Universal Church, Tiny States, Private Property

This essay
originally appeared as “The Theory of Economic Development and
the ‘European Miracle'” in
The
Collapse of Development Planning
, edited by Peter J. Boettke.

Among writers
on economic development, P.T. Bauer is noted both for the depth
of his historical knowledge, and for his insistence on the indispensability
of historical studies in understanding the phenomenon of growth
(Walters 1989, 60; see also Dorn 1987). In canvassing the work
of other theorists, Bauer has complained of their manifest “amputation
of the time dimension”:

The historical
background is essential for a worthwhile discussion of economic
development, which is an integral part of the historical progress
of society. But many of the most widely publicized writings
on development effectively disregard both the historical background
and the nature of development as a process. (Bauer 1972, 324–25)

Too many
writers in the field have succumbed to professional overspecialization
combined with a positivist obsession with data that happen to
be amenable to mathematical techniques. The result has been models
of development with little connection to reality:

Abilities
and attitudes, mores and institutions, cannot generally be quantified
in an illuminating fashion… Yet they are plainly much
more important and relevant to development than such influences
as the terms of trade, foreign exchange reserves, capital output
ratios, or external economies, topics which fill the pages of
the consensus literature. (Ibid., 326)

Even when
a writer appears to approach the subject historically, concentration
on quantifiable data to the neglect of underlying institutional
and social-psychological factors tends to foreshorten the chronological
perspective and thus vitiate the result:

It is misleading
to refer to the situation in eighteenth -and nineteenth-century
Europe as representing initial conditions in development. By
then the west was pervaded by the attitudes and institutions
appropriate to an exchange economy and a technical age to a
far greater extent than south Asia today. These attitudes and
institutions had emerged gradually over a period of eight centuries.
(Ibid., 219–20)[1] 

At the root
of the approach criticized by Bauer there appears to be a methodological
holism that prefers to manipulate aggregates while ignoring individual
human actors and the institutions their actions generate. Yet,
“differences in people’s capacities and attitudes and in their
institutions are far-reaching and deepseated and largely explain
differences in economic performance and in levels and rates of
material progress
” (Ibid., 313–14; emphasis added).

Bauer’s critique
thus draws attention to the need to study both the centuries of
European history antedating the Industrial Revolution and “the
interrelationships between social, political, and legal institutions”
in that period (Ibid., 277).[2] 
Here his assessment links up with an impressive body of scholarship
that has emerged in recent years emphasizing precisely these points.

The “European
Miracle”

While it
would be wrong to suggest the existence of any monolithic analysis,
a number of scholars concerned with the history of European growth
have tended to converge on an interpretation highlighting certain
distinctive factors. For the sake of convenience, we shall, therefore,
speak of them, despite their differences, as forming a school
of thought. The viewpoint may be referred to as the “institutional”
– or, to use the title of one of the best-known works in
the field – the “European miracle” approach.[3] 

The “miracle”
in question consists in a simple but momentous fact: It was in
Europe – and the extensions of Europe, above all, America
– that human beings first achieved per capita economic growth
over a long period of time. In this way, European society eluded
the “Malthusian trap,” enabling new tens of millions to survive
and the population as a whole to escape the hopeless misery that
had been the lot of the great mass of the human race in earlier
times. The question is: why Europe?

One possible
answer, which has long enjoyed powerful support in intellectual
circles in the West and among officials in underdeveloped countries,
was heavily influenced by socialist and even Marxist tenets.[4] 
It accounted for Europe’s extraordinary growth largely by the
more or less spontaneous advance of science, combined with a “primitive
accumulation” of capital – through imperialism, slavery and
the slave trade, the expropriation of small farmers, and the exploitation
of the domestic working class. The conclusion was clear. The extraordinary
growth of Europe was at the expense of untold millions of the
enslaved and downtrodden, and the European experience should serve
decision makers in underdeveloped countries more as a cautionary
tale than an exemplar.

The contributors
to the newer model, however, reject this venerable legend. Concerned
as they are with comparative economic history, they have sought
for the origins of European development in what has tended to
set Europe apart from other great civilizations, particularly
those of China, India, and Islam. To one degree or another, their
answer to the question, why Europe? has been: Because Europe enjoyed
a relative lack of political constraint. As Jean Baechler, in
a pioneering work, pointedly expressed it:

The first
condition for the maximization of economic efficiency is the
liberation of civil society with respect to the state…The
expansion of capitalism owes its origins and raison d’être
to political anarchy.
(Baechler 1975, 77, 113;
emphasis in original)

The Uniqueness
of Europe

John Hicks
partially adumbrated this approach in the late 1960s (Hicks 1969).[5] 
In A
Theory of Economic History
,
Hicks laid out the “chief
needs” of the expanding, mercantile phase of economic development
– the protection of property and the enforcement of contracts
– and stated:

The Mercantile
Economy, in its First Phase, was an escape from political authority
– except in so far as it made its own political authority.
Then, in the Middle Phase, when it came formally back under
the traditional political authority, that authority was not
strong enough to control it. (Ibid., 33, 100)

Hicks’s account,
however, proved to be much too schematic, besides limiting itself
to economic analysis and deliberately ignoring political, religious,
scientific, and other factors (see Bauer 1971). Around the same
time as Hicks, David Landes was sketching the essentials of the
newer outlook. In seeking to answer the question why the industrial
breakthrough occurred first in western Europe, he highlighted
two factors “that set Europe apart from the rest of the world
… the scope and effectiveness of private enterprise, and
the high value placed on the rational manipulation of the human
and material environment” (Landes 1970, 14–15). “The role
of private enterprise in the West,” in Landes’s view, “is perhaps
unique: more than any other factor, it made the modern world”
(Ibid., 15).

But what
was it that permitted private enterprise to flourish? Landes pinpointed
the circumstance that would be vital to the new interpretation
– Europe’s radical decentralization:

Because
of this crucial role as midwife and instrument of power in
a context of multiple, competing polities
(the contrast
is with the all-encompassing empires of the Orient or the Ancient
World), private enterprise in the West possessed a social and
political vitality without precedent or counterpart. (Ibid.;
emphasis in original)

Damaging
incursions by government did occur, and the situation in some
parts of Europe conditioned a social preference for military values;
“on balance, however, the place of private enterprise was secure
and improving with time; and this is apparent in the institutional
arrangements that governed the getting and spending of wealth”
(Ibid.).

A precondition
of economic expansion was the definition and defense of property
rights against the political authority. This occurred early on
in Europe. Landes contrasts the European method of regular taxation
(supervised by assemblies representative of the tax-bearing classes)
with the system of “extortion” prevalent in “the great Asian empires
and the Muslim states of the Middle East … where fines and
extortions were not only a source of quick revenue but a means
of social control – a device for curbing the pretensions
of nouveaux riches and foreigners and blunting their
challenge to the established power structure” (Ibid., 16–17).[6] 

Landes’s
insights, briefly sketched in a few pages of introduction to his
Prometheus
Unbound
,
have been vastly elaborated upon by the new
school. The upshot is an overall interpretation of Western history
that may be stated as follows:

Although
geographical factors played a role, the key to western development
is to be found in the fact that, while Europe constituted a single
civilization – Latin Christendom – it was at the same
time radically decentralized.[7] 
In contrast to other cultures – especially China, India,
and the Islamic world – Europe comprised a system of divided
and, hence, competing powers and jurisdictions.

After the
fall of Rome, no universal empire was able to arise on the Continent.
This was of the greatest significance. Drawing on Montesquieu’s
dictum, Jean Baechler points out that “every political power tends
to reduce everything that is external to it, and powerful objective
obstacles are needed to prevent it from succeeding” (Baechler
1975, 79). In Europe, the “objective obstacles” were provided
first of all by the competing political authorities. Instead of
experiencing the hegemony of a universal empire, Europe developed
into a mosaic of kingdoms, principalities, city-states, ecclesiastical
domains, and other political entities.

Within this
system, it was highly imprudent for any prince to attempt to infringe
property rights in the manner customary elsewhere in the world.
In constant rivalry with one another, princes found that outright
expropriations, confiscatory taxation, and the blocking of trade
did not go unpunished. The punishment was to be compelled to witness
the relative economic progress of one’s rivals, often through
the movement of capital, and capitalists, to neighboring realms.
The possibility of “exit,” facilitated by geographical compactness
and, especially, by cultural affinity, acted to transform the
state into a “constrained predator” (Anderson 1991, 58).

Decentralization
of power also came to mark the domestic arrangements of the various
European polities. Here feudalism – which produced a nobility
rooted in feudal right rather than in state-service – is
thought by a number of scholars to have played an essential role
(see, e.g., Baechler 1975, 78). Through the struggle for power
within the realms, representative bodies came into being, and
princes often found their hands tied by the charters of rights
(Magna Carta, for instance) which they were forced to grant their
subjects. In the end, even within the relatively small states
of Europe, power was dispersed among estates, orders, chartered
towns, religious communities, corps, universities, etc., each
with its own guaranteed liberties. The rule of law came to be
established throughout much of the Continent.

Thus, there
is general agreement that crucial to laying the foundations for
the European miracle were, in Jones’s words, the “curtailment
of predatory government tax behavior” and “the limits to arbitrariness
set by a competitive political arena” (Jones 1987, xix, xxi).
Over time, property rights – including rights in one’s own
person – came to be more sharply defined, permitting owners
to capture more of the benefits of investment and improvement
(North 1981). With the freer disposition of private property came
the possibility of ongoing innovations, tested in the market.
Here, too, the rivalrous state system was highly favorable. The
nations of Europe functioned “as a set of joint-stock corporations
with implicit prospectuses listing resources and freedoms” in
such a way as to insure “against the suppression of novelty and
unorthodoxy in the system as a whole” (Jones 1987, 119). A new
social class arose, consisting of merchants, capitalists, and
manufacturers “with immunity from interference by the formidable
social forces opposed to change, growth, and innovation” (Rosenberg
and Birdzell 1986, 24).

Eventually,
the economy achieved a degree of autonomy unknown elsewhere in
the world except for brief periods. As Jones puts it:

Economic
development in its European form required above all freedom
from arbitrary political acts concerning private property. Goods
and factors of production had to be free to be traded. Prices
had to be set by unconditional exchange if they were to be undistorted
signals of what goods and services really were in demand, where
and in what quantities. (Jones 1987, 85)

The system
protecting the ownership and deployment of private property evolved
in Europe by slow degrees – over at least “the eight centuries”
mentioned by Bauer. Quite logically, therefore, the economic historians
concerned with “how the West grew rich” have directed a great
deal of their attention to the medieval period.

The Importance
of the Middle Ages

The stereotype
of the Middle Ages as “the Dark Ages” fostered by Renaissance
humanists and Enlightenment philosophes has, of course,
long since been abandoned by scholars. Still, the “consensus”
writers on economic development whom Bauer faults have by and
large ignored the importance of the Middle Ages for European growth
– something that makes as much sense as beginning the explanation
of the economic and cultural successes of European Jewry with
the eighteenth century. Economic historians, however, following
in the footsteps of the great Belgian historian Henri Pirenne
(Pirenne 1937), have had a quite different estimation of the medieval
period. Carlo M. Cipolla asserts that “the origins of the Industrial
Revolution go back to that profound change in ideas, social structures,
and value systems that accompanied the rise of the urban communes
in the eleventh and thirteenth centuries” (Cipolla 1981, 298).

Of Europe
from the late tenth to the fourteenth centuries, Robert S. Lopez
states:

Here, for
the first time in history, an underdeveloped society succeeded
in developing itself, mostly by its own efforts … it created
the indispensable material and moral conditions for a thousand
years of virtually uninterrupted growth; and, in more than one
way, it is still with us. (Lopez 1971, vii)

Lopez contrasts
the European evolution with that of a neighboring civilization,
Islam, where political pressures smothered the potential for an
economic upsurge:

The early
centuries of Islamic expansion opened large vistas to merchants
and tradesmen. But they failed to bring to towns the freedom
and power that was indispensable for their progress. Under the
tightening grip of military and landed aristocracies the revolution
that in the tenth century had been just around the corner lost
momentum and failed. (Ibid., 57)

In Europe,
as trade and industry expanded, people discovered that “commerce
thrives on freedom and runs away from constriction; normally the
most prosperous cities were those that adopted the most liberal
policies” (Ibid., 90). The “demonstration effect” that has been
a constant element in European progress – and which could
exist precisely because Europe was a decentralized system of competing
jurisdictions –   helped spread the liberal policies
that brought prosperity to the towns that first ventured to experiment
with them.

Scholars
like Cipolla and Lopez, attempting to understand European development
in the Middle Ages, make constant reference to ideas, value
systems, moral conditions,
and similar cultural elements.[8] 
As Bauer has emphasized, this is a part of the distinctive European
evolution that cannot be divorced from its institutional history.
In regard to the Middle Ages, prime importance, in the view of
many writers, attaches to Christianity. Harold J. Berman (Berman
1974)[9]  has stressed
that with the fall of Rome and the eventual conversion of the
Germans, Slavs, Magyars, and so forth, Christian ideas and values
suffused the whole blossoming culture of Europe. Christian contributions
range from the mitigation of slavery and a greater equality within
the family to the concepts of natural law, including the legitimacy
of resistance to unjust rulers. The Church’s canon law exercised
a decisive influence on Western legal systems: “it was the church
that first taught Western man what a modern legal system was like”
(Ibid., 59).

Berman, moreover,
focuses attention on a critical development that began in the
eleventh century: the creation by Pope Gregory VII and his successors
of a powerful “corporate, hierarchical church … independent
of emperors, kings, and feudal lords,” and thus capable of foiling
the power-seeking of temporal authority (Ibid., 56).[10] 
In this way, Berman bolsters Lord Acton’s analysis of the central
role of the Catholic church in generating Western liberty by forestalling
any concentration of power such as marked the other great cultures,
and thus creating the Europe of divided and conflicting jurisdictions.[11] 

In a major
synthesis, Law
and Revolution
,
Berman has highlighted the legal facets
of the development whose economic, political, and ideological
aspects other scholars have examined (Berman 1983): “Perhaps the
most distinctive characteristic of the Western legal tradition
is the coexistence and competition within the same community of
diverse legal systems. It is this plurality of jurisdictions and
legal systems that makes the supremacy of law both necessary and
possible” (Ibid., 10)[12] 

Berman’s
work is in the tradition of the great English scholar, A.J. Carlyle,
who, at the conclusion of his monumental study of political thought
in the Middle Ages, summarized the basic principles of medieval
politics: that all – including the king – are bound
by law; that a lawless ruler is not a legitimate king, but a tyrant;
that where there is no justice there is no commonwealth; that
a contract exists between the ruler and his subjects (Carlyle
and Carlyle 1950, 503–26).

Other recent
scholarship has supported these conclusions. In his last, posthumous
work, the distinguished historian of economic thought, Jacob Viner,
noted that the references to taxation by St. Thomas Aquinas “treat
it as a more or less extraordinary act of a ruler which is as
likely as not to be morally illicit” (Viner 1978, 68–69).
Viner pointed to the medieval papal bull, In Coena Domini
– evidently republished each year into the late eighteenth
century – which threatened to excommunicate any ruler “who
levied new taxes or increased old ones, except for cases supported
by law, or by an express permission from the pope” (Ibid., 69).
Throughout the Western world, the Middle Ages gave rise to parliaments,
diets, estates-generals, Cortes, etc., which served to limit the
powers of the monarch. [13] A.R.
Myers notes:

Almost
everywhere in Latin Christendom the principle was, at one time
or another, accepted by the rulers that, apart from the normal
revenues of the prince, no taxes could be imposed without the
consent of parliament … By using their power of the purse
[the parliaments] often influenced the rulers policies, especially
restraining him from military adventures. (Myers 1975 29–30)

In a recent
synthesis of modern medievalist scholarship, Norman F. Cantor
has summarized the heritage of the European Middle Ages in terms
strikingly similar to those employed by the current institutional
historians:

In the
model of civil society, most good and important things take
place below the universal level of the state: the family, the
arts, learning, and science; business enterprise and technological
process. These are the work of individuals and groups, and the
involvement of the state is remote and disengaged. It is the
rule of law that screens out the state’s insatiable aggressiveness
and corruption and gives freedom to civil society below the
level of the state. It so happens that the medieval world was
one in which men and women worked out their destinies with little
or no involvement of the state most of the time. (Cantor 1991,
416)

One highly
important factor in the advance of the West, possibly linked to
Christianity, has not, however, been dealt with by the newer economic
historians. It is the relative lack of institutionalized envy
in Western culture. In a work endorsed by Bauer, the sociologist
Helmut Schoeck has drawn attention to the omnipresence of envy
in human societies (Schoeck [1969] 1987). Perceived as a grave
threat by those at whom it is directed, it typically results in
elaborate envy-avoidance behavior: the attempt to ward off the
dangers of malicious envy by denying, disguising, or suppressing
whatever traits provoked it. The antieconomic consequences of
socially permitted – or even encouraged – envy and reactive
envy-avoidance scarcely lend themselves to quantification. Nonetheless,
they may clearly be highly damaging. Drawing on anthropological
studies, Schoeck stresses the harm that institutionalized envy
can inflict on the process of economic and technical growth (Ibid.,
73). Western culture, according to Schoeck, has somehow been able
to inhibit envy to a remarkable degree. Why this is so is less
clear. Schoeck links this fact to the Christian faith: “It must
have been one of Christianity’s most important, if unintentional,
achievements in preparing men for, and rendering them capable
of, innovative actions when it provided man for the first time
with supernatural beings who, he knew, could neither envy nor
ridicule him” (Ibid., 79). Yet the evident variation in socially
permitted envy in different Christian societies (e.g., Russia
as against western Europe) suggests that the presence of Christian
faith alone is not an adequate explanation.

Case Studies
of Development

Obviously,
all of Europe did not progress at the same rate. In particular,
in the modern period the Netherlands and then England became the
pacesetters of economic growth, while other countries declined.
These facts can also be accounted for by the model.

The Low Countries
had long benefited from the legal system inherited from the dukes
of Burgundy. These rulers, who governed in collaboration with
an active estates-general,[14] 
had promoted an open commercial and industrial system, based on
protection of property rights. In the rise of the “northern Netherlands”
(the United Provinces, or “Holland”) we have a near-perfect example
of the European miracle in operation. First, the area had been
a major participant in European economic, political, social, and
cultural developments for centuries. As Cipolla has observed,
“The country that in the second half of the sixteenth century
rebelled against Spanish imperialism and then rose to the role
of Europe’s economically most dynamic nation, was anything but
an underdeveloped country from the outset” (Cipolla 1981, 263).
Owing its independence to the decentralized state system of Europe,
it emerged itself as a decentralized polity, without a king and
court – a “headless commonwealth” that combined secure property
rights, the rule of law, religious toleration, and intellectual
freedom with a degree of prosperity that amounted to an early
modern Wirtschaftswunder. It is not surprising that Holland
exerted a powerful demonstration effect. As K.W. Swart states:

both foreigners
and Dutchmen were apt to believe that the Dutch Republic was
unique in permitting an unprecedented degree of freedom in the
fields of religion, trade, and politics…. In the eyes
of contemporaries it was this combination of freedom and economic
predominance that constituted the true miracle of the Dutch
Republic. (Swart 1969, 20)

The success
of the Dutch experiment was noted with great interest, especially
in England, whose soil was already well prepared to accept the
idea that prosperity is a reward of freedom. The deep roots of
economic individualism, and hence of development, in English medieval
history have been emphasized by Alan Macfarlane (Macfarlane 1978
and 1987).[15]  In the
early modern period, the common law, which had evolved over many
centuries, acted as a guarantor of the sanctity of property and
free entry to industry and trade against the policies of the early
Stuart kings. In the face of authoritarian usurpations, Sir Edward
Coke and his fellow jurists acted, in the words of North and Thomas,
“to place the creation of property rights beyond the royal whim;
to embed existing property rights in a body of impersonal law
guarded by the courts” (North and Thomas 1973, 148). Crucial in
the case of both the Netherlands and England was the preservation,
against attempted royal encroachments, of traditional representative
assemblies determined to deny the ruler the right to tax at will.
Here the antiauthoritarian side exploited – and further developed
– the inherited discourse whose key concepts included “liberties,”
“rights,” “the law of nature,” and “constitution.”

The decline
of Spain, on the other hand, is also taken into account in the
model. Confiscation of the property of Jews and Moors by the Spanish
crown was, according to North and Thomas:

only symptomatic
of the insecurity of all property rights . . seizure, confiscation,
or the unilateral alteration of contracts were recurrent phenomena
which ultimately affected every group engaged in commerce or
industry as well as agriculture…. As no property was secure,
economic retardation was the inevitable consequence. (Ibid.,
131)

The economic
decay of Spain, in turn, provided a negative demonstration effect
that played a potent role in the policy choices of other countries.

The theme
of the autonomy of the market and the inhibition of the predator-state
as major factors in economic growth is pursued in the examination
of non-European cultures. Baechler, for instance, states that
“each time China was politically divided, capitalism flourished,”
and maintains that Japanese history manifests conditions approximating
those of Europe (Baechler 1975, 82–86). Anderson, after
surveying economic growth in the history of Sung China and Tokugawa
Japan, as well as the Netherlands and England, concludes that
the common element is that “they occurred when governmental constraints
on economic activity were relaxed” (Anderson 1991, 73–74)[16] 

While, needless
to say, much more research requires to be done on economic development
in the history of non-European civilizations, the evidence so
far suggests strong support for the basic thrust of the institutional
approach.

Contrast
of Europe with Russia

The meaning
of the European miracle can be better seen if European developments
are contrasted with those in Russia. Colin White lists, as the
determining factors of Russian backwardness “a poor resource and
hostile risk environment … an unpropitious political tradition
and institutional inheritance, ethnic diversity, and the weakness
of such key groups limiting state power as the church and landed
oligarchy.” (White 1987, 136) After the destruction of Kievan
Rus by the Tatars and the rise of Muscovy, Russia was characterized
for centuries by the virtual absence of the rule of law, including
security for persons and property.

The lawlessness
– as well as the poverty – of Muscovite Russia was notorious.
When the emissary of Elizabeth I inquired of Ivan the Great the
status of his subjects, he was told: “All are slaves” (Besançon,
in Baechler, Hall, and Mann 1988, 161). Ivan IV, the Terrible,
annihilated the flourishing commercial republics of Novgorod and
Pskov, and loosed his Oprichnina (Ivan’s praetorian guard)
on the kingdom for a frenzy of butchery that came to stand for
what was permissible in the Muscovite state. Alain Besançon
remarks dryly, “Of the three legends (Romanian, German, and Russian)
that depict, in the guise of Dracula, the reign of Vlad the Impaler,
the Russian alone sings the praises of the prince” (Ibid.).

The nobility
in Russia was a state-service nobility, lacking any independent
base. As White observes: “Russia was never truly feudal in the
west European sense of the term” (White 1987, 10). In contrast
to Europe and America, the towns, as well, were “simply another
arm of the state” (Ibid., 137–38). The differences between
Russia and the West can be seen in their respective ideas of “absolutism.”
Ivan IV’s concept is well known. It may be compared with that
of a political writer in the West who is famous as a defender
of royal absolutism, Jean Bodin. Alexander Yanov has pointed out
that, for all his faith in absolutism:

Bodin regarded
the property of the citizens as their inalienable possession,
in the disposition of which they were no less sovereign than
was the monarch in ruling his people. To tax citizens of a part
of their inalienable property without their voluntary consent
was, from Bodin’s point of view, ordinary robbery. (Yanov 1981,
44–45)[17] 

In this connection,
Yanov reports a telling anecdote. A French diplomat in a conversation
with an English colleague affirmed his belief in the principle
enunciated by Louis XIV, that the king was ultimate owner of all
the property within his kingdom (a principle which even the Sun-King
never dared to act upon). The Englishmen retorted: “Did you study
public law in Turkey?” (Ibid., 44 n. 17)

The fact
that Russia received Christianity from Byzantium rather than Rome
shaped the entire course of Russia’s history (Pipes 1974, 221–43).
In the words of Richard Pipes, the Orthodox church in Russia became,
like every other institution, “the servant of the state.” Pipes
concludes, regarding the “relations between state and society
in pre-1900 Russia”:

None of
the economic or social groups of the old regime was either able
or willing to stand up to the crown and challenge its monopoly
of political power. They were not able to do so because, by
enforcing the patrimonial principle, i.e., by effectively asserting
its claim to all the territory of the realm as property and
all its inhabitants as servants, the crown prevented the formation
of pockets of independent wealth or power. (Ibid., 249)

What ideas
of liberalism came to Russia came perforce from the West. It was
from listening to the lectures on natural law at the University
of Leipzig that Alexander Radishchev first learned that limits
may be put to the power of the tsar (Clardy 1964, 37–38).
The beginnings of the shift to a more market-oriented economic
policy before the First World War are traced by Besancon to the
fact that the Russian ministers read the liberal economists (Besancon,
in Baechler, Hall, and Mann 1988, 166).

The Downfall
of Marxist Historiography

The Marxist
philosophy of history is filled with manifold, often strategic,
contradictions and ambiguities. Yet, if “historical materialism”
has any significant content at all it is as a technological
interpretation of history (Mises 1957, 106–12; Bober 1962,
3 –). Although Nathan Rosenberg has denied that Marx held
that “technological factors are, so to speak, the independent
variable in generating social change, which constitutes the dependent
variable” (Rosenberg 1982, 36; see also 34–51),[18] 
the weight of evidence is heavily against him (Cohen 1978, 134–0).

According
to Marx, Engels, and the theoreticians of the “Golden Age” of
the Second International, history proceeds basically via changes
in the “material productive forces” (the technological base),
which render obsolete the existing “mode of production” (the property
system). Because of technological changes, the mode of production
is compelled to change; with it, everything else – the whole
legal, political, and ideological “superstructure” of society
– is transformed, as well (Marx [1859] 1969b, 8-). As Marx
put it aphoristically: “The wind mill yields a society with feudal
lords, the steam mill a society with industrial capitalists” (Marx
[1847] 1969a, 130).

Marxism has,
of course, been subjected for generations to withering rebuttal
on many different fronts, not least in regard to its philosophy
of history. The newer understanding of European history is particularly
destructive of its fundamental claims, however, in that it directs
attention to the peculiar shallowness of “historical
materialism.” This newer understanding insists that the colossal
growth of technology in the Western world in the past millennium
must itself be explained, and the explanation it provides is in
terms of the institutional and moral matrix that emerged
in Europe over many centuries.[19] 
New and more productive machines did not spring forth mysteriously
and spontaneously, nor was the spectacular expansion of technical
and scientific knowledge somehow inevitable. As Anderson has summed
up the evidence, “the scientific and technical stasis that followed
the remarkable achievements of the Song dynasty, or of the flowering
of early Islam, indicates that scientific inquiry and technology
do not necessarily possess in themselves the dynamism suggested
by the European experience” (Anderson 1991, 46). On the contrary,
technology and science emerged out of an interrelated set of political,
legal, philosophical, religious, and moral elements in what orthodox
Marxism has traditionally disparaged as the “superstructure” of
society.

Conclusion

According
to the Indian development economist R.M. Sundrum, if we are to
understand how development can be promoted in the poorer countries
today, we must understand the historical process which transformed
developed countries in the past, and why this process failed to
take place elsewhere (cited in Arndt 1987, 177). This is the position
that P.T. Bauer, too, has insisted upon. Rejecting the “timeless
approach” to economic development, Bauer has accentuated the many
centuries required for economic growth in the Western world, and
the interplay of various cultural factors that were its precondition.
Most important, in Bauer’s view, is that in the Western world
institutions and values evolved that favored private property
and the market, set limits to state arbitrariness and predation,
and encouraged innovation and the sense that human beings are
capable of improving their lot through their actions on the market.

Recently,
W.W. Rostow, in a summary of Bauer’s career, chided him for failing
“to take adequately into account the extremely large and inescapable
role of the state in early phases of development” (Rostow 1990,
386).[20]  Such a criticism
is not surprising, coming from one of the leaders of what Bauer
has for years assailed as the “spurious consensus.” Yet it finds
little support in the work of the historians dealt with here.
(For some reason, Rostow ignores this whole body of scholarship
in his very lengthy history of theories of economic growth; Ibid.,
passim). While some of these authors would stipulate a significant
role for the state in certain areas – particularly in defining
and enforcing property rights – this is consistent with Bauer’s
viewpoint. Moreover, the overall thrust of their work – which
stresses the importance of limits on state action in the development
of the West – tends to corroborate Bauer’s position rather
than Rostow’s. Peter Burke, for instance, writing on one of the
earliest examples of European development – the merchant-states
of northern Italy and the Netherlands – describes them as
“pro-enterprise cultures in which governments did relatively little
to frustrate the designs of merchants or hinder economic growth,
a negative characteristic which all the same gave those countries
an important advantage over their competitors” (Burke in Baechler,
Hall, and Mann 1988, 230). William H. McNeill notes that “within
Europe itself, those states that gave the most scope to private
capital and entrepreneurship prospered the most, whereas better
governed societies in which welfare on the one hand or warfare
on the other commanded a larger proportion of available resources
tended to lag behind.” As the growth leaders McNeill cites “such
conspicuously undergoverned lands as Holland and England” (McNeill
1980, 65). And F.L. Jones takes as a guiding principle in the
explanation of growth a famous passage from Adam Smith: “Little
else is requisite to carry a state to the highest degree of opulence
from the lowest barbarism, but peace, easy taxes, and a tolerable
administration of justice; all the rest being brought about by
the natural course of things” (Jones 1987, 234–35, cited
in Stewart [1793] 1966, 68).

The new paradigm
generated by the work of these and other scholars has already
helped produce further major works of research and synthesis.[21] 
It goes without saying that a great deal more study is required.
Yet it is likely that further research will provide additional
substantiation of the viewpoint steadfastly represented by Professor
Bauer. As Anderson observes: “The emphasis on release from constraints
points to a fruitful direction of research into why some societies
experienced economic development and others didn’t” (Anderson
1991, 73–74). In any case, the subject will continue to
be of very great theoretical interest to scholars – and to
many millions in the underdeveloped world, a matter of life and
death.

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Notes

[1] 
Cf. Roberts (1985, 75), who writes of “the general liberation
of the economy,” which was well on the way to autonomy everywhere
in western Europe by 1500, if autonomy means regulation by prices
providing undistorted signals of demand and a substantial degree
of security for property against arbitrary confiscation by king,
lord, or robber.”

[2] 
Cf. Rosenberg (1976, 286), who raises the question why Western
European civilization was able to evolve a uniquely powerful combination
of cultural values, incentive systems, and organizational capabilities,
and remarks: “Interesting answers to this question are unlikely
to come from any single social science discipline.”

[3] 
Major works in the field include North and Thomas (1973); Baechler
(1975); North (1981); Rosenberg and Birdzell (1986); Jones (1987);
Baechler, Hall, and Mann (1988), especially the essays by Michael
Mann, John A. Hall, Alain Besançon, Karl Ferdinand Werner,
and Peter Burke; and Jones (1988). Summaries of some of the scholarship
are provided by Anderson (1991); and Weede (1988) and (1990, 40–59).
See also Osterfeld (1992, 43–46). The essay by McNeill (1980)
makes creative use of the fundamental concepts of the approach.

[4] 
F.A. Hayek in the 1950s referred to “a socialist interpretation
of history which has governed political thinking for the last
two or three generations and which consists mainly of a particular
view of economic history.” See Hayek (1954, 7).

[5] 
The idea of a strong connection between the relative freedom of
European society and its economic success can, of course, be traced
back to much earlier authors, including those in the Whig historical
tradition. Here it is being considered in the context of recent,
mainly economic, historiography.

[6] 
A secondary theme (Landes 1970, 21–22) is the character
of the European Weltanschauung. Landes points to the
emphasis on rationality in European culture, relative to others,
fostered by elements in Christianity that ultimately may be traced
to Judaism’s disparagement of magic and superstition.

[7] 
Cf. Baechler (1975, 74): Europe was “a society based upon the
same moral and material civilization that never ended up in political
unity, in short, in an Empire.”

[8] 
Cf. Douglass C. North, “Ideology and the Free Rider Problem,”
in North (1981, 45–58).

[9] 
I am grateful to Leonard P. Liggio for calling my attention to
this essay.

[10] 
Cf. Roberts (1985, 67–9), on the Hildebrandine reform, and
his comment, 68–69: “The preservation of an idea of liberty
and its transmission to the future thus owes an incalculable amount
to the quarrels of church and state.”

[11] 
See Lord Acton’s great essay, “The History of Freedom in Christianity
(Acton 1956): To that conflict of four hundred years [between
the Church and the temporal rulers] we owe the rise of civil liberty…
although liberty was not the end for which they strove, it was
the means by which the temporal and the spiritual power called
the nations to their aid. The towns of Italy and Germany won their
franchises, France got her States-General, and England her Parliament
out of the alternate phases of the contest; and as long as it
lasted it prevented the rise of divine right” (86–87).

[12] 
Cf. Chirot (1986, 23): “The main reason for the legal rationalization
of the West, then, was the long, indecisive, multisided political
struggle between king, nobles, the church, and the towns.”

[13] 
See A.R. Myers (1975, 24), who states of these parliamentary bodies:
“they flourished at one time or another in every realm of Latin
Christendom. They first emerge clearly towards the end of the
twelfth century in the Spanish kingdom of Leon, in the thirteenth
century in Castile, Aragon (and also Catalonia and Valencia),
Portugal, Sicily, the Empire and some of the constituent states
such as Brandenburg and Austria, and in England and Ireland. In
the fourteenth century … in France … the Netherlands,
Scotland, more of the German and Italian states, and Hungary;
in the fifteenth century … in Denmark, Sweden, and Poland.”

[14] 
Cf. Chirot (1986, 18): “a Burgundian states-general met 160 times
from 1464 to 1567, exercising great fiscal powers and defending
the rights of towns and merchants.”

[15] 
Cf. Baechler (1975, 79): “If the general political structure of
the West was favorable to economic expansion, it would be the
most marked in that country where political power was most limited
and tolerated the greatest autonomy of civil society.” That country,
according to Baechler, was England.

[16] 
See also the chapters on Sung China and Japan in Jones 1988.

[17] 
Compare Carlyle and Carlyle (1950, 512): “And most remarkable
is it that Budé, who set out the doctrine of the absolute
monarchy in France in the most extravagant terms, should have
at the same time felt compelled to draw attention to the fact
that the French Kings submitted to the judgment of the Parliament
of Paris; and that Bodin should have contended that the judges
should be permanent and irremovable, except by process of law,
because the kingdom should be governed by laws and not by the
mere will of the prince.”

[18] 
Rosenberg states that the technological interpretation of the
Marxist philosophy of history relies upon a few “aphoristic assertions,
often tossed out in the heat of debate” (1982, 36). Nowhere in
his essay, however, does he allude to the locus classicus
of the subject, Marx’s Preface to A
Contribution to a Critique of Political Economy
(Marx
[1859] 1969b).

[19] 
Anderson (1991, 41) rejects technical change as an independent
variable explaining economic growth: “Technology is more appropriately
seen as dependent on the institutional structure and the availability
of capital, including ‘human capital’ expressed as an educated,
skilled, and healthy workforce. The availability of capital is
in turn dependent on a favorable set of institutions.”

[20] 
Rostow’s dismissive tone in his treatment of Bauer may well have
been affected by Bauer’s devastating review of Rostow’s magnum
opus, The
Stages of Economic Growth
.
See Bauer (1972: 477–89).

[21] 
See, for instance, Roberts (1985): Chirot (1986); and Kennedy
(1987, 19–20), where the author of this celebrated book
writes of the “decentralized, largely unsupervised growth of commerce
and merchants and ports and markets [in Europe]… there was
no way in which such economic developments could be fully suppressed
… there existed no uniform authority in Europe which could
effectively halt this or that commercial development; no central
government whose change in priorities could cause the rise or
fall of a particular industry; no systematic and universal plundering
of businessmen and entrepreneurs by tax gatherers, which so retarded
the economy of Moghul India.”