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TEDGlobal 2011

Niall Ferguson: The 6 killer apps of prosperity

Filmed:

Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture -- call them the 6 killer apps -- that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.

- Historian
History is a curious thing, and Niall Ferguson investigates not only what happened but why. (Hint: Politics and money explain a lot.) Full bio

Let's talk about billions.
00:15
Let's talk about
00:18
past and future billions.
00:21
We know
00:24
that about 106 billion people
00:26
have ever lived.
00:29
And we know that most of them are dead.
00:31
And we also know
00:34
that most of them live or lived in Asia.
00:36
And we also know
00:38
that most of them were or are very poor --
00:40
did not live for very long.
00:44
Let's talk about billions.
00:47
Let's talk about
00:50
the 195,000 billion dollars of wealth
00:52
in the world today.
00:56
We know that most of that wealth
00:59
was made after the year 1800.
01:02
And we know that most of it
01:05
is currently owned
01:08
by people we might call Westerners:
01:10
Europeans, North Americans, Australasians.
01:14
19 percent of the world's population today,
01:18
Westerners own two-thirds of its wealth.
01:21
Economic historians
01:25
call this "The Great Divergence."
01:27
And this slide here
01:30
is the best simplification
01:32
of the Great Divergence story
01:34
I can offer you.
01:36
It's basically two ratios
01:38
of per capita GDP,
01:40
per capita gross domestic product,
01:42
so average income.
01:45
One, the red line,
01:47
is the ratio of British to Indian
01:49
per capita income.
01:51
And the blue line
01:53
is the ratio of American to Chinese.
01:55
And this chart goes back to 1500.
01:58
And you can see here
02:00
that there's an exponential Great Divergence.
02:02
They start off pretty close together.
02:05
In fact, in 1500,
02:07
the average Chinese was richer than the average North American.
02:09
When you get to the 1970s,
02:13
which is where this chart ends,
02:16
the average Briton is more than 10 times richer
02:18
than the average Indian.
02:20
And that's allowing
02:22
for differences in the cost of living.
02:24
It's based on purchasing power parity.
02:26
The average American
02:29
is nearly 20 times richer
02:31
than the average Chinese
02:33
by the 1970s.
02:35
So why?
02:37
This wasn't just an economic story.
02:40
If you take the 10 countries
02:43
that went on to become
02:45
the Western empires,
02:48
in 1500 they were really quite tiny --
02:50
five percent of the world's land surface,
02:53
16 percent of its population,
02:55
maybe 20 percent of its income.
02:57
By 1913,
03:00
these 10 countries, plus the United States,
03:02
controlled vast global empires --
03:05
58 percent of the world's territory,
03:08
about the same percentage of its population,
03:10
and a really huge, nearly three-quarters share
03:13
of global economic output.
03:16
And notice, most of that went to the motherland,
03:18
to the imperial metropoles,
03:22
not to their colonial possessions.
03:24
Now you can't just blame this on imperialism --
03:28
though many people have tried to do so --
03:30
for two reasons.
03:33
One, empire was the least original thing
03:36
that the West did after 1500.
03:39
Everybody did empire.
03:42
They beat preexisting Oriental empires
03:45
like the Mughals and the Ottomans.
03:48
So it really doesn't look like empire is a great explanation
03:50
for the Great Divergence.
03:53
In any case, as you may remember,
03:55
the Great Divergence reaches its zenith in the 1970s,
03:57
some considerable time after decolonization.
04:00
This is not a new question.
04:04
Samuel Johnson,
04:06
the great lexicographer,
04:08
[posed] it through his character Rasselas
04:10
in his novel "Rasselas, Prince of Abissinia,"
04:13
published in 1759.
04:16
"By what means are the Europeans thus powerful;
04:19
or why, since they can so easily visit Asia and Africa
04:22
for trade or conquest,
04:25
cannot the Asiaticks and Africans
04:28
invade their coasts,
04:30
plant colonies in their ports,
04:32
and give laws to their natural princes?
04:34
The same wind that carries them back
04:37
would bring us thither?"
04:40
That's a great question.
04:42
And you know what,
04:44
it was also being asked at roughly the same time
04:46
by the Resterners -- by the people in the rest of the world --
04:48
like Ibrahim Muteferrika,
04:51
an Ottoman official,
04:54
the man who introduced printing, very belatedly,
04:56
to the Ottoman Empire --
04:59
who said in a book published in 1731,
05:01
"Why do Christian nations which were so weak in the past
05:04
compared with Muslim nations
05:06
begin to dominate so many lands in modern times
05:08
and even defeat the once victorious Ottoman armies?"
05:12
Unlike Rasselas,
05:16
Muteferrika had an answer to that question,
05:18
which was correct.
05:20
He said it was "because they have laws and rules
05:23
invented by reason."
05:27
It's not geography.
05:31
You may think we can explain the Great Divergence
05:34
in terms of geography.
05:36
We know that's wrong,
05:38
because we conducted two great natural experiments in the 20th century
05:40
to see if geography mattered more than institutions.
05:42
We took all the Germans,
05:44
we divided them roughly in two,
05:47
and we gave the ones in the East communism,
05:49
and you see the result.
05:52
Within an incredibly short period of time,
05:55
people living in the German Democratic Republic
05:57
produced Trabants, the Trabbi,
05:59
one of the world's worst ever cars,
06:02
while people in the West produced the Mercedes Benz.
06:05
If you still don't believe me,
06:08
we conducted the experiment also in the Korean Peninsula.
06:10
And we decided we'd take Koreans
06:12
in roughly the same geographical place
06:14
with, notice, the same basic traditional culture,
06:16
and we divided them in two, and we gave the Northerners communism.
06:20
And the result is an even bigger divergence
06:23
in a very short space of time
06:26
than happened in Germany.
06:28
Not a big divergence in terms of uniform design for border guards admittedly,
06:30
but in almost every other respect,
06:34
it's a huge divergence.
06:36
Which leads me to think
06:38
that neither geography nor national character,
06:40
popular explanations for this kind of thing,
06:42
are really significant.
06:44
It's the ideas.
06:47
It's the institutions.
06:49
This must be true
06:51
because a Scotsman said it.
06:53
And I think I'm the only Scotsman here at the Edinburgh TED.
06:55
So let me just explain to you
06:58
that the smartest man ever was a Scotsman.
07:00
He was Adam Smith --
07:03
not Billy Connolly, not Sean Connery --
07:05
though he is very smart indeed.
07:08
(Laughter)
07:11
Smith -- and I want you to go
07:14
and bow down before his statue in the Royal Mile;
07:16
it's a wonderful statue --
07:19
Smith, in the "Wealth of Nations"
07:21
published in 1776 --
07:23
that's the most important thing that happened that year ...
07:25
(Laughter)
07:28
You bet.
07:31
There was a little local difficulty in some of our minor colonies, but ...
07:34
(Laughter)
07:37
"China seems to have been long stationary,
07:39
and probably long ago acquired that full complement of riches
07:41
which is consistent with the nature of its laws and institutions.
07:44
But this complement may be much inferior
07:48
to what, with other laws and institutions,
07:50
the nature of its soil, climate, and situation
07:53
might admit of."
07:55
That is so right and so cool.
07:57
And he said it such a long time ago.
07:59
But you know, this is a TED audience,
08:02
and if I keep talking about institutions,
08:05
you're going to turn off.
08:07
So I'm going to translate this into language that you can understand.
08:09
Let's call them the killer apps.
08:13
I want to explain to you that there were six killer apps
08:17
that set the West apart from the rest.
08:20
And they're kind of like the apps on your phone,
08:23
in the sense that they look quite simple.
08:25
They're just icons; you click on them.
08:27
But behind the icon, there's complex code.
08:29
It's the same with institutions.
08:32
There are six
08:34
which I think explain the Great Divergence.
08:36
One, competition.
08:39
Two, the scientific revolution.
08:41
Three, property rights.
08:43
Four, modern medicine.
08:45
Five, the consumer society.
08:47
And six, the work ethic.
08:49
You can play a game and try and think of one I've missed at,
08:51
or try and boil it down to just four,
08:53
but you'll lose.
08:56
(Laughter)
08:58
Let me very briefly tell you what I mean by this,
09:00
synthesizing the work of many economic historians
09:03
in the process.
09:06
Competition means,
09:08
not only were there a hundred different political units in Europe in 1500,
09:10
but within each of these units,
09:12
there was competition between corporations as well as sovereigns.
09:14
The ancestor of the modern corporation, the City of London Corporation,
09:18
existed in the 12th century.
09:21
Nothing like this existed in China,
09:23
where there was one monolithic state
09:25
covering a fifth of humanity,
09:27
and anyone with any ambition
09:29
had to pass one standardized examination,
09:31
which took three days and was very difficult
09:33
and involved memorizing vast numbers of characters
09:35
and very complex Confucian essay writing.
09:38
The scientific revolution was different
09:42
from the science that had been achieved in the Oriental world
09:45
in a number of crucial ways,
09:48
the most important being
09:50
that, through the experimental method,
09:52
it gave men control over nature in a way that had not been possible before.
09:54
Example: Benjamin Robins's extraordinary application
09:57
of Newtonian physics to ballistics.
10:01
Once you do that,
10:04
your artillery becomes accurate.
10:06
Think of what that means.
10:09
That really was a killer application.
10:11
(Laughter)
10:13
Meanwhile, there's no scientific revolution anywhere else.
10:16
The Ottoman Empire's not that far from Europe,
10:19
but there's no scientific revolution there.
10:21
In fact, they demolish Taqi al-Din's observatory,
10:23
because it's considered blasphemous
10:26
to inquire into the mind of God.
10:28
Property rights: It's not the democracy, folks;
10:31
it's having the rule of law based on private property rights.
10:34
That's what makes the difference
10:37
between North America and South America.
10:39
You could turn up in North America
10:41
having signed a deed of indenture
10:43
saying, "I'll work for nothing for five years.
10:45
You just have to feed me."
10:47
But at the end of it, you've got a hundred acres of land.
10:49
That's the land grant
10:52
on the bottom half of the slide.
10:54
That's not possible in Latin America
10:56
where land is held onto
10:59
by a tiny elite descended from the conquistadors.
11:01
And you can see here the huge divergence
11:03
that happens in property ownership between North and South.
11:05
Most people in rural North America
11:08
owned some land by 1900.
11:10
Hardly anyone in South America did.
11:13
That's another killer app.
11:15
Modern medicine in the late 19th century
11:18
began to make major breakthroughs
11:20
against the infectious diseases that killed a lot of people.
11:22
And this was another killer app --
11:24
the very opposite of a killer,
11:26
because it doubled, and then more than doubled, human life expectancy.
11:28
It even did that
11:31
in the European empires.
11:33
Even in places like Senegal,
11:35
beginning in the early 20th century,
11:37
there were major breakthroughs in public health,
11:39
and life expectancy began to rise.
11:41
It doesn't rise any faster
11:43
after these countries become independent.
11:45
The empires weren't all bad.
11:47
The consumer society is what you need
11:49
for the Industrial Revolution to have a point.
11:51
You need people to want to wear tons of clothes.
11:54
You've all bought an article of clothing in the last month;
11:56
I guarantee it.
11:58
That's the consumer society,
12:00
and it propels economic growth
12:02
more than even technological change itself.
12:04
Japan was the first non-Western society
12:07
to embrace it.
12:09
The alternative,
12:11
which was proposed by Mahatma Gandhi,
12:13
was to institutionalize and make poverty permanent.
12:15
Very few Indians today
12:18
wish that India had gone down
12:20
Mahatma Gandhi's road.
12:22
Finally, the work ethic.
12:25
Max Weber thought that was peculiarly Protestant.
12:27
He was wrong.
12:30
Any culture can get the work ethic
12:32
if the institutions are there
12:34
to create the incentive to work.
12:36
We know this
12:38
because today the work ethic
12:40
is no longer a Protestant, Western phenomenon.
12:42
In fact, the West has lost its work ethic.
12:45
Today, the average Korean
12:48
works a thousand hours more a year
12:51
than the average German --
12:55
a thousand.
12:57
And this is part
12:59
of a really extraordinary phenomenon,
13:01
and that is the end of the Great Divergence.
13:04
Who's got the work ethic now?
13:07
Take a look at mathematical attainment
13:09
by 15 year-olds.
13:12
At the top of the international league table
13:14
according to the latest PISA study,
13:16
is the Shanghai district of China.
13:19
The gap between Shanghai
13:21
and the United Kingdom and the United States
13:23
is as big as the gap between the U.K. and the U.S.
13:26
and Albania and Tunisia.
13:29
You probably assume
13:32
that because the iPhone was designed in California
13:34
but assembled in China
13:36
that the West still leads in terms of technological innovation.
13:38
You're wrong.
13:41
In terms of patents,
13:43
there's no question that the East is ahead.
13:45
Not only has Japan been ahead for some time,
13:47
South Korea has gone into third place,
13:50
and China is just about to overtake Germany.
13:53
Why?
13:56
Because the killer apps can be downloaded.
13:58
It's open source.
14:00
Any society can adopt these institutions,
14:02
and when they do,
14:04
they achieve what the West achieved after 1500 --
14:06
only faster.
14:10
This is the Great Reconvergence,
14:12
and it's the biggest story of your lifetime.
14:14
Because it's on your watch that this is happening.
14:18
It's our generation
14:21
that is witnessing the end of Western predominance.
14:23
The average American used to be more than 20 times richer
14:25
than the average Chinese.
14:27
Now it's just five times,
14:29
and soon it will be 2.5 times.
14:31
So I want to end with three questions
14:33
for the future billions,
14:36
just ahead of 2016,
14:38
when the United States will lose its place
14:41
as number one economy to China.
14:43
The first is, can you delete these apps,
14:46
and are we in the process of doing so
14:50
in the Western world?
14:52
The second question is,
14:54
does the sequencing of the download matter?
14:56
And could Africa get that sequencing wrong?
15:00
One obvious implication of modern economic history
15:05
is that it's quite hard to transition to democracy
15:07
before you've established
15:10
secure private property rights.
15:12
Warning: that may not work.
15:15
And third, can China do without
15:18
killer app number three?
15:20
That's the one that John Locke systematized
15:22
when he said that freedom was rooted in private property rights
15:26
and the protection of law.
15:30
That's the basis
15:32
for the Western model
15:34
of representative government.
15:36
Now this picture shows the demolition
15:39
of the Chinese artist Ai Weiwei's studio
15:41
in Shanghai earlier this year.
15:44
He's now free again,
15:46
having been detained, as you know, for some time.
15:48
But I don't think his studio has been rebuilt.
15:50
Winston Churchill once defined civilization
15:55
in a lecture he gave in the fateful year of 1938.
15:59
And I think these words really nail it:
16:03
"It means a society based upon the opinion of civilians.
16:06
It means that violence, the rule of warriors and despotic chiefs,
16:10
the conditions of camps and warfare, of riot and tyranny,
16:13
give place to parliaments where laws are made,
16:16
and independent courts of justice
16:19
in which over long periods those laws are maintained.
16:21
That is civilization --
16:24
and in its soil grow continually
16:26
freedom, comfort and culture,"
16:28
what all TEDsters care about most.
16:31
"When civilization reigns in any country,
16:35
a wider and less harassed life
16:38
is afforded to the masses of the people."
16:41
That's so true.
16:44
I don't think the decline of Western civilization
16:48
is inevitable,
16:51
because I don't think history operates
16:53
in this kind of life-cycle model,
16:56
beautifully illustrated by Thomas Cole's
16:58
"Course of Empire" paintings.
17:00
That's not the way history works.
17:03
That's not the way the West rose,
17:06
and I don't think it's the way the West will fall.
17:08
The West may collapse very suddenly.
17:11
Complex civilizations do that,
17:14
because they operate, most of the time,
17:17
on the edge of chaos.
17:19
That's one of the most profound insights
17:21
to come out of the historical study of complex institutions
17:24
like civilizations.
17:27
No, we may hang on,
17:30
despite the huge burdens of debt that we've accumulated,
17:32
despite the evidence that we've lost our work ethic
17:36
and other parts of our historical mojo.
17:39
But one thing is for sure,
17:42
the Great Divergence
17:44
is over, folks.
17:46
Thanks very much.
17:48
(Applause)
17:50
Bruno Giussani: Niall,
18:15
I am just curious
18:17
about your take on the other region of the world that's booming,
18:19
which is Latin America.
18:22
What's your view on that?
18:25
Niall Ferguson: Well I really am not just talking
18:28
about the rise of the East;
18:30
I'm talking about the rise of the Rest,
18:32
and that includes South America.
18:34
I once asked one of my colleagues at Harvard,
18:36
"Hey, is South America part of the West?"
18:38
He was an expert in Latin American history.
18:40
He said, "I don't know; I'll have to think about that."
18:42
That tells you something really important.
18:44
I think if you look at what is happening in Brazil in particular,
18:46
but also Chile,
18:48
which was in many ways the one that led the way
18:50
in transforming the institutions of economic life,
18:53
there's a very bright future indeed.
18:56
So my story really is
18:59
as much about that convergence in the Americas
19:01
as it's a convergence story in Eurasia.
19:04
BG: And there is this impression
19:06
that North America and Europe
19:08
are not really paying attention
19:10
to these trends.
19:12
Mostly they're worried about each other.
19:14
The Americans think that the European model is going to crumble tomorrow.
19:17
The Europeans think that the American budget is going to explode tomorrow.
19:20
And that's all we seem to be caring about recently.
19:23
NF: I think the fiscal crisis
19:26
that we see in the developed World right now -- both sides of the Atlantic --
19:28
is essentially the same thing
19:31
taking different forms
19:33
in terms of political culture.
19:35
And it's a crisis that has its structural facet --
19:37
it's partly to do with demographics.
19:41
But it's also, of course, to do with the massive crisis
19:43
that followed excessive leverage,
19:46
excessive borrowing in the private sector.
19:48
That crisis,
19:50
which has been the focus of so much attention, including by me,
19:52
I think is an epiphenomenon.
19:55
The financial crisis is really a relatively small historic phenomenon,
19:57
which has just accelerated
20:00
this huge shift,
20:02
which ends half a millennium of Western ascendancy.
20:04
I think that's its real importance.
20:06
BG: Niall, thank you. (NF: Thank you very much, Bruno.)
20:08
(Applause)
20:10

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About the Speaker:

Niall Ferguson - Historian
History is a curious thing, and Niall Ferguson investigates not only what happened but why. (Hint: Politics and money explain a lot.)

Why you should listen

Niall Ferguson teaches history and business administration at Harvard and is a senior research fellow at several other universities, including Oxford. His books chronicle a wide range of political and socio-economic events; he has written about everything from German politics during the era of inflation to a financial history of the world. He’s now working on a biography of former US Secretary of State Henry Kissinger.

Ferguson is a prolific and often controversial commentator on contemporary politics and economics. He frequently writes, reviews, and hosts for the British and American press. His latest book and TV series, Civilization: The West and the Rest, aims to help 21st-century audiences understand the past and the present. In it, he asks how, since the 1500s, Western nations have surpassed their Eastern counterparts and came to dominate the world (his answer: thanks to six “killer apps”: science, medicine, protestant work ethic, competition, property rights, consumer society). And he wonders whether that domination is now threatened by the rise of Asia. His theories have drawn criticism and prompted discussions, which he says was his intent. “It’s designed to be slightly annoying, so that you talk about it,” he told The Observer.

He says: "If a majority of people subscribe to a particular view, it pays to question it. It pays to think: maybe this is wrong."

More profile about the speaker
Niall Ferguson | Speaker | TED.com