Tuesday, August 4, 2009

Famine free growth

What is the greatest achievement of human history? How about the achievement in particular societies of sufficient levels of per head economic growth that death by hunger was no longer a significant threat?

An achievement first managed in C17th Netherlands but which has since spread to many (though not all) parts of the globe. I read in quick succession two books which seek to explain relatively briefly, in the words of Robert Lopez in the first (The Commercial Revolution of the Middle Ages, 950-1350) why:
if medieval economic growth was not fast, it was altogether irreversible; 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 (p.vii).
In order to understand the medieval commercial revolution, Lopez starts with the Roman economy. His book is full of striking details – including some amazing characters such as Benedetto Zaccaria or that
between the ninth century and the twelfth the price of mules dropped radically, and their numbers steeply increased
freeing human porters from the burden of mountain cartage (p.80).

In order to understand the commercial revolution of the C16th and C17th which led to the breakthrough Dutch achievement, Nobel Laureate Douglass North and Paul Thomas (The Rise of the Western World : A New Economic History) start with the C10th. ‘Commercial revolution’ means the same for both sets of authors – lower transaction costs with more secure and more clearly defined property rights so that private gain and social benefit became more closely aligned than in other human societies leading to long term growth. As North & Thomas write (p.157):
There is little new in this conclusion. Karl Marx and Adam Smith … both saw successful growth as dependant on the development of efficient property rights. Their followers appear in the main to have forgotten this.
If Lopez is richer in detail, North & Thomas are more deeply penetrating – North & Thomas bring out very clearly the importance of shifting factor prices (for land, for labour) in the developments of medieval history. Including the later importance of cheaper capital resulting from Dutch institutional innovation in human material betterment.

I enjoyed both books greatly, though North & Thomas was the more demanding read (their claim to be writing for the lay person was a little overstated).
Both books were produced in the 1970s, before the full onset of modern scholarly nervousness about the term ‘feudal’. North & Thomas in particular mainly describe, in their summary of manorial economy and tenant service, the situation in England.

Both books are at times written from a C20th perspective. For example, North & Thomas note that the much lower private than social return from inventiveness kept the rate of innovation down. Yes, but only by modern standards. By the standards of contemporary civilisations, medieval Europe was a powerhouse of, if not so much invention, as technological adaptation (as Gimpel makes clear).

Similarly, North & Thomas talk about institutional inefficiency and slow development of property rights: again, only by modern standards. By the standards of contemporary civilisation, medieval Europe developed startlingly strong property rights and provision of public goods (as Jones makes clear: with, as Jones also makes clear, the perennial exception of Japan).

I particularly enjoyed North & Thomas’s intelligent analysis of technological diffusion, seeing it as embedded in people’s choices. For example, they explain the slow change from two-field fallow farming to three-field farming in terms of the relative scarcity of land (Pp41-43). While population was low and land plentiful, the advantages of the three-field system were insufficient to warrant the effort of changing. As population grew (and returns to labour diminished), land become scarcer, so of sufficient value to warrant the effort of changing.

Despite my quibbles above, all the authors have an acute sense of the practical demands of life, a sense that modern writers about the past don’t always manage.

Both books provide reasons why growth and freedom can be antipathetic to concerns for material equality. Growth typically takes place in some cutting edge sector first, increasing inequality (at least initially). Conversely, to produce material equality requires a high level of social control antipathetic to the very innovation that fuels growth.

I was again struck by propertied warriors as a basis for long-term growth, despite their penchant for local wars. They have reason to pay attention to economic development (consider lordly construction of water and wind mills, interest in estate management, interest in military and building technology) plus the independent income and coercive power to resist central authority via social trade-offs (which Magna Carta is the archetypal but not even close to the sole example) rather than simply attempting to seize for themselves the income from centralised predation.

Both books in their different ways also display the crucial importance of (comparatively) stable competing jurisdictions, which allowed a ferment of institutional forms to be explored, the predation of rulership restrained, its protective qualities (and other public good provision) improved. Rulers do not produce public goods out of the goodness of their hearts. Competing jurisdictions drove Western rulers to provide more extensive and better quality public goods. A process which also occurred in Japan, despite Japan notionally being a single realm.

What was also striking about both books is that they see (Lopez implicitly, North & Thomas explicitly) the Industrial Revolution as a product and acceleration of what came before, not some amazing sui generis thing. They also have a good sense of the interaction of rulership with the wider society (not always a notable feature of modern economists).

North & Thomas see the heart of medieval society as it first evolved as being local lords providing public goods (justice and protection) in return for the labour of local peasants while also having a very acute sense of the fluctuating pressures on that relationship. They point out that, in a situation where trade was very limited, providing shared inputs (labour service) was an effective way of distributing risks between lord and peasant, despite issues such as shirking. As monetised trade expanded, the transaction cost advantages of turning it into a monetary arrangement increased. The “customs of the manor” slowed the process. But, and here more recent conceptual development shed light, we are dealing with arrangements which required long-term commitment on both sides. “Binding” arrangements made sense in such a situation.

North & Thomas write perceptively about how the expanding monetary economy in the late medieval period encouraged tax-paid armies, pushing rulers into taking over public good provision which itself played to expanding merchant and peasant interests in the suppression of “baronial anarchy”.

One of the most disturbing implications of North & Thomas is that the “Black Death” may have actually provided long-term benefit to the West, by breaking out of the “Malthusian trap” Latin Christendom seemed to have hit by about 1300 (particularly with the Great Famine). As the population expanded (and it was very conspicuous that medieval Europe could support a much higher population than it had in the Roman period) the value of labour declined, making serfdom less useful (since the gap between subsistence income and free wages fell below enforcement costs). The dramatic drop in population freed up resources and, due to the failure of the crowns (increasingly reliant on taxes rather than feudal dues and noble service) to support lordly collusion (itself undermined by alternative income sources such as tenancy agreements, mills, etc.) to re-impose serfdom, raised wages (and thus labour cost) encouraging capital investment.

The great virtue of both books, particularly North & Thomas, is one can see how the large-scale trends made sense in terms of the situations actually confronting people at the time.

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