Liberty Matters

Which Came First: Ideas or Growth?

Readers seeking bloodsport may be disappointed that we all agree on so much, but anyone seeking to understand how material progress has been obtained in the past and might continue to in the future will see how our refinements at the margins open up vast areas for further research.
Both Don and Deirdre acknowledge the value of my speculative questions, but feel that their case is sufficiently robust that discussion of How Ideas Matter should be thought of as next-level issues to advance a mature thesis.  But, in fact, I still want to hear an explicit chain of reasoning -- linking the timing of attitude changes in Britain to their influence on politicians or entrepreneurship to the laws as enforced to industrial take-off -- that would explain why Britain was first to industrialize and was so much more successful than the Dutch.  Deirdre claims that the Dutch became an honorable hierarchy.  But how are we to know when that hierarchy is or is not destructive of growth?  As the example of China suggests, neither the formal rhetoric of the Communist Party nor its actual functioning in the 1980s suggested respect for bourgeois values.  Yet in that case, merely opening the door to toleration of capitalism seems to have worked miracles. Were the Dutch really so much less liberal than Deng’s China?   It would seem that a Dutch nation with advanced understanding of commercial and market liberalism seems to have been rather easily held back by seemingly smaller changes in norms and rules.  Yes, the Dutch at least acquired prosperity, but they were leaders in the prosperity game before the advent of modern economic growth and did little to lead the way in promoting those ideas after industrialization.
Or take the French case:  the relevant figure I claim was neither Chevalier nor Rouher but Napoleon III. It was he who presided over the decades when French growth began its ascent, and it was his regime that carefully nurtured liberal ideas in a way that allowed France to perform well even if one takes the most pessimistic assessment of 19th-century France as an also-ran.  Someone following on McCloskey’s work might point to Louis Napoleon’s exposure to liberal ideas while in exile in Britain as being formative of his later policy decisions and as a good example of the Bourgeois Values thesis.  Yet if Louis Napoleon was a liberal, he was certainly not a consistent one.  After all,  while Napoleon III promoted universal male suffrage, he did it to facilitate his becoming a dictator for life.  Then, having become a dictator, he made himself Emperor.  Yet his empire was successful in promoting European free trade, modernizing Paris, promoting investment banks, liberalizing corporation law, and spurring mechanical invention.  All in a rather un-bourgeois top-down fashion.  Was he successful despite his inconsistency, or because he saw that his interventions made liberal reform more possible than a less hypocritical and openly democratic course of action?
I think that ideas matter most where the political system privileges the opinions of a few over the many.  In those cases, accidents of influence and upbringing may matter a lot.  In contrast, the more liberal and competitive is the political system, the more likely it is that a nation which has not yet become a productive market economy will be mired in factionalism and rent-seeking, even when – as in the case of the Philippines – the general public attitude supports and even admires market ideals in the abstract.
I still do not understand when ideas should be seen as either necessary or sufficient conditions.  We have not discussed the problem of individualism and the nuclear family as necessary if not sufficient conditions for bourgeois market success.  While individualism is not sufficient for success, some may be necessary.  To this day, countries with strong clan and extended family ties – as we see in the Middle East or the Philippines – find it difficult to effectively support liberal norms even when the formal rules mostly mimic those of the developed West.   China seems to have lost the entanglements of multigenerational clans that were characteristic of the society even up to the late 19th and early 20th centuries. But change came after many horrendous interventions, some unintended (as the Second World War) and some following from the draconian policies of different rulers.  If this factor is significant, then the Catholic Church, and its promotion of the nuclear family many centuries ago, may have made a greater contribution to the eventual rise of Europe as a whole than the timing of attitudinal changes in early modern England.
The problem of liberal ideas emerging from rapid growth (rather than vice versa) also comes up when comparing China and Russia over the last two decades.  Certainly, the modern Chinese leadership tends to view the experiments of Russia with democracy and an open espousal of liberal ideas through a relatively free press as a failure to be avoided, and President Putin also seems to agree.  Yet an illiberal Putin and an oil-rich elite seem to have spawned a new liberal middle class in the very cities – Moscow and St. Petersburg – that benefited from cronyism and unequal growth. 
If timing matters, then this also keeps alive the case for institutions and property rights because the specifics of those rights and how they were exercised were quite different in early medieval England and 18th-century Britain.  Property rights may be most progressive in very specific political circumstances with appropriate material and/or attitudinal support.  I deeply want to believe that ideas were the key element in the Industrial Revolution.  Promoting reform would actually become easier.  But we are a long way from understanding when ideas cause growth or vice versa.