This episode of Hub Dialogues features host Sean Speer in conversation with Mark Koyama and Jared Rubin, economics professors at George Mason University and Chapman University, respectively, about their fascinating new book, How the World Became Rich: The Historical Origins of Economic Growth.
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SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Mark Koyama and Jared Rubin, who are economics professors at George Mason University and Chapman University, respectively, and co-authors of the fascinating new book, How the World Became Rich: The Historical Origins of Economic Growth. The book, which has received a ton of positive reviews and comments, asks the fundamental question: What explains the extraordinary growth in wealth and prosperity that countries like Canada have experienced over the past 200 or 300 years? I’m grateful to speak with them about this question and how they’ve come to think about the answers. Mark and Jared, thank you for joining us at Hub Dialogues, and congratulations on the book.
JARED RUBIN: Thanks for that intro, and thanks for having us.
MARK KOYAMA: Thanks, Sean. We’re very happy to be here.
SEAN SPEER: You may have seen, gentlemen, that the Economist magazine recently published an article about how “the West fell out of love with economic growth.” It points to, among other things, a drop in references to economic growth in how political parties talk about their priorities. Let’s start with a two-part question. First, why do you think so much of our political discourse has come to focus on issues like equality and less on growth? Second, in that context, why did you write this book?
MARK KOYAMA: I know the article. I’ve seen it but I’ve not read it. I currently have the subscription, but I think it’s definitely right. I think there has been less and less emphasis on growth politically and in our discourse. I think the turning point was probably the financial crisis. And I think the Occupy movement, and then the rise in interest in inequality in 2010, and then the rise of populism, and the increasing attention to parts of our society who either have lost out or feel they have lost out and been left behind, and the rise of populism and Donald Trump, and Brexit and so on. That’s been the shift and it’s understandable that perhaps there was a shift after the financial crisis and our perceptions about how well the economy’s doing were reset in some sense.
I don’t think it’s entirely unsurprising or even entirely a bad thing that as we’ve moved away some degree of a margin, but I think we’ve overshot. So economic growth is vitally important, and that’s why we wanted to write this book. And so inequality, things like this also matter. Things like global warming now take a lot of attention, and often we think in a little bit of a naive way that there’s a trade-off where more economic growth is going to destroy the natural environment, maybe via global warming through the emission of carbon dioxide and so on. We think it’s been overshooting all of the motivation for a book because actually, our perspective is more of one that economic growth means more resources, and that means more resources potentially if you want to distribute to poor people or more resources to funnel towards technological change, things like carbon capture, nuclear fusion.
And so economic growth I think is something that we are able to get around. A large proportion of people should be able to agree is good. That’s actually a way to build consensus in a potentially fractured society. So it’s bad that we’ve lost its focus on growth and it needs to be turned around. Otherwise, you have very zero-sum conflicts in society about redistributing the existing resources, and that can be a source of conflict.
JARED RUBIN: Maybe I can address part of the second half of the question. Yes, I mean, I completely agree with what Mark just said. I think one thing I’d add that also gets at your second question is that while it is quite understandable, especially in the last decade-plus that within country inequality has become more of an issue—and frankly there’s plenty of research that even suggests inequality can lead to slowing of growth within countries—one of the real issues, and it’s why I think one of the real reasons why Mark and I wanted to write this book and present all of this amazing work that’s been done both by ourselves but really by others, is that when we think about cross-country inequality, that’s where growth really—you don’t overcome that without economic growth.
If you think about the very poorest people in the world, frankly just the bottom 20 percent who are still quite poor, that does not go away by the types of policies that rich countries use to, say, redistribute wealth or address issues of inequality. It requires economic growth. And understanding the mechanisms through which that happens, whether it be the initial spurts of growth that happened in Britain in the 18th and really 19th centuries, or have happened frankly in the 21st century, especially in a place like China, they’re different mechanisms that have been true for different parts of the world. But understanding what those are at least helps us frame the question in a much better way. And I think I would even say, yeah, probably most people who get into economics at some point, whether it be actually doing it for a job or just enjoy reading about it or thinking about it, one of those big issues is, well, what can we do to get the poorest people in the world out of that situation? And I think one thing that this book at least tries to do, and I like to think we did it pretty successfully, is really present the various insights that many in the last, say, 10 to 15 years have had on the various ways that this can happen.
SEAN SPEER: Before we get into some of those mechanisms, Jared, let me ask the two of you a bit of a contextual question. How are we able to assess the rate of economic growth in historical societies? What data or methodologies enable you to go back hundreds and even thousands of years?
MARK KOYAMA: Yeah. Of course, no one was calculating per capita GDP in like Song Dynasty China or Renaissance Italy, or so on. So as many of your listeners and readers will know, the history of GDP accounting, it’s really a 20th-century phenomenon. And it’s really people like John Maynard Keynes and Simon Kuznets who are responsible for putting together these accounts. But the methodology used in a modern era where you’re adding up all the income, all the expenditure, all the output, and putting the market value on it, that methodology can be extended backward so long as it’s adequate data. And the definition of adequate data, that’s where we sometimes may have to stretch it a little bit. But certainly, people managed to push it back to 1870. And tt’s very reliable, and it’s very high-quality data.
Then for many economies, you could push it back to 1820 and it’s still very good. And then going back from 1820, you have to make a few more assumptions, but countries like England have pretty high-quality data. And you can do it in different ways, income side, expenditure side, and you get relatively similar estimates back to around the 13th century, where there are some disagreements amongst different scholars about the precise details. In other countries, it’s a little harder. And so there have been these pioneering attempts to do this.
The guy who’s most famous for working on this is Angus Maddison, who is based in the Netherlands, who’s an economic historian. So often you’ll see a Maddison dataset. But Maddison was one guy, and sometimes he was making a lot of assumptions. What’s happened in the last 15 years is various teams of researchers have worked in countries like Spain or Portugal and really from the ground up produced much better quality data for those countries. France as well has been revised. And so what I would just say is the data, we know with a very high-degree of certainty that medieval France or England were not rich like Canada or the United States. We know that for sure. Are we as sure about the exact comparison was 1376 a worse year than 1336? That’s more of a margin of error. And suddenly, there have been pioneering efforts to extend this work to China and India, which is actually vital to answer the types of questions we’re interested in. We’re interested in the global scope of economic growth and global differences between countries. And that work is pioneering because it’s replacing basically a vacuum. We had nothing before. But actually often the evidence we’re using or people are using is slimmer than you have for, say, England. And so it’s still work in progress, but I think we know more than one might naively think if one didn’t know what’s been done in the last 15 years.
SEAN SPEER: That’s a great answer, Mark. Just as an aside, I know it sounds like a wonky subject, but one of the most fascinating histories I’ve read in the past five or 10 years is a book by the Canadian economic historian, Duncan McDowell, about the creation of the Canadian system of national accounts and the politics of that process, some of the intrigue behind that process. Listeners interested in the subject, I’d recommend the book. It’s called, The Sum of the Satisfactions: Canada and the Age of National Accounting.
Let’s move now, if it’s okay with you and Mark, Jared, to one of the most important two questions that those interested in the subject of the origins of economic growth invariably asked, which is when and where? That is to say, it’s notable that economic growth starts to take off in the mid-18th century, and also that it seems to start in England. Let’s cover both, starting with the timing. Why did it take so long for humans to generate high rates of economic growth? And what was it about the mid-18th century in your view that enabled it?
JARED RUBIN: I guess I can start with this. I mean, I think that the answer to both questions is in a sense the same, in that one thing that we argue in this book is that there was no silver bullet and there was certainly no silver bullet in say mid-18th century, early 19th-century England. There were a series of things that needed to come together. England happened to have all of these. So for instance, we look at something that historically has been often quite good for economic growth, even though in and of itself it is not sufficient, is something like limited governance. So constraints on what rulers can do. This is something that as early or maybe even as late as the 17th-century England had. There were other places that had it though. So the Dutch certainly had it in probably as early as maybe the 16th century once they broke free from Spain. And other smaller places you would say had it. Certainly, something like some city-states would’ve had it. This is all to say that this is one important thing that we have then seen afterward, especially after England took off or Britain took off, has been quite important elsewhere. Even though again, not sufficient. China has grown rapidly in the last 40 years without having almost any constraint on executive power.
But there were other things too that the literature has cited as being quite important. So somebody like John McCrae, one of the real godfathers of recent work on industrialization, would say something like that England had a large set of skilled workers. And this goes back for several historical reasons. Again though, this would be something that England had that other places had as well, especially the independent cities of Central Europe and Northern Italy, the low countries, et cetera. It also had large external markets. Or sorry, internal markets. This would be something that might have made it a little different from the Dutch Republic, which was much smaller. It also had access to the Atlantic. This is something that you can then say, to the extent that you think the Atlantic mattered and the markets of the Atlantic mattered, and many do in the literature, that would at least give some idea on the timing. Certainly, that means it’s not really going to happen before, say, 1600 when you really start getting—it’s not just the finding of, “the New World,” but it’s really there being some economic activity happening in the New World that translates into growth in Europe.
And there are a series of other things as well. I think so when we say, “Well, why did it happen when and where it did?” The “where” is that England in a sense got a little lucky. A lot of the things we described in the book and that have been described in much greater detail in the literature would suggest that nothing about this was necessarily preordained. Well, maybe except for the fact that England’s an island and has coal in the north. But even then again, even something like coal, which might be a geographical feature, there are plenty of places with easy to access coal, the Roar Valley, large parts of China. That again may mean that it might have been necessary, at least, for England to develop the way it did, but not sufficient.
The exact timing one could imagine that it certainly could have happened a little earlier, or had a few things gone wrong, I think it’s actually more likely that it could have happened much later had these things not congealed at one time. And then we can say that after stuff happens in Britain, you no longer need to reinvent the wheel. So these other places start getting both, not just the technology adoption, but it’s, whether you want to call it culture or ideology or something that really favours innovation and views towards innovation, that innovation can be used for the betterment of mankind. Things like that, that end up being really important. And of course, the technical know-how as well. Eventually, and by the mid to late 19th century, the marriage of science and technology becomes quite important. By that point, that requires a whole host of different things like schools and much higher human capital, both for the broader population in terms of, say, secondary schooling and even at a higher level of education for leading scientists and things like that. But that’s after the story. I think when we get to the mid to late 18th century or early 19th century Britain, there’s no one answer. I think it’s a series of answers that just so happened to congeal there.
SEAN SPEER: Mark, do you want to pick that up at all?
MARK KOYAMA: Yeah, I’ll just briefly add. I think that’s exactly right. One way of looking at it is to say it’s a very hard question to answer: “Why did growth begin in England?” Because there’s a multiplicity of factors, basically, which is what Jared outlined. And no single one of them was determinative. The other way you can flip it around is to say, “Why did all these other episodes of economic growth fail?” And you could think that actually in a sense, if you understand economics, you might think that there are quite a few conditions under which with reasonable security of prosperity and reasonable background conditions, people would start just trading and specializing and improving things at the margins. And gradually, you’re going to, very slow but gradually, you can imagine some prosperity emerging, people specializing as merchants or traders, more trading networks beginning.
And you might think that actually there should have been growth as soon as there were large-scale agrarian societies. And there was some growth, but it never came anything close to what we’ve observed after the Industrial Revolution. And so why did it stop? And one way of thinking about that is to think, well, it’s always negative feedback. There was always negative feedback, at least. So there were negative shocks like war, being invaded. Especially if you were prosperous, you get attacked by some neighbour who wants your stuff. Or there were massive disease epidemics, which constitute major shocks to the demography of societies. Or there was some other personal decision to close a country off to trade or something like that. So another way to think about it is that there are loads of other episodes where growth was bubbling up but some combination of negative forces pushed it back down again. And then it’s up again. The English case then is one of those episodes. In some sense, it’s like another commercial trade-driven episode beginning in the 17th century, we now think, for the initial prosperity, and then it’s just the negative shocks were not big enough to push it down again.
Then one of the decisive things which Jared mentioned at the end was the science. This is again a John McCrae point. The Scientific Revolution, which occurs in the 17th century, initially, it doesn’t have a huge amount to do with the Industrial Revolution or economic growth, but it means there was a background set of mathematical knowledge and all of that, which means that it’s then possible—once you’ve reached the end of what you can improve with tinkering and trial by error, there are now these scientific principles, which it turns out you can apply to 4improving these processes. And so the 19th century then is a period where you get the marriage of science and technology, the application of scientific knowledge to making better goods for the economy. And that’s really very transformative.
SEAN SPEER: Jared mentioned that over time, people came to recognize the broad-based benefits of growth. I want to take that subject up, if that’s okay, and ask you to talk a bit about the distributional effects of early economic growth and what explains the transmission of growth into improved living standards across the population. In other words, how is it that economic growth was not merely captured by capitalists, as Marx and others might have anticipated?
MARK KOYAMA: One thing I would say is that almost all growth episodes are unequal. So now economists and people often wring their hands. There are some people who always say, “Economic growth in India or China, it’s good, it’s great, but look, it’s not everyone is benefiting and the rich are getting richer.” And in some sense, that’s almost an inevitable part of the process, but some people get to benefit more than others. And the moral justification of economic growth, it rests on the fact that in the long run, these benefits are going to be distributed more evenly than maybe they are initially. So the British Industrial Revolution is a more streamlined version of that if anything. The people who get rich are those who are able to either benefit from the entrepreneurship directly or politically capture some share of this. And so landowners benefit initially as the demand for food goes up with these burgeoning factories and so on.
Whereas a lot of the workers, initially, whether they benefit—I mean, there were benefits, but the distribution of benefits was skewed towards the factory owners and so on. So that’s why when Engles writes a book on the condition of the working class in Manchester in the 1840s, the 1840s is the decade of chartism. It’s a decade of a lot of social unrest. It’s the last actual decade of Britain of serious social unrest, because actually by 1850 and thereafter, there are pretty dramatic improvements to the living standards of ordinary people in Britain. But the initial decades of industrialization saw the economy dramatically transform itself, saw aggregate GDP really go up a lot, but the population more than triples, almost quadruples between 1750 and 1830s. So there are more mouths to feed. Between the 1790s and 1815 Britain’s fighting basically a world war against France, which involves mobilizing tremendous resources. The taxes are quite high and they’re quite regressive. They fall on the poor.
And so a combination of these factors, as well as its quite disruptive, technological change, which is in some cases putting people out of work as well as employing more people, does generate losers as well as winners. But Marx is wrong because Marx looks at the situation in 1840 and he thinks what industrialization does is immiserating workers over time. And I mean it’s both theoretically unsound, but it turns out to be empirically unsound in the long run. But the point I initially would make is just that the Industrial Revolution initially definitely benefited the rich more than the poor. And if a benevolent policy maker went back in time, they would probably design some policies differently. And neither me nor Jared are saying we should go back to the labour laws of the 19th century or endorse particular policies pursued by the British state at that time, but in the long run living standards went up and they obviously went up dramatically.
SEAN SPEER: Some, like the economist Robert Gordon have argued that the era that you’re studying is something of an aberration and that long-run growth is poised to slow down. What do you think of that argument? Is there something unique in the period that you studied, or is it an experience that can be replicated into the future?
JARED RUBIN: Maybe I can take this first. And Mark, this might not be something we necessarily are in full agreement on because this is more of an implication of the book rather than something in the book itself. So Gordon does make a convincing case I think on some margins. And it’s certainly true that the period that we’ve been talking about here since, say, Britain in the late 18th century and then spreading to much of the world the last 200 years is the aberration in world history, it’s definitely not the norm. Throughout world history, you would get these, as Mark was just noting, these efflorescences of growth that then just petered out mainly due to demographic factors, what is widely known as the Malthusian trap, where people would just essentially have more babies and those babies would eat the surplus.
So what is different in the last couple centuries is the rate of technological change has increased many, many, many fold. This has now, in the last century or century-plus, been supported by the growth of human capital, particularly education and even in higher education, and massive investments in states into that. But I think that one thing that has been clear in the last, at least, few decades is that we have seen some sort of slowdown in the rate of technological change, even with the advent and spread of the internet and then things like smartphones. Smartphones are possibly in a sense even being more important because it really gets that type of technology out to poor people and the rest of the world in a way that very few technologies had prior.
The question is whether the lessons from the last couple hundred years are is this something that has been a massive amount of low-hanging fruit that was hanging around to be picked, or is this something that will continue to arise? I’m actually more of a tech optimist, I think, certainly than Gordon. And I think there’s a recent article by Mark here that suggests he’s also more on the tech optimist side, in that one thing that I think that we see happening again and again with these technologies is you just don’t know where or what the purpose or the economic purpose of these new technologies will be.
I think AI is the most obvious one. That much like some of the previous technologies, it has the chance to end the world, but it also has a chance to be fundamentally transformative in ways that frankly are unimaginable to not just the three of us, but the people that are actually making these technologies. And that’s been true of practically every major technology of the last 150 years. You think stuff like automobiles, certainly, really all types of transport. I mean, definitely something like the internet. You had people as late as the mid-90s, very smart people, saying that this was a flash in the pan and wouldn’t fundamentally change the way that businesses were run. So if anything, I would say that it’s a combination of things. One, I think that technology, since we have, as humanity, been able to harness innovation as something that is regularly done, has shown an amazing ability to continue to create technologies that fundamentally transform the way that we interact with the world.
And I’d say second is that there’s actually still a lot of low-hanging fruit out there. Getting these types of technologies and especially technologies that require little human power to work, certainly something like AI, getting these to the poorest parts of the world and whether it be doing tasks that previously required a ton of manual labour, whether it be spreading capital to its most highly valued uses in ways that either politics or other things had previously made impossible. There’s still so much out there that I at least—I wouldn’t even say in my lifetime, with a massive caveat that the environmental degradation and the terminator scenario on AI could have serious impacts on the world, and obviously on nuclear weapons as well—in the absence of those things, I’m much more of a tech optimist based on my own and really the research done by many, many others on this about technology over the last couple centuries.
MARK KOYAMA: I can jump in briefly just to add to what Jared said. So I think, well, my view is the right way to read what Gordon says, which is not the way I think he says it or has said it in some places, but the right way to think about it is that technological change is not linear. So at least the way it impacts the economy it’s not linear. And so what happened in the period he talks about, which is really late 19th century to World War II, is these amazing complementarities. So it’s like the germ theory disease happens to come about or be discovered or become mainstream around about the same time as you have states willing to make massive investments in public health, build sewer systems. And things like the combustion engine comes about—these things are coming about simultaneously and they complement each other. So you get these payoff after payoff after payoff.
So the possibilities of the world economy were really transformed by those technologies in a way that we don’t see that rate of cumulative progress earlier. And we probably don’t see It after World War II, after 1970, let’s say. But there’s no reason why it can’t happen again, basically. I’m not saying it’s happening now or it will happen, but there’s no inherent reason why you can’t get an adding together of different technologies and the sum is bigger than the individual parts added together, if you understand what I’m saying. So that can happen again. That can happen again, basically. And maybe it is happening, but I’m not enough of an expert about things like AI or nuclear fusion to tell you it is, but it could be happening.
And the only thing I would say is we have seen things progress slower than we might have thought, often perhaps due to regulatory concerns. So for example, probably the three of us will remember the discussion about self-driving cars I’m thinking almost 10 years ago. So many years ago, at least more than five years ago, I remember discussing with my colleagues all the things that self-driving cars could do, eliminating car parks, and how much real estate that would free up. And we thought that self-driving cars would be a thing by 2025. And in some sense, the technology is there, but my understanding about it is the legal liability for what happens when a self-driving car kills somebody is just too difficult for regulators to overcome. So there are other things which maybe have slowed us down rather than the actual technology itself.
JARED RUBIN: I’d like to add one more thing to that. Sorry. Mark says, and I agree with him, that there’s no real reason that we should necessarily expect this to not repeat itself. And I think one reason that we actually should expect it to repeat itself that has been noted by several actually prominent economists, is that as more and more of the world becomes rich, as we describe it in this book,—and again, by rich I don’t necessarily mean making a hundred thousand-plus a year, we essentially mean being far enough away from poverty, the abject poverty where you’re not worried about the very basics of life on a day-to-day basis—as more and more brain power can be used to not be worried about where the next meal or where your child’s health care is coming from and it can be put towards more productive enterprise, potentially like innovation, especially using localized knowledge to produce such innovation, that’s where the real fruits I think are eventually going to come from. It’s moving from one small island in Northwestern Europe to be able to have these five, hopefully up to seven to eight billion people having the resources to be able to really do this. And when we think about where the strokes of genius come from, on an individual level, it’s random, it’s lucky. At a societal level, on the other hand, the more people you have and the more people that are well-fed and rich enough to not worry about things like that, it’s just you’re more likely to have continual innovation.
SEAN SPEER: Thanks, guys. There’s just a ton of insight in those answers. Just in parentheses, we’re having this conversation on December 19th. This episode is going to be released in early 2023. At about the same time for listeners, we’ll have an episode with Manhattan Institute, senior fellow and physicist, Mark Mills, whose latest book, The Cloud Revolution: How the Convergence of New Technologies Will Unleash the Next Economic Boom and A Roaring 2020s in some ways draws on the insights of Mark and Jared about the importance of the convergence of complementary technologies as the key source to that step change growth that they’re talking about.
You guys have been so generous with your time. I just have a few more questions for you. The first relates to similarly the implications of your research, but particularly for development economics. Jared and Mark, if the preconditions for economic growth are a mix of factors including culture, geography, and institutions, what are the implications for development economics? What should policymakers in poor countries be doing to cultivate this mix of conditions within their countries?
MARK KOYAMA: I think that you inherit a set of things, like your geographical position in a world, that’s hard to change, and you inherit things like culture. Well, can be changed on the margin, but in some sense, an East Asian country like China inherits a particular cultural tradition that is different from Latin American tradition. So you have to work on that. The way you really can think about policy or things you can change is the politics, getting the politics right and getting some sense of a pro-growth coalition together. Stephen Durkin has a recent development book. I can’t remember his title just now but I quite like it. And I’m simplifying his message. His message is in some sense, once the political elite decides to get serious about economic growth as opposed to rent-seeking, then in some sense in the current world economy, there is the knowhow and the expertise and the other commissions are out there, to at least make substantial progress in the way that say Rwanda has in the last 20 years.
That’s one way you can take it, but you should work within these constraints which you inherit. So if you’re a landlocked sub-Saharan African country, it’s going to be difficult to get a world-class textiles industry going like China or Bangladesh have. The reason for that is because textiles are very low value relative to their volume. So you want to ship these out because container shipping is a very cheap way to transport these goods to America. And if you’re a landlocked sub-Saharan African country, it’s going to be difficult to do that. And so you should probably specialize in a sector which is more high value to volume and you can rely on air transportation. That’s why Kenya ships a lot of flowers to Western Europe. You need to work with inland constraints, but I think the politics is where it’s really hard. You’ve got to get a political coalition together, which is going to be in favour of growth and able to resist the rent-seeking interest who are going to want to siphon off resources for their own narrow benefit. I think what you can say about the British political system in the Industrial Revolution era is they did build a broad enough coalition of elites who were not going to drown the baby in the bathwater but actually allowed it to grow.
JARED RUBIN: Yeah. Maybe there’s just one small thing I’d like to add to that. I agree with everything Mark said, and I think that an additional lesson for development economists is more of in a sense a negative lesson and it’s more about what not to do, and it’s not to have a one-size-fits-all, we need a certain type of democracy, or we need certain specific types of constraints on executives because the whole idea, I think, as Mark was denoting geography obviously plays a role in the types of things you want. Even culture is going to mean that the types of institutions that we know have typically been good for economic development just work differently in different settings. So it’s really having localized knowledge that matters. Again, there are going to be different answers in different places, but it starts with knowing that what worked in the United States and Great Britain is actually probably not going to work in a lot of the places that are still poor today.
SEAN SPEER: My penultimate question is about globalization. If the goal, Mark and Jared, is to raise as many people around the world out of poverty, is there a risk that Western countries, advanced countries more generally, are flinching in the face of globalization and that a trend towards de-globalization will actually harm that progressive goal of lifting people up? First of all, do you agree with that premise? And second, what should we be doing in terms of public policy to support globalization while at the same time addressing concerns from populations in advanced societies about its implications for different sectors, different workers, different regions within our countries?
JARED RUBIN: Yeah. No, I do agree with that. And I think this goes back to one of the things Mark was saying before that to the extent that we’re facing problems both in the rich world and the developing world, a lot of it has to do with politics. And the types of policies that, in the case you’re talking about here, are maybe favouring de-globalization. Or when I think of de-globalization, I think one of the most important things I also think of is not just the movement of goods but the movement of people, and freer immigration from a place with high human capital going to places where there are the greatest returns for that. I think that’s something we’re clearly seeing in North America and Western Europe, which is something that’s becoming much more restrictive, frankly, in the last decade or so.
And that above all else might be leading to not just degrowth, but some real long-run implications for the poorer parts of the world. I mean, I think when you think about policies that, I mean, I would certainly be strongly in favour of policies that open up borders to the greatest extent possible. I think that that’s going to be among the most important things to do. Now, I think as Mark alluded to earlier, the politics on this becomes really hard because politics on these questions in particular are becoming skewed by cultural changes that are really not favourable to those headwinds. And I think, hopefully, even though it really, I wouldn’t say was the primary intention for us to write this book, but I think one of the outcomes of not just books like this, but work that others are doing that really are saying, “Look, the world is becoming better and as the world becomes richer, it’s not just that the rich get lifted up, it’s everyone can be lifted up,” is to understand that this helps everyone when the world becomes richer. And it’s not even from a moral perspective. I mean, I do think it’s actually moral to want to lift the poorest people in the world out of poverty and not just the people in your own country, but even setting that aside, what’s best for the U.S., what’s best for Western Europe and other rich places in terms of just their own national accounts, in the long run, is certainly going to be things that lift up the rest of the world and continue to lead to, whether it be globalization in terms of goods, but I think again more specifically and more importantly, in terms of people.
MARK KOYAMA: I’ll just add very briefly that it’s unfortunate the countries like the United States have shifted towards being more protectionist in the last couple of years under the Trump administration, and it’s not been reversed under the Biden administration—I mean, only in the most trivial way. What I would say is that one of the good things otherwise on economic growth over the last 20 years is that it matters a little bit less. So for example, you’ll often hear about one of the ways that the rich countries keep poor countries poor is by closing off agricultural and other markets to them. So access to the EU market, access to American market is hard for poor countries, but actually as poor countries can grow, they can become markets for each other.
And so countries in sub-Saharan Africa and Latin America can reduce trade barriers and sign trade treaties. And there could be some growth out of that. Similarly, developments like for example, this is a bit parochial, but Brexit in the United Kingdom, that’s widely interpreted as a movement away from globalization and movement away from trade. And it was in many respects, but actually, there have been possibilities for the UK to sign trade deals with countries like India. And so those are also possibilities. So you have to grab the possibilities there are, even though they’re not necessarily the best ones available. So the Trans Pacific Partnership is another good example of something where you could build up trade relationships and trade ties. So I’m not totally gloom and doom, but I think you don’t want to shut off international markets whatsoever. And I agree with Jared. I mean, migration is a whole other topic. I can’t say everything I think about migration in one topic, but I think certainly in a margin you could get H-1B visas and more green cards would benefit the world in general. Yeah.
SEAN SPEER: My final question is, if you could correct one misperception about economic growth, what would it be?
JARED RUBIN: Okay. I’ll start with this. I think it was one of the first things Mark said, which is that there’s a trade-off between economic growth. And frankly, there’s a lot of things you could say after that. I think a big one is inequality, for instance. I think another one is environmental degradation. So taking the latter one first, while it is certainly true that industrialization and its aftermath has been responsible for a good fraction of the environmental degradation that’s happened in the last couple hundred years. But I also think there’s plenty of reason to think that continued economic growth and particularly continued technological change is the most likely solution to changing the environment. In fact, from what we just saw last week, there’s a possibility of cold fusion. So to the extent that that could then become something that would be fundamentally transformative, both economically and environmentally. The same is true of inequality. Again, something I hit on earlier is that for me, I do wish more people would think about this when we talk about inequality, is that, yes, within country inequality is important.
And I do care deeply about the people that live around me. Both. I live in California and across the United States, but when we think about where the real inequality is, it’s around the world. We have to consider where the poorest people in the United States, for instance, are still in the top 10 percent of the world’s distribution of income and wealth, typically. They’re certainly, at least in terms of income. And that just means different things for the way we think about different types of policies. Even the stuff we were just talking about with immigration, the types of ways we view economic growth, I think in particular. I think that there’s a view out there, especially in the richer world, that we have the riches we need. Now, let’s pull the ladder up behind us. And I think that when taken from a global view is just very, very wrong, in my opinion.
MARK KOYAMA: I agree 100 percent with Jared on this one. So I have another one which is that the World Bank talks about pro-growth and pro-poor growth. And if you read an article, not just in a left-leaning newspaper like the Guardian, but even in the Economist, about economic growth in some middle-income countries, somewhere like Brazil or China, they might talk about this tremendous growth and how it’s been beneficial, but then it’ll note that it’s also increased inequality. It’s also made the rich richer. As if the alternative is a controlled growth process, which makes the poorest people rich first, right? So I’m a pro-growth egalitarian. If you applied those standards to British Industrial Revolution or to America during the late 19th century when America was the fastest growing economy in the world, you’re like, “Hang on, this growth is not good because it’s making rich richer.”
In some sense, it’s telling off these countries because they’re not doing it right, as if the West did it in an even more egalitarian way. So in some sense, we have to accept that that’s the nature of economic growth. It will make some people be rich, and some of these people will be morally undeserving. They will be doing things we think of as frivolous or so on. That’s the nature of the process. And the reason why we think the process is important isn’t because it makes some YouTuber a billionaire, it’s because of the broader benefits it brings. But I feel that people often, always want there to be a trade-off. Which in some sense, my point is a subset of Jared’s point. They always want there to be a trade-off of economic growth.
And my view is in some sense, there’s no alternative to economic growth. So another related point is, Jason Hinkle, who’s an anthropologist, he’s written this piece in Nature called “Peace in Nature” and he calls for countries to stop focusing on economic growth as an outcome. They should do de-growth, and that’s going to be better for the environment, better for inequality, better for poverty, and so on. But in some sense, it’s a total misunderstanding of a process because countries don’t maximize economic growth. It’s not like a lever you control on a machine. It’s an outcome of basically people innovating, people doing real work, people coming together and trading, producing new goods, and investing. And it’s something that’s just very hard to control, and we only really understand that kind of ex-post. So that’s partly why I and Jared probably don’t have a huge amount of concrete things to say about technology right now because over time you see it, you don’t know how it’s going to pan out. You don’t know how transformative AI is going to be, but we’ll see it in 30 or 40 years.
SEAN SPEER: Well, this has been a fascinating conversation, and it’s a fascinating book, How the World Became Rich: The Historical Origins of Economic Growth. Mark Koyama and Jared Rubin, thank you so much for joining us at Hub Dialogues.
JARED RUBIN: Thank you, Sean.
MARK KOYAMA: Thanks, Sean. Thanks for having us on. It’s been great.
