West Side story3 min read . Updated: 15 Sep 2007, 12:59 AM IST
West Side story
West Side story
Economic history often conjures images of musty tomes, bygone eras that no one knows about and in general, scholarship that is dry and difficult to relate to. Gregory Clark’s new book, A Farewell to Alms: A Brief Economic History of the World, conveys a different image.
Offering a sweep of history from the border between antiquity and the medieval age, the book is an attempt at tackling grand themes. Why did the Industrial Revolution take place in England and not China, which too had labour and markets? What were the reasons for the “great divergence" that propelled the West forward and left the “rest" behind?
These ideas are not dead, but have a contemporary ring in the debates on the role of geography and institutions in shaping economic outcomes. Is the fate of countries such as Bolivia due more to geographic accidents or poor institutional arrangements? Are both responsible? (Imagine a landlocked African nation with malaria-hit citizens and a military dictatorship—which is causing more damage?)
His journey of mankind, from wretched poverty to affluence, takes one through a Malthusian world where birth and death rates determined the income. Technological progress only resulted in population growth and little improvement in living standards. Suddenly, somewhere around 1800 AD, the Industrial Revolution unleashed all that is modern. But Clark does more. He links the origins of the Industrial Revolution to developments in the Malthusian stasis, something other scholars have ignored.
This period spawned habits, ideas and mores without which such take-off would have been impossible. These “selectional" pressures generated by the fight for survival, and their links to economic life, form the core of his thesis.
Clark takes a swipe at received wisdoms. In a chapter titled Institutions and Growth, he shows how 14th century England had the institutional framework that the World Bank and the International Monetary Fund argue is a must for an economic take-off. Yet, until 1800 AD, the living standards in England were, to again use a dismal expression, Malthusian. Institutions are but a part of the matrix that makes economic miracles possible.
On the other hand, it was inefficient use of available technology by poor countries that explains one part of the “great divergence." In one of the most systematic chapters of his book, Clark neatly demolishes one of the shibboleths of “nationalist" economic history: lack of capital as the reason for an industrial revolution not taking place (for example, in India). The data exhibited in the book, such as returns to government bonds and railway debentures in early 20th century, show that this was not the case and capital availability was a fact.
This “missing" industrialization is attributable to poor labour practices. This was the main barrier to the spread of technologies of the Industrial Revolution in countries such as India and China. He examines the performance of two enterprises—cotton mills and railways—to demonstrate this. Indian and Chinese mills employed more persons per spindle than their counterparts elsewhere. This led to a huge gap in output per machine. The same story held true in railways. Clarke’s arguments should be an eye-opener for those who make the usual arguments about colonialism and underdevelopment.
The stimulating book, however, does permit some quibbling. The author’s use of biological analogies in reasoning economic phenomena seems more like an escape route from the inexplicable: The time-scale of the two is very different. Evolutionary changes take place, at a minimum, over thousands of years. Economic events take place over much shorter time intervals. In any case, the use of biological/evolutionary arguments is fraught with challenges: Even if there are long-time biological effects that affect economic outcomes, their quantification is very difficult. That makes any cause and effect sequence hazy and likely to be non-existent. Economists of various stripes have for long been fascinated with biological ideas, but the quest is usually regarded as quixotic.
Yet, at the end of it all, the author appears to be sensitive to the complexities that an economic historian must face. He asserts: “Economic historians thus inhabit a strange netherworld. Their days are devoted to proving a vision of progress that all serious empirical studies in the field contradict. Trapped in this ever-tightening intellectual death spiral, they can maintain the vision only through a strange intellectual dissonance, appealing to more and more elaborate conceptions of how early institutions could unwittingly have provided poor incentives."