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« Chinese entrepreneurs in Africa | Main | A cultural/biological explanation for the Industrial Revolution? »

August 21, 2007

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robertdfeinman

Both the US and UK led the industrial revolution because of the availability of nearby natural resources.

Other states with similar good luck also faired well, such as Germany.

They also developed democratic institutions, but (except for the US which didn't exist yet) most of this started as an outgrowth of the desires of the landed gentry to preserve their property rights. When the industrial class arose the same factors came into play and democracy was expanded to include them.

It was only with the rise of organized labor that these rights were extended to the rest of the population (and in the case of women, only after a long delay).

I would argue that the resource factors are much more important than historical mumbo jumbo.

Today, even those states which have little in the way of resources which can be exploited locally are hampered in their development. Iron and coal could be used to build a society. Exporting oil or other feed stocks does not provide the same capabilities. It only allows for the import of money, which has, as we have seen, a way of never reaching the people.

Per Kurowski

Now where does this all take us? If democracy is not good for wealth is the lack of democracy good for it? Who funded this research? You must excuse me but coming as I do from chavezland I am a little paranoiac about it.

Of course this does not preclude the always interesting discussion of what would have happened if the North Europeans had ended up in South America and the South Europeans in North America. It is not that clear cut. I tell you I have seen many north Europeans adapt very fast to the Caribbean lifestyle… which would then take us to Jarred Diamond’s geography factors… from which we would probably hurriedly return to governance factors. Long live the debate!

corvad

Jared Diamond is not a geographer. He's an environmental determinist.

I suggest that perhaps the development of capitalism in conjunction with colonialism should be considered here (see dependency theory, but also "neo" versions of dependency theory coming from places like Chiapas, or Caracas ...

by the way, what is so inherently antidemocratic about Chavez abolishing term limits? No one thinks of FDR in the US as a totalitarian dictatorship, despite being elected four times. Venezuela's elections have been free, fair and overwhelmingly in support if Hugo Chavez, unlike the US.

sorry, too much political economy for this here economy discussion.

also would be interested in dani and commenters' takes on Ken Livingston's deal with Chavez, and the rescaling of economic policy ... anyone else see it as an interesting twist to the "global cities" paradigm, with cities competing with each other to attract capital? seems like a better, barter type policy directed at benefitting the folks who aren't playing on Friedman's level playing field ...

final remark: Jared Diamond is not a geographer, he's an environmental determinist.

Barkley  Rosser

I suppose the opening for optimism is precisely that one does not know when the next historical juncture might come along. How many people forecast the timing of the breakup of the Soviet Union? It's those darned black swans, even if Nassim Taleb thinks they are more common than they are.

Saif

Barkley raises an excellent point.

Institutional economics seems to largely tell us "Stuff happens, sometimes, and it sometimes matters. A lot."

By stuff, they mean 'Institutions', and by institutions, they mean pretty much anything you can attribute something to.

The 'Institutional' explanations for different countries are so different and contradictory that it is sometimes amusing to hear them all bundled together under 'institutions'--you might as well replace the word 'instituion' with 'explanation'.

But the real problem with these explanations is that they are little more than elaborate, erudite and complicated egrigious manifestations of the narrative fallacy. We look back at hundreds of years of history and boil it all down to fit into a neat narrative that confirms our pre-held beliefs. The real test of the validity of this, of course, is whether these narratives can be used to predict anything. If they were right in their anlaysis, then they could observe the near past, present and predict the future.

They obviously fail horribly in doing this, and that is why we should be very careful about believing these stylized narratives.

notsneaky

"Both the US and UK led the industrial revolution because of the availability of nearby natural resources."

If you were going to go by that then say, Latin America, should've been first. There's obviously a lot of places in the world with nearby natural resources. But as shown for example by Engermen and Sokoloff natural resource abundance can result in perverse political outcomes as the elites make moves to consolidate their control of the resources. This in turn can also have perverse economic outcomes.

Per Kurowski

Re corvad: “by the way, what is so inherently antidemocratic about Chavez abolishing term limits?”

Nothing, if duly allowed by the law of course and the elections are clean. No what I was referring more to was the fact that even though everyone knows that Venezuela is polarized, and that in December 1986 the opposition, with the votes counted by the government managed to get 37% of the votes, ever since the elections of December 4, 2005, its Congress includes 167 members who are in favor of and none, zero, zilch, of who differ with him. Have you had something like that in the USA? Is this compatible with democracy?

Re corvad: “Jared Diamond is not a geographer, he's an environmental determinist (bis)”

Sorry, my mistake, I hope I have not upset the community of environmental determinists or the geographers too much.

Ed

I side with Acemoglu, Johnson, & Robinson "colonial origins of underdevelopment" thesis. Colonialism was a key factor in determining the development of a system of property rights. However I am of the opinion that the colonial origins of underdevelopment have nothing to do with mortality rates of settlers. Take for example the colonization of the Americas. Europeans first settled where there were abundant natural resources to be extracted, mainly gold and silver, regardless of mortality rates. This is the reason that Central and South American colonies were initially much more succefull than the ones in North America (succesfull in the sense that they were generating lots of gold, silver and sugar for Portugal and Spain). North America developed a system of property rights precisely because England during the early stages of the colonization of its American colonies (16th and 17th centuries) did not find abundant gold and silver as Portugal and Spain did in the colonies of the south. Had England found abundant gold and silver in the early stages of its colonization of North America I can assure you that it would have adopted the same mercantilistic policies that Spain and Portugal adopted in the colonies of Central and South America.

corvad

sorry about the jared diamond thing, it's irritating to a lot of geographers (but not all of them -- he was invited to keynote at the last AAGs).

I like that AJR are rigorously analyzing colonialism within the context of economic theory, but I wonder how original their basic analysis is. do the names of dependcy theorists like Gunder Frank, or world systems theorists like Wallerstein and Samir Amin, register at all with this community? not that their work is the summit of postcolonial theory.

as far as Chavez' opposition goes, there's the old guard that staged the 2002 coup and thanked the RCTV station whose license was first not renewed recently -- those paragons of democracy boycotted the last elections. And then there's the new guard, funded by USAID, who take a much more rhetorically democratic approach to opposition (other than relying on foreign funding for organization). Certainly it isn't healthy to have a one party system in the long run, but on the other hand Chavez' domestic programs are oriented towards enabling grassroots organization and decentralized planning (another form of democratization). The new opposition is not going to look like the old opposition -- it can't. It will look more democratic.

Ali Sohail (pakistan)

I second the point made by Barkley and Saif.
In short, If you were to pinpoint the History of the Indian Subcontinet, specifically Pakistan, the way the British manhandled our Independence, pulled it forward a good 9 months! In lay man language, it brought our instutions, down to their knees, they were virtually nonexistent! and the 60 years to follow have been an anecdote of the doings of the british in the region.
That being said, there is a parallel if not a direct relationship between wealth and institutions. They compliment and maintain each other, they necessarily do not need to be democratic, which is an extremely cliched an overrated power structure!
It is the underlying financial, social and economic structure which may draw parallels to the soo-called democratic system that compliments wealth rather than the phrase itself!
In some Dictatorship's especially, the "musharraf' govt in Pakistan, although a dictotarial setup on first glance, the policy aprroach, the trickle down mechanism, accountability, openess, freedom of right, thought, life, expression has never been as closer to being as democratic(so-called system) as it is today in Pakistan! Hence, the postive relationship b/w wealth and Institution!
Uncontrolled, Unprecendented freedom of the Press, Judiciary. industry, Economic Policy, Social policy or any other such fascet! It is the foreign policy specifically given the role of Pakistan in the war of terror that depicts a dictator look like. But hey, maybe that is a blessing in disguise! and Maybe that is really the need, will and want of the day! It is not a game for the second best anyway!

Although, I am drifting a bit, but what is democracy in a country where less than 50% of the voting population votes, and out of the ones that do, 30% vote on free will (for their desired candidates)

In total, reality is not theory or empirical data to fit in a short story!

Bernd Mueller

corvad,

Frank and Wallerstein are quite different. Their 'dependency' does not only root in the colonising history, but rely much more on a somewhat 'present-day' perspective ... for them the 'underdevelopment' of the South is constantly 'developed' by the North. The industrialised nations actively - though not necessarily consciously - exploit the 'Third World' economically and the only development strategy for them is (world) socialism or autarky (not even some 'moderate' stuff like ISI). So that's quite a different story!

Since you mention it, what do you gather is the summit of post-colonial (development) theory?

I agree that it's not 'dependency theories', however, I want to add that some of those 'heterodoxies' like e.g. Arghiri Emmanuel's unequal exchange deserve a much closer look than they usually get today. (not saying that this is the pinnacle either)

Per Kurowski

I am so sorry. I did not want to get dragged into a debate about the chávez so many Americans love, just because he speaks badly of Bush. But, in terms of development theory how can the following be explained. You could make reference to culture, geography, psychology, governance, black black swans, stuff happens, whatever.

My country has 26 million people and though chávez speaks of himself as a socialist, nine years into his government, the price of a gallon of gas goes for less that 12 cents, transferring yearly about 10% of GDP from those who have nothing of nothing to those who buy gasoline and with an annual gas subsidy of US$ 3.000 per car/year stimulating the import of 400.000 cars the last 12 months. He also handed out last year 100.000 Kalashnikovs to who knows who and last weekend he announced, among laughs, that he was now going to hand out 5.000 sniper rifles so that “any gringo running around on a riverbed…boom!”

By the way as any opposition to chávez is immediately equated to someone working for the gringo empire, I guess… boom goes with them too! I shut up, but my question on adequate development theory to explain a chávez is of course pending.

corvad

bernd mueller: excellent point about frank and wallerstein, they are quite different. I guess I was unsure if dependency theory and world systems theory circa quite some time ago, had been any part of development economists training.

I'd rather emphasize postcolonial theory's diversity than point to a summit of any kind. I'd say that Subcomandante Marcos is particularly interesting.

RE; Per Kurowski, wasn't Venezuela quite the consumerist country, at least for Latin America, before Chavez? also quite the handgun-owning society? I definitely defer to local knowledge, but to date has Chavez thrown any of his opposition in jail? committed any human rights abuses? committed any electoral fraud? brutally repressed protesters? threatened any country of any sort with pre-emptive military action? the questions start out sincere and move to rthetorical, I apologize. I'm open to hearing about really bad things Chavez has done, I just keep hearing fairly circumstantial evidence for why he's so bad ...

as far as adequate development theory and Chavez, here's a shot:

I understand his purchase of Kalishnakovs, like his purchase of naval ships from Spain, as investing in political economic solidarity, as weird as that might sound (saving the Spanish shipbuilding Industry from intra-EU competition, gaining a strategic ally in his quest to insulate Venezuela from US unilateralism/market dominance).

Chavez has Big Plans, he's definitely got a messiah complex, but maybe that's the only way business as usual can change in Venezuela. His "industrial policy" isn't just about growing industries (it's about taking advantage of high oil prices that were none of his doing), it's about leveraging a beneficial global moment into creating long-term local and regional autonomy from the global hegemon and its conventional wisdom machines. Isn't that what China is doing, too? and the EU? just in their own historically and geographically specific contexts ...

corvad

and finally, as per points out, I don't believe Chavez is a socialist, in practice. He seems more like a postcolonial neo-Keynesian, redistributing petro-profit windfalls this time quite differently from last time (the 1970s, when they went into highly speculative development projects, foreign bank accounts, the pockets of dictators, and as a consequence the coffers of the IMF and WB as debt payments were restructured over and over again).

Lots of problems with this approach, among them what happens if world oil prices stabilize around $50 per barrel or lower. He might then indeed end up like his hero Simon Bolivar: increasingly demanding highly centralized, authoritarian government, losing everything, and dying sad and alone. Unless those long term investments in solidarity and alternative exhange agreements pay off ...

Clint

Regarding determinism in the Social Sciences (including the Jared Diamond comment above), my article “Determinism and the Antiquated Deontology of the Social Sciences” might be of interest to some:

http://philsci-archive.pitt.edu/archive/00004152/01/Determinism_and_the_Antiquated_Deontology_of_the_Social_Sciences.pdf

It basically argues that the common gut-level reaction in the social sciences to anything deemed “deterministic” is overly simplistic and out of touch with the last half century of important developments concerning free will and ethics in philosophy.

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