Oded Galor, The Journey of Humanity - Chapter 5, Metamorphosis PDF

# Metamorphosis During the early phases of the Industrial Revolution, amid rapid technological progress and rising incomes, the populations of most industrializing nations expanded rapidly. Yet, in the second half of the nineteenth century, that trend reversed: population growth and birth rates in...

# Metamorphosis During the early phases of the Industrial Revolution, amid rapid technological progress and rising incomes, the populations of most industrializing nations expanded rapidly. Yet, in the second half of the nineteenth century, that trend reversed: population growth and birth rates in developed countries fell sharply - a pattern that was repeated in the rest of the world at a faster pace during the twentieth century. Between 1870 and 1920, fertility rates declined by 30 to 50 per cent in most Western European nations (Fig. 8), and in the United States they plummeted even more precipitously. This dramatic collapse in fertility rates along with the fall in mortality rates, which often preceded it, have become known as the Demographic Transition. The Demographic Transition shattered one of the cornerstones of the Malthusian mechanism. Suddenly, higher incomes were no longer channeled towards sustaining an expanded population; "bread surpluses" no longer had to be shared among a larger number of children. Instead, for the first time in human history, technological progress led to an elevation in living standards in the long run, sounding the death knell for the epoch of stagnation. It was this decline in fertility that prised open the jaws of the Malthusian trap, and heralded the birth of the modern era of sustained growth. ## Why did Demographic Transition occur? From a contemporary vantage point, one might suppose contraception was a major factor. In the absence of modern forms of birth control, the most common ways of avoiding pregnancy at this time were the age-old strategies of delayed marriage, abstinence and of course the withdrawal method. In Western Europe, during periods of scarcity, the average age of marriage rose, as did the prevalence of celibacy - both of which resulted in a drop in birth rates. Indeed, as William Cobbett, the English MP and leading campaigner against the changes brought by the Industrial Revolution, observed, this was a "[s]ociety in which men, who are able and willing to work, cannot support their families, and ought, with great part of the women, to be compelled to lead a life of celibacy, for fear of having children to be starved". By contrast, in times of prosperity, the average marriage age dropped and birth rates rose accordingly. This is known as the "European Marriage Pattern", which prevailed between the seventeenth century and the early part of the twentieth century (Fig. 9). Elsewhere, customs such as dowry payments in Eurasian and North African societies, and "bride price" in sub-Saharan Africa, Asia, the Middle East and Oceania, further solidified the link between living standards, marriage age and birth rates. During periods of prosperity, a larger number of families could afford these payments, and therefore marry off their children at younger ages - causing the marriage age to drop and birth rates to rise, whereas in times of scarcity fewer families could afford these transfers, delaying the age of marriage and lowering fertility rates. Induced abortion was also practiced in a wide range of pre-industrial societies, at least as early as ancient Egypt. Intense physical activity such as back-breaking labour, climbing, weight-lifting or diving could be deliberately undertaken to induce miscarriage, for example. Other techniques included fasting, pouring hot water onto the abdomen, lying down on heated coconut shells, or consuming medicinal herbs such as silphium (which was driven to extinction before the fall of the Roman Empire, arguably due to excessive use). And some evidence suggests that spermicides and primitive condoms were used in the ancient civilizations of Egypt, Greece and Rome. But since all these methods of managing fertility had been present throughout history and had not changed on the eve of the Demographic Transition, the catalysts for such a major, sudden and widespread decline in fertility must have been more profound. ## Triggers of the Demographic Transition: The Rise in the Return on Human Capital As seen in the previous chapter, the growing importance of education in response to a rapidly changing technological environment contributed to human capital formation. A large number of occupations in manufacturing, trade and services now required the abilities to read and write, perform basic arithmetic operations, and conduct a range of mechanical skills, so parents were induced to invest in their children's literacy, numeracy, skills and even health. As a result, the balance in the timeworn quantity-quality trade-off that parents had been forced to wrestle with throughout human history shifted - and thus precipitated the dramatic decline in fertility of the Demographic Transition. Similar patterns can be observed in earlier periods of human history. In the first century BCE, for example, when Jewish sages decreed that all parents should acquire education for their sons, Jewish farmers who struggled to meet the cost of education faced a stark choice: either they disobeyed or even abandoned their religion, as many did, or they settled for fewer children. In time, this mandate gradually elevated the proportion of individuals within the Jewish community who were favourably inclined towards the investment in the education of their children. Technological progress during the Industrial Revolution affected the quantity-quality trade-off anew in several key respects. First, it boosted parental income, meaning that parents could afford to invest more in their children should they wish to. This income effect acted to increase the resources being invested in the raising of children overall. Second, the growth in earning capacity also amplified the opportunity cost of raising children - the income a parent would have to forgo in order to raise a child instead of working. This substitution effect acted to reduce the number of births. It is conceivable that historically the income effect dominated the substitution effect, leading to an increase in birth rates. Indeed, empirical studies show that rises in household income in the Malthusian epoch and in early phases of industrialisation had precisely this outcome. However, at the time of the Demographic Transition there were additional forces at play. The new opportunities available specifically to those with an education led parents to invest a higher proportion of their earnings educating their children, further suppressing the degree to which the income effect might have increased birth rates. Ultimately, then, it was the increase in the return on parental investment in their children that overpowered the income effect, forcing birth rates down. At the same time, this mechanism was reinforced by several important changes that were triggered by the advances in technology. The surge in life expectancy and the decline in child mortality amplified the likely duration of the return on education, further enhancing the incentive to invest in human capital and reduce fertility. Technological development and the rise in industrial demand for education also had the knock-on effect of reducing the relative productivity and thus profitability of child labour, which presented a disincentive to bear children as a source of labour. Finally, migration from the countryside into towns and cities, where the cost of living was higher, increased the cost of child rearing, further contributing to the fertility decline. The geographical diffusion of the Protestant Reformation in Prussia provides a quasi-natural experiment that reveals the effect on fertility rates of greater investment in education. On 31 October 1517, Martin Luther nailed his Ninety-Five Theses, protesting the Church's sale of indulgences, to the door of All Saints' Church in Wittenberg, sparking the Protestant Reformation. Luther argued that the Church had no role mediating between man and God, and encouraged independent Bible reading - a radical belief that incentivised his followers to strive for literate children. Prior to 1517, the evidence suggests that proximity to Wittenberg had no effect on a region's economic or educational development. After 1517, however, as waves of Protestantism rippled out of Wittenberg, parents in nearer regions experienced a greater exposure to these revolutionary ideas, increasing their inclination to invest in their children's literacy. The effect of the Reformation on human capital formation was so persistent that three and a half centuries later Prussian counties closer to Wittenberg were characterised by higher levels of education and, in line with the quantity-quality trade-off, experienced a larger reduction in birth rates than counties further away. Another quasi-natural experiment that sheds light on the relationship between education on fertility rates occurred in the United States. In 1910, the Rockefeller Sanitary Commission launched an initiative to eradicate hookworm in the American South. This intestinal parasite was known to cause infected children to be less attentive at school, and its eradication would therefore boost their ability to learn and complete their studies. In other words, if the initiative was successful - which it was - there would be an increase in the return on investment in the children's human capital. Comparing the changes in parental birth rates in areas that benefited from this intervention with those in similar regions that were unaffected by the programme suggests that the greater returns on children's education did indeed trigger a reduction in parental birth rates. The role of the quantity-quality trade-off in the decline in fertility rates has also been observed in other countries, such as China, France, England, Ireland, and Korea, as well as in cross-country analyses of developing societies in the past decades. In particular, data from England in the period 1580-1871 suggests that the birth of an additional child within a family reduced the probability that other siblings would be able to read and write and acquire skilled trades. Similarly, evidence from China, between the thirteenth and twentieth centuries, indicates that children born into smaller families were more likely to apply for the rigorous entry exams for China's public service positions. The impact of human capital on labour productivity was clearly not the only reason for parents choosing to invest in the education of fewer children. As noted in the previous chapter, societies have invested in education for thousands of years, reflecting religious, cultural and national aspirations - factors that have surely affected rates of fertility and technological innovation too. Nevertheless, it is not a coincidence that the investment in human capital and the provision of public education became especially widespread in industrialised nations towards the end of the nineteenth century. Nor is it any coincidence that this took place in parallel with the onset of the Demographic Transition. However, there was an additional important factor at play: the narrowing of the gender wage gap and the rise in women's paid employment. ## The Decline in the Gender Wage Gap Today, over half a century after pay discrimination became illegal in the United States and the United Kingdom, and despite the fact that women achieve higher education levels than men, women in both countries and throughout the world receive on average lower pay than men do. This gender wage gap is the result of various factors: greater employment of men in senior positions and higher-paying sectors; the adverse effect of parental leave on career advancement and paid working hours; straightforward forms of discrimination. Not long ago, however, the gender wage gap was far greater than it is today, having declined significantly across the globe since the second phase of industrialisation began. In 1820, the average working woman in the US earned only 30 per cent of a man's salary. In 1890, the total wages of women stood at 46 per cent of the wages of men, and by the Second World War, it had risen to around 60 per cent. Perhaps not surprisingly, the narrowing of the gap between men's and women's wages coincided with greater access to education for women. In 1840, literacy rates for British men stood at 67 per cent compared to 50 per cent for women, while by the end of the century, that gap had dramatically shrunk and more than 90 per cent of men and women were literate. A similar pattern was observed in Western European nations in the course of their industrialisation, and across the developing world in the twentieth century. Various economic, cultural, institutional, legal and social factors contributed to the narrowing of the gender wage gap. In particular, the mechanisation of the production process diminished the importance of low-skilled heavy manual labour, traditionally considered to be "men's work", while fostering the significance of mentally intensive work, both of which served to reduce gender disparities in earning and education. In addition, widespread access to education, as well as legislation designed to secure property rights in the economy as a whole, planted the seeds for women's electoral enfranchisement and ultimately for the legal prohibition of gender discrimination and its condemnation as morally unacceptable. In the early nineteenth century, when automation in the textile industry reduced the demand for handspun fabrics made by women in home-based workshops, the gender wage gap in England widened and birth rates rose. But over the course of the century, the gender wage gap narrowed dramatically across sectors, partly due to the rapid mechanisation of the production process and the increasing importance of mental skills. Indeed, for almost a century, between the years 1890-1980, sectors in the US that experienced more rapid technological progress witnessed women's employment rates rise relative to men's. The surge in women's wages had conflicting effects on fertility rates. On the one hand, rising women's wages eased household budget constraints and permitted a larger number of children an income effect. But, on the other, women's higher wages increased the household's opportunity cost of having more children, as well as of marrying daughters earlier, inducing delayed marriage and suppressing birth rates – a substitution effect. Since historically in most cultures the burden of raising children fell mainly on women, the substitution effect dominated the income effect, and fertility declined. The decline in gender wage gaps reinforced the drop in birth rates that had been triggered by the rise in the return on human capital. Data from the 1911 census in England and Wales suggests that as job opportunities for women increased and the gender wage gap declined, birth rates also fell. Comparable patterns emerge from an examination of textile factories in Germany in the time period 1880-1910, the United States in the period 1881-1900, and Sweden in 1860-1955. This rich historical evidence suggests then that technological advances during the Industrial Revolution led to higher returns on investments in human capital, the narrowing of the gender wage gap, a decline in child labour, an expansion in life expectancy and an increase in migration from rural to urban regions, and that these factors contributed to the decline in fertility in the course of the Demographic Transition. ## Family Tales Consider three fictional families, each representing the typical experience of birth rates, education levels and living standards in a different historical period. **The Kelly family:** * This family lives in the Malthusian epoch, during which the economic well-being of the population remained unchanged in the long run and food surplus was predominantly channelled into raising a larger number of children. * They are a poor family in 16th century Ireland who own a small plot of land and struggle to make ends meet. * They have three children and have recently lost their youngest daughter to pneumonia. * They live in a leaky shack and their children suffer from hunger and malnutrition. * Their life improves when they start growing potatoes, which allows them to have more children and live a better life. * However, their prosperity doesn’t last long and their lives become difficult again when the potato blight hits Ireland. **The Jones family:** * This family lives at the dawn of the Industrial Revolution, a period in which increased income led to even larger families and sporadic training of children. * They are a poor family in 19th century England who own a ruin of a farm and struggle to make ends meet. * They have three children and have recently lost their youngest son to smallpox. * Their fortune changes when the father is invited to work in a factory in Liverpool. They move to the city and their life improves. * The Jones family is able to give their children a better life even though they start to invest in their education. * However, the couple also invests in having more children. * The family's prosperity will continue to increase over time. Their grandchildren will enjoy increasing prosperity over time. **The Olsson family:** * This family lives in the post-Demographic Transition era, marked by a reduction in the number of children per family, increased investment in their education, and significant improvements in living conditions. * They are a middle class family in 20th century Sweden. * They have two sons and a daughter. * They are fortunate enough to avoid the losses of children that families in the previous eras faced. * They are more educated and are able to afford to send their children to secondary school. * This family lives in a time where the importance of human capital is turning education into a powerful status symbol, indicating one's place in the social hierarchy and affecting one's ability to find a suitable spouse, forge meaningful social and commercial ties, and more. * The couple decides to invest in a new steam-powered trawler. It increases their wealth dramatically. * However, as their life improves, they decide not to have more children. * The family is one of the first generations to have escaped the Malthusian trap. * They will experience prosperity and live longer. The family avoids the hardships that the previous families faced. ## Phase transition From the dawn of humankind, technological progress helped generate a gradual increase in population size as well as the proliferation of traits that were conducive to further technological progress. However, as discussed in earlier chapters, for hundreds of thousands of years, the gravitational forces of the Malthusian trap thwarted any meaningful sustainable increase in living standards. Nonetheless, beneath the surface the great cogs of human history - the interplay between technological progress and the size and composition of the population - were turning from the start, gathering pace at first imperceptibly but accelerating faster and faster until eventually, in the late eighteenth century, they unleashed the technological explosion of the Industrial Revolution. One hundred years later, the acceleration of technological innovation and its impact on the growing appetite for educated workers who could navigate the changing technological environment, along with the rise in life expectancy, the decline in child labour, and the reduction of the gender wage gap set off the Demographic Transition, liberating economic growth from the counterbalancing effects of population growth. At last, societies escaped from the long arms of the Malthusian octopus, allowing living conditions to soar. The trajectory of the journey of humanity - the progression out of the Malthusian trap and into the modern era of growth - might now appear inevitable. But its timing and pace were influenced by other monumentally important factors. To return to our earlier kettle analogy, the precise moment of water's phase transition from a liquid to a gas depends on temperature, yes, but other variables too, such as humidity and atmospheric pressure. Under the influence of these additional conditions, evaporation may occur below or above the threshold of 100 degrees Celsius. Similarly, while the phase transition in the journey of humanity was brought about by the deepest tectonic shifts, which propelled technological progress in every era and corner of the globe and lifted most societies out of the Malthusian trap, aspects of local geography, culture and the institutions that shaped and defined societies accelerated this transition in some places and hindered it in others. Uncovering these forces and understanding their effects will be the goal of the second part of our journey. But first, what if the rise in living standards we have been experiencing ever since this phase transition turns out to be only a temporary anomaly? What if our current era of growth were to end abruptly, as some believe it must? Have we indeed reached the promised land? Is industrialisation conducive for prosperity in the long run? Is the journey of humanity sustainable?