Banks spend considerable time working on issues of economic inequality. This issue is the centerpiece of many, if not most, banks’ community investment efforts, not least because the more locals can be catapulted into a better financial position, the more high-dollar accounts the bank is likely to get.
Policymakers and legislators, too, are constantly on the lookout for better ways to help address the entrenched disparities that exist throughout society. Part of this is for electoral-math reasons — let’s help people and they’ll vote for us — but mostly it’s a moral imperative.
There is no excuse for people to be desperately poor or hungry in the world’s richest country. The question of how countries sorted themselves into the GDP ranking that exists today is a vital one. Why do certain former European colonies now dominate the world economy, while others with the same heritage struggle? What explains the differences between neighboring nations or even individual regions within a country? Is the current economic order predetermined, or is there something we could do to make the world more fair, so that individuals have a better chance no matter where they were born?
To answer these questions, it would be helpful if all of economics — the whole sweep of human financial interactions over the millennia, from the earliest exchange of goods back in hunter-gatherer days to today’s tech-enabled world — could be explained in one argument. Oded Galor, an economics professor at Brown University, is here to solve that problem with his Unified Growth Theory. There must be data-based reasons we are in the situation we’re in — explosive economic growth over the last century, paired with uneven prospects for different countries — and this theory offers an explanation as to why. Just like the theories that promise to tie together all of physics or any other science, Galor’s work aims to make the world’s economic trajectory seem logical, even inevitable.
Galor has laid out this thesis previously for his fellow specialists, in nearly two decades’ worth of academic papers, lectures and an eponymous 2011 book. His new book, “The Journey of Humanity,” is adapted from a Hebrew-language version published in Israel in 2020. It’s aimed at an educated lay audience, who are familiar with the intractable problem of global inequality. He goes beyond the much-quoted idea that we’re doomed to repeat history if we don’t understand it; he instead argues that we’re often looking at the wrong things when we attempt to draw lessons from the past.
“The Journey of Humanity” starts by examining the problem first posed by Thomas Malthus, the influential 18th-century thinker who argued that mankind was doomed to overpopulation. If people’s living standards rose, because they made some technological leap and were able to produce food more efficiently, for instance, they might be able to have more children, because they could feed them.
But eventually, the rise in population would outstrip the available food, and the village would be left supporting more people with less food per person: “Painfully, their technological progress would lead to a larger but not a richer population in the long run,” Galor writes. It’s a dismal, grim way to look at the world, but this “poverty trap” is the cycle in which the world was stuck for thousands of years.
So how did we accelerate out of Malthusian stagnation and into the hockey-stick growth curve of the last hundred years? To answer that question, Galor journeys back 300,000 years ago, at the very beginning of Homo sapiens, and explains how a “phase transition,” similar, mathematically, to the way water boils, propelled the human race — in fits and starts, and unevenly, but inexorably — upward.
“These insights are essential for understanding the growth process in its entirety, the hurdles faced by poorer economies today in their transition from stagnation to growth, the origins of the great divergence in the wealth of nations in the past centuries, and the fingerprints of the ancient past in the fate of nations,” he writes. He reviews a list of factors, explaining how they impacted society’s ability to stop living hand-to-mouth and start investing in the future and, in particular, in our children.
This is where the book’s argument gets interesting, because the world didn’t experience this economic escape velocity at the same time; some areas have yet to experience it. Galor spends the second half of his book sifting through various academic theories that purport to explain why some countries, regions or even cities have done better than others economically, at particular points in time and over the long arc of their histories. It’s difficult to do this in a sensitive way — that is, in a manner that neither blames groups of people for their misfortune nor brands them as irredeemable in terms of their economic prospects — but Galor manages it delicately. He cites studies from researchers around the world that look at elements like geography, colonialism, conquest, slavery, gender-based wages and expectations, the types of crops and livestock a particular area supported, and culture.
To take one striking example, Galor looks at various explanations for why northern Italy is generally more prosperous than the country’s south, although Italy has been governed as one country for nearly two centuries. Galor cites the work of Edward Banfield, which posited that southern Italians have stronger family ties, which leads to lower levels of trust outside the family, as well as the thinking of Robert Putnam, who linked the Italian differences to the country’s history: While the north was freer and more self-governing, the south was ruled by a feudal system that invaders imposed. These differences are stark even today: “Residents of northern Italy, which is characterized by higher levels of social capital, reflected in higher voter turnout and blood donation rates, for example, have a greater tendency to hold their wealth in banks, accept credit, invest in stocks and obtain loans.”
Galor makes the point that catastrophes that loom large for a generation — World War II or the COVID-19 pandemic, for instance — are blips that don’t affect the overall trajectory of human progress. He does note that it’s unclear whether climate change is one of these blips or a major course-altering phenomenon.
He points out that everything he’s discovered points to optimism. Of course that means optimism for humankind overall. What we still haven’t figured out is how to wrangle an optimistic future for everyone, no matter where they’re born.
