Citizen Economists » class struggle

Was the Industrial Revolution caused by Bourgeois Dignity or Institutional Change?

Winton Bates — Thu, 23 Dec 2010 16:54:50 +0000

Most of Deidre McCloskey’s important new book serves to establish that if we want to explain the industrial revolution we need to explain why so much innovation occurred in England from the late 18th century and through the 19th century. She suggests that we should dismiss attempts to explain the industrial revolution in terms of such factors as thrift, accumulation of capital (physical or human), transport, geography, natural resources, the slave trade, business organization, imperialism, eugenics and even foreign trade.

The style of the exposition suggests, at times, that Deidre may not suffer fools gladly (or has a wicked sense of humour): ‘If someone claims that foreign trade made possible, say, economies of scale in cotton textiles or shipping services she owes it to her readers (as I have already said twice: I wish you would pay attention) to explain why the gains on the swings are not lost on the roundabouts. Why do not the industries made smaller by the large extension of British foreign trade end up on the negative side of the account?’ (p 221).

Well, I’m not sure Deidre, perhaps there is a link between international trade, specialization and scale economies – but you may have discussed that possibility somewhere else in the book when I wasn’t paying attention. In any case, I agree with you that innovation must have been a lot more important than scale economies.

I was a little more concerned that I didn’t see any recognition of the possibility, as discussed in Eric Jones’ recent book (reviewed here), that clustering of manufacturing in the north of England – as a result of trade and specialization within England – provided an economic environment conducive to subsequent innovations. Perhaps middle class enrichment resulting from trade and specialization could also help to explain why the bourgeois revaluation occurred when and where it did. (The bourgeois revaluation is the greater approval of the middle classes – and of innovation and markets – that began to occur in thought and talk in Holland and England three centuries ago.)

My main concern, Deidre, is that in attempting to clear the field prior to sowing a new crop of ideas (or the old ideas you want to propagate anew) you may be inadvertently slashing and burning some other ideas that are worth preserving. This applies, in particular, to the relationship between institutional change and economic performance as discussed by Douglass North (‘Institutions, Institutional Change and Economic Performance’, 1990). I agree with you that North could not have been correct in attributing the industrial revolution to more secure property rights following the Glorious Revolution. There is, however, more to institutional change than more secure property rights. I reject your attempt to dismiss appeals to institutional change as ‘still another attempt to reduce one of the greatest surprises in human history to a materialist routine’ and to claim that changes in institutions did not have much to do with the industrial revolution (p. 354).

In fact, evidence that you cite in your book seems to conflict with your claim that changes in institutions – the rules of the game – had little to do with the industrial revolution. You acknowledge that ‘the norms of antibourgeois aristocrats and clerics did discourage innovation’ (p. 267). You also suggest: ‘Had the Ottoman or the Qing empires or the Japanese Shogunate admired trade and innovation sufficiently to overcome their worries about the maintenance of state power – encouraging innovation and having a go rather than crushing it – then they, not the Europeans, would have come first’ (p. 371). You note that in France and Spain in the 18th century a nobleman caught engaging in commerce could be stripped on his rank’ (p. 387) and that in France it was necessary to apply to the state for permission to open a factory (p. 395).

I think your true position may be that bourgeois dignity and institutions (economic freedom) are both important in explaining the industrial revolution. This comes through fairly clearly when you write: ‘By adopting the respect for deal-making and innovation and the liberty to carry out the deals that Amsterdam and London pioneered around 1700, the modern world was born’ (p. 397). In such passages you seem to be offering an encompassing theory incorporating both bourgeois dignity and institutional change.

So far so good. I can understand that ideology (an amalgam of perceptions and values) influences the climate of opinion toward commerce and innovation which in turn influences both informal institutions (conventions and codes of behaviour) and formal institutions (regulations, laws, constitutions) which may or may not provide a climate conducive to innovation. Is that all there is to understand?

Perhaps not. The missing element is a sense of personal identity. As you say: ‘In truth, the agent wants to act because she attributes meaning to her life … She is a human with an identity, not a Max U calculating machine like grass or bacteria or rats’ (p. 307).

That gets me thinking again about identity economics – the idea of George Akerlof and Rachel Kranton that people gain utility when their actions conform to the norms and ideals of their identity (which I first discussed here). Even a person with great potential to be innovative might find that difficult if the norms and ideals of their identity dictated that any attempt to innovate would be futile. If we start thinking in terms of identity economics, however, we might have to question the sub-title of your book – perhaps economics can explain the modern world after all.

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Workers Of The World Unite

Dan McLaughlin — Mon, 22 Jun 2009 11:22:54 +0000

Socialism is alive and well. In America, as elsewhere, however, the socialist movement isn’t and never has been a worker’s movement, as it has been made out to be. Socialism has been, from the start, a movement of intellectuals. It festers on college campuses. It is a framework constructed by very smart people who think that ordinary people are too stupid to run their own lives. Those less capable underlings need wise, educated people, like the intellectual socialist class, to tell them what to think, what to buy and not to buy, and to determine what is good and bad for them and their families. Workers of the world, they consider you to be the incompetent slugs who cannot manage your affairs.

Since the beginning, the workers of the world have been used as pawns for the wealthy and intellectual socialist elite to achieve political power. Together, the Kim Jong Ils, the Robert Mugabes, the Maurice Strongs and George Soroses of the world control billions of dollars in personal wealth. Not your typical working class guys.

While Karl Marx gave the pseudo-theoretical justification to the revolutionary class struggle approach to socialism, he was not of the working class, nor was his benefactor, Freidrich Engles, a wealthy industrialist. The inevitable Marxian state dictatorship is not made up of workers, but rather the political elite. The workers become slaves wherever Marx’s flavor of revolutionary socialism is forced upon them.

Fabian Socialists use a very different method than the Marxists. It is the gradualist approach, which uses the institutions of a society to turn public opinion against voluntary markets and individual freedom. It seems that they have been very successful over the last few decades, as a large share of American politicians and high level bureaucrats are either closet socialists or outright, self avowed socialists.

The problem with socialism is that, whether it is the brutal Marxian version or the patient Fabian version, it is still slavery. It is the forfeiting of the rights of the individual to the state. Ultimately, there can be no middle way. There can be no mixed economy in the long run. Socialism is the abolition of voluntary markets. To the extent that socialism wins out, freedom loses. The ultimate expression of socialism is totalitarianism because people don’t give up their freedom voluntarily. The only way to make people obey the will of the state is with the iron fist.

The societies that appear to be mixed economies now are not really mixed. They are free markets that are in the process of being overrun by socialism. They are precursors to the socialist state. It is a very uncomfortable idea, but the United States is actually a very long way down the road in that direction. Most Americans are simply normal, good natured, busy people who want to live their lives without being bothered by politics, except for a few days during election season. Unfortunately, those who wish to take their freedom from them are very happy to work diligently all year round. Fortunately, it is not an inevitable progression, and it has been reversed in the past, when the people vigorously fight against it.

Things are happening startlingly quickly. The events of the day have many politicians reciting the mantra, “Never let a good crisis go to waste.” The consolidation of power needs crisis for legitimacy. Some of the things we are seeing now have never happened in this country in my lifetime, nor that of most living Americans. A disturbing number of people have forgotten or have never learned what it is to be an American, a citizen of the only country the very foundation of which is freedom of the individual and responsibility for one’s own life. It is time for Americans to sit up and take notice that history repeats itself when people forget, and history is often not pretty.

These events have happened in the past, even the recent past, in other countries. History is littered with the ashes of egalitarian workers paradises, or the corpses of the workers themselves. Members of the political class under any form of highly centralized government, whether they are made up of corporatists, czars or commissars, necessarily use the common person for their own benefit.

Marx’s famous words from the Communist Manifesto, “Workers of the world, Unite!”, is an appropriate theme for today. With its obvious tendency to create mass misery, the workers should realize they must unite against socialism for their own benefit.

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