John Nye on Economic History
By Arnold Kling
The greatest achievement of early modern economic growth was not the Industrial Revolution itself, but the way in which the leading Western economies began to move away from highly parochial, narrow networks of personal exchange and came to rest instead on increasingly complex national and international commercial networks of impersonal exchange.
…In some ways, FDR did not so much break from normalcy as return to it. It helps to recall that large-scale systems based on anonymous exchange were a recent phenomenon. The system of orderly, global trade developed in the 19th century under the financial and political leadership of the United Kingdom, and backed by the gold standard, produced growth and prosperity. But it also produced plenty of social disruption and downward as well as upward mobility. It certainly never inspired the kind of devotion that nationalist and communal ideology more readily induce, as suggested by the rise of fascism during the interwar period. The world’s experience with democracy and market capitalism was limited. The more common experience by far consisted of political systems that allowed limited access to property rights and trade, reserving the most exalted benefits for elites who treated control of the political economy as their reward for preserving peace.
…Just as an outbreak of incurable plague would lead to both a renewed search for sound cures and an atavistic appeal to folk remedies, so the Depression stimulated both productive thinking about the sources of business instability as well as destructive appeals to extreme nationalism, protectionism and military aggression.
Read the whole thing. Thanks to Tyler Cowen for the pointer.
Nye shares, along with folks such as Douglass North, a view that open-access orders are rare and somewhat contrary to human nature. What is in fact more natural are societies based on principles of an extended family. It is more natural to live in a world of Mafia Godfathers than one with fair, open, competitive markets.