Authors: Yuval Noah Harari
Why Bankers are Different from Vampires
The modern pursuit of power is fuelled by the alliance between scientific progress and economic growth. For most of history science progressed at a snail’s pace, while the economy was in deep freeze. The gradual increase in human population did lead to a
corresponding increase in production, and sporadic discoveries sometimes resulted even in per capita growth, but this was a very slow process.
1000 a hundred villagers produced a hundred tons of wheat, and in
1100, 105 villagers produced 107 tons of wheat, this growth didn’t change the rhythms of life or the sociopolitical order. Whereas today everyone is obsessed with growth, in the premodern era people were oblivious to it. Princes, priests and peasants assumed that human production was more or less stable, that one person could enrich himself only by pilfering somebody else and that their grandchildren were unlikely to enjoy a better standard of living.
This stagnation resulted to a large extent from the difficulties involved in financing new projects. Without proper funding, it wasn’t easy to drain swamps, construct bridges and build ports – not to mention engineer new wheat strains, discover new energy sources or open new trade routes. Funds were scarce because there was little credit in those days; there was little credit because people had no belief in growth; and people didn’t believe in growth because the economy was stagnant. Stagnation thereby perpetuated itself.
Suppose you live in a medieval town that suffers from annual outbreaks of dysentery. You resolve to find a cure. You need funding to set up a lab, buy medicinal herbs and exotic chemicals, pay assistants and travel to consult with famous doctors. You also need money to feed yourself and your family while you are busy with your research. But you don’t have much money. You can approach the local lumberjack, blacksmith and baker and ask them to fulfil all your needs for a few years, promising that when you finally discover the cure and become rich, you will pay your debts.
Unfortunately, the lumberjack, blacksmith and baker are unlikely to agree. They need to feed their families today, and they have no faith in miracle medicines. They weren’t born yesterday,
and in all their years they have never heard of anyone finding a new medicine for some dreaded disease. If you want provisions – you must pay cash. But how can you have enough money when you haven’t discovered the medicine yet, and all your time is taken up with research? Reluctantly, you go back to tilling your field, dysentery keeps tormenting the townsfolk, nobody tries to develop new remedies, and not a single gold coin changes hands. That’s how the economy froze, and science stood still.
The cycle was eventually broken in the modern age thanks to people’s growing trust in the future, and the resulting miracle of credit. Credit is the economic manifestation of trust. Today, if I want to develop a new drug but I don’t have enough money, I can get a loan from the bank, or turn to private investors and venture capital funds. When Ebola erupted in West Africa in the summer of 2014, what do you think happened to the shares of pharmaceutical companies that were busy developing anti-Ebola drugs and vaccines? They skyrocketed. Tekmira shares rose by 50 per cent and BioCryst shares by 90 per cent. In the Middle Ages, the outbreak of a plague caused people to raise their eyes towards heaven, and pray to God to forgive them for their sins. Today, when people hear of some new deadly epidemic, they pick up the phone and call their broker. For the stock exchange, even an epidemic is a business opportunity.
If enough new ventures succeed, people’s trust in the future increases, credit expands, interest rates fall, entrepreneurs can raise money more easily and the economy grows. People consequently have even greater trust in the future, the economy keeps growing and science progresses with it.
It sounds simple on paper. Why, then, did humankind have to wait until the modern era for economic growth to gather momentum? For thousands of years people had little faith in future growth not because they were stupid, but because it contradicts our gut feelings, our evolutionary heritage and the way the world works. Most natural systems exist in equilibrium, and most survival
struggles are a zero-sum game in which one can prosper only at the expense of another.
For example, each year roughly the same amount of grass grows in a given valley. The grass supports a population of about 10,000 rabbits, which contains enough slow, dim-witted or unlucky rabbits to provide prey for a hundred foxes. If one fox is very diligent, and captures more rabbits than usual, then another fox will probably starve to death. If all foxes somehow manage to capture more rabbits simultaneously, the rabbit population will crash, and next year many foxes will starve. Even though there are occasional fluctuations in the rabbit market, in the long run the foxes cannot expect to hunt, say, 3 per cent more rabbits per year than the preceding year.
Of course, some ecological realities are more complex, and not all survival struggles are zero-sum games. Many animals cooperate effectively, and a few even give loans. The most famous lenders in nature are vampire bats. These vampires congregate in their thousands inside caves, and every night they fly out to look for prey. When they find a sleeping bird or a careless mammal, they make a small incision in its skin, and suck its blood. Not all bats find a victim every night. In order to cope with the uncertainty of their life, the vampires loan blood to each other. A vampire that fails to find prey will come home and ask for some stolen blood from a more fortunate friend. Vampires remember very well to whom they loaned blood, so at a later date if the friend comes home empty-handed, he will approach his debtor, who will return the favour.
However, unlike human bankers, vampires never charge interest. If vampire A loaned vampire B ten centilitres of blood, B will repay the same amount. Nor do vampires use loans in order to finance new businesses or encourage growth in the blood-sucking market – because the blood is produced by other animals, the vampires have no way of increasing production. Though the blood market has its ups and downs, vampires cannot presume that in 2017 there will be 3 per cent more blood than in 2016, and that in
2018 the blood market will again grow by 3 per cent. Consequently, vampires don’t believe in growth.
For millions of years of evolution, humans lived under similar conditions to vampires, foxes and rabbits. Hence humans too find it difficult to believe in growth.
The Miracle Pie
Evolutionary pressures have accustomed humans to see the world as a static pie. If somebody gets a bigger slice of the pie, somebody else inevitably gets a smaller slice. A particular family or city may prosper, but humankind as a whole is not going to produce more than it produces today. Accordingly, traditional religions such as Christianity and Islam sought ways to solve humanity’s problems with the help of current resources, either by redistributing the existing pie, or by promising us a pie in the sky.
Modernity, in contrast, is based on the firm belief that economic growth is not only possible but is absolutely essential. Prayers, good deeds and meditation can be comforting and inspiring, but problems such as famine, plague and war can only be solved through growth. This fundamental dogma can be summarised in one simple idea: ‘If you have a problem, you probably need more stuff, and in order to have more stuff, you must produce more of it.’
Modern politicians and economists insist that growth is vital for three principal reasons. Firstly, when we produce more, we can consume more, raise our standard of living and allegedly enjoy a happier life. Secondly, as long as humankind multiplies, economic growth is needed merely to stay where we are. For example, in India the annual population growth rate is 1.2 per cent. That means that unless the Indian economy grows each year by at least 1.2 per cent, unemployment will rise, salaries will fall and the average standard of living will decline. Thirdly, even if Indians stop multiplying, and even if the Indian middle class can be satisfied with its present standard of living, what should India do about its hundreds of millions of poverty-stricken citizens? If the economy doesn’t
grow, and the pie therefore remains the same size, you can give more to the poor only by taking something from the rich. That will force you to make some very hard choices, and will probably cause a lot of resentment and even violence. If you wish to avoid hard choices, resentment and violence, you need a bigger pie.
Modernity has turned ‘more stuff’ into a panacea applicable to almost all public and private problems, from Islamic fundamentalism through Third World authoritarianism down to a failed marriage. If only countries such as Pakistan and Egypt could keep a healthy growth rate, their citizens would come to enjoy the benefits of private cars and bulging refrigerators, and they would take the path of earthly prosperity instead of following the Islamic pied piper. Similarly, economic growth in countries such as Congo and Myanmar would produce a prosperous middle class which is the bedrock of liberal democracy. And in the case of the disgruntled couple, their marriage will be saved if they just buy a bigger house (so they don’t have to share a cramped office), purchase a dishwasher (so that they stop arguing whose turn it is to do the dishes) and go to expensive therapy sessions twice a week.
Economic growth has thus become the crucial juncture where almost all modern religions, ideologies and movements meet. The Soviet Union, with its megalomaniac Five Year Plans, was as obsessed with growth as the most cut-throat American robber baron. Just as Christians and Muslims both believed in heaven, and disagreed only about how to get there, so during the Cold War both capitalists and communists believed in creating heaven on earth through economic growth, and wrangled only about the exact method.
Today Hindu revivalists, pious Muslims, Japanese nationalists and Chinese communists may declare their adherence to very different values and goals, but they have all come to believe that economic growth is the key for realising their disparate goals. Thus in 2014 the devout Hindu Narendra Modi was elected prime minister of India largely thanks to his success in boosting economic growth in his home state of Gujarat, and thanks to the widely held view that only he could reinvigorate the sluggish national economy.
Analogous views have kept the Islamist Recep Tayyip Erdoğan in power in Turkey since 2003. The name of his party – the Justice and Development Party – highlights its commitment to economic development, and the Erdoğan government has indeed managed to maintain impressive growth rates for more than a decade.
Japan’s prime minister, the nationalist Shinzō Abe, came to office in 2012 pledging to jolt the Japanese economy out of two decades of stagnation. His aggressive and somewhat unusual measures to achieve this have been nicknamed Abenomics. Meanwhile in neighbouring China the Communist Party still pays lip service to traditional Marxist–Leninist ideals, but in practice it is guided by Deng Xiaoping’s famous maxims that ‘development is the only hard truth’ and that ‘it doesn’t matter if a cat is black or white, so long as it catches mice’. Which means, in plain language: do anything it takes to promote economic growth, even if Marx and Lenin wouldn’t have been happy with it.
In Singapore, as befits that no-nonsense city state, they followed this line of thinking even further, and pegged ministerial salaries to the national GDP. When the Singaporean economy grows, ministers get a raise, as if that is what their job is all about.
This obsession with growth may sound self-evident, but only because we live in the modern world. It wasn’t like this in the past. Indian maharajas, Ottoman sultans, Kamakura shoguns and Han emperors seldom staked their political fortunes on ensuring economic growth. That Modi, Erdoğan, Abe and Chinese president Xi Jinping all bet their careers on economic growth testifies to the almost religious status growth has managed to acquire throughout the world. Indeed, it may not be wrong to call the belief in economic growth a religion, because it now purports to solve many if not most of our ethical dilemmas. Since economic growth is allegedly the source of all good things, it encourages people to bury their ethical disagreements and adopt whichever course of action maximises long-term growth. Thus Modi’s India is home to thousands of sects, parties, movements and gurus, yet though their ultimate aims may differ, they all have to pass through the
same bottleneck of economic growth, so why not pull together in the meantime?
The credo of ‘more stuff’ accordingly urges individuals, firms and governments to discount anything that might hamper economic growth, such as preserving social equality, ensuring ecological harmony or honouring your parents. In the Soviet Union, when people thought that state-controlled communism was the fastest way to grow, anything that stood in the way of collectivisation was bulldozed, including millions of kulaks, the freedom of expression and the Aral Sea. Nowadays it is generally accepted that some version of free-market capitalism is a much more efficient way of ensuring long-term growth, hence rich farmers and freedom of expression are protected, but ecological habitats, social structures and traditional values that stand in the way of free-market capitalism are destroyed and dismantled.
Take, for example, a software engineer making $250 per hour working for some hi-tech start-up. One day her elderly father has a stroke. He now needs help with shopping, cooking and even showering. She could move her father to her own house, leave home later in the morning, come back earlier in the evening and take care of her father personally. Both her income and the start-up’s productivity would suffer, but her father would enjoy the care of a respectful and loving daughter. Alternatively, the engineer could hire a Mexican carer who, for $25 per hour, would live with the father and provide for all his needs. That would mean business as usual for the engineer and her start-up, and even the carer and the Mexican economy would benefit. What should the engineer do?