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Slouching Towards Utopia?: The Economic History of the Twentieth Century
-III. The Meaning of Economic Growth-
J. Bradford DeLong
University of California at Berkeley and NBER
January 1997; DRAFT 1.00
Population Growth:
The tremendous increases in material wealth and living standards in the twentieth century have been accompanied by a three-fold multiplication in the human population of the world as well-the fastest rate of increase in human population ever, or at least since the invention of fire, and an increase that has carried the human population of the world to levels that far outstrip those of previous centuries: today there are, we think, more than six billion people alive on this earth.
Demographers guess that on the eve of the invention of agriculture--say, sometime around 10,000 B.C.--the hunting and gathering human population of the world was about five million. From then up until roughly the year one populations grew relatively swiftly, as civilizations based on agriculture and herding spread throughout the world as different groups learned the techniques of farming and livestock management from their neighbors. By the year one perhaps 250 million people lived on the earth.
Human Population
Date
Population (Millions)
Growth (Percent Per Year)
10000 B.C. 6
0.008% 1 252
0.037% 1000 253
0.000% 1500 461
0.120% 1750 771
0.206% 1900 1,634
0.501% 1950 2,530
0.874% 1990 5,292
1.845% Thereafter populations grew more slowly. Arable land that could be used to grow crops using the technologies of the time was mostly occupied. When population expanded, it would run into sociological or biological limits: more people scratching a living from the same plot of land would reduce nutrition, and deprive some women of the chance of conceiving; a lack of open farmsteads would keep young adults single and in their parents' households for an extended time, rather than forming households and having children of their own. Slow improvements in technology and investments in land-clearing would raise the pool of available natural resources to a population, fertility would rise, and population would grow-until once again the population would begin to press against the sociological or biological limits given available technology, fertility would fall, and the episode of growth would come to an end. Between the year one and the year 1700 demographers guess that the population of the world grew from roughly 250 milion to roughly 700 million.
After 1700 population growth began to accelerate. Some argue that it was due to improving climates: both Europe and China appear to see substantial population growth in the eighteenth century, and China certainly did not benefit from the waves of technological innovation and improvement that were beginning to sweep over Europe. Others argue that the quadruple congruence of printing, religious doctrines generating higher literacy, technological innovation driven by constant wars between European nationa-states, and expanded trade greatly multiplied Europe's command over its environment and banished the Malthusian forces that had previously swung into action to check population growth.
The eighteenth century appears to have seen human populations grow by perhaps fifty percent worldwide. The nineteenth century saw human population grow by some eighty percent. And--as modern technologies have diffused throughout the world--in the twentieth century human populations have tripled.
Before the twentieth century, the fastest-growing populations on the globe were almost invariably the richest populations on the globe. In the twentieth century things have been different: population growth in the richest countries has slowed down markedly. People are living longer than ever before, but also fewer children are being born, per couple of childbearing age, than ever before. This slowdown in fertility-based population growth to near-stasis in the world's richest countries is the second stage in what is called the demographic transition. Thus the population of Europe has grown relatively slowly in the twentieth century--and are growing even more slowly today--even though it was the richest continent in this century.
The demographic transition has two components, and is driven by rising income and wealth and the sociological changes that rising income and wealth set in motion. The first stage is one of greatly accelerated growth: a richer population has better nutrition, sees more opportunities, and receives better medical care. Thus both the biological and sociological checks to rapid population growth vanish. And population growth accelerates: life expectancy rises and more children are born.
Life Expectancy in the Demographic Transition
Country\Year 1750 1800 1850 1880 1900 1930 1950 1990 England 36.9 37.3 40 43.3 48.2 60.8 69.2 74.5 France 27.9 33.9 39.8 42.1 47.4 56.7 66.5 76.1 Italy 35.4 42.8 54.9 65.5 75.9 Japan 35.1 37.7 45.9 59.1 78.5 The second stage comes when children cease to be a short-term addition to the economic resources of a household and become a short-term use of economic resources: when-at least from the standpoint of five or ten years-having more children is no longer "investment" (in the number of people who will soon be able to help with odd jobs or the harvest, or the number of people who will be able to keep the household's textile spinning and weaving moving smoothly), but is instead more like "consumption". In relatively rich, urban populations most children are in school, and there is little that a pre-adolescent can do that would significantly increase household income in any case.
Characteristics of the Demographic Transition
Italy 1880 Italy 1980 Births per 1000 36.5 11.4 Deaths per 1000 28.7 9.6 Life Expectancy 35.4 74.4 Maternal Age at First Marriage 24.1 24 Maternal Age at Final Birth 39 30 Percent of Population 0-14 32.20% 21.40% Percent of Population 15-64 62.70% 65.30% Percent of Population 65+ 5.10% 13.30% Thus mothers and fathers put more energy into sharply limiting the number of children in their households, and more energy into improving the quality of life and education for the children that they do have. Throughout the world, as countries have industrialized and urbanized, the pattern of rapid initial population growth followed by a sharp reduction in fertility and in the rate of population growth has repeated itself.
The first nation to go through the demographic transition was France. Today developing economies, like Mexico and China, are undergoing the same process. Population grows extremely rapidly during the transition--the historical range is from a less-than-doubling for France to an apparent seven-fold multiple of population in Mexico's transition. But the period of rapid population growth has, in almost all cases to date, come to an end usually less than a century after the beginning of the steep fall in the death rate that marks the start of the transition.
Timing of the Demographic Transition for Selected Nations
Country Beginning End Duration Transition Multiplier Sweden 1810 1960 150 3.83 Germany 1875 1965 90 2.11 Italy 1875 1965 90 2.26 Russia 1895 1965 70 2.05 France 1785 1970 185 1.62 China 1930 2000? 70? 2.46 Taiwan 1920 1990 70 4.35 Mexico 1920 2000? 80? 7.02 Indeed. the demographic transition has progressed sufficiently far that the world appears to be past the time of maximum percentage population growth. In the late 1960s, the world population was growing at some 2.1 percent per year. Today it is growing somewhat more slowly, at some 1.7 percent per year.
But how fast the rate of population growth will decline in the future, and what the trend of global population will be--that is anyone's guess. Some observers are predicting that the human species will run up against its natural resource constraints in short order, and begin seeing a return to a time in which widespead famine and disease check human populations and are a normal part of human experience. Indeed, some observers have been predicting the beginnings of widespread death from famine for thirty years. According to Paul Ehrlich's popularization The Population Bomb, the first major famines were supposed to hit the developing world in the 1970s.
Yet so far nutritional levels around the globe keep rising, food supply has more than kept pace with population growth. There is no sign yet of a return of human populations to any "Malthusian" regime.
Whether declining rates of population growth will be the result of human choices in the presence of relative material abundance, or the result of a "Malthusian" apocalypse of war, famine, disease, and death is not clear. However there is every reason to hope for the first.
Causes of Growth: the Importance of the MarketWhy has the twentieth century been so different from all previous centuries in the pace of its economic growth?
One answer is that the twentieth century has been blessed with market economies. Market economies have many powerful advantage over other ways of organizing economic activity--whether by redistribution within extended kin groups, reciprocal exchanges of goods for goods among people who know each other well, or large-scale government- or temple-mediated redistribution and storage. Market economies give manufacturers and traders every incentive to use resources most efficiently. They have the additional advantage of providing a "sunset" for relatively inefficient organizations: enterprises that are relatively inefficient cannot pay their bills, and vanish. This automatic weeding-out of inefficient organizations that fail the test of the market is so lacking where state enterprises draw on the general taxation or money-printing power of the state.
How important has the fact that most economic life has been governed by the market in the twentieth century been? We are lucky to be able to take a look at what production, distribution, and economic growth in the twentieth century would have been like in the absence of the market system by looking across what used to be the iron curtain, at how economic growth proceeded under the central planning system in the Soviet Union that Columbia economist Richard Ericson calls the "classical Soviet-type economy."
In the Soviet Union the production and distribution of commodities was determined by vast bureaucracies. A complex structure of overlapping administrative hierarchies that gathered information, coordinated interactions, disseminated instructions, and moniored performance. The heads of the Communist Party stood at the top of the system, drawing information from and sending information to more than twenty ministerial committees, with such names as Gosplan (responsible for planning), Gossnab (materials supply), Gostroi (responsible for construction), and Goskontrud (responsible for labor relations). These ministerial committess in turn issued directives to and gathered information from more than fifty branch ministries composed of several hundred departments. At the base of the bureaucratic pyramid were the enterprises: 46,000 industrial enterprises, 50,000 state and collective farms; 47,000 construction enterprises, and 1,000,000 wholesale and retail trade enterprises.
Planning began with directives from on high, that Gosplan used to produce numerical targets and priorities, and that were specified in increasing detail down the administrative hierarchy until they became specific targets for enterprises: your factory will produce five million ball bearings next year. Enterprises respond to these assignments by requesting machines, buildings, raw materials, workers, and other resources. Central authorities strive for maximal performance with threats of punishment and demotion, while subordinates plead their inability to perform their assigned tasks. The outcome is a comprehensive set of commands to all ministries that--in the eyes of the top, at least--involves a rough, tolerable balance between supplies and demands. Typically the result demands from each organization is a small percentage increase in what it is doing.
When it becomes impossible to do what was commanded because the plan is inconsistent or impossible, subordinates make critical choices on the spot in which they have every incentive to appear to fulfill the plan: a producer of ball-bearings will find itself driven to produce that assortment of bearing sizes and qualities which it can accomplish--whether or not fulfilling planned categories and numbers has any relation to social demand or to the needs of users. Thus tractor components are produced that do not fit with other components; buildings are built without the utility connections to make them habitable. Attempts by cenral planners to bring enterprise production into closer conformity with social needs tend, in Ericson's words, to "generate additional inconsistencies, as they are ill-informed, taken under time pressure, and themselves channeled and compartmentalized by the hierarchy."
In Ericson's view, the resulting system lacked flexibility--no one has or can gain authority to solve problems--and lacked incentives: every incentive is to meet the plans and desires of superiors, and not to achieve beneficial economic consequences.
It functioned in certain, limited circumstances. When the task was to accomplish something where even the highest political authorities could see whether it had been accomplished or not, the system functioned: when the task was to build a subway for Moscow or a dam at Dnepropetrovsk, and when the party was willing to shoot people from chief engineers on down if the task was not accomplished, then Moscow got a subway and Dnepropetrovsk got a dam; when the task was to replicate something that existed elsewhere in the world, it could be replicated (although at enormously greater cost); when the consumers of an industry ran it, and had a blank check to use whatever methods and resources they wished to achieve the production of what they desired, then it could indeed be produced. The Soviet armed forces, with first claim on national resources and with the ability to send defaulters to Siberia or worse, got not state-of-the-art but functional equipment produced by the Soviet military production complex.
But elsewhere? The Soviet Union singularly failed to produce quality consumer goods, or a varied crop of foodstuffs, or habitable apartments. As Richard Ericson assessed the harvest of seventy years of Soviet rule, it left the Communists' successors with:
over sixty years where building physical capital and institutions has been largely an arbitrary, willful political act, independent of economic considerations. The result is a capital stock that is massively obsolete, abuse and destrution of the resource base, and an environmental poisoning unmatched in history. Most Soviet steel output uses a technology all but abandoned by the rest of the world. The bulk of investment goes to the backlog of unfinished, and never to be finished, construction. New industrial facilities that take less than two years to build in the rest of the world remain under construction for over fifteen years. Vast amounts of expensive imported equipment rusts at ports, rail sidings, and construction sites. Large oil reserves have been rendered inaccessible by use of technologies allowing rapid and easy meeting of quotas. The entire Aral Sea area of central sia has been poisoned, the sea itself reduced to a salinated cesspool and the agriculture around it ruined by excessive use of chemicals, all in pursuit of the plan.
How does a market system do a better job? First, it imposes a reality check on every organization--an organization that is relatively inefficient at producing will find its customers going elsewhere, and its revenues falling. It will soon go bankrupt and vanish. This "sunset" concentrates the minds of bosses and managers on figuring out how to produce more goods, more efficently. Second, it imposes a reality check on every line of business because products that are unsatisfactory to customers do not sell: there is no such thing in a market economy as "overfulfilling" your plan targets by producing something that is useless to all of your customers. Third, the market possesses enormous flexibility: organizations and individuals can change their production patterns any time they choose, without seeking approval at all levels up to and including the highest levels of the national government.
Comparisons of the Soviet Union's economy, and of the economies of the other Communist regimes of Eastern Europe, with Western European patterns suggest that adoption of the market economy has the capacity to multiply economic prosperity by a factor of two to five.
Indeed, previous episodes of mercantile capitalism--like Classical Athens around 400 B.C., Sung dynasty China around 1000 A.D., Mediterranean Islam circa 1000, northern Italy around 1500, or Augustan Britain around 1750--have been relatively bright spots in human history. They have been richer than their neighbors, and they have seen wealth and enterprise spread and increase. But until this century no episode of "capitalism", no market economy has generated anything like the explosion of wealth seen in this century.
So two additional factors have been very necessary to the economic miracle of the twentieth century: first, political democracy; second, technological density.
Causes of Growth: Political DemocracyBefore our century, a productive mercantile economy was a goose that laid golden eggs. But from a historical perspective, a golden goose is a short-lived beast. The ruling prince was always subject to the temptation to squeeze the goose a little tighter, either to pay for a slightly greater degree of courtly splendor or to pay for a slightly higher military effort on whatever was the current active conquest frontier.
In fact, history is littered with the corpses of golden geese.
One of the oldest themes in economics is the incompatibility of despotism and development. Economies in which security of property is lacking--because of either the possibility of arrest, ruin, or execution at the command of the ruling prince, or the possibility of ruinous taxation--experiencee relative stagnation. By contrast, economies in which property is secure--either because of strong constitutional restrictions on the government's power, or because the ruling class is itself a mercantile, property-owning, entrepreneurial class--should prosper and grow. Even in the eighteenth century, both Adam Smith and Montesquieu remarked on the correlation between constitutional republican rule and economic growth, and between despotism and economic decline.
And a transition from a mercantile republican to a despotic or a dictatorial regime usually meant that the best days of the local economy were past--that economic decline was on the way as higher and higher taxes and greater and greater exactions to achieve whatever were the current goals of the rulers disrupted the mercantile economy.
Successful democracy changes the calculus. Once people have gotten it into their heads that legitimate governmental authority comes not because God has anointed the king or through inheritance, it becomes hard to maintain a government that does not have popular support. At the very least, regular plebiscites are necessary to demonstrate that the current bunch of thugs-with-guns holds power by the will of the people. If not, then other bunches of thugs-with-guns will be tempted to stage coups, or the government will fall because mass discontent and demonstrations undermines the loyalty of the army: think of the fall of the Shah of Iran in 1979, of President Ferdinand Marcos of the Philippines in 1986, of the Argentine junta that attempted to imprison Juan Peron in 1945, or of Erich Honeker's Communist regime in East Germany in 1989. In the later stages of the twentieth century, especially, governments may not be elected by the people but they can be overthrown by popular discontent.
Hence courtly splendor and an overmighty military budget become of less interest and less urgency to rulers--even to non-democratic rulers. Keeping real wages rising, employment high, and profits growing becomes the principal aim of governments. For political parties that are either unlucky to catch an unfavorable wave of the business cycle or unskillful enough to disrupt economic growth are likely to vanish rapidly. Economic growth becomes an aim of government policy in itself, rather than a way station on the way to a larger military budget.
This is not to say that governments know how to achieve economic prosperity. It is possible to question whether the net impact of government attempts to boost output and employment in this century has been positive. But before the coming of modern democracy, government policy had a substantial bias against economic growth.
Some--mostly apologists for Lee Kuan Yew of Singapore, or for other semi-authoritarian semi- or un-elected East Asian rulers of rapidly-growing economies--argue that democracies are subject to "indiscipline": civil disorder, or cycles of tax-your-enemies and reward-your-political-friends. By contrast, they argue, a benevolent dictator has every inclination to take the long view, for his security of tenure and the power of his successors are closely linked to rapid economic growth.
But there is a problem with this argument. There is no such thing as a "secure" dictatorship, and no such thing as an authoritarian ruler who can afford to take the long view. There never was. Consider, as an example, the monarchy of England, the strongest in Europe for the five hundred years 1000-1500, and still strong up until the Glorious Revolution of 1688. Queen Elizabeth I Tudor executed her legal heir. King Richard I Plantagenet "Lion-Heart" found that his younger brother had bribed the Duke of Austria to imprison him. 18 out of 31 monarchs had something go seriously awry with the succession before or upon their death. Only one time in five did the English throne pass peacefully down to the legitimate second-generation heir of any monarch. Any one dictator can be "enlightened", and pro-development. The chance of a chain of such despotic rulers being benevolent is vey small indeed.
Bet on democracy as a co-requisite for successful economic development in the long run.
Causes of Growth: Technological DensityEven the conjunction of market economic organizations and political democracy is insufficient to account for the economic miracle of the twentieth century. Both of these factors are only tangentially related to the extraordinary explosion of technology--of scientific knowledge and its application to production in every day life--in this century. In order to achieve this centuries' revolutions in science and technology, we need "technological density" as well: research and development has to become an industry in itself, rather than an avocation of a few learned gentlemen reading papers before a Royal Society, to maintain the pace of invention and innovation that we now take for granted. Only the confluence of all three, market institutions, political democracy, and high technological density, could generate the economic revolutions of the twentieth century.
Hiero of Alexandria built the first steam engine roughly two thousand years ago. An enclosed sphere on a vertical pole with two openings, one on the right side and one on the left, each pointing counterclockwise. Put some water in the sphere and put the apparatus over a fire. The water boils, the steam escapes through the jets, and the sphere begins to spin clockwise.
A pleasant toy.
It would be more than seventeen hundred years before the steam engine would be used to substitute for human or animal musclepower to boost production. Much pre-industrial technology seems similar: ideas that contain the germ of powerful advances in human command over nature, but just the germ, and are never developed. There is technological progress in the ancient and the medieval world, but it takes place at a glacially slow pace. Medieval historians plot the hundreds of years that it takes the horse collar--so that the weight of whatever the horse is pulling rests on its shoulders, not its neck; thus the horse does not half-choke itself every time it tries to pull--to diffuse and become general across Europe. They plot the thousands of years that it takes the water wheel to become common, and the extraordinary lapses of time before simple improvements--like going from the "undershot" to the "overshot" wheel--are introduced.
And there are times of retrogression. Go to the Musee de Cluny in Paris and look at the crowns of the Visigoths. The Visigoths were a tribe of barbarians that conquered and ruled what is now Spain for more than two centuries at the end of the Roman Empire and before the Muslim invasion of Iberia. Their crowns show pathetically poor workmanship: the Visigoths in 600 A.D. could not find any goldsmiths in Spain capable of doing work even one-tenth as competent as was routinely done in the Iberian city of New Carthage--now Cartagena--800 years before.
Some of it was cultural. Archimedes is reputed to have refused to write a handbook of engineering; Henry Hodges reports that the reason given was that "the work of an engineer... was ignoble and vulgar."
We can track the very, very long run growth of human technology--from "One Million B.C.", in MIT economist Michael Kremer's phrase--by looking at the growth of human population density. For almost all of human history until the industrial revolution, human populations have been in Malthusian equilibrium: average living standards were close to subsistence, and improvements in technology led to increases in population that brought population to the level that could be supported at near-subsistence given the technological capability to use natural resources. If we look at the relationship between human population levels and population growth rates before the industrial revolution, it looks as though the higher the population the higher the growth rate: back when the human population was less than 100,000, population growth averaged less than one-tenth of a percent per year; by the time the human population reached a billion, population growth averaged half a percent per year. It is tempting to speculate that, back before the industrial revolution, higher populations meant higher growth rates because higher populations led to greater technological density and a faster rate of technical progress: the larger the population, the more people there are to hear about and improve on previous discoveries and to make new ones. Thus the faster technological capability grows.
Moreover, the rise in sea level at the end of the last ice age some fifteen thousand years ago cut the major continents off from one another as far as technological diffusion was concerned: Eurasia plus Africa, the Americas, Australia, and Tasmania formed four separate human cultural populations as far as technological progress was concerned for most of the past fifteen thousand years. Of these four regions Eurasia plus Africa had more than twice the land area of the Americas, Australia had about one tenth the non-desert land area of the Americas, and Tasmania had about one-thirtieth the non-desert land area of Australia.
Pre-Contact Populations and Population Densities by Continent
Continent
Non-Desert Area (Million Sq. Km.)
1500 Population (Million)
1500 Population Density
Eurasia plus Africa 75
400
5.33
Americas 34
20
0.58
Australia 4
0.24
0.06
Tasmania 0.1
0.003
0.03
In 1500, when improvements in ship construction and other factors restored cultural contact between continents, Eurasia plus Africa had some twelve times the population density of the Americas; the Americas had some five times the population density (on non-desert lands) of Australia; and Australia had some three times the population density of Tasmania. It is almost inevitable to attribute these differences in population density to differences in technology: much of metallurgy, the plough, the wheel, and the domestication of many large animals (rather than hunting them to extinction) were known in Eurasia plus Africa, but not in the Americas. And it is hard to see any cause for these divergences in technological development in a relatively small number of thousands of years other than technological density: the old world had more spaces for people and civilizations to live, hence more possibilities for good ideas to develop and then diffuse. The higher the population--and the more that different members and segments of the population can communicate with one another--the higher the technological density.
Technological density depends on more than just sheer numbers alone. We today have much more than the ten times the capability to invent and discover that the human race had five hundred years ago and that a simple count of human numbers would suggest. In broad historical perspective, there have been four upward leaps in technological density over the past ten thousand years that have greatly improved communication at any given level of population density: writing, printing, the development of the specialized vocabularies and procedures of modern science, and the long-distance telecommunications revolutions that make communication nearly instantaneous across the entire globe.
Information about what human life was like before the invention of writing is--not surprisingly--scarce. That it transformed humanity's capability to remember and thus to build technological knowledge there can be no doubt: as Sir Isaac Newton put it, "If I have seen further than other men, it is because I have stood on the shoulders of giants." And shoulder-standing is not possible without writing to make reliable communication across generations possible. We know of no "civilizations" without writing of some form.
Printing--in the sense of Johann Gutenburg and movable type--is only some five hundred years old in Europe, and only some twelve hundred years old in China. The impact of printing on China (little impact: used for the mass distribution of some Buddhist texts, but for little else) should caution us against any narrow belief in technological determinism. Sir Francis Bacon, for example, noted that the three inventions of gunpowder, the compass, and printing had utterly transformed Europe. Yet all three of these were known, indeed invented, in China. And they had not transformed China.
But in Europe the invention of printing had a profound effect on much of cultural, religious, and scientific development. Over the fifty years separating pre-Gutenberg times from the start of the sixteenth century, the cost of producing a book fell by a factor of several hundredfold: for the time and skilled labor that a monastic scribe would have taken to produce several manuscript copies of a work, a post-Gutenberg printer could (using a different kind of skilled labor) produce 1,000 copies.
After Gutenberg the purchase of a book was a more significant decision than today, when buying a book consumes the money earned in 15 or 30 minutes of work by the average established member of the literati. Technical progress in book production has contributed to further tenfold or so since the immediate post-Gutenberg age; offsetting this is the fact that the average established member of the literati ranked considerably higher in the income scale in the sixteenth century than today; the representative book purchaser in the sixteenth century spent the equivalent of an hour or two's wages on a book.
Contrast this with the month or more's worth spent on creating and purchasing a pre-Gutenberg manuscript--overhead for maintaining the library and the scriptorium, the time of the copyist (and the requirement that the copyist be highly literate lest he corrupt the manuscript), and distribution of what was truly a one-of-a-kind product.
What difference did it make that the cost of production of the "unit of information" that was a book went from weeks or months of skilled labor time to hours of skilled labor time? The historian Elizabeth Eisenstein makes a strong case for four very important consequences of this reduction in the cost of books:
The process of economic growth was perhaps unstoppable after Galileo, and probably unstoppable after Newton. The success of each previous generation's scientists and engineers enlarged the pool of those willing to work on science and technology in the next generation. The printing press made the diffusion of work and knowledge across Europe cheap, easy, and rapid. The second half of the seventeenth century saw the invention of the pendulum clock, the pocket watch, the microscope, the vacuum pump (without which the steam engine was impossible)--and champagne. The first half of the eighteenth century saw the invention of the flying shuttle (which doubled weaving productivity) and the Newcomen "atmospheric" steam engine. The second half of the eighteenth century saw the invenstion of Arkwright's automatic spinning machine, of the improved Watt "condenser" steam engine, the power loom, the cotton gin, the hot-air balloon, vaccination, and lithographic printing.
Thereafter the flow of inventions became a flood. European governments made it profitable to become inventors by adopting the patent system: the power to devise patent and copyright laws is one of the few powers explicitly granted congress by the U.S. constitution. The links between science and industry became close and tight with the invention of electric technologies and with the appliation of physics to engineering design. Thomas Edison was among the first to assemble a research laboratory: more than fifty mechanics and scientists in a facilty in Menlo Park, New Jersey.
We can approximately gauge the increasing technological capability of humanity before the industrial revolution by looking at non-mechanized sources of power. An "overshot" waterwheel (so called because the water shoots over the wheel and falls on the wheel from above; better than an "undershot" wheel which requires that the steam flow be neither too low nor too high) generates the power of perhaps two hundred humans (for humans get tired, while the waterwheel does not). Pictures of the Dutch countryside before the industrial revolution that are populated with windmills are not pictures of an idyllic pre-technological utopia; rather, they are pictures of one of the most technologically-advanced eocnomies of its day.
Pre-Industrial Sources of Power
Source
Horsepower
Man working a pump 0.04
Man working a crank 0.08
Man pushing a capstan 0.05
Horse in a circle at a walk 0.58
18-foot overshot waterwheel 5.0
Post windmill 8.0
Turret windmill 14.0
But the industrial revolution moved things a full order of magnitude forward. The energy at the disposal of the average Belgian industrial worker in 1910 was some ten times what his or her own muscles could have provided.
Power Used in Belgian Industry, ca. 1910
Industry
Horsepower per Worker
Metals 1.59
Ceramics 0.63
Food processing 1.91
Textiles 1.14
Apparel 0.07
Leather 0.43
Printing 0.36
Craftsmen 0.51
The first half of the twentieth century saw power at the service of the average manufacturing worker improve roughly fivefold as electricity replaced steam, and as capital accumulation muitplied the number and capability of machines. By 1953 the average American manufacturing worker had roughly three hundred times as much power at his or her disposal as did his or her colonial predecessor of two hundred years before. And simply counting horsepower understates the change, for the precision with which power and force can be used vastly exceeds what was possible in previous centuries as well, and there are many applications where the precise application is more important than the amount of force.
Sources of Mechanical Drive in American Manufacturing
Thousand Horsepower
Year Steam Engines
Steam Turbines
Internal Combustion Engines
Water Wheels and Turbines
Electric Motors
Total
Horsepower per Manufacturing Worker
1869 1216 0 0 1130 0 2346 1.04
1879 2186 0 0 1225 0 3411 1.10
1889 4581 0 9 1242 16 5848 1.25
1899 8022 0 120 1236 475 9853 1.57
1909 12026 90 592 1273 4582 18563 2.25
1919 11491 465 856 970 15612 29394 2.68
1929 6857 1112 722 623 33844 43158 3.90
1939 4216 1736 866 394 44827 52039 4.35
1948 86095 6.60
1953 105007 7.18
How long will this go on? There might have been a time when people might have thought that the industrial revolution would run its course: the industrial revolution of the eighteenth and nineteenth centuries was based on power (first steam, then electricity and gasoline), simple automation using power (looms and spinning machines), and metalworking. Perhaps at some point the pace of productivity improvement in these technologies would begin to slow. But power, simple automation, and metalworking were followed by industrial revolutions in chemicals and in artificial materials; in transportation; in communications; and then in microelectronics and information processing--not to mention the atomic bomb. So far there are no signs that invention and innovation have begun to run into increasing returns, and the technological density of the world continues to grow.
Consequences of Growth: Structural ChangeLooking at simple one-dimensional measures of growth hide extraordinary shifts in the relative quantities and the character of the goods consumed. Turn of the century urban households spent half or more of their money on food. Households today spend one fifth on food. Half of Americans were farmers in 1900. Only three percent are farmers today. As economic growth proceeds, agriculture shrinks and industry grows, until industry in its turn peaks at a little more than one-third of the economy and then itself begins a slow decline relative to services. The balance between agriculture and industry, between design and craftwork, between production and distribution, and-most important-between labor within and without the household all underwent profound shifts in the past century.
Employment Structure in Great Britain
Year Agriculture Industry Other Services Information-Intensive Services: Control, Entertainment, Education, Communication 1000 80% 12% 5% 3% 1500 67% 15% 12% 6% 1700 56% 22% 14% 8% 1820 40% 32% 18% 10% 1890 16% 44% 23% 17% 1990 2% 29% 35% 34% Before the industrial revolution, even during the industrial revolution, agriculture had always been more important than industry in the sense of making up a greater part of employment and of real national product. Representative urban families had always spent more than half of their incomes on food. The overwhelming majority of rural families had always raised their own food,plus if they were lucky enough surplus for the lord, the taxman, andperhaps a little to exchange in addition.
Farming was always hard work, especially in the pre-industrial Malthusian days when improvements in technology soon generated increases in population, and thus reductions in the amount of land each farmer could work. The Greek philosopher Aristotle of Stagira believed that farming dulled the brain--that the contemplation and education necessary for full human mental development would inevitably be beyond the reach of all but a small portion of the human race, because the destiny of most of the human race was to farm the land, and farming left no leisure for philosophy. Eighty to ninety percent of households in the world of Aristotle had to labor, and as far as he could see would always have to labor, full time to grow food for themselves and the rest of the population. This Aristotle saw as the law of nature. Aristotle also believed that the first prerequisite of philosophy was leisure--which required, in Classical Athens, property, wealth, and slaves.
All this changed in the twentieth century. By its end, instead of the 4:1 ratio of farmers to non-farmers of the middle ages or the 1:1 ratio in the later nineteenth century, the ratio was 1:30: one farm for every thirty non farm households.
What would Aristotle say if told that in the United States today not eighty percent, but three percent of households are farmers? What would he say if he went on to learn that a major political flashpoint is that these three percent grow too much food? What would he say to the observation that the United States today could maintain its entire population at the material standard of living of classical Athens without requiring more than 100 hours a year of work from each of its adult citizens? The number of families fed by the food grown by one farm family has gone from 1.2 in Aristotle's day to 2.5 in the late nineteenth century to 33 today. What had been the principal occupation of the human race for 10,000 years-agriculture-has become the occupation of only a small part of the late twentieth century population.
Within industry, the balance of work also underwent profound shifts. Even in 1900, most industrial production was handwork, craft production. Even the most mass-produced and machine-intensive commodities-textiles and weapons-still required considerable handwork and final filing and fitting to complete their production. In the late twentieth century, most industrial production was mass production: handwork by skilled, specially trained, long-time experienced workers was the exception rather than the rule. Skills entered the production process mostly at the design stage, and at the maintenance stage-not, except for luxury goods, at the stage of direct craft production.
The balance between production and distribution also changed. By the end of the twentieth century, the United States had more people employed selling cars than making cars. Assembly-line auto workers were a smaller part of the total automobile production and distribution workforce than the employees of the distribution channel.
The character of the service sector changed as well. Think of the service sector as being divided into two components: those who perform services directly (whether cutting hair, carrying goods from place to place, or extracting appendixes) and those whose service-sector work is largely directed toward creating and manipulating information: governors, tax accountants, scribes and recorders, teachers, messengers (and others who work in communications technology), and entertainers. Throughout most of human history the number of service-sector workers has been relatively small: trade and personal services are luxuries largely for the rich. And there is little information to be processed: how many bushels of wheat the serfs owe to Baron Fred. As the commercial revolution took hold, and as trade greatly expanded, the size of the distribution component of the service sector grew rapidly. Perhaps one in five workers in Britain in 1800 was serving as a butler, or a porter, or a waiter, or a carter.
More recently it has been the turn of the information-intensive services to grow. This is not to say that information-intensive service-sector jobs are high-paying high-skill jobs. In fact, the growth of the retail scanner in the past generation has completed a process begun with the invention of the original cash register that has turned "cashier" from a high-wage, high-skill, high-trust job into one of the lowest-skilled of entry-level jobs in the modern economy. Yet the job of cashier continues to be very information intensive: tracking what is bought, and how much money is paid for it.
And perhaps most important of all, the balance between work within and without the household also shifted profoundly. Reductions in infant mortality, the advancing average age of marriage, and the increasing costs of child raising together drove a decrease in fertility. The rate of population growth slowed drastically, from an approximate doubling each generation to a rate approximately consistent with zero long-run population growth in the advanced industrial economies. The number of babies per potential mother dropped by about two-thirds.
Along with the reduction in fertility came an expansion of household technology: microwaves, dishwashers, washing machines, dryers, vacuum cleaners, improved chemical cleansing products, and so on all made the tasks of keeping the household clean, ordered, and functioning much easier. Maintaining a nineteenth century, high-fertility household was a much more than fulltime job. Maintaining a twentieth century household was-except in peak periods surrounding birth and illness-a part time job. Large reserves of female labor that had, for most of the nineteenth century and before, been effectively tied to work within the household because of the backward state of household technology could now be used for other purposes.
It is presumably no accident that the reduction in the internal time demands of running a household came at the same time as the rise of modern feminism. It is presumably an accident that this reduction and rise of feminism came at a time when women's liberation could turn to its own account ideological and intellectual weapons that had already proven effective for two centuries. First, the Third Estate had used equality among adult males-the principle of "careers open to talents" to overthrow status-based distinctions between classes of nobles and classes of commoners. Second, ethnic and religious groups that were victims of discrimination had used the same principles-judgment not by the color of their skin but by the content of their character-to win a series of partial victories, and to end racism as a dominant public ideology in the industrial west.
Third, the same principles could be applied by feminists. Restrictions on female education, on female voting, and on female career choice could all be attacked using the same set of principles and ideals that had proven effective in the first two waves of equality. In response to the declining time demands of within household work and the expanding set of outside opportunities, female participation in the paid labor force surged. At the turn of the twentieth century, the principle was that (with the sizeable exceptions of female domestic servants and-principally unmarried-female factory operatives) the paid labor force consisted of men. At the end of the twentieth century, things were very different.
In the United States, the end of the twentieth century saw female levels of training and education rapidly approaching male levels, and poised to surpass them. Male wages and earnings still appeared higher than female wages and earnings by more than could be easily accounted for by differences in education, training, and degree of labor force attachment: there was still discrimination visible at the aggregate level. But the discrimination-driven wedges between male and female wages appeared to be closing-slowly-with every passing decade.
Consequences of Growth: Slouching Towards Utopia?I have spent nearly forty pages arguing that the most important thing about twentieth century economic history is its extraordinary surge in material prosperity, a surge so great as to remake the world in which the average human being lives, at least in the leading-edge nations that make up the industrial core of the world economy.
Yet turn to other forms of history, whether political, cultural, or social, and the enormous absolute and relative pace of twentieth century economic growth has much lower billing. It is seen out of the corners of their eyes, at the edge of their peripheral vision--if it is noted at all.
To some degree this is the result of an overnarrowness of focus forced by their specialization: a professional deformation. Cultural historians typically track eras by the styles of life lived by the upper classes. Political historians look at the distribution of power and influence at the top of the income distribution. Social historians spend more time looking at the relative gap between top and bottom than looking for significant shifts at the bottom. The rich today are very rich indeed, but they are rich in different things and in different ways than the rich of a century ago.
So a view of the century that concentrates on changing elite styles of life, on the use of political power and influence, or on the relative gap between rich and poor, will not see economic growth at the center of its picture.
This fuzziness of vision is reinforced by the fact that in some ways, today's rich are impoverished when compared to their predecessors a century ago. The formal marks of deference and service that they were accustomed to receive have in large part disappeared. The ability to boss one's many servants around has traditionally been the mark of belonging to the truly upper class, and this style of life is the one that has become rarest--because it has become much more expensive in relative terms-today.
The rich today live in smaller houses. They have fewer servants. They share modes of intercity and international transport with those who a century ago would not have been allowed on the boat or in the railroad car. The upper classes today are far richer than their predecessors of a century ago, if wealth is understood in terms of command over nature and over commodities. But the rich of today have less ability to command human beings. If what you value in wealth is domination--the command and control over the wills of others that wealth gives you--then the rich are poorer in spirit (although much more prosperous in body) than the rich of a century ago.
A small detail is revealing. Consider George Orwell, who after the end of World War II was to become famous as the author of Animal Farm and of 1984: anti-utopian novels about how the future might go horribly wrong--and had gone horribly wrong in the Soviet Union. But before World War II George Orwell was a socialist. His most famous pre-World War II books were Homage to Catalonia, an account of his experience fighting for the left in the Spanish Civil War, and The Road to Wigan Pier--an account of his travels among the unemployed and desperate of England during the Great Depression of the 1930's. Orwell wrote Wigan Pier as a call for fundamental reform at the least, and possibly for revolution. He sought to convince middle class citizens that they had interests in common with the working classes: interests in prosperity, in fairness, in the avoidance of unemployment, and in an egalitarian distribution of wealth.
One of Orwell's major points is that the system (which Orwell, writing during the Great Depression, argues is not working at all for the lower classes) is not working for the middle classes either. So Orwell tries to sketch the plight of the British "lower upper-middle class" in the years just after World War I. As Orwell tells it, this class-to which he belonged-was becoming relatively impoverished. They had lost the traditional marks of British upper-class status:
[Y]our gentility was almost purely theoretical.... Theoretically you knew all about servants and how to tip them, although in practice you had one or, at most, two resident servants. Theoretically you knew how to wear your clothes and how to order a dinner, although in practice you could never afford to go to a decent tailor or a decent restaurant....[I]n [this]...kind of shabby-genteel family... there is far more consciousness of poverty than in any working-class family above the level of the dole
From today's perspective, Orwell's vision seems nonsense. It divides the world into two groups: those with more than two live-in servants-those with a nanny, a cook, a butler, and perhaps more-and everyone else. A household with "one or, at most, two resident servants" has only a "shabby" gentility. It is, Orwell thinks, ripe for recruitment to the cause of socialism, for there is no real difference between them and the industrial working classes.
But how many upper-class American families have permanent live-in servants today? As Orwell counts, rich Americans today cannot claim to be "genteel"--and should presumably be socialist--even though they have levels of real wealth some thirty-fold greater than their counterparts of the past century.
The answer is that Orwell believes that the touchstone of being truly well off is to boss many people around in your private life: only if there are people always waiting on you. Note the marks of gentility: servants, multiple restaurant waiters, tailors. The upper and middle classes in England were indeed losing their ability to casually employ armies of resident servants in the first third of this century. But they were not losing this ability because they were becoming poorer. They were losing this power because those who would otherwise have become their servants were becoming richer. Real wages were rising, opportunities for employment outside domestic service appeared more attractive, and potential servants were demanding higher real wages to enter domestic service.
Moreover, technology was creating cheap and effective replacements for many forms of personal service. Scrubwomen have been replaced by dry cleaners and washing machines. Maids (for the rich) have been replaced by vacuum cleaners and dishwashers. Messengers have been replaced by telephones. Butlers have been replaced by answering machines. Automobiles have become more reliable, so that each car does not need to come with a full-time chauffeur cum mechanic. There is a story that one of the founders of Mercedes-Benz said that there would never be more than a million cars in the world, because there were no more than a million potential chauffeurs.
When you unpack what is really going on, it becomes very hard to think of it as a "plight" at all. It is hard to argue that any class of people in Britain really were impoverished by the replacement of scrubwomen by washing machines. There is thus a certain cognitive dissonance created by judgments of wealth, poverty, and gentility like those of Orwell. He implicitly defines wealth not as the power to get things done but as the power to make other people do them. The twentieth century has seen wealth defined as power over nature increase; but wealth defined as power over people cannot increase. It in fact declines over time as the economy grows because people become less hungry, and so less willing to be bossed around.
This raises an issue: is the purpose of wealth to get things accomplished--to get clothes clean--or is it to demonstrate one's power by bossing the scrubwomen around?
Economists have a strong professional bias--perhaps a professional deformation of our own-- to define it as the first. This is, at bottom, a moral stance: love of domination for domination's sake is not allowed to be an end and a source of utility. The aim must be to get clothes clean, not to show that you are master and she is servant. Your wealth and welfare are defined as the things you can do (or cause to get done) in absolute terms, not by how your pile of commodities stacks up when compared to somebody else's or how many other people you can boss around. You are not impoverished if someone else becomes better off.
The past century has in fact seen the wages of relatively unskilled workers rise at about the same pace as productivity as a whole. Any commodity or service--like restaurant meals, skilled hand-crafted carpentry, or tailoring--that is heavily labor intensive has become, compared to other commodities, more expensive. The rise in material standards of living has necessarily taken the form not of an increase in the ability to acquire commodities that require not predominantly the input of other people's time and skill, but of an increase in the ability to acquire commodities created primarily the application of technology and the use of machines.
The past century has seen households trade cash for leisure. The wholesale city price of raw foodstuffs today amounts to four percent of consumer expenditure. It amounted to 20 percent a century ago. Yet the share of food in household budgets has shrunk not by a factor of five but by a factor of two. The difference is that today much preparation is done outside the household: mixing, chopping, pre-cooking, combining, freeezing, and processing all make cooking a meal a much less time-consuming process today than it was a century ago. Our food bill today seems so large because we count a very large share of the meal production process as a market expenditure. A century ago, much of this process was hidden inside the household and was never registered through a market exchange. To a large extent, Americans today are like rich Edwardian Britons in that they do have cooks. But today the counterparts of the last century's domestic servant cooks work outside the household, for companies like Nabisco, using very capital- and machine-intensive production processes.
A counterpart of the rising price of labor-intensive services has been the falling prices of once luxurious and scarce goods, and the growth of the consumption of "cheap luxuries" on the part of the relatively poor. Once again, this disquiets Orwell: the system is taking advantage of the relatively poor by enabling them to consume commodities that they think are luxuries, but that in fact are no longer so. In Britain during the Depression many among the poor were deprived of steady employment, good housing, nourishing well-balanced diets, and their self-respect as productive and hard-working members of society. Yet there were no revolts and little protest, even though "whole sections of the working clasd...have been plundered of all they really need." Why not? Because they had been "compensatef...by cheap luxuries which mitigate the surface of life": fish and chips, artificial-silk stockings, tinned salmon, cut-price chocolates, movies, radio, tea.
Orwell is profoundly uneasy with these cheap modern "luxuries." His prose shows this uneasiness with words like "palliative," "mitigate," "surface." He is in the last analysis not pleased but upset by the fact that "the youth...for two pounds ten on [installments]...can buy himself a suit which... at a... distance looks... tailored on Saville Row. The girl can look like a fashion place at an even lower price.... [I]n your new clothes you can stand on the corner, indulging in a private daydream of yourself as Clark Gable or Greta Garbo." At some level Orwell believes that this expanded range of choice masks the reality of the situation--which is that the working class has gained little in terms of relative income, relative wealth, or relative power. It makes tolerable what should not be tolerated: that the upper class has too large a share of the pie.
This shows that Orwell does not have the habits of mind of an economist, to whom absolute levels of material prosperity are much more important than relative wealth distinctions. But Orwell may have been right. It may be a mistake to say that the twentieth century has given the shop-girl of this century the same standard of living as a duchess of the nineteenth century, if the key element of being a duchess is being exceptional. To the extent that goods are valued not for the services they provide by themselves but as indices of exclusivity, it is pointless to produce them for more people because then they become less exclusive and so less valuable.
The economist Paul Krugman, for example, is on Orwell's side: he would rather be middle-class in 1950 than working poor in 1990--even though the material standard of living of America's working poor in 1990 is higher than that of America's middle class in 1950. He:
know[s] quite a few academics who have nice hourses, two cars, and enviable working conditions, yet are disappointed and bitter because they have never received a [job] offer from Harvard and will probably not get a Nobel Prize. The live very well... but they judge themselves relative to their reference group, and so they feel deprived. And on the other hand, it is an open secret that the chief payoff from being really rich is, as Tom Wolfe once put it, the pleasure of "seeing 'em jump." Privilege is not merely a means to other ends, it is an end in itself.
It may be a big mistake to think that human happiness is necessarily and significantly increased by piling up larger and larger heaps of material goods. For today we have exceeded the technological capabilities of all previous utopias. Recall Edward Bellamy's Looking Backward, where the limit of human felicity is attained by the ability to dial one of four orchestras and listen to it over a speakerphone.
Yet America today does not see itself as possessing wealth vast beyond dreams. Americans today do still have dreams of avarice. And certainly do not believe that they live in anything like a Utopia. They by and large do not feel as though they have gone far beyond the limits of useful wealth into the realm of sybaritic luxury. And America has not been able to--or has not wished to--distribute this wealth in a way that makes everyone feel that he or she has "enough."
Thus we today do not see ourselves as living in, or even as rapidly approaching, Utopia. Yet dreamers in all previous centuries would have thought that Utopia could be built with much less power over nature and ability to produce material goods than a late twentieth century industrial nation in fact possesses.
I want to stress this contrast between how we regard our prosperity, and how our predecessors would have regarded us. Consider John Maynard Keynes, perhaps the greatest economist of the twentieth century. He was one of the few who did clearly see the power of economic growth in an essay he wrote at the beginning of the Great Depression: "Economic Possibilities for Our Grandchildren." Keynes, correctly, classified the then-current depression as a temporary interruption of a long-run tide of rising prosperity. But what did he see as the result of this rising tide? Keynes concluded that the Economic Problem, that is "the problem of want and poverty and the economic struggle between classes and nations," was in the last analysis "nothing but... a transitory and unnecessary muddle."
Keynes' argument had three steps. First, he--correctly and in fact somewhat pessimistically--expected "...the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is [in Britain] today." We in the United States only a little more than half a century after his writing have at least met and perhaps far surpassed this expectation. Second, Keynes saw human needs as "fall[ing] into two classes-those needs... absolute in...that we feel them whatever the situation of our fellow[s]... and those which are relative...that we feel... only if their satisfaction... makes us feel superior...." Third, he argued that although "needs of the second class... may indeed be insatiable... this is not so true of the absolute needs."
Keynes' conclusion was that "a point may soon be reached... when these [absolute] needs are satisfied, in the sense that we prefer to devote our further energies to non-economic purposes." In that case:
the day is not far off when the Economic Problem will take the back seat where it belongs, and that the arena of the heart and head will be occupied... by our real problems---the problems of life and of human relations, of creation and behavior and religion.
Then the desire to acquire for the sake of impressing our next door neighbors will fall as well:
When the accumulation of wealth is no longer of high social importance, there will be great changes in... morals.... We shall...rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years.... We shall...assess...the love of money as a possession--as distinguished from the love of money as a means to the enjoyments and realities of life--for what it is... one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain... however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then... discard.
There are many ways to see that Keynes is mistaken. First, note that much of what Keynes thought of as "necessities" in the mid-1930s would have struck, say, Agamemnon in 1400 B.C. as pointless and decadent luxuries.
More important, Keynes's predictions have not come to pass. He expected society to undergo a profound change as attention shifted from working hard to keep the wolf from the door to living a good life. But we today do not feel that material acquisition is about to go out of style, we do not appear to be on the threshold of converting en masse from full-time to half-time or quarter-time work, and we have not begun to rank and applaud people by how they spend their leisure as opposed to what they do at work. The dividing line between useful necessity and pointless luxury always comes at roughly twice one's current standard of living. After all, Americans could subsist--healthily--off of wheat flour, evaporated milk, cabbage, spinach, and navy beans for less than fifty cents a day. But, as George Stigler wrote:
such a diet would not be to the satisfaction of either the population or the students of nutrition.... Man insists upon luxuries such as meat, and should we somehow fully address his desire (despite his penchant for shifting from sow belly to pheasant), he will no doubt insist upon shifting to another and more expensive food.... [T]he economic system has as its purpose forcing people to find new scarcities... the alteration of a host of circumstances and policies that deprive large numbers of people of eminently desirable things that a more efficiently organized society could afford.
So there is no real reason to expect "satiation" at any level of per capita income that I can foresee. The level of luxury at which people imagine satiation is always three times the value of their current consumption.
It is significantly more pleasant to eat broiled sole at Chez Panisse than to munch on a tuna sandwich while sitting on the concrete wall by the North Gate to the Berkeley Campus. It is more fun to write on a powerful laptop PC, while sitting at a tile table in an air-conditioned cafe and drinking cappucino, than to write on a manual typewriter in a small, hot office while drinking a combination of dishwater and sludge made from instant coffee--or to write with bad ink on parchment by the light of a single candle.
We cannot approach utopia in terms of material welfare because we can always imagine how increased resources could give us a more comfortable and rewarding life. Or perhaps it is better to say that from the standpoint of every previous century we have surpassed utopia, but failed to stop and properly appreciate the accomplishment.
An equally important answer, of course, is that Utopia does not require merely command over nature. It requires command over self, and command over society as well. Command over self is a matter of psychology. But it means that material welfare is not standard of living. Public order and public safety, relative income, one's material consumption relative to one's parents, and so forth all make the standard of living or style of life more complicated than simply the consumption of material goods, of commodities and services. They make relative income as important, in some circumstances, as absolute prosperity. And it is as important to teach people how to choose the ends they want their lives to serve as to give them wealth--power--that can be used to achieve such ends.
The second answer is that we have not achieved utopia--in spite of immense material wealth--because we have approached it as a problem of engineering, and it is in fact a problem of psychology. This leads to a third answer: our collective failure to solve the problems of command over self means that the economy is not just as a means for the satisfaction of wants, but also serves as a social discipline mechanism: a device for compulsion and regulation of behavior through the granting and withdrawal of material rewards for appropriate and inappropriate behavior.
The institutions of the economy and polity never confine themselves just to the administration of things, but becomepart of the government of humans as well.
Yet to use the economy as a social discipline device to control behavior requires that those who do not behave appropriately do not benefit from the fruits of our collective prosperity. And economic forces can only be effective as mechanism of social control if the relative misery generated by the failure to behave appropriately is great: if the economy is to be used as a social discipline mechanism, then some must be disciplined--and live in poverty. This principle was restressed during the right-wing swing of the political pendulum in the 1980s: it was argued that the rich and skilled would not work their hardest and do their best unless they got to keep a very large share of what was produced produced, and that the poor would be idle and unproductive unless the consequences of unproductivity were truly dire--that disability insurance only encouraged more people to remain disabled, and that unemployment insurance only encouraged people to stay unemployed.
Thus the paradox; the carrot of lower taxes to the rich and the stick of a withdrawal of social insurance to the poor are, it is widely agreed, necessary to rev up the engine of rapid economic growth and development. The result is a society that is materially richer than any previously imagined utopia. Yet this society also falls far short of anyone's vision of a shining city on a hill. In the imagination of utopians, their cities on a hill did not have masses of itinerant beggars, or poor mothers working their fingers to the bone because of life-choices they had made in the distant past. Yet our civilization does.
There is a possibly apocryphal story about Lenin in exile in Switzerland. One day he was eating lunch in a hotel. Someone asked him how, after the revolution had been accomplished and the building of utopia had been completed, goods would be distributed. Lenin pointed to the sugar bowl in front of him. In middle class restaurants, he said, sugar and salt are not scarce; everyone takes what they need, and there is enough for all. So will it be for all commodities under socialism.
Now Lenin was not only one of the most brutal but also one of the most clueless political leaders of the twentieth century. He had no understanding of how to create a government that would nurture and protect individual liberty. He had no idea how to order society to create general prosperity. He did understand--to Russia's great misfortune--the institutions of political conspiracy.
But it is not only from Lenin's perspective alone, but from Edward Bellamy's and from John Maynard Keynes's perspective that our present society falls short of the utopia that they had imagined such great material wealth and technological capability would generate. From their perspective, our combination of enormous material wealth on the one hand with the use of economic forces as a social discipline device on the other would appear profoundly weird, and mark a degree of continued enslavement to "avarice, usury, and precaution" that they would have found incredible.
And the answer, of course, is that there is much, much more to be done if we are ever to finish slouching towards utopia.
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