Stagnant Malthusian Economy
- In the proceeding sections we will compare these two perspectives and relate this to the underdevelopment issues surrounding the Third World at present. First, we need to explore the characteristics of an economy where changes in income is more than surpassed by changes in population, leading to a stagnating economy embroiled in a population trap, i.e. the Malthusian Economy.
Stagnant Malthusian Economy
- Clark bases his arguments on the Malthusian and Ricardian model of subsistence economy. As seen in Fig 1, income per person stagnated until 1800 in the world. The people lived in subsistence- a level of income, especially wages, just adequate to support a standard of living that will lead the average family to reproduce itself (Solow 2007). If wages exceed subsistence for while (say, because of good harvest or high death rate due to war and diseases), then fertility will rise. However, since land and capital are fixed, increase in population would essentially mean that productivity per labor will decrease. The law of diminishing marginal returns kicks in and wages (or income) comes back to the subsistence level. The final effect would be a rise in population without a rise in material living standard.
- One of the striking features of the Malthusian economy is that income per person is independent of technological change. Any incremental technological progress will not improve living standards; it will just allow a larger population to be supported with the same income. This means that people in the forager societies had a better material living standard than the people just before 1800 (Clark, A Farewell to Alms: A Brief Economic History of the World 2007).
Clark argues that the classical prescription of stable institutions, free markets, free trade, low inflation, well-defined property rights, avoidance of armed conflict, taxation, and monopolies would make no difference to material living standards in the Malthusian era; it will only lower living standards. Clark dismisses Smith’s call in The Wealth of Nations, published in 1776, for restraint in government taxation and unproductive expenditure because it would not make any difference in the living standards given the fact that the economy was governed solely by changes in population rate. Clark argues that classical economist like Smith could not correctly interpret their own world because limited government with restrictive taxation and expenditure, and free markets did not make sense in the Malthusian era. In fact, he argues that “bad” government, which shifts the death schedule upwards, makes people better off in material terms but with a reduced life expectancy.
- The evils of today like drought, famine, diseases, illness, war, etc. were virtues in the Malthusian era because it increased material living standard by decreasing population. The relative wealth of people was directly dependent on the population growth.
- This means that the government had no power whatsoever to induce growth and development. However, England was able to break out of the Malthusian trap circa 1800. Clark argues that this was possible due to good bourgeois virtues of the English people and may be the inheritance of middle class values across generations (i.e. quality labor and social mobility). In order to substantiate these arguments, Clark relies on Darwin’s famous evolution theory called “Survival of the fittest”. Clark integrates the Malthusian theory and the Darwinian evolutionary theory to come up with his new theory on the Industrial Revolution and economic growth in England: “the survival of the richest” or Social Darwinism.
