Why the West grew rich while the rest grew poor?

By The Kian Wie

The following is a commentary on David Landes' latest book The Wealth and Poverty of Nations -- Why Some Are So Rich and Some So Poor. This is the first of two articles.

JAKARTA (JP): In this magnum opus, David S. Landes, professor emeritus of history and economics at Harvard University and author of the widely acclaimed book The Unbound Prometheus about the origins of the Industrial Revolution, has endeavored to tackle the important questions of world economic history.

These are, why and how did a relatively small number of countries, specifically Western countries, get prosperous, while most other countries achieved little or no growth, or, after a promising start, slowed down or stagnated? Hence, Landes' basic concern in his latest book is the West-Rest dichotomy: Why "the West" (specifically Northwestern Europe and its offshoots in North America and Australia) in the course of the last thousand years got ahead much faster than the rest of the world, and therefore became the prime mover of development and modernity?

At the risk of oversimplifying Landes' wide-ranging and erudite book, his answer to the above questions boils down to three major points. Europe, or more specifically Northwestern Europe, had a mild, temperate climate which enabled and stimulated people to work at full capacity; a culture which encouraged invention and technological innovation; and institutions which over the centuries protected property rights, and therefore guaranteed that people could not only reap the fruits of their endeavors, but could pass them on to future generations.

Identifying climate as one of the major determinants of material progress can be a controversial issue. While conducting groundbreaking research on the connections between physical environment and human activity, the American geographer Ellsworth Huntington gave geography a bad name when he classified civilizations hierarchically, assigning the best to the most invigorating climates. No wonder that for a time geography in the United States was accused of cultural, even racial bias.

On the other hand, it is certainly true that the advanced, rich countries lie in the temperate zones, particularly in the northern hemisphere, and the bulk of the poor countries in the tropical and subtropical zones. However, linking the level, intensity and quality of human activity to the physical environment alone can lead to a simplistic geographic determinism, which offers little prospect of significant economic progress for those luckless billions living in the tropics and subtropics.

Landes himself acknowledges that seeing geography as a major determinant of a society's material progress is a mistake, as scientific and technological progress, particularly during the past two centuries, has led to better living and working conditions in many areas of the world, including in the developing countries in the tropics. In fact, middle-class Indonesians and Westerners living and working in Indonesia can now in many ways lead similar lifestyles thanks to air- conditioning in their workplaces and homes.

Another, more crucial determinant of material progress is a culture which favors scientific invention and technological innovation. In this respect too, Western Europe as early as the Middle Ages benefited from having developed a cultural and social environment which encouraged not only invention and innovation, but also guaranteed the inventors the fruits of their endeavors. It was in that environment that the water wheel, eyeglasses, the mechanical clock, printing and gunpowder were invented.

Printing and gunpowder were actually invented much earlier by the Chinese. However, while the invention of printing in Europe led to a rapid and wide diffusion of knowledge, in China this diffusion of new ideas was discouraged by the conservative Confucian mandarins. Although China, given its head start in many inventions, could have remained at the forefront of scientific and technological progress, at a certain point Chinese technology just stopped progressing.

Sinologists have suggested various reasons to explain China's scientific and technological stagnation. One of the more plausible reasons advanced was the absence of a free market and institutionalized property rights, enabling the imperial government to strangle scientific initiative, exact bribes on profitable enterprise and hamper the creation of private wealth.

Another related reason was what the sinologists referred to as the pattern of totalitarian control in imperial China; that is the complete hold the state and its executive organs and functionaries had over all social activities. Without this stifling social control and constant interferences over private initiative and economic activities, the ingenuity and inventiveness of the Chinese might have enabled China to advance as fast as the West, if not faster. For largely similar reasons, rapid scientific progress in India, the other great center of Asian civilization, was also nipped in the bud.

Although in medieval Europe these interferences could also be found, over time societal forces were able to overthrow vested and conservative interests, enabling free enterprise to thrive and innovation to grow rapidly. It was in such an environment that inventions and innovations multiplied, eventually leading to an Industrial Revolution in Britain.

For Landes, like many other Western economic historians before him, the one overriding event which exerted the most decisive impact on world economic history was the Industrial Revolution in Britain in the 1760s. Although various economic historians have pointed out that in the particular case of Britain, the term "industrial evolution" would have been more appropriate in view of the long evolutionary progress in the organization and technology of its industry, there is no doubt that in the latter part of the 18th century technological progress in Britain greatly accelerated. In the following decades the industrial revolution spread to other countries, first the other countries of West Europe, such as France, Belgium, Germany, Sweden and Italy, and later to the United States, Russia and Japan.

While in the past, several societies achieved economic progress, the period of modern economic growth really started with the Industrial Revolution in Britain in the middle of the 18th century. According to the late Prof. Simon Kuznets, former Nobel Prize winner in economics, the distinguishing feature of the period of modern economic growth was the epochal innovations which took place during this period and which involved the extended application of science to the problems of economic production.

In fact, since the second half of the 19th century the major source of economic growth in developed countries in Western Europe and in the United States has been science-based technology; that is the applied knowledge which rests in the reliability of its predictions and practices upon verified general knowledge in the sciences and upon specific observations of materials and natural phenomena.

The application of science required a proper social climate in which both the pursuit and use of science could be fostered. Hence, if the modern epoch of economic growth is distinguished by the application of science to problems of economic production and human welfare, this implies that it is distinguished by a distinct social and intellectual climate which fosters science and its applications. This also implies that the application of science via technology to economic production would not have taken place without changes in political and social institutions. New attitudes were needed to accommodate and foster the adjustment of political and social institutions to the exploitation of the potential provided by science-based technology.

It was the good fortune of Britain and the other West European countries that various political and social developments favored the development of new attitudes conducive to scientific and technological development. These included the emergence of a state system after the Renaissance which was favorable to the development of an efficient regime of private property rights, which, in turn, encouraged saving and investment; the security of the right of personal liberty, which provided a safeguard against the abuses of tyranny and private disorder; the enforcement of the rights of contracts; the development of a stable, responsive and honest government governed by publicly known rules (i.e. a government of laws rather than men), which dissuaded economic actors from "rent-seeking activities", that is activities which focused on seeking economic advantage and privilege inside or outside the market place; and finally the development of a moderate, efficient and ungreedy government, which reduced government's claims on the social surplus and avoided the granting of privileges to politically well-connected groups.

The Industrial Revolution in Britain and subsequently in other West European countries, the United States, Japan and Russia changed the world and the relationship between states and nations. While the relatively small number of economically and technologically advanced countries in the world, specifically Western countries and Japan, have during the past century been growing steadily richer, less developed countries -- with a few notable exceptions, such as the East Asian newly industrializing economies (NIEs), including South Korea, Taiwan, Hong Kong and Singapore -- have remained relatively poor, even though some Southeast Asian countries, including Indonesia during the period between 1967 and 1997, since the early 1970s recorded rapid and sustained economic progress until the severe financial and economic crises of 1997/1998 put a halt to this progress.

In spite of these achievements, the economic gap between the rich, advanced countries and "the rest", that is the large number of less developed countries, remains vast and is even growing bigger.

The Kian Wie, Ph.D is an economic historian with the Center for Economic and Development Studies at the Indonesian Institute of Sciences, Jakarta. He recently published a book: Explorations in Indonesian Economic History (Lembaga Penerbit Fakultas Ekonomi, Universitas Indonesia, Jakarta 1999).