Transcript BRITANNIA RULES THE WAVES

Lecture 1
Britannia Rules The Waves
Whence the idea of 'development'?
• • The concept of development is critically linked to
structural differences arising in a given historical framework
and leading to the 'idea' of superiority.
• • Development is, essentially, an ideological construct. This
statement does not imply that it is either a-theoretical or
eschewing analysis.
• • It is advisable to place even the most abstract theory in
an appropriate historical mold.
• • Akin to the notion of 'development' are the related ones
of 'backwardness' and 'forwardness'.
The great divergence
• • According to well documented historical evidence, the world prior
to roughly the mid-XVIII century did not exhibit extraordinary
differences.
• • This statement is to be understood in terms of relevant quantities.
Cultural differences were there but they did not translate into
major gaps in GDP per head, average standard of living.
• • Some indicators bear out this proposition; namely, market
development, consumption per head or even more complex ones
such as the population growth rate, shortages of land-intensive
products.
• • Main reference: David Pomeranz (2000): 'The great divergence'.
Princeton, Princeton University Press.
An interesting argument
(by Brad DeLong (http://www.j-bradford-delong.net/)
commenting Pomeranz (2000).)
• • The fifteenth-century Portuguese Infante Dom Henrique sat
in his castle at Sagres and sent his ships in small squadrons
groping for perhaps a thousand miles south along the coast of
Africa. The fifteenth-century Chinese notable Cheng Ho--in
modern transliteration Zheng He, the eunuch admiral who
was a trusted lieutenant of the Yung-lo Emperor--took 30,000
men and seventy ships on eight voyages to the Indian Ocean,
reaching as far as Zanzibar and projecting power on a very
large scale.
• • The Ottoman Emperor Mehmet II deployed the largest and
strongest pieces of artillery in the world--specially made for
the occasion--for his conquest of Constantinople in 1453.
Zheng He Voyages
Vasco da Gama Voyages
Vasco da Gama’s voyage
continued
• • We think that the populations of China and
India grew more rapidly than the population of
Europe from 1500-1850: this suggests--at least if
we believe in Malthus--somewhat more
prosperous societies with more rapidly growing
economies in the Eurasian "east."
• • Basically, it was the discovery of America and
the availability of key natural resources that
explain the split at about the mid-XVIII century.
Note the counterfactual argument:
• 1. - At the core of Pomeranz’ book is a grand
counterfactual. Suppose that you removed the
Americas from the surface of the globe:
Columbus sails west in 1492 and dies of thirst
in a mammoth world ocean. And suppose that
you erased the coal deposits from the island
of Britain and from the Rhine valley. What
would post-1500 world history have looked
like then?
continued
• 2. Pomeranz’ answer is that the most likely trajectory
would have seen economic life in northwest Europe
evolve the way that economic life in Gujarat or the
Yangzi delta evolved between 1500 and 1800: a
flourishing commercially-revolutionized society
bumps up against ecological limits as deforestation,
declining marginal products of labor, the rising ability
of peripheral regions to make their own
manufactures, and so forth reduce the returns to
innovation and commerce and increase the rewards
of landlord or priestly surplus extraction. Thus
growth stops. And what growth there is follows a
labor-intensive, resource-economizing logic that--as
it did in the nineteenth century Yangzi delta--boosts
elite consumption but not mass standards of living,
and leaves no space for an industrial revolution.
Consider other points of view..
• 1. David Landes (1998): 'The wealth and poverty of nations.
Why are some so rich and others so poor.' New York. Norton.
• 2. Technology, technology and yet more technology!!!
Basically an European achievement in terms of applications to
industry and economic endeavor.
• 3. Here is a quote from DeLong:... Thus Landes wages
intellectual thermonuclear war on all who deny his central
premise: that the history of the wealth and poverty of nations
over the past millennium is the history of the creation in
Europe and diffusion of our technologies of industrial
production and sociological organization, and of the attempts
of people elsewhere in the world to play hands largely dealt
to them by the technological and geographical expansions
originating in Europe.
• 4. It is indeed difficult to deny this proposition.
But how did Europe manage to undergo
a technological revolution????
• 1. It wasn't just a technological revolution but a historical
process that took a long time.
• 2. The evidence brought forth by Pomeranz is compelling
but it overlooks a crucial fundamental argument.
• 3. It is possible to hold, by economising on concepts, on
numerology and extensive anecdotal evidence but by
resorting to simple logical yet theoretical arguments that
some early even random events may have led to successful
trajectories. A crucial assumption supported by clear
evidence is the increasing returns assumption.
• 4. Hence, random success stories in the so called West and
random failures in the East (or South).
Trade and Production
• 1. Until well into the age of the Renaissance, the vast
majority of the population lived off the output of their
own plots of land. 'Own' does not imply 'property' but
availability. A world of aristocrats, landlords and
peasants.
• 2. Yet trade had an extraordinary role to play.
Paradoxically, trade even in ancient times was
international, long-distance and dealt with in luxury
goods.
• 3. The major trade routes known in antiquity: The Silk
Road, The Spice Route.
The silk road
The spice route
Trade as a spur to early forms of
industrial enterprise
• • Textiles and metal working in Italy, possibly the first
factory system in the western world, since the early XIII
century.
• • Venice and its arsenal, the most advanced production
plant in the Middle Ages.
• • Industry spreads to Flanders, France and England
• • Venice and the Mediterranean as a large commercial
clearing house between East and West.
Venice Arsenal
Trade and Industry as a spur to
financial development
• • From physical money to trust money.
• • The rise of the great Italian money lenders and financial
houses: Siena, Florence, Lucca, Milan.
• • Flemish and German bankers.
• • The rise of Dutch supremacy: long distance trade,
financial and commodity markets, banks.
• • Money and banking as a truly international phenomenon.
Quentin Massys’ Money lenders
The international dimension of money:
Jan Van Eyck
The rise of a sea power
• Elizabethan mercantilism: early protection
• Increasing sea-trade, port cities and urban
markets
• The new industries:
- ship-building
- sails and navigational implements
- clock-making and precision instruments
- machine tools
The triangular trade
• From Europe to Africa
• From Africa to the Overseas colonies: the West
Indies and the American eastern seaboard.
• From the colonies back to Europe.
• The slave trade: was it important?
• Most sea-faring European states took part: Spain,
Portugal, Great Britain, France, Holland,
Denmark..
• Even more quantitatively important: the Eastern
slave driving.
The triangular trade
The break-through
• Cromwell and the English civil war, in fact a
revolution.
• The state intervenes: the Navigational Acts.
• Land reform and the agricultural revolution.
• The commercial revolution
• Courts, custom-houses and tax collectors
• Off to the colonies: losing one but gaining the
crown’s diamond: India and the East India
Company.
The first industrial state
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International markets and domestic markets.
Raw materials and the new industries
From textiles to capital goods industries
The transportation revolution: railways and
the steam power
• The age of machinery.
• Land shortages
A development theory as a conflicting,
evolutionary process: Braudel,
Wallerstein, Arrighi
• • 1300-1450: The Italian one-hundred year war
• • 1450-1560: Genoa and Spain
• • 1560-1650: El Siglo de Oro: the age of Charles V and
Philip II.
• • 1650-1720: The United Provinces and their world
trade.
• • 1720-1780: Dutch financial success and decline.
Towards the modern world
• • 1780-1880: The first Industrial Revolution and
Great Britain as the first true World Power
• • 1880-1915: British (relative) industrial decline.
• • 1915-1970: The US hegemony
• • 1970-2000....Financial supremacy and... final
demise??
Theory and Power
• 1. The great productivity increase and the age of machinery
• 2. Production as the source of wealth and the key to explain
prices
• 3. The theories of production and distribution: wages,
profits and rents.
• 4. Why should the state meddle? Free trade and
comparative advantage
• 5. The underlying necessity: trade as a way to lessen the
burden of rents.
Now that I am developed let us trade
freely
• Free trade as the overriding ideology.
• Every state (economy) has some comparative
advantage: you sell me your wheat and I sell
you my machines.
• The exchange process as the fundamental
explanation of prices and distribution.
• Away from labour and on to utility.