Parasite cities and the decline of Rome

Why there was no Industrial Revolution in the Pax Romana

By Daniel Freeman, Managing Editor at the IEA.

If you spend enough time with free-marketeers, you’ll probably have come across the following quote:

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

When Adam Smith made this statement in 1755, there was little reason to doubt it. Peace, low taxes and a fair justice system are both desirable in their own right, and other things being equal, they will lead to greater prosperity. Smith believed these conditions would allow for greater trade and specialisation both among workers and regions, allowing for a steady increase in general prosperity. 

But there is a problem: this steady Smithian model of growth is insufficient to explain why a chart of world GDP looks like a hockey stick with a dramatic acceleration starting around 1800.

In the late 18^th century, Britain was on the cusp of an economic explosion which would later spread across the world. Harnessing the power of labour-saving technologies, and cheap energy in the form of waterpower, coal and steam, saw a dramatic increase in per capita GDP even as population growth increased. This Industrial Revolution was just the start of what is known as modern economic growth, which has been more rapid and sustained than anything which came before.

An obvious question is: why did this transformation began in Georgian Britain, which was frequently at war, and had some of the highest taxes in Europe? But the corollary of this is why other societies, which met the criteria for Smithian Growth, failed to industrialise. Economic historians have often focused on why the Industrial Revolution did not start in the Qing-ruled Yangtze Delta, but a question at least as interesting is why it didn’t begin over a millennium and a half earlier in the Mediterranean of the Pax Romana.