Power and Plenty
Power and Plenty is the name of a new book by Ronald Findlay and Kevin H. O’Rourke. Chapter 6, “Trade and the Industrial Revolution,” is worth reading.On p. 355, the authors write,
The point of our extensive recounting of the experiences of our seven regions…has been to show that…Technology, population, and sociopolitical organization were not fixed and stable in any of the regions.
When I reached this point, I was thinking, “Geez, you could have shown this with a few timelines and tables. Why did you make me slog through 300 pages of text, with all the confusing names of places and ethnic groups, and all the random dynasties?”
Like Greg Clark, they are not happy with conventional institutional economics as the main factor in the industrial revolution. On p. 357,
attempts to explain European success by pointing to more liberal economic policies there seem doomed to failure…By early modern standards, the Indian Ocean which the Europeans encountered was a laissez-faire paradise, with ports such as Calicut and Melaka adopting much more liberal policies than any European state of the time.
They want to make the case that one of the factors in the Industrial Revolution was the positive feedback between European military power, economic growth, and trade. Western European powers dominated trade with Asia and the New World. This in turn gave them access to elastic supplies of land and labor, the latter via slavery. They reproduce data from J.E. Inikori showing that in the late 18th century 80 percent of exports from the Americas were produced by Africans (think of sugar from the West Indies). In addition, Britain faced elastic demand for its manufactured products, with markets in America and Asia.
The book’s subtitle is “Trade, War, and the World Economy in the Second Millenium.” However, trade from 1000 to 1500 takes up only 55 pages of the 540-plus pages of the book’s narrative. The chapter suffers from a lack of quantitative data and excessive use of modern analogies. For example, on p. 88, discussing the period 1000-1350 in the Mediterranean, they write,
Trade between the Islamic World and Europe can be analyzed within a “center-periphery” framework, with Europe specializing in resource-intensive and labor-intensive commodities and the Islamic World in more modern manufactures…[Western Europe experienced] the deindustrialization of a previously more balanced economic system by opportunities for lucrative exports of primary products to a more advanced and technologically sophisticated partner: an early example of what is now known as the “Dutch Disease,”
I find all of the modern jargon offensive, because it evokes images of an economy dominated by market activities and arms-length trade, as we have today. Instead, I suspect that most people rarely saw goods that were produced by people unknown to them. I would speculate that for a typical family, at least 50 percent of what a household consumed was produced by that household. Nearly all of the rest was produced by neighbors and relatives. To imply otherwise could be highly misleading.
I would further speculate that when goods traveled long distances this was more likely to reflect organized plunder than voluntary trade. Marauders who originated in location A would take some goods with them to raid location B. They would leave some goods behind and take some back. An anthropologist seeing the traces of goods from A in B and goods from B in A might think “Trade!” But I have my doubts. I can see the more sophisticated warlords having a system of money and accounts for use in implementing an incentive system for fighters. But my guess is that the typical civilian lacked the numeracy and trustworthiness to produce goods for a market.
My guess is that organized plunder was replaced relatively slowly and relatively recently by voluntary, arms-length trade. The authors themselves write (p. 379)
major breakthroughs in transportation technology which occurred in the late eighteenth and early nineteenth centuries…would open national economies to intercontinental trade in ways that differed radically from what had gone before.
The authors’ description of the mercantilist era that preceded the Industrial Revolution points out how important this era was for globalization. I came away thinking that perhaps that countries were following the “organized plunder” model in that period, fighting for monopolies over key resources and shipping routes. However, because these monopolies could not be sustained, commercial competition gradually replaced military competition. For the first time in history, aggressive and ambitious men found that they could get rich nonviolently, by engaging in production and trade. Prior to the late 18th century, my guess is that this was rarely possible.
I wish that Findlay and O’Rourke had addressed my hypothesis about the relative lack of markets and trade until fairly modern times. Their impressionistic accounts would lead one to believe that trade among strangers has been a feature of mankind for much longer than I tend to think.
The book will be a required acquisition for the shelves of specialists. It serves the purpose of a score of survey articles in the Journal of Economic Literature. But for the rest of us, it is too long and too tedious. In addition to timelines and tables, it could have benefited from using extensive end notes, the use of which could have reduced the size of the main body by 50 percent or more.