By J. Bradford DeLong

(Caijing Magazine) I have been reading the works of Robert Allen, one of the finest economic historians and now a professor of economic history at Oxford University's Nuffield College, and meditating on the difference between the world today and the world of 1870.

Back then, any thought that modern economic growth would take hold and grip the world was still a fringe, utopian idea more or less confined to dreamers and socialists, and not even all of them. The world's leading economist in 1871 was British polymath, moral philosopher and (democratic) socialist John Stuart Mill. The leading economics textbook back then was his Principles of Political Economy with Some of Their Applications to Social Philosophy. In 1871, he revised his book and left intact this passage:

"Hitherto it is questionable if all the mechanical inventions yet made have lightened the day's toil of any human being. They have enabled a greater population to live the same life of drudgery and imprisonment, and an increased number of manufacturers and others to make fortunes...."

Why was it questionable whether the inventions of the 18th and 19th centuries — the classic age of the Industrial Revolution — had yet, in Mill's words, "lightened the day's toil of any human being?" The answer, I think, is one given by Robert Allen. The key inventions of the 18th and 19th centuries — the steam engine, new modes of making iron, improvements in firearms and precision machinery, the coming of automatic spinning and weaving — were impressive breakthroughs but required a very special set of circumstances to make their uses efficient.

Two thousand years ago, people would have laughed at the idea of Britain as an economic, political, social or cultural center. Around 50 BC, the Roman proconsul of Gaul, Gaius Julius Caesar, raided Britain while categorizing Britons as among the most backward people he'd ever conquered. Caesar's contemporary among Roman politicians, lawyer Marcus Tullius Cicero, joked to his friend Titus Pomponius Atticus that Caesar's invasion of Britain was completely pointless: Not an ounce of silver was to be stolen on the entire island but only slaves -- and not very good quality slaves, certainly not a single slave with a useful skill such as literacy or musicianship.

A thousand years ago, the technological and civilization cutting edges of mankind were in Caliph Haroun al-Rashid's capital of Baghdad and the Tang Dynasty rather than London or Bristol or New York or Washington. Even 300 years earlier, around 1570, it would have taken a sharp eye to see that northwestern Europe was about to get its act together in a way that the Ottoman civilization around Constantinople, the Moghul civilization around Delhi, and the Ming civilization around Beijing could not.

By 1870, however, the power and technology gradients across world civilizations were very clear. Real wages in England in 1870 were for the first time higher than past averages from the Middle Ages.

The late Middle Ages starting in 1400 or so had been a relatively prosperous time for the people of Eurasia. In Europe, the catastrophe of the Bubonic Plague had reduced the population by between a quarter and half from its high in the early 14th century, and larger farms were yielding an agricultural bonanza for peasants who could produce more and bargain for lower rents from feudal earls desperate to have somebody work the land. In Asia there had been plague, too — and also Genghis Khan and his descendants — along with the spread of highly productive, wet rice agriculture. It looked as though even unskilled, urban laborers across Eurasia could earn three times as much as necessary to house a family in a small shack and feed them the cheapest possible diet of millet, sorghum or oats.

Travelers to Asia from northwestern Europe in the 1600s and earlier had been impressed not just by the scale of the empires and luxurious wealth of their rulers but by the rest of these economies as well. Scales of operation, the prosperity and industry of the merchant classes, good order among the people, and an absence of extraordinary poverty among the masses frequently struck European observers as worthy of comment. They saw striking contrasts back home.

But by the 1800s, this was no longer the case. Travelers from Europe reported a ruling elite richer and a proletariat poorer than what they were used to in Europe. And it was not Europe as a whole but northwestern Europe alone that made the difference. Living standards, levels of sophistication in the use of machines and steam technology, and the contrast between rich and poor were much the same in Florence and Vienna as in Delhi or Beijing.

The difference in northwestern Europe was caused not only by the boom in trans-Atlantic trade and exploitation of the American colonies, but also because new technologies of the Industrial Revolution fit the configuration of prices in northwestern Europe. Steam engines were clumsy and inefficient and could only be profitably used where coal was essentially free. Textile machinery was clumsy, and could only be used profitably where cotton was very cheap and unskilled labor relatively expensive. Skilled craftsworker fingers were hard for primitive machines to match. Unskilled worker muscles were often cheaper than coal painfully dug from the earth. Clearly, technologies had not yet lightened the day's toil of any human around the world because labor around the world was cheap, but cotton and coal often expensive. Only Britain (and, a little bit later, Belgium, northeastern France, northwestern Germany and New England) could benefit from the combination of cheap access to slave-grown American cotton, cheap coal, and relatively expensive labor because of booming world trade.

And even then, whether the Industrial Revolution would truly take off and create a world of abundance was unclear. Economic historian Gregory Clark of the University of California at Davis points out that there had been narrowly focused "technological revolutions" many times before Britain in the 18th century: printing, the windmill, the musket, the seagoing caravel, wet rice capable of sustaining three crops a year, the watermill, the horse collar, the heavy plow, bureaucracy to maintain Pax Sinica, legions to maintain Pax Romana, the phalanx, olive press, and so forth back into the mists of time. Yet none of these lit the rocket of continuous rapid modern economic growth that the world has ridden for the past century and a half.

John Stuart Mill in 1871 placed his trust for the future of humanity not in a rapid increase in economic growth, but rather in a combination of fair distribution of production and population control to keep the land-labor ratio within reasonable bounds. Mill thought that, in the end, invention would be decisive — even though it had not been previously. He wrote that mechanical inventions "have not yet begun to affect those great changes in human destiny, which it is in their nature and in their futurity to accomplish."

Yet not by itself; only in combination.

"Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers become the common property of the species, and the means of improving and elevating the universal lot."

To Mill, not productivity growth but an order based on fair distribution, a democratic political-economic order — "just institutions" — and universal fertility control —  "the increase of mankind... under the deliberate guidance of judicious foresight" — were the keys. Only then could "conquests made from the powers of nature" become "the means of improving and elevating the universal lot."

Mill, in short, believed the industrial age was and would remain a Malthusian age, one of strictly limited resources in which expanding human numbers would always act as an enormous drag.

Yet over the past century and a half, Mill has been wrong. Our numbers have grown from 1.2 billion in 1870 to 6.3 billion today. And, yes, finding space and raising agricultural productivity to support those extra 5.1 billion of us has been an enormous task. But it has not left us collectively as poor as our ancestors were in 1870. Whether the future will see the return of a Malthusian age is anyone's guess; it depends on whether we are able to minimize global warming and manage the social, economic and political turmoil and destruction that global warming will wreak.

Mill was wrong because something important happened to the progress of invention. The Industrial Revolution, it turned out, was not just a lucky set of individual inventions but, instead, set in motion something truly new: the invention of invention and innovation. The new industrial economy created by the Industrial Revolution could be counted on to throw out additional innovations of the same magnitude as the railroad and the power spindle at least once a generation. For after 1870 the character of the industrial growth process changed.

That the break came in 1870 is a puzzle that's disturbing to us economists, for we tend to talk about the importance of the market economy. Yet China had had a market economy since the end of the Tang Dynasty, and Europe had had a market economy since the end of the Middle Ages. This raises great suspicions that we have been looking in the wrong place for explanations of our current global relative prosperity.