Evan Davis interviews economic historian Deirdre McCloskey in front of an audience at the London School of Economics, where she argues that poverty matters more than inequality. She describes how at the beginning of the 19th century most people who had ever lived had survived on $3 a day. Today, on average, people in Western Europe and North America live on over $100 a day. Although Professor McCloskey is an economic historian, she says we can't explain this 'Great Enrichment' using economics alone. She also argues that capitalism is an inherently ethical system, and that it would be a mistake to prioritise equality over innovation. Prof McCloskey talks about the role of ideas and attitudes in creating modern prosperity and discusses what her study of history tells us about where our priorities should lie today.
Producer: Luke Mulhall.
United States


00:00:00This is the BBC Thiss podcast is supported by advertising outside the UK Thank you for downloading analysis from the BBC For over forty years analysis has been examining the ideas and forces which shape public policy in Britain and abroad I'm Evan Davis and this week I talked to
00:00:21the economic historian Deirdre McCloskey about equality innovation on the origins of the modern world Hello and welcome to the old theater at the London School of Economics and Political Science Now given all we've been through in recent years you may be worried about the world about global inequality
00:00:45the excesses of the rich the numbers of poor by dysfunctional capitalism Well we're here to get some perspective on those issues Some history on some implications off that history with me on the audience here is deadly McCloskey distinguished professor off of economics of History of English and communication
00:01:04of the University of Illinois Chicago And for five years she was a visiting professor of philosophy at Erasmus University in Rotterdam It would be quicker to list the subject You're not a professor off DeVry Now Professor McCloskey has thought hard about the cause of the biggest episode and
00:01:21mystery in our nation's life The Industrial Revolution Perhaps better Called the Great in Richmond it is thie subject of her books Bourgeois virtues Ethics in an Age of Commerce on bourgeois Dignity Why Economics can't Explain the Modern World Paraphrasing Douglas Adams professor McCloskey tries to answer the question
00:01:44How do we go from society asking How should we eat toe one asking Wes we do lunch Well Professor McCloskey's answer is a surprising one But then she has had a surprising personal and career journey herself describing herself as a literary quantitative X Marks is free market progressive
00:02:04Episcopalian Christian libertarian Midwestern woman from Boston Who was what Not we will I hope Deconstruct some of that Please welcome Professor Daydream McCloskey What I want to do is start with the history I called it the biggest episode in our nation's history Is it the biggest episode of
00:02:31the Industrial Revolution Well not really because it's the follow on That was big There had been industrial revolutions elsewhere in Song China in various parts of the ancient world But there hadn't ever been the nineteenth and twentieth century which could be called a great enrichment because we went
00:02:56from that three dollars a day average in the world in eighteen hundred two thirty three dollars a day factor of ten in real terms and in places like England up to one hundred three to one hundred thirty three times over the over two hundred years over two hundred
00:03:16years That's a pretty good rate of growth And it's worth saying of course that the the three dollars a day or plus or minus a few dollars had prevailed everywhere forever until then So it is a remarkable thing that happened They had prevailed since the caves Now how
00:03:34do we explain In historical terms it was so sudden and so quick It is like the flicking of a switch What was the switch That was flick I explain it with a change in ideology but by accident happens in Northwest Europe first in Holland that in England in
00:03:54what became the United States and so forth and the switch wass equality a new notion of the liberty and dignity of ordinary people People start attributing virtues to betterment to innovators to markets to progress in a way that they were deeply suspicious of before that them made ordinary
00:04:24people both So that ignites enormous innovation in your account and the internation that's driving its innovation That's driving in As a student famously said on examination script many many years ago a wave of gadgets swept over England So this is the bourgeois The boy Who was he That
00:04:46you're talking about The titles of your Well it's It's ordinary folk and among them the butch one See what's important here is that there was a market test Now there there were markets in all human societies It's not true that the market arises and we become rich now
00:05:04That's not work They were very good markets in in China for millennia in all things But there wasn't this as you call it the spark and the spark wass ideological social and political and bang it happen So the big event happened and all the big episode happened And
00:05:26it wasn't because because there were markets that were introduced because they're wrong market It was really to do with this ideological changes Some of us just bit skeptical that you could change Well then ideas could have such a big effect You're not a conventional economic historian in that
00:05:45sense But they would talk about I suppose modern capitalism or capitalism arriving on DH making Working with the clue for them is in that word isn't it In capital its capital it is It's wrong for a little growth It makes a lot of sense If Scotland is trying
00:06:03to become Holland then capital accumulation is how to do it That will double your income Maybe maybe triple it But that's not what happened What would happen understand is not one hundred percent growth but anywhere from twenty nine hundred percent growth Two thousand nine hundred percent growth Two
00:06:29nine thousand nine hundred percent growth a factor of you either thirty or one hundred thirty times richer rose up to a hundred times you're not twice All right Well look I'd like to move on because obviously there are a lot of worries about the way the world is
00:06:46working at the moment Andi I want to pick up some of the implications you draw from your study of history to where we are now on Perhaps one of them is if you put a huge weight as you do on innovation on on the values the culture that
00:07:06encourages innovation on the innovators I wonder whether you could put you in that category that says for goodness sake avoid the politics of envy at all costs The job is to make the pie bigger rather than slice the pie differently I mean um I being fair Now you're
00:07:24being completely sure Look all I care about is the poor of the world What has helped the poor more than any of the envy driven policies of taxing the rich regulating garbage collection or whatever besides of the pie If we were to expropriate the expropriated er's eye was
00:07:51a Marxist once I can't help if if we were to take all the profits in the British economy and give them to poor people it would help Hm A little bit What twenty percent perhaps maybe thirty percent once because you can't keep expropriating the express operators because they're
00:08:13no longer expro paraders If you understand the problem here so the engine of economic growth is the great salvation of the working class So trade unions government regulation is not the thing that explains why a working class person today is so much richer than one hundred years ago
00:08:37I'm not against that sort of activity and not against government Wei need government to kind of do a bunch of stuff But if we want to help poor people and I hope everyone in this room wants to help poor people we should help poor people We shouldn't do
00:08:56these other things that at best do nothing and sometimes make the pie smaller I have started to read trollop for the first time two of the palace or novels and one of the character says It's not equality we want we liberals nineteenth century style It's raising up poor
00:09:20people that we want right If someone's a better chess player than me I don't want him to be made less intelligence so that I can beat him I want to improve my own chess game I'd like to get some questions from the hole here on these issues around
00:09:38contemporary capitalism where we are now Take the lady right up there You began by saying that the switch in relation to the Industrial Revolution was a move towards equality Yeah So how do you square that with the idea that one should focus only on helping the poor and
00:09:59not redressing inequality I don't think equality is an ethically sensible purpose I don't see what variants has to do with anything when you've got poor people who you need to raise up That's that's the kind of philosophical point on the historical point It's not so much that equality
00:10:19changed The switch was not actually quality It was an ideology of equality It's an attitude that other people deserve liberty and dignity But look here's the economic history situation Inequality rose in the early nineteenth century in Britain in the United States Then it felt then it grows Now
00:10:44we're talking about the early twentieth century By the nineteen twenties inequality was about the same as it is now Then of thirties It reversed and went down to the nineteen seventies Then it started to go up in none of these cases Did it change enough that equality was
00:11:07the issue facing the working class it was made an issue by the intelligence of the artists in the ant elections They said Oh inequality Terrible Oh it didn't change all that much even between nineteen seventy three and the present I mean you say Oh the top one percent
00:11:24look they show it on TV all the time It must be true It must be true It's actually not true In any case you have to ask and I think you'll agree with this what the source of the inequality is If the source is stealing from poor people
00:11:41I'm against it But if the source is you got there first with an innovation that everyone wants to buy So you get paid some crazy Some would be paid that much So you understand the point There's nothing to be gained in focusing on inequality if all you're going
00:12:02to do is cut off the tall poppies Even if the tall poppies earned every cent they made I just have a question about your ideas behind poverty and equality understanding poverty Do we see it as a comparative thing or do you see it is like an absolute Yes
00:12:20I see it is absolute and I think it truly is a fool's errand to see it relatively because you can never eliminate the bottom ten percent of any distribution whatever it's hopeless Whereas if you ask what is enough for poor people to fully participate in the society shoes
00:12:46Abed a roof Enough food etcetera etcetera etcetera If you start talking those absolute terms then poverty is something that can be solved Let me just remind you you're listening to analysis on BBC Radio four with me Evan Davis This evening we're guests of the London School of Economics
00:13:04where I'm talking to the economic historian Dadri McCloskey There's just pick up some other implications on DH Follow on if you like From the argument be giving us Professor McCloskey Let me let me put this to you Maybe some of the things we've seen Some of the grotesque
00:13:20features of Ah economy in the last decade or so are things that neither enlarged pie or redistribute It is in the ways that would help The poor may be employing some of your brightest people to work out more and more devious ways to extract money from everybody else
00:13:39And maybe that's what we've done in the financial sector for example So maybe if we can regulate that away tax it away intervene a little bit Mohr Those people would actually do something more productive rather than less productive This is an old argument that there are some parts
00:13:55of the economy that are unproductive that don't really do anything And I think that a market test is pretty good So I'm claiming pretty good I don't think it's perfect Then we're living on You're denying the existence of what Comical genuinely predatory activity Yeah no I'm not If
00:14:14there's genuinely predatory activity people should go to jail Well what about a symmetries of information Because what we know what everybody who studies economics now knows is that markets are riddled with ace And so the person buying insurance or an extended warranty knows less about the product and
00:14:32the person selling it And that's the only reason they would be stupid enough to buy Yeah that's not what he could not make sense he could harm except said among others in faults in the markets a monopoly there exists asymmetric information So my friend Joe Stiglitz says this
00:14:55but they offer no evidence that it's a big deal Not at all But quis Custodian Custodian Who are you going to trust to fix this asymmetric information Does it strike you as plausible that Parliament and in fact doesn't strike you as implausible Try the United States Congress Hey
00:15:22is a good instrument for discerning what's information and what's bologna So you can't compare ideal socialism with ideal capitalism That's a fool's errand We don't get anywhere that way because ideal worlds are ideal That's kind of other constructed So you have to look at the actual ability of
00:15:47government to do things And some things they do very well And some things not so well And the actual empirical factual scientific prevalence of market imperfections Well I mean one of the things you write quite a lot about is the role of morality in capitalism You say capitalism
00:16:09is drenched in it A lot of economists just assume it's a moral on A lot of people will think it's actually often rather immoral It's a danger to be corrupted by the economist talk I think it's happened in the last thirty years the economists said Just maximize utility
00:16:31incentives incentives incentives behavior behavior behavior agency theory In the business schools it was all very corrupting talk because it said Be tough be a capitalist Don't be ashamed of it isn't that great And then what they meant by It's not a full life in this unfortunately named capitalism
00:16:58but I mean purpose only just maximize screw everyone else and that's a great danger and we must oppose it So can you be an ethical person and still participate in a modern economy Yes the evidence is all around us now Course there is evidence of malfeasance But there's
00:17:24malfeasance You may have noticed in an aristocratic economy or a peasant economy or a spiritually economy Malfeasance is human To have a full life and business is to have an ethical life to believe in justice intemperance and love chase and hope courage as well as prudence The economists
00:17:51Yes the economists Under the improvements they ignore the others I just wonder whether you're very glass half full person really because you do on DH Maybe you're a glass half full person because you're a historian And of course if you compare us now two Stone Age man Well
00:18:07pretty good or Teo pre pre industrial revolution Britain does It looks pretty darn good You really don't know But maybe just maybe people could hold themselves a slightly higher standard and say Well we could do a little better than comparing ourselves to two hundred years ago Why couldn't
00:18:23we made our country as rich as fill in the you know insert country Here is Richard's the United States or his riches Germany There are sort of smaller differences are there between countries that they're interesting but they're very small You know I don't want Britain to become the
00:18:41United States We already have fifty states We don't need another big state although I agree it would be better than Texas But Britain is a very rich country spent the early part of my career isn't economic Historian argues against the claim with very common claim You still hear
00:19:03it that Britain failed economically in the late nineteenth century or early twentieth or yesterday which is just ridiculous It's a very successful country because there are still countries down at one or two or three or four dollars a day Plenty of thumb although many fewer than there once
00:19:21were All the differences between affluent nations whether there are number one in the league or number fifteen in the Levi's thatjust detail detail their small potatoes school data set And I'm working on the large potatoes I want Bangladesh to become wealthy I want subsaharan Africa too develop and
00:19:42become rich like the United States or Britain That's what matters to me is an economist and a human being But you've also made the point though that for a country like Britain or the United States stay on the course your own Don't worry too much about a small
00:19:58number of people The one percent is that Robin called who are walking off with such a big portion of our national income and growing portions But let's take a few more questions Any topics you like folks That gentleman over there Yeah You were talking about your ambition about
00:20:13raising up sub Saharan Africa or Somalia Too greater Well getting the side sort of growth rates were described in the first part of your daughter What is this switch that is needed in those countries After all the ideas are all around us now Well what happened Well to
00:20:30the world Well clearly in a place like Somalia first you need the rule of law Let's get a government that works And that can stop people from killing each other Yes but once you have that if you then go say let's tax farmers to death and give the
00:20:49money to urban bureaucrats That sounds like a good idea Or let's socialize the means of production That's good None of those are good ideas Once you got the rather obvious preconditions for economic growth and they're not rare China was the place in sixteen hundred That should have had
00:21:10an industrial revolution Not the's pathetic places around the North Sea with their crappy weather ven ideology matters Want to go back to this hypothesis Why economics can't explain the modern world I kind of want to bring a resident academic into the room His name's Peter Hall on DH
00:21:31His partner Jonathan's Oscar's on one of the big studies they did was to look at the difference between economy like ours on economy That's been incredibly resilient in the post economic crisis like Germany and they look at thesent realization of wage bargaining institutions The fact that trade unions
00:21:49are heavily entrenched in these economies the fact that government gets heavily involved in these economies on insulate its citizens against these kind of changes You know sometimes that works tohave the government to have more power Look I understand that the competence of the government is an issue here
00:22:07and that needs to come into the argument You can't just say Oh let me have some of that nice works relationship between company unions and the buses they have in Germany Well maybe that better Society doesn't include that Ifyou're goingto play cricket you're not going Do you know
00:22:29Actually in the world it doesn't matter that much income per head in real terms is ten percent now That's the whole world Not just Britain is ten percent higher than it was in two thousand eight So let's not get panicked by the great recession It was nasty I'm
00:22:49not recommending it I wish those people who allegedly caused it if they did illegal things they should go to jail and they haven't But I'm an economic historian We've had forty recessions since eighteen hundred four zero Six of them have been as bad or worse than the last
00:23:09one We had the two thousand seven eight my marks his friends They're ecstatic because they say the final crisis of capitalism I saved them dear You were saying that about the eighteen fifty seven percent It's just pick up some other implications on DH Follow on if you like
00:23:31from the argument be giving us Professor McCloskey I wonder whether history has changed whether the great Enrichment has stopped Let me quote a little bit of Tyler Count in the book The Great Stag Nation The end of the Good Years Hey says in a figurative sense the American
00:23:47economy is enjoyed lots of low hanging fruit since the seventeenth century Freeland Immigrant labor Powerful new technologies During the last forty years that low hanging fruit started disappearing We pretended it was still there but we failed to recognize that were technological plateau The trees are bare than we'd
00:24:05like to think That's it That's what's gone wrong I doubt it In the nineteen thirties and forties Canes believed that the low hanging fruit has been plucked the innovations of steam and steal And then electricity in the automobile had been exhausted And that was it What were you
00:24:23going to do What we're going to do that On the contrary the nineteen thirties we're the most innovative decade in American history Nylon stockings alone predicting the future of human fares is a deeply foolish project Your politics are complicated on the I mean you're you're not down the
00:24:46line Republican down the line right wing It's hard to categorize I've been everything respectable in my life except a Birkin conservative or Republican I think the whole talk of wanting to put people into categories either you're a progressive or your conservative is a ridiculous way of talking Gets
00:25:10to reduce all of politics to a single dimension And what kind of craziness is that Let's get personal now way Might we get to the end of the conversation You've had a lot of journeys in your life You've become skeptical of economics If you're a Marxist you've turned
00:25:27You're very quantitative now your incredibly literary and perhaps the biggest Your transition from male to female You born as Donald McClosky or dead right now Is there a connection between the journeys on that last one in particular Well on the intellectual journey you've made in the argument you're
00:25:45making Well I make a joke I can't distinguish becoming older and wiser from becoming a woman In a way that joke is true Slowly in the course of my three years transition I caught on to female friendship and I was a guy I know from age eleven on
00:26:15that that I wanted to be a woman but I was born in nineteen forty two nineteen fifty three Believe me there was nothing be done So I said Oh well I'll be a guy that's fine And I I was a cheerful guy But what I learned about female
00:26:29friendship is that love is deep in human life I was talking with a dear friend of mine a man he said Oh yeah love is an exchange You love someone because then they'll do something for you I said No John that's you got it That's not a mother's
00:26:51love for her child That's not the kind of love that was expressed to me by so many women during my transition So I kind of got it and I got a wider understanding of humanity My my mom but ninety one years old she says You're so fortunate because
00:27:08you've seen it from both sides And you know I wish I'd been born a girl and I wish had my first period and all those wonderful things that you women have she says Now don't talk that way You You've had it both ways till age fifty three You're
00:27:24a guy and then you're not your woman You've been been a woman now for almost twenty years She she says though very wisely Don't do anything more interesting And we end on that optimistic note I know we could talk all along night about these things but we don't
00:27:44have time to do so Thank you very much for taking part in this edition of analysis at the London School of Economics and of course very special thanks to Professor Dadri McCloskey Thanks for listening to the analysis podcast next week on analysis Tim Finch of the I P
00:28:10P R argues it's time to rethink UK policy on asylum and refugees

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