Monday, February 16, 2015

Economic Growth

This last week I have been reading Sven Beckert’s Empire of Cotton and Sheilagh Ogilvie and A.W. Carus Institutions and Economic Growth in Historical Perspective. Both deal with the relationship between institutions and economic growth.

Beckert’s book reminds me of the old saying that “There is much here that is new and much that is interesting. Unfortunately, that which is new is not interesting, and that which is interesting is not new.” The interesting parts are the discussions of the industrial revolution (mostly Robert Allen’s theory), the role of force in promoting trade (Findlay and O’Rourke, and others, have made this argument); the capitalist nature of slavery (Conrad and Meyer and Fogel and Engerman said this a long time ago). What’s new is the argument that cotton, slavery and empire were not just important parts of economic history, they are the key to how the west got rich and capitalism was born. The book falls into the popular “________ that changed the World” category, where you insert whatever it is you are writing about into the blank. It places too much emphasis on one part of the economy: cotton. This is particularly true for the United States. We see many references to the importance of cotton as an export, but we never see any information about how important exports were to U.S. growth. The problem is that economic historians for more than half a century have been moving away from simple monocausal arguments about economic growth.  Beckert declares that slavery was the first big business, not railroads. But the new history of capitalism is on no firmer ground making slavery the driving force behind economic growth than Rostow’s non-communist manifesto was in making railroads the driving force. The only difference is that much of the evidence about railroads the importance of railroads was developed after Rostow wrote.

Of course, one can make the argument that “Plunder may not have directly fueled the Industrial Revolution, but mercantilism and imperialism were an important part of the context within which it originated, expanding markets and ensuring the supply of raw materials.” (Findlay and O’Rourke, xx) But Findlay and O’Rourke already made this argument in Power and Plenty.

Sheilagh Ogilvie and A.W. Carus Institutions and Economic Growth in Historical Perspective is at the opposite extreme. For them the devil is in the details. One of their key points is that it is not really productive to consider the influence of one institution in isolation; particular institutions can only be understood within the broader institutional framework that they are a part of. Beckert should have given more consideration to this point because the most obvious problem with his argument is that the institutions at the center of his story (slavery, expropriation, and the use of force to control trade) have existed for a long time. They did not lead to modern economic growth. If Ogilvie and Carus are right understanding modern economic growth might be hard work.

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