As we have seen in part one and part two, the huge sums of money showered on fighting in Europe gave military leaders the flexibility to buy new weapons and battleships and try out new tactics, fortifications, and methods of supply. In the process, they learned from their mistakes and improved their technologies. And because European countries were small and geographically close, they could easily learn from their rivals’ errors and copy their improvements.

Between 1492 and 1914, Europeans conquered 84 percent of the globe, establishing colonies and spreading their influence across every inhabited continent. This was not inevitable. In fact, for decades, historians, social scientists, and biologists have wondered: Why and how did Europe rise to the top, even when societies in Asia and the Middle East were far more advanced?

So far, satisfactory answers have been elusive. But this question is of the utmost importance given that Europe’s power determined everything from who ran the slave trade to who grew rich or remained mired in poverty.

Despite the consequent religious polarization, the Crusades dramatically increased maritime trade between the East and West. As Crusaders experienced the feel of silk, the taste of spices, and the utility of porcelain, the desire for these products created new markets for merchants.

Merchants’ ships brought Europeans valuable goods, traveling between the port cities of western Europe and the East from the 10th century on along routes collectively labeled the Silk Road. However, transporting goods along the Silk Road was costly, slow, and unprofitable. Muslim middlemen collected taxes as the goods changed hands. Robbers waited to ambush treasure-laden caravans.

As well as seeking a water passage to the wealthy cities of the East, sailors wanted to find a route to the exotic and wealthy Spice Islands in modern-day Indonesia, whose location was kept secret by Muslim rulers. The lure of profit pushed explorers to seek new trade routes to the Spice Islands and to eliminate Muslim middlemen.

Outside of Europe, political and military conditions kept war innovations, particularly new gunpowder technology, from being advanced at the same relentless pace. China, for instance, had far less tax revenue to spend on the military than the Europeans did. In the late eighteenth century, per-capita taxes were 15 times higher in France than in China, and 40 times higher in England, and much of the tax money China did collect went not toward new forms of fighting but to aid archers on horseback, who were far more effective than musketeers in fighting the nomads who had long been China’s major enemy. What’s more, China was often the dominant power in East Asia, so fewer rivals dared to challenge it, which meant it had little incentive to spend heavily on its military. As a result, there was simply less use for gunpowder weapons in East Asia.

Europe, by contrast, had no such dominant power. And once the Western Europeans took the lead in pushing gunpowder technology forward, it was hard for China to catch up; the center of progress was a continent away.

By 1914, Europe had not only achieved global military dominance, but it also had powerful states that could raise huge sums of tax revenue to fund wars. In France and Germany, real per-capita tax revenue had increased 15 fold or more over the previous two centuries. That enormous capacity to tax went well beyond what can be explained by the higher per capita incomes that industrialization brought to Europe. It was the result of the same kind of learning that advanced gunpowder technology. The only difference was that here the learning involved economics rather than military technology, and the rewards went to political leaders who successfully bargained with the elites to boost tax revenues. The leaders then used the added tax revenue to expand and equip their armies and navies.

Europe’s ability to tax was no small achievement. China could not raise equivalent tax revenues, even in the nineteenth century. And countries in sub-Saharan Africa today still lack the basic capacity to tax, which keeps them from providing security and other basic public goods to their citizens.

Europe had yet another advantage as well: its entrepreneurs were free to use gunpowder technology to mount expeditions of conquest, colonization, and militarized trade. Although they usually needed official permission to launch a voyage, entrepreneurs were often encouraged by authorities eager to find riches abroad. And they had no trouble acquiring weapons or finding battle-hardened veterans to train military novices who joined their undertakings. By the seventeenth century, such private expeditions had spawned gigantic enterprises that raised huge sums on Europe’s burgeoning capital markets to finance ventures abroad, enterprises such as the Dutch East India Company, which was not only a private arm of Dutch foreign policy but also the first business to issue tradable shares of stock.

A final difference between Europe and the rest of the world lies in political history. From 221 B.C. onward, China, more often than not, was unified in a large empire. The Chinese empire soon developed a centralized bureaucracy that drew local elites into government service and gave them a stake in the empire’s survival. The rewards of government service helped hold the empire together, and as long as the empire was strong and unified, other East Asian powers hesitated to attack it. This meant that China had little incentive to seek out new enemies or opportunities.

Western Europe, by contrast, experienced no such lasting unification after the collapse of the Roman Empire. What it endured instead were centuries of warfare by bands of warriors whose leaders resembled modern-day warlords. The incessant fighting groomed leaders who were victorious in war. The conflict also generated enduring enmities between leaders and their followers, enmities that eventually hardened into lasting political borders. It was such ill will, and not Europe’s physical geography, that kept any single leader from ever uniting Western Europe in the sort of durable empire that prevailed for centuries in China. In the long run, the winners in Western Europe were the military leaders who learned how to impose heavy taxes to fund their fighting, and as a result, Europe ended up with kings who spent pharaonic sums on warfare.

The following map shows the world in 1914 with its empires colonies territory:


The Price of Conquest 

After World War I, expansion of Europe’s colonial holdings however halted, and by 1938 the  European colonial empire had shrunk by 1 percent.¹ Having an empire,  though still acceptable, began to run into resistance, both from western critics of colonialism and from indigenous nationalists hostile to European domination. 

Even more important, there was not much more territory the Europeans could profitably conquer. The case against colonialism gathered strength after World War II. Western Europe’s military power had collapsed, its political leaders were concentrating on economic recovery and domestic social spending, and opposition to empire (bolstered by the Cold War) waxed louder, both at home and in the colonies themselves. By the late 1970s, the European empires had virtually disappeared.  As its empires vanished, western Europe also fell further and further behind the leaders in the race to advance military technology. Two military superpowers, the United States and the Soviet Union, dominated the world after World War II, facing off against one another in another armed peace, the Cold War. Unable to match these two behemoths, most of the western European powers did just what the tournament model would predict and sat out the arms race that the Cold War generated. For political leaders, the choice made eminent sense. Peace and prosperity weighed heavily on voters’ minds, and heavy military spending would draw money away from rebuilding their economies. Sitting on the sidelines as all the more appealing because the United States would provide for their security, allowing them to free ride. The western Europeans did join the United States in the North Atlantic Treaty Organization (NATO) alliance and provide NATO with some military resources. Britain and France did acquire their nuclear weapons. 

But western Europe’s military forces and military spending were still dwarfed by those of the two superpowers.²  Although the British Empire was rarely mentioned in elections, it could become a salient issue when there were crises in the colonies. At those moments, the public made it very clear that it did not want to send troops or spend money abroad. 

The days of the western Europeans dominating the world were thus over. They had come to wield global power and to rule vast territories overseas by pushing the gunpowder technology further than anyone else in Eurasia. Thanks to that effort, they built up a significant military lead by 1800 and widened it even further in the nineteenth century. Behind their technological might stood political and fiscal reforms that paid for enormous military spending. The growth of useful knowledge and engineering know-how during the Industrial Revolution magnified the effect of this spending, and it was all the easier to devote money to the military when industrialization lifted incomes. 

As for the ultimate cause behind the European conquest of the world, it was not frequent war or physical geography. Could it have been a distinctive military culture? Some would say yes, arguing that there was such a culture in the West, an enduring culture that in his view originated in ancient Greece and stressed adaptability, discipline, an egalitarian infantry, and fighting to annihilate in defense of democracy.³ The problem, however, is that adaptability and fighting to annihilate are not at all peculiar to the West.

Furthermore, this notion of culture somehow has to be stretched to cover the conquistadores and the mercenaries who filled western armies in the early modern period, which seems impossible to do without tearing into this argument apart. After all, Cortés, Pizarro, da Gama, and their men were not battling for democracy; neither were the early modern mercenaries. They sought money and a chance to improve their station in life. 

Glory and a desire to defeat enemies of the faith may have also spurred them on, but not democracy.⁴ It should also be mentioned that the Incas fought to kill, and in battling the conquistadores, the Aztecs clearly adapted their tactics. And those are hardly the only counterexamples.

Finally, if western military culture was so much better, why did early modern Europeans have such esteem for Japanese warriors? Their admiration went beyond mere talk, for they even sought to hire the Japanese as mercenaries.⁵ 

Rather than culture, or geography, or frequent war, the ultimate cause behind the European conquest was political history: the peculiar chain of past political events that shaped the size of states and determined the distinctive values in each part of Eurasia for the exogenous parameters in the tournament model. That is what the tournament model points to, and it is the reason why Europeans conquered the world. 

We are left then with a question: did the western Europeans end up profiting from their conquest of the world and all the advances to the gunpowder technology? They certainly won the spoils of raiding and colonization, beginning with the silver from Latin America and the sugar and coffee that slaves produced. They gained New World crops such as maize and potatoes as well. But the Europeans also paid the price, though far less than the slaves or the Native Americans, who perished not just from disease but the conquerors’ devastation of their whole society. Much of the American silver helped fund more of the wars that European princes pursued without bearing the costs of military adventures. 

Mercantilist battles to control commerce with their distant acquisitions added yet another cause for war among western Europe’s rulers and restricted trade as well. And although their incessant fighting did give birth to the military novations, it went far beyond what average Europeans likely wanted to pay for to guarantee their security.

All the war came with massive costs too. Arming ships added substantially to the price of transportation, and land war imposed an even more massive toll: not just crushing taxes, but epidemics and violence at the hands of soldiers who were unchecked by discipline (at least before the late 1600s) and whose ravages could cut agricultural productivity by 25 percent for as long as a generation.⁶ Nor was nineteenth-century colonialism much better; for a while, it involved no hostilities within western Europe itself; it did in all likelihood take a toll on average Europeans. The British Empire, for instance, generated no profits, at least in the years 1880–1912. It required a subsidy and ended up merely redistributing income from middle-class taxpayers to the upper classes.⁷ 

So even in Europe itself, there was little that could offset all the harm that the conquest of the world did, at least if we consider the welfare (or even more narrowly the income) of the average person. Outside Europe, the damage done was immeasurably more significant. Besides the horrors visited upon the slaves and the Native  Americans, and the atrocities committed in nineteenth-century colonies such as will be highlighted in an upcoming movie directed by Ben Affleck King Leopold’s Belgian Congo, there is plausible econometric evidence that the slave trade still keeps Africa poor and equally persuasive proof that the Spanish conquest causes poverty today in Latin America.⁸ The root of the problems, so research suggests, lies with the corrupt institutions and the unequal distribution of wealth that empire often fostered. Inequality created political incentives that blocked institutional reform and worked against mass education and the acquisition of human capital. Some would argue that scarce human capital is the real obstacle here, not institutions because, in the long run, human capital transforms institutions. If so, then the human capital that the Europeans brought along in their colonial ventures may have ultimately promoted economic growth in ex-colonies; technology, crops, and livestock they carried might conceivably have done the same. But these positive effects, if they did finally materialize, took a long time to arrive, particularly in colonies with large indigenous populations.⁹ And even if they did lead to higher incomes in the distant future, that still does not compensate for the toll the conquest took on human welfare. 

Here, however, some would argue that the conquest and all the war in Europe did bring one unexpected benefit into the world, an advantage that would atone, albeit only partially, for all the evil they did: together, the conflict and empire-building helped trigger the British Industrial Revolution. Several economic historians have made such a claim and in their view, the war, paradoxically and despite all the damage that it did, actually touched off the world’s first episode of sustained economic growth.¹⁰ 

Their claim is surprising because there is little evidence in the modern world that war or defense spending accelerates economic growth.¹¹ So what then is their argument? 

It is not that the inventions of the military revolution were essential for the innovations; it went far beyond what average Europeans likely wanted to pay to guarantee their security.

All the war came with a massive Industrial Revolution. Nor is it that the great inventors of the Industrial Revolution were all toiling for the military sector. Only 13 percent of them had any connection with the military, about what one would expect if they had been randomly distributed across the military and civilian sectors of the economy since military spending was 12 percent of GDP in the 1780s.¹² It is true that in the iron industry, the inventors did have ties to the military, because of the vast demand for cannons, anchors, firearms, and hardware for ships: Henry Cort, for example,  whose puddling and rolling process cut the cost of manufacturing wrought iron,  was a British naval supplier, and he was not alone among inventors in the iron industry.¹³ But innovation in the iron industry was only a small part of the Industrial Revolution. It accounted for less than 4 percent of the total factor productivity growth in Britain between 1780 and 1860, in other words, the productivity of both labor and capital that was the hallmark of the Industrial Revolution. Inventions in the textile industry, mainly cotton, were far more critical: they explain ten times more productivity growth.¹⁴ And the inventors in the textile industry had no connection to the military.¹⁵ 

Instead, the argument that Robert Allen, Ronald Findlay, Kevin O’Rourke, and  Patrick O’Brien make is different. They maintain that victory in wars of the late seventeenth and eighteenth centuries stimulated the British economy by winning Britain a large share of Europe’s intercontinental trade. The trade-in turn created jobs in London and other cities, drawing in migrants and ultimately raising wages and agricultural productivity as farmers responded to demand. When combined with Britain’s cheap coal and capital (so the argument goes, particularly in the work of Robert Allen), the high wages gave inventors an incentive to find ways to substitute inexpensive, energy-con-sum-machines for labor that was so dear. The inventors responded by inventing spinning machines and steam engines, and they put Britain, and eventually the rest of western Europe, on the path toward sustained economic growth. 

One could take this argument further and push it in a different direction to say that war may have even made the rest of western Europe ripe for industrialization. 

Since the Middle Ages, the incessant fighting in western Europe had drawn manufacturing out of the countryside, where it could take advantage of cheap seasonal labor, and into cities, where wages were higher because of the cost of transporting food but the industry was protected by walls. But the higher fees would make it profitable to use labor-saving machines earlier in western Europe, whereas in China it  would be cheaper to stick with hand labor in the countryside, where wages were  low, but the empire provided more security from war.¹⁶ 

If the argument about high wages, war, and the Industrial Revolution is correct,  then without Britain’s victories in the wars of the seventeenth and eighteenth centuries and the jolt they gave the British economy, the Industrial Revolution would have been delayed for decades or more. Conceivably, it would have been held up for 50 or 100 years, and economic growth throughout the world would have been stalled for just as long. Had that happened, we might still be living in the final days of horse-drawn carriages. The reason is that if Britain had lost the wars and with it is West Indies and Asian trade, then its urbanization and its wage levels would both suffer. Indeed, Allen’s empirical model implies that British wages in 1800 would mire back at the level where they had been in 1700 and that British urbanization in 1800 would be back at the level of 1750. And without the increased wages and urbanization, Britain would not have industrialized.

Worse yet, if this counterfactual nightmare is right, no other economy could have taken Britain’s place as the engine of economic growth via mechanization and industrialization. If, for instance, France had won the wars and captured the amount of trade Britain had in 1800, then Allen’s model implies that French urbanization in 1800 would have risen, but only by 7 percent, and that French wages in  1800 would have climbed by only 2 percent, not enough to launch industrialization in France. The problem is that in the empirical model, the invigorating effect of intercontinental trade is spread out over an economy’s entire population and reduced if the population is large. France’s much bigger population (nearly three times that of Great Britain) would significantly dilute the stimulus that the trade won in a war would give the French economy, at least in Allen’s model. Nor could one hope that trade might ignite early industrialization in East Asia. Japan’s population in 1800 was roughly the same as France’s, and China’s was much more significant.

British levels of trade would have had little effect with a population that big.¹⁷ 

But is this argument about high wages and war plausible? Could the war have been the driving force behind the British Industrial Revolution? It is true that by concentrating on naval conflict and avoiding land battles on its soil, Britain did escape much of the damage done by war.¹⁸ And since Britain escaped most of the collateral damage from war and reaped most of the benefits, one might, therefore,  be inclined to accept the argument. 

But that would be premature. The crux of the argument is that high wages in Britain induced inventors to find ways to substitute machines for expensive labor, with inventors aim to cut costs. But high salaries need not have that effect on an invention. High fees will spur this sort of innovation only under certain conditions. In the simplest model of inventors’ incentives, for example, that will happen only when it is challenging to replace men with machines. Otherwise, there may be less invention.¹⁹ More importantly, the argument about wages and invention implies that workers should have migrated from France to England in search of higher wages. But the migration flowed in the reverse direction; furthermore, the migrants tended to be skilled artisans, mainly mechanics. That pattern fits a very different explanation for Britain’s industrialization, an explanation that has been invoked by other historians. It would not make war the fuel that fed  the fires of the Industrial Revolution, but rather human capital, or in other words,  the knowledge and capabilities of skilled workers, which had nothing to do with  war.²⁰ More human capital (and not just literacy, but the sort of skills mechanics had) would explain the high wages in Britain, the flow of migration, and why the Industrial Revolution was British. 

At most, war may have been a match that helped ignite the blaze in Britain, but the real question is not the match, but the fuel. The fuel was human capital. And it was something else as well, political institutions, including Parliament’s control of the purse, ministerial responsibility, and a uniform fiscal and legal system. That at least is what is implied by a very different empirical analysis of trade and growth, which finds no role for war. According to this model, trade did stimulate economies in Europe in the years 1300–1850, and Britain’s economy in particular; it acted directly, and also indirectly, by fostering political institutions that favored economic growth. But there is no evidence that war fueled early economic growth in Europe.²¹ 

The institutions that fostered economic growth in Britain were the same ones that won Britain’s wars by allowing the country to mobilize resources at low political cost.²² They were a product of Britain’s political history. Political history is then one of the ultimate causes behind both the European conquest of the world and the “great divergence,” which saw western European incomes rise above those elsewhere in Eurasia during the Industrial Revolution. It was certainly not the only cause: others (including the movement to acquire useful knowledge in the eighteenth century, which played an essential part in the buildup of human capital) also played a significant role. But political history was critical. It could launch a lengthy process of cultural evolution that had nothing to do with Max Weber’s Protestant ethic and yet set western Europeans apart from other Eurasians as far back as the early Middle Ages.²³ But it also worked in the short run, creating states that could mobilize enormous resources for war at low political cost, as in Britain in the eighteenth century. At certain pivotal moments, it could have been reversed, in western Europe or elsewhere in Eurasia, but in the long run, it put west Europe on the path to take over the world.


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