Rich and Poor: Opportunities and Challenges in an Age of Disruption

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Avatar for Shienna
3 years ago

Before 1800, just about everybody was poor. You had royalty, you had these huge landowners, but they were a tiny, tiny minority and just about everyone lived in poverty. And everyone lived very much wedded to their land.  This was the entire history of humanity. There were some huge changes, of course: agriculture.  What happened was that mostly people were hunters and gatherers before agriculture. And then, when agriculture started, food production was then brought to people rather than vice versa.  People didn't go out looking for food. There were places where they knew that a steady supply of food would be created. 

But wealth was tied to land, and those who controlled land, controlled much of the world's wealth. And the difficulty was in shipping or moving anything: things, ideas, people. It was very difficult to move anything, so there wasn't very much trade. And so, the cost of moving things really mattered and shaped the way societies were formed. 

In the 17th century, only 3,000 European ships sailed to Asia. In the 18th century, for the next hundred years, about 6,000 ships sailed. It was very difficult to move anything. 

Now, around 1800-1820, some very important things happened. And the two most important ones that most historians will look at are the Industrial Revolution and steam power. So, around 1820, steam power allowed the movement of goods, and the movement of goods fueled industrialization, trade, and economic growth. 

But at that time, also was the start of--one of the great economists, Deirdre McCloskey, talked about right around that time, with the advent of the Industrial Revolution and steam, you had the beginning of what she called the great divergence, meaning that certain areas, especially Europe and the United States, grew rich very, very quickly.  

She talks about the founding--the formation of the so-called bourgeoisie. And the bourgeoisie were former peasants who were close enough to royalty that they wanted to live like that. And so, she sees the development of the bourgeoisie as a very important development because they were the precursors of the middle class. 

Now, in the two centuries from 1820 until now, what happened was that the availability of goods, of services just exploded.  It wasn't a little bit of change, it was just huge amounts of change, because before 1820, people were born and they died in pretty much the same world. The world, from the time they were born to the time they died did not change very much.  But starting in 1820, the world started changing very, very quickly. 

Two centuries ago, four out of five U.S. adults worked to grow food for their families.  Now, one farmer feeds 300 people. 

So, the reason I talk about this is because we have to put these things in perspective. We have to put the evolution of sort of human advancement--which is what we work on at the World Bank, development--we have to put it in the perspective of what happened. 

You know, Chinese President Xi Jinping talks about having thousands of years of a great success.  And truly, it was Asia and the Middle East that were the sources of much innovation before 1800. And then, he often says that the 200 years after 1800 were not so great for China, but of course China is growing very rapidly, now.

And again, before 1800, remember, just about everybody was poor. 

Now, this is what I see everywhere I go: Everywhere I go I see young people who may not own a smart phone, but who have access to smart phones. By 2025, many analysts are saying that the entire world will have access to broadband.  

Now, when you get access to broadband, when you can see things on the Internet, a couple of things happen. First of all, people are much more satisfied with their lives when they have Internet access.  When they have Internet access, they can see how the world works. They can watch movies, television shows. The satisfaction with life goes up.  

But the other thing that happens is their reference income goes up, and this is something that we actually study at the World Bank Group. The income to which they compare their own goes up. And when that happens, your income also has to go up or you're not very satisfied.  

Now, technology is going to do us a great service by getting everyone connected, but the other thing that technology is doing at the same time is it is going to eliminate some jobs. 

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