Introduction to Modern and Contemporary History PDF

Introduction to Modern and Contemporary History The Journey of Humanity - The origins of wealth and inequality, by Oded Galor. Chapter 1: First Steps - Africa and the Middle East Genesis: Archaic and early modern humans slowly but steadily acquired new skills and what defines humankind and s...

Introduction to Modern and Contemporary History The Journey of Humanity - The origins of wealth and inequality, by Oded Galor. Chapter 1: First Steps - Africa and the Middle East Genesis: Archaic and early modern humans slowly but steadily acquired new skills and what defines humankind and sets us apart from other species was the evolution of the human brain. Several forces might have contributed jointly to this process: The ecological hypothesis - The human brain evolved as a result of the exposure of our species to environmental challenges. The social hypothesis - The growing need to cooperate, compete and trade within complex structures lead to a more sophisticated brain, with its better ability to understand the motives of others and anticipate their reactions. The cultural hypothesis - The ability of the human brain to assimilate and store information, allowed it to be passed from one generation to the next and making it possible to learn efficiently from the experiences of others, facilitating the acquisition of habits and preferences that boost survival in diverse settings without relying on the slower process of biological adaptation. The sexual selection - Humans developed a preference for mates with more advanced brains, which shone through qualities that were important for raising and protecting children, such as wisdom, articulation, quick thinking or sense of humor. The evolution of the human brain was crucial for the unique advancement of humanity and to bring about technological progress - the discovery of increasingly more sophisticated ways of transforming nature and the resources at our disposal to improve the human condition. These advancements shaped future evolutionary processes, enabling human beings to adapt more successfully to their shifting environments and to further advance and utilize new technologies - an interactive and intensifying mechanism that has led to greater technological strides. For example, mastering the use of fire (to cook) allowed additional growth of the brain, by reducing the energy required to chew and digest and freeing space in the cranium previously occupied by bones and muscles. Similar transformations happened to the human hand and the intergenerational transmission of these skills increased the share of proficient hunters in the population, as well as the number of further innovations. A positive feedback loop is when environmental changes and technological innovations allow population growth and unleash the adaptation of humans to their habitat, and these adaptations increase the capacity to manipulate the environment and create new technologies. Exodus from the Cradle of Humankind: The first evidence of Homo sapiens in Africa dates to 300.000 years ago. For hundreds of thousand years, the human species roamed in small bands of hunter-gatherers in Africa, developing several capabilities along the way, increasing their population and reducing the living space and natural resources available. Thus, once climatic conditions permitted (ending of the ice age - pleistocene - and global warming), humans started branching out to other continents, in search of additional fertile grounds. Homo erectus (the first 1  Introduction to Modern and Contemporary History The Journey of Humanity - The origins of wealth and inequality, by Oded Galor. Chapter 1: First Steps - Africa and the Middle East Genesis: Archaic and early modern humans slowly but steadily acquired new skills and what defines humankind and sets us apart from other species was the evolution of the human brain. Several forces might have contributed jointly to this process: The ecological hypothesis - The human brain evolved as a result of the exposure of our species to environmental challenges. The social hypothesis - The growing need to cooperate, compete and trade within complex structures lead to a more sophisticated brain, with its better ability to understand the motives of others and anticipate their reactions. The cultural hypothesis - The ability of the human brain to assimilate and store information, allowed it to be passed from one generation to the next and making it possible to learn efficiently from the experiences of others, facilitating the acquisition of habits and preferences that boost survival in diverse settings without relying on the slower process of biological adaptation. The sexual selection - Humans developed a preference for mates with more advanced brains, which shone through qualities that were important for raising and protecting children, such as wisdom, articulation, quick thinking or sense of humor. The evolution of the human brain was crucial for the unique advancement of humanity and to bring about technological progress - the discovery of increasingly more sophisticated ways of transforming nature and the resources at our disposal to improve the human condition. These advancements shaped future evolutionary processes, enabling human beings to adapt more successfully to their shifting environments and to further advance and utilize new technologies - an interactive and intensifying mechanism that has led to greater technological strides. For example, mastering the use of fire (to cook) allowed additional growth of the brain, by reducing the energy required to chew and digest and freeing space in the cranium previously occupied by bones and muscles. Similar transformations happened to the human hand and the intergenerational transmission of these skills increased the share of proficient hunters in the population, as well as the number of further innovations. A positive feedback loop is when environmental changes and technological innovations allow population growth and unleash the adaptation of humans to their habitat, and these adaptations increase the capacity to manipulate the environment and create new technologies. Exodus from the Cradle of Humankind: The first evidence of Homo sapiens in Africa dates to 300.000 years ago. For hundreds of thousand years, the human species roamed in small bands of hunter-gatherers in Africa, developing several capabilities along the way, increasing their population and reducing the living space and natural resources available. Thus, once climatic conditions permitted (ending of the ice age - pleistocene - and global warming), humans started branching out to other continents, in search of additional fertile grounds. Homo erectus (the first 1 hunter-gatherer species) spread out to Euroasia 2 million years ago, yet it appears that they became extinct or retreated to Africa. The widely accepted “Out of Africa'' hypothesis suggests that the current population of modern humans across the globe descends predominantly from a more significant migration of Homo sapiens from Africa 60.000 - 90.000 years ago. Humanity flocked to Asia through two routes: the northern via the Nile Delta and the Sinai Peninsula and the southern via the Bab-el-Mandeb Strait. These waves of migrations out of Africa contributed to the size and the diversity of the human population across the globe, which settled new ecological niches, enjoyed access to new grounds for hunting and gathering and started to multiply more rapidly. Their adaptation to new environments led to greater human and technological diversity, fostering the spread and cross-pollination of innovations and leading to further population growth. In fact, the further a region is from Africa, the less diverse it is - it is called the Serial Founder Effect. However, population growth led to the same scarcity of fertile land and resources that had spurred the migration from Africa. Despite their new tools and techniques, humans’ living standards gradually reverted towards the subsistence level. The inability to sustain the growing population, as well as climatic changes, eventually induced humanity to explore an alternative mode of subsistence - agriculture. Early Settlement: 12.000 years ago, as the climate warmed, people swapped their nomadic wandering for sedentary lifestyles, beginning to make great strides in art, science, writing and technology. The Agricultural/Neolithic Revolution first emerged in the Fertile Crescent, a region down the eastern Mediterranean coast, abundant in a wide variety of domesticable species of plants and animals. About 10.000 years ago, agriculture emerged in South East Asia and from these locations it spread across Eurasia. According to J ared Diamond (in “Guns, Germs and Steel”, 1997), the Fertile Crescent was ideal for the diffusion of agricultural practices, because of the East-West orientation of these continents and the feasibility of the dispersal of plants, animals and technologies, along similar lines of latitude without encountering major natural obstacles. In contrast, sub-Saharan Africa and the Americas, which contained fewer domesticable species and many natural barriers (deserts and tropical rainforests) to the diffusion process, 2 experienced that transition much later given their North-South orientation (which created major differences in climate and soil between regions). Agricultural societies benefited from significant technological advantages and started producing larger output, which supported a growing population, and, ultimately, displaced and absorbed non-agricultural groups as they proliferated. The intensification of trade within each agricultural community freed individuals to specialize in particular occupations, leading to the emergence of distinct social strata (including a class dedicated to knowledge creation) and to advancements in art, science, writing and technology. The Natufian was a prehistoric culture that existed 15,000-11,700 years ago in the Levant. Its people are believed to be among the first humans to abandon foraging and to settle in permanent locations. The Dawn of Civilization: Initially, most agricultural societies maintained the social frameworks that had prevailed prior to the Neolithic Revolution. The cohesiveness of these small-scale, tribal societies facilitated cooperation and the mitigation of disputes. But, as populations grew in size, there arose a need for more widespread and large-scale cooperation, which led to the emergence of complex political and religious institutions that enabled them to build vast irrigation systems, temples, fortresses and armies. New social layers were born. Jericho, one of the earliest settlements in the world, began to expand around 9.000 BCE and lasted into the biblical period. It was a dense warren of houses, abundant in tools and ritual objects. Another important settlement in the Fertile Crescent was Çatalhôyûk (in current Turkey, 7.100-5.700 BCE), a traditional center for pottery, flint and obsidian tools and luxury goods. Most of the great cities of the ancient world sprung up initially on the banks of Euphrates, Tigris and Nile rivers 4.000 - 6.000 years ago. A sudden acceleration of innovation at this time enabled further domestication of plants and animals, and improved cultivation, storage, communication and transportation (the use of hoes, hand/animal-drawn ploughs and irrigation systems). Societies mastered the use of fire in the processing of clay and metal, and used these materials along with cement for the construction of dwellings, tools and grain storage. They learned to utilize water energy to grind grain, saddled domesticated animals to carry them across land and harnessed the wind’s power to sweep them over oceans and seas. Writing first appeared in Mesopotamia 5.500 years ago, and it was used for accounting and recording, funerary inscriptions and to store useful knowledge and pass it on to future generations. ~ Egriulture The Neolithic Revolution not only transformed the lifestyle and tools of human beings, but in doing so it also stimulated biological adaptations to new environments. The co-evolution of genes and culture is perhaps best exemplified by an adaptation brought &Bio-adaptation by the domestication of animals: lactase persistence. Prehistoric humans only generated lactase in infancy (crucial for the digestion of lactose), but a mutation permitted the persistence of the enzyme, which allowed adults to use their animals as a portable and renewable source of food. Similar mutations enabled the digestion of starch, enabling - humans to integrate bread into their diets. The rise in population density and the domestication of animals led to greater prevalence and resistance to infectious diseases and contributed in some societies to an innate immunity to malaria. 3 Thus, the Agricultural Revolution set the stage for a cycle of mutual reinforcement between technological change and human adaptation. Triggered by population growth and climate change and shaped by geography, a technological transformation took place and resulted in social and biological adaptations that enabled it and intensified our dependence on this transformation. It was this cycle that made Homo sapiens the dominant - - - species on planet Earth. However, despite all the progress, the poverty trap maintained the living standards very low. linted th dependency agro innovation inequality · on ·. Social · Unequal accu to rroucer Ineromental · gradation our Goo Populatio a Chapter 2: Lost in Stagnation - The Malthusian World The eighteenth-century influential cleric Thomas Malthus published “An essay on the principle of population”, in 1798, in which he expressed his profound skepticism about the 3. Poverty & hardship possibility of wealth in time and the belief in the inevitably of crises - the Malthusian Trap. ~4 Natural prevent. ~ helps · Any improvement would only lead to the increase of population and not of income: in the POPULATIONAL Growth 5 Cyclical NATURE long run, humanity could never prosper because any gains it made would ultimately be I depleted by population growth. The theory is historically true, but raises the problem of knowing how it was possible to overcome it. He was supported by David Ricardo and Stuart Mill and criticized by Karl Marx and Friedrich Engels. - The Malthusian Thesis: Imagine a village which has discovered an efficient way to grow wheat, increasing its ability to produce bread and, consequently, the villager’s diet and living conditions. The surplus would allow them to sustain more surviving children and the population would grow over time. However, since the land for cultivation is limited, this growth would lead to a reduction in each villager’s bread ration. Living standards would drop until the ratio returned to its original level. Therefore, their technological progress would lead to a larger but not richer population. The Malthusian hypothesis is based on two fundamental building blocks: A rise in resources leads populations to have more surviving children, driven by the predisposition to reproduce and the decline in mortality that accompanies better nourishment. Population growth engenders a decline in living conditions whenever living space is limited. The size of any population will adapt to the available resources via two mechanisms: ○ “The positive check” - A rise in mortality rates due to the increased frequency of famine, disease and war over resources in societies whose populations have outgrown their food production. ○ “The preventative check” - A drop in birth rates during periods of scarcity through delayed marriage and the use of contraception or celibacy. Technological sophistication and population size were indeed positively associated in this era, but the existence of this relationship does not in itself indicate an impact of technology on population. Technological advancements during this period were partly the result of larger populations, because sizable societies produced both more potential inventors and greater demand for their inventions. Besides, there might have been other independent factors (cultural, institutional or environmental) accounting for the positive relation between the two, so this correlation cannot itself be taken as evidence of Malthusian forces. 4 Jared Diamond argued that regions that underwent the Neolithic Revolution earlier enjoyed a technological head start over their contemporaries, therefore we can infer a region’s level of technological advancement from our knowledge of when it went through the revolution (or the number of domesticable species). Regions that had gone through it earlier would be expected to have higher levels of technological sophistication, so, if they are richer or larger, we can say that that had been caused by its level of technological advancement. Technological innovations and higher land productivity led primarily to larger but not richer populations, which implies that prior to the Industrial Revolution, people across the world enjoyed largely similar standards of living. The Inevitable Onset of Agriculture: Human remains from early agricultural societies do not attest to improved health or wealth but rather to deteriorating living standards as compared to those of hunter-gatherers living millenia before. The prehistoric humans who branched out of Africa and settled new ecological niches would have enjoyed access to plentiful new resources and would have been able to multiply more rapidly without reducing their living conditions. However, this population growth would have balanced out the gains as greater numbers of humans competed for the same stock of wild animals and plants and living conditions would have reverted to the original subsistence level or even worse (societal collapse) - especially in regions where animals did not adapt to the human threat and some animals became extinct (Oceania and the Americas). For instance, among the isolated Polynesian tribes (Easter Island in the Pacific Ocean at the beginning of the thirteenth century), the rapid expansion due to the abundance of vegetation and fishing waters pressured the fragile local ecosystem. By the turn of the eighteenth century, Easter Island’s bird population had been wiped out and its forests destroyed, making it hard to build and maintain fishing boats, which generated internal conflicts and caused the population to be decimated by 80%. where carlet human agricultural and urban socetic emerge, Hunter-gatherer societies in the Fertile Crescent experienced similar pressure 12.000 years ago. Population growth supported by food abundance and technological from Frrigation the improvements prompted a gradual decline in per capita food availability from hunting and Euphrates Figrin and gathering until their temporarily enhanced living standards reverted towards subsistence. However, the biodiversity of the Fertile Crescent with its abundance of domesticable species and favorable climatic conditions granted an alternative mode of subsistence that was largely unavailable to the Easter Islanders - adopting agriculture. With the end of the last ice age (11.500 years ago), land became more suitable for cultivation and climatic volatility and seasonality increased. Farming became a safer strategy of food production despite the inferior quality than the richer but less predictable and increasingly scarcer one of hunting and gathering. Ultimately, population size of agricultural societies stabilized at a new and higher level, but this time, in reverting to subsistence level, their living conditions became lower than those of S hunter-gatherers when ecological niches weren’t densely populated (but this transition did not reflect a deterioration). Why ? 5 Population Swings: The Malthusian mechanism can be detected in the population swings that took place after the Neolithic Revolution, triggered by dramatic ecological, epidemiological and institutional upheavals. One of the most devastating events was the Black Death - a pandemic of bubonic plague that first erupted in China in the fourteenth century and that between 1347 and 1352 killed over 40% of the European population, which was especially lethal in densely populated areas. After the terrible devastation, European farmers resumed their work and found that demand for their labor had soared. The land desperately needed more working hands, and average workers soon enjoyed higher wages and better working conditions → Golden - Age of Wages. - In the years 1345-1500, as England lost more than half of the population, wages more than doubled, which led to increasing birth rates and falling death rates. The population I started to recover and the wages started to revert to their pre-plague levels. In summary, the population of England declined sharply after the onset of the Black Death, !! resulting in a temporary increase in real wages, which reverted to their pre-plague level as the population rebounded to its pre-plague level, by 1615. Another momentous population swing followed Christopher Colombus’ voyages to the Americas in 1492-1504. These continents had crops (cocoa, maize, potatoes, tobacco and tomatoes) that started being shipped back to Europe and, in the opposite direction, other crops (bananas, coffee beans, sugar cane, wheat, barley and rice) were brought to the Americas for the first time. The potatoes reached Europe (1570) and became a staple of European cuisine, having a huge impact especially on Ireland (where it boosted farmer’s incomes and calorie consumption). The Irish population swelled from 1.4 M (1600) to 8.2M (1841), keeping living standards close to subsistence and becoming very dependent on potatoes for its survival. In 1844, there was a fungus ravaging potato crops in the U.S.A, which soon reached Europe, destroying several crops (by 1846 ¾ of all potato crops in Ireland were blighted). The lack of diversity in Ireland’s potato crops and the dependency on one single crop led to the Great Famine (1845-1849). About 1 million people died from starvation, typhus and diseases that malnourished human bodies were unable to survive and over 1 million immigrated to Great Britain and North America. Over the course of 3 centuries, the introduction of a superior crop and its subsequent destruction translated into an increase and then a tragic decline in population size, but living conditions, in the long run, were largely unaffected. Maize reached China in the mid-sixteenth century across three routes and, although it spread fairly slowly initially, it gained popularity in the mid-eighteenth century and had such an impact on the country’s agricultural output that its adoption was their “second agricultural revolution”. The fact that it arrived at different times in the different provinces of China provides such a quasi-natural historical experiment with which to test the Malthusian thesis within a country rather than across countries. However, there are other key differences and major transformations that China underwent that also affect population density and living standards, so comparing these region’s is of no use. Scholars have compared the changes in the first 3 provinces that adopted maize with those who did it much 6 later, and the early introduction of maize resulted in a 10% larger increase in population than in other provinces over 1776-1910 and no apparent impact on wages. Neither the surpluses nor shortages prevailed indefinitely during the Malthusian epoch. The introduction of novel crops/technologies magnified the rate of population growth, mitigating their impact on economic prosperity, while the long-term economic devastation of ecological disaster was averted by their adverse effects on population via famine, disease and wars. An economic ice age was inevitable. The Economic Ice Age: Over most of humans’ existence, they were caught in a trap of hardship and privation, near the subsistence level (income per capita, wages and life expectancy fluctuated within a very narrow band for thousands of years). After the Agricultural Revolution the life expectancy (30 years) did not change significantly in most regions, but there were some fluctuations in the range of thirty to forty years in England from the mid-sixteenth centuries, as well as in pre-industrial France, Sweden and Finland. For nearly 300.000 years after the emergence of Homo sapiens, per capita incomes were scarcely higher than the minimum necessary for survival, plagues and famines were abundant, ¼ of babies did not reach their first birthday, women commonly perished during childbirth and life expectancy rarely exceeded forty years. But then, Western Europe and North America abruptly began to witness a rapid and historically unprecedented rise in living standards across various strata of society, a process that was subsequently experienced in other regions of the world. Remarkably, in the period since the dawn of the nineteenth century, per capita incomes soared by a factor of fourteen in the entire world, while life expectancy more than doubled. It is false to state that from the first appearance of Homo Sapiens to the nineteenth-century, there was no economic growth. It existed (even in the Malthusian Period), but population growth kept it balanced out: there were several periods of economic growth (such as the time after the Black Death or the one following the introduction of the potato crop in Ireland), but they were not sustained. It is important to mention that it wasn’t the Industrial Revolution that put an end to the Malthusian Trap, it was the changes in society (decreasing birth and death rates) that allowed the population to stagnate. The investment in human capital (education) led to the raising of less (but more educated) children. NB: Great Divergence (Pomeranz): After the Industrial Revolution there was a divergence in income per capita between the West and the East (eg.: China vs Europe). Little Divergence: Between South and North (in Europe). Seventeenth-century English philosopher Thomas Hobbes once said that human life was nasty, brutish and short. Chapter 3: The Storm beneath the Surface 7 In the past two centuries, humankind experienced a transition from stagnation to growth, which appears to have been dramatic and sudden, but the fundamental triggers of the transformation were operating from the emergence of the human species. It occurred at different times across the globe, generating previously inconceivable levels of inequality between those who underwent that transition sooner and later. Unified Growth Theory: Recently, physics have attempted to devise a “Theory of Everything”, that would explain all the physical aspects of the universe. Nicolaus Copernicus, the Renaissance astronomer who maintained that the planets revolve around the sun, argued that in the absence of a unified theory to understand the operation of the universe, it would be as tough an artist were to gather members from diverse models, each part excellently drawn, but since they wouldn't be related to a single body, the result would be a monster rather than a man. Similarly, the Unified Growth Theory (by Oded Galor and his co-authors) was fuelled by the conviction that an understanding of what drives economic development globally would be fragile unless it reflected the primary forces behind the entire process of development. Prior analysis, which considered the modern era of economic growth and the Malthusian epoch as two distinct and disjointed phenomena, limited and distorted the understanding of the growth process. Unified growth theory captures the journey of humanity over the entire course of history and identifies the forces that governed the process of development during the Malthusian Epoch and the escape from the poverty trap to an era of sustained economic growth. Its basis is the idea that the transformation of the Industrial Revolution is founded on things that were happening in the previous period. In search for the catalyst of the transition from stagnation to growth, some may argue that it was the Industrial Revolution that caused an abrupt external shock that jolted it into the modern phase of growth, but there are evidences from that time that suggest that there was no “jolt” at any point. While the change was rapid when compared with the timespan of human history, the productivity gains experienced during this period increased gradually. When the Industrial Revolution first transpired, populations spiked but average incomes increased very modestly (just as predicted by the Malthusian theory). Yet, nearly a century later, the Malthusian equilibrium vanished and tremendous growth ensued. The bifurcation theory demonstrates how, beyond a certain threshold, minor alterations in a single factor may generate a sudden and dramatic transformation in the behavior of complex dynamical systems. What were the wheels of change that operated persistently during the Malthusian epoch, triggering the dramatic metamorphosis in living standards in the past two centuries? Wheels of Change: Population Size - at the eve of the Neolithic Revolution, 2.4 million human beings roamed the Earth, and, at the turn of the nineteenth century, the human population nearly reached 1 billion. The relationship between population size and technological change is a reciprocal one - larger populations were more likely to generate greater demand for new goods, tools and practices, as well as exceptional individuals capable of inventing them, and benefited from more extensive specialization, expertise and exchange of ideas through trade. This self reinforcing 8  positive feedback loop emerged at the beginning of humanity and has been operating ever since. Regions that experienced an earlier onset of the Neolithic Revolution (such as the Fertile Crescent) had the largest prehistoric settlements and a persistent technological head start and the ones with more suitable land for agriculture, therefore higher density of population, possessed more advanced technologies. The critical importance of population size to a society’s ability to foster technological innovation is exemplified in the printing revolution of the German Johannes Gutenberg (born in Mainz and lived in Strasbourg): benefiting from rich contacts with other developed civilizations, from the accessibility of older generation’s knowledge and from the exposure to the diffusion of inventions in the printing field, he was able to profit from an apprenticeship as a goldsmith and to have access to funding for the development of his movable-type printing system - none of this would have happened if he had been born in an isolated village. Larger populations were more conductive to technological development, preventing declines common in smaller communities, such as in the Polar Inuit of north-west Greenland in 1820 (this society was hit by an epidemic that decimated its adult population and the young survivors could not restore the lost technological know-how, leading to an extreme regression), or in the Aboriginal Tasmanian tribes (after the loss of their land bridge with Australia led to an acute technological regression). In larger populations, which tend to have trading links with other groups, spread their knowledge across society and enjoy regular infusions of new inventions, these regressions are much rarer. This reinforcing cycle gradually but continuously intensified until the rate of innovations reached a critical threshold - one of the sparks for the phase transition that hoisted humanity out of the epoch of stagnation. Population Composition - according to Charles Darwin, any intergenerationally transmitted trait which makes an organism better adapted to their environment, generating more resources and thereby fostering a larger number of surviving offspring, can be considered favorable. Because of this survival advantage, the prevalence of these favorable characteristics in any population will increase over time. This is the essence of Darwin’s natural selection. The composition of existing traits within a given population can, in fact, alter quite rapidly (take the example of the change in dominant color of common moths from pale to dark, in nineteenth century Britain: as surfaces became covered in soot in industrial areas, darker moths enjoyed better camouflage, having a survival advantage, and soon became dominant in the moth population). Environment adaptations are how we acquire natural immunity to local diseases, boost our resistance to infections and develop the ability to metabolize regional food supply or the capacity for long-term acclimatization to high altitude areas. For example, in regions of higher UV radiation, populations evolved skin pigmentations as protection, and, in places further from the equator (that receive less sunlight), a mutation that caused lighter skin tones helped generate vitamin D, becoming a survival advantage and thus more prevalent. Moreover, when the adaptation is cultural rather than biological, these changes can take hold in a population even more quickly, since they don’t require the passing of genetic mutations and spread through imitation, education and indoctrination, giving rise to new cultural traits and their impact on economic and institutional 9  changes. These are the favorable variations that are perhaps most relevant to the journey of humanity. During the Malthusian epoch, cultural traits that were complementary to the technological environment would have generated higher income and thus a larger number of surviving offspring, leading to an increase in the prevalence of these traits, which would reinforce the pace of technological change, contributing to the development of the process from stagnation towards growth (placing high value on education and having a “future-oriented, entrepreneurial mindset”.) This process is epitomized by the evolution of the cultural inclination for parental investment in human capital - factors that influence worker productivity, such as education, training and skill, along with health and longevity. Consider two communities: one which has as many children as possible and invests its limited resources in raising them and another one that has fewer children, but invests part of their time and resources in human capital. If technological development boosts the demand for specialized workers, the increase in the first one’s earning capacity places it at a distinct evolutionary advantage, being able to bear and educate more children. The other, not being affected by the development, has the same income and thus equal numbers of children reaching adulthood. A moderate rather than large number of children per family leads to a larger number of descendants after several generations and families who tend to invest in their children’s human capital have the largest number of offspring surviving into adulthood. Therefore, in societies where innovations offer economic opportunity and thus reproductive success is enhanced by the investment in human capital that allows one to seize it, a positive feedback loop will lead the first society to dominate population in the long run. It is not unlikely that during the periods of high fertility within the Malthusian epoch (when the pace of adaptation could have had a significant impact on the composition of the population), the prevalence of individuals with a stronger inclination towards investment in the survivability of fewer offspring gradually increased. Technological innovations sustained larger populations and triggered the adaptation of human beings to their ecological and technological environments. Larger and more adapted populations foster, in turn, the ability of humankind to design new technologies and gain increasing control of their environment. These wheels of change led to a spectacular explosion of innovations on a scale never seen before in human history - the Industrial Revolution. Chapter 4: Full Steam Industrialization lent the revolutionary period its name since it was its most novel and glaring characteristic, but to fully grasp the implications of the Industrial Revolution it’s important to realize that industrialization itself was secondary. According to Deirdre McCloskey: “The Industrial Revolution was neither the age of steam, nor the age of cotton, nor the age of iron. It was the age of progress.” Acceleration of Technological Development: 10  The progress of this era took many forms, one of them being industrialization. The immeasurable rise in technological advancement had been gathering pace since the Age of the Enlightenment (a period of rigorous scientific (newton), political and philosophical discourse that characterized European society during the late 17th and 18th century, that framed and led to the Industrial Revolution → Lumiers - positive about the future of humanity ENLigthe The one and considered the main book the Enciclopedie) and over the course of the next few hundred years, the number of inventions that emerged in Europe and North-America exceeded everything developed so far, in a short time and geographic regions. Science also advanced at great speed across Europe, as well as art, literature and music similarly benefited from an unprecedented flourishing (since the beginning of the seventeenth century). NB: Renaissance (Reformation, Luther King and Protestants), 15-16th century → Scientific Revolution, 17th century → Enlightenment, 18th century (Use of reason to question the importance of religion). I pratical steam engine , umping a a > - One of the most important inventions was the steam engine, by Thomas Newcomen, which entered commercial use in 1712, and was further advanced (in 1763-1775) by James Watt,- Scottish who adapted the engines for the operation of factory machinery, proliferating its commercial use. · · manurtursing Tramportation ↓ The textile industry was the cutting edge of the Industrial Revolution, the high-tech sector of Bantons War its day. Inventors like John Kay, Richard Arkwright and James Hargreaves designed sophisticated machines that automated much of the textile manufacturing process, Europe Byaret which reduced the hours of labor needed, decreasing the price of finished garments. Initially, the new machines were operated with water wheels in factories built next to rivers and waterfalls, but the industry was liberated from its dependence on running water and the steam engine enabled the development of industrial towns across Europe and North-America (although proximity to coal mines remained necessary). The construction of large-scale structures and the transportation by land, sea and air were also revolutionized. In the beginning of the eighteenth century, Abraham Darby invented a cheaper method of smelting iron ore (encouraging the widespread use of this metal and the construction of bridges and skyscrapers), and in the middle of the nineteenth century, Sir Henry Bessemer developed a cheap and rapid method for the production of strong and supple steel. Improvements in the iron and steel industries led to the development of new and transformative cutting and processing tools, which contributed to the rise of steam locomotives and steamboats (reducing traveling times across long distances and liberating maritime trade from its reliance on the winds), accelerating the pace of globalization. There were also some breakthroughs in the field of communication: Samuel Morse built the first electromagnetic telegraph in 1844, and, within 3 decades, the world’s main arteries were lined with telegraph wires and messages could be transmitted across oceans in a matter of minutes. In 1877, Thomas Edison unveiled the phonograph (the first audio recording device) and, in 1879, the incandescent light bulb (“We will make electric light so cheap that only the rich will burn candles.”). In 1882, he founded the world’s first commercial power station in New York, following which electrical power was quickly adopted and gradually replaced the steam engine in factories. The late nineteenth century also 11 Y Tsunami Idaci of witnessed the invention of the internal combustion engine, which soon allowed automobiles to supersede the horse-drawn carriage as an ordinary method of local transportation. Every field of human endeavor was radically transformed during this age of innovation (chemistry, agriculture, woodwork, mining, canal-digging, production of materials, bicycle, hot air balloon, industrial production line, elevator,...). This transformation in technological power of European nations and the US swung the balance of power across the globe. The change was so rapid that it caught even technologically developed societies elsewhere off guard, lacking resources to resist European military power, which led to their populations to be oppressed and exploited (Eg.: Britain’s victory in the First Opium War, 1839-1842; A decade later, technological advantages allowed the US Navy to coerce Japan to end more than 200 years of isolationism and their feudal system of government, leading to the restoration of the imperial power, which transformed Japan into an economic and military powerhouse). This dramatic change influenced the way Europeans and North-Americans lived. Europeans philosophers, writers and scientists radically revised collective conceptions of human nature, society and cosmos. Among some social circles, it became a mark of status to be educated and up to date on the latest ideas and debates. The fundamental characteristic of this era (the acceleration in the rate of innovation) had a more profound impact on education than merely turning it into a cultural commodity among the middle classes and elites: it transformed education’s very purpose and brought it fot the first time to the masses. Education in the Pre-Industrial Era: For most of human history, formal education was available only to a small, privileged part of society. When education was provided to wider sections of society, it served primarily cultural, religious, social, spiritual and military purposes - no system considered the development of skills that would be useful for adult professional occupations a priority. As Europe started to make strides in technology and trade, the importance of education began to intensify. Renaissance European civilizations were markedly more technologically sophisticated than other contemporary societies (some of the major inventions in the pre-industrial era were the printing press, the pendulum clock, the eyeglass, the telescope, the microscope and countless improvements in agriculture and seamanship). By this time, other civilizations that had previously out-paced Europe in technological development (the Chinese and the Ottoman) had started to lag behind and, in a few centuries, after 1500, the world’s most advanced technology became virtually indistinguishable from European technology. This technological divergence was reflected in a widening literacy gap between Europe and the World. Growing literacy at this time contributed to the growth and proliferation of the printing industry and mass printing increased the desire to read/write. The rapid expansion of the European book industry spurred further technological and cultural change, which in turn contributed to the enhancement of human capital formation. The late fifteenth century saw the mass printing of “commercial mathematics” textbooks (which explained how to price stocks, convert currencies, calculate profit margins and interest payments and disseminated the discipline of the double-entry bookkeeping) and professional textbooks (which were sources of knowledge for doctors, 12 Very Important lawyers and teachers). Cities that embraced the printing press in the late fifteenth century experienced greater population growth (due to inward migration) and became major hubs of intellectual thought and literature, further promoting literacy as a noble pursuit for respectable citizens and as a virtue in its own right. Europe became the most literate and technological place in history and, in non-Europeans societies, literacy rates only started to rise in the twentieth century. Yet education in pre-industrial Europe was still not geared towards the provision of skills to a mass workforce. One of the pioneers of modern education, the seventeenth-century Czech philosopher John Amos Comenius, promoted innovative pedagogical methods, such as learning in vernacular languages (instead of Latin), introducing pupils to a range of subjects with gradually increasing degrees of complexity and enhancing logical thinking over dull memorisation. However, even Comenius’ most revolutionary inclusive teaching enterprise, integrating women and the poorer segments of society into the education system, was designed to instill moral and cultural values, not to impart expertise vital for work. Few children, including those fortunate enough to gain a rudimentary education, acquired skills and knowledge at school that were relevant to their adult working lives - those were learned on the job.- On the gab learning Starting in the mid-seventeenth century, Western Europe became home to philosophers who championed a notion of progress based on cumulative scientific knowledge, rationalist rejection of mysticism and religious dogma, and sometime progressive values such as equality of opportunity, freedom of expression and individual liberties, curiosity and skepticism. During this Age of Enlightenment, education and human capital became still not increasingly important, both culturally and economically. However, the metamorphosis in the nature of education - geared towards industrial and commercial purposes - had yet to come. -present Industrialization and Human Capital: In the earliest phase of the Industrial Revolution, literacy and numeracy played a limited role in the production process, so the enhancement of human capital had a limited effect on worker’s productivity and a large portion of the tasks in industry was successfully performed by illiterate people. During the subsequent phases, the demand for skilled labor in the growing industrial sector markedly increased. Human capital formation now had the primary purpose of satisfying the increasing requirements of industrialisation for literacy, numeracy and mechanical skills among the workforce. This was particularly apparent among the first countries that experienced industrialization (England, France, Germany and the United States). Technological advancements in the course of industrialization have been associated with human capital formation: England: The first phase of the Industrial Revolution was associated with the intensification of the mechanization of the production process, but had no impact in the employment of skilled workers. Workers developed skills through on-the-job training and child labor was highly valuable. Later on, the scale of education dramatically changed. The proportion of children in primary schools rose from 11% in 1855 to 74% in 1902, as the government provided 13  a free education system. Literacy rates among English men increased significantly reaching 97% by the end of the century. France: The development of the education system occurred well before the Industrial Revolution, but it was deepened and transformed to satisfy industrial needs during the beginning of industrialization. Elementary and secondary education, in the seventeenth and eighteenth centuries, was dominated by the Church and religious orders, although there were some state interventions in technical and vocational training, to reinforce development in commerce, manufacturing and military efficiency. After the French Revolution, the state established primary schools and selective secondary and higher education, in order to produce effective elites to operate the military and governmental apparatus, and, because of the growing industrial demand for human capital, the provisions of education were extended. By 1882, a universal, free, compulsory and secular primary school system had been established. Prussia: As in France, the first steps of compulsory education were at the beginning of the eighteenth century (before the revolution) and education was viewed as a way to unify the state. In the second part of the century, it was made compulsory for all children, but it wasn't strictly enforced due to the lack of funding. At the beginning of the nineteenth century, motivated by the need for national cohesion, military efficiency and trained bureaucrats, the system was further reformed. Schooling became compulsory and secular (for 3 years), the gymnasium (secondary school that prepares students for higher education at a university) was reconstituted as a state institution that provided education for the elite and secondary schools also started to serve industrial needs. The Realschulen, which emphasized the teaching of mathematics and science, was adopted and vocational and trade schools were founded. Industrialization coincided with the implementation of universal primary schooling. United States: Industrialization also increased the importance of human capital: the rise of industrial, business and commerce sectors, in the late nineteenth and early twentieth centuries, increased the demand for managers, clerical workers and educated sales personnel (trained in accounting, typing, shorthand, algebra and commerce) - by 1910, some companies demanded blue-collar craft workers. The structure of education was transformed to meet these needs. Establishing a line of causality between technological acceleration and industrialization and human capital formation, there’s a quasi-natural historical experiment: In France, the steam engine was first introduced in a mine in Fresnes-sur-Escaut. Due to the regional diffusion of this novel technology, over the course of the mid-nineteenth century, the closer a local region (département) was to this village, the more rapidly it adopted the steam engine - geographical distance from this place could predict the relative presence of steam engines. While the number of steam engines may have been affected by the pre-existing level of education in that département and other potential confounders, distance from 14 Fresnes-sur-Escaut can be used to assess the potential causal impact of technology on education, because it directly predicts the presence of steam engines, it cannot be affected by pre-existing level of education or other confounders and has no direct effect on education levels (only indirectly through its impact on the number of steam engines). Fresnes-sur-Escaut wasn’t the first place to adopt education in France, so it wasn’t the origin for its spread throughout the country. Technological acceleration in the form of industrialization, as reflected by the number of steam engines in each French département and inferred by distance from the village, had a positive impact on several measures of human capital formation in the 1840s - the more steam engines in each département, the greater the investment in human capital. The impact of technological advancement on human capital formation is also observed in the United States. With the expansion of railroads into new American towns (1850-1910), counties that were plugged into the national train network were characterized by higher literacy rates and more skilled workers (engineers, technicians, doctors and lawyers) and had a lower share of the population employed in the agricultural sector. Technological and commercial development during the Industrial Revolution stimulated various forms of investment in human capital and human capital facilitated further technological advancement - mutually reinforcing cycle. Indeed, besides being rich in coal, one of the reasons why the revolution broke out in Britain was its comparative advantage in human capital - a broad class of professionals was able to support the work of the finest inventors and improve their designs. Engineers who emigrated from Britain became industrial pioneers of many countries - the first textile factory in North America (built in Rhode Island in 1793), funded by the American industrialist Moses Brown, was the initiative of the British-American industrialist Samuel Slater (the “Father of the American Industrial Revolution”), who worked in a british textile factory since the age of 10, developing a first-hand understanding of the technicalities of Richard Arkwright’s spinning frames. Hoping to protect its advantage, the British government banned the export of the machine, as well as the blueprints required for its construction, but Slater memorized the designs - he was called “Slater the Traitor”. The Advent of Universal Public Education: In 1848, one of the most influential books in history was released in London: Karl Marx and Friedrich Engels’ The Communist Manifesto. They believed that the social and political upheavals the world was facing were directly related to the rapid technological change in production methods and argued that the rise of the capitalist class had played a major role in taking out the feudal order and generating economic progress. However, they sustained that ever-intensifying competition among capitalists could only result in a reduction in their profits, inducing them to deepen the exploitation of workers. Therefore, class struggle would be inevitable, since society would reach the point where the “proletarians have nothing to lose but their chains”. The central pillar of the Marxist thesis was the unavoidable power struggle between capitalists and workers, that would lead to a revolution and the shattering of the class-based society. Industrialized nations experienced fierce and violent conflicts between capitalists and organized labor, in the late nineteenth and early twentieth centuries. The 15 communist revolution Marx and Engels foresaw happened in 1917, in Russia (where the share of employment in the agricultural sector exceeded 80%). However, the most heavily industrialized capitalist nations have never experienced a successful class revolution. The threat of revolution prompted these nations to adopt policies designed to alleviate interclass tensions and mitigate inequality (such as the expansion of voting rights and thus the power to redistribute wealth, as well as the rise of the welfare state). Besides this, investing in the education and the skills of the workforce became increasingly more important to the capitalist class, as they came to realize that all of all the capital at their disposal, it was human capital that prevented declines in their profit margins. Specific craft skills were replaced by adaptable sets of skills that would allow the workforce to navigate the challenges associated with rapidly changing technological and institutional environments. Workers benefited from having a broad and flexible education, rather than exclusive and vocational skills. Contrary to Marx’s conjecture that the Industrial Revolution would erode the importance of human capital, allowing the owners of the means of production to exploit their workers more viciously, ongoing technological transformation of the production process made human capital an increasingly critical element in the boosting of industrial productivity. Instead of a communist revolution, industrialization triggered a revolution in mass education. Capitalist’s profit margins stopped shrinking and worker’s wages started rising and ultimately the threat of class conflict (the beating heart of Marxism) began to fade. Even though industrial societies supported the provision of public education (because they realized its importance), industrialists were reluctant to fund education of their potential workforce, as they weren’t guaranteed to not find employment elsewhere (the British iron magnate James Kitson testified that individual manufacturers were holding back on funding schools, because they feared that their competitors would reap the rewards). In the Netherlands and Britain, some industrialists funded their own private schools, but had limited success and the few capitalists that maintained schools in this period (such as Robert Owen) were motivated by philanthropic, rather than commercial, reasons. As it became apparent that skills were necessary for an industrial society, previous concerns were discharged and capitalists started lobbying governments for the public provision of education. Industrialists in Belgium, Britain, France, Germany, the Netherlands and the United States became actively engaged in influencing the structure of their countries’ public education systems and encouraged their leaders to amplify investment in mass education. In 1867-1868, the British government established the parliamentary Select Committee on Scientific Instruction and so began various parliamentary investigations into the relationship between the sciences, industry and education, designed to address the capitalists’ demands. A sequence of reports underlined the inadequacy of the training that supervisors, managers, proprietors and workers generally had been receiving and recommended the redefinition of primary schools and the introduction of technical and scientific education in secondary schools. In 1870, the government assumed responsibility for ensuring universal primary education and, in 1880, education was made compulsory throughout Britain. There was some resistance from the landed, because the output of an educated farmer wasn’t much higher than the one of uneducated peers and education was an incentive to 16 leave the land in the pursuit of new opportunities. Members of Parliament from constituencies with high proportions of workers in industrial professions voted in favor of the Education Act, while the constituencies that most opposed the establishment of comprehensive education were the agricultural-intensive ones. Another factor that influenced opposition was the concentration of land ownership - In areas where land was equally distributed, landowners had no incentives to impede education reforms (their earnings were limited in comparison to the impact education would have on their children’s wellbeing). However, in the opposite scenario, landowners (who relied heavily on agriculture for their wealth and wished to prevent the exodus of their workers) were particularly hostile to this transformation. Historical inequality in land ownership had a powerful effect on the transition from agriculture to industry. For example, the egalitarian distribution of land in Canada and the US compared to Latin America’s one explains the educational gap between the two regions. Furthermore, within South America, educational standards are higher in countries (Argentina, Chile and Uruguay) where the distribution was more even. In other areas of the world (Japan, Korea, Taiwan and Russia), agrarian reforms that equalized land ownership predicted further reforms that improved education. Ultimately, in the second phase of industrialization, the interests of children, parents and industrialists outshone the landowner’s ones and education spread to all layers of society among the first industrialized nations. This progress led to other improvements in worker’s lives - 50 years after Marx prophesied the specter of class struggle, worker’s wages were rising, class boundaries began blurring and mass education enabled the democratization of further opportunities and the phasing out of child labor. Child Labor No More: In 1910, Lewis Hine photographed barefoot 12 year-old Addie Card, leaning against a machine in a textile factory, with a haunting expression. Other photographers also immortalized images of child labor and their pictures soon became iconic symbols of the Industrial Revolution, arousing fierce public protest, which led to legislation banning the employment of children. However, contrary to public belief, child labor was neither an innovation of the revolution, nor a significant factor in industrialization, nor was it eradicated because of the legislation. It has been an intrinsic element of human history, as the challenges of subsistence demanded children to perform various back-breaking tasks (domestic and agricultural). When the Industrial Revolution broke out, the prevalence of this phenomenon had reached an unprecedented magnitude. Families’ earnings in urban areas were barely above subsistence, and children (as young as 4) were sent for employment in the industrial and mining sectors. The abusive working conditions that they experienced, along with educational deprivation, reinforced the cycle of poverty. Rapid technological change and its impact on the demand for educated labor gradually reduced the profitability of child work, for parents and industrialists, in two ways: New machines reduced the relative productivity of children, by automating the simpler tasks that they were capable of, magnifying the difference between the 17  earnings capacity of parents and children and reducing parental benefit from child labor. The rise in the importance of human capital induced parents to invest their children’s time and energy in education rather than work and led the industrialists (who wanted better workforce) to support laws which limited and ultimately prohibited child labor. The first effective legislation was passed in Britain in 1833 (Factory Act) and in 1844, the Parliament passed a new act. Since regulations amounted to a tax on employing children, many argue that it was crucial in eradicating child labor in Britain, but, while it may have been a contributing factor, child labor was in a downward slide (in Britain) well before that intervention. Technological advancements played an important role in phasing out child labour long before legislation did, because machines had already reduced its need in many sectors and had widen the parental-children income gap. In fact, while the silk industry was exempted from the legislation (due to struggles with competition), the proportion of child workers also fell. Given that these changes in attitudes were partly due to the rising demand for human capital, it is unsurprising that child labor first disappeared in the most industrialized areas. A stunning increase in the rate of technological innovation, the arrival of mass education and the end of child labor - the Industrial Revolution was indeed the age of progress. Nevertheless, it was the impact of these factors on women, families and childbirth that brought about the phase transition and the escape from the Malthusian Trap. NB: The first phase of the Revolution occurred mainly in Britain and the second one e German, France, Britain and so on → More geographically distributed 1833 Factory Act → Legislation that regulated child labor (banned employment of children under 9 years old, limited the working hours (9-13 years old) and prohibited the night shift (below the age of 18). Chapter 5: Metamorphosis During the early phases of the Industrial Revolution, the populations expanded rapidly, but in the second half of the nineteenth century fertility and mortality rates declined and that trend reversed (higher incomes were no longer channeled towards sustaining an expanded population), shattering one of the cornerstones of the Malthusian mechanism - it was the Demographic Transition. For the first time in human history, technological progress led to an elevation in the living standards in the long run and the modern era of sustained growth outshone the stagnation epoch. A factor that might have contributed to this transition might have been contraception: the most common ways of avoiding pregnancy in this time was delayed marriage, abstinence and the withdrawal method. In Western Europe, during periods of scarcity, the average age of marriage and prevalence of celibacy rose (resulting in a drop in birth rates) and, in times of prosperity, the average marriage age dropped and birth rates rose accordingly - this is the “European Marriage Pattern”, which prevailed between the 17th and the begging of the 20th century. Elsewhere, customs as dowry payments and “bride price” further solidified the link between living standards, marriage age and birth rates. Induced abortion was also 18 practiced in a wide range of pre-industrial societies, at least as early as ancient Egypt, through intense physical activity, fasting, pouring hot water onto the abdomen, lying down on heated coconut shells or consuming medicinal herbs. However, since these methods had been present throughout history and had not changed on the eve of the Demographic Transition, they weren’t the catalyst for the major decline in fertility, Triggers of the Demographic Transition: The Rise in the Return on Human Capital - The growing importance of education in response to a rapidly changing technological environment contributed to human capital formation and the balance in the timeworn quantity-quality trade-off that parents had been forced to deal with shifted and precipitated the dramatic decline in fertility of the Demographic Transition. Technological progress during the Industrial Revolution boosted parental income, meaning that they could invest more in their children - Income Effect (increase in resources invested in the raising of children). 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 - Substitution Effect (reduction in number of births). Historically, the income effect dominated the substitution one, leading to an increase in birth rates, but, at the time of the Demographic Transition, the new opportunities available to the educated ones led parents to invest a higher proportion of their earnings educating their children and ultimately, it was the increase in the return on parental investment in their children that overpowered the income effect. This mechanism was reinforced by the surge in life expectancy and decline in child mortality (which amplified the duration of the return on education, enhancing the incentive to invest in human capital and reduce fertility), by the reduction of the productivity and profitability of child labor and by the migration from the countryside into towns and cities where the cost of living was higher (which increased the cost of child rearing, contributing to the fertility decline). In 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. He argued that the Church had no role mediating between man and God and encouraged independent Bible reading - which incentivized his followers to strive for literate children. Prior to 1517, proximity to Wittenberg had no effect on a region’s economic/educational development, but, after 1517, as waves of Protestantism rippled out of Wittenberg, parents in nearer regions were more exposed 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 centuries later Prussian countries closer to Wittenberg were characterized by higher levels of education and, in line with the quantity-quality trade-off, experienced a larger reduction in birth rates. The Decline in the Gender Wage Gap - Today’s 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 pid working hours, and so on). However, not long ago, it was far greater than it is currently, having declined significantly across the globe since the second phase of the Industrial Revolution. In 1820 the average working woman in the US (and Western European nations) earned 30% of a man’s salary, in 1890, it increased to 46% and by 19  the Second World War (1939-1945) it had risen to 60% - the narrowing of the gap coincided with greater access to education for women. Various economic, cultural, institutional, legal and social factors contributed to the narrowing of the gender wage gap. In particular, the mechanization of the production process diminished the importance of low-skilled heavy manual labor (traditional “men’s work”), while fostering the significance of mentally intensive work, reducing gender disparities in earning and education. In addition, widespread access to education and legislation designed to secure property rights in the economy as a whole planted 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, due to the rapid mechanization of the process and the increasing importance of mental skills. The surge in women’s wages had conflicting effects on fertility rates. Rising women’s wages eased household budget constraints and permitted a larger number of children (income effect), but also increased the household's opportunity cost of having more children and marrying daughters earlier, inducing delayed marriage and suppressing birth rates (substitution effect). Since, historically, the burden of raising children fell mainly on women, the substitution effect dominated and fertility declined. The decline in gender wage gaps reinforced the drops in birth rates that had been triggered by the rise in the return on human capital. Job opportunities for women increased, the gender wage gap declined and birth rates fell. Technological advances during the Industrial Revolution led to higher returns on investments in human capital and the narrowing of the gender wage gap, a decline in child labor, an expansion in life expectancy and an increase in migration from rural to urban regions. These factors contributed to the decline in fertility in the course of the Demographic Transition. From the dawn of humankind, technological progress helped generate a gradual increase in population size and the proliferation of traits that were conducive to further progress. However, 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 of 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 until, in the late eighteenth century, there was 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 factors that led to the Demographic Transition, liberated economic growth from the counterbalancing effects of population growth. At last, societies escaped from the Malthusian trap, allowing living conditions to soar. Chapter 6: The Promised Land 20 In the late nineteenth century, the vast majority of people had no electricity, running water, toilets, sewerage or central heating and their diet was meager and monotonous. Few could even imagine the use of cars or planes and televisions or computers. Radio had just been invented and communication over the telephone was very limited. Yet, these living conditions transformed in a heartbeat and there was a huge improvement in the average person’s quality of life. Health is one of the most important factors in life quality and also experienced a massive leap forward. Before the advent of modern medicine, in the latter half of the twentieth century, the contribution of the French Scientist Louis Pasteur to the recognition of the germ theory of disease and the subsequent installation of sewerage and water networks in major towns in the turn of the twentieth century and the later diffusion of vaccinations led to a sharp decrease in deaths from infectious diseases. This unprecedented rise in living standards contributed to an extraordinary increase in life expectancy (changes in resources, wars, famines and epidemics triggered temporary swings in fertility and mortality rates, but it would remain stable because of the mechanism), allowed by the rising income per capita. These trends began in industrialized nations from the middle of the nineteenth century onwards, during their escape from Malthusian forces, and proceeded in developing countries towards the second half of the twentieth century (affecting the poorest sections of society). These improvements in public health reinforced the virtuous circle between technological progress and human capital formation: the decline in death rates and rise in life expectancy boosted the incentive to invest in education and foster further innovations. In particular, the eradication of malaria, at the start of the twentieth century, in the American South and other countries improved children’s health, education and earning capacity decades into the future. One’s standard of living isn’t just about health, material goods and physical comfort, but also influenced by the social, cultural and spiritual dimensions of our existence too. Technological advancements provided greater access to information, cultural exchange and social contact irrespective of physical distance. The rapid proliferation of Gutenberg’s printing technology facilitated the diffusion of information and culture via books and newspapers and the reforms championed by Sir Rowland Hill, in the nineteenth-century British postal service, allowed ordinary citizens to exchange letters, while the advent of the telegraph made near-instantaneous communication possible between remote regions. In 1876, the Scottish inventor Alexander Graham Bell, conducted the first call on his newly invented telephone, and it soon spread to the rest of the world. Edison conceived of the phonograph, in 1877, to record political speeches and teach elocution, but (by the 1890s) it was used to play music. The biggest improvement in terms of public access to culture and entertainment was the development of the radio, by the Italian Inventor Guglielmo Marconi, in 1895. World War I briefly postponed the arrival of radio technology on open markets, but, during the 1920s, there were many stations across the world and, for many families in isolated areas, it was the only exposure to the outside world. Wireless transmission technology had appeared in the late nineteenth century and was promptly embraced by the world of shipping. Following the first filming screening by the Lumiére brothers, in Paris (1895), there was a profound proliferation of cinemas in the early part of the twentieth century (featuring stars like Charlie Chaplin and Mary Pickford). 21 The human species also experienced several catastrophes in the first half of the twentieth century: millions of people died in World War I (1914-1918) and in the Spanish flu pandemic (1918-1920), the Great Depression (1929) pushed many countries into poverty, unemployment and political extremism and World War II was later fired (1939-1945). Meanwhile, within some advanced societies, prosperity over this period of ascent living conditions was not equally shared across the various layers of society. Unequal opportunities, discrimination and social injustice had contributed to massive social and economic inequality, reflecting racial prejudice, gender biases and the legacy of slavery. Disparities in health and education were augmented and social injustice became more prevalent. Yet, even these dreadful events of the last hundred years have not diverged humanity from its new phase of economic sustained growth and living standards have always recovered from the catastrophes. Malthu Sociatin low well of Brith and drith rate. Se change of Typi c al The , This progress is captured by the unprecedented growth of income per capita since the onset of the Demographic Transition. Most of the world’s population bears children they can expect will outlive them, enjoys varied diets, entertainment and culture, works in relatively less perilous and strenuous environment and benefits from significantly higher incomes and longer lives.The forces that exploited progress to amass power, destroy and oppress were outshined by the ones that leveraged it to create, promote equality of opportunity, reduce human misery and build a better world. As we consider the sustainability i of this growth, however, one major shift in recent decades demands a deeper reflection: The continued rise in living conditions towards the end of the twentieth century has taken place not because of industrial manufacturing, but perhaps despise it. The Twilight of Industry: In the early twentieth century, Henry Ford founded his successful Ford Motor Company in Detroit (Michigan), which soon attracted an influx of entrepreneurs, turning it into the world capital of the automobile industry (and the fifth largest city in the U.S.). Automobile workers enjoyed higher wages than their peers in other industries and car manufacturers employed a large class of managers and engineers, who had an income that allowed them a luxurious lifestyle in the suburbs. However, in 1960, competition in the industry intensified and some manufacturers moved their operations elsewhere, causing an exodus from the city (currently its population is less than one-third of its size in the 1950s and there are many deserted and neglected buildings). Many other cities in the industrial heartlands of the American North-West and Midwest experienced a significant decline in the latter half of the twentieth century - a pattern that gave the region the name “Rust Belt”. Donald Trump based his 2016 election campaign on a promise to make American industry great again, having pivotal support from states in the Rust Belt (Indiana, Michigan, Ohio and Pennsylvania). Britain, France and Germany also saw industrial regions that had previously bloomed, fall far behind their neighbors. After 1980, the developed world as a whole witnessed an overall decline in manufacturing jobs. Rising living standards in the West during the Industrial Revolution were predominantly the result of human capital formation and rapid technological advancement, but they weren’t contingent on the process of industrialization - the growth in income per capita rose in parallel to the growth of industry. But, in the twentieth century, as the pace of technological change in low-skilled industries slowed down, the impact of industrialization on living standards was transformed. Instead of encouraging the cultivation of human capital and 22 economic growth, low-skilled industry stifled it. In France, regions that experienced rapid industrialization in the mid-nineteenth century, remained relatively wealthy until the 1930s, but, by the turn of the twenty-first century, they had fallen behind other less industrial areas. Overtime, the reliance of the industrial sector on workers with only basic education (which in the short-run had enriched the locals) reduced the incentive to invest in higher education, limiting the educational aspirations of their populations. The disparities in human capital formation deepened over time, impeding the adoption in the former industrial heartlands of technologies that demanded high levels of education, reinforcing their tendency to focus on low-skilled sectors and reducing their prosperity. Brexit may also be associated with the decline of manufacturing - Britons working in this field or living in areas that were dependent on industrial production were more likely to vote in its favor. In France, Germany and other developed nations, politicians assist domestic industries through subsidies, tariffs, quotas and various benefits in the hope of discouraging corporations from shifting their operations to developing countries where wages are lower. Investment in human capital has enabled an increasing fraction of workers in dying industries to switch to booming sectors of the economy and enjoy continuously rising living standards. Developing countries may benefit from the allocation of resources towards human capital formation and skill-intensive sectors rather than towards the development of traditional low-skilled intensive industrial sectors. human Capital ir · Enentially flexible tool a. The Age of Growth: In the latter half of the twentieth century, the age of growth finally reached economies worldwide, boosting living conditions (although very unevenly) - the American economic historian Claudia Goldin names this period the “century of human capital”. The diffusion of technologies intensified both the demand for the value of human capital formation, bringing the Demographic Transition to every corner of the planet. In the latter half of the twentieth century, many developing countries finally broke out of the Malthusian Trap. Among the technological breakouts of the twentieth century were the harnessing of nuclear energy, introduction of personal computers and the internet, development of antibiotics, advancement of previous inventions and the upgrading of agricultural commodities (high-yield and disease-resistant varieties of wheat, corn and rice improved agricultural productivity). Described as the “Green Revolution”, the adoption of these new crops increased harvests tremendously and reduced hunger across the world - India, Pakistan and Mexico benefited a lot. In many other cases, innovation was primarily organizational rather than scientific. In 1968, the International Organization for Standardization recommended American entrepreneur Malcom McLean’s design for the modern intermodal shipping container as the standard template worldwide, which made loading and unloading at ports much easier, reducing the costs of freight transport and contributing to a boom in international trade. Barring migration, the populations of the most developed countries (Germany, Italy and Japan) are expected to shrink in the coming decades, as current fertility rates have fallen below the rate of replenishment. Combined with rapid economic growth, these declining birth rates led to a dramatic improvement in living standards all around the globe. (but, today, about 10% of the world still lives below the poverty line). 23 The pace of economic growth has also been affected by a wide range of temporary factors. In the aftermath of WWII, many countries experienced an intense and rapid economic growth spurt, due to the post-war reconstruction effort. In the 1970s and 80s, by contrast, it slowed as a result of the 1973 oil crisis and demographic trends. In the 1990s, growth picked up again thanks to the revolution in information technology, globalization, outsourcing and the astounding expansion of China and other developing countries. The financial crisis (2008) and the Covid-19 pandemic have also had temporary effects on the global growth tragedy, but, in Western Europe and North-America, since the onset of the Demographic Transition (in the past 150 years), has maintained an average pace of about 2% a year. The British economist John Maynard Keyes once said that “in the long run, we are all dead”, criticizing those who were focused on long-term developments instead of the immediate effects of short-term crises. However, this maxim is quite misleading, since contemporary economic prosperity at the societal level is, to a large extent, a product of deep historical, geographical, institutional and cultural features, rather than, say, the grave consequences of the atrocities of WWII or the devastating impact of the Great Depression. In recent decades, while large segments of the developing world have joined this age of growth and billions have liberated from the vulnerability to hunger, disease and volatility, global warming has appeared. Growth and Environmental Degradation: The Industrial Revolution set the stage for humanity’s alarming impact on the environment and pollution has increased, contributing to the climate crisis we currently face. The burning of fossil fuels has elevated the level of heat-trapping greenhouse gasses in the atmosphere and fostered global warming, which might lead to the extinction of plants and animals and the disruption of Earth’s balance. The forecast rise in sea levels is predicted to displace millions of people, affecting the world food supply and generating significant economic losses and human suffering. The gradual adoption of environmental regulations and environmentally sustainable technologies (harnessing solar and wind energy, recycling and waste management and wastewater treatment) have partly mitigated this trend, but our pollution remains alarming. The dramatic increase in worldwide consumption has contributed to environmental degradation and the insufficient pace of transition towards sustainable energy sources and the ongoing production of eco-unfriendly goods leads to the growing view that avoiding an environmental disaster will necessitate slowing the pace of economic growth. An increase in population leads to a rise in carbon emissions that is an order of magnitude larger than would result from a compatible increase in the material well-being of that population (50 people with 10€ each emit more carbon than 10 people with 50€ each). Economic growth fuelled by a decline in fertility rates - growth arising due to an increase in the relative size of the working population - permits reductions in the projected level of carbon emissions. The decline in fertility rates since the onset of the Demographic Transition has been reducing the burden of exponential population growth on the environment. So while the Industrial Revolution triggered our current period of global warming, the ·Economic growth compatiblewith prevent 24 the a  Demographic Transition may well mitigate its effects, diminishing the potential trade-off between economic growth and environmental preservation. Technological innovation facilitates the transition away from the reliance on fossil fuels and towards environmentally friendly technologies and a decline in fertility reduces the population burden on the environment and engenders further economic growth. As Bill Gates puts it: “We should spend the next decade focusing on the technologies, policies and market structures that will put us on the path to eliminating greenhouse gasses by 2050.” Chapter 7: Splendour and Misery In the past decade, boats overloaded with migrants from Africa have sunk just off the coast of Libya and the few survivors rarely reach their destination (Italy), but don’t regret going to Europe. This desperate mass exodus is a result of the immense inequality in living standards across world regions (and social, ethnic and racial lines within societies) - manifesting as gaps in human rights, civil liberties, socio-political stability, quality of education, life expectancy, earning capacity and the prevalence of violent conflicts. The gulf in living standards between the richest and the poorest countries is so large that millions of people risk their lives in the attempt to reach the developed world. Disparate Factors: Income per capita in developed nations is significantly higher than in developing countries, which results in a much higher expenditure on education, health care, nutrition and housing. This earning gap partly reflects differences in labor productivity: each hour of work in some regions produces goods/services of greater value than an equivalent hour of work elsewhere. Agricultural labor productivity, for instance, varies enormously across countries (in the U.S. it is much higher than in Ethiopia, Kenya, India, China and Brazil), because of technologies used for cultivation and harvesting and the skills, education and training of the farmers. American farmers are better trained and can use genetically modified seeds, advanced fertilizers and refrigerated transportation, which isn’t feasible or profitable in the developing world. But, why does the production in certain countries benefit from more skilled workers and more sophisticated technologies? Rusty Tools: Sala Previous attempts to understand economic growth, like Nobel Prize-winning economist e Robert Solow’s, focused on the importance of the accumulation of physical capital to economic growth. However its impact is constrained by the law of diminishing marginal productivity - the amount of resources available is limited, so the first ones will boost output much more than the following, until they’ll barely affect productivity at all. Only perpetual improvements in efficiency deliver long-term income growth. Furthermore, they would spur faster growth on a poor community than it would on a more advanced one of equal size (because it would likely be the first ones). Thus, a relatively poor community should grow more quickly than a more advanced one and, over time, the income gap between the poor and the rich ones should narrow. Solow’s growth model suggests therefore that economic growth cannot be sustained indefinitely in the absence of technological and scientific progress and predicts that, with time, income disparities between countries that only differ in their initial levels of income and capital stocks should diminish (poorer economies should gradually converge with the richer ones). 25 Yet, the economies of the developed and developing nations haven’t converged. In fact, the gaps in living standards between regions have largely expanded over the past two centuries. In the second half of the twentieth century, policymakers advanced programmes with the aim of raising the living standards of developing countries, based on the insight that technological progress and the accumulation of physical and human capital stimulate economic growth. However, inequality across nations persists, suggesting that these policies have a limited impact. Too narrow a focus on observable factors on the surface (the manifested disparities) rather than on the underlying causes that created them has prevented the design of policies that would help poorer nations overcome the obstacles they face. These forces could have created a barrier that inhibited investments, education and the adoption of new technologies, leading to uneven development across the globe. Trade, Colonialism and Uneven Development: During the nineteenth century, international trade rose significantly, triggered by the rapid industrialization of north-western Europe, enabled by colonialism and encouraged by the reduction of trade barriers and transportation costs. While a major portion of this commerce was taking place between industrialized societies, developing economies were an important and growing market