Week of January 31, 2021
Why not China? Why Europe? And Why England?
This week, we study the political foundations of economic growth, emphasizing the role that institutions played in accelerating and regarding development processes. While institutions are clearly an insufficient condition for industrialization, as discussed in previous editions, they are—if not necessary—often capable of exerting a decisive positive or negative influence on a society’s potential for radical change. Some of the following studies are, as the institutionalist literature often tends to be, overly qualitative and should be read with caution, but the Bogart and AJR papers represent interesting attempts to bring alternative data sources and econometric analysis to these classic problems.
The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China
Justin Yifu Lin | Economic Development and Cultural Change | January 1995
The question of why China—the world’s most technologically advanced civilization in 1500 (and maybe 1700)—surrendered a seemingly unassailable lead to the Western World and suffered delayed economic take-off is endlessly fascinating. Lin, in the spirit of Joel Mokyr, offers an intellectual-cultural answer. Rejecting the demographic explanations offered by scholars like Mark Elvin, he proposes that China’s problem was a supply-side one. China, endowed with a large population, led during pre-modern areas as a result of proficiency with experience-based invention (learning-by-doing), but fell behind because no switch to experimental science—as happened in Europe through the Scientific Revolution—occurred. Using a stochastic model of invention, whereby innovators pull successes or failures from a normal distribution centered roughly on the scientific frontier, Lin proposes that the lack of a European-style experimental system made major breakthroughs increasingly unlikely in the modern period as returns to tinkering diminished. The failure of Chinese scientific culture, in turn, was the result of the adverse personal development incentives offered by the bureaucracy, which demanded rote memorization of the classics at the expense of both practical and theoretical education. Though this style of argument is wanting and empirically unsatisfying in many respects—if science was so much more important than learning-by-doing, why did England industrialize before France?—the paper remains an interesting and valuable read.
The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth
Daron Acemoglu, Simon Johnson, and James Robinson | American Economic Review | June 2005
Unlike “Colonial Origins” and “Reversal of Fortune,” “The Rise of Europe” is an unquestionably excellent paper. Using a variety of proxies for commercial suitability and economic development, AJR establish that participation in the Atlantic trade drove differential development in Western Europe after 1500. Nations prospered or lagged because of the “interaction between medieval political institutions and access to the Atlantic”; those with “nonabsolutist” regimes, such as England and the Netherlands, saw mercantile interests outside the royal circle demand property rights and constraints on the monarch, while despotic France and Spain suppressed reformist challenges. Institutional development along these lines, as suggested by North and Weingast, later contributed to economic growth. The unique part of the argument is the aforementioned “interaction” effect. Trade was only a small part of any pre-modern European economy, so the direct effects on capital accumulation or total product were small; however, the authors show that the political effects of a rising merchant class produced a developmental impact far in excess of the immediate profits of commerce. In doing so, they reconcile the perceived importance of trade (by contemporaries) with the lackluster economic data.
Political party representation and electoral politics in England and Wales, 1690–1747
Dan Bogart | Social Science History | June 2016
Bogart studies the biographies of MPs from 1690 to 1747 and codes each member according to their political affiliation—Whig or Tory—based on information about their personal lives and the division lists. He uses the resulting data to compare the strength of the Whig and Tory parties in all English and Welsh constituencies, finding that the former was stronger in municipal boroughs with small, narrow electorates and the latter in larger and more democratic areas. Moreover, Whig power was concentrated in the Southeast and North, whereas the Tories were supreme in the West and Wales. The Whigs also grew stronger in the Midlands, Southwest, and East Midlands under the government of Robert Walpole in the crucial years preceding the Industrial Revolution. Though the party was less popular among the commons, it was dominated by the powerful aristocrats, landowners, and businessmen who were able to manipulate regulations and buy votes. “Whig strength,” writes Bogart, “is significantly greater in boroughs where the franchise was held by corporation and burgage holders compared to other boroughs. The opposite pattern holds for Tory strength. The Tories were significantly stronger in boroughs where the franchise was held by households, freeman, freeholders, or by Scot and Lot.” He also discusses patterns in majority government, finding that the Whigs held power in the first decade after the Glorious Revolution, ceded it, and then commanded consistent and large majorities between 1715 and 1741. Bogart’s work helps to improve the understanding of political alignment in the early days of the English party system and helps to link the commercially-interested Whig government with the pro-business legislations that helped to fuel the Industrial Revolution.
What really happened during the Glorious Revolution?
Steven Pincus and James Robinson | NBER | July 2011
The debate launched by Douglass North and Barry Weingast over the economic implications of the Glorious Revolution for the British Industrial Revolution a century later has hardly waned in intensity in the last thirty years, and this paper is one of many follow-up studies published in the last decade. The authors argue that while institutional change was the important consequence of 1688-9, the focus of “Constitutions and Commitment” on de jure changes was misguided. Instead, the. Revolution shifted the balance of political power in England such that policy was conducted by party ministries (rather than royal advisors) and Whigs—representing the merchants, commercial landowners, and urban bourgeois, as noted above—controlled government. This led to the implementation of a modernization program (of which the result was the elevated borrowing documented by North and Weingast), consisting of a constantly-standing Parliament, the establishment of the Bank of England, and the series of turnpike acts, which was conducive to economic growth in the modern era. Had the Tories been in power, England would have turned inward and been more financially conservative; instead, the interests amenable to industrial development were overrepresented in the legislature at the crucial moment.