In “A Farewell to Alms: A Brief Economic History of the World” (forthcoming, Princeton University Press), Gregory Clark, an economics professor at the University of California, Davis, identifies the quality of labor as the fundamental factor behind economic growth. Poor labor quality discourages capital from flowing into a country, which means that poverty persists. Good institutions never have a chance to develop.
Professor Clark’s analysis counters Jared M. Diamond, who in his “Guns, Germs and Steel” (W. W. Norton & Company, 1999) located the ultimate sources of European advantage in geography, like safety from tropical diseases, and a greater number of available animals that could be domesticated.
However, he quotes some very interesting examples from Gregory Clark's book (emphasis added)
As early as the 19th century, textile factories in the West and in India had essentially the same machinery, and it was not hard to transport the final product. Yet the difference in cultures could be seen on the factory floor. Although Indian labor costs were many times lower, Indian labor was far less efficient at many basic tasks.
For instance, when it came to “doffing” (periodically removing spindles of yarn from machines), American workers were often six or more times as productive as their Indian counterparts, according to measures from the early to mid-20th century. Importing Western managers did not in general narrow these gaps. As a result, India failed to attract comparable capital investment.
An independent estimate by two economics professors at the University of Wisconsin, Madison, Rodolfo E. Manuelli and Ananth Seshadri, (“Human Capital and the Wealth of Nations") suggests that if variations in the quality of labor across nations are taken into account, other productivity factors need differ by only 27 percent to explain differences in per capita income.
Evidence from pre-capitalist society suggests that people stop working once they have achieved subsistence. Andre Gorz describes how this blighted early factories:
The worker did not ask: ‘how much can I earn in a day if I do as much work as possible?’ but: ‘how much must I work in order to earn the wage which I earned before and which takes care of my traditional needs?’
The unwillingness of the workers to do a full day’s labour, day after day, was the principal reason why the first factories went bankrupt. (Critique of Economic Reason, p21.)
It was also, he says, the reason why factory owners wanted child labour; only children were sufficiently pliable.