Matthew's Reviews > Power and Plenty: Trade, War, and the World Economy in the Second Millennium

Power and Plenty by Ronald Findlay
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's review
Dec 30, 10

bookshelves: business-history, economics, history
Read from December 15 to 30, 2010

A real gem of a book. Power and Plenty is organised as a history, rather than on a thematic basis, despite the name. If there is one recurring theme it is that military and economic power go together -- but the authors argue this in a nuanced and non-obvious way, and do not bang on this theme incessantly, rather, it is simply a resonant truth that emerges time and again as they go through world economic history in a chronological and geographic order. The book separates the last millenium into chunks of time, describes the major developments of that time period, elucidates the questions that economists and historians have raised with respect to that period (such as, why Britain and why Europe, that led the Industrial Revolution, and not Asia), then walks through trade flows across different regions, answering the major questions posed along the way. In this sense it is not a Big History type of book, but more like an chronological encyclopedia.

The first third reads more swiftly in terms of pages spent per century -- due to lack of data and scholarship -- but is really quite fascinating from the point of view of historical anecdote. The second third is weightier, with far more quotation of data and academic theory -- but for anyone with intermediate economics training this portion is actually fascinating: the authors reinstate my faith in orthodox economics in placing the theories in historical context and showing how they are adequate to explaining many historical questions behind, for e.g. the Industrial Revolution. In journalistic fashion, there is plenty of clever use of statistical data to back up arguments, and when combined with explanation of how the data is consistent with the predictions of a economic model, these make some of the best parts.

Truly the book reads like a History -- I reiterate this because the tone is extremely balanced, the authors seem highly sensitive to ideology driven historical interpretation, including that of their home subject, economics; rather, they are interested in explaining events using, but not necessarily confined to, an economist's point-of-view, and indeed come up with conclusions that surprised me. I wish I'd read this as an undergrad, and it reinforces again how much I think the typical undergrad economics curriculum is lacking -- too much static theory, insufficient emphasis on contextualising the actual history in which these theories were born, and on tracing the evolution of economic thought over the last 2 centuries, from Adam Smith up to and including modern finance.

I shall just summarise one portion that fascinated me: the question of why the Industrial Revolution in Britain enabled it to escape the Malthusian trap that constrained real GDP per capital growth. Prior to the IR, technological innovations led to a one-time burst in productivity and overall income, but then population growth meant that eventually, GDP per capita fell back to original levels. What really marked out the IR was the sustained growth in GDP per capita for the entire 19th century and beyond. On p339, P&P lays out the authors' thoughts on why this was so -- and why international trade was critical to enabling this: First, trade meant that Britain could access large international markets, both to sell its hugely increased manufacturing output, as well as to purchase large amounts of raw materials -- without this elasticity of demand and supply due to world markets, the income accruing to technical innovation would have been much lower, and the cost of supplies much higher, preventing production and growth. The latter (elasticity of supply of raw materials) links to the humanitarian question of whether English prosperity was entirely off the backs of African slave labor -- the authors argue that it was the large amounts of (practically free) land in the Americas, worked by the large amounts of (practically free) labor from Africa, that supplied much of England's raw materials in the 19th century.

This raises the question of whether, since the escape from Malthus in the 19thC was due to highly elastic supply of previously unutilised land and labor, whether the world has now fully exploited those supplies and will once more run into resource constraints. Anti-Malthusians tend to cite technical progress, but if I read the argument correctly, technical progress in human history prompted only one-off and cyclical improvements in GDP per capita, that were moderated thereafter by population growth. It was the large increase in accessible resources per capita that allowed for 19thC sustainable growth in GDP per capita. Will productivity gains in the 21stC be sufficient to sustain this? However, the resource constraints we are again running into are today balanced against moderating population growth due to falling birth rates and top heavy population pyramids -- the other half of developed country rises in GDP per capita, to which geographers have tended to pay more attention than economists. Still, given the population pressure in Asia, where growth is now expected to come from, and the already extensive environmental degradation here, I am skeptical that Malthus has been proven permanently wrong.

A final note: I helped out on this book as a research assistant to Ronald Findlay, during my undergrad years at Columbia, so it is doubly fascinating for me to read this -- not because I contributed in any more than a trivial way (I helped him navigate the library system, basically), but because I can only now imagine how all this was running through his mind back then, and also because I can see his personality in the book. You wouldn't tell by his name but Findlay is actually from Burma, and the work shows great deal of racial sensitivity -- Power and Plenty gives plenty of credit to the Oriental Islamic and Chinese empires of the early 800-1200 AD period, for e.g. He also proves is sensitive to income inequality and migrant tensions; indeed, one excellent insight was the observation that globalisation prior to the 19th century involved trade of otherwise unavailable goods, while trade especially in the 21st century was of manufactured commodities that leads to tension from threatened producers/workers in the recipient country. Finally, on tone and aesthetics: He enjoys watching historical TV dramas, and that shows in the writing as well -- sensitive to the structural themes that drive history, but without denying the influence of heroic individuals.
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