The coming end of 150 years of the USA as the largest economy

Note: GDP is log-transformed!

Most projections usually predict that China will be the largest economy by the year 2030. This got me thinking: when exactly did the USA surpass other nations? I knew it was in the 19th century, but I wasn’t sure exactly when.

GDP estimates are always somewhat dicey, and they were even more so in the past. But the above plot* is representative of what you can find online: the USA became #1 in the decade or so after the Civil War. What surprised me is that the nation it surpassed was China! Around 1880 the USA overtook China, and around 2030 China will overtake the USA. That’s 150 years of American singular economic dominance. Curiously, for a period India was #3, just as it will be in 2030 (though its GDP will be far lower than #2 USA by most estimates).

I am aware that on a per capita basis America will be the most affluent large society in the world for decades beyond the point when its economy is not the largest. My only observation is that we are living to see the end of a particular phase in world history.

One aspect of this that I wonder about is that it is a fact that to some extent in the late 19th and early 20th century America refused to take over the role of the world’s preeminent power from the United Kingdom long after it had become the most consequential economic force. To be frank, it was clear in the early 20th century that the UK was simply longer up to the task, and arguably a great deal of suffering might have been alleviated if the United States had stepped into its natural role earlier. Now I wouldn’t be surprised if the inverse occurred in the second quarter of the 21st century: the USA, like Britain, continues to play the role of hyperpower hegemon longer after it’s able to carry out that role credibly. I hope I’m wrong.

* Data from Barry Ritholtz’s blog.

Imperium did make the least of us richer

After reading the section on Rome in War! What Is It Good For?: Conflict and the Progress of Civilization from Primates to Robots, I realized I had changed my mind over the past 10 years on the issue of differences in wealth in the past. Following the treatment in A Farewell to Alms: A Brief Economic History of the World or Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History, I held to the position that before the pre-modern world, and back to the Paleolithic, the vast majority of people had been roughly at the same standard of living at the Malthusian limit.

Basically, a British peasant in 1500 was no more poor or rich than a Japanese peasant in 1500 who was no poorer than a Paleolithic hunter-gatherer who lived in 15,000 BC. The reason being that in the pre-modern world economic growth rates were so slow that population growth always caught up, and the populace was back to immiseration on the Malthusian margin. Yes, there were some differences of detail, but not worth mentioning.

In David Warsh’s Knowledge and the Wealth of Nations there is a great deal of emphasis on economic growth being driven by gains in productivity, which are driven by innovation. This is common sense. We all know that people are wealthier and healthier because of technological growth and development over the last few hundred years. But there’s another variable: the demographic transition. After all, modern middle-class Westerners could have huge families and spend all their discretionary income raising children. They don’t.

Malthus’ logic was actually right. He even understood that productivity gains and efficiency were going to occur. But the iron law of human reproductive fecundity seemed to be an inevitability…until it wasn’t. It is always important to move beyond logic. It seems clear that productivity gains in the pre-modern world were low…but there was variation in consumption and quality of life, even though it was nothing like what we see today.

Books like The Fate of Rome: Climate, Disease, and the End of an Empire and The Fall of Rome: And the End of Civilization have convinced me that the Roman Peace wasn’t simply a propaganda coup. That it wasn’t simply a great con by the elites to steal surplus wealth from the masses and channel it into public works which reflected their glorious and status and secured their immortality in the memory of future generations (though it was that!).

This doesn’t necessarily mean you’d rather be a Roman citizen or subject than a barbarian living beyond the frontiers. That depends on how much you value your life as opposed to your freedom. But whereas 10 years ago I would stay that the attraction of Romanitas was simply a function of elites attempting to capture the best extractive institutional mechanisms, I do think there was a “trickle down” in consumption goods through classical dynamics described in Adam Smith’s Wealth of Nations. Trade, specialization, and peace did bring dividends, both to the high and the low. On the margin being 25% wealthier on a low base may not seem like much to us, but it was probably a lot to them. How much do you value dishware?

The material over the ideological

I come not to praise or bury Max Weber. Rather, I come to commend where warranted, and dismiss where necessary.

The problem as I see it is that though a meticulous scholar, Max Weber is the father of erudite sophistry which passes as punditry. Though he was arguably a fox, his genealogy has given rise to many hedgehogs.

Weber is famous for his work on relating the Protestant ethic and capitalism (more precisely, Calvinism). In general I think Weber is less right than he is wrong on this issue. But the bigger problem is that Weber’s style of interpretative historical analysis also has spawned many inferior and positively muddled imitators, whether consciously or not.

To my mind the problems with Weber’s sweeping generalizations, interpretations, and inferences, are clearest on the topic of China. His assertions on the nature of the Chinese mind informed by Confucianism, and how it would relate to (and hinder) modern economic development are very hit or miss.

By the end of the 20th century things had changed in terms of the perception of how Confucianism might relate to capitalism. In the 1990s Paul Krugman famously argued that the East Asian economic miracle did not have to do with a particular model or cultural genius, but simply increases in capital investment and labor force participation (factor inputs). This was too stylized a fact. Though growth has slowed, I think it is undeniable that East Asian economic modernity is here to stay.

And some of that may be attributable to Confucianism in a distant causal sense, because the cultural sensibility does encourage the development of broad-based literacy through self-cultivation. In Strange Parallels Victor Lieberman notes the contrast between Vietnam, with its more Sinic cultural orientation, and the rest of Southeast Asia, with their Indic Theravada Buddhist cultures.

The Vietnamese elites’ orientation toward Confucianism meant that there was stratification in society, as there were constant upward and downward movements across class. The chasm between the Confucian literati and the peasantry was large. In contrast in Cambodia popular religion was relatively unifying due to its accessibility. But it is notable to me that Vietnam in particular is often perceived by those who travel in Southeast Asia to be an industrious and striving nation.

So yes, culture may matter. But simple economic forces, and material conditions, are incredibly important, and our understanding of their origins are more mysterious than we’d like to think.

This is on my mind because of the recent evidence of the power of the slave trade in the Islamic world. Islam gets a bad rap in relation to slavery. This is justified, as Muslim nations have been, and are, the most prominent perpetuators of institutional chattel slavery* in the modern and near-modern world. But it is also correct that in many ways de jure Islamic law gave slaves a degree of dignity and human rights which would not have been called for in Classical antiquity. Though the reality is slaves were often part of the Roman familia in many cases, ultimately they were still human tools, to be abused and disposed as one would domestic animals.

But the genetic data seem clear that African slavery increased greatly during the Islamic period, resulting in a much more human agony, as so many of the slaves died en route (males who were to be eunuchs had a high mortality rate as they had to be castrated before entering Muslim lands). This had nothing to do with the cruelty of Islam per se, but the overall development and advancement of the Eurasian oikoumene, and the role of African slave labor in its post 1000 A.D. economy.

In fact one might argue that the unity of the Islamic world, and its relatively uniform legal and cultural superstructure after the collapse of its political unity, was a factor in fostering the rise of the global slave trade. That is, Islam generated asabiya, social solidarity, within the group, but this ultimately was to the detriment of those who were outside of the group.

A similar story can be told about the New World slave trade. It flourished in the wake of the Reformation and the Renaissance, and just as European society was undergoing a cultural revolution which would usher in modernity. If one looked at the nature of European society in the 17th century, and its increasing moralism, and focus on personal piety, probity, and humanity, would we predict the expansion and scaling up of the European slave trade? No.

That dynamic was driven by economics (in the American case, the triangle trade).

Similarly, the mortality rates of slaves varied greatly by locale and the what they cultivated. The sugar islands were death traps. The rice farmers of coastal South Carolina lived relatively stable lives, even comparable to serfs. Those who grew tobacco were somewhere in the middle. All were under English jurisdiction. The mortality of Brazilian slaves was high, but nominally Roman Catholic jurisdictions were subject to more humanitarian codes. But the primary determinants of mortality, of humanity, were economic. Material, even if ideological variables had an impact on the margin (Rodney Stark has argued that the French legal system was more humanitarian in Louisiana, and one can see this in various vital statistics).

Obviously ideological and material forces interact and influence each other. My point here is to observe that too often public commentary gets caught up on the idea of the great idea driving history. But once we have some distance it is often obvious that on the proximate scale many of the patterns we see are constrained, driven, and conditioned, on material forces and parameters.

And yet ultimately those material forces through gains in productivity relax tight the pressures which constrain ideologically driven change and revolution. Slavery for example was long considered an institution that would always be with us in some form, but over the past few thousand years most societies have frowned upon it. Slave societies, whether ancient Roman or in the antebellum South, develop an unhealthy paranoia. With modern technologically driven economic growth the possibility of a post-slave economy seemed plausible, and opened the window for a practical abolition.

And here we are!

* I said “institutional chattel slavery” specifically to head off annoying nit-picking comments. Please don’t.