Chapter 2:

Why Lilly Died and Scott Lived 

 Your comments, please! This is a draft version of Chapter 2, provided here for the purpose of getting reader feedback. This feedback will be incorporated into the final version.

If you drive between Regina, Saskatchewan and Winnipeg, Manitoba you will easily cover the distance in a day. And, if anyone asks about remarkable scenery, you'll likely respond that you found it boring. Nothing but mile after mile after mile of grain fields, and a big sky.

If you'd made the same trip between the two cities a hundred or more years ago, the scenery would have looked much different. From the train, or the back of a horse, you'd have come across little homesteads every mile or so, modest farms with humble houses, barns, and granaries. Traveling during the day, you'd have seen a few farm animals on every homestead, as well as men working the fields with horses, while women tended gardens, milked cows, fed chickens, and kept an eye on children too young to work.

But, if you had ridden your horse by the farm of my great-grandparents, Charles and Catherine Milburn, on September 3rd, 1881 you'd have seen little outside activity. That day, their baby daughter, Lilly Florence, passed away. She died at just over 11 months, not quite reaching her first birthday on October 1st.

Her death would been a singularly sad occasion for the family, but on the farms, and in the villages and cities of the 1880s, such child deaths were common. Before the coming of such modern staples as penicillin, vaccines, and safety-certified baby furniture almost every family mourned the loss of a child and many families mourned multiple children.

117 years later, in 1998, my son Scott was diagnosed with leukemia, a cancer of the blood. He seemed an unlikely victim. At the time of the diagnosis, he was 25 years old and in excellent physical condition as he worked on his career as a hockey linesman, in the Western Hockey League. Given his size and strength, he was able to break up brawls between big hockey players. Given his ability to read the play, the players, and the puck he was able to make decisive calls. But, he was having a problem with one of his eyes, and after several visits to doctors, he received the grim diagnosis: Leukemia.

Unlike Lily Florence Milburn, his great-great aunt, he received immediate, medically sophisticated, and expensive medical help. Within hours of the diagnosis, he was hospitalized and began receiving Interferon, a short-term solution. In the longer-term, he needed, and received a bone marrow transplant; two of them in fact, likely from a donor in Europe, and survived a disease that just a few years earlier had a near 100% mortality rate. 

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Leaping Lifespans

It's not many miles, relatively speaking, between Virden, Manitoba where Lily died and Calgary, Alberta where Scott received his treatment. But, a phenomenal, literally phenomenal, distance in terms of medical expertise and technology, as well as the financial ability to pay for this expertise and technology. Both factors have had an amazing impact on the lengths of our lives.

In looking at lifespans, we consider two principle measures: Infant mortality, and adult life expectancy. Infant mortality refers to the rate of deaths among children of five or younger, and has played an important part in extending life spans, throughout Canada and around the developed world.

And, while not as dramatic, adult life expectancies also shot up in the years since Charle's and Catherine's generation. Consider this: Charles died in 1905, at the age of 56. To us, that seems an early age at which to have passed away. But, he actually lived longer than the average Canadian was expected to live at the turn of the last century -- just 50 years.

By the turn of the latest century, from 1999 to 2000 (or 2000 to 2001, if you prefer) life expectancies had jumped significantly. As I write this, at the age of 62, I'm planning for my retirement. And, like other Baby Boomers, I have to assume for financial planning purposes that I need to make my savings last until at least age 90.

Average life expectancy for male Canadians now stands at 78 years, but that's based on full birth-to-death life spans. Having reached the age of 60, the odds are high I'll live beyond 78. It's still quite possible I'll die before 90, but prudent planning means assuming I'll keep drawing breaths until 90 (and who knows what may happen to life expectancies between now and the year 2037 when I'm scheduled to reach age 90).

That increase in life expectancy, roughly 40 years over the span of a century and a bit, is unprecedented in human history. It's also part of the reason we now have retirement, rather than work til you drop.

The Pension Idea
Since about the middle of the 19th Century, roughly 150 years ago, social and religious groups have campaigned for more and better social programs, including pensions for older citizens. And in the 19th Century, that made a lot of sense; the elderly literally ‘wore out' from working in factories and other repetitive, physically demanding workplaces (including most homes). At the same time, the old family structures that supported the elderly had disappeared with the old rural way of life.

Chancellor Otto Von Bismarck of what is now Germany proposed the first government pension scheme in 1881 and saw it enacted in 1989. His plan paid a minimal pension to any working person who reached the age of 65; that wasn't expected to cost the treasury much since very few working people survived to that age.

Still, it did help establish the idea of ‘retiring' at age 65, and of governments being responsible for the financial support of retirees. Generally, those two premises -- retiring at 65 and government responsibility -- became benchmarks in most industrializing nations. 

A Long Road in a Short Time
Had you been born anytime before 1800, you'd be far poorer in just about every material way. Yes, you've heard lots of arguments about the stalling or declining wages among working people in the last few decades of the 20th Century, but compared to 1800, you're immensely rich.

If you could see yourself in 1800 or before, you might first be shocked by your lack of cleanliness. You wouldn't bathe often, perhaps never at all. You'd wash your clothing infrequently, if ever. If you bathed, or washed your clothes, you would do so in a river, stream, lake, or sea. Your home would be dirty and drafty, and no doubt smell of smoke as well, because you'd be cooking on an open fire in a badly ventilated hovel.

There's no telling how many family members would live in your house, but undoubtedly there would be two or three generations. Regardless of how many of you there were, you'd likely all share one small room, sleeping and eating together. And, it's quite possible farm animals might live with you as well.

If you were a working person, you'd have started your working "career" about the age we and our children begin to go to school. Not that you'd need much schooling: Your work would have involved only physical labor, perhaps hard physical labor. There were no opportunities for advancement, and you'd do the same menial work throughout your whole life.

Do you recognize yourself, yet, as a peasant or serf? Now your life as a peasant would have had its shortcomings obviously - we've just discussed some of them. Still, as peasants, we would have been better off than our ancestors who lived before the Agricultural Revolution - they had to survive by hunting animals and gathering edible wild plants. Those ancestors would have been hungrier far often, and starved to death more frequently.

Whether you were a hunter or a peasant, food would have been a constant preoccupation. Before the 20th Century, starvation of whole populations occurred frequently. A growing season without enough rain, too much rain, or rain at the wrong time, to list just a couple of the many perils, could mean hunger or starvation during the coming winter and spring.

Ironically, as Rosenberg and Birdzell note in their history of the period, people in one village might starve to death while people in another village a few miles away had surpluses. The lack of communication between the villages would doom you, even though the solution, by modern standards, was so close and easy.

On the other hand, the lack of communication might spare you some of the many virulent diseases that so frequently haunted us before the modern era. Had you lived in one of the of the bubonic plague eras, one of every three people in your family and village might have died.

Had you lived before the Industrial Revolution or even during its first century, you likely would bury one or more children. Infant mortality was high and a constant threat. Childhood diseases (remember how we talked about dirty houses and lack of personal hygiene) were common; accidents were not unusual, and there were few effective medicines or treatments.

Even if you survived childhood, life was short, far shorter than a modern life. In the years before, and during the early years of, the Industrial Revolution, there were relatively few people who lived beyond 30. Imagine: had you lived two hundred or more years ago, you'd likely have died before you reached your 30th birthday, as would many of your family and friends.

At this point, you might well question my emphasis on the negative. You might even point to the wonders of the Italian Renaissance, the glories of medieval England, or courts of French kings. And, you'd be partially right; but, I'd also remind you that only a very small proportion of the population lived well in previous ages. The lives of the vast majority were not touched by great achievements in art, science, and literature. Thomas Hobbes may have exaggerated somewhat when he wrote that life was "...solitary, poor, nasty, brutish, and short." but there was certainly a kernel of truth in it.

That's a thumbnail portrait of the lives of working people before the Industrial Revolution; one that captures the state of their lifespans and living standards before and during the early years of the Industrial Revolution. Now, it's time to see how their circumstances changed so radically.

More than Just Machinery
While individual historians may disagree about the specific year in which the Industrial Revolution began, they would all agree that the world began to change in a momentous way in the last half of the 18th century (1750 - 1800).

If you remember the Industrial Revolution from your school years, you likely recall James Watt playing with steam coming out of the spout of his mother's kettle, and how that led to the invention of the steam engine, which led to the beginnings of modern machinery and factories.

But to see the Industrial Revolution as just the beginning of a machine age is to miss what's most important for those of us living today. The Industrial Revolution also introduced the biggest and longest-sustained improvement in human welfare since the dawn of human time. While improvements had occurred from time to time throughout human history, they'd been relatively minor and short-lived. The Industrial Revolution, by contrast, did make a continual and lasting difference.

I wouldn't be surprised if you find that hard to believe, because much of what we know about the early years of the Industrial Revolution comes from advocates of change who were inclined to accentuate the negative. Personally, I've always been struck by the vivid pictures of poverty in the novels of Charles Dickens. I can't help but remember the scenes of revolting poverty that afflicted the many poor but lovable characters he created. 

The 19th Century years of the Industrial Revolution might also call to mind William Blake's image of "dark, Satanic Mills" from his poem, Jerusalem. Certainly journalism and history give us many reports on the grimness of factories, of child labor, filth, noise, and injuries. Often, they compare life in factories with a bucolic, pastoral, and innocent life on wholesome farms.

But, you probably did not hear that our great-great-grandparents and other generations usually went to work in these dark, Satanic mills voluntarily, because the mills, as bad as they might seem to us, were preferable to plain, ordinary rural life which included frequent shortages of food and an abundance of cold houses. Of course, thousands of years earlier, our ancestors had given up the hunter life to become primitive farmers for the same reason.

This economic and social progress, that began to appear during the Industrial Revolution, occurred because of the convergence of four critical streams. First, the boost which free markets received; second the growth of productivity in the work our great-great-something grandparents did, third, improvements in health; and fourth, improvements in education.

The Emergence of Free Markets
The Industrial Revolution emerged in lockstep with another critical change, the emergence of relatively free markets. Thanks to developments in Britain over many centuries, citizens there enjoyed significant property rights, political freedoms, and religious ideas that tolerated, if not fostered, new enterprises.

Free markets did not begin with the Industrial Revolution, but they were certainly given the impetus they needed to become the predominant form of social economy. On the other hand, the free markets of the Britain around the beginnings of the Industrial Revolution provided the channel through which the massive technological changes could occur. While hardly totally free, markets were much less restricted by government and church than they were in other European nations.

And as the Industrial Revolution began to take hold, its economic engines, such as factories, began to generate a great deal of money. That money, in turn, was invested in new and better factories, new and better equipment, and other resources which increased the flow of cash even more. It was a virtuous circle of wealth creation.

Let's touch on one other critical point -- thanks to relatively free markets, entrepreneurs and established business people were able to reinvest most of their money in new businesses. This was a significant change. Rather than having this new wealth gobbled up for non-productive use by kings and nobles, it was reinvested by middle class entrepreneurs. Rather than seeing their kings get bigger castles, the British people saw bigger factories and better machinery, which increased society's wealth, and eventually trickled down to them.

The Growth of Prosperity
That's why, as the Industrial Revolution took hold in Europe, the United States, Canada, and some other British colonies, living standards began to improve. At the same time, the number of nations adopting the practices of the Industrial Revolution also expanded, and they grew more affluent, too. As William Bernstein writes, "Throughout the 1800s, real per capita GDP growth in what is now called the developed world gradually accelerated to about 2% per year, then maintained that pace throughout the entire turbulent twentieth century."

What does 2% growth mean? It may not seem a lot, but when compounded year after year, it quickly adds up. Think of it this way: Using what's called the Rule of 72, growth of 2% per year means a doubling of our national output of goods and services every 36 years. Wages of working people don't exactly track this growth of GDP, but generally we would expect wages and the standard of living to double in about the same period.

You likely believe, as do most of us, that every generation should be better off than the generation before. In other words, I expect my generation to have a higher standard of living than my parents' generation, and in turn, for my childrens' generation to have a higher standard of living than my generation. That idea, that each succeeding generation should enjoy a higher standard of living did not, and could not, have existed before the start of the Industrial Revolution.

Part of that increasing prosperity of individuals and nations came from greater productivity. If you're not familiar with the term, productivity simply refers to the amount of output produced by one unit of input. The steam engine, for example, may have been a scientific and engineering marvel, but for working people, it mattered because of its ability to multiply the value of human labor. In 19th century coal mines, one man with a horse might move only two carts at a time; but a small steam engine operated by one man could pull a dozen carts. That meant one man's energy, or productivity, had been multiplied six times.

And when a man could do more, the way was cleared for his employer to pay more. After all, the more coal that gets to the surface and is transported to buyers, the more money the owner earns. One man with a small steam engine and a string of cars can make far more money for his employer than one man with a horse and a cart or two. That opens the door to higher wages for the person doing the work. The same principle still plays a major role in determining our wages today.

Productivity of another sort also led to higher wages for workers, and more wealth for societies: Personal productivity, as in the sense of being disciplined and working steadily. The increasing use of machines and their installation in factories introduced the need for regular hours and the orientation of lives around clocks rather than natural time rhythms. Rural agricultural workers worked according to the seasons, obviously spending more time at work in the spring and summer, and less in the fall and winter. That practice had to change if factories were to operate successfully, and it did. From that change, we've inherited the 9 to 5, the rat race, and punching the time clock.

Greater productivity also meant lower prices for consumers. Again, consider the example of one man, a horse, and two carts versus one man, a steam engine, and 12 carts. Because the man with a steam engine can transport coal at a lower cost, the door opens to potential reductions in the price of coal paid by consumers. In turn, consumers who pay less for their coal then enjoy higher standards of living.

And, since the start of the Industrial Revolution, growing productivity has been part of a virtuous circle. Increased productivity makes nations grow richer. When nations grow richer, they spend more on education and better educated citizens are more innovative, more likely to discover new and better ways of making things. These innovations allow companies to be more productive, and increase their profits; In turn, that means they can pay higher wages and more taxes, making more money available for education.

Similarly, a richer nation has more to spend on health care, public sanitation, and other measures that widely improve health standards. That means people in the nation are generally healthier; in turn, that means they're more reliable and more productive workers. The companies that employ them make more money, and pay more taxes, again making additional money available for new health initiatives.

Convergence in Practice
It was August 31st, 1854 and residents of London, England's Soho district were frightened, very frightened. And for good reason - the deadly disease cholera had just broken out. Over the next three days, 127 people who lived on or near Broad Street died of cholera. In 10 days, 500 people would die. In the immediate area, the disease killed one in every eight people.

To the rescue (eventually) came Dr. John Snow, who is widely credited with breaking the chain of mortality. He talked to residents of the area, then used logic, statistics, and geographic knowledge to pinpoint the local source of the contamination. He identified a hand pump that provided water to the area, and then traced the contamination from the pump back to the River Thames.

Snow's education allowed him to understand and identify the problem. The education of members of the local council enabled them to understand Snow and to take appropriate action. And, in the longer term, engineers were able to design public works projects that largely eliminated cholera as a threat in England and Great Britain. In addition, British society was prosperous enough to pay the cost of this megaproject.

Prosperity, education, and health converged, not only in London, but all around the world. And the effect of that convergence both improved and changed our lives in ways not even imaginable by earlier generations.

So in the final analysis, that's why Lilly died and Scott lived: increased prosperity, provided by the freer markets, greater productivity, better health, and the educational advances of the Industrial Revolution, made treatment available, gave us medical experts who could diagnose and treat more and more illnesses, and provided the prosperity to pay for it all.

Next, we find out what pension funds and mutual funds do with the money we give them, through our voluntary and mandatory contributions...

Next...

Chapter 3: We're All Capitalists Now

Or, go to the Table of Contents

Please send me your comments and questions. Send an email to wordengines@gmail.com . Thanks!

Bob Abbott

People, Profits, & Pensions: The Ownership Revolution, Copyright Robert F. Abbott 2010