Capitalism and the Malthusian Trap

THE MALTHUSIAN TRAP

Explain what is meant by the Malthusian trap and assess how capitalism may have helped to escape from this trap.

The Malthusian trap is a theory originally proposed by the economist Thomas Robert Malthus in the late 18th century. Malthus theorized that improvements in technology would inevitably lead to a demographic growth with which the world would not be able to support agricultural production to feed the growing population. In Malthus’s reasoning, the logic is that the human population grows with geometric rates, while agricultural production grows with arithmetic rates. It will be inevitable, without prejudice to these premises, that at a certain point the mass of the population will find themselves contending for food that has become scarce, favoring the creation of war conflicts (there will be wars to contend for the fertile territories that have become increasingly precious or for the wheat produced from those lands), alternatively it will create the favorable situation for epidemics and diseases. Both eventualities (which can also act in combination) will lead to a reduction in the human population. At this point, however, once the population has been reduced in that certain territory, the man who does not know how to restrain his animal instincts will return to procreate and to double the population every 25 years until falling back on the problem mentioned above. This theory was already anticipated by Richard Cantillon, an Irish economist who had stated that “men multiply like mice in a barn if they have unlimited means of subsistence.” The Malthusian theory basically does not see human beings as very different from other animals. In fact, he was aware that man’s intellectual abilities were above other animals but at the same time it was not necessary to suppose that the physical laws to which he is subject were different from those observed in other parts of the natural animated world. A pack of a few wolves can reproduce if there is a lot of food (ex. caribou). If the number of wolves grows more than the caribou, whose growth is linked to the amount of vegetation and the number of predators, wolves, having food shortages, are reduced in number and this implies the growth of the caribou and the cycle starts again. Malthus considers this a vicious circle from which it is very difficult to get out, a trap, precisely: the trap that will take its name.

Malthus begins his thesis with a question raised by Godwin and Condorcet: “Can man improve his situation by changing social conditions?” Malthus responds with: “The great question is whether man shall henceforth start forwards with accelerated velocity towards illimitable, and hitherto unconceived improvement, or be condemned to a perpetual oscillation between happiness and misery, and after every effort remain still at an immeasurable distance from the wished-for goal.”

His two postulates are:

1. Food is necessary for man (trivial for the obvious)

2. The attraction between the two sexes is indispensable and will always remain constant.

From the second postulate it is clear that without any restraint, the human population will grow out of proportion while the means of subsistence will have a slower growth. In reality Malthus, with his “preventive checks” had indirectly provided some solutions for his own trap in fact war, epidemics, famines, abstention from sex, hunger and wars often solve the problem.

So basically, Malthus predicts that improvements in technology will not lead to an increase in living standards if the average productivity of work decreases with the increase in the work employed on a fixed amount of land and if the population grows in response to an increase in income. In the long run, an increase in productivity will lead to a demographic increase, but not an increase in per capita income that remains “trapped” in the rank of subsistence. This discouraging conclusion was once considered so universal and so inexorable as to be considered a “law”, the Law of Malthus.

Malthus wrote at an interesting time in history, when human societies were in the throes of rapid change. The industrial revolution was about to break out in the world and prove that Malthus was wrong, in a sense.

In the pre-industrial era, there was no increase in GDP per capita for a long period and this era was dominated by the “Malthusian trap”. The economy thus gravitated permanently around a subsistence balance. Characterized by political instability, torn by continuous military conflicts and governed from a feudal regime, the Europe of the 1400s could hardly compete with the rest of the world. There were other nations, in fact, much more promising in terms of growth: China, for example, was politically stable, united and in a continuous technological evolution. In the 1700s, despite the initial forecasts, Europe knew a growth in per capita income and urbanization that brought it to the top of the world, a primacy that materialized with the advent of the Industrial Revolution. A decisive weight is given to the dynamics of the population (changes in birth and mortality rates) and especially to the exogenous shocks (plague, urbanization, trade and wars) that caused them: the latter, in fact, can be identified as the real responsible for the transition to a new stationary state of the European economy. In this case, a first increase in income was caused by the Black Death that, with its spread, had caused from 1349 to 1351 a share of deaths between a quarter and a third of Europe’s population. The reduction, following the Black Death, in the number of people employed in agriculture increased agricultural productivity and improved the condition of the farmers and the owners of the land on which they worked. The wages continued to increase and the peasants began to assert their increased strength by asking, in particular with the rebellion of 1381, for more freedom and less taxes. Events, initially and certainly negative and catastrophic, produced however at the same time also positive externalities, representing, in fact, a fuel for growth, per capita income and development of Europe: since the increase in the mortality rate had been so significant, the increase in population failed to be as rapid as the increase of the per capita income and, therefore, broke the “Malthusian trap” by making savings and accumulation possible. This increase in income turned out to be a temporary phenomenon only in fact it led to a rise in the birth rate in the sixteenth century, to the point of reaching it above that of mortality rate, thus absorbing the initial increase in income and bringing wages towards the initial and only steady state. Based on these data, we can say that the Malthusian theory is consistent. These are the historical backgrounds on which Malthus based his theory. However, what he had not considered was that improvements in technology could take place at a higher rate than the demographic growth. The period in which Malthus writes his “Essay on the Principle of Population” was a period of revolutions in England. During the eighteenth century the industrial, agricultural, technological and demographic revolution grew together as sisters. With the Agricultural Revolution, new cultivation techniques and the birth of large companies run by entrepreneurs, the yields of the fields increased; the resulting capitals were used to build factories and they were invested in the implementation of new techniques that where labour savings and capital intensive helped to give rise to the Industrial Revolution; the inventions and innovations of the Technological Revolution increased, in turn, the productive capacity of the emerging industries and changed the face of factory work; and, finally, the conspicuous growth of the population provided labour for the industries and consumers of the products of those same industries. In the presence of the permanent technological revolution the Malthusian model ceased to be a reasonable description of the world. The average standard of living grew rapidly and permanently after the capitalist revolution. If from the 13th to the 16th century there was an evident negative relationship between population and real wages, from 1800 the economy moved towards a completely new regime, in which real population and wages continued to grow constantly and at the same time. Thus England “escaped” from the trap of Malthus and later also other countries.

We can conclude that the vicious circle of the Malthusian model may in some way explain the stagnation of living standards in the centuries preceding the Industrial Revolution in which the lifestyle was relatively poor. From the 18th century onwards the life standards improved very rapidly in some countries. First among these, it was England where this change coincided with the start of a period of rapid technological progress, and with the emergence of a new economic system, capitalism, in which private property, markets and business capitalist play a central role and in which the capacity of man to work becomes a commodity that must be able to offer itself freely on the market as opposed to pre-capitalist systems in which labour was generally forced or rigidly regulated. The capitalist economy has provided incentives and opportunities to make technological innovations, and makes specialization profitable. So the transition from economic stagnation to growth has been the inevitable result of Malthusian interaction between population, technology and human capital demand.

BIBLIOGRAPHY & REFERENCES

• Malthus, Thomas Robert (1826). “An Essay on the Principle of Population: A View of its Past and Present Effects on Human Happiness; with an Inquiry into Our Prospects Respecting the Future Removal or Mitigation of the Evils which It Occasions”
• Core: The Economy chapter 1 “The capitalist revolution”, chapter 2 “Technology, population, and growth”
• Encyclopaedia Treccani “Malthus, Thomas Robert” and “the Industrial Revolution”
• Galor, Oded (2011). “From Stagnation to Growth: Unified Growth Theory”  Princeton University Press
• Pomeranz, Kenneth (2000). “The Great Divergence: China, Europe, and the Making of the Modern World Economy.”