Slouching Towards Utopia

Why did the world begin slouching towards economic progress in 1870, and how did it lose its path by 2010?

1. Humanity Broke Free From Poverty Through Technology

From the dawn of civilization up to 1800, most humans lived in poverty, trapped by limits on food and resource production. Economist Thomas Malthus warned that unchecked population growth would outstrip resources, leading to widespread famine and suffering. For centuries, his grim predictions seemed unavoidable.

The Industrial Revolution began to shift this grim reality, but even its innovations couldn’t truly solve the problem of poverty for all. Though it introduced revolutionary tools like the steam engine and printing press, population growth still outpaced technological progress by the early 1800s. This meant that while the elite profited, the masses endured unchanged lives of hardship.

All of that changed in 1870. At this time, something remarkable occurred: technology and scientific discovery became systematic. Northern economies pioneered the industrial research lab, fostering a methodical approach to invention. Advances in transport, communication, and organizational structures allowed ideas and innovations to spread more quickly than ever before, enabling both industry and the standard of living to grow in tandem with population increases.

Examples

• After 1870, technological growth rates of 2.1% surpassed population growth for the first time in history.
• Thomas Edison’s invention of the lightbulb transformed homes and industries; investments amplified his breakthroughs worldwide.
• The middle class began emerging, as workers in industries like U.S. Steel earned unprecedented wages by the early 1900s.

2. Globalization Fueled Prosperity Unevenly

The late 19th century saw globalization explode, driven by technological developments in transport and communication. Steamships, railroads, and telegraphs erased barriers, allowing international trade to grow rapidly. By 1913, global trade accounted for 17% of the world’s economy, up from just 6% before 1700.

Globalization created a deeply interconnected world where goods flowed across continents. Bread in Hamburg contained wheat grown in North Dakota, while machines built in Hamburg powered Japanese businesses. Workers and investors migrated across oceans—with one in 14 humans changing continents between 1870 and 1914—to take part in booming markets.

However, globalization also exposed divides. The Global North—led by Europe, the US, and countries with abundant capital and literate workforces—flourished, while the Global South lagged behind. Formerly colonized nations were trapped in cycles of low-value production fueled by imperial interests, which failed to invest in local industrial capacity.

Examples

• By 1913, English investors could phone businesses in India to make trade decisions instantly.
• Argentina’s wages rose with growing wheat and beef exports, along with US and Canadian prosperity.
• Meanwhile, African and South American economies were locked into supplying raw goods like coffee and rubber.

3. World War I Shattered Economies and Optimism

Economic progress between 1870 and 1914 seemed unstoppable—industry thrived, wages rose, and war seemed irrational. Yet nationalist tensions, treaties, and ambitions culminated in World War I when Austria declared war on Serbia in 1914, drawing in nations worldwide.

The war upended industries that had been focused on growth. Economies turned toward military production, and soldiers, propaganda-fed by elites, fed the trenches in horrific numbers. In four years, 10 million soldiers and civilians died, and postwar disease killed millions more. Hyperinflation and rebuilding left economies reeling well into the 1920s.

The war marked the start of globalization’s retreat. It destabilized empires like Austro-Hungary, weakened Britain, and forestalled the US from stepping into its future role as world leader. Germany, crushed by reparations demanded by the Treaty of Versailles, embarked on a dangerous path toward economic ruin and political upheaval.

Examples

• Entire industries, like arms manufacturing, redirected civilian economic activities to war efforts.
• The Spanish flu of 1918-1919 claimed over 50 million lives globally, partly due to wartime conditions.
• Germany’s hyperinflation worsened after being bound to exorbitant reparation payments post-war.

4. The Great Depression Showed the Shortcomings of Free Markets

In the early 1930s, the Great Depression became a worldwide crisis. It revealed that markets left to their own devices couldn’t guarantee stability or prosperity, as Friedrich Hayek’s laissez-faire doctrines suggested. People suffered mass unemployment, poverty, and anxiety about the future, as governments failed to intervene effectively.

During this time, many governments prioritized balancing budgets over stimulating recovery. In the United States, unemployment peaked at 23%. Germany’s struggles became fertile ground for extreme ideologies like fascism, as citizens sought alternatives to a market that had failed them.

Economists like John Maynard Keynes argued that governments must take a more active role in economic crises. In times of recession, when citizens stop spending, governments must spend more to create jobs and circulate money. Keynesian ideas later helped Western economies recover after World War II.

Examples

• Germany’s economic crisis paved the way for Hitler’s rise in 1933.
• The stock market crash of 1929 wiped out savings and investor confidence across the globe.
• Keynes emphasized that cutting government budgets during panics deepens unemployment and suffering.

5. Totalitarian Systems Promised Progress but Brought Atrocity

Between the wars, communism and fascism emerged as radical alternatives to capitalism. Lenin and Stalin envisioned a society ruled by a state-controlled economy, but mismanagement and brutality quickly unraveled their vision. Famine killed millions, and labor camps turned human lives into expendable resources.

In contrast, fascism in Germany and Italy promised a blend of ultranationalism, authoritarian rule, and anti-liberal ideals. Hitler’s conquests, and his genocidal policies of ethnic cleansing, devastated Europe by the end of World War II. Both systems exploited economic fears but sacrificed millions of lives in their pursuit of utopias.

Neither ideology could sustain its promises. While socialism failed due to inefficiency and control issues, fascism was destroyed by its militaristic ambitions, which sparked global resistance during WWII.

Examples

• Stalin’s forced collectivization led to the deaths of 15 million peasants during famines.
• Hitler gained popularity by aiding Germany’s post-Depression recovery but orchestrated horrors like the Holocaust.
• World War II saw the Nazi war machine defeated by Allied economies outproducing it eightfold by 1945.

6. Post-War Social Democracy Fostered Equality

After World War II, Roosevelt’s New Deal-style policies became a global model, tying Keynesian economics to government-run social programs. Mixed economies flourished as governments spent on public welfare, education, and housing to ensure high employment.

This era, marked by growth and stability, reduced wealth inequality in countries like the US. Progressive taxation ensured top earners contributed more to funding public services, while unions helped secure workers' rights. Many called this period the “Golden Age” of capitalism.

Meanwhile, Europe forged alliances like NATO and the IMF to ensure economic cooperation and enduring peace. However, Cold War tensions kept socialism versus capitalism as a global battleground, shaping politics for decades.

Examples

• US income inequality fell; by the 1950s, the wealthy’s share of income dropped to just 12%.
• Europe rebuilt through public initiatives like Britain’s National Health Service.
• Cold War spending inadvertently drove economic advancements, especially in the US.

7. Economic Growth Was Unequal for Women and Minorities

Despite post-war progress, many groups were excluded from economic gains. Black Americans in the US faced systemic barriers due to segregation, voter suppression, and wage disparities. Women, facing societal hurdles, were also denied full access to opportunities for economic independence.

Civil rights and women’s rights movements challenged these inequalities. Iconic progress, from the Emancipation Proclamation to affirmative action, began eroding barriers. However, systemic inequities persisted, with Black family incomes averaging 60% less than white families—unchanged since 1960 in relative terms.

Global South countries faced similar struggles. Colonization had fostered dependence on Northern markets, leaving their major industries underdeveloped. Political instability following independence hampered further progress.

Examples

• Black Americans battled legalized segregation until the Civil Rights Act of 1965 banned it.
• Only 2% of top corporate leadership in the US belonged to minorities by 2000.
• New nations like Congo and India were left economically fragile after gaining independence.

8. Neoliberal Policies Reversed Progress on Equality

The 1970s saw neoliberal principles, favoring free markets and less government intervention, dominate. Politicians like Reagan and Thatcher reduced social spending, eroded corporate regulations, and cut taxes for the wealthy.

These trends widened wealth gaps. While top earners amassed exponential wealth, middle- and lower-class incomes stagnated. Outsourcing production to emerging economies increased Northern corporate profits but reduced jobs for domestic workers, further entrenching inequalities.

Neoliberal policies claimed success by controlling inflation, but the broader promise of prosperity faded for the many. Critics argue this turn steered developed economies into today’s instability.

Examples

• Reaganomics coincided with doubling income shares of America’s top earners after the 1980s.
• Outsourcing boomed as tech-enabled firms moved operations to China for lower costs.
• Thatcher’s austerity weakened British labor unions and social services, growing poverty.

9. The 2008 Financial Crisis Marked a Turning Point

Decades of deregulation culminated in the financial crash of 2008. Speculation on housing markets triggered unstable credit systems, crashing household savings and investments. Policymakers failed to counter the collapse effectively, deepening the recession.

In Europe, austerity responses mirrored the Great Depression’s missteps. Instead of spending to stabilize economies, countries slashed budgets. Nations like Greece experienced prolonged recessions, losing entire generations of economic momentum.

The crash ended the narrative of endless growth. By 2010, economic progress had slowed significantly for the Global North, leaving many disillusioned with systems they once trusted.

Examples

• Lehman Brothers’ collapse symbolized the bursting of bloated real estate speculation in 2008.
• Income growth in France stagnated to 0.3% post-crisis; US income growth slowed to 0.6%.
• Greece faced unemployment levels of 25% after harsh austerity measures.

Takeaways

1. Advocate for balanced government intervention, blending market dynamism with policies ensuring broad welfare access and equality.
2. Acknowledge and proactively address uneven wealth distribution, both among global regions and marginalized groups within nations.
3. Approach economic policies with humility, learning from history’s cycles of optimism, overreach, and unintended consequences.