Where did economic growth come from? Well...that also is a moderately simple question with a moderately simple answer. Economic growth as a new trend began somewhere in Northwest Europe sometime between 1550 and 1800. The Netherlands and England were the primary start-point, and it leaked to America as well. As the new growth economists have pointed out, it's almost all about knowledge growth...and so we have the Industrial revolution.
The question is: Why in England / Holland between 1550 and 1800, and not anywhere else ever before...and specifically, why not in China?
I've heard, now, basically 3 answers to the question. While I have a personal favorite, it's worthwhile to note all three.
- It's the existence of freedom. Peace, limited rule, and ability to exit define the path.
- It's the enlightenment. Newton showed that the natural world was comprehensible, and people started to learn chase that idea. Engineering followed. Business followed that.
- It's the English. They're weird. Greg Clark is the leading voice in this explanation. And this weekend, I read something at Steve Sailer's place (linked through to The Guardian) that furthers the position. Anglos (people from Angleterre) have nuclear families, and have had nuclear families since ~1250AD, unlike all the other people in the world. This supports my prior notion that one of the things preventing Capitalism from succeeding elsewhere is the extended-family hangers-on.
In the early Industrial Revolution (1550-1800), in England and Holland, a peculiar thing happened. For the first time ever, the individual male citizen had an expectation that he could enrich his children by the application not only of his brawn, but also by means of his brain.
The rulers were prevented from predation via various revolutions and constitutions. There was an expectation of peace, and if those failed, the somewhat wealthier family could fly away, overseas or at least across the channel. There was no extended family that one was beholden to. And the great Newton had explained God's work with science, discovered by man. That means I can make a better world for my family by being smart.
Suddenly, and for the first time, individual industriousness, the power of ten million brains, had a payoff. And so it went. Individual, self-interested, all-but anarchic tinkerers made the world a better place...and the rest of us live there.