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  • 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.