Why is the world’s wealth distributed as it is?
At the end of the last post, looking at Gapminder, we took note that the rich countries of the world could be divided up into roughly four groups. There are the states of western Europe; a few former English colonies, most notably the US; the oil-rich countries of the Persian Gulf; and finally the highly-industrialised countries of east Asia.
How did it come to be that way? Well, how long has it been that way?
Gapminder has a very neat feature: you can push the slider at the bottom of the graph, and change the year for which data is shown. If we play around with the slider, watching how the relative positions of the dots change, we can see that two of the groups are nouveaux riches. Both the Gulf states (green) and the ‘Asian tigers’ bubble up out of the pack around the middle of the 20th century – roughly from the 50s to the 70s, it seems to me.
This makes perfect sense (for a certain value of ‘perfect sense’). It seems like oil production began in earnest in the Persian Gulf around the end of World War II.* Meanwhile, the Asian tigers of Hong Kong, Singapore, Taiwan, and South Korea experienced extraordinarily strong, sustained growth in the wake of WWII, an economic rise dubbed the ‘Asian miracle.’ Japan also experienced strong growth over the same period, albeit starting from a somewhat higher level.
So, if we play the reel backwards and drag our slider back to the year 1900, those two groups drop out. But the other two groups remain at the top of the distribution.
If we pull the slider as far back in time as it will go, to 1800 (with Gapminder helpfully telling us that the data is much less reliable at this point), Europe basically falls back into the pack (albeit at the higher end). The highest per-capita income in the world belongs to the United Kingdom – ground zero of the nascent Industrial Revolution.
Something for nothing
The Industrial Revolution, or IR for short, is pretty important in this story. The development of effective coal-fired steam engines in late 18th-century Britain touched off a cascade of technological, economic, and social upheavals that continues to this day.**
The links between technological advance and wealth are complex, but there’s a simple argument from fundamentals that the technology of the IR was a prerequisite for the prosperity which germinated in western Europe and the US in the 19th century. It’s a question of energy.
To do a lot of useful stuff, you need energy. If you want to operate a loom, or a bellows, or a pump, you need energy. If you want to plow a field, you need energy. If you want to move goods or people from one place to another, you need energy. The amount of energy you can bring to bear limits how much you can do and how rapidly you can do it.
The rate of energy output of the unaided human body is pretty modest; for thousands of years, people have looked to supplement it. One of the simplest and oldest ‘engines’ is a bigger, stronger animal, like a horse or an ox. If you have a fast-flowing stream, you can use a water wheel to drive machinery. If you have a good breeze, you can build a windmill. Up until the IR, those were more or less your only options.
The IR was made possible by the discovery of how to effectively exploit a much more potent source of energy: fossil fuels. You burn coal; the heat boils water; the steam drives rotation; and you hook up that rotation so it drives your mill, or your loom, or your train, or whatever you want.
Early steam entrepeneurs coined the energy unit of ‘horsepower‘ because they were literally pitching their engines to customers who were at that point using horses. (How do you get rotational motion out of a horse? Make it walk in a circle.) James Watt’s famous engine in the late 18th century could do the work of 10 horses; by the late 19th century, “engines that could provide 10,000 hp had become feasible,” far outstripping any preindustrial source. In time, other means of exploiting fossil fuels were invented, like the internal combustion engine; the resulting demand for oil drove the wealth explosion of Kuwait and our other Gulf states. There was a feedback loop at work: the energy output from the early engines created wealth, which funded technological improvements, which resulted in better engines, with a host of cheap manufactured goods as a byproduct.
And the fuel for these amazing machines was just sitting there in the ground. Energywise, it was something for nothing.***
Why the wait?
A couple of questions suggest themselves. First, was this the whole story? Almost certainly not. Energy is a fundamental physical limit, and we can say that an abundant energy source was a necessary factor for the type of wealth seen in the modern world. But it surely wasn’t the only factor.
The other question: if combustion engines are so great, why did people wait so long to start using them? Humans have been burning coal for thousands of years. It was appreciated at least 2000 years ago that steam could be used to drive motion. What was the hold-up?
In another post, I’ll examine the second question, and try to suss out the preconditions for the development of IR technology.
* The petroleum industry is one subject I want to learn more about. But Wikipedia gives dates for discovery of oil of 1937 and 1938 in Kuwait and Saudi Arabia respectively, with full-scale exploitation following a few years after.
** It kinda peaked around the 1890s and has been gradually levelling off since, but don’t tell anybody.
*** Well, unfortunately, not quite.