Thursday, July 23, 2009

Growth Recurring

Historically, mass poverty is the normal human condition. This has naturally led to attempt to explain those historically rare instances of sustained economic growth leading to mass prosperity as being somehow special. Not merely in being, before 1900, rare but also involving some very particular human motivations, institutions or discoveries. A common scholarly pattern has been to equate serious growth with industrialisation.

In Growth Recurring: Economic Change in World History, Prof. Eric Jones looks at the matter the other way round. He assumes that all human societies had within them folk who were interested in bettering their material condition (an analytical condition that is, as he says, universalist but not universal). Why was it that this pressure for growth broke through into sustained growth in living standards so rarely?

This seems to be the correct way to look at the problem. I would be even more parsimonious: we can take it as being a widespread feature of the human condition that most folk in most places wish to reduce the chance of them and their families starving to death and will generally act accordingly. So, why did it take so long to achieve societies where famine was no longer a significant threat?
Support for Prof. Jones’ approach comes from study of human longevity. We used to look for what was special about those places where folk notoriously lived to great ages. As human life-expectancy has continued to climb, it has become clear that, provided one gets reasonable amounts of exercise, has reasonable nutrition and avoid contagious diseases (including from food or water) then the normal human life expectancy is that previously associated with rare, generally mountainous (and therefore disease-protected), regions. It was the foreshortening of life expectancy which was normal, not the lack of the capacity for long lives.

Prof. Jones is quite explicitly interested in the history (mostly the lack of it) of intensive growth. That is growth per person: rising living standards. He is explicitly not interested in equating that with capitalism or the history of capitalism. Nor in seeing the Industrial Revolution as more than a phase in long-term intensive economic growth already underway in European societies. (I particularly liked his point that zeroing in on the Industrial Revolution tends to produce would-be explanations merely of a certain form of modernity already passing, or even passed.)

Prof. Jones notes that, on the evidence, there have been several, diverse, episodes of intensive economic growth: the early Abbasid Caliphate, Sung China, Tokugawa Japan, Western Europe (I would add in the early Roman Empire) yet, with the exception of Japan and Western Europe, all these episodes came to an end.

Technological change is not the key variable. On the contrary, it is clear that a general, low level, of technological advance is common to human societies down the millennia and occurred across Eurasia—that impetus not to starve. But such advance generally led to extensive economic growth (supporting more people) rather than higher living standards. Technological change tended to speed up in societies with intensive economic growth, but that is effect (or at best interactive reinforcement) not cause.

Gently taking the reader through a consideration of cases and the scholarly debate, Prof. Jones concludes that politics is central. What was needed was rulership strong enough to provide appropriate public goods, but not so strong as to appropriate any resulting surpluses for itself. Japan and Western Europe both evolved competitive jurisdictions where authorities competed to provide public goods while such competition also placed a check on their predatory behaviour. Once intensive growth was underway, rulers could see the revenue advantage of fostering trade and commerce and, in somewhat erratic fashion, tended to do so.

Prof. Jones points out that Western Europe and Japan both avoided the Mongol scourge, an advantage not so much because of the direct costs of conquest (high though those were – Chinese casualties from the Mongol invasions and conquest was in the order of 35 million dead while areas of Iran never recovered from the Ilkhanate and Timurid invasions) but the institutional flattening that followed. He also points out that this is hardly a complete explanation in itself, since Southern India and SE Asia were also spared without achieving intensive growth. Avoiding Mongol conquest was a good thing (despite established Mongol rule’s trade-fostering tendencies) but not sufficient in itself.

Prof. Jones makes the excellent point that ancient empires had, by our standards, ramshackle governments: providing little in the way of public goods and with limited capacity to follow direction. This strikes me as a competitive pressure point: rulers provide the convenient (to them) level of public goods. If you dominate a large area, the convenient level is generally not very high. If, however, you are surrounded by comparable competitors, you may be spurred to do better. Particularly if your territory and theirs are relatively mutually permeable for ideas, skills and capital.

In Japan, while the local daimyo competed for skills and capital for their local han (competition that Prof. Jones points out aspects of Tokugawa rule encouraged in a market-friendly direction), the Tokugawa bakufu kept the samurai system in place because they had no particular competitive pressure to do otherwise: samurai were ample to keep the peasants in place. As soon as Commodore Perry forcibly inducted Japan into a competitive (even rapacious) international state system, the impetus existed to modernise. So the samurai went the way of the knights replaced, as the knights had been, by tax-paid peasant armies armed with guns. With the key point that Japan’s institutions already had sufficient similarity with those of the West that modernisation was a far easier process for them than any other non-Western society.

Prof. Jones offers his analysis as the beginnings from which to develop a more rigorous model. In which regard I kept thinking of two books: one – Ibn Khaldun’s great work – written centuries before the first edition of Growth Recurring, the other – Mancur Olson’s posthumous book – published just after the second edition of Growth Recurring.

Ibn Khaldun developed a model of predatory rule that has the striking feature that the history of the Soviet Union conformed to it. First, a group bound by common feeling seizes power (Lenin), then the ruler separate himself from the original group to entrench his own power (Stalin), then the system slowly decays as group solidarity fades and corruption erodes social resilience and regime power (Khruschev to Chernenko) until it finally collapses (Gorbachev). Olson developed the stationary bandit model of government, which is somewhat congruent with Ibn Khaldun’s model. If one takes Olson’s stationary bandit model, flesh it out more with principal-agent theory and expand the consideration of selection pressures, then it seems to me you have something that looks very much like what Prof. Jones is pointing to.

The paradox of politics is that we need government to protect us against predators but rulership is itself the most potent of social predators (given rulership is coercive monopoly). The key question is where the balance between predation and (public good) provision will lie. It is a notorious problem of infrastructure (that is, network) industries that, having irreducible externalities, they lack “definitive” solutions within economic theory (i.e. outcomes cannot be fully specified even with the full gamut of standard economic assumptions so there is no clear, fully-specifiable preferred solution, one symptom of which is their long-run tendency to move back and forth between private and government ownership).

Government is the ultimate case of an infrastructure industry with irreducible externalities. So it will also lack a definitive solution even in theory. (Indeed, that government action cannot be bound is a major factor in encouraging public ownership of infrastructure industries, as they are particularly vulnerable to government appropriation.) The paradox of politics can never be solved, it can only be managed at various levels of success – with the delusion that it can be solved being particularly disastrous. (A delusion that the Jacobin model of totalist politics in general, and Leninism, in particular, is based on and whose results can be seen in the current North Korea disaster.)

So I agree with Prof. Jones that the balance between predation and provision is the key factor and that how things turn out is very path dependent. Most of the time, the selection pressures for predation have been stronger (particularly given difficulties in fully controlling officials) than the selection pressures for provision. So intensive growth has either not happened, or been stymied. In one set of societies plus an outlier (North-Western Europe and its settler offshoots plus Japan), the selection process for provision stayed stronger for long enough for intensive growth to get underway, to then provide positive feedbacks, and so for rising living standards to become permanently established. Providing a model that is now spreading. Hence the world we live in.

But apart from all the examples and insight, what I most enjoy about reading Prof. Jones’s books are not the vast erudition – though the breadth of his reading and citations are intimidating – but the intellectual good sense. He is happy to take insights from anyone and anywhere, judging them on their congruence with the evidence, not the congeniality of their implications or the philosophical outlook of their proponent. In a world where far too much academic output has predetermined conclusions, healthy, informed, intelligent, open-minded scholarship is all too rare. In a world where the safety of specialisation discourages even the seeking the general patterns and the common causal agents it is always good to see a scholar willing to ask big questions and seek big answers. And whose prose is delightfully clear: no small point. Enjoyed the book greatly.

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