Economic Development
The first human societies, tens of thousands of years ago, were nomadic hunter-
gatherer groups of 20 to 40 people. They had few rules about the production and
distribution of capital. Sometimes a particularly talented or interested person might
specialize in a task, like making pottery or spears, but otherwise everyone worked
together to provide food, shelter, and clothing, and there were few other material
resources available (nomads can’t own a lot) (Panter-Brick, Layton, and Rowley-
Conwy, 2001). Then came the Agricultural Revolution.
The Agricultural Economy
Around 10,000 years ago, people living along the great rivers in Mesopotamia, Egypt,
and China learned how to plow the land and grow regular, predictable crops of rice,
wheat, or corn. No longer nomadic, they could acquire more goods. And because
agriculture is far more productive (more food produced per hour of work) than
hunting and gathering, not everyone had to be involved in providing food, shelter,
and clothing for the group. Farmers could use their surplus crops to pay professional
potters, builders, or priests. A division of labor began.
Sometimes a village might have a surplus of pottery makers and start exchang-
ing its pottery with a village downstream, which had a surplus of spear makers.
Markets,regular exchanges of goods and services, began, and with them the econ-
omy became a social institution. The agricultural economy, with its characteristics of
permanent settlements, job specialization, and intergroup trade, lasted for thousands
of years, through the great empires of Greece, Rome, China, and Mesoamerica
(Cameron and Neal, 2002; Cipolla, 1994; North and Thomas, 1976).
The Industrial Economy
Before 1765, all work was done by human or animal muscle, except for an occasional
windmill or waterwheel. Then James Watt marketed the first reliable, high-functioning
steam engine, and the era of the machine began. Within a century, hundreds of new
machines powered by steam or electricity appeared, including lithographs, telegraphs,
steam locomotives, sewing machines, slot machines, lawn mowers, and refrigerators. By
1900, there were typewriters, phonographs, electric stoves, and automobiles. The
Industrial Revolution,or the era of the machine, transformed economics, politics, and
social life, first in Europe and North America, and eventually in the rest of the world.
Industrial economies, economies based on factory production, differed from agricultural
economies in five ways (Hobsbawm, 2000; Oshima, 1986; Stearns, 2001):
1.Power. Machines were powerful: They could do 100 times the work of human
or animal muscles. And they were production oriented. Before the Industrial Rev-
olution, most work had been about growing or hunting food. Now natural
resources were less important than the products that could be manufactured from
them.2.Centralization. Manufacturing required bulky, expensive machines unfeasible for
home use, so most jobs moved away from family farms to centralized offices and
factories. For the first time, people had leave home in the morning and go to work,
juggling two distinct worlds.ECONOMIC DEVELOPMENT 419