Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries
In the 1970s Harvard undergraduates used to be offered what was called the Sherwin-Williams course. In lieu of a single coherent economic history, a galaxy of faculty stars would "paint the globe." One after another they would describe to their audience, seated in the university's vast Memorial Hall, different facets of world economic history-first the experience of Europe, then America, then Asia, and finally, time permitting, other parts of the world. What the course offered in variety, it lacked in coherence. But no one felt capable, or at least inclined, to describe a whole that was more than the sum of these parts.
Few scholars, in other words, have the courage to pose the questions addressed by David Landes in his new book. Consciously echoing the title of Adam Smith's classic, the author sets out to explain nothing less than the wealth of nations-why some are rich while others are poor. Even fewer scholars aspiring to answer such questions would be taken seriously in an age when economists specialize in technical treatments of narrow topics and historians indulge in postmodern analyses of gender and identity. But Landes has exceptional credentials. Having moved across departments at Harvard, from history to economics, disciplinary boundaries do not deter him. His 1969 book, The Unbound Prometheus, may be the single most widely read history of Western technology. The present book, a lineal descendant of that predecessor, shows every sign of having been carefully crafted over many years. In it Landes enlarges his canvas to cover not just technology but other aspects of economic growth, and not just Western Europe but the world.
To be sure, there have been previous attempts to pull this off, starting with Smith himself, who saw economic growth as a single coherent process driven by the expansion of the market. But Smith focused on the growth of trade and did not appreciate the industrial and technological revolutions going on around him. Landes is a powerful advocate of capitalism, but the writer in whose footsteps he follows most closely is, ironically, Karl Marx. Marx, like Landes, saw technological change and capital accumulation as powerful engines of economic growth sweeping aside all in their paths. Of course, Marx reached a different verdict than Landes on the long-run viability of capitalism and offered a rather mechanistic rendition of the growth process, positing that the less-advanced economy sees in the more-advanced economy an image of its future (in other words, that all countries follow the same development trajectory).
Alexander Gerschenkron, for many years Landes' colleague, offered an improved model of development. According to Gerschenkron in his 1970 book, Europe in the Russian Mirror, some countries, of which Russia was prototypical, initially lacked the economic and social preconditions for capitalist development. The more backward the economy in this sense, the later its industrialization. But the longer industrialization was delayed, the faster it went once started, since the latecomer could import the most advanced technology. It followed that economic structure differed between early and late industrializers: the economies of the latecomers were more capital intensive, and the state, heavy industry, and large banks played more important roles in surmounting the obstacles to industrialization. Germany was a classic late industrializer, Britain the early bird.
But Gerschenkron's geographic competence was limited, his account stretching no further east than European Russia. His emphasis on the ability of bankers, managers, and government officials to find substitutes for growth's missing requirements only heightened the mystery of why substantial parts of the world were so resistant to change.
WEATHER IS DESTINY
If one approach to the historical study of economic growth can be said to be the most influential, it is that which takes technology as the fundamental force for growth. This was the focus of Landes' teacher, Abbott Payson Usher, as it has been for generations of historians of Western technology. Their agenda has been to model technological change as an endogenous process. They look not simply at the consequences of technological change, but also its causes. Technical progress, in this view, accelerated in the West following the Renaissance and Reformation, which cultivated a culture of rationality and fostered systematic curiosity. It responded to the expansion of trade in Smith's century, since increased economic mobility facilitated the flow of information and expanding commerce held out the lure of greater profits. It encouraged and was encouraged by the limited state, which provided inducements for industry but allowed markets to operate and limited interference by foreign marauders and the tax man.
Recently, this tradition, emphasizing the singularity of Western technological achievement, has fallen out of favor in the academy. In the now-fashionable multiculturalist view, Europe's knowledge and know-how did not surpass those of other civilizations until the beginning of the nineteenth century. Gunpowder, paper and printing, and the first long-distance explorers all came from the East, after all. Europe was just luckier, or at best more systematic in exploiting the discoveries and resources of other regions.
Landes launches an all-out counterattack against cultural relativity in economic history. He insists that the West is special, its achievements unique, and that to argue otherwise is bad history. Its distinctiveness derives from two factors: geography and culture. Europe's Industrial Revolution was, at the deepest level, a product of the Gulf Stream. The continent's mild summers permit intense physical activity, unlike the tropics, whose heat and humidity force even the most energetic to seek shelter from the midday sun, and where the incentive to find others to do hard labor accounts for the concentration of wealth and ultimately explains the rise of slave society, a form of economic and social organization incompatible with capitalist growth. As the author puts it with characteristic bluntness, "Where society is divided between a privileged few landowners and a large mass of poor, dependent, perhaps unfree laborers-in effect, between a school for laziness (or self-indulgence) over against a slough of despond-what is the incentive to change and improve?" Europe's cold winters suppressed pathogens and pests and rendered parasitism the exception, increasing the capacity of its natives for work. The continent enjoyed just the right amount of rainfall, between the extremes of desert, where crops died of thirst and topsoil eroded away, and the torrents of the Tropics, where jungle and rain forest crowded out settled agriculture.
All else followed from this favorable climate. The agricultural revolution followed in the seventeenth and eighteenth centuries, raising living standards, generating an investable surplus, and freeing labor for employment in industry. A state with the capacity to fend off invaders followed, since control of the river valleys that fed food supplies was vital to survival. The favorable climate sustained larger horses capable of dominating set military battles and repelling invaders, plowing clayey soils, and, not incidentally, producing more animal fertilizer than those of other regions. Sustained growth required only that the hardwood forests covering most of northern Europe be cleared away, which became possible with the development of iron cutting tools whose appearance and diffusion explain the timing of Europe's economic divergence from the rest of the world.
The ultimate product of Europe's geography and climate was Western democracy itself. In India and China, flood and drought made the control of water flow essential to the production of food. Controlling water in turn entailed the construction of large-scale hydraulic projects by forced labor. This implied a powerful, centralized state whose tentacles extended into all parts of the economy. Private property and individual initiative were luxuries such societies could ill afford. Invention and innovation were threats to the political and religious elite, the ultimate vested interests.
The more benign geography and climate of the West, by contrast, supported a more independent life. There was less need to concentrate labor on the land. It was possible to survive outside the confines of the coordinating state. Germanic law and tradition, appropriate to the circumstances of Central Europe's nomadic tribes, recognized each individual as master of his possessions, a custom of which mobility was the ultimate arbiter. Since the oppressed were able to vote with their feet, state power derived from consent and was therefore limited. From this followed the rise of city-states and competition among them, including competition to attract economic resources and cultivate military might. To be sure, the growth of the Smithian market required a strong centralist state in sixteenth-century England and seventeenth-century France, but there was still a sharp contrast with Eastern despotism.
CULTURE AND GROWTH
Thus, from geography sprang a social and political form of organization and a culture conducive to economic growth. The logic of this argument leads Landes into a defense of Weber's thesis of the connections between the Protestant ethic and the rise of capitalism and, more importantly, of Robert Merton's link between Protestantism and the advent of modern science. Calvinistic Protestantism, Landes agrees, legitimized and encouraged behavior consistent with business success. It gave sanction to rationality and encouraged the belief that man could master his environment. Its emphasis on instruction and literacy facilitated the acquisition and spread of knowledge. The result was not just the rise of experimental science but its coupling with a self-sustaining dynamic of practical, profit-oriented industrial innovation.
Here, then, was where Western Europe and its North American appendage diverged from other parts of the world. The Reformation was a fundamental threat to the established church, which regarded intellectual and political novelty as subversive and persecuted nonconformists, prohibiting study abroad and stifling the spread of scientific knowledge. Landes argues that the anti-Protestant backlash sealed the fate of southern Europe for the next three hundred years. Southern Europe, in turn, exported its shortcomings to South America. In North America, by contrast, geography and the culture of dissent carried the day. Abundant free land created a society of small farmers and well-paid workers of unparalleled individualism, self-reliance, and initiative. Ample natural resources and an extensive consumer market, itself the product of a relatively level income distribution, led to the American system of manufactures, a form of industrial organization in which raw materials were intensively used to churn out standardized products using what ultimately developed into mass-production techniques. Even the American South, where climate and geography had encouraged the use of slave labor, quickly shed the lingering effects of its anticapitalist system once air conditioning freed it of its climatic handicap.
Japan poses something of a problem, and an important one, given that it was the first non-Western country to industrialize. From the seventeenth century, Japan closed itself off from the West and Western learning. The shogunate systematically extracted resources from the mercantile class. But once again, culture and geography come to the rescue: while Japan did not have Calvinism, Buddhism encouraged a similar work ethic, and a geographically compact economy undermined efforts to protect local industry from competition. Ultimately, the vibrancy of the economy broke down barriers to intellectual exchange. The Meiji Restoration and the resumption of relations with the outside world were more consequence than cause. Korea and Taiwan, to which many of Japan's lessons were forcibly transplanted, succeeded in following, but not so most other non-Western nations.
The truly disturbing aspect of this story, of course, is the tenacity of cultural inheritance and the inevitability of geographic destiny. Africa remains slow to develop even today because of an unfavorable climate, a view recently advanced by Landes' Harvard colleague Jeffrey Sachs. The Middle East is held back by the culture of submission characteristic of Islam. Much of Latin America remains handicapped by the legacy of Iberian colonialism. As for the future, no Huntingtonian clash of civilizations here; for "the rest" is too weak.
WANTED: PATIENT ECONOMISTS
Unfortunately for Landes, an increasing number of economies refuse to conform to the pattern. Chile, Peru, and even Argentina and Brazil have cast aside monetary instability, for the time being at least, and display very respectable rates of growth. China has joined the first rank of rapidly growing economies. By comparison, the Asian miracles of Korea, Thailand, and Japan suddenly look less impressive as they face a steep crisis. (Of course, if Landes' argument is correct, this too shall pass.) One wonders whether the tyranny of geography has been weakened by technological change, be it in the form of drought-resistant seeds that make farming possible in arid climates, air conditioners that make it tolerable to work in a factory in Atlanta, or containers that render shipping to far-flung lands economical. One wonders similarly whether cultural inheritance has been rendered increasingly irrelevant by the revolution in communications that has brought VCRs and satellite dishes to the most remote Indian villages and, with them, the homogenizing influence of the mass media. If so, perhaps all that are left to determine the capacity for growth are the government's economic policies, specifically toward money, trade, property rights, and education.
Time will tell-as, hopefully, will scholarship. That the great questions of economic history that occupy Landes tend increasingly to be regarded as fair game for pundits rather than scholars is one of the intellectual tragedies of our times. The erudition on display in this book requires one to read more than one writes, something that is not rewarded in today's academic age of publish or perish. It requires one to invest decades in crafting a single book, not something that is
encouraged by a culture of instant gratification. Historians, sad to say, are among the worst offenders. The postmodernism and multiculturalism that run rampant in history departments are fundamentally incompatible with the approach taken by Landes here. Attempting to offer a rational explanation for the dominance of postmodernism in historical scholarship would be a self-contradictory exercise in futility. Painful as it is to admit for a resident of Berkeley, California, one suspects that there is an element of politics involved. The children of the sixties set in motion this intellectual tide. Fortunately, each generation of children is inclined to rebel against its parents. One waits with baited breath for the next generation of history students to rebel against their teachers.
Until then, most economic historians will continue to work in economics departments and talk with economists. Indeed, the typical economist is more sympathetic to economic history nowadays than in years. Economic history has always been about why some are rich while others are poor, and economists, responding to the increasing sterility of business-cycle analysis, have recently returned to this fundamental question. The failure of the transition economies of Eastern Europe to grow and prosper immediately following the collapse of the Soviet bloc reminded the economics profession of the importance of historical preconditions for growth.
But economists are the least patient of scholars. To be sure, they will read Landes. They will latch onto one or more of his ideas, and they will grab growth indicators from the World Bank database in the effort to subject them to statistical tests. But if economics is to develop into a serious discipline, they will have to do more. They will have to understand the growth patterns they observe as historical processes. They will have to emulate Landes' example, not just by asking the big questions but by pursuing them with the breadth and depth of scholarship they deserve.