We began with Jared Diamond's
interpretation of why some countries
are rich, why some countries are poor.
We look to Eurasia
as the continent where we believe
we will find the rich countries.
Because they have that
east-west orientation
where technology will
travel much more easily.
We have early farming transporting
itself across the continent.
So we look to Eurasia as the place where
we believe the countries will become rich.
Now we move forward to
the Industrial Revolution.
This is when we see the achievement
of modern economic growth rates.
This is when those rich countries really
take off and achieve modern economic
growth rates in GDP of 1.5%
to 2% per year consistently.
This is the moment when, not are there
going to be rich countries here,
but rich countries start to become
the rich countries of today.
With the Industrial Revolution, we focus
in Eurasia specifically on Great Britain.
This was where the beginning
of industrialization occurred.
Some believe in North America as well,
we'll talk about that, but Great Britain
is where we see the industrial
revolution begin, again, on Eurasia.
Why Great Britain?
This was an area where there was
a lot of openness of trade, of ideas.
People were relatively socially mobile.
It was a region of political liberty,
one of the centers of the scientific
revolution, where we see
the beginning of mathematics,
the beginning of science
as we know it today.
They also have a location that
is geographically blessed.
In Britain they have an island economy
where there is sea based trade.
Any sea based trade is going to be
the least expensive of all the trade.
It's also close to the European continent
where they can access trade with a lot of
these countries.
They have rivers that you
can easily navigate, so
goods move really easily
within the country.
It was good dirt for
agriculture, the climate for
agriculture, and it was close
in proximity to North America.
There was also, being an island economy,
less risk of invasion,
so they didn't have to worry
as much about invaders, and
therefore were able to focus their
energies on economic growth.
Many believe also, the coal available in
Britain that could power the industrial
revolution was critical in why they were
the focus of the Industrial Revolution.
So, when you look at these countries,
these countries that are becoming rich,
Great Britain was the beginning of it.
We saw it in Great Britain, we saw as
these modern economic growth rates spread
to other countries,
very similar social changes occurring.
These also occur today in other
areas where we see economic
development, urbanization is one of
the first changes of industrialization.
People moving from outside of
the city to inside cities,
creating these urban
centers where trade and
specialization can occur,
also changing gender roles.
We have, women participating
in the workforce in a way that we don't
typically before industrialization.
As a result of falling birthrates,
job opportunities in the market,
delayed marriage,
empowering of women overall.
These major changes we see as there
is an increase in specialization
which increases efficiency and
we see growth.
So how did industrialization spread,
right?
So first from Britain to her colonies,
North America, Australia,
New Zealand, they have a similar climate,
the technologies transferred very easily.
These were also colonies where
locals were pushed out or killed.
And so the British moved
in with their set of laws.
The way that they had
industrialized their own country,
these folks industrialized these colonies.
Now within Europe we saw a movement from
Northwestern Europe to
Southeastern Europe.
It began in the Northwest where
the climate, the natural resources,
the disease environment, political and
social conditions were more favorable for
industrialization and
then it moved Southeast.
It spread more quickly
after the end of serfdom
when constitutional
governance was introduced.
Railways facilitated the spread
of technology, ideas, capital.
Once these transportation infrastructures
were established, then these ideas,
these technologies moved Southeast.
After this movement was spread to
Latin America, Africa and Asia.
And again, those first two moments,
there was not a lot of resistance, right?
The locals had been pushed out or
killed, spread of disease
with the initial colonization,
when industrialization initially spread.
Then, organically it moved from the
Northwest down to the Southeast of Europe.
But when the spreaded industrialization
moved to Latin America,
moved to Asia, moved to Africa,
we had a lot more confrontation.
This was a tumultuous move,
it was the rich powerful European
powers exploiting poorer and
less powerful regions.
There was an increase in
standard of living as a result of
the industrial spread.
However, it came at a very high cost.
So when you're looking
at economic development,
we look at this last transition
really as the beginning
of where we're starting to
talk about development today.
When we want to hone in on this
period of economic growth for
this spread of industrialization happened
with Latin America, Asia, Africa.
It's important for us to rewind back
to World War I and its consequences.
We had a destabilization of the Russian
Czarist Regime with World War I.
It eventually lead to a 20th century
world split into three giant pieces.
There was the first world,
the second world and the third world.
This destabilization of
the Russian Czarist regime led to
the eventual communist control of about
a third of the world's population.
Financial instability in Europe, debt,
the destruction of the Ottoman and
Hapsburg Empires which led to these
small successor states fighting
with one another.
There were Allied claims for
reparation payments from Germany
that led to Hitler and World War II.
So this 20th century world started
with World War I, World War II,
all of this confusion with who was going
to be in power in the world in Europe.
That gave us this second
half of the 20th century,
where we had the first world,
which was the capitalist world.
This was Western Europe,
it was the US, it was Japan.
We then had the second world,
this was the world under central planning,
the communist world.
USSR, the Soviet Union, China, Cuba,
North Korea, the eastern European
states that were under Soviet dominion,
and then we had the third world.
This is where this term comes from,
the third world countries.
These are the Autarkic countries,
they isolated themselves.
They were the post-colonial countries,
they did not want anything to do with the
capitalist first world or the communist
second world, they wanted to develop,
but they wanted to develop on their own.
The problem with these third world
countries in their development is that
Autarky didn't work.
So today, what we are left with
is a new global interaction.
Right, we've a new global
interaction where we have
those developing countries of the second,
and third world
trying to catch up to the first world
while maintaining their sovereignty.
They don't want to be
colonies of the first world.
They want to keep their sovereignty,
while participating in
global economic prosperity.
They want to take part in trade, they
want to take advantage of global capital,
but all of this, while remaining respected
members of the global community.
So, really this is where we are today.
We moved from Jared Diamond saying that
there are certain continents that are ripe
for growth, then the industrial
revolution takes us to this moment
where we have Britain
beginning industrialization,
spreading to her colonies,
spreading to Southeastern Europe.
Then getting pushed out
into the rest of the world.
We have World War I destabilizing
the global economy,
and separating after World War II.
The globe into first world capitalism,
second world communism and
third world independent,
please don't mess with us,
we want to industrialize
on our own countries.
In the 1960s, we found ourselves
wanting to help these folks
from the third world not always
being very good at doing it,
sometimes imposing,
taking away sovereignty.
Then we move to the 1990's
where the second and
third world countries want
to take part in trade,
want to take advantage of global capital
while still keeping their sovereignty.
When we look now at this world, we want
to be able to help these second and
third world countries, and
we focus on some key aspects
that are important to achieve growth,
savings, trade,
technology, resources.
Where growth has failed for many of these
countries is with the poverty trap,
they are too poor to save and invest.
Physical geography,
they have high transportation costs
as a result of their terrain.
They fall into a fiscal trap,
the government cannot collect taxes.
Maybe they're too poor,
not well run if they can't carry
the taxes to build the infrastructure.
Then they burden themselves with debt
to start building the infrastructure.
Sometimes the debt
burdens the government so
that they can't spend the money
that they need to spend.
There are also governance failures,
problems with rule of law,
problems with corruption,
cultural barriers.
In many of these countries,
certain groups are isolated.
Women, certain ethnic groups are isolated,
this is very destructive to economic
development and can slow growth.
Also, geopolitics,
interference from the outside world
including trade barriers
from rich countries.
Sometimes, they fall into
the trap of lack of innovation.
The market is too small
to get off the ground.
They can't start these ideas and get
going, and finally the demographic trap.
There are just too many
kids to support for
these countries to get going in terms
of getting their step on the ladder,
the first step on the ladder
of economic development.
