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"Understanding the Economic Basics &
Modern Capitalism: Market Mechanisms and Administered
Alternatives" Smith:
Wealth of Nations. Ricardo: Principles.
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Page Contents
FUTURECASTS online magazine
www.futurecasts.com
Vol. 7, No. 1, 1/1/05
(From Vol. 1, No. 4, 11/1/98.)
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The determinants of modern economic prosperity
are geography and key characteristics of Western culture. & |
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Revisionist stupidity:
Why some advanced and others fell behind:
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This is plainly obvious, of course. However, because
of the efforts of certain "politically correct" revisionist
scholars to obscure or even deny the leading role of Western
civilization in shaping the modern economic world, David
S. Landes has felt obliged to emphasize the obvious in his thoroughly
researched, impressive history of the last 1,000 years of economic
development. His book covers all the most important and secondary
regions of the world, and provides a wealth of detail and insight. & Writing prior to the end of the 20th century, Landes explains:
Landes provides an unblinkingly realistic, harsh
indictment of those scholars who, for ideological reasons, are
striving to grossly distort economic history. Rejecting
political correctness, he traces modern economic development
to two European characteristics, one geographic and the other
cultural. |
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Geography has clearly played an important role
in determining which societies and nations have progressed and
which have lagged behind. Landes points out that peoples in tropical
and semi-tropical zones have obviously been severely handicapped
by the climatic and weather patterns of those regions. & |
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Divided they rose! |
Hot climates
are enervating. They breed a wide variety of dispiriting and
incapacitating diseases. When not dominated by deserts, their
weather patterns alternate between drought and torrential downpours
that are inimical to farming. While modern medicine and technology
now offer some hope for overcoming these natural handicaps, it
is still grossly stupid to ignore or deny the problems. & The author points out that Europe, too, had its geographic limitations - until the development of iron tools. These permitted the clearing of the great hardwood forests that dominated Europe and restricted the area suitable for farming. & The pertinent geographic difference between Europe and other temperate regions was the fragmented nature of European topography. Overland transportation and communications were simply too difficult. It proved impossible, after the fall of the Roman Empire, for any one nation or autocrat to conquer all of Europe.
Landes asserts that nations dependent on irrigation
systems from great rivers inevitably fall under the despotic
authority capable of organizing, constructing and maintaining
great irrigation projects. Autocrats inevitably smother individuality
and economic freedom - characteristics essential for modern economic
development. These characteristics can also be smothered by powerful
fundamentalist religions. |
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The beginnings of individuality: |
The differences for Europe cultural development - especially
within Western Europe - involved the relationship of the individual to
the ruler or the state. There was a pervasive sense of property
rights, and that god is above - rather than on a par with - the
ruler. |
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Property and propriety:
Political and religious rivalry and the right of exit:
Competition provides good results in politics and religion as well as in economics.
The power of freedom, individuality, and property rights: |
People felt free to be - discreetly - judgmental with respect
to the conduct of kings and aristocrats. They had a sense of
what was proper and what was improper. These principles arise
from diverse sources, including the Judeo-Christian bible and
ancient works on Greek and Roman philosophy. All of these works were
published and became widely accessible in the vernacular in the
16th century, simply because there were always some countries
in Western Europe where people were free to publish as they wished. & In addition, in Western Europe, with its variety of nations, principalities, and semi-autonomous commercial cities, Landes points out that people could "vote with their feet" and opt for the location where enterprise was possible and knowledge could be pursued. With the variety of political powers existing within the confines of Western Europe, and within individual states as well, commercial interests became important players in political power struggles, bringing with them concepts of contracts and individual rights. & Competition provides good results in politics and religion as well as in economics. "Political rivalry and the right of exit made all the difference." & Ultimately, fragmentation also allowed competing religious attitudes to carve out places for themselves, with similar beneficial results. "Europe was spared the thought control that proved a curse in Islam," Landes asserts. At each moment, there were political and religious leaders in much of Europe who tried to control events and throttle dissent or innovation. However, there were always some places in Europe where innovation and enterprise and dissent were permitted to flourish. & The wealth, power and influence of such places inevitably forced changes throughout Europe, as it now does throughout the world. Wherever people could work for their own interests instead of for the interests of overlords, inventiveness and commercial development flourished. & |
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The importance of freedom
& |
In 1000 A.D., Europe was a barbaric backwater,
well behind the civilizations of China, India and the Islamic
world. There were flourishing centers of trade and industry in
many regions of the Asian landmass and around the Indian Ocean.
Muslim and Chinese traders crisscrossed the Indian Ocean from
East Africa to Southeast Asia. Muslim trade in slaves from East
Africa flourished for centuries before the coming of Europeans
(and for a century after the ending of the European slave trade). & |
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Why try? |
However, invention and commerce were limited by the
absence of freedom. As Landes points out, in China and India,
there was "an absence of incentive to learning and self
improvement." In the Islamic world, there was religious
opposition to anything new. In China there was a lack of competitive
pressures on the autocratic rulers. & The peasant belonged to the emperor. He had only very limited rights in land or personal property, and no incentive to improve the land or productive tools. With China usually a single, unified, great empire, there was no exit for those who felt stifled in their economic ambitions. India, too, suffered from religious taboos, autocratic governments, and lack of rights in land or personal property. Any wealth could be expropriated. & "In short," says Landes, "no one was trying. Why try?" & Early in the 15th century, China launched grand fleets, with hundreds of great ships and tens of thousands of men, that cruised the Indian Ocean all the way to East Africa, decades before the coming of the Portuguese. But these were imperial displays, at vast cost. Although they did conduct trade, the emperor felt little economic incentive. Ultimately, a new emperor came to power, and the Chinese expeditions ended. The emperor felt no need for these expensive expeditions. (Note the similarities with the NASA moon landings.) & |
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Profit incentives:
Despotic control was more important than economic prosperity, or even military strength.
Despotic power was hard but brittle. |
However, the European expansion was profit-driven,
and thrived. By the 15th century, Europe had the upper hand in
economic power and weaponry. With the cruel attitudes of those
times, they drove forward towards empire, with disastrous results
for native peoples in the backward regions of Africa and the
Americas & Landes spreads before us the great bloody tableau of expanding European imperialism, providing perceptive insights into the successes and failures of the various players. At each point along the way, the nations where men of enterprise were most free to pursue wealth and/or knowledge slowly pulled ahead of those autocracies and theocracies that stifled individual ambitions. & Repeatedly, in Asian nations like China, Japan and India, and then in European nations like Spain and Portugal, governments and religions demonstrated that their first priority was control of the minds and bodies of their subjects and flocks, even though that meant slow descent into economic and military weakness. & Europeans conquered empires because those empires were despotic and oppressive in nature, with no real interest or loyalty extending from the subjects to their rulers. Their strength might be hard, but it was always brittle. Repeatedly, the populace welcomed and assisted the strangers who came to overthrow the indigenous tyrants. Frequently, the populace was tyrannized as badly by the newcomers. & |
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The advantages bestowed by geography and freedom
on such nations as England and The Netherlands were also decisive
in their rapid industrialization. & |
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The Protestant advantage:
Victimology propaganda is a self defeating escapism.
The Industrial Revolution was the result of European cultural characteristics. |
In addition, there was the Protestant Reformation that gave Northern
Europe an important intellectual advantage over Catholic Southern
Europe.
Landes constantly does effective battle with modern
revisionist economic history. For example, he skewers those who challenge the accelerated growth rates that define the "Industrial
Revolution." He points out that the revisionist statistical
analyses leave much to be desired. Just adding in the advances in quality
(and variety, too) such as improved metals and improved engines,
etc., greatly increases growth statistics. |
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Freedom, individuality, and property rights: |
The focal points of intellectual freedom and ferment
shifted from country to country over time. However, there were
always some places in Europe where men could pursue intellectual
and scientific pursuits free of political or religious constraints.
There were always places where ideas could be freely discussed,
published and contested, and where nongovernmental institutions
could be created that encouraged the dissemination of scientific
inquiry.
Landes provides many examples of instances where
economic freedom permitted the pursuit of profitable results and achieved commercially rational results, while similar efforts
in government directed systems achieved inferior economic results.
The building of roads and canals for commercial purposes in England
are a primary example. |
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"In the long run, only optimism pays." |
Aside from contempt for revisionist scholarship,
Landes offers many questions and only one conclusion: "In the
long run, only optimism pays." He is skeptical about the effectiveness
of government economic policy initiatives, but hesitates to place
all bets on the market and comparative advantage. & |
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The mixed blessings of industrial policy:
When governments pick winners and losers, we should not judge success just by looking at the winners. |
This leads to the only - minor - problem with this book. Comparative
advantage is a constant concern for Landes. He repeatedly points
out how comparative advantage for various industries shifted
favorably or unfavorably between nations due to advances in technical
knowledge, education, or the development of transportation and
communication infrastructure. He notes the major role government policies
often played in these shifts. He notes that the theory had been
used to justify the international division of labor prevailing
at various times, and rightly criticizes the notion that governments
should meekly accept a particular status quo. & Even after noting the many cultural factors and protectionist and obstructive government economic policies that have held back development in India and Latin America, he indicates that some of the blame should be placed on laissez faire acceptance of the prevailing comparative advantage. (He appears unaware of the contradictory nature of these positions.) & He notes that Portugal and Spain opted for empire rather than being content with the commercial advantage possible with their comparative advantage. (However, pursuit of empire left these nations impoverished for centuries.) & He notes with approval that Germany and Japan opted for heavy industry.
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Facilitate commerce, burden commerce, or plunder commerce: |
Indeed, as Landes frequently points out, not all government efforts at altering comparative advantage prove commercially favorable. More often than not, their efforts are designed to benefit favored economic entities rather than the economy as a whole - or are directed at enhancing military strength rather the material prosperity of the nation. Then, of course, there are the kleptocracies.
At any rate, as he notes, those major nations that historically made little or ineffective efforts to favorably influence their comparative advantage acted in that manner because they were willing to surrender economic and even military advantage in favor of assuring religious or political control. Their policies were not based on any high regard for a static view of comparative advantage.
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Copyright 1998 Dan Blatt