– January 2, 2020

The Wealth Explosion by Stephen Davies is one of the books the world needs. Much of the growing literature in what is called the “New History of Capitalism” credits (or blames) different kinds of exploitation like slavery, colonialism, and empire for the prosperity of Europe and its overseas offshoots. Some historians argue, for example, that slavery was essential to American cotton cultivation, American cotton cultivation was essential to the development of the British textile industry, and the British textile industry was essential to the Industrial Revolution. Hence, we have high incomes today because our ancestors exploited people and left us the spoils.

Davies, the Head of Education at London’s Institute of Economic Affairs, pays little attention to this literature but offers a rather different and, in my view, a much more accurate account. It will, I suspect and hope, stand up much better than the reanimation of “King Cotton” by the new historians of capitalism. He is a proper historian who is conversant with the work scholars have done in departments of economics and economic history. The Wealth Explosion is a work of synthesis: it is not an attempt to break new scientific ground; rather, it is a useful and easy-to-read distillation of what we know about the most important questions in the humanities and social sciences: “Why is our world so very different from the world of our ancestors?” and “Are the differences good?”

Davies’s answers will not be terribly controversial to regular readers of Regulation or economic history journals. We’re rich because of what has variously been called “creative destruction” (by Joseph Schumpeter in Capitalism, Socialism, and Democracy), “dynamism” (by Virginia Postrel in The Future and Its Enemies), “innovative dynamism” (by Arthur Diamond in Openness to Creative Destruction, which I review here), “innovism” (by Deirdre McCloskey and myself in a book that should appear next year), and “capitalism” (by just about everyone else). He argues that it is good — or at least acceptable, if one is willing to tolerate things like long lives and lower child mortality.

There are two other questions, however, that bother economists, historians, and economic historians. Why did it happen in Northwestern Europe, of all places, and why did it happen in the 18th century? As Davies and many other scholars have argued, what looks like they might be “prerequisites” for capitalist development are in some cases ancient, in other cases universal, and in still other cases both ancient and universal. Davies goes to great lengths to explain to readers that nothing in the modern world had to happen. The process is highly contingent, and we might argue that the long arc of history doesn’t actually bend toward anything in particular. The Industrial Revolution could have happened millennia ago, or it could have happened elsewhere. Indeed, someone looking at the world a thousand years ago would have bet that a Wealth Explosion would have happened in China if it was going to happen anywhere.

It almost did. After documenting the changes and clarifying the empirical and theoretical questions in his first two chapters, Davies explains precisely why it wasn’t China. There was an “efflorescence,” which is the historical sociologist Jack Goldstone’s term for brief flowerings and flourishings of economic progress, in Song China roughly a thousand years ago. It was, however, stamped out by external threats (the Mongols) and perhaps more importantly internal threats (the Chinese ruling elite).

It is here that we see how Davies’s argument dovetails with work by economists like Deirdre McCloskey, Joel Mokyr, and Douglass C. North. There are differences in emphasis, in my opinion, but the stories are mostly consistent. Davies (largely following North and Mokyr more than McCloskey in this respect) puts his emphasis on the elites, their incentives, and their ideas. He writes (p. 241):

All human societies since the advent of agriculture have seen a division between ruling groups that gain income and status from the exercise of power on the one hand and the productive classes who create wealth through trade and production on the other. Of course the division is not so clear but that does not make it any less real.

I am reminded in this of North’s definition of a state in his 1981 book Structure and Change in Economic History as “an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents.” The difference between China and eventually Europe, Davies argues, came from the political concentration and geographic extension of the ability to deploy violence in China. Europe, on the other hand, differed in that it was extremely politically fragmented. As McCloskey and Mokyr both emphasize, this made censorship and efforts to kill green shoots of innovation a lot harder. Suppression that worked in China and elsewhere in the world did not work quite as easily in Europe — though the history of European persecutions and wars suggest it was not for a lack of trying.

Over about 250 pages, Davies takes us through the Song efflorescence, the reaction and elimination of its fruits by the Ming Dynasty, changes in military technology and what that meant for the gunpowder empires, an explanation of why the Habsburgs did not become innovation-squelching European hegemons, the development of modern science, the Enlightenment, and the various pro- and anti-innovation ideas that have shaped the human experience in the early 21st century. 

He finishes with what is, to me, a new claim: that what we inhabit now is not “Western western civilization” but something different that has transcended the merely “western.” This makes a certain sense in light of the fact that, as Davies emphasizes, it’s not clear that there is anything peculiarly, uniquely, and essentially western about it. This, I think, is where he might get a lot of pushback from conservatives and libertarians who are especially fond of the Western western project. But , but particularly in light of the fact that it has been limited to the last couple of hundred years, years it would probably be a mistake to read inevitable prosperity into the volumes of the Great Books of the Western World. As McCloskey argues throughout her “bourgeois era” trilogy, this should give us hope: as good as I think Western western ideas are, they aren’t necessary or sufficient for prosperity. A society can enjoy a Great Enrichment without abandoning its cultural heritage.

I thoroughly enjoyed the book and expect to return to it regularly. Stylistically, The Wealth Explosion is an easy read. This doesn’t surprise me as Davies is one of the best public speakers I’ve ever seen, and his speaking style translates well to the printed page. Davies eschews the normal scholarly trappings — some of us might find this frustrating; on reviewing my marked-up copy, I discovered that I had written, “I want my footnotes!” at the top of page 77, where chapter 3 begins — but each chapter closes with a short bibliographic essay that will help interested readers find out more. I hope The Wealth Explosion inspires them to do so.

Art Carden

Art Carden

Art Carden is a Senior Fellow at the American Institute for Economic Research. He is also an Associate Professor of Economics at Samford University in Birmingham, Alabama and a Research Fellow at the Independent Institute.

Get notified of new articles from Art Carden and AIER. SUBSCRIBE *AIER is a 501(c)(3) Nonprofit registered in the US under EIN: 04-2121305