The Journey of Humanity - Chapters 8 & 9: Institutions & Culture - PDF

The Fingerprints of Institutions This satellite image is surely one of the most haunting photo- graphs ever taken from space. The Korean Peninsula Satellite imagery of night-time light, zox z' *44 the Jo urney ofHum a nit y In t...

The Fingerprints of Institutions This satellite image is surely one of the most haunting photo- graphs ever taken from space. The Korean Peninsula Satellite imagery of night-time light, zox z' *44 the Jo urney ofHum a nit y In thebottom portion of the picture is the prosperous coun- try of South Korea, late in the evening.a glittering galaxy of stars radiating the light of prosperity. South Koreans drive back from work on illuminated roads, spend their evenings in res- taurants, malls and cultural centres flooded with light, or else with their families in their well-lit homes. In contrast, the top segment of the picture contains one of the poorest countries on Earth — North Korea, engulfed in darkness. Most North Ko- reans prepare for an early bedtime in the gloom ofintermittent power outages. Their country does not produce sufficient energy to keep its electricity grid permanently switched on even in the capital city, Pyongyang. The disparities between North and South Korea areneither the result of geographical or cultural dilferences, nor a reflec- tion of North Koreans' lack of knowledge about how to build and maintaina functioning electricity grid. For most ofthepast millennium, the Korean Peninsula largely formeda single social entity, whose inhabitants shareda common language and cul- ture. However, the partition of Korea after World War IIinto Soviet and American spheres of influence brought about diver- gent political and economic institutions. North Korea's poverty and technological underdevelopment — like that of mast Ger- many prior to the fall of the Berlin Wall — originates in political and economic institutions that restricted personal and economic freedoms. Insufhcient constraints on government power, limited rule of law, insecure property rights, along with inherently inef- ficient central planning, have hindered entrepreneurship and innovation, while encouraging corruption and fostering stagna- tion and poverty. Not surprisingly, South Koreans enjoyed per capita income levels twenty-four times higher than that of their northern neighbours in zox 8,anda life expectancy eleven years longer in zozo; differences based on other measures o1 quality of life are no less drastic.2 More than two hundred years ago, the British political economists Adam Smith and David Ricardo highlighted the importance of specialisation and trade for economic prosperity.  The Fingerprintsof InStitutiO ns 145 Yet, as argued by the Nobel Prize-winning American economic historian Douglass North,a critical precondition for the exist- ence of trade is the presence of political and economic institutions, such as binding and enforceable contracts, that enable and encourage it. Put simply, if the governing institu- tions fail to prevent the violation of agreements — or indeed racketeering, theft, intimidation, nepotism or discrimination — trade is likely to be significantly harder and the typical gains it conveys less available.' In the distant past, societies relied on kinship ties, tribal and ethnic networks, and informal institutions to facilitate and foster trade. Medieval Maghribi traders, for example, imposed collec- tive sanctions on those who violated agreements, and built on the special ties between far-flung communities to developa flour- ishing transnational trade across North Africa and beyond.’ However, as human societies grew larger and more complex, it became necessary to formalise these norms. Societies that ultim- ately developed institutions conducive to trade — shared currencies, property rights protections, and a set of laws that was uniformly enforced — would have been better able to foster economic growth, reinforcing the virtuous cycle between thesize and com- position of the population and technological progress. Societies that were late to develop pro-trade institutions would have lagged behind. Over thecourse of human history, the concentration of polit- ical and economic power in the hands ofa narrow elite, empowering them toprotect their privileges and preserve exist- ing disparities, has typically held back the tide of progress. It has stifled free enterprise, prevented significant investment in education, and suppressed economic growth and development. Scholars refer to institutions that enable elites to monopolise power and perpetuate inequality as extrDctive institutions. In contrast, institutions that decentralise political power, protect property rights, and encourage private enterprise and social mobility are considered inclusive institutions. 5 In their book Why Nations Leif, the economists Daron Acemoglu and James i46 The Journey of Humanity A. Robinson have demonstrated that differences in political institutions of this sort have contributed to the gaps between nations. Extractive institutions have typically hindered human capital accumulation, entrepreneurship and technological pro- gress, thereby delaying the transition from stagnation to long-term economic growth, whereas inclusive institutions have reinforced these processes. Yet history suggests that extractive political institutions need not be detrimental at every stage of economic development. In fact, dictators have occasionally orchestrated major reforms in response to external threats to their regimes, as happened in Prussia in the aftermath of its defeat by Napoleon inx 8o6 and inJapan inthelate nineteenth century during the Meiji Restora- tion. Moreover, for decades after the partition of the Korean Peninsula, South Korea wasa dictatorship — it did not begin its transition towards democracy until xp87 — andyetover these three decades it enjoyed impressive growth while North Korea remained undeveloped. Both Koreas were ruled initially by autocracies; their fundamental difference lay in their economic doctrines. The dictators in Seoul adopted private property pro- tections, as well as far-reaching agrarian reforms that decentralised political and economic power, while their rivals in Pyongyang opted fora massive nationalisation of private property and land and centralised decision-making. These early differences pro- vided South Korea with an immense economic head start over North Korea, long before it becamea democracy. Similarly, the non-democratic regimes that used to rule Chile, Singapore and Taiwan — and the ones that still govern China and Vietnam — successfully spurred long-term economic growth by promoting investment in infrastructure and human capital, the adoption of advanced technologies, and the promotion ofa market economy. Nevertheless, while non-inclusive political institutions can coexist with viable inclusive economic institutions, this has been largely the exception rather than the rule — and at critical junctures in human history, the rule appears to have beena piv- otal one. The existence of inclusive institutions might partly  The Fingerprints of InStitutionS ›47 explain why the Industrial Revolution first began in Britain of all places, whereas the presence of extractive institutions may shed light on why some previously colonised parts of the world continue to lag behind, decades after their official liberation from colonial rule. Institutional Origins of the British Ascent Britain's unprecedented leap forward during the Industrial Rev- olution allowed the country to seize control of vast swathes of the planet and build one of the most powerful empires inhistory. And yet for most ofhuman history, the inhabitants of the British Isles lagged behind their neighbours in France, the Netherlands and northern Italy in terms of wealth and education; Britain was a mere backwater on the edges of Western Europe. British soci- ety was agricultural and feudal; political and economic power was held bya narrow elite; and in the early seventeenth century many sectors of the economy were aristocratic monopolies by royal decree.6 Given the dearth of competition and free enter- prise in England, these monopolised industries were spectacularly unproductive in developing new technologies. Like many other rulers, English monarchs were hostile to technological change and thwarted their kingdom's technologi- cal progress. One famous and ironic example is associated with the delayed inception of the British textile industry. In x 589. Queen ElizabethI refused to grant the clergyman and inventor William Leea patent forhisnovel knitting machine. She feared that his invention would harm thelocal guilds of hand knitters, fostering unemployment and, therefore, unrest. Rejected by the English queen, Lee relocated to France, where King Henry IV gladly awarded him the desired patent. Only several decades later did William Lee's brother sail back to Britain to market this cutting-edge technology, which became the cornerstone of the British textile industry. In the late seventeenth century, however, Britain's governing 148 the ou ruey of Hu man ity institutions were radically overhauled. King James II's efforts to entrench an absolutist monarchy along with hisconversion to Roman Catholicism provoked stiff opposition. The king's rivals founda saviour: William of Orange, stadtholder of various Protestant counties of the Dutch Republic (and husband of Princess Mary, the king's eldest daughter). They urged him to seize power in Britain. William heeded their call, deposed his father-in-law, and was crowned King William IIIof England, Ireland and Scotland. This coup, known astheGlorious Revo- lution because it was considered, somewhat mistakenly, to be associated with relatively little bloodshed, transformed the bal- ance of political forces in Britain: asa foreign king withouta Tom e,rir be.‹o of opport in Fogland, William III depended heavily on Parliament ina way that his predecessor had not. Inx 68d, the king gave royal consent to the Bill of Rights, which abolished the monarch's powers to suspend parliamen- tary legislation and to raise taxes and mobilise armies without Parliament's consent. England becamea constitutional mon- archy. Parliament began to representa relatively wide range of interests, including those of the rising mercantile class, and Brit- ain established inclusive institutions that protected private property rights, encouraged private enterprise, and promoted equality of opportunity and economic growth. In the aftermath of the Glorious Revolution, Britain intensi- fied its attempts to abolish monopolies. The Royal African Company, towhich King Charles II had awardeda monopoly over the African slave trade, was just one of many companies to lose power. Parliament also passed new legislation to promote competition in the growing industrial sector, undermining the economic interests of the aristocracy. In particular, it reduced taxes on industrial furnaces while raising duties on land, which was largely owned by thenobility. These reforms, which were unique to Britain at the time, cre- ated incentives that did not exist elsewhere in Europe. In Spain, for example, the Crown zealously guarded its control on profits from its transatlantic trade, often funnelling them into funding  The hingerprints of In strtutioH s 149 wars and theconsumption of luxury goods. In Britain, by con- trast, the gains from the transatlantic trade in raw material, goods and enslaved Africans, were shared bya broad class of merchants and were therefore largely invested into capital accu- mulation and economic development. These investments laid the foundations for the unprecedented technological innova- tions of the Industrial Revolution. Britain's financial system also underwenta dramatic meta- morphosis atthetime, further enhancing economic development. King William III adopted the advanced financial institutions of his native Holland, includinga stock exchange, government bonds and a central bank. Some of these reforms expanded access to credit for non-aristocratic entrepreneurs and encouraged the English government to be more disciplined in its balancing of government expenditure and tax revenue. Parliament gained stronger powers of oversight over the issuance of public debt, and bondholders — those who had lent money totheCrown — won representation in the decision-making process concerning fiscal and monetary policies. Britain thus came toenjoy greater credibility in the international credit market, reducing its bor- rowing costs in comparison to other European kingdoms. In fact, the early onset of the Industrial Revolution in England may have been contributed to by even earlier institutional reforms.7 As described in Chapter z, in the fourteenth century the Black Death killed nearly4o percent of the inhabitants of the British Isles. The resulting scarcity of agricultural workers increased the serfs' bargaining power and forced the landed aris- tocracy to raise their tenant farmers' wages in order to prevent their migration from rural areas to the cities. In hindsight, the plague had delivereda fatal blow tothefeudal system, and Eng- land's political institutions became more inclusive and less extractive. They decentralised political and economic power, encouraged social mobility, and alloweda larger segment of society to innovate and participate in wealth creation. In Eastern Europe, by contrast, the existence ofa harsher feudal order as well as lower rates of urbanisation, along witha growing demand i so The yourn ey o[Hu manity foragricultural output from theWest, strengthened the landed aristocracy and its extractive institutions in the aftermath of the Black Death. In other words, what might have been insignificant institutional variations between Western and Eastern Europe before the Black Death ledtoa major divergence after its out- break, placing Western Europe ona radically different growth trajectory from Eastern Europe.' The relative weakness oftheguilds in Britain also contributed to some of the institutional changes that preceded Britain's Industrial Revolution. The guilds, which operated across Europe asa whole, were institutions that defended the interests of their members — skilled craftsmen engaged ina particular trade. They often used their monopolistic powers to stifle entrepreneurship and technological progress. For example, the Scribes Guild in late-fifteenth-century Paris managed tobartheentry of the city's first printing press for nearly twenty years.’ In x 6z, the Red- Metal Turners Guild of Nuremberg pressured the city council to detera local coppersmith by the name ofHans Spaichi, who had inventeda superior slide rest lathe, from spreading hisinvention, ultimately threatening to jail anyone who dared to adopt his new production techniques.10 In 15 79, the Danzig city council ordered the inventor ofa new ribbon loom, which threatened traditional ribbon weavers, to be drowned insecret.'1 And in the early nineteenth century, an angry mob of theWeavers Guild in Fiance protested against Joseph-Marie Jacquard (z75 z—x834), theinventor of an innovative loom operated usinga series of punched cards — technology that would later inspire the pro- gramming of thefirst computers. In contrast, the British guilds were less powerful than their European counterparts, which may have been partlya consequence of the rapid and largely unregulated rebuilding of the City of London intheaftermath of the Great Fire ofx 666, as well as rapid market expansion else- where, leading toa greater demand forcraftsmen than theguilds could supply. Their weakness made it easier for Parliament to protect and enable inventors, allowing British industrialists to adopt new technology more quickly and efficiently.  The Fingerprints of Institutio nS 151 It was thanks to these institutional reforms that Britain in the late eighteenth century was influenced by the assorted interests of merchants and entrepreneurs rather than predominantly by those ofa landed elite determined to avert technological progress and perpetuate their power. In this respect, Britain had become the world's first modern economy, and therest of Western Europe was quick to follow suit. Thus, while deep-rooted forces were bringing humanity asa whole to theend oftheMalthusian age and to the brink of the age of growth, these institutional developments, in conjunction with other factors that will be explored shortly, made Britain an exceptionally fertile ground for rapid technological development at precisely the time when humanity was ripe for its phase transition. Both the early onset of the Industrial Revolution in Britain and the divergence of the economies in the Korean Peninsula show theprofound impact that institutions can have on devel- opment and prosperity. But might these especially dramatic examples be the exception rather than the rule? When inthe course of history institutions have evolved more gradually, did institutional reforms affect economic prosperity or was it in fact economic prosperity that led to institutional changes? Or might some other factors be responsible for the apparent rela- tionship between the two? Institutions and Long-Run Development Over thepast two centuries, richer countries have tended to be more democratic.'2 Some have argued that democracy equips the public with thepower toovercome special interest groups in society, thus improving equality of opportunities and the alloca- tion of talents across occupations, which in turn boosts productivity and encourages economic prosperity. Put another way, because democracy is politically inclusive it is also eco- nomically inclusive. Yet, although democracies have experienced faster economic its The Journey ofHumanity growth that does not necessarily mean that democracy causes growth.1' In fact, it might be that economic growth has fostered the emergence ofa middle class with the power tochallenge the political status quo and push fordemocratic reform; inclusive institutions might be theresult, not the cause, of growth. Indeed, some studies have argued in favour of the ‘Modernisation Hypothesis’ whereby economic growth is conducive to democ- ratisation.1’ Alternatively, this positive correlation might reflect the impact of other factors that promote both democracy and prosperity. It might be,for example, that growth happened to take place ina democracy — forreasons that are specific to that locale — but that geographical and cultural proximity to that I ‹confirm ensuereget other crw ntzien 8 rJcinr hoth_ its terh_n ri!o- gies and its democratic institutions, thus generatinga positive association between democracy and growth. One promising method forresolving this conundrum is to examine the impact of historical events, caused by forces unre- lated to local economic development, which led to sudden institutional transformation in some regions but not in others. Comparing thechanges in economic prosperity over the long term inthe affected and unaffected regions would enable us to disentangle the impact of institutions from that of other, con- founding factors. Episodes of conquest and colonialism provide quasi-natural experiments of this sort. The Spanish conquistadors’ site system of forced labour offers an insightful example of thepersistent and adverse effect of extractive institutions on economic development. The mite system compelled indigenous villages in certain areas, but not others, to surrender one-seventh of their male workforce to labour in the Spanish silver mines. Although this system was abolished in 181 z, Peruvian regions that were subjected to it remain poorer and have higher child malnutrition rates com- pared to nearby areas that were notexposed to thesystem. These findings appear to reflect the long-term effects of the migration of the most productive men out of wife areas (to escape their conscription to the silver mines), as well as the emergence of  The Fingerprints of Institutions l§3 large rural communities outside the site areas, which supported the development of public infrastructure in their villages and contributed to their inhabitants' long-term well-being. 5 Another episode is provided by the Napoleonic conquest of parts of Prussia shortly after the French Revolution. In areas under their occupation, the French established inclusive institu- tions that encouraged economic growth, such as legal systems based on equality before the law, the abolition of the monop- olies of professional guilds, and a reduction in the privileges of Prussian aristocracy. Although invasions are typically associated with disarray and exploitation in the occupied territories, dec- ades after the French retreated, the formerly occupied parts of Prussia were indeed more economically developed, as reflected by their higher rates of urbanisation, relative to neighbouring areas that had not been occupied.16 These particular historical events would suggest that institu- tions can indeed havea long-term influence on the process of development. But does the broader history of colonialism and conquest corroborate this? The Legacy ofColonialism The colonial era witnessed the immense enrichment of colonial powers and the immiseration of generations of indigenous peoples and enslaved Africans. As seen in the previous chapter, in the midst of the Industrial Revolution, colonial trade further exacerbated this stark divergence in their fortunes. While thecol- onisers often had devastating and horrific ramifications on native populations across the vast colonised world, it is plausible that over the longer term thesweeping political and economic institu- tions that colonisers — predominantly Britain, France, Portugal and Spain — imposed and left behind had the more persistent effects on their former colonies’ standard of living. Large regions of North America, Australia and New Zealand, which had been relatively sparsely populated and less advanced 154 The Jo urney ofHumanity technologically, enjoyed rapid economic growth after they were colonised, though ofcourse the growth was notexperienced by the native populations of these lands, but rather bya rapidly expand- ingimmigrant population from Europe. Conversely, the densely populated regions of Meso and South America that had given rise to the most advanced pre-Columbian civilisations — home totheflourishing Aztec, Inca and Maya cultures — encountered slower development in the modern eraand were overtaken by the European colonies in North America.17 This was largely an unanticipated reversal of fortunes. The French philosopher Voltaire spoke for many when he belittled the British and French skirmishes over their colonies in North America as fighting ‘overa few acres of snow’. The Seven Years War in the period175 6—63 ended o itha British victory. During thesubsequent territorial negotiations, many argued that Britain should demand France's Caribbean possessions, where theecon- omy of plantations, farmed with slave labour, were producing immense profits, instead of its holdings in North America, which had just been ravaged by colonial wars.1’ And yet, in later years, these ‘few acres of snow’ became one ofthewealthiest regions on Earth. The causes of this apparent reversal of fortunes has pro- vokeda stormy academic debate over the past few decades. How did the legacy of colonialism affect long-term development? Why did some colonies grow into prosperous nations while others came tobe mired inpoverty? One hypothesis focuses on the fact that most former colonies inherited the legal systems of their colonisers. Former British col- onies and protectorates, including Australia, Canada, Hong Kong, India, New Zealand and Singapore, adopted English-style common lair systems, whereas former Spanish and Portuguese colonies, such asAngola, Argentina, Bolivia, Brazil, Chile, Colom- bia, Indonesia and Mexico, embraced civil law systems in various forms. Common lawsystems provide stronger protections for investors and property rights, and empirical studies point toa positive correlation between the adoption of the common law legal system and economic prosperity; former British colonies  The Fi ngerprints of Instrtutio nS 155 enjoyed greater long-term prosperity, as measured by income per Capita,t haflthe former ColOflieS Ofother world powerS.'9 Yet we cannot disregard the possibility that the British happened to col- onise regions that had greater economic potential, or that the British colonisers themselves brought to bear particular skills, attitudes and approaches to running an economy. Different climatic conditions might also have contributed to the long-term effects of colonisation on local institutions. The climate and soil in Central America and the Caribbean were best suited for growing coffee, cotton, sugar cane and tobacco — crops for which efficient cultivation requires large plantations. The agricultural sector that emerged inthese regions during the colonial era was therefore characterised by centralised land ownership, which ledto unequal wealth distribution, coerced labour and even slavery — the most extractive of all insti- tutions — entrenching inequality and inhibiting growth. In fact, even inlater periods the severe concentration of land ownership in Central and South America, the Caribbean and theUS South stifled economic development. As seen in Chapter 4. land- owners who relied heavily or exclusively on rural labour for their income, as tended to be the case where landownership was highly concentrated, had a strong incentive to thwart invest- ments inpublic education in order to prevent the migration of their workers to urban areas where educated labour was in higher demand. These forces directly impeded human capital accumulation, industrialisation and economic growth.20 In contrast, climatic conditions in the colonies of North Amer- ica(except for the US South), which were better suited to mixed farming of grains and livestock, encouraged the growth ofa network of small family farms,a more equal distribution of wealth, and the adoption of inclusive political institutions, such as democracy, equality before the law and security of property rights, which were conducive to long-term prosperity.21 Ironic- ally, these institutions were themselves highly discriminatory: the denial of civil liberties and the exploitation of African Amer- icans and Native Americans were integral to this ‘inclusivity’. i $6 The Jo urney of Humanit y A related hypothesis maintains that the reason why Meso and South America, once technologically more advanced than their northern neighbour, ended up becoming thepoorer part of the Americas, was an indirect and macabre consequence of vari- ations in population density in the pre-Columbian era. During this Malthusian period, as technological development and pop- ulation density went hand in hand, densely populated areas were naturally the ones where civilisations were most advanced. In these prosperous regions, therefore, colonial regimes had a greater incentive to form institutions that would extract the wealth of the vast indigenous population. When these colonies gained independence, the powerful local elites who succeeded the European colonisers maintained these extractive. growth- retarding institutions, so as to sustain and gain from the persistence of economic and political disparities, condemn- ing these regions to underdevelopment.22 By contrast, in less advanced areas with lower population density, colonial regimes tended to settle and develop these regions for themselves, com- monly after they had destroyed, displaced or subjugated the native population. They therefore formed inclusive, growth- enhancing institutions for their own benefit and for that of their descendants. While highly discriminatory towards African American and Native American populations, these institutions contributed to the overall economic development of these regions, fostering the reversal of fortunes. Yet, the colonial era gave rise to all sorts of transformations in the colonised world apart from theinstitutional ones, and the growth potential of these colonies was hardly uniform given their vast differences in agroclimatic characteristics. How might we disentangle these various forces and isolate the persistent impact of institutions alone? Europeans tended not to immigrate in significant numbers to colonies that had relatively higher mortality rates from such diseases as malaria and yellow fever. Most Europeans who relo- cated to these regions were not settlers, as they were inNorth America, but rather members oftheruling elite — officials and  Th e Fi nge r printsof InStt tutiOnS 1$7 military servicemen — who arrived for temporary duty and established institutions that exploited and enslaved local popu- lations. In contrast, European immigrants settled en masse in areas with relatively lower prevalence of these fatal diseases, such as North America, where they supported the establishment of more inclusive institutions, conducive to further European immigration and long-term economic growth. At the end of the colonial era, the independent nations that emerged in North America, Australia and New Zealand maintained these semi- inclusive institutions, while many ofthelocal elites in Africa, Latin America and the Caribbean inherited and perpetuated their extractive institutions. The mortality rate of different settler populations might therefore serve asa predictor of the nature of modern institu- tions that arose in their wake. And provided that settler mortality rates (and the underlying disease environment) have no direct effect on present-day economic prosperity, these rates can be used asa variable with which to assess the causal influence of these institutions on economic prosperity. Studies using this method suggest that historical governing institutions have indeed had a major impact on the wealth of nations in the modern era.2' But this argument is not without its critics, who argue that since the same diseases may have also been lethal for native populations, their prevalence might have diminished native pro- ductivity and thus undermined prosperity independently of any indirect effect via political institutions.24 Indeed, mortality rates today continue to be higher in regions where settler mortality rates were high in the past. Perhaps, then, it was not only the nature of the colonial institutions established in disease-ravaged regions, but also the perilious disease environment itself that condemned these regions to centuries of economic underdevelopment. It is equally challenging to disentangle the effects of colonial institutions from theimpact of the skills of European settlers. When Europeans migrated to colonies, displacing vast native populations, they brought with them certain knowledge and n8 The Journey ofHumanity skills as well as commercial ties to their European homelands. Indeed, evidencé suggests that colonies consisting of large con- centrations of European populations in the nineteenth century were significantly more likely to enjoy economic growth than colonies comprised predominantly of indigenous populations.25 What appears to bea major impact of institutions might partly reflect the direct effect of European immigrants themselves, with their imported human capital, on economic development. Some have even argued that past levels of human capital area stronger predictor of modern-day percapita income than the nature and quality of political institutions.26 From this perspective, the relatively rapid economic develop- ment ‹nf Korrh America compared with that of Meso andSouth America is not the reversal of fortunes it first appears to be. It clearly does not reflect changes inthe well-being of the descend- ants of the native pre-colonial populations, who in North America were either exterminated or displaced. Rather, it indi- catesa persistence of fortune, as the wealthy regions of North America today arepredominantly home topeople whose ances- tors emigrated from thericher regions of the world.°7 It is also worth noting that the power ofcolonial institutions to shape economic development may insome regions have been outweighed by that of other, pre-existing institutions. Consider the African continent. Many ofAfrica's ethnic groups were arbitrarily divided by artificial borders imposed by European imperial powers during the era known as theScramble for Africa (x**4 *P*4). These borders divided regions that shared the same ethnicity, tribal organisation and language between different nations, subjecting them to distinct central governing institutions. Intriguingly, the evidence suggests that present-day economic development in Africa has been primarily influenced by the pre-existing local social structures and ethnic institutions rather than by the national central institutions that persisted from thecolonial era.2' To recapitulate, then: during the colonial era extractive institu- tions were formed and persisted in some colonies, while more  The hingerprinis of InS titutious 19 inclusive ones prevailed in others, reflecting geographical charac- teristics, the disease environment and population density. The current body ofevidence suggests that these institutions had a significant lasting effect on the economic development of for- mer colonie5, although important confounding factors — notably the disease environment and thehuman capital of the colonisers — may preclude firm quantitative conclusions. But what about societies that were not colonised? What was theorigin of their institutions, and why did institutions conducive to technological progress and economic prosperity first arise in Europe rather than in, say, the sizeable and advanced civilisations of Asia? And within Europe, why first in Britain rather than France or Germany? Origins of Institutions Institutional reforms at critical junctures in the course of his- tory, triggered by war, disease, capricious, charismatic or brutal leaders, or the quirk of fate, have occasionally been the direct cause ofa divergence in development trajectories across the globe.29 If medieval Europe had been spared the Black Death, or if James II had repelled William of Orange on the battlefield, then feudalism and absolute monarchy might have lasted longer in England, and ultimately the Industrial Revolution might have occurred somewhere else or ina different time period. Indeed, in some cases, as on the Korean Peninsula,a relatively arbitrary political decision — the division of the country along the 38th parallel — condemns two segments of the same people to an entirely different economic fate, despite the stability of their basic geographical and cultural environments. In other words, it may be that some institutional shifts at critical junctures end up being the fork in the road at which thegrowth path bifur- cates and disparities between nations are born. And unlike geographical and cultural factors, which areinherently persist- ent over time, institutions can alter very rapidly and may for that reason have particularly dramatic effects. i6o the Jo urney of Hum an ity Yet, ‘random’ institutional transformations are rather uncom- mon. Institutions typically survive for centuries and adapt very slowly, even when technological and commercial developments call for urgent reform. The main impact of institutions might in fact lie in their continuity and thus in their persistent effect on development, as has been the impact of extractive institutions in Latin America and growth-enhancing institutions in North America. For the most part, institutions have evolved gradually in response to long-term pressures and trends: as the complexity of societies intensified; as shifts in the environment opened up new opportunities for trade and led to demand forpublic infra- structure; as climatic conditions reo,uired cooperation in the formation of irrigation systems; as the increasing scale and diversity of populations enhanced the importance of social cohesiveness.30 It is these other factors — cultural, geographical and societal — that will need to be examined if we are to shed light on the origins of the prevailing institutions in non-former colonies across the globe. Moreover, we may reach the limits of the power of political institutions to account for differences in economic prosperity when we begin to examine the great variation among Western European democracies whose income percapita in zozo ranged from$›7.*7* in Greece to$ I,+z6 in Sweden, to $86,6oz in Switzerland to $Ix §,874 in Luxembourg." Similarly, additional factors will surely be required to explain the centuries-long endurance of significant disparities within countries, such asthe gulf between northern and southern Italy, which have in prin- ciple shared the same central governing institutions since the country was politically unified in the second half of the nine- teenth century. We have seen how growth-enhancing political and economic institutions have intensified the virtuous circle between techno- logical progress and the size and composition of populations, hastening the transition to the era of modern growth. We have also explored how growth-retarding institutions, in contrast,  The Fingerprints of Institutions i6i have puta spoke in this wheel, impeded development and con- tributed to long-term economic stagnation. But as will become apparent,a broad range of cultural, geographical and societal factors have affected and interacted with institutions, in some places curtailing innovation and human capital formation, in others fostering technological progress, investment in educa- tion, and the Demographic Transition. To properly understand the role of these factors, we must journey further back intime — exploring initially the origins of the cultural traits that have affected the growth process.  9 The Cultural Factor ‘It is easier fora camel to go through the eye ofa needle,’ con- tended Jesus, ‘than fora rich man to enter into the kingdom of God.’ This wasa common theme oftheChurch's earliest founders, and for many centuries Christian theologians argued against the pursuit of personal wealth, considering it an obstacle to spiritual development and salvation. Paul the Apostle supposedly went so faras to argue that ‘the love of money was theroot of all evil’. Later theologians shared similar sentiments, and Thomas Aquinas declared in the thirteenth century that ‘covetousness’ was a sin. Moreover, Christianity maintains that on Judgement Day thesocial order will be overthrown and themeek ‘shall inherit the earth’.1 In1 17. Christendom was shaken to thecore when theGer- man monk andtheologian Martin Luther nailed his Ninety-five Theses to the door ofa Wittenberg church, decrying the Cath- olic Church's sale of indulgences. Luther's intention was to reform the Church, not to break away from it, but the fer- ocious debate that ensued between Luther and supporters of the papacy caused an irreparable rift. In x 3 zo, Pope Leo X formally threatened to excommunicate Luther, who responded by publicly burning the papal bull — Fxsurge Domine — along with volumes of canon law. In the bonfire, he also burned his final bridges with the Catholic Church, shaping Lutheranism asa distinct movement intheChristian world, and sparking the Protestant Reformation inWestern Europe. i64 The Jo urney of Hu man ity Protestantism unleasheda wave ofnew religious norms and beliefs on a range of issues, including thrift, entrepreneurship and wealth. As noted in Chapter 3, Luther(›48§—* 54*) argued that the Church had no role mediating between man and God, encouraging independent Bible reading —a radical practice that incentivised his followers to acquire literacy skills. The French theologian Jean Calvin (IBOQ—I§*4), founder of the Calvinist branch of Protestantism, asserted that all faithful Christians were duty-bound to serve God through diligent work, frugal liv- ing, and abstinence from waste and licentiousness; economic success, in his view, might bea sign of God's favour, possibly even that one was predestined for salvation. Other new branches of Christianity looked favourably on the accumulation ofwealth. John Wesley (17 §—1791), the eighteenth-century English cleric who founded Methodism, for example, urged his disciples to amass wealth and donate generously to charity.° These denomi- nations of Christianity, which gained traction in Germany, Switzerland, France, England, Scotland and Holland, and subse- quently spread to North America, as well as pre-Reformation ones such as the Cisterclans, encouraged the emergence of cul- tural traits such as thrift and hard work that are commonly associated with economic growth.3 Protestantism in fact sowed thefirst seeds of modern thought about the relationship between cultural traits and economic growth. MOSt famously, in xpoy German sociologist Max Weber published hisinfluential thesis The Protestant fitfiic and the Spirit o/ Cnpirn/ism. He argued that Protestantism had contributed to the conviction that the ability to amass wealth in tfii.s world was a strong indication of the likelihood of reaching heaven, legiti- mising wealth as an end in itself, while recasting idleness asa source of shame. Accordingly, he argued that the Protestant ethic was the source of the ‘spirit of capitalism’ in Western Europe. Weber's thesis was criticised for prioritising the power ofideas in the emergence of capitalism over the material forces under- lined by Marx. Nonetheless, there is evidence to support the claim that the ‘Protestant ethic’ playeda role ›.n the emergence of  The Cultural Factor i6s cultural traits that are conducive for economic growth. During thenineteenth century, regions of Prussia that had relatively large Protestant populations did indeed enjoy higher levels of literacy and economic prosperity than their peers, and the Protestant inclination to invest in education has contributed to the long- term impact ofthis movement on economic prosperity.4 Moreover, evidence from contemporary areas of the former Holy Roman Empire suggests that Protestantism is associated today with sig- nificantly higher likelihood of becoming an entrepreneur. 5 Regardless of the importance of the Protestant ethic in the growth process, it is quite apparent that culture playsa key, sometimes critical role in the process of economic development. The Power ofCulture Cultural traits — the shared values, norms, beliefs and prefer- ences that prevail ina society and are transmitted across the generations — have often madea significant impact ona soci- ety's development process. In particular, aspects of culture that dispose populations towards or away from themaintenance of strong family ties, interpersonal trust, individualism, future orientation and investment in human capital have considerable long-term economic implications.6 The boundary between cultural and personal traits may often appear fuzzy. Some people might invest heavily in the education of their young because of the values of their social, ethnic or religious group, while others may be driven by personal traits, reflective of their life experiences, upbringing and family back- ground. Nonetheless, one's values, beliefs and preferences are rarely independent of one's social and cultural context. And when variations in these norms correlate clearly with ethnic, religious or social groupings, it is plausible that they are, toa large extent,a manifestation of cultural rather than individual differences. In other words, it is the cultural component that is pertinent for the understanding of inequality across groups. i66 the Jo urney of Humanity Sohow have cultural traits emerged and persisted and how have they affected the evolution of societies in the course of human history? Judaism provides an example ofa cultural trait that emerged rather spontaneously, endured because of its delayed unfore- seen advantages and turned out to have long-lasting implications. Hearly z,ooo years ago, as part of the power struggle between rival movements within Judaism, several Jewish sages promoted universal literacy. The most famous advocates of this principle were Rabbi Shimon ben Shetach in the first century BcE and High Priest Joshua ben Gamla about a century later, who insisted that Jewish parents had a duty to acquire education for their sons. As noted in Chapter J. this doctrine presented an immense challenge ata time when literacy rates were extremely low, few occupations required the ability to read or write, and most households could neither afford to forgo their sons' labour nor pay for their education.7 Cultural initiatives of this sort are a common feature of human societies but rarely do they survive long enough to con- tribute to meaningful cultural changes over the long term.' But in this case,a series of events conspired to keep this cultural change very much alive. In the aftermath of the Great Revolt against the Roman Empire, which erupted in Judaea in 66 CE, the Romans destroyed Jerusalem and the Jewish Temple. Sev- eral of the main branches of Judaism died out, including the Sadducees — the priestly elite — and the Zealots who fought for Jewish independence, while the Pharisees, the relatively moder- atefaction that emphasised the study of Jewish texts over ritual worship in theTemple, became thedominant group intheJew- ishworld. The scholarly Pharisees encouraged mass access to education and later imposed cultural sanctions on families who failed to send their sons to school, inadvertently inducing poorer households to abandon Judaism. Hoping to strengthen the surviving remnants of hisdefeated people, Rabbi Judah ha-Nasi, the head oftheJewish community inRoman-occupied Judaea at the turn of the third century cE,  The Cultural 'actor 67 also emphasised theimportance of reading the Bible and practis- ing its commandments. And over the centuries, the expulsion of the Jews from their homeland and theemergence of laws in the diaspora that banned them from land ownership made the acquisition of human capital, an inherently mobile asset, an especially attractive and worthwhile investment. The subsequent urbanisation of the Muslim world and medieval Europe increased the demand foran educated workforce, further enhancing the benefits of this cultural norm and accelerating the Jews’ long- run trend away from agriculture-based occupations towards commercial and education-intensive urban professions. Like biological mutations, the initial appearance ofa cultural change may be ‘random’, but its survival or extinction is not accidental.9 The norm ofliteracy and book-learning might never have appeared in either the Jewish or Protestant communities without the decree of the Jewish sages and the preaching of Luther; but it is nearly certain it would never have taken root in the way that it did were it not for the advantages — in this case commercial and economic — bestowed on those who embraced it, advantages that the early advocates of Bible study neither envisioned nor invoked. Different societies in different places at different times have inevitably developed different norms in order to adapt to the particular ecologies they inhabit. Over time and across civilisa- tions, thinkers and leaders have proposed countless initiatives to reform norms, values and beliefs. Yet it is mostly when either geographical and climatic characteristics, the disease environ- ment, or technological, commercial and social conditions have reinforced the benefits of these novel cultural traits that they have persisted and generated significant cultural change. Humans have developed traditions and norms that regulate, for example, diet, property rights, social cohesion, family structure and gender role. Individuals within these societies often consider these traditions to be based on timeless and essential truths, com- monly adhering to and perpetuating them as such, without necessarily knowing their original purposes or understanding the i68 The Jou ruey of Humanity adaptive reasons for their existence.10 This psychological tendency to adhere to existing cultural norms without challenging their foundations has conferreda survival advantage. Societies with hardly any scientific knowledge of human biology, group con- sciousness or the ecological factors that affect their habitats have been able to thrive in complex and precarious environments, behaving as if they did possess such knowledge, thanks to accumu- lated wisdom ofgenerations of trial and error, passed on in the form ofancient traditions, timeless beliefs and universal rules. For example, by inheriting dietary laws that were developed inresponse to poor sanitation or limited ability to distinguish poisonous from nourishing wild plants, new generations would be spared the potentially deadly process of learning and adapting to these condi- tions for themselves. The great diversity of cultures across the world is an outcome of each society's adaptation to its unique ecological niche and historical circumstances.11 This process, therefore, has not gener- ateda hierarchy of norms across the globe. Nevertheless, as the founder of the field of cultural anthropology Franz Boas argued, the one trait most cultures have incommon is the misguided and sometimes destructive conviction that their own norms arethe proper ones, universally. This tendency may have contributed to the emergence of racism asa cultural trait in many societies. The portrayal of other people and cultures as inferior, or even subhu- man, was often invoked by conquerors and colonial powers as moral legitimation for exploitation, slavery and genocide, and contributed to the tremendous disparity between colonial powers and thepeople they colonised. 12 Unsurprisingly, many of the norms that persist are ones conducive to the long-term prosperity of those who adhere to them. These traits include a greater tendency towards wider cooperation, which emerged inregions where geographical char- acteristics necessitated the development of public agricultural infrastructure, such as terraces and irrigation systems; the adoption of more future-oriented behaviours, which evolved in agricultural communities where the benefits of the harvest are  The CulturaI £ac tor i6p enjoyed fora significant while after the investment of planting; and greater trust in strangers, which arose in regions where cli- matic volatility necessitated risk-sharing. These traits emerged at various times in different places, but they all lasted and spread because they benefited the society asa whole. But thena dramatic transformation occurred in one region of the world that galvanised these growth-enhancing traits, lead- ing to ‘a culture of growth’. A Culture of Growth For most of human history, individuals who questioned the norms, beliefs and preferences they inherited from their ancestors would have struggled to devise alternatives that were more effi- cient. Cultural wisdom and tradition were venerated because they had aided survival, and since few individuals had a deep understanding of for they contributed to their well-being, it would have been evolutionarily risky to question their validity. As such, most human societies in history have resisted rapid cul- tural changes, such as those that accompany major technological, philosophical and scientific advancements. Instead, cultures tend to emphasise theprudence of their ancient ancestors, revering the distant past witha mix of nostalgia and idealism. For instance,a tenet of Orthodox Judaism is the ‘decline of generations’: the belief that past generations were wiser and closer to God, and that the profound and well-argued interpretations of the Bible by the Jewish sages millennia ago are hard to match. However, there came a point when technological change reached sucha pace that the advantages of conservatism began to wane, and from that point onward thereverence for ancient wis- dom gradually declined. The BDttle o[the Books,a satirical work by theAnglo-Irish writer Jonathan Swift published inI7o4,Cofl- tainsa particularly colourful description of the spirit of this age, in which new and old books come to life ina library and fight one another. This was a metaphor fora quarrel that had started l7 The Journey ofHum anit y with the emergence of humanism during the Renaissance, gath- ered force over the seventeenth century and was shaking the European continent at the time. On one side were the ‘Mod- erns’, who argued that time and values had changed and it was feasible to progress beyond theclassical thinking of Greece and Rome. On theother side were the‘Ancients’, who maintained that the wisdom oftheclassical thinkers was eternal and univer- sal and that modern philosophers and writers ought to confine themselves primarily to its salvation, restoration and imitation. This quarrel markeda unique moment inhistory: the first time that forward-looking philosophers started to gain the upper hand over their rivals. Thus wrote Immanuel Kant inhis TW8J essay ‘WhSt 1$enlighten..e t?’ Enlightenment is man's emergence from hisself-imposed nonage. Nonage is the inability to use one's own understanding without another's guidance. This nonage is self-imposed if its cause lies not in lack of understanding but in indecision and lack of cour- age to use one's own mind without another's guidance. Dare to know! (Sapere aude.) ‘Have the courage to use your own under- standing,’ is therefore the motto oftheEnlightenment. 13 The Enlightenment called on human beings to trust them- selves and have the resolution to reject antiquated cultural traditions. It encouraged the development ofa more sceptical, empirical and flexible approach towards the world, in the hope of creatinga new culture founded not ona faith in the tradi- tions of the past but on the belief thata better world could be built through scientific, technological and institutional progress. This outlook, suited as it was to rapid adaptation toa changing environment, has been described recently by the economic his- torian Joel Mokyr as‘a culture of growth’.14 As the pace of technological and social change dramatically increased, individuals and societies who were ina position to adopt this ethos thrived. This wasa radical paradigm shift from previous periods when thepace of progress was slower and so the ethos of  The Cultural FaC tOY l7* theEnlightenment was often less advantageous than reverence for the wisdom oftheancients and adherence to tradition. Yet, it is in the nature and purpose of culture to preserve and persist, not to reject the past and celebrate change, and this inherent tension meant that for most societies,a rapid trans- formation was either challenging or infeasible. Cultural Inertia According to the thri[ty gene hypothesis, an evolutionary adapta- tion permitted our distant ancestors to survive periods of food scarcity through the build-up of fat reserves. Today, however, in contemporary societies where food is abundant, this same adap- tation has becomea keycontributor to the global obesity epidemic anda leading cause of morbidity and mortality.1’ The persistence of this trait in spite of its modern disadvantage reflects the fact that biological traits have typically evolved ata slower pace than the human habitat. Cultural traits are, of course, distinct from biological traits. Unlike genes, they are transmitted horizontally among peers and not only vertically across generations. This social transmis- sion occurs through learning, imitation, education and taboo, meaning that cultural characteristics may evolve far more rap- idly than our genome does. Nonetheless, cultural traits have also evolved less rapidly than living conditions, and unlike insti- tutional changes, they rarely undergo rapid transformation even in the face of major shifts in the surroundings. The impact of cultural inertia on economic development can be seen in the different trajectories of northern and southern Italy. Sincex 87a,Italy has beena unitary republic, governed by a single set of political, legal and economic institutions. In con- trast to Korea, there is no international border separating Italy's northern region from its southern one. Yet, the two parts of Italy differ considerably: in much ofthesouth, income per cap- itais only two-thirds of the level in the affluent north. 17› The Journey of Hu inan ity In it 38 the American political scientist Edward Banfield advanced an influential thesis that attributed southern Italy's lower level of prosperity to stronger family ties in the region.1‘ He argued that more intense family ties diminished trust out- side of one's kinship group, weakened cooperation in pursuit of a common public goal, and thereby reduced the level of eco- nomic prosperity in the region. In line with his thesis, recent evidence suggests that kinship ties do indeed differ significantly across Italian regions, as they do more generally across coun- tries. Likewise, tighter nuclear family bonds do tend to adversely affect levels of social trust, political participation, the status of women intheworkforce and geographic mobility.17 And since, as the Nobel Prize-winning American economist Kenneth Arrow noted, business deals often rely on trust while its absence harms trade, lower levels of trust outside of the family setting might have diminished the level of economic development in southern Italy compared tothenorth.1’ But how didthese differences in trust levels and family ties emerge in the first place? Nearly thirty years after Banfield's study, the American public policy researcher Robert Putnam released an equally influential book that offered an explanation for these puzzling variations.A thousand years ago, southern Italy was governed by Norman kings who imposeda feudal economic order, whereas northern cities that enjoyed relative freedom after casting off the yoke of the Holy Roman Empire developed more democratic institutions.19 Historically, there- fore, citizens in northern Italy had played an active role in political affairs, contributed to communal activities, and had greater levels of trust in their peers, whereas those in the south had grown accustomed to having limited voice in the hierarch- ical political system. According to Putnam, for that reason northern Italy nurtureda culture conducive to democracy, while swathes of southern Italy retained institutions reminiscent of the old feudal order and were dominated by theMafia. Putnam argued that democracy is critically nourished by social capital — cultural traits that foster trust and civic  The Cultural Factor 1y3 engagement in politics. Indeed, modern-day inhabitants of Ital- ian cities that achieved independence relatively early in the Middle Ages exhibit higher levels of democratic and civil com- mitment, greater trust, and higher levels of economic prosperity.20 Social capital has also contributed to greater openness to the instruments of contemporary finance and thus to economic prosperity. Residents of northern Italy, which is characterised by higher levels of social capital, reflected in higher voter turnout and blood donation rates, for example, havea greater tendency to hold their wealth in banks, accept credit, invest in stocks and obtain loans. Intriguingly, social capital has a long-term, persis- tent impact: Italians who migrate to other parts of Italy are still influenced by the cultural heritage of their ancestral regions. The Italian divide illustrates the powerful influence of cultural attributes associated with social capital. It indicates that they per- sist over centuries, thereby bringing the effect of institutional changes from the ancient past to bear on social and political developments in the present. The fingerprints of the long-term historical impact of culture are visible in other regions, too. The Habsburg Empire governeda vast expanse of Central and East- ern Europe from the mid-fifteenth to early twentieth centuries and was known fortheefficiency of its institutions. Parts of East- ern Europe once ruled by the Habsburgs still enjoy greater trust in governing institutions and lower levels of corruption than adjacent regions (even within the same country) that were for- merly ruled by the Ottoman ortheHoly Roman Empires.21 The enduring legacy of the slave trade in Africa providesa par- ticularly sobering example ofthepersistence of social capital — or the lack of it. Slavery existed in parts of Africa before the fifteenth century, but with theadvent of the transatlantic trade in enslaved Africans, abductions and inter-ethnic conflicts greatly increased in West Africa as local chiefs responded to the immense demand from European slave traders. These traumatising practices fomenteda precautionary distrust of Europeans and strangers but also of neighbours and relatives. Indeed, based ona survey conducted by the Afrobarometer across sub-Saharan African 174 The Journey of Hu man ity countries, there appears to bea substantial gap in levels of inter- personal trust between areas affected by the slave trade and those that were spared, more thana century after that trade came toan end.°2 Yet, the persistence of cultural traits is perhaps most clearly observable among migrants and their descendants. As you would expect, adaptation toa sudden change in environmental conditions and governing institutions can bea lengthy process. Among migrants into Europe and North America, attitudes towards women's role in the workforce and children's inde- pendence, for example, converge quite rapidly with those that prevail in the settled local population; however, when it comes to re!igioii_s beliefs and moral x o lifes, even Prin rth-generoticin_ immigrants to these areas tend to maintain part of their trad- itional native culture.23 This adaptation gap may reflect the fact that some cultural values do not havea significant impact on economic prosperity and so the incentive for rapid cultural adaptation is limited; in these circumstances, individuals are more likely to preserve their parental values and traditions. In summary, cultural traits emerge from myriad factors, pre- dominantly as an adaptive response to our habitat. Adjustments in that environment, whether in the form of new institutions, technology, the arrival of new crops, trade or migration, have hada major impact on the emergence and endurance of new cultural traits. Whena shift in cultural characteristics has led to economic success, that change seems to have taken place more quickly. But since on the whole cultures evolve more slowly than technology, especially in the past few centuries, it is likely that in some societies cultural traits have been and may still be a barrier to development. Culture and Prosperity Culture has contributed to the growth process and economic prosperity in various ways. It has playeda major role in how we  The Cultural FactOr 1/5 raise our children, affecting human capital formation and ultim- ately the onset of the demographic transition. It has shaped the degree of trust we have in each other as well as in political and financial institutions, fostering social capital and cooperation. It has formed our inclination towards future-oriented behaviour, affecting saving, human capital formation and technological adoption, and it has affected the way we have perceived trans- formative ideas and paradigm shifts. Indeed, just as political and economic institutions have influ- enced cultural values — enhancing or diminishing our tendency to trust strangers, invest in education, or cooperate with others — culture has also exerted its own influence on those institutions in return.24 In North America, for example, various European immigrant groups established institutions that were aligned with the cultural values they held dear in their home- lands.°’The Quakers, whose culture valued personal and religious liberties, supported the formation of institutions that limited the role of government, prioritised individual freedom, separ- ated church and state, and levied relatively low taxes. The Puritans, who valued literacy for the sake of spiritual independ- ence, as well as social cohesion, founded institutions that promoted public education, communal involvement, and strict law and order, all supported by higher taxation. Meanwhile, immigrants from Scotland and Ireland, who favoureda limited role of gov- ernment inpersonal affairs, established institutions that defended individual liberties, used ad hoc courts (‘frontier justice’) to set- tle disputes, supported the right to bear arms, and maintained low taxes. These cultural values are apparent in different seg- ments of American society — and the types of institution they favour — to this day. Over thecourse of human history, individuals across most societies have treated technological, scientific and philosophical changes with suspicion, safeguarding their governing institu- tions and existing power structures. This is no coincidence; as we have seen, it isa consequence of the critical role that inter- generationally stable values, beliefs and preferences have played *76 The Jo urney of Humanit y in survival and prosperity in uncertain environments. However, a few centuries ago, societies in Western Europe did experience a cultural shift, one that accelerated the speed of the great cogs of human history, and helped bring about the modern eraof sustained economic growth. They arrived at the conviction that scientihc, technological and institutional development held the keys toa better world. In other words, they believed that devel- opments of this sort were progress. Crucially these societies adopted cultural traits such asa greater tendency towards investment in human capital and gen- der equality, which would become the central drivers of the Demographic Transition and the onset of the sustained growth regim.e. Furtb.erm.ore, iM. tim.e IF.e , cam.e to em.brave th.e gro *7tb.- enhancing values of individualism and secularism:a belief that the individual should have theright to shape their own destiny, without social or even religious constraints. These cultural transformations were also instrumental in establishing political and economic institutions that were conducive to further tech- nological progress. And as the pace of technological and social change intensified, these new cultural norms and institutional structures became even more advantageous. Thus,a virtuous cycle arose. Growth-enhancing cultural norms accelerated the pace of technological progress and the transition from stagna- tion to growth, while the great cogs of history encouraged the evolution of cultural traits that were adapted to the intensifying growth process. Yet,a major puzzle remains unresolved: why did the cultures and institutions that were particularly conducive to technologi- cal development emerge incertain societies and not others? The technological development of both the Song Dynasty and the Abbasid Caliphate were spectacular, but ultimately their pace of development waned, while in the West it has so far persisted thanks to the emergence of growth-enhancing institutions and cultural traits. At some junctures in human history, the location of cultural and institutional transformations may appear rather arbitrary;  The Cu ltural Fac tOr 177 Institutions, Culture and the Cogs ofChange onecanimaginea counterfactual history in which North Korea becamea capitalist powerhouse while South Korea sank into communist poverty. However, in most circumstances, deep- rooted factors underpinned the emergence of cultural norms and institutional structures. These were geography and human diversity.