Subtitles section Play video Print subtitles Let's talk about billions. Let's talk about past and future billions. We know that about 106 billion people have ever lived. And we know that most of them are dead. And we also know that most of them live or lived in Asia. And we also know that most of them were or are very poor -- did not live for very long. Let's talk about billions. Let's talk about the 195,000 billion dollars of wealth in the world today. We know that most of that wealth was made after the year 1800. And we know that most of it is currently owned by people we might call Westerners: Europeans, North Americans, Australasians. 19 percent of the world's population today, Westerners own two-thirds of its wealth. Economic historians call this "The Great Divergence." And this slide here is the best simplification of the Great Divergence story I can offer you. It's basically two ratios of per capita GDP, per capita gross domestic product, so average income. One, the red line, is the ratio of British to Indian per capita income. And the blue line is the ratio of American to Chinese. And this chart goes back to 1500. And you can see here that there's an exponential Great Divergence. They start off pretty close together. In fact, in 1500, the average Chinese was richer than the average North American. When you get to the 1970s, which is where this chart ends, the average Briton is more than 10 times richer than the average Indian. And that's allowing for differences in the cost of living. It's based on purchasing power parity. The average American is nearly 20 times richer than the average Chinese by the 1970s. So why? This wasn't just an economic story. If you take the 10 countries that went on to become the Western empires, in 1500 they were really quite tiny -- five percent of the world's land surface, 16 percent of its population, maybe 20 percent of its income. By 1913, these 10 countries, plus the United States, controlled vast global empires -- 58 percent of the world's territory, about the same percentage of its population, and a really huge, nearly three-quarters share of global economic output. And notice, most of that went to the motherland, to the imperial metropoles, not to their colonial possessions. Now you can't just blame this on imperialism -- though many people have tried to do so -- for two reasons. One, empire was the least original thing that the West did after 1500. Everybody did empire. They beat preexisting Oriental empires like the Mughals and the Ottomans. So it really doesn't look like empire is a great explanation for the Great Divergence. In any case, as you may remember, the Great Divergence reaches its zenith in the 1970s, some considerable time after decolonization. This is not a new question. Samuel Johnson, the great lexicographer, [posed] it through his character Rasselas in his novel "Rasselas, Prince of Abissinia," published in 1759. "By what means are the Europeans thus powerful; or why, since they can so easily visit Asia and Africa for trade or conquest, cannot the Asiaticks and Africans invade their coasts, plant colonies in their ports, and give laws to their natural princes? The same wind that carries them back would bring us thither?" That's a great question. And you know what, it was also being asked at roughly the same time by the Resterners -- by the people in the rest of the world -- like Ibrahim Muteferrika, an Ottoman official, the man who introduced printing, very belatedly, to the Ottoman Empire -- who said in a book published in 1731, "Why do Christian nations which were so weak in the past compared with Muslim nations begin to dominate so many lands in modern times and even defeat the once victorious Ottoman armies?" Unlike Rasselas, Muteferrika had an answer to that question, which was correct. He said it was "because they have laws and rules invented by reason." It's not geography. You may think we can explain the Great Divergence in terms of geography. We know that's wrong, because we conducted two great natural experiments in the 20th century to see if geography mattered more than institutions. We took all the Germans, we divided them roughly in two, and we gave the ones in the East communism, and you see the result. Within an incredibly short period of time, people living in the German Democratic Republic produced Trabants, the Trabbi, one of the world's worst ever cars, while people in the West produced the Mercedes Benz. If you still don't believe me, we conducted the experiment also in the Korean Peninsula. And we decided we'd take Koreans in roughly the same geographical place with, notice, the same basic traditional culture, and we divided them in two, and we gave the Northerners communism. And the result is an even bigger divergence in a very short space of time than happened in Germany. Not a big divergence in terms of uniform design for border guards admittedly, but in almost every other respect, it's a huge divergence. Which leads me to think that neither geography nor national character, popular explanations for this kind of thing, are really significant. It's the ideas. It's the institutions. This must be true because a Scotsman said it. And I think I'm the only Scotsman here at the Edinburgh TED. So let me just explain to you that the smartest man ever was a Scotsman. He was Adam Smith -- not Billy Connolly, not Sean Connery -- though he is very smart indeed. (Laughter) Smith -- and I want you to go and bow down before his statue in the Royal Mile; it's a wonderful statue -- Smith, in the "Wealth of Nations" published in 1776 -- that's the most important thing that happened that year ... (Laughter) You bet. There was a little local difficulty in some of our minor colonies, but ... (Laughter) "China seems to have been long stationary, and probably long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. But this complement may be much inferior to what, with other laws and institutions, the nature of its soil, climate, and situation might admit of." That is so right and so cool. And he said it such a long time ago. But you know, this is a TED audience, and if I keep talking about institutions, you're going to turn off. So I'm going to translate this into language that you can understand. Let's call them the killer apps. I want to explain to you that there were six killer apps that set the West apart from the rest. And they're kind of like the apps on your phone, in the sense that they look quite simple. They're just icons; you click on them. But behind the icon, there's complex code. It's the same with institutions. There are six which I think explain the Great Divergence. One, competition. Two, the scientific revolution. Three, property rights. Four, modern medicine. Five, the consumer society. And six, the work ethic. You can play a game and try and think of one I've missed at, or try and boil it down to just four, but you'll lose. (Laughter) Let me very briefly tell you what I mean by this, synthesizing the work of many economic historians in the process. Competition means, not only were there a hundred different political units in Europe in 1500, but within each of these units, there was competition between corporations as well as sovereigns. The ancestor of the modern corporation, the City of London Corporation, existed in the 12th century. Nothing like this existed in China, where there was one monolithic state covering a fifth of humanity, and anyone with any ambition had to pass one standardized examination, which took three days and was very difficult and involved memorizing vast numbers of characters and very complex Confucian essay writing. The scientific revolution was different from the science that had been achieved in the Oriental world in a number of crucial ways, the most important being that, through the experimental method, it gave men control over nature in a way that had not been possible before. Example: Benjamin Robins's extraordinary application of Newtonian physics to ballistics. Once you do that, your artillery becomes accurate. Think of what that means. That really was a killer application. (Laughter) Meanwhile, there's no scientific revolution anywhere else. The Ottoman Empire's not that far from Europe, but there's no scientific revolution there. In fact, they demolish Taqi al-Din's observatory, because it's considered blasphemous to inquire into the mind of God. Property rights: It's not the democracy, folks; it's having the rule of law based on private property rights. That's what makes the difference between North America and South America. You could turn up in North America having signed a deed of indenture saying, "I'll work for nothing for five years. You just have to feed me." But at the end of it, you've got a hundred acres of land. That's the land grant on the bottom half of the slide. That's not possible in Latin America where land is held onto by a tiny elite descended from the conquistadors. And you can see here the huge divergence that happens in property ownership between North and South. Most people in rural North America owned some land by 1900. Hardly anyone in South America did. That's another killer app. Modern medicine in the late 19th century began to make major breakthroughs against the infectious diseases that killed a lot of people.