade and imperial finance, but more committed to and tenacious in staying the course. These were Max Weber’s bearers of the Protestant ethic: Slow but steady wins the race. Time is money. Save the pennies and the pounds will take care of themselves. They were great accumulators of capital, in large part because they were not supposed to enjoy their wealth, and this made them singularly resistant to the appeal of genteel, spendthrift styles of life. These were the people who laid the foundation for industrial as opposed to commercial capitalism—for a system that required increasingly heavy investment in fixed plant and equipment and rested on the accumulation and application of new kinds of know-how, a system, in other words, that demanded continuity of commitment.

Weber’s thesis linking a Protestant—specifically Calvinist—ethic with the rise of capitalism was first put forward at the beginning of this century and aroused passionate controversy from the start. It was perceived by many as an invidious comparison between two major systems of religious belief—though it was not clear which came out better. For those Catholics who were sensitive about the apparent backwardness of Catholic, Latin Europe, this was one more example of northern arrogance. For those other Catholics who rejected the material values of “Modern Industry” (Marx’s term for what was later to be called capitalism), Weber merely confirmed what they had always known, that only a black-hearted Protestant could devote his whole life to making money and think himself saved because of it. Marxists denounced what they saw as an inversion of proper historical causation: religion could not be the cause of a major change in the mode of production; religion had to be an epiphenomenon and derive from material conditions and class relations. Weber, in other words, put the cart before the horse: it was not Protestantism that made capitalism, but the reverse. Many economic historians, conscious or unconscious materialists, have tended to agree.

Somewhat surprisingly, R & B are sympathetic to Weber’s argument, although their emphasis is different. Market institutions, they tell us,

required a moral system woven of obligation and responsibility in the fulfillment of one’s [business] commitments and of industry in the performance of one’s work [the reference here is primarily to employees]. The Protestant Reformation probably supplied a moral system somewhat better suited to economic growth than the older Catholic teaching.

My sense is that such a distinction in business morality is more invidious than anything Weber said; and I know of no historical basis for it. A Calvinist businessman may have felt safer doing business with a fellow Calvinist, but that had more to do with in-group ties and obligations than with moral differences. Weber’s argument seems more convincing, namely, that what mattered was less the Calvinist’s relation to others than to himself. What Calvinism did was create a new kind of man—alone, anxious about his fate, workaholic, hostile to diversion and recreation, obsessed by time, ever ready to consider new and more productive ways (the essence of Weberian rationality), ruthless in his indifference to anything but market considerations, humorless, incapable of enjoying his material success.

All of this was preparation. In the eighteenth century, beginning in Britain and spreading to the European continent and the United States, a revolution in the mode of production (the Industrial Revolution with capital I and R) set these advanced economies on a new, steeper path of economic growth. R & B do not provide statistical data on product and income—their book is a reflection and not a survey—but if one consults the historical estimates of national income, it is clear that, from this point on, the divergence of the West from the rest of the world compounds rapidly. Where the difference in income per head between Europe and, say, China or India in the eighteenth century was small (no more than one or two to one), two hundred years later we find a gap of tens to one; and this is not because Asia got poorer, but because Europe grew richer. A new technology made possible major and continuing gains in productivity, and the entire world was drawn into the Western ambit as supplier, not only of spices, stimulants, and other exotica, but of industrial raw materials. Western science, in the meantime, took on a consciously cumulative character that substantially enhanced its ability to generate, test, and diffuse knowledge. The cognitive and intellectual gap was growing faster, if anything, than the discrepancies in wealth.

In the beginning of the Industrial Revolution, the sources of know-how were largely empirical; but from the middle of the nineteenth century, science was systematically enlisted in the service of agriculture and industry, first in improving existing techniques and then in the invention of new ones. Of the many examples cited by R & B, two will have to do, chosen for their unobtrusive importance. Andrew Carnegie, reminiscing about the advantage of scientific advice, recalled how ore “from mines that had a good reputation was now found to contain ten, fifteen, and even twenty percent less iron than it had been credited with…. The good was bad and the bad was good.” (One can only wonder how empiricism can have been so inaccurate. Weren’t these people keeping records and comparing results?) In the same way, laboratory tests (along with the new technology of cheap steel) helped to increase the life expectancy of rails from two years to ten and their load-bearing capacity from eight tons to seventy over a period of forty years, between 1865 and 1905. That kind of silent gain, multiplied and ramified, constituted a new industrial revolution.

All in all, this millennial process of enrichment was an extraordinary achievement, one that many of us apologize for (Is it fair?), but that R & B recount with satisfaction. They are at times too optimistic and complacent, as in their discussion of factories, where they dismiss the well-documented facts on the abuses of workers and stress instead a hypothetical question: Would these workers have been better off in some other form of employment? And in that regard, they introduce what for me is a new thought, that the factory contributed to freedom by taking the worker out of the employer’s household and enabling him to live separately. That would no doubt have been an improvement, at least in some instances, but such a sequence is largely imaginary: the workers who went into the early mills were not housed apprentices of guild crafts. On the contrary, many mill hands (in particular, the parish apprentices of unhappy fame) were lodged in employer-built and monitored dormitories; and in any event, the supervision of the domestic shop was mild compared to the discipline imposed by machines and overseers. The pessimistic view of the Industrial Revolution (what John and Barbara Hammond called the Bleak Age) has been much overdone, often for reasons of political polemic, but there is no reason to err in the other direction.

Moreover, because R & B are largely dependent, especially for the period before the nineteenth century, on such interpretative syntheses as those of Fernand Braudel, Douglass North and Robert Thomas, William McNeill, Sir John Hicks, and myself, that is, on tertiary sources, they sometimes telescope centuries, omit important parts of the story (there is little about the extraordinary advantages of European geography and almost nothing about the specifics of European culture), and on occasion get the story wrong. One example that I can vouch for: the market for clocks and watches in the seventeenth and eighteenth centuries did not consist “almost entirely of those who bought them as articles of jewelry, status symbols, or from collectors’ enthusiasm.” By that time there was a substantial demand for watches (in the tens of thousands annually, and growing) by people who needed them for their work, travel, and social engagements, and that was no trivial development.

In general the early chapters are the more derivative, trading authority for sweep and pace. The later parts are denser, more scholarly; the footnotes themselves have a different tone.

These weaknesses, however, are more than compensated by the fundamental good sense of the authors, who recognize the difference between what probably was and what should have been. They keep their eye on their subject, do not let themselves get diverted by passion or moral indignation, do not feel an obligation to do penance and thereby prove their personal virtue and good feeling. One may not always agree with them, but that is to be expected: there is no big picture that can’t use some emendation.

Some will fault them for not doing more with the other side of the unequal sign: Why is the rest of the world so poor? True enough, but R & B have made a contribution to the third world as well. Poor countries can learn from, if not copy, example, and the West is the only successful example around.

This Issue

May 29, 1986