Liberty Matters

Some Explicit Chains of Reason Linking Ideas to Growth


John wants “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 takeoff -- that would explain why Britain was first to industrialize.”   That’s not hard, since there are numerous chains lying about all over the place.  One is explored in vol. 3, Bourgeois Equality, showing that elite opinion early in the 18th century shows many signs of shifting from an essentially Elizabethan political economy to a Younger Pitt version.  As to the link to laws as enforced, a result (which I don’tmuch explore: I can’t do everything!) was, for example, that courts in Britain stopped enforcing guild rules.  You can see how it would lead to betterment directly, and this in contrast to say Germany or France.  At the same time, as Peg Jacob points out, petitions for patents start bragging about labor saving, instead of “job creation” (the Mercantilist Mind—in the amiable Bob Reich for example—has not much advanced beyond Elizabeth I).  You can see how such bragging might lead to more betterment on the table.  Then gradually the case for free international trade, as John has noted himself, becomes respectable (and indeed the Blessed Adam Smith also and even more strongly inveighs against domestic monopoly).  Speaking of Pitt the Younger, had he not had to manage a war against the French he would have introduced actual free trade decades before it happened.  And as to entrepreneurship, isn’t it obvious that someone like Samuel Arkwright would have been crushed in 1560, and only a little less crushed in 1660?  Can one imagine the serried ranks of betterers after 1760 coming out of Elizabethan or even Restoration England?  No: they would have been sneered at, and then actually stopped—and were if they had a go.  John knows the history of the English inventor of the knitting frame.
But to proceed to the other half of John’s sentence as quoted -- “and was so much more successful than the Dutch” -- why am I making no impression on the easy and mistaken conviction by John (and I suppose still Joel) that the 18th- and early-19th century Dutch were not “successful”?  I repeat: if so, East Anglia, London, and the Home Counties generally were also not “successful.” Charles Dickens had not the slightest idea of how industrialization was going, because he lived in London and hardly ever ventured North.  So his portrayals of economic life are of merchants and bankers and other Londonish trades.  John sticks then with “the Dutch failed” in “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.”  “Held back” the way London and environs were “held back”?    
One might well suppose, as John does about China, that “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.”  Of course a bit of laissez faire, after three decades of idiotic economic governance, can work “miracles” (let us not get too excited, by the way, until the Chinese approach Japan or Korea, not to speak of Hong Kong, on the “miracle” front)if in modern conditions, able to take advantage (finally) of two centuries of betterment.  The evidence from India is in some ways cleaner, since there is before 1991 a marked change in ideology in favor of entrepreneurship and against planners and bureaucrats.  But even in the Chinese case there is no doubt, surely, that the commanding heights of the Party became much, much more tolerant of merchants and manufacturers.
John turns to the French case.  I am happy to hail Napoleon III as a “liberal,” setting aside his ideological teachers Cobden, Bright, Bastiat, Chevalier, and Rouher.  John evidently thinks that the approach as he delicately puts it of “top down” is somehow inconsistent with liberalization in mid-19th century Europe.  I suggest he consult the case of Prussia, where Bismarck, too, introduced manhood suffrage for mixed reasons (Bismarck was a liberal in many ways).  Or consult the case of Sweden or Italy liberalizing the same era, from the top down.
John argues plausibly that “ideas matter most where the political system privileges the opinions of a few over the many,” and points to the Philippines unable to implement liberalizing because it is democratic (contrast Singapore).  I agree too with his point that clans in the Middle East make liberal laws of incorporation, say, dead letters—this is what is wrong with Timur Kuran’s notion that the Islamic world was held back by not having French laws of incorporation (to state his thesis admittedly a little crudely).  But they got the French laws, in the 19th century, and nothing happened—except in Timur’s own native Turkey, because of “the opinions of a few over the many.”  
I merely want John to admit that ideas matter, sometimes, and to join Don and me in researching the numerous cases in which they do.  It is revealing that he writes, “I still do not understand when ideas should be seen as either necessary or sufficient conditions.”  But we are not looking for universal necessary or sufficient conditions, just local ones, in this time or that, which I am sure John would agree are sometimes sufficient and sometimes necessary.  
I would say that Holland and Britain and the United States provide numerous “explicit chains of reasoning” connecting ideas to outcomes.  Yet at the very end John falls back into the Materialist’s Lemma, which economizes so much on tiresome inquiries into the human mind and spirit in favor of calculations of Interest: “we are a long way from understanding when ideas cause growth or vice versa.”  Admitted.  But we will never get straight the history, or the present-day economics (to venture into universals), if we insist, as the neo-institutionalists/ Samuelsonians/ Marxoids do insist, on only examining the evidence for the one direction of causation.