This post continues the weekly series discussing themes from Gregory Clark’s book A Farewell to Alms. In chapter 17, Clark asserts, based on the historical evidence which he cites, that a major cause of the gap which grew in the relative incomes of different countries after 1800AD was differences between countries in output per worker. In other words, England and other countries which grew wealthy had a “better” quality of worker than many other countries which remained poor.
Clark hypothesises that “existing differences in social energy across societies” led to a significant disparity in income, and that “the technology developed since the Industrial Revolution has been of a kind much less forgiving of deficiencies in the quality of labor input”. The dominant view in economics textbooks in the first half of the 20th Century was that Chinese, Indian and African workers were much less productive than British workers.
More recently, the predominant explanation for the difference in productivity has been differences in management competence. However, at least in the case of the textiles industry, Clark controversially argues that there is sufficient evidence to show that the productivity differences were attributable to workers, not management. Clark concludes that differences in cultural values which produce seemingly minor differences in quality of workmanship create enormous differences in productivity when using modern technology.