Transformation of Leading
World Economic Powers
excerpted from the book
Wealth and Democracy
a political history of the
by Kevin Phillips
Broadway Books, 2002, paper
The seed of imperial ruin and national decay-the unnatural gap
between the rich and the poor. . . the exploitation of ... labor,
the physical degeneration which seems to follow so swiftly on
civilized poverty . . . the swift increase of vulgar, jobless
luxury-are the enemies (of Britain).
Winston Churchill, 1908
Great powers in particular have found history full of meaningful
repetition, especially in broad outline. What Americans were asking
themselves at the end of the twentieth century and the beginning
of the next was what the Dutch had asked in 1750 and many British
had pondered in the decades leading up to the world war: Was their
increasing national reliance on finance and services rather than
physical commerce and goods production the secure and reliable
evolution of a genuinely new economy-or was it a familiar and
vulnerable twilight stage of a great economic power?
Historians on both sides of the Atlantic
had chewed on the subject for over a century. In The Law of Civilization
and Decay, published in 1896, historian Brooks Adams-of the Boston
Adamses-related a nation's decline to the rise of financiers and
their values, a breed he saw everywhere in the U.S. of his era.
Theodore Roosevelt, reviewing the book, disagreed in part-Adams
was certainly premature in assessing U.S. vulnerability- but added
that "with Adams' contempt for the deification of the stock
market . . . all generous souls must agree."
Leading economic powers are not made or unmade overnight. Each
of the three that preceded the United States gained that status
over roughly a half century, always amid a powerful convergence
of commercial, political, geographic, and cultural forces.
Greater Spain became the world's most
important political and economic force by the 1540s and 1550s.
Shipments of gold and silver from the New World, only a trickle
in the decades following Columbus's explorations, now arrived
on a large enough scale to help bring on what scholars have called
the "sixteenth-century price revolution." Dynastic upheaval
also extended Spain's reach. Ferdinand and Isabella had ruled
Castile and Aragon. Their Hapsburg son-in-law, Charles V, by 1520
would not just be king of Spain, but ruler of Austria, southern
Italy, Burgundy, and Flanders as well as the elected Holy Roman
Imperial economics gained sophistication
in the late 1550s as the Spanish Crown, already sovereign over
Antwerp and the Low Countries, allied itself with the merchant
bankers of the rich, maritime republic of Genoa. Besides the Flemings
and Augsburgers, the Hapsburgs ruling in Madrid had now enlisted
another financial elite with an influential network across Europe.
After these convergences, Greater Spain was not displaced as Europe's
leading power until the drain of the Thirty Years' War (1618-48)
and the full-fledged emergence of an independent Holland.
The United Provinces of the Netherlands,
born of a late-sixteenth century revolt against Hapsburg authority,
started their own extraordinary climb to commercial leadership
while Spain's might was still in place. The engines of Dutch advance
were maritime, commercial, and even religious. The expulsion of
Protestants in 1585 from the Spanish Netherlands (later Belgium)
sent so many bankers, merchants, and artisans fleeing to the Protestant
north that in the words of one refugee, "Antwerp became Amsterdam."
Mushrooming from 30,000 residents in 1580 to 105,000 in 1622 and
201,000 by 1662, Amsterdam replaced Antwerp as Europe's commercial
Frugal and commercially adept, the Dutch,
only a million or so in contrast to 16 million Frenchmen and 20
million Spaniards, soon boasted the world's largest merchant fleet-some
6,000 ships in 1669, virtually as many as the rest of Europe-as
well as its largest pool of investment capital. The Dutch also
developed Europe's most advanced technology, and through it large
and successful textile, shipbuilding, fishing, and specialized
industries. In the 1600s, Dutch shipping jumped from regional
importance to lucrative control of the so-called "rich trades"
to the Baltic, the Levant, and the Indies, an edge they held for
another hundred years. By the 1700s, although Amsterdam remained
Europe's great lending center, the Dutch elite had begun to shift
their own investments to the next great economic power: Britain.
The precise timing of Britain's own emergence
is a continuing debate. Defeat of the French in 1763 gave the
British a huge global empire, to say nothing of diplomatic precedence
over the representatives of King Louis. Besides launching the
Industrial Revolution, Britain also controlled the world's largest
navy and verged on replacing Holland as Europe's principal pool
of investment capital. Defeat of Napoleon in 1815 made British
industry, capital, and empire paramount. But after a mid-Victorian
heyday, large portions of British manufacturing were becoming
obsolescent by the early twentieth century even while finance
and national wealth were still reaching a zenith. Two world wars
completed Britain's decline and transferred global economic leadership
to the United States.
Even these short capsules preview some
striking recurrences. The early decades of each emerging economic
primacy-Greater Spain in the 1520s and 1530s, Holland in 1600
or 1615, late Georgian and regency Britain-were fat years for
each nation's economic elite. But it was the subsequent heydays,
the golden ages, that brought the flood tide of commercial opportunity,
new markets, and wealth that produced the broadest benefit for
the largest number. Thereafter, each nation's relative distribution
of wealth and income would narrow. Stratification would set in.
But for now we will examine the relative breadth of opportunity
and wealth of each nation's best years.
For all that Spain's economic data is
least reliable, these years stretched from the 1530s, when the
gold and silver began pouring in, to the 1580s, after new techniques
had further increased New World silver output, bringing what Spaniards
called the largueza-the abundance of money. Besides restoring
national confidence, shaken by periodic royal bankruptcies, the
largueza also underwrote the ill-fated armada against England.
Commercial and manufacturing towns like Toledo, Segovia, and Burgos
grew through the 1570s or 1580s. Seville, principal base of the
American trade, increased its population from 70,000 in 1530 to
about 150,000 in 1588, the Armada year. A turning point is often
found in 1596, when yet another royal bankruptcy from overspending
produced a wave of national pessimism.
The golden age of the United Provinces,
in turn, came between 1647, when Dutch ships were readmitted to
seaports under the Spanish Crown, and the French invasion of 1672.
Some historians have stretched it further, from the 1630s up to
1702 and the economic disruptions of the War of the Spanish Succession.
Dutch commercial success in the first half of the seventeenth
century was middle-class and relatively unpretentious. This cultural
conservatism is still apparent in the cautious, calculating faces
painted by Rembrandt or Hals and the sober facades of their great
houses on Amsterdam's Heerengracht.
If thrifty Holland had Europe's first
industrial proletariat, it was a relatively well-paid one-wages
were two or three times higher than in Switzerland or nearby Germany.
Dutch municipal neatness and sanitation was the wonderment of
visitors. Commercial centers like Amsterdam, Leiden, Haarlem,
Delft, and Zaandam doubled and trebled their population in the
first half of the seventeenth century (even while Castilian towns
far to the south were shrinking by almost the same ratios). Yet
the Dutch prosperity and wealth that most impressed foreign observers
was that of the brede middenstand-the broad middle of the population
whose ratios were unmatched elsewhere in Europe. In the words
of one historian, "The Republic was an island of plenty in
an ocean of want. Its artisans, even its unskilled workers and
its farmers (for it seems a misnomer to call them peasants), enjoyed
higher real incomes, better diets and safer livelihoods than anywhere
else on the continent."
The third golden age, Britain's, stretched
from the great railway boom of 1846-47 through the symbolic Crystal
Palace Exposition of 1851 and into the 1870s. R. F. Delderfield
set his most famous novel, God is an Englishman, in the Kentish
Weald of the heady 1850s. His metaphor was the success of a small
provincial transport entrepreneur in an era that saw England become
a vibrant grid of factories, railroads, and canals. These sped
manufactured goods-textiles especially, but also ironware and
machinery-to docksides in London, Liverpool, and Bristol for shipment
around the world.
Up 30 percent between 1800 and 1830, international
trade then jumped fivefold between 1840 and 1870, with British
vessels and manufactured exports accounting for about half of
the total. London's population climbed from just over 2 million
in 1841 to just under 5 million in 1881. Metalworking Sheffield
swelled from 111,000 to 285,000 and textile-based Salford from
53,000 to 176,000. Coal mining centers in Wales and northeast
England quadrupled their smaller head counts. Industrial slums
also thickened their gloom and squalor-tenements untouched by
daylight, rivers like dye vats-but the wages of ordinary Britons,
adjusted for inflation, rose by about one-third in the quarter
century between 1850 and 1874-75. Skilled Britons became the wage
elites of European labor.
The British middle and lower middle classes,
15 to 25 percent of the population depending on one's calculus,
gained even more rapidly. Suburbs began spreading around London.
Household sugar consumption soared in the 1850s and 1860s, and
more middle-class families could afford at least one servant.
Elements of the middle class became a leisure class. By 1871,
out of a British population of 26 million, 170,000 "persons
of rank and property" without visible occupation, mostly
women (many widowed or unmarried), lived on the interest and dividends
from a half century of commercial and railroad expansion.
Let us underscore this next point: What
all three "golden ages" involved, first and foremost,
was a wave of success that brought broad enough status and prosperity
to set the generality of Spaniards, then Dutch and Britons, ahead
of their peers elsewhere. At first God was Spanish, which the
banners of the sixteenth-century galleons more or less proclaimed.
To Holland's favored brede middenstand, the Almighty must have
been a Dutch burgomaster. And on Delderfield's bustling mid-nineteenth-century
Kentish plain southeast of London, God was an Englishman.
The equivalent heyday in the United States,
as we have seen, spans the years from World War II to some point
in the 1960s or the early 1970s- the "good years" following
the Good War, the era of the Great Compression, when income growth
was high and the distance between bottom and upper wage levels
was at its narrowest.
The next stage for each leading power
began to erode this relatively