How it all Began (Routledge Revivals)

Origins of the Modern Economy

W. W. Rostow

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317805618
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

First published in 1975, this book traces the origins of our modern economy, showing the routes by which nations have either achieved wealth or have been impoverished. W. W. Rostow brings together issues of public policy, international trade and the world of science and technology, arguing that conventional economic thought has failed to relate scientific innovation to the economic process. Chapters consider the politics of modernization, the Commercial Revolution and the development of the world economy between 1783 and 1820.

1
Why Traditional Societies Did Not Generate Self - Sustained Growth

I

The premodern world is worth study for many reasons: to satisfy our curiosity; to extend our knowledge of the human condition and of human creativity; to help us understand the long shadows the premodern world cast on modern civilizations and cultures. For the limited purposes of this book, however, there is a narrow, almost mathematical reason for beginning with the premodern world: It did not generate self-sustained growth. If we can establish which factors were present and which absent in premodern as opposed to modern societies, we may help identify the specific elements that brought about the two centuries of self-sustained growth that began in the late eighteenth century. Was self-sustained growth blocked in premodern societies by a lack of interest in material things, religious beliefs, systems of slavery and feudalism, excessively narrow and impoverished markets, scientific ignorance, the lack of a commercial middle class, or what?

II

In one sense, the answer is simple and obvious: What distinguishes the world since the industrial revolution from the world before is the systematic, regular, and progressive application of science and technology to the production of goods and services. This is how and where I would draw the line in the famous debate whether the ancient world was "primitive" or "modern."¹ It was neither; it simply lacked a more or less regular flow of technological innovation. In the modern world, this flow has been an additional factor of production which is, so far as we know, infinitely expansible. The organized creativity of the human mind appears thus far to be of a productivity capable of compensating for limitations of land and natural resources. Thus for two centuries have societies, which organized themselves to exploit the technological stock and flow, fended off Ricardian diminishing returns to land and the Malthusian spectre. Only now have the rate of population increase, potential limits on natural resources, and threats to the environment challenged the efficacy of the scientific and technological revolution, although science and technology will surely play a decisive part if man succeeds in coming to dynamic equilibrium with his physical environment.

The premodern world was not without scientists, inventors, and innovators, as well as philosophers, politicians, administrators, artists, and creative writers of great sophistication, but at any given period of time men and societies lived within technological limits, because innovation was sporadic. The ceiling could be lifted—and was—by elements of technological advance and innovation, but it could not be lifted regularly. Therefore, constraints operated on the levels of agricultural production, output and employment in urban industry, population that could be sustained, taxable income, and on the consequent capacity of governments to carry forward their objectives.

To assert these propositions, however, is to pose, not to answer, the question that is the main subject of this chapter; that is, why technological innovation was not a regular flow in the premodern world. Before getting at that central question, we may find it useful to consider how a relatively fixed technological ceiling caused the life of the premodern world to assume the form of cycles.

Consider first a model of what might be called a smallscale traditional society—say, an African tribe.

The small-scale traditional society is one whose economic life is bound quite rigorously by a relatively fixed area of arable or grazing land and by a narrow, or relatively stable, trading environment. It is mainly taken up with producing for local consumption. Its political and social organization is also tied intimately to the region and does not strain to enlarge the area of its political and economic power, although it may be drawn, from time to time, into offensive or defensive military activities on its borders. Production functions may change with chance discoveries or the occasional intrusion of knowledge from outside, such as knowledge of a new crop, but these are, essentially, onetime changes to which the society adjusts, moving to a new plateau.

The model, however, is not static; the small-scale traditional society does not ride smoothly along its plateaus. Within its existing production functions and acreage, population and income are likely to exhibit fluctuations of relatively short duration, determined by the size of the harvests and the incidence of disease and war. By routes of considerable complexity, these factors yield birth and death rates that, in turn, cause population to move in a roughly cyclical way, quite aside from a year-to-year sensitivity to the availability of food. The pattern that Heckscher was able to present for eighteenth-century Sweden is likely to prove general for small-scale traditional societies; that is, "Nature audited her accounts with a red pencil," with a rise in the death rate roughly, and fairly promptly, cancelling a population surge induced by intervals of peace, absence of epidemic, and good harvests.²

History also offers cases that suggest a somewhat different model. Large political trading units are permitted, as well as the possibility of substantial increase in acreage. The scale of allocations to military activities fluctuates over a much wider range than in the small-scale case, allowing for protracted intervals of peace and for wars yielding, directly and indirectly, greater economic damage and more profound political and social consequences than in the model of the small-scale traditional society. Here we are probing at the dynamics of the empires and dynasties of Asia and the Mediterranean world.³ Although history offers us no pure cases, not even the tempting case of the undulating sequence of Chinese dynasties, the most appropriate model appears to be a cycle of greater length than the relatively short compensatory adjustment of the smallscale model.

The abstract cycle of the traditional empire begins with the establishment of political order over a reasonably large area by strong purposeful administration that concentrates a high proportion of its energies and resources on the domestic scene. It comes to power at the trough of a previous cycle when war and epidemic have driven down the population, freed acreage, and disrupted trade. In this special sense, idle capacity exists.

Within the framework of peace and order, agriculture revives; the routes for domestic, and sometimes international, trade are opened or reopened, and kept open and reliable; and, where appropriate, the irrigation works are built, or rebuilt, and maintained. Agricultural output not only expands but shifts in its composition to exploit the possibility of trade with the expanding cities in commodities of higher value than the basic grains. The taxes are collected with tolerable efficiency and honesty by the government, and the expanded outlays of a prosperous government, as well as those above the ranks of the peasantry, stimulate various forms of handicraft manufacture. Processing and handicraft manufacture—and, in general, higher degrees of specialization—are stimulated as well by an increase in interregional and, perhaps, international trade. Efforts may be made not only to repopulate the old acreage but to bring new lands under cultivation. In this environment, women are married younger, more of their children survive the early precarious years, reasonably provident government combines with reasonably efficient transport to make food available to regions suffering poor harvests, and population expands.

As time passes, however, three factors tend to set a limit on economic progress: first, the pressure of expanding population against good land; second, the built-in difficulty of maintaining over long periods of time efficient, honest and purposeful administration; and, third, the likelihood that the state will become embroiled in wars whose cost outweighs their return either in expanded trade, booty, or in acquisitions of good land. At some stage these factors might yield bad harvests arising from land pressed too hard, excessive taxation, epidemics, peasants' revolts or other forms of civil strife, and the decay of central administration.

Proximately—operationally—the downturn is caused by a fiscal crisis: the government cannot generate the taxes required to meet the security and welfare obligations that have accumulated, and its own efforts to deal with the situation may exacerbate an underlying constitutional crisis caused by the disequilibrium between resources and objectives.

After this upper turning point, economic, social, and political life retreats to narrower limits, within which the society conducts its affairs on a less productive, more self-sufficient basis, a process usually accompanied by a decline in population.⁴

The fundamental technical reason for the abortive character of these expansions, in both small-scale and imperial cases, lies in the fact that economic invention and innovation in traditional societies were not regular features of their life. For reasons that are examined later in this chapter, these societies did not regularly allocate a substantial proportion of their creative talent and other resources to breaking economic bottlenecks.

To understand the nature of modern economic growth, we must, therefore, begin by accepting Postan's challenge "... to lay bare the essential processes of a society held in by physical or, if the term is used in a broad sense, Malthusian checks."⁵ And, from what we know, his tentatively expressed insights have a meaning beyond the late Middle Ages. In the history of traditional empires, we can, indeed, ". . . find explanations of later decline in the conditions of previous growth." It is not only in fourteenthcentury Britain that "the honeymoon of high yields was succeeded by long periods of reckoning when the marginal lands, no longer new, punished the men who tilled them with recurrent inundations, desiccations and dust storms."⁶

The premodern world poses, then, two questions: What forces account for the periods of economic expansion and what characteristics of premodern societies yielded the technological ceiling which set limits on expansion and, sooner or later, sent them into decline? We shall deal with these questions under three headings: politics; trade and industry; and science, technology, and innovation.

III

In talking about traditional, premodern societies we are, of course, generalizing the experience of many cases of great variety. In his study, The Political Systems of Empires, for example, S. N. Eisenstadt summarizes his findings on thirty-two premodern societies in tables set out in an appendix of about one hundred pages. These tables array his cases against many structural and functional standards, primarily drawn from Parsonian sociology. One's first impression is that there is almost impenetrable variety among them. Moreover, there is change over time within these premodern societies; for example, in the succession of Chinese dynasties and the evolution of Rome and the Byzantine Empire. Nevertheless, for our narrow purposes, a few generalizations about the politics of these societies are possible.

Like their predecessors and successors throughout history, the primary aim of their rulers was, of course, to stay in power. But in so doing they were caught up in one or another version of the three eternal tasks of government: to preserve or advance their interests against other political systems; to provide an acceptable standard of welfare for the people in terms of the cultural norms of their day; and to conduct their constitutional business, notably the maintenance of unity and the provision of justice.⁷ Like their successors down to the present day, these rulers lived in a competitive arena of power, which always threatened and often yielded war. Similarly, their constitutional business —the unity and tranquility of the state, the quality of justice, and the presence or absence of corruption in the court and bureaucracy—reflects criteria which extend into modern times. With respect to welfare, the situation was different. Their cultures, in the widest sense, set a relatively static standard. There were norms for good times, often drawn from the memory of golden eras of the past when the frontiers were quiet, crops ample, taxes modest, state granaries full, the roads free of bandits, and, where relevant, the irrigation works well maintained. Rulers were assessed, in part, against such standards, but the society was not expected to yield a regularly rising standard of life for the people as a whole. This was not because people lacked interest in material things and worldly goals. From top to bottom, from courtiers to peasants, the desire for more was evident, be it luxuries, money, land, or additional food for the village family to eat. And, narrow as they sometimes were, there were channels for vertical mobility in these societies that individual men exploited with vigor. But the expectation for the society as a whole was that, although it might suffer good times or bad at the whim of the harvests, the vicissitudes of war, or the quality of rule, there would not be regular overall progress.

In political aphorisms, the reality of the three functions of government was recognized and, sometimes, a priority asserted among them. Confucius, for example, is quoted as follows:

Tsekung asked about government, and Confucius replied: "People must have sufficient to eat; there must be a sufficient army; and there must be confidence of the people in the ruler."

If you are forced to give up one of these three objectives, what would you go without first?" asked Tsekung.

Confucius said, "I would go without the army first."

"And if you were forced to go without one of the two remaining factors, what would you rather go without?" asked Tsekung again.

"I would rather go without sufficient food for the people. There have always been deaths in every generation since man lived, but a nation cannot exist without confidence in its ruler."⁸

And from the Middle East came this less discriminating prescription:

A ruler can have no power without soldiers, no soldiers without money, no money without the well-being of his subjects, and no popular well-being without justice.⁹

The rulers of such societies sought to reconcile these often conflicting objectives in the face of complex restraints and dilemmas. These were present, in one form or another, within city states, tribes, and relatively simple state structures, but they are most dramatically revealed in the larger empires, consolidated and maintained for substantial periods of time.

The great rulers of such empires were inherently modernize rs. They came to power in times of disarray or fragmentation, sometimes by conquest from outside. They sought to establish unity and order over wide areas, and they sometimes asserted new objectives or visions of the society's mission. Their initial enemies, moreover, were usually the traditional landowning (or landholding¹⁰) aristocracy, and they had to look to new, more flexible men to win their victories, consolidate their rule, and administer their large domains. But they soon found themselves hedged about.

Let us look first at their relations to the landowning aristocracy. The rulers might displace at least some of the existing aristocracy and reallocate land to their own supporters, but these supporters, in turn, soon generated familiar vested interests in local power and in retaining payments from the land for their own purposes rather than those of the central ruler. Moreover, the landowning aristocracy was needed to help administer, often to collect revenues, and to mobilize troops and corvée labor.

Their second problem arose in relations with the bureaucracy. The rulers initially built or enlarged bureaucracies with men loyal to them, but with the passage of time the bureaucrats sought to consolidate a quasi-independent position and to perpetuate the position of their families by the acquisition of land.

The third relationship of the rulers was with the peasantry. They were needed to generate food for the cities, taxes for the rulers, and to serve in the armies and on large public projects. Moreover, they could not safely be driven to such desperation as to yield revolt—a subject of constitutional anxiety of rulers that can be traced from anti...

Table of contents

• Cover
• Title
• Copyright
• Original Title
• Original Copyright
• Dedication
• Preface
• Contents
• 1. Why Traditional Societies Did Not Generate Self-Sustained Growth
• 2. The Politics of Modernization
• 3. The Commercial Revolution
• 4. Science, Invention, and Innovation
• 5. The World Economy, 1783-1820: An Epilogue
• Notes
• Index