Chapter 1

Why, When, and How Did the World Become Rich?

The world is rich. Certainly, some parts of the world are richer than others, and many millions still live in poverty. But the world is richer than it has ever been, and it continues to grow richer with each passing day.

Why, when, and how did the world become rich? And just how rich is the world? The figure at the top of this page gives us some indication. It shows all the countries in the world with greater real per capita GDP in 2020 than Great Britain in 1800. Note that a vast majority of the world's people live in countries that are richer than Britain was in 1800. Here's the catch: Britain was the world's wealthiest country in 1800! While we obviously have a long way to go, this is a massive achievement. And it mostly happened in the last two centuries.

It’s not just that there has been a reduction in absolute poverty as the world has grown wealthier. More and more of the world has moved further from the edge of subsistence in the last century. Take, for instance, the relatively arbitrary milestone of $10 per day in 2018 USD. This is hardly enough to make one "rich," but in most economies it is more than enough to afford the basics of life. The figure below shows when each country reached this milestone. It represents a level of security unknown throughout most of human history.

Year that per capita GDP exceeded $10 per day (2018 USD)

On the surface, the answer to the question "how did the world become rich?" is simple: the last two centuries have seen more economic growth than the rest of human history combined. We care about economic growth not because it is an end in itself, but because it is the key to alleviating the type of poverty experienced by almost everyone who lived prior to 1800 and that still plagues way too large of a share of the world’s population today.

Modern, sustained, economic growth has only happened in the last two centuries. Sure, there have been spurts of growth here and there in history classical Greece, the Roman Empire, the Middle East under Abbasid Rule, and Song China. But those spurts of growth were not sustained, and they were subject to reversals. It is only in the last two centuries that parts of the world have seen a takeoff. And, as the figure below shows, once the takeoff started, it continued unabated (even reversals such as the Great Depression were only temporary!).

Yearly per capita income for selected regions, 1 CE–present

The goal of this book is to bring together the many social scientific theories on the origins of modern, sustained economic growth. This is a big issue with important implications, and unsurprisingly it has been the focus of many great minds. Almost all of these theories focus on one aspect of the origins of growth, such as geography, culture, institutions, colonialism, or demography. The first half of the book classifies and surveys these major strands of literature.

Yet, most theories on the origins of economic growth are concerned with pushing one side of the debate. As a result, less attention has been given to how the various theories are connected. A phenomenon as important and widespread as the origin of modern economic growth is almost certainly not monocausal.

In the final chapters (7-10), we assess the relative strengths and weaknesses of the major arguments and lay out the ones we find the most convincing. One key insight is that many of the causal channels interact with each other: culture impinges on institutions, geography and demography affect both culture and institutions, a society's colonial past has a long legacy affecting several socio-economic outcomes, and so on. To build a complete account, our focus shifts to Britain, the home of the Industrial Revolution, and ultimately the first country to achieve modern, sustained economic growth. We ask, “What were the preconditions that made sustained economic growth possible in northwestern Europe?” We then address the flip-side of this question: “Why did sustained economic growth not first happen elsewhere?” Next we delve into the Industrial Revolution itself, as well as its connection to sustained economic growth. We explore what we find to be the most convincing explanations of its causes, linking these back to the broader sources of sustained, long-run economic growth.

This website is meant to give you a flavor of the arguments made in each chapter. Chapters 2 through 6 classify and summarize the five primary strands of literature related to the big question of "how the world became rich": geography, institutions, culture, demography, and colonization. Chapters 7-8 use these insights to assess which "preconditions" were present in northwestern Europe prior to its ascent, as well as understanding why industrialization occurred when and where it did. The final two chapters (9-10) take these arguments further, revealing why some parts of the world have become rich and others have not.

We invite you to take a tour of the book. Chapter summaries and teaching slides are available at the tabs at the top of the page. We hope you enjoy the book!