Loading document…
Opening in Pages for Mac...
Your browser isn’t fully supported.
For the best Pages for iCloud experience, use a supported browser.
Learn More
Cancel
Continue
Lecture Notes: The
Development of
Underdevelopment
J. Bradford DeLong
Department of Economics & Blum Center for Developing Economies at
U.C. Berkeley
, & WCEG
http://bradford-delong.com
::
brad.delong@gmail.com
:: @delong
2019-12-25
Revised 2020-03-28
Slides:
<
https://github.com/braddelong/public-fi les/blob/master/econ-135-lecture-17.pptx
>
Text: <
https://github.com/braddelong/public-fi les/blob/master/
l
ecture-development-of-
underdevelopment-text
.pdf
>
To edit this: <
https://www.icloud.com/pages/08HqmPxZLVnjrTxce2B9ro5Ag
> <
https://
www.icloud.com/keynote/0lWeNgJnwEjyoHm3Gf81hWJXw
>
html:
3068 words
I.
The Watershed:
The
1870 Inflection Point
A. Had the Industrial Revolution Lightened the Toil?
As of 1870, had the British Industrial Revolution raised the standard of
living or lightened the toil of the working class in England, the country at
its center? No. Why not? Because of Malthusian forces—a population
explosion & thus smaller farm sizes would result from any improvement
in human technological knowledge about the control of nature and the
organization of humans. The smaller farm sizes produced by larger
populations would reduce productivity. Thus while human technological
knowledge capital-H would increase and could increase signifi cantly,
1
human labor effi ciency capital-E would not. And the pace of technological
and organizational change not fast. Not fast enough to raise incomes high
enough to force the demographic transition, and break the mold of this
Malthusian system.
From this comes the permanent world-historical importance of 1870:
Around the year 1870—in the generation between 1860 and 1880—our
worldwide lower case-h proportional rate of growth in the value of the
stock of useful human technological knowledge about the control of
nature and the organization of humans.goes from 0.44
%
/yr to 2.06
%
/year.
And there it sticks—until, possibly, this rate of growth drops off, starting
now. (But that is the subject for another time.)
B. Causes of the Circa-1870 Speed-Up
The principal cause of this speed-up? The coming of the modern industrial
research lab and the growth of the STEM labor force that made the
process of creating, developing, and then providing proof-of-concept of
new productive technological ideas a routine and routinized and
rationaalized one. Plus the coming of the modern corporation that made
the process of deploying new technological ideas on a global scale a
routine and routinized and rationalized one.
Was the growth of the STEM labor force, the development of the
industrial research lab, and the coming of the modern corporation
inevitable—baked in the cake—as a result of what went down during the
1770-1870 British Industrial Revolution era? Or might the path to this
circa-1870 economic-engineering-technological breakthrough have been
missed? This is a deep question that we do not have good answers to. I
tend to say that it was not baked in the cake, at least not by anything that
happened in the fi rst two-thirds 1770-1840 of the British Industrial
Revolution century. Why do I think this? Because arguments that it was
2
baked in the cake tend, I think, to lead us to have expected another couple
or more of speed-ups in lower case-h since. And we have not had such.
C. Globalization and Divergence
But assisting the STEM-lab-corporation trio in discontinuously and
substantially boosting lower case-h was globalization:
•
Globalization of goods through trade ,using railroads and iron-hulled
steamships
•
Globalization of people through migration, using railroads and iron-
hulled steamships
•
Globalization of communications, using the telegraph
Yet, somehow, at least the fi rst century of the post-1870 Modern Economic
Growth era has also seen DIVERGENCE, BIGTIME. While economic
and political-economic processes have seen the global north develop
massively, they have also seen the emergence of enormous income and
productivity gaps between the global north and the global south. While the
global north has been developed, the global south has been
underdeveloped—has grasp of a lot smaller a fraction of the human
technological cornucopia H than it had hold of in 1870, or, indeed, at any
time earlier.
II.
The 1870
-1914 El Dorado
A. Growth and Modernization
The jump in lower case-h from 0.44
%
/year to 2.06
%
/year around 1870
meant that the next half-century—the years before World War I began in
1914—were, as John Maynard Keynes, looking back from 1919, called it
3
in his
The Economic Consequences of the Peace
, an economic El Dorado:
a previously unseen and unimagined epoch of expansion in global wealth
and prosperity, visible nearly everywhere all over the globe.
And as a result, in same ways that world economy as it stood in 1914 on
the eve of World War I was remarkably modern. This was true in heavy
industries, especially. In 1913 Britain burned 194 million tons of coal.
Total coal-equivalent energy consumption of Britain less is less than three
times as large. Average U.S. passenger railroad mileage in 1913 was 350
miles/person. The average American thus spent ten hours on a train getting
someplace at a distance and at a speed beyond the wildest imaginings of
previous centuries, save for miracle tales like the one in which an angel
carries the Prophet Habbukuk by the hair from Jerusalem to Babylon to
feed the Prophet Daniel a bowl of stew he had just cooked. Today average
U.S. airline miles per year are 3000/person. Today we travel ten times as
fast and ten times as far on average, but the quantum gap is between 1800
and 1914, not be
t
ween 1914 and today.
B. Yet an Economy in Many Ways Premodern
In other ways, however, even the global north was desperately poor and
premodern, even in the most advanced parts. Agriculture, even in North
America, was still largely unmechanized: more than half of Americans
still working on the farm. Only Britain and Belgium had less than half of
the labor force in agriculture, and that was not because their food was
grown via mechanized agriculture, but because their manufacturing
exports allowed them to have the farmers who grew by hand the crops that
fed them be located in other parts of the world with more abundant and
better land.
Remember, in the years before World War I, nitrogen artifi cial fertilizers
were just coming on line. People still worked like dogs in the South
Pacifi c to mine the products of avian defecation off of islands offshore of
4
Chile and Peru—and then ship the guano back to Europe as fertilizer.
“Guano King” was an occupation and description of more than one
plutocrat in those days.
C. The Serpent in Garden: Landed Aristocracy
And 1914 still saw, throughout all of the globe save the recent-European-
settlement English-speaking lands of Australia, New Zealand, Canada, and
the United States, the remarkably thorough political dominance of
landlord-aristocrats:
•
people who feared being creatively destroyed by economic, political,
and sociological change;
•
people who had lost or who were rapidly losing any claim to performing
a valuable social role;
•
people who were then remarkably eager to stoke the flames of
nationalism and roll the dice of war, in order to “busy giddy minds with
foreign quarrels” and so distract the thoughts of those they wanted to
have remain their underlings from ideas like “socialism”, “progressive
taxation”, and “expanded government provision of commodities”.
III.
1870
-1914 Migration
A. Migration from Europe and Asia
One of the key factors that made the twentieth century what it was was the
course that migration took over 1870-1914.
During the half-century before World War I, 100 million people left their
continents of origin—70 million of them permanently.
They did so because of the iron-hulled screw-propellered ocean-going
steamship. After 1870 it took 9 days from Liverpool to New York: it had
5
taken a month in 1800. After 1870 a steerage-class ticket for such a
transatlantic voyage cost only 1.5 of a month’s wages for an unskilled
European worker. Pay 1.5 of a month’s wages—or have a relative already
in the New World pay 3/4 of a month’s of their wages—for the journey,
and you double your pay, and your children’s pay.
Wages were lower in China and India, and so costs were proportionately
higher. But the wage gaps were as large: Chinese for San Francisco is still
“Gold Mountain”.
And so 50 million from Europe and 50 million from Asia changed
continents.
This was an absolute bonanza for those who made the voyage. This was a
relief for those back at home who found resources less crowded and
scarce.
But this was also a principal source of global inequality—a reason why the
global south found itself as a whole leveled down to the Chinese and
Indian standard, for China and India were then in the down, poverty-
stricken phase of the Malthusian cycle. The development of
underdevelopment in the global south can be understood only as a
consequence of these waves of migration.
B. Migration and Exceptional America
And this great migration wave was a big reason that the United States of
America became truly exceptional throughout the twentieth century. Only
America’s welcoming of migration—and Germany’s lack of the land and
thus the living standards to absorb migrants from eastern and southern
Europe, and the British Empire’s lack of the will and desire to absorb
eastern and southern European migrants—gave America the demographic
heft it needed for it to become the world’s dominant 20th century
6
hyperpower as it became the one to fi ll the niche of Saxon-descended
superpower.
Back in the days of the decline of the Roman Empire there was a tribe
called the “Saxons”. Some of them crossed the North Sea to Britain.
Others stayed in Germany. In England today there are three counties
named after the Saxons—Essex, Sussex, and Middlesex—plus there is a
Earl of Wessex; in Germany there are Niedersachsen, Sachsen, and
Sachsen-Anhalt. In the United States there are fi ve Essex, four Middlesex,
and three Sussex counties; and I have not looked in Canada, Australia, or
New Zealand. That makes eighteen counties plus an earldom named for
the original tribe in the lands of the Anglo-Saxon and the Saxon-Saxons.
Of these peoples’ three countries back in 1800, the British Empire had 17
million European descended subjects—plus Indians, descendants of
Africans, and others who the Empire was not interested in educating and
so would not make a source of strength rather than a subjugated people
whom it cost resources to hold down so they could be exploited. The
kingdoms in the lands that would become modern Germany had 15
million. The United States had 4 million—plus 1.5 million African-
Americans and 500,000 Amerindians whom, like the British Empire, they
were not interested in educating and so would not make a source of
strength rather than a subjugated people whom it cost resources to hold
down so they could be exploited. Back in 1800, in the race for what nation
would become the Saxon-descended 20th century superpower, Britain was
ahead of Germany not so much by virtue of its population but of its
industry, while the U.S. was far behind.
By 1840 the Saxon language group-speaking populations were 28 million
in the British Empire, 27 million in the German states, and 13 million in
America—the edge still to Britain, again by its level of industrialization,
although the U.S. was catching up fast.
7
By 1870 the full-citizen populations were: the about-to-be-formed German
Empire with 41, the British Empire with 37, and America with 33 million,
with the U.S. catching up fast because of both natural increase and waves
of immigration from the British Empire in the wake of the Irish potato
famine and from Germany as well. By 1913 America had a small edge in
industrialization over both Britain and Germany, which were about equal;
and America had taken the full-citizen population edge: 83 full-citizens as
opposed to 67 in Germany and 59 million in Britain—a 25
%
edge to
America. By 1939 America would have a 42
%
larger full-citizen
population than Germany, and a 50
%
population edge over the British
Empire.
Without the U.S.’s welcoming to eastern and southern European migrants,
that would not have happened. And the 20th century would then have been
much less of an American century.
C. Restrictions on Migration from Asia
What role did migration—and the rest of globalization—play in the
development of underdevelopment in the global south?
50 million left from China and India to places from South Asia and Africa
to the Caribbean and the highlands of Peru. Peru in the late twentieth
century could have a President surnamed Fujimori. The author V.S.
Naipaul was born not in India but in the Caribbean. The redwood forests
of northern California contain shrines to the boddhisatva Guan-Yin. Never
before or since have we seen such a rapid proportional redistribution of
humanity around the globe.
The redwood forests of northern California contain shrines to the
boddhisatva Guan-Yin—although migration from China to European-
settled California and to the rest of temperate-climate settler colonies and
ex-colonies was quickly shut down. Plutocrats like Leland Stanford (the
8
railroad baron and governor of California who founded and endowed
Stanford University in memory of his son) favored immigration; the
populists favored exclusion–and “Chinaman go home.”
In the temperate zone economies to which migrants from Europe went, the
populists won out before World War I in one narrow aspect: with respect
to making and keeping settler colonies “European”. Asian immigrants
were largely kept out of what Arthur Lewis calls the “temperate countries
of European settlement”–the United States, Canada, Argentina, Chile,
Uruguay, Australia, and New Zealand.
The flow of migrants out of China and India was directed elsewhere, to the
tea plantations of Ceylon or the rubber plantations of Malaysia.
D. Consequences of Migration from Asia
Migration out did not raise wages much in the migration-source
economies of China and India. They were so large relatively in population
that emigration was a drop in the bucket.
Did migration lower relative wages in tropical-zone recipient economies?
Yes. Moreover, migration from China and India lowered relative wages in
tropical-zone economies that never saw a migrant. British capital,
Brazilian-stock rubber plants, and labor imported from China to Malaya
could and did put heavy downward pressure on the wages in Brazil of
people who did not know there was such a place as Malaya.
E. The Role of the British Empire
Worth noting in all this is the role of the British Empire. The comparative
advantages of the regions that were to become the periphery of the late
nineteenth century global economy were not so much given as made.
Where the British went they builT a fort, some docks, and a botanical
9
garden—the botanical garden to discover what valuable plants grown
elsewhere might flourish here as well. During the nineteenth century the
rubber plant came to Malaysia, the tea shrub came to Ceylon, and the
coffee bush came to Brazil. Rubber was not introduced into Malaysia,
Indonesia, and Indochina until the last quarter of the nineteenth century.
But by the end of World War I these three regions had become the
principal sources of the world’s natural rubber supply.
F. The Malthusian Hammer
India and China, through ill-luck and bad government, had not escaped the
Malthusian regime. Technology had advanced: the population of China in
the late nineteenth century was some three times what it had been at the
start of the second millennium, and living standards were no (or not much)
lower. But improvements in productive potential had been absorbed in
rising populations, and not in rising living standards. So potential migrants
from China and India were willing to move for what seemed to Europeans
and others around the glober to be starvation wages.
IV. The Development of Underdevelopment
A. Wages in the Global South
Thus the large populations and low levels of material wealth and
agricultural productivity in China and India checked the growth of wages
in any of the areas–Malaysia, Indonesia, the Caribbean, or east Africa–
open to the Asian migration stream. Workers could be cheaply imported
and employed at wages not that far above the physical subsistence level.
These workers would be very happy with their jobs: their opportunities
and living standards in Malaysian or African plantations would be
signifi cantly above what they could expect if they returned to India or
China. Low wage costs meant that commodities produced in countries
open to Asian immigration were relatively cheap. And competition from
10
