Introduction
For most of human history, the majority of people lived in dire poverty. Despite revolutions in agriculture and commerce that allowed for population growth, social, economic, and technological progress couldn't keep up. As a result, most working people struggled to keep their families fed and healthy.
But in 1870, everything changed. A series of revolutions in transport, communication, and organization brought world economies closer together and allowed them to prosper. For the first time in history, technology was able to keep pace with the growing human population. The path to a utopia where all humans enjoyed food, shelter, and a decent life became walkable.
In his book "Slouching Towards Utopia," economist J. Bradford DeLong takes us on a journey through this remarkable period of human history, from 1870 to 2010. He explores how technological change enabled a global explosion of wealth, but also examines how governments mismanaged markets, how fascist and socialist ideologies turned dystopian, and why progress eventually turned sour.
The Great Escape from Poverty
Overcoming the Malthusian Trap
In the early 19th century, English scholar Thomas Robert Malthus painted a bleak picture of humanity's future. He argued that population growth would inevitably outpace technological progress, leading to a poverty-stricken world plagued by war, famine, and disease.
For centuries, Malthus's prediction seemed accurate. Even after the Industrial Revolution of the 1770s, population growth outran technological growth by a factor of 1.5 to 2. While inventions like the printing press, windmill, and steam engine revolutionized industry, the benefits mostly accumulated at the top – the rich got richer, while the rest of the population languished.
But in 1870, everything changed. Humanity's technological and organizational capacities began to grow at an unprecedented rate of 2.1 percent per year. This growth wasn't just due to new inventions; it was the result of a systematic approach to innovation.
The Birth of Industrial Research
The Northern economies had essentially invented invention itself. Previously, innovations were singular discoveries that provided new ways of doing old things. But in 1870, the North Atlantic economy began to develop the industrial research lab. Discoveries became systematic and were deployed methodically.
New communication technologies allowed ideas to disseminate faster. Inventors like Thomas Edison and Nikola Tesla had their ideas amplified million-fold by the corporations that backed them. This systematic approach to innovation allowed technology to finally outpace population growth.
The Rise of the Working Class
As a result of this technological boom, working-class people began to benefit from the advance of industry, and a new middle class developed. While working conditions were still grueling by modern standards, they were a significant improvement over previous eras.
For example, a blue-collar worker at US Steel in 1910 had a one in seven chance of dying on the job before their 50th birthday. However, they "only" worked six days a week and earned about $900 a year – a sum that was considered luxurious by global standards at the time. Moreover, wages continued to rise, attracting immigrants from all over the world to the US for a chance to become part of this new world of opportunity.
The great economist John Maynard Keynes rightly called the period from 1870 to 1914 an "economic Utopia," with the United States leading the way.
The Age of Globalization
The Rise of International Trade
Technological progress generated another accelerant of growth: globalization. Innovations in transport, such as steamships and railroads, allowed international trade to pick up the pace. Advancements in communication eased the issues of trust and information transfer that international trade brought with it. By 1870, investors in London could call companies in Bombay, facilitating global business on an unprecedented scale.
Before 1700, international trade consisted mainly of luxury goods and precious metals, making up only 6 percent of global economic life. By 1913, this figure had risen to 17 percent. The world was becoming increasingly interconnected, with workers in Hamburg eating bread made from North Dakota wheat, London investors financing railroads in California, and Tokyo business owners buying machines made by workers in Hamburg.
Mass Migration and Economic Growth
The falling barriers to trade and travel spurred waves of migration. Between 1870 and 1914, one in 14 humans changed continents – among them historical figures such as Winston Churchill and Gandhi. This mass movement of people contributed to the rapid economic growth of the period.
In the years leading up to 1914, wages in the US, Canada, and Argentina went up by 1.7 percent per year. The economies of the Global North began prospering together, creating a rising tide that lifted many boats.
The Dark Side of Globalization
However, the benefits of this economic boom were not equally distributed. The economies of the Global South were left behind, creating a sharp international division of labor. Regions without a literate labor force, engineering practices, or adequate startup capital were left to produce low-value goods like rubber, coffee, and sugar for Northern demand.
Moreover, Europe – particularly the British Empire – used its technological edge to pursue imperial ambitions. By 1914, only a handful of countries, including China and Japan, had escaped European conquest. In most places, the imperialists had little interest in helping their subjects jump on an escalator of economic growth. While they occasionally provided a package of ports, schools, railroads, and banks, as in India, they failed to deliver the final push to set up modern manufacturing industries.
As the twentieth century progressed, the logic of empire began to crumble. It became cheaper to produce luxury goods at home and trade them on the international market. By 1914, the British Empire was already on shaky ground, setting the stage for the tumultuous events to come.
The World Wars and the Great Depression
The Unexpected Outbreak of World War I
The years between 1870 and 1914 had been more peaceful and prosperous than ever before. On an economic level, war didn't make much sense anymore. Why spend money on military conquest when you could make money manufacturing and trading?
But in the summer of 1914, a series of events triggered by the assassination of Archduke Franz Ferdinand of Austria-Hungary plunged the world into chaos. What started as a regional conflict quickly escalated into a global war, drawing in major powers through a complex web of alliances and territorial ambitions.
World War I was cruel, bloody, and needlessly long. The opponents were so evenly matched that they were forced to dig trenches, leading to a prolonged and devastating conflict. Europe's aristocratic elites used nationalist propaganda to feed these trenches with young men. Whole economies switched gears to focus on military production, with Germany establishing a command-and-control economy that would later inspire Russian socialists.
The Aftermath of World War I
By the end of the war, Europe was in ashes, and ten million people were dead. If one counts the Spanish flu of 1918 to 1919 as a by-product of the war, the casualties ran to over 50 million. The world order was reordered, with Britain's power greatly diminished and the US not yet ready to step up as a world hegemon.
The Austro-Hungarian and Ottoman Empires crumbled, and fearing too much interdependence, the remaining countries doubled down on nationalism and isolationism. Globalization went into retreat, undoing much of the economic progress made in the previous decades.
In Germany, Emperor Wilhelm II abdicated, making room for the Social Democratic Party to lead the new Weimar Republic. However, Germany's hopeful experiment with social democracy didn't last long. The Treaty of Versailles bound the German government to exorbitant reparation payments, setting the stage for economic turmoil and political instability.
The Great Depression
The stock market crash of 1929 further shook people's confidence in the economy, and the banking crisis of 1930 sent them into full-blown panic. Everyone stopped spending and scrambled to turn their assets into cash, causing the world economy to spiral into the Great Depression.
Governments could have rectified the excess demand for cash by increasing their spending – buying things, hiring people, or trading financial assets. Instead, following the laissez-faire philosophy of economists like Friedrich Hayek, they did nothing.
The results were catastrophic. In the US, unemployment peaked at 23 percent. In Germany, the economic crisis paved the way for the rise of fascism. The Great Depression proved to be a pivotal moment in economic history, demonstrating the need for active government intervention in times of crisis – a lesson that would shape economic policy for decades to come.
The Rise of Totalitarian Ideologies
Fascism and Socialism: False Utopias
In the fragile period between the wars, three powerful ideologies confronted each other. The first was the old order of semi-liberal industrial capitalism, which had been called into question by the Great Depression. The alternatives that emerged – fascism and socialism – would go on to kill millions of people in their pursuit of utopian visions.
Really-existing socialism, based on the ideas of Karl Marx and Friedrich Engels, claimed that market economies inevitably produce ever-rising inequality. However, the "inevitable" working class revolution that Marx prophesied never came to pass. Instead, totalitarian leaders like Lenin, Trotsky, and Stalin tried to force it – with disastrous results.
After gaining power in 1917, Lenin attempted to create a centrally organized, top-down, command-and-control economy for the Soviet Union. It proved inefficient, wasteful, and corrupt. At the start of his rule, Russia was about half as rich as the US, with a life expectancy of only 30 years. By 1921, it was about a third as rich, with a life expectancy of 20 years.
Stalin's regime was even more brutal. He chose to force Russia's industrialization by waging war on the peasant population. The result was 15 million dead due to famine, and 18 to 50 million dead or half-dead in the forced labor camps of the gulag.
The Rise of Fascism
In Germany, a different but equally murderous ideology won out. Fascism, as pioneered by Benito Mussolini in Italy, centered itself around ethnonationalism and strong leadership. Adolf Hitler added to it the tenets of anti-Semitism and territorial expansion.
After seizing power in 1933, Hitler gained massive popularity by helping the German economy recover from the Great Depression. His aggressive expansionist policies, however, eventually led to the outbreak of World War II in 1939.
The Nazis initially humiliated the Allied forces with their superior tactics and overwhelming force. But the allies brought their full economic power to bear. In 1944, their war production outnumbered Germany's efforts by 150 to 24. In the end, Germany's defeat was inevitable. Hitler's "total war" and the Holocaust had cost 60 million people their lives.
The Failure of Utopian Visions
Both fascism and really-existing socialism are considered to be on opposite ends of the political spectrum. Yet, in the end, they produced similarly disastrous results. Both provided their people with a utopian vision of how society and economy should be organized – and in trying to enforce this vision, produced dystopias.
These ideologies demonstrated the dangers of trying to forcibly reshape society according to a rigid ideological blueprint. The human cost of these experiments was immense, and their failure paved the way for a more pragmatic approach to economic and social organization in the post-war era.
The Post-War Economic Boom
The Rise of Social Democracy
After World War II, the world was reordered once again. The British Empire was dead for good, and the US had more power than ever before. The Western world was to be shaped in the American model. But what would that model be?
The Great Depression had provided some powerful lessons. Countries which had bet on austerity had suffered longest and hardest, while those which had increased government spending had recovered more quickly.
In the US, left-of-center president Franklin Roosevelt had solved the interwar crisis by increasing public spending, regulating financial markets, and establishing broad social security programs. After World War II, the US and Europe returned to developing mixed economies, with a focus on government welfare. Even staunch Republicans like President Dwight D. Eisenhower believed that resurrecting laissez-faire policies would be "stupid."
The Keynesian Consensus
The new social programs were paid for by a strongly progressive income tax. Middle-class wages rose, while inequality reduced. In the US, the top 1 percent went from holding 20 percent of all wealth in the 1930s to 12 percent of wealth in the 1950s.
Indeed, the US government post-WWII wedded the ideas of Friedrich Hayek and Karl Polanyi under the economic principles of John Maynard Keynes. As long as the government kept employment high, both people and the economy were happy.
This approach led to another economic growth spurt for the Global North. Technological innovation, globalization, and social progress picked up the pace again. Broad political and financial alliances formed – from the EU to the UNO, NATO, and the IMF. The French nicknamed this period the "Thirty Glorious Years."
The Cold War and Its Paradoxical Effects
In the background, however, the war of ideologies kept simmering. The Soviet Union still wanted to prove that socialism would work and supported like-minded revolutionaries in capitalist countries. The US viewed socialism with rising concern and tasked the CIA with thwarting these revolutions. Fearing the other's military and nuclear power, both countries multiplied theirs. In Korea and Vietnam, the Cold War briefly but disastrously turned hot.
Paradoxically, the arms race of the Cold War may have accelerated the growth of Western economies. Europeans didn't necessarily embrace American capitalism, but they were far more terrified of a Soviet takeover. And so the US social democratic, capitalist system took over the world.
With the collapse of the Soviet Union in 1990, it became clear that this system was better than the disaster of really-existing socialism. But a good portion of humanity was forced to ask, How much better?
The Uneven Distribution of Prosperity
The Global South Left Behind
While the long twentieth century from 1870 to 2010 had lifted much of the world out of mass poverty, the benefits were not equally distributed. The countries of the Global South – China, India, South America, and especially Africa – were largely left behind.
Most countries in these regions couldn't clear the checklist needed for economic growth after 1870. This checklist included a stable government, railroads and ports, banks for commerce and investment, education, and strategic tariffs. Their European colonizers had little interest in lending a helping hand to develop these crucial infrastructures.
When the old empires began to crumble after World War II, the decolonized nations tried to follow the Northern model of establishing social democracies. But in most places, these new governments proved too unstable to focus on long-term economic development. In Africa, centuries of trade in enslaved people and exploitation had created a culture of distrust that made it hard for democratic principles to take root. In South America, property-owning elites were more interested in oppressing the masses than building up local manufacturing.
In several countries like Iran, Guatemala, Nicaragua, and Chile, US secret services helped totalitarian and military dictators gain power for fear of a socialist takeover, further complicating these nations' paths to economic development.
Success Stories in the Pacific Rim
Of all countries outside the Global North, Pacific Rim countries like Japan, South Korea, and Taiwan have fared the best. China and India, too, have begun to catch up in recent decades. However, the average income in the US still outranks China's 3 to 1, highlighting the persistent economic divide between the Global North and South.
Inequality Within Nations
On a national level, even prosperous countries like the United States failed to include whole segments of their own population in the wealth explosion. For the longest time, women and Black Americans were excluded from meaningfully sharing in economic development.
For Black people in the US, the Emancipation Proclamation and the Civil Rights Act of 1965 marked meaningful steps toward equality. But any tide of racial inclusion was usually immediately mitigated by a rising significance of class and an explosion of wealth inequality. Even today, half of US states boast election laws that are specifically designed to suppress Black votes. The average income of a Black family stands at 60 percent of that of a white family – the same as it was in 1960.
This persistent inequality within nations, even as overall wealth increased, highlights the complex challenges of ensuring that economic growth translates into broad-based prosperity.
The Neoliberal Turn
The End of the "Thirty Glorious Years"
The "Thirty Glorious Years" after World War II set a high bar for the economies of the Global North. In 1973, people enjoyed around 2 to 3 times more material wealth than their parents. But in the 1970s, the oil crisis tripled the price of gas everywhere, causing the inflation rate to rise to between 5 and 10 percent per year. Economic growth slowed, and old fears crept back.
With memories of the Great Depression fading, people began to question the idea of government intervention. The political center shifted right. In an attempt to curb inflation, President Richard Nixon had already reduced government spending and let unemployment soar. He called it "shock therapy" for the economy.
The Rise of Neoliberalism
By 1982, the unemployment rate stood at 11 percent, and the economy entered a recession. This economic turmoil provided the perfect fodder for neoliberals. They argued that it was time to return to the laissez-faire principles of Friedrich Hayek. Even less government spending, they claimed, was the answer to the economic problems.
The neoliberal turn was rapid and affected nearly every country in the Global North. In the US, Ronald Reagan's government pushed for high interest rates and financial deregulation. In Britain, Margaret Thatcher and the Tories promised to restore order by radically cutting government spending. And in France, President François Mitterrand abandoned his socialist roots in favor of severe austerity.
The Impact of Neoliberal Policies
The new neoliberal approach succeeded in curbing inflation. However, it failed to deliver on many of its other promises – including raising employment, boosting investment, and strengthening the middle class. Instead, its principal outcome was tax cuts for the rich. Under neoliberalism, the top 1 percent more than doubled its wealth.
Tariff reductions and new technologies made it easy for companies to move production overseas. For the first time, economies in the Global South saw faster income growth than the North. In the US, median incomes even declined. The bottom 90 percent of the population began to lose ground.
The Persistence of Neoliberal Ideology
Despite its empirical failures, neoliberalism became conventional wisdom, even among Democrats. Several factors contributed to its staying power:
- It benefited the rich, who had significant influence over public discourse.
- It coincided favorably with the end of the Cold War and was somehow given credit for it.
- It gave a dissatisfied population the feeling that no one was getting "handouts" they didn't deserve.
Looking back, neoliberalism was an empirical failure. But until 2010, politicians could still tell themselves that things were going well. The true reckoning would come with the financial crisis of 2008.
The End of the Long Century
The 2008 Financial Crisis
In 2007, everything still seemed fine. There was virtually no inflation, productivity was rising, and the Global South was finally catching up to the North. US President George W. Bush had doubled down on the deregulation of his predecessors, and it seemed to be working.
The dot-com crash of 2000 had been little more than a small hiccup. But in 2008, the housing bubble burst, and things came crashing down fast. In the "general glut" that followed, people scrambled to sell their assets and turn them into cash.
What the US government should have done was pump cash into the economy by boosting purchases and employment – just as FDR had done during the Great Depression, and just as China did now, allowing it to avoid the coming recession.
Instead, the US government decided to make an example of one of the financial firms that had overspeculated during the housing boom. When Lehman Brothers filed for bankruptcy, the government let it fail. This move backfired spectacularly. People began panic-selling even more, and the crisis deepened.
Mishandling of the Crisis
In Europe, the EU handled the debt crises in Greece just as poorly. Instead of easing Greece's debt to let the economy recover, debtors tightened the screws and plunged the country into a recession it still hasn't recovered from.
The Global North had all but forgotten the wisdom of John Maynard Keynes that had helped them overcome the Great Depression: "The boom, not the slump, is the right time for austerity at the Treasury." In times of crisis, Keynes argued, the government needs to spend money, not tighten the belt.
The Aftermath
The 2008 financial crisis wasn't a backfire of neoliberal policy, but a direct result of it. In the US, income growth slowed from 2.1 to 0.6 percent. In France, it now stood at 0.3 percent. But instead of turning their backs on neoliberalism, voters began looking for someone to blame.
The political right swooped in with various bigoted offerings, digging up age-old human biases. Eventually, the election of Donald Trump in the United States confirmed the end of the "long century" and marked a turn towards populism and nationalism in many parts of the world.
Conclusion: The Path Lost
The long century from 1870 to 2010 had lifted the world out of mass poverty. It was the century of globalization, tech-fueled growth, and murderous ideologies. But it was also one of optimism, hope, and confidence. It eventually turned into the century of social democracy and American exceptionalism.
Humanity wasn't exactly running toward utopia – it was slouching. The path was unequal, but it was walkable. Now, it seems we have lost our path and entered an era of pessimism, fear, and panic. It's a new century, whose principal narrative remains to be written.
As we look back on this remarkable period of human history, several key lessons emerge:
Technological progress and innovation can drive unprecedented economic growth and improvements in living standards.
Globalization can be a powerful force for economic development, but its benefits are not equally distributed.
Government intervention in the economy can be crucial for managing crises and ensuring broad-based prosperity.
Extreme ideologies, whether on the left or right, can lead to devastating human costs when put into practice.
Economic growth alone does not guarantee social progress or equality. Deliberate policies are needed to ensure that prosperity is shared widely.
The financial sector, if left unchecked, can pose significant risks to economic stability.
The path of progress is not linear or inevitable. Gains can be reversed, and new challenges can emerge.
As we face the challenges of the 21st century – from climate change to rising inequality and technological disruption – these lessons from the "long century" can provide valuable guidance. The task now is to find a new path towards a more equitable and sustainable prosperity, one that learns from both the successes and failures of the past.
The story of the long century shows us that human ingenuity and collective action can overcome seemingly insurmountable challenges. But it also warns us of the dangers of complacency and the pursuit of narrow ideological goals at the expense of broader human welfare.
As we slouch towards an uncertain future, the lessons of this remarkable period in human history remind us that progress is possible, but it requires constant vigilance, thoughtful policy-making, and a commitment to shared prosperity. The utopia we seek may still be out of reach, but the journey towards it continues to shape our world and our collective destiny.