Landes, Chapter 1: Natures Inequalities Economic Geography: Theory Many philosophers linked environment and character, while early

anthropologists considered merit and wisdom distributed along with the climate, suggesting western cultures as the best of both. However, this portrayed geography as racist, as it labelled and characterised peoples. The core of the issue is that geography informs us about an unpleasant truth, that nature can be unfair and unequal: opportunities for development are not equal. John Kenneth Galbraith noted that (at the time), that there are no developed countries within the tropics and much of the subtropics. Others have blamed this on technology: rich countries developed their technology and agricultural methods to suit temperate climates and soils, which are not easy to apply to tropical soil. Some blame colonial disruption of these regions. Climate In general, the discomfort of heat exceeds that of cold. What Landes meant is that preparations to withstand cold winters are easier than those for preparation with hot summers. Fire was around since the Stone Age, but we only recently developed air conditioning, an expensive solution for the worlds poor. When one does work, heat is created; sweating can only do so much to alleviate this, and it may be a necessity to siesta at the hottest times. Whoever you are, hot and wet conditions are the worst to work in. With slavery, they pushed this hot work onto those who could not say no, forcing them to work in hot conditions. Also, agriculture has often employed women to do much of the manual work in some cultures: again, it is those who have little say who have to do the toughest work. Disease Heat and humidity also encourages life forms hostile to man, such as malarial insects. This disease has a much higher rate of disease transfer than one like mumps, a disease common in Europe that also has epidemic potential. Others have blamed the absence of frost for success of insects and parasites that blight much of the developing world. Sleeping sickness is a disease common in Africa, associated with the Tsetse Fly, an insect that has adapted to live by drinking blood. There exists some medicines, but the density of these insects makes large areas of tropical Africa uninhabitable. This disease influenced how those economies developed: animals could not be herded easily, and transport was impossible humans had to be the transport, often forced through slavery. Sophisticated urban societies depend on a steady source of food from outside; these factors made this very difficult, even impossible. Others think differently: animals and many people in Africa have resistance to tropical diseases. The disruption brought about through colonialism and the slave trade may have worsened the situation by disrupting pre-existing arrangements. Dealing with disease before germ theory was haphazard, with much of it based on guesswork. When the French colonised Algeria, they noticed disease around marsh land and they drained swamps to get rid of bad air. While they did not understand the direct cause, it had a positive effect anyhow.

This illustrates another key thought: it is easier to keep people from getting sick than curing illness. Medicine and public hygiene has drastically improved life expectancy in the third world. However, the extra life expectancy does not tell us about quality of life: more medicine may simply allow sick people to live longer lives in sickness. Tropical medicine is a large field, and one with high costs. Pharmaceuticals do not see high return on investments in tropical medicine, as those in developing countries do not have the funds for these treatments. Many locals may also resist modern treatments, when a cheaper and better known traditional medicine is available, or religion/tradition bans its use. Water Tropical rainfall is more irregular and unpredictable than in temperate regions, even if the average is generous enough. Rainforests do well, but cultivation is not easy to adapt to this. Many attempts at rainforests cultivation see the land transform to a useless clay surface. As a result, agriculture clears land, gets two-three years of good harvest, but becomes useless within the decade. Desertification is another problem the Sahara has been expanding into the Sahel region since the 1970s and earlier. Once the land becomes desert, the topsoil can blow away, losing the land its nutrients, making it much harder to reverse. In all, tropical and desert climates are much less forgiving areas for agriculture, and thus urbanisation, a key driver of development. As a result, we saw urban areas in hotter climates concentrated around rivers, like the Nile, Indus, and Tigris/Euphrates. Even there, droughts occur. For example, the Volta River in West Africa sees huge fluctuations in flow, and evaporation leads to huge losses, which made society less resilient than in milder climates. Urban areas in Africa often rely on food imports from abroad due to issues like drought and poor agricultural potential; this makes it hard to invest in development infrastructure. Catastrophes Once in a hundred year events (classified based on western probability of events) are surprisingly common in the developing world. Even a developed society would find it hard to cope with these events financially, and a developing country has even less resources to import materials and rebuild society after these events. There are many examples, but a striking one is the 1970 Bangladesh cyclone, which killed half a million and drove one million from their homes. Today, we know much more about these events due to global media, but even fifty years ago, European knowledge of famine in Africa would be minimal, even when the worst happens. Conclusions: Poor climate, poor development Africa, in particular, has incredibly tough natural conditions. While there have been many poor development initiatives, it is perhaps impressive that Africa has done as well as it has. However, geography is not destiny: science and technology, and the innovation of man, will help people overcome these obstacles. Landes emphasises that we should note geographies natural limitations, so we are able to develop solutions: what worked for Europe will not necessarily work for the developing world.

Answer to geography: Europe and China

Lesson Objective: This chapter aims to understand why Landes believes the Europeans had an agricultural and economic advantage over the Chinese during the Medieval era. Europe: While cold winters in Europe keep down pathogens and pest, killers and disablers can be found in hot lands. The kind winter temperatures + even rainfall pattern (rarely torrential) = Western Europe is able to grow crops all year long. Atlantic Ocean brings winter precipitation that fall before getting to the central and Eastern Europe. Mediterranean countries = kind temperatures but more uneven rain. How to explain the warm temperatures? The Gulf Stream rising in tropical waters provide Europe. Due to its shape, Brazil splits the south equatorial current and sends half of it up North gives Western Europe warm winds, gentle rain, water in all seasons and law rates of evaporation good crops can be grown, big livestock, dense hardwood forests.

Assumption: geographical handicaps partly accounts for industrialisation retardation and poverty Europe geography isnt idyllic: famines, diseases, cooling/ warming happen forest source of berries, nuts when starvation came. Rainfall being relatively even crops will grow again soon But favourable environment: Europeans could leave more lands to forest, bigger and stronger animals advantage in heavy work and transport larger herds and yielded lots of animals fertilizer = more intensive agriculture + larger crops diet rick in dairy products, meat and animal proteins (= Europeans grew taller and stronger) Gains from animals fertilizer couldnt match with fertile riverine areas (i.e. slit of the Nile) but irregular interruption in riverine cultivation far more hurtful than wet spells in a rainy climate.

China: High demand of labour in rainy season in wet cultivation high density of population promoted (40x that of Europe per unit arable). Riverine civilizations maximized population China = 7% of the worlds land, 21% population Early in the medieval era, Asian steppe exchanged nomadic pastoralism for higher yields of sedentary agriculture number food power link In order to destroy forces of rival political chiefs, it was desires to extend the area under cultivation and amass the supply of grains. They then provided water for irrigation, made possible the accumulation of large supplies of grains, and served route for the transport of government grains.

 Problem: erratic seesaw of labour-hungry soil and food-hungry labour led to times of want and famines no surpluses of food to feed animals. Chinas agriculture couldnt run fast enough, constantly state and society strived for new lands: making people, using people to feed people.

Stages of the treadmill: o 1. Chinese started in the North cleaning the land and work it as much as they could. They moved south to loess soils then o 2. Loess agriculture = water control and irrigation technology. Wetter agricultures more fertile production of rice, which yielded more calories/ area. Improve supply and use of water, use of draft animals and intense weeding. The Chinese energy system is in place. o 3. 8th-12th century: 2nd Industrial Revolution: they substituted labour for land (60-80 persons/ hectare vs. 1 in American wheat farms) = obtained double and triple results. Their agriculture was then the most sophisticated in the world. o 4. Later innovation: 17th-18th century: new plants taken for peanuts, potatoes, sweet potatoes and yams. These were supplement to a rice complex that couldnt keep up o 5. Concentration on rice yielded: Good side: appetite of rice for nutriments is lower than that of the other food staples, it grows in diverse habitats Bad side: greater labour requirement, exposed to nasty parasites

The labour-intensive, water-intensive Chinese energy model influenced social and political organization. The riverine civilizations control food through the control of water (i.e. the stream and canal it feeds), which leads to a centralization of power. Indeed, the management of water in China called for supra-local power and promoted imperial authority.

Summary chapter 3: European Exceptionalism: A different Path Europe was lucky, but luck is only a beginning. Anyone who looked at the world, say a thousand years ago, would never have predicted great things for this protrusion at the western end of the Eurasian landmass that we call the continent of Europe. In terms popular among todays new economic historians, the probability at that point of European global dominance was somewhere around zero. Five hundred years later, it was getting close to one. Property rights had to be rediscovered and reasserted after the fall of Rome. This world, which we know as medieval the time between was a transitional society, an amalgam of classical legacy, Germanic tribal laws and customs, and what we now call the Judaic-Christian tradition. All of these provided support for institutions of private property. What mattered in the long run were the constraints imposed by political fragmentation and general insecurity. In the centuries that followed the end of empire, the arm of authority was short. Power derived in principle from the freely consented allegiance of the group or an elite within it and was correspondingly limited. The only thing that could be held and defended was private property. Sometimes it was seized by force, just as today someone might be mugged and robbed. But the principle never died: property was a right, and confiscation, no more than plunder, could not change that. There was fragmentation, which gave rise to competition, and competition favored good care of good subjects. Treat them badly, and they might go elsewhere. Ecumenical empires did not fear flight, especially when, like China, they defined themselves as the center of the universe, the hearth and home of civilization, and everything outside as barbarian darkness. Later on, the rulers were transferring some of their own power. The reason for that was that this could bring new land, new crops, trade and markets brought revenue, and revenue brought power. Another reason, paradoxically, rulers wanted to enhance their power within their own kingdom: free farmers (note that I do not say peasants) and townsmen (bourgeois) were the natural enemies of the landed aristocracy and would support the crown and other great lords in their struggles with local seigneurs. After all, one has usually seen fragmentation as a great misfortune, as a recipe for conflict ; it is no accident that European union is seen today as the cure for the wars of yesterday. And yet, in those middle years between ancient and modern, fragmentation was the strongest brake on willful, oppressive behavior. Political rivalry and the right of exit made all the difference. The church succeeded in asserting itself politically in some countries, notably those of southern Europe, not in others; so that there developed within Europe areas of potentially free thought. This freedom found expression later on in the Protestant Reformation, but even before, Europe was spared the thought control that proved a curse in Islam. One final advantage of fragmentation: by decentralizing authority, it made Europe safe from single-stroke conquest. The history of empire is dotted with such coups-one or two defeats and the whole ecumenical autocracy comes tumbling down. There ensued a long period of population increase and economic growth, up to the middle of the fourteenth century, when Europeans were smitten by the plague (the balck death) in its bubonic and pneumonic forms and a third or more of the people died; a half when you count the losses inflicted by sequellae. That was a jolt, but not a full stop. The one hundred fifty years that followed were a

period of rebuilding, further technological advance, and continued development. In particular, these centuries saw the further expansion of a civilization that now found itself stronger than its neighbors, and the beginnings of exploration and conquest overseas. This long multicentennial maturation (1000-1500) rested on an economic revolution, a transformation of the entire process of making, getting, and spending such as the world had not seen since the so called Neolithic revolution. The medieval economic revolution also built on gains in the production and application of energy and concomitant increases in work. In the early 13th century, merchants began to hire cottage workers to perform some of the more tedious, less skilled tasks, this shift to outsourcing initially encountered little resistance from urban workers. But when merchants started putting out yarn to cottage weavers, they were attacking one of the most powerful vested interests of the day, the guild weavers of the towns. The one country where putting-out had a free field was England, where local political autonomies made it hard for the monarchy to sustain corporate guild claims to monopoly and where guilds were quickly reduced to ceremonial fraternities. By the fifteenth century, more than half the nations woolen cloth was being made in rural cottages. This recourse to cheap labor lowered costs over competitors abroad, so that by the sixteenth century a country that had once been largely an exporter of primary products, including raw wool, was well on its way to becoming the premier manufacturing nation of Europe. The economic expansion of medieval Europe was thus promoted by a succession of organizational innovations and adaptations, most of them initiated from below and diffused by example. The rulers, even local seigneurs, scrambled to keep pace, to show themselves hospitable, to make labor available, to attract enterprise and the revenues it generated. At the same time, the business community invented new forms of association, contract, and exchange designed to secure investment and facilitate payment. In these centuries a whole new array of commercial instruments came into use; commercial codes were elaborated and enforced; and partnership arrangements were devised to encourage alliances between lenders and doers, between the men who supplied the funds and merchandise and those who went to distant lands to sell and to buy. Almost all of this commercial revolution came from the mercantile community, bypassing where necessary the rules of this or that city or state, inventing and improvising new venues for encounter and exchange, creating in short a world of its own like an overlay on the convoluted, inconvenient mosaic of political units. They got thereby substantially enhanced security, a sharp reduction in the cost of doing business (transaction costs), a widening of the market that promoted specialization and division of labor. It was the world of Adam Smith, already taking shape five hundred years before his time.

CHAPTER 4: The invention of invention Europe in the Middle Ages is one of the most inventive societies that history had known. While this centuries has been seen as a dark interlude between the grandeur of Rome and the brilliance of the Renaissance this does not hold in technical matters. During this period there were a couple of inventions that were quite important for centuries that came later. 1. The water wheel: Although known to the Romans, the waterwheel was re-instated in the 11th century. As a result it was used to create power and with a couple of improvements could be used for manufacturing. 2. Eyeglasses: Eyeglasses made it possible to do fine work and se fine instruments. But also the converse: eyeglasses encouraged the invention of fine instruments, indeed pushed Europe in a direction found nowhere else. The Europeans went on to invent gauges, micrometers and other tools linked to precision measurement and control. This laid the basis for articulated machines with fitted parts. Close work: When other civilizations did it , they did it by long habituation. The skill was in the hand not the eye- and- tool. They achieved remarkable results, but no piece was like any other; whereas Euro was already moving towards replication batch and then mass production. 3. The mechanical clock: The clock was the greatest achievement of medieval mechanical ingenuity. Revolutionary in conception, it was more radically new than its makers knew. This was the first example of a digital as opposed to a analog device: it counted a regular, repeating sequence of discrete actions rather than tracked continuous, regular motion such as the moving shadow of sundial or the flow of water. Today about all high-precision devices are based on the digital principle. 4. Printing: Europe came to printing centuries after China. Since there was a rise in towns and bureaucracy demand increased for keeping records. Much of these were written in the vernacular leaving and opening to wider readership and a literature of dissent. As a result scribes could not keep up with demand. 5. Gunpowder: Europeans probably got this from the Chinese. However the Chinese used gunpowder in powder form, weakening its power. The Europeans used to corn the powder making in the form of small kernels or pebbles, this lead to a more powerful explosion. This combined with experience in bell founding, gave Europe the worlds best cannon and military supremacy. The one civilization that could have surpassed (as the above inventions show) were the Chinese. Chinese industry long anticipated Europe and inventions of them were often earlier than in Europe as well. The most persuasive explanations why Chine did not surpass Europe are the following: The absence of a free market and institutionalized property rights The larger values of the society; Women were not aloud to do stuff outside home and could in that matter not contribute to society Chinas abortive technology was part of a larger pattern of totalitarian control; there was an absence of freedom, the weight of custom, consensus, what passed for higher wisdom. Whatever the mix of factor, the result was a weird pattern of isolated initiatives and Sisyphean discontinuities. Almost as though a silk ceiling held down the society. Innovation was allowed to go, so far and no farther.

The Europeans knew much less of these interferences. Instead they entered during these centuries into an exciting world of innovation and emulation that challenged vested interests and rattled the forces of conservatism. Important in all this was the Church as a custodian of knowledge and school for technicians.

But why created the Europeans this pleasure in new and better, this cultivation of invention (the invention of invention): 1. The Judeo-Christian respect for manual labor, summed up in number of biblical injunctions. 2. The Judo-Christian subordination of nature to man. 3. The Judo-Christian sense of linear time; linear time is progressive or regressive, moving on. For Europeans the progressive view prevailed. 4. The market: enterprise was free in Europe. Rulers and vested were limited in their ability to prevent or discourage innovation.

13 The Nature of Industrial Revolution

In the eighteenth century, some inventions transformed the British cotton manufacture and gave birth the factory system (a new mode of production), at the same time that other branches of industry made related advances. The variety of these innovations fall under three principles: 1. Substitution of machines for human skill and effort 2. The substitution of inanimate for animate sources of power (i.e. the invention of engines) 3. The use of new raw materials (implantation of vegetable or animal substances)

These substitutions made the Industrial Revolution. This yielded a rapid rise in productivity and in income per head. The industrial Revolution also transformed the balance of political power and revolutionized the social order. The word revolution has many faces, but in the book the writer uses it in its oldest metaphorical sense to denote an instance of great change or alteration in affairs or some particular thing. It is important to remark that the technological advances of the great Industrial Revolution were not achieved overnight; it took time and a lot of small and large improvements to turn an idea into a technique. Steampower. Thomas Savery in 1698 was the first one to create a vacuum and work a pump. Thomas Newcomen in 1705 made the first steam engine proper with piston, which was grossly wasteful of energy, in times when fuel was almost a free good. Sixty years later (1768) James Watt invented an engine with separate condenser and fifty years later was possible to adapt the machine to rotary motion. Another line is the high pressure engines, used to drive ships and land vehicles, this took another quarter century. The size and power of steam engines were limited by the pistons inertia and it was required enormous energy to reverse direction. It was solved by Charles A Parsons in 1884, who replaced the piston with a steam turbine. Meanwhile, waterpower and turbine were much improved. The first successful coke smelt of iron went back to 1709 by Abraham Darby at Coalbrookdale. But this achievement was a lucky strike: Darbys coal was fortuitously suitable.

Powered machinery. The machine itself is made to do the work of the hand. The Middle Ages, were already familiar with a wide variety of machines (for grinding corn or malt, shaping metals, spinning yarn, fulling cloth, scrubbing fabrics, blowing furnances. Many of these were power-driven by water wheels. After 1500 these devices proliferated with some innovations. One of the most potent advances were - The introduction of the foot treadle. -The invention of the flyer -The achievement of unidirectional, continuous spinning and reeling These changes together quadrupled or better the spinners productivity. Another important step was to mechanize spinning by replicating the gestures of the hand spinner. That took decades of trial and error, from 1930 to the 1960s. When power spinning came to cotton, it turned industry upside down. In metallurgy, big gains came from substituting rotary for reciprocating motion. Was also very important the growing recourse to precision gauging and fixed settings, here the clock and watchmakers and instrument makers gave the lead. All these gains, plus the invention of machines to build machines, came together in the last third of the eighteenth century (a period of contagious novelty). Some of this merging stream of innovations may have been a lucky harvest, but no, contemporaries argued that the mechanization of cotton manufacture forced these other branches to modernize. And on and on, into a brave and not-so-brave world of higher incomes and cheaper commodities, unheard-of devices and materials, insatiable appetites, the world had slipped its moorings. It is not easy to put dates to this revolution, because of the decades of experiments that precede a given innovation. We can say that the core of the larger process lies in the story of textile manufacture. Rapid change began with the spinning jenny of James Hargreaves (1766) followed by Thomas Arkwrights water frame (1769) and Samuel Croptons mule (1779). In 1787 Edmund Cartwright built the first successful power loom, and in 1830 Richard Roberts, a machine builder, devised a self-acting mule to free spinning. This sequence of inventions took some sixty years and dominated completely the older technology. On this basis the British Industrial Revolution ran about a century, from 1770 to 1870, the entire interval between the old order and the establishment of a fairly stable relationship of the different aspects of industry under the new order. There is a question about why overall growth was not faster, the question is worth posing. The answer is that The Industrial Revolution as uneven and protacted in its effects, it left behind and

even destroyed old trades while building new, so it is impossible to replace older technologies overnight. This is why estimates for growth in those years are so sensitive to weights: give more importance to cotton and iron and growth seems faster; give less and it slows down. Anti-Revolutionists have a point about continuity. History abhors leaps. But continuity does not exclude change, even drastic change. It can be noted that British income per head doubled between 1780 and 1860, and then multiplied by six times between 1860 and 1990, here we have more than a simple continuation of older trends. It should be added that Britain was not the most impressive performer over this long period. The consequence of these advances was a growing gap between modern industrial countries and laggards, between rich and poor. For example in western Europe (excluding Britain) and eastern in income per hear was 15% in 1750, more than 20% in 1800, 64% in 1860 and in 1900 almost 80%. The same polarization took place between Europe and those countries that later came defined as Third World. The Paradox here is that The Industrial Revolution made the world closer together and more homogeneous, but the same revolution fragmented the globe by estranging winners and losers.

When is a Revolution not a Revolution?

The early students of the Industrial Revolution reflected the statistical limitations of that day. Around 1950, numerically minded economic historians began to construct measures of aggregate growth during the eighteenth and nineteenth centuries. , this was an extension of historical work where data were fuller and more reliable. It is said that as one went back in time before, the collection of numbers by government bureaus, it was a heroic exercise of imagination and ingenuity: figures collected at different times, for different purposes, on different bases, use of customary or nominal rather than market prices. This is not a surprise, these construction have varied with the builder and over the time. Now we place our trust in hard data provided they are sanctioned by theory. The crux of disagreement in this instance has been what has been presented by some as an unrevolutionary revolution. However impressive the growth of certain branches of production, the overall performance of the British economy during the century 1760-1860 that emerges from some recent numerical exercises has appeared modest: a few percent per year for industry; even less for aggregate product. But why believe the estimates? The methods employed are less than convincing. One recent exercise found that after adding up British productivity gains in few major branches (cotton, iron, transport) no room was left for further gains in the other branches (textiles, pottery, paper, machine building) And.. What to do? Simple, the author decided that most British industry experienced low levels of labor productivity and slow growth on it, there was no advance during 1780-1860. Imagination before experience, it is also wrong.

What is more, these estimates underestimate the gain implicit in quality improvements and new products, for instance, how measure the value of iron ships that last longer than wooden vessels and hold considerably more cargo? In the meantime, the new quantitative historians have announced the demolition of doctrine received, some of them have written histories of the period without using the term of industrial revolution. They leaped the conclusion that everyone has misread the British story. Britain, they would have us believe, never was an industrial nation, the most important economic development have been in agriculture and finance, while industrys role was subordinate. And some have argued that Britain changed little during these revolutionary years

The advantage of going round and round

The great advantage of rotary motion lies in its energetic efficiency: it does not require the moving part to change direction, it continues round and round. It is important to take into account the shift from reciprocating to rotary steam engines in steamships. Both merchant marines and navies were demanding larger and faster vessels. For Britain the definite decision to go over the new technology came with the building of Dreadnought, the first of the big-gun battleships. This was in 1905; the Royal Navy wanted a ship that could make 21 knots. Some of the naval officers were afraid to take chances with the new technology and there were many doubts about that. Phillip Watts, settle the issue. The result more than justified his hopes. The next step would be liquid fuel, created higher pressures and drove shafts and propellers faster. Incidentally, much of this improvement would not be captured by the measures of output and productivity. These would sum the cost of the new equipment, but not the change in the quality of work.

Chapter 14

Why Europe? Why Then?

Lara Rodrguez Valero

Why Industrial Revolution there and then? Two main questions:

a) Why and how did any country to change from conventional knowledge to this new mode of production? Why,
finally, in the 18th century when history shows other examples of mechanization like Sung China with ironmaking, medieval Europe with water and windmill techno and early modern Italy with silk throwing?

b) And why did Britain do it and no some other nation?

Answers:

a)

Because of the accumulation of knowledge and knowhow in Europe. In Europe we have continued accumulating, just the other way that other cultures. E.g. interruption of Islamic and Chinese intellectual and technological advance. There are three considerations to distinctive European sources of success: 1. the growing autonomy of intellectual inquiry 2. the development of unity in disunity in the form of a common,implicitly adversarial method, that is, the creation of a language of proof recognized and understood across national and cultural boundaries 3. the invention of invention, that is the routinization of research and its diffusion. (1) Autonomy: the flight for intellectual autonomy went back to medieval conflicts over the validity and authority of tradition. Roman Church was the Europes dominant view-defined by holy scripture and modified by the wisdom of the ancients. This system fostered a sense of omnicompetence and authority. Althought, new ideas in Europe was easily accepted by practical usefulness and protected by rulers who sought to gain by novelty an advantage over rivals. So in Europe came to cultivate a vogue for the new and a sense of progress thanks to limitation of the Church by the competing pretensions of secular authorities and the gathering fires of religious dissent. Moreover, the shattering of authority came with the widening of personal experience. The ancients, for example, thought no one could live in the tropics: TOO HOT! But Portuguese navigators showed the error such preconceptions. Garcia dOrta (1563-cited in Goodman Scientific Revolution), physician to the Portuguese viceroys wrote the testimony of an eye-witness is worth more than that of all the physicians and all the fathers of medicine who wrote on false information. (2) Method: seeing alone was not enough. One must understand and give nonmagical explanations for natural phenomena. Early, searchers came to see mathematics as immensely valuable fro specifying observations and formulating results. The marriage of observation and precise description, in turn,

made possible replication and verification. Such an approach opened the way to purposeful experiments: instead of waiting to see something happen, make it happen. So, the new combination of perception with measurement, verification and mathematized deduction was the key to knowing. Although, to experiments they first had to invent research strategies and instruments of observation and measurement like telescope and microscope (c. 1600), nonius to give navigational readings to a fraction of a degree (Pedro Nuez), the invention of micrometer (Gascoigne, 1639), pendulum clock (Huygens, 1657) to develop the time measurement, Napiers logarithms to calculate faster and better and new calculus from Newton or von Leibniz (3) Routinization: the widely dispersed population of intellectuals, working in different lands, using different vernaculars and yet a community. What happened in one place was quickly known everywhere else partly thanks to a common language of learning: Latin, partly to cooperation and partly to a development of courier and mail services. In 17th century, these links were institutionalized with secretaries, meetings and periodical journals. Then, fame was the spur to show and tell to aficionados since these gentlemen and ladies were witnesses to achievement. So, the role of the printing press and movable type was crucial; also the shift from Latin to vernacular, the language of the larger public. Scientific method and knowledge paid off in applications in power technology but the great invention was the conversion of heat energy into work by means of steam. No technique drew so closely on experiment-a long inquiry into vacuums and air pressure that began in the 16th century and reached fruition in the late 17th in the work of Guericke, Toricelli, Boyle, Papin, Carnot who described the laws of thermodynamics and finally Watt who made the point separating the condenser. All of this took time, and that is why, in the long, the Industrial Revolution had to wait. The technological basis had not yet been laid in other periods. The streams of progress had to come together. These advances enhanced the advantatge that techno gave to Europe. But technology was not enough. What was needed was technological change of mighty leverage, the kind that would resonate through market and change the distribution of resources.

b) In 14th century Italy found ways to throw silk and its industry prospered for centuries, to the envy of
the other countries. Then French knew the secret in 1670 and Dutch at about the same time. Then Lombe in 1716, brought the technique to England and built a large waterpowered mill. But, silk was a costly raw material with a small and affluent clientele. So, it was not the model for a new mode of production. Wool and cotton were something else. Wool was much the more important in Europe, and cottons role in the Industrial Revolution was in some ways an accident. The British calico acts (1700 and 1721), which prohibited the import and even wearing of east indian prints, were intended to protect the native woolen and linen manufacturers, but inadvertently sheltered the still infant cotton industry. The first attempts to build spinning machines aimed at wool. But, when wool fibers proved troublesome and cotton docile, inventors turned their attention to the easier material. Also, the encrustation of the woolen industry and the vested power of its workforce impeded change. Cotton, growing fast and technology was developed. Why the interest in mechanization? Primary because the growth of the textile industry was beginning to outstrip labor supply. Meanwhile, trying to meet demand, employers raised wages, that is, they increased the price they paid for finished work. The higher income permitted workers more time for

leisure, and the supply of work actually diminished. Manufacturers came to wish for higher food prices. Perhaps a rise in the cost of living would compel spinners and weavers to their task. Workers were contractors as well as wage labours, and this dual status gave them opportunity for self-enrichment at the expense of the putter-out. Spinners and weavers would take materials from one merchant and then sell the finished article to a competitor. They also learned to set some of the raw material aside for their own use. Manufacturers turned to large workshops where spinners and weavers would have to turn up on time and work under supervision but, that was no small matters since cottage industry had great advantages for the manufacturer: low cost of entry and low overhead. Of this form, it took power machinery to make the factory competitive. Power made to drive larger and more efficient machines, thus underselling the cottage product by ever bigger margins. They find their labor force in children, women and convict labour because those could not say no. So was born what Marx called Modern Industry fruit of marriage between machines and power!

Chapter 15: Britain and the Others This chapter is about why the Industrial Revolution first took place in Britain, and not in one of the other European countries? On one level, the question is not hard to answer. By the early 18th century, Britain was well ahead in cottage manufacture, seedbed of growth; in recourse to fossil fuel; in the technology of those crucial branches that would make the core of the Industrial Revolution: textiles, iron, energy and power. Furthermore, Britain had an efficient commercial agriculture and transport. The advantages of increasing efficiency in agriculture are obvious: rising productivity in food production releases labor for other activities (industrial manufacture, services) and this burgeoning workforce needs ever more food. So one can hardly exaggerate the contribution of agricultural improvement to Britains industrialization: Middle Ages: precocious emancipation of serfs and the commercialization of both cultivation and 18th century: the shift from the collective constraints of open fields to the freedom of concentrated, fenced or hedged holdings. Unlike most other countries, then, British agriculture was not conservatisms power base, it was a force for economic change. Unlike the Continental countries, mineral resources belonged to the owner of the land, not to the crown more opportunity for enterprise. At the same time, the British were making major gains in land and water transport: new turnpike roads and canals, intended primarily to serve industry and mining, opened the way to valuable resources, linked production to markets, facilitated the division of labor. Other European countries were trying to do the same, but nowhere were these improvements so widespread and effective as in Britain. For a simple reason: nowhere else were roads and canals typically the work of private enterprise, hence responsive to need (rather than to prestige and military concerns) and profitable users. The early technological superiority of Britain in these key branches was itself an achievement: the result of work, ingenuity, imagination and enterprise. The ideal growth-and-development society would be one that: - Knew how to operate, manage and build the instruments of production and to create, adapt and master new techniques on the technological frontier - Was able to impart this knowledge and know-how to the young, whether by formal education or apprenticeship training - Chose people for jobs by competence and relative merit; promoted and demoted on the basis of performance - Afforded opportunity to individual or collective enterprise; encourage initiative, competition and emulation - Allowed people to enjoy and employ the fruits of their labor and enterprise These standards imply corollaries: gender equality, no discrimination on the basis of irrelevant criteria (race, sex, religion, etc.) and a preference for scientific rationality over irrationality. such a society would also possess the kind of political and social institutions that favor the achievement of these larger goals; that would for example: secure rights of private property and personal liberty, enforce rights of contract (explicit and implicit), provide a responsive, honest moderate, efficient and ungreedy government. The ideal society would also be honest and enforced by law. But ideally, the law would not be needed. No society on earth has ever matched this ideal.

The most efficient, development-oriented societies of today, say those of East Asia and the industrial nations of the West, are marred by all manner of corruption, failures of government, private rentseeking. This paradigm nevertheless highlights the direction of history. Britain had the early advantage of being a nation: a self-conscious, self-aware unit characterized by common identity and loyalty and by equality of civil status the whole is more than the sum of the parts. Moreover, Britain was not just any nation. This was a precociously modern, industrial nation. The salient characteristic of such a society is the ability to transform itself and adapt to new things and ways, so that the content of modern and industrial is always changing one key area of change: the increasing freedom and security of people. To all of these gains one can oppose exceptions: England was far from perfect. It had its poor many more of them then of the rich, it knew abuses of privilege as well as enjoyment of freedom, distinctions of class and status and concentrations of wealth and power. But everything is relative and by comparison with populations across the Channel: Englishmen were free and fortunate. The contribution of high consumption to technological progress struck contemporaries, and more of them as the British advance grew. Without taking a course in Keynesian economics, French merchants understood that mechanization made for high wages, that high wages made for increased demand for manufactures and that effective demand made for increase prosperity. The British were in the 18th century the worlds leading producers and consumers of timekeepers, in the country as in the city. They made them well and pricey. As a consequence, Britain started to work with schedules to the minute, widely advertised: closely calculated arrival times and transfers, drivers checked by sealed clocks and speed over comfort. Note here the contrast with France where they preferred economy over time and quite correctly found that speed clashed with comfort. Why no industrial revolution in India? After all, India had the worlds premier cotton industry in the 17th and 18th centuries, unbeatable for quality, variety and cost. They had a huge market (domestic as well in Southeast Asia and China). Why, then, was there no interest in easing these difficulties by substituting capital (machines) for labor? Indian historians have tended to overlook or reject this omission. Some, especially Indian nationalists, blame it on the Europeans, and most particularly the British. India has been prosperous and resourceful until these intruders burst on the scene, mixing into Indian politics and fomenting conflict. One useful way to approach the problem is to ask, cui bono, who benefits? Who would have gained from mechanization and transformation? Three groups or interests were involved: the workers (spinners and weavers), the middleman, who typically advanced capital to the weavers against the promise of delivery; and the European traders and chartered companies, who wanted to buy for both the country (intra-Asian) trade and their European clientele. It would be unreasonable to expect capital-using technological innovations from the first group. If there was to be a move to technological change, then, it would have to come from the Indian middlemen, who had both interest and, some of them, means; or form the European chartered companies. Yet neither budged. Why not? Some explanations have been based on an implicit law of conservation of energy. The supply of labor was elastic, so it was easier and more economical to hire additional workers, from among untouchables and poor women for spinning, from agricultural laborers for weaving, than to look to change in technology, and that may well be the whole of the story.

Hardware (instruments, equipment, machines) was another matter. This is what it took to make an industrial revolution, and India was not ready. In India it is seldom that an attempt is made to accomplish anything by machinery that can be performed by human labor. One reason for this general indifference: no one seems to have passionate interest in simplifying and easing tasks. Indifference, moreover, was promoted by segmentation: it was not the cloth merchants job to find, assemble, and deliver the raw materials. He advanced capital, and it was up to weaver and spinner to do the rest. This was significantly different from putting out as practiced in Europe, where the merchant took part in the production process. Finally, where were Indias ideas of mechanization to come from? Indian society did know technological change: the most important in the textile manufacture came with the substitution of the wheel for the distaff. But innovation took place within the conventional manual context, and a big conceptual and social difference separates machines and hand tools. Worse yet, Indian craftsmen avoided using iron, and iron (and steel) is indispensable to precision work. This was not a ferruginous society. And still in the 19th century: the British engineers who built the Indian railways understood that Indian labor, cheap as it was, would move earth and rock by hand; but they also took for granted that the Indians would use wheelbarrows. Not at all: the Indians were used to moving heavy burdens in a basket on their head and refused to change. We even have one report of Indian laborers placing barrows on their head rather than wheel them. Presumably such resistance reflected desire to spread the work and increase employment, especially to woman and children. All the same, European workers, very different, would have been happy to gain higher pay through greater productivity; to say nothing of easier labor.

Chapter 16. Pursuit of Albion Since the Industrial Revolution, Britain was the economic leader in the world and it took the quickest of the European followers more than a century to catch up. According to the classical economic theory, it really made no difference to other countries that Britain had moved ahead in industrial technology and productivity. Each nation, after all, could and would follow its own comparative advantage, could and would buy what it needed on the most favorable terms. Not everyone was happy with Britain as superpower and especially the French (with their eternal rivalry with Great Britain) were not happy about it. But still even the French had to admit that Britain was the superpower at that moment and that they had important boundaries like rules of equity. Other countries tried to copy and learn the British techniques but they were not ready. There was not real pattern in the catch up of the following countries. So there was no uniformity of sequence, no single way, no law of development. Each of the following countries, however much influenced by the British experienceto some extent inspired, to some extent frightened or appalleddeveloped its own path to modernity. When we talk about the term machine readiness the highest grades go to the countries in the north west of Europe, and the lowest to the countries more in the east. "To move east was likewise to go back in time, or in levels of economic development; in eastern Europe and Russia the industrial centers were oases in a sea of peasant sloth and bureaucratic inertia." The medieval legacy; 1: The status of the peasantry In the middle Ages, most peasants had been reduced (or raised, for slaves) to a condition of bondage or serfdom. By 1500 there were almost no serfs anymore in this old form, the serfs had to pay money rents now. In this area England was also walking in front, the land was owned by free tenants. The diversity of the serfdom in Germany varied because there was not one ruler in the country. Mobility in some parts was high in others extremely low. The other great barrier to mobility in German lands was the division of society into status groups (Stande) of reserved vocation and privilege. In the east this medieval, old ways held on much longer. In the east (mostly Russia) land was far more abundant than people so lords had to make strict rules about their serfs because they could easily start for themselves. These deepened the social and political gulf between West and Eastthe one moving steadily toward greater freedom, the other to petrified servitude. In the long run this eastern system of forced labor failed 2: The organization of manufacture A second medieval legacy was the organization of industry into guilds or corporations. These were bodies of masters and workers, organized perhaps for social or fraternal reasons, but quickly transformed into business associations and collective monopolies. Guilds were to be found all over the worldin Europe, but also in Islamic lands, India, China, and Japan. The economic objectives were to control entry, typically via obligatory apprenticeship and limitations on mastership; to uphold quality standards; and to restrict competition both within and without. In Italy, France and Germany (actually almost all the western countries) these guilds were not the most economical efficient. Moral criteria were more important than commercial ones. From 1859 it was finally definitive in Habsburg, established freedom of enterprises. The move was contagious and spread through Europe. 3: Boundaries and barriers

A third major medieval legacy in restraint of trade was the extraordinarily complex array of interferences with transport and travel: river and port tolls; road fees; entrance duties at city gates; customs barriers following one upon the other because of the lacework of political boundaries, including enclaves and exclaves; a multiplicity of exemptions and franchises, honored as much in the breach as in the observance. Tolls did not pay for improvements and maintenance, but were simply extortion. The whole system around the tolls was set up to encourage bribes and the people who were in charge of these tolls were not eager to give up their gains. The growing trade was actually an incentive to raise the tariffs. From the 17th century the goal of the European monarchies worked against the high toll tariffs and tried to eliminate them. Here again, the British had not much to do with these tolls, since the 15th century their local tolls were disappeared and because of this they had the largest national market in Europe. Here again, France needed the revolution to make an end to this tolls and Germany was again so divided that it took a while before they cleared the way. Russia had no problem with tolls but with the nature; cold, snow and ice. Scandinavia catched up really quickly. Scandinavia built on free enterprise and quick response, on the export of staples to more advanced industrial countries, on the investment of these gains in more diversified production. Compare the late industrial development of Mediterranean Europe, in particular of Italy, Spain, and Portugal. All of these were hurt by religious and intellectual intolerance, and all were plagued by political instability. Some region in those countries did well (Catalonia / Lombardy). As mentioned earlier Russia did not well and the people there were used to poverty. But Russia wanted to be a world power, and to become one you need industry. They sold to the national market, exported little or nothing. They were simply not competitive, especially not during the Soviet years. Even worse than Russia were the Balkan lands. Leftist political economists and economic historians like such explanations. They think in terms of core and periphery: the rich center vs. the surrounding dependencies. But that is not the relevant metaphor or image: Europe's development gradient ran from west to east and north to south, from educated to illiterate populations, from representative to despotic institutions, from equality to hierarchy, and so on. It was not resources or money that made the difference; nor mistreatment by outsiders. It was what lay insideculture, values, initiative. These peoples came to have freedom enough. They just didn't know what to do with it.

Chapter 17 You need money to make money

The chapter elaborates on four sources of financing for economic development in a country.

How Britain did it? First slow and easy, training labour force and accumulating capital as it went. Then everything was small and cheap. It could be financed privately and small credits. Later it became bigger - Machines, buildings, transport facilities. The way to finance was mostly internally thanks to good overall performance of British entrepreneurs and economy. Alternatives, like a chartered joint-stock company with limited liability was an option, but still there was no big bank to provide significant long-term financing. Britain was ahead of the others. Continental Europe due to revolutions and wars from 1789 to 1815 limited accumulation of capital, and resources were going trhough cycle of construction and desctruction. Big task for the others to catch up, but then the gains are bigger you skip the mistakes, but at the same time lost lagging also costs so its important to start asap The rest wanted to catch up, but needed capital for up-to-date machine, factories and engines an railways, canals, roads and bridges. Money was needed. Where from? 1) Personal investments limited option, depended a lot on connections and politics, fell short of an industrial revolution 2) Financial intermediaries and private credit

a network of private banks (personal firms and partnerships) was in place, collectively rich and capable of financing medium and long term investments in industry and choosing the customers notr so much by price and terms as by probity, resourcefulness, above all connections (typically religious and cultural affinities); Any effort to understand the Industrial Revolution in Europe before the age of public joint-stock companies and stock exchanges must take family and personal connections into account. - but the collective danger (in bad times once on starts calling the loans, the system weakens as a whole) led to establishment of new financial intermediary the joint-stock investment (development) bank (credit mobilier in France) sponsoring more risky, long-term investments

 e.g. Societe Generale (e.g. railways in France) - germany universal banks -> development banks combined investment, commercial and deposit banking 3) Government assistance How government canhelp if the country is too poor to finance the banks neede d to finance the industry? Either promoting financial intermediaries or by direct investment and participation. - britian all private, even canal and railways; indirectly through defending from outside competition (tariff protection, discriminatory shipping rules),also paid associated security cost of private ventures and adventurers in distant seas - France the old monarchy assisted new industries and technologies by subsidy and stipend, fiscal exemption and privilege (unpaid loans); the French revolution reinforced the role of the state, war made production an urgent priority-aid to industry was based on transfer of wealth (e.g. confiscated church proprieties) ;after the revolution (1798 on) the Bonapartists closed the market to British imports, which was later removed after france being defeated in 1815; no further direct assistance after 1830 the state wanted the private to build the railroads and refused to purchase shares, but agreed to pay for the land and roadbed; until 1848 the French state paid around 25% of the cost of railway lines - germany political fragmentation, some subsidised, some - US it varied from one state to another (usually land loans along the railroad) - Russia state driven developmet e.g. the state assisted banking and industry, the railroad were built, owned and operated by the state; modernisation from above rested on forced labour; other industries supported included mining and metallurgy, encouraging formation of huge enterprises; once state-funded industrialisation made enough progress, the accumulated capital financed investment banks comparable in function and strategy to the german ones 4) International capital flows

- it was in place across Europe, eg. England investing in French railways, France and Belgium in Prussian ironworks and Austrian banks; Germany in Italian banks and Balkan railways; everybody in Russian mining and industry (later confiscated by the Bolshevik revolution)

18. The Wealth of Knowledge Europe was characterized by innovation of new technologies in the 18th and 19th century, whereas the British were ahead of other countries in the beginning. They had for example melt-making skills to make armament and machinery or chronometry which is the key to superior navigation. That is why countries (especially the French) sent out explorers to mainly the British to hire away skilled craftsmen. These technology agents were aware that if they just bring home blueprints and explicit instructions of new technologies from abroad, they cannot be copied. They lacked the tacit knowledge that can only be gained by learning by doing. Thus, a flow of technological talent took place. In order to protect ones own countrys knowledge, laws were passed that prohibited emigration of machinery and certain skilled craftsmen. But such constraints only delayed the diffusion of knowledge. First, surveillance was not properly developed. Secondly, temptation was high because these workmen were drawn by wages that ran twice and three times higher than at home (even though the wage levels in Britain were ordinarily considerably higher than those abroad, but the experienced craftsmen were scarce commodities in follower countries). But in the long run, were universities of science and technology more important for following countries than stealing away talent. In the beginning, the French were in the led (Germany directly behind) when it came to educate skilled technicians and supervisor personnel. Graduates learnt the latest metallurgic techniques from the British, led in building the French railways and ran Frances biggest high-tech corporations. The first Industrial Revolution was driven by the British Learning by Doing strategy where technology improvements were incremental (little steps). But from the late 18th century onward exploration went beyond the lessons of sensory experience. The new directions of technology innovation found their biggest return in two areas, chemical (pharmaceuticals, development of plastics, ) and electricity (use of electricity as a form of energy: generators and dynamos). The 2nd Industrial Revolution is determined by the role of formally transmitted knowledge (mainly due to universities). That is why the British fell behind and the Germans took over the lead in technology development. Two further technologies that originated due to the 2nd Industrial Revolution: 1. Steel: It is easy to make steel, but it is difficult to make good steel. Crucible steel is steel heated up to liquid to reach homogeneity. It was the best steel and made stronger armaments and more precise tools. The English and Germans were able to produce it but the French experienced an economic backdrop because of not being able to produce it. 2. A British (William Henry Perkin) explored artificial dye to make color clothes possible. The new colors stimulated demand for fashionable fabrics. But since the British chemical industry was not developed, it was the Germans (had the furthest developed chemical industry) that made use out of it and by 1900 it made 80 to 90% of the worlds artificial dyestuff. Thus, in Germany, big corporations arose and flourished. From that time on, it is the innovation CLUSTERS not the genius alone that drives innovation! By WW1 Germany had left the rest of the world far behind in modern chemistry and even the confiscation of German industrial patents during war did not immediately benefit competitors

overseas. The biggest American firms did not know what to do with them or how to make them work. So in the 1920s they hired away German chemist Back to Industrial espionage.

Chapter 19. Frontiers Author: Landes GDP per person USA Mexico
* In 1985 dollars

1700 $490 $450

1800 $807 $450

1989 $18,300 $3,500

The biggest frontier was the Americas, but also Australia and South Africa. These lands were not empty when the Europeans came. Indigenous people were farming and raising livestock. The density of the settlements varied, dictating the opportunity and circumstances of invasion. Northern latitudes that became the USA and Canada were not densely settled and gave way for superior organization. Staple Theory: One starts with earnings from exporting primary products, which raises incomes at home, which in turn promotes a market for manufacturing while financing the development of an industrial sector and more balanced economy. But just because an economy earns money from exports doesnt mean they use it for the right activities. Americas is a case study in the strengths and weaknesses of the staple theory. On one hand there is the USA and Canada, (strong, developed economies) and on the other hand, fragments of the old Spanish empire. In the beginning these southern countries were richer and far more populated. Today, they lag far behind. The divergence of North America (ex-British) and Latin America (ex-Spanish and Portuguese) needs multiple explanations. First, is resources. In the USA the land was fertile, good climate for growing crucial raw materials (cotton), Rich deposits of wood, coal, copper, and petroleum. US was the only country in proximity to have both iron and coal. Also, the US had convenient lines of communication: a large coastline with good harbors, large rivers, and wide plains. By comparison, Mexico is puzzled with mountains, plateaus, and deserts. One could argue that the Americas development was predetermined by nature. In the USA quasi-free land and scarce labor led to high wages. Americas society of smallholders and relatively well paid workers was a seedbed of democracy and enterprise. Good workers were the envy of the neighborhood and heroes of the community. Meanwhile high wages increased the incentive to substitute capital for labor, machines for man. This partially led to the industrial revolution hitting hard in America. Colonists imported and copied models of European devices and machines, and skilled machinists and craftsmen were invited, or sought on their own account because of the higher wages. Britain was the most innovative society at the time and British people felt at home in a society speaking the same language. The northeast was the center of manufacturing and steel making and thus the south became heavily dependent on their technologies even after the civil war.

A recent study shows America well ahead of Britain in the productivity of manufacturing by 1820. Americas most decisive innovation was its manufacturing process, which came about as response to 1. a market free from local and regional preferences and 2. the scarcity of labor relative to materials. These led to standardization and processes to enhance productivity. Small machines were created. Then machine shops were created to maintain and build the equipment. Then these shops took to the making of other kinds of machines like locomotive. Unlike Europe, America didnt resist deskilling and routinizing manufacturing. The American system set standards of productivity for the rest of the industrial world. Each technology became a stepping stone to others. In 1870, the United States had the largest economy in the world and its best days still lay ahead. The American system had created insatiable consumerism. Mass consumption made mass production feasible and profitable; and vice versa.

Ch. 27 Winners and

France The wars of 1914 and 1945 were times in history that crippled the economies of many nations. France-1948 for example, after decades of economic standstill followed by war and occupation, was tired of all the poverty (few cars, no street lights, little electricity, little hot water) they were experiencing. During the thirty wonderful years from 1945 to 1975 France moved in with enthusiasm. After basically having nothing thy started new construction, new industrial installation, and new road networks which was an opportunity to install up-to-date facilities, to electrify and mechanize and motorize. In 1953 only 8% of French workers owned cars but 14 years later half of them did. High levels of posts, telegraphs, and telephones usage caused demand for France Telecom to be created as a first step to autonomy, initiative, and market responsiveness. France developed modernized infrastructure that led to railroads, roads, communication, public housing, and equipment. They even became world leaders in some of these areas. France remained the master of quality, making articles set above and apart by taste and beauty. By the 1990s France had one of the highest standards of living in the world.

Germany The German comeback was astonishing after the heavy war damage they undertook. In 1945, they had stopped taking baths due to the lack of hot water and soap. Western powers need and wanted Germany back on their feat so they offered substantial aid to their defeated enemies. In 1945 the German currency was worthless but in 1948 the new Germany issued a new currency, exchanging 1deutsche Mark for 10 Reichsmark. Price controls came off and hoarded stocks came out of hiding. This caused the economy to take off. After twenty years, the Deutsche Mark became one of the strongest currencies in Europe. New plants sprang up everywhere for the Germans and goods sold everywhere.

Japan The Japanese, like the Germans built their recovery on hard work, education, and determination. Prewar Japan had been convinced that control of raw materials was a signal of power and wealth and they went to war to secure this power. After they lost everything they found out that raw materials can be delivered on competitive terms anywhere in the world as long as you have the money to buy them. Japan learned that they had more to gain by buying than grabbing. Their quickness to learn, produce, and grow, stunned their competitors. Japan was good at copying object through reverse engineering, watching and asking, and photographing a tape-recording production in western lands. Their greatest success came in automobile industry. They also exceled in optical devices, precision machinery and instruments, robotics and electronics.

It was the Japanese ethic of collective responsibility that made for effective teamwork, sharing of ideas between labor and management, attention to detail so as to eliminate error. Japan banned entry of foreign investment in their country following earlier European and American examples to protect yourself until youre strong enough to not have to worry about competition. Once Japan was free to set tariffs, it set them high enough to shelter home industry. Items they could produce on their own they did but they still allowed imported specialty items such as Scotch whisky, French cognac, Vuitton luggage, and rolex watches. Even though people questioned Japans understanding of comparative advantage, they argued that anyone can buy, but not everyone can make. Substantial state involvement higher support than in other countries, advanced infrastructure, focus on foreign trades, state-owned pilot factories BUT traditional sectors still important. Zaibatsu financial and industrial conglomerates headed by a bank that controlled the Japanese economy national and foreign policies (stock exchange, mining, chemical, metal industries, machinery and equipment market...)

Little Tigers Behind the Japanese comes the little tigers: Taiwan, Korea, Singapore, and Hong-Kong. No group has grown more rapidly and more consistently of the past 35 years. In all four the primary assets have been a work ethic that yields high product for low wages and an exceptional manual dexterity -obratnostuseful in manual-assembly (coordination from eating with chopsticks). The availability of fine-skilled, low wage labor has made all of these countries attractive to advanced enterprises, especially from places with over priced currencies.

Landes: Chapter 28, Losers Middle East has great potential and large resources, but political, social and cultural institutions do not ensure enterprise security or free technological innovation. Gender bias and cultural attitudes also inhibit industry, as well as promote under- or unemployment. There has been some well meaning government, such as Egypt, who invested in cotton in the 1960s, but the timing was poor, as the yarn was of low quality when the world demanded higher quality. Some nations also saw military might as a drive of prosperity, such as the Iraqui invasion of Kuwait. Recipes for improvement: structural adjustment policies, like competitive exchange rates, low/no budget deficit, low/no trade barriers, and market freedom. Problems: how do you eliminate budget deficits when half the workforce is employed inefficiently by the state? The change would be serious, and could lead to political instability. In sum, structures and institutions are essential.

Latin America: vested interests in agriculture grew with their focus on pastoralism, and this led to a reactionary elitist system, who dominated much more discontented poor. This stifled the development of industry as a result, and slowed reform. Policy here was built upon import substitution: this depended on protectionism. With the US and Japan, this worked when the industries were energetic and operated at world-level standards. In Latin America few industries reached world standard, and most industries need the protectionism to survive. As protectionism fell with structural adjustment, many industries collapsed or had to be propped up. Measures like trade and money manipulation, import barriers, exchange rate manipulation, and borrowing all worked for a while, but had a heavy price inflation, transaction costs, low FDI. Also, currency collapse, like the Peso crisis of 1994-95, could be disastrous, and even led to further borrowing. Borrowing became condition on adjustment, a series of challenging policy changes.

Soviet Bloc: the logic of the soviet ideal was admirable, but the performance was not. While the Soviet Union was able to mobilise resources for large projects, general mismanagement was rife. Arrogance and gigantism characterised the soviet system. Furthermore, performance was exaggerated, and produced goods were not of international quality. Corruption and incompetence were widespread. One might order a car of low quality, and wait for a year or more for it to be delivery. Under communism, one worked for a promise of goods tomorrow, and yet they may not arrive the system generated poverty, in buildings, and through their treatment of people. Example: the Aral Sea, a poisoned, dried up cesspit built upon soviet misuse of a limited water resource for cotton production, where the ecology could only maintain a limited water resource. The mismanaged of Chernobyl also illustrates this: restoration funds were siphoned off, containment of the crisis was poor, and the people and the IAEA were told the cleanup was a success. The true extent of the mismanagement was only found after communism.

Sub-Saharan Africa: Bad government, unexpected and poorly divided sovereignty, backwards technology, inadequate education, and poor climate were all among huge structural issues which limit development in this region. GDP growth has been minimal, even negative. Even with large oil reserves, Nigeria is now a third of the GDP size of Indonesia, a country it was larger than in 1965. The 1960s were a time of great hope for Africa: growth was 6-11% in Kenya, Congo, etc. However, some of this was from more transactions being counted, and in the end, appearance of growth soon disappeared. Freedom was not the boost they may have hoped for. Why? Poor food security and self sufficiency meant that many were starving, and there was an anarchic series of wars between states and rebel groups. Even with the land at its best, and the farmers squeezed for all they can give, food still had to imported. From 1960-1984, food output could not keep up with population, and imported food was much cheaper than local. Population growth was high due to cultural preference for large families, and mens unwillingness to use condoms, in societies where women have limited rights compared to men. Colonial Africa: Attempts by the colonial powers to rule were no better, and were blighted by other motives. An example is a plan of producing margarine from peanuts grown in Tanganyika for British domestic use, with only a secondary desire for African development. This peanut scheme was poorly conceived, with little consideration of local ecology, and with no engineering expert on hand. Local women suffered at trying to raise these peanuts, while machinery broke down with little hope for replacement parts. Once the land was cleared, it becomes solid as rock. The overall plan was impractical, and ruined the local economy, as British employees bought out local food and imported liquor and created a demand for prostitutes. The French saw similar problems with cotton in Mali, where they uprooted locals from their land to make space for French producers. Post-colonial Africa: many projects were driven by a desire to spend money they did not have. The new rulers were often put in place undemocratically, and attempts at democracy were slow to stick. The bureaucracy grew to make jobs for the rulers friends, and foreign aid ended up in hidden foreign bank accounts. Zaire is perhaps the worst example we could pick. Western interest was only in getting resources out, and the ruler Mobuto Sese Seko grew incredibly wealthy on this resource extraction. There were a few cities where he had control, but much of the country was accessible only by air, as investments in roads were nonexistent. On the east side, the country was being invaded by rebels supporting overthrow of Mobutos government. Refugees were caught in between the two sides. Benin had a Marxist/Leninist government, which in theory country peanut and palm oil production. However, the farmers sold products in parallel channels for higher profits. Adjustment in Africa: what can Africa do to see the same growth as East Asian successes? Adjustment was pushed on many African nations (as listed above) , but fairly ineffectively; indeed, the era of structural adjustment in the 1980s saw the worst growth records in recent African history. UN/IMF plan to raise $25 billion to help invest in Africa. However, this would only pay one year of African debts (total is about $313 billion). In general, better policies are all we can hope for. However, behind bad policies is bad government (or none) and corruption in many cases.

Algeria: Case Study. Africas first Japan was the claim by the Algerian president in 1970, a time when Algeria had high oil reserves and the largest industrial base on the continent. The socialist country promoted investment in heavy industry as the way to go, even where they didnt have comparative advantages in those areas. Industry was state owned, with associated problems of overemployment, inefficiency, nonmarket prices and fraudulent records; as a result, gradual collapse set in. Output fell by 1.9% per year 1980-1992. At the same time, the government was importing consumer durables. Population was also rising greatly, helped by a government desire for big families to make the country more powerful. This rise was unprepared for (food supplies and education in particular). Oil money was not as lucrative as the country hoped, especially as two thirds of revenue went to cover interest payments on debt. Like many struggling countries, it had to finance debt with more debt. In the 1990s, the IMF offered structural adjustment as a solution; they quickly accepted. However, the state socialism is a symbol, and a commitment, one that they would not let go of easily. Also, the country was under civil war from 1992 to 2002, fighting against islamist rebels. Many people were killed, including many women, trained jurists and technicians, as well as intellectual leaders. This also put of many foreigners from visiting. Realism Dependency theory, developed in Latin America, was a movement throughout the 1960s-80s. It was anticapitalist and anticolonialism, and connected with the ideals of a socialist economic system, built on providing for the needs of the people as an opposite to a technocratic mass production society. In part, this was a reason for Latin American protectionism. Over time, dependency theory became discredited as the theory of choice for this region, as neoliberalism and structural adjustment became imposed on these regions as condition of IMF loan support or write off. In essence, if a country wanted to escape runaway inflation and rampant debt, it had to adopt the structural adjustment policies as listed above. However, Brazilian economists like Cardoso (1993- became minister of finance) also realised that the old system was flawed, and the old hostility to western influence began to decline. Cadosa became president in 1995, in part due to his creation of the real currency, which was much stronger than the old; however, the currency did not heal all problems, and the country saw slow, even negative, growth post 1995.

Chapter 29

How did we get here? Where are we going?

Lara Rodrguez Valero

From a world of great and little empires, more or less equal in wealth and power, we have become a world of nation-states, some far richer and stronger than others. From working with modest if ingenious tools and techniques, we have become masters of great machines and invisible forces. Putting aside magic and superstition, we growing corpus of scientific knowledge that generates a continuing flow of useful applications.

We suffer from the asymmetry between our knowledge of nature and our knowledge of man. So, still few people would prefer a return to earlier times. Those who secede from the rich material world to find spiritual renewal in nature, but they take books, eyeglasses and manufacturing clothes. The reasons for this reaction, often couched in preferences for feeling over knowing.

Until very recently, the most people look upon as progress in Western civilization: the knowledge, the techniques, the political and social ideologies. This dissemination flows partly from Western dominion, for knowledge and know-how equal power. Today, the very account of this story is seen as an aggression due to Eurocentric global history. It is intended as a Western domination justification by pointing the European superiority. It is carrying to Europhobia in recent discussions of the age of voyages and discovery. E.g. Chinese told that might have found Americas. Some globalists think to divide history both European and nonEuropean by including what did not happen like failed struggles as well as successful ones are all part of history but it will be problematize the fact. So they prefer to understand and explain the record to help us understand today and anticipate tomorrow. Economists now opine that the world will continue to get richer, that the poor will catch up with the rich, that islands of growth will become continents, that knowledge can solve problems and overcome material and social difficulties along the way. Although, economists have not always felt this way. E.g. Malthus with his press of people on food supply or Ricardo with his stationary state as land and rent soaked up the surplus or Jevons with his bogey of fuel exhaustion. Nowadays, we should attend to the serious and irremediable damage we are inflicting on the environment. This threat to well-being ties directly to economic development, for waste, pollution and environmental damage grow with wealth and output. So, rich see the peril and they are doing something towards their wealth permits and good ecological advice to new industrializers. However, why should the latecomers have to be careful? Developing countries are ready to pay the environmental price, disease and death down the road. But rich countries have much more to lose.

If we learn anything from the history of economic development, it is that culture makes all the difference. Witness the enterprise of expatriate minorities e.g. Jews throughout much of Europe. It has a sulfuric odor of race and inheritance, an air of immutability. Some economists recognize that this is not true and indeed salute examples of cultural change for the better while deploring changes for the worse. But if culture does so much, why does it not work consistently? An economist, master of political-economic therapies says that culture does not enable to predict outcomes since one could have foreseen the postwar economic success of Japan and Germany by taking account of culture. Anyway, culture does not stand alone. Monocausal explanations will not work. Culture and economic performance are linked, changes in one will work back on the other. E.g. Russian case where 75 years of anti-markets and antiprofit have planted and frozen antienterpreneurial attitudes.

Convergence and experience will be the watchword of the day, the promise of eventual equality. The numbers for the small set of advanced industrial countries seem to confirm convergence, but individual countries do not always stay with the pack. What will happen in a future? Advanced and backward, rich and poor do not seem to be growing closer. Optimistic number crunchers point to overall mini convergence, but they put Asia with the poor, and only the special success of East Asia yields this optical illusion. Africa and the Middle East are still going nowhere. Latin America is doing a mixed job, mixed over time and space. The former Socialist bloc is in transition some countries are doing well, others swing in high uncertaintly.

Do globalization and convergence signal the end of national striving? Does the very idea of international economic competitiveness no longer make sense? The economist Krugman would say that the views of those who call for a national economics are based on a failure to understand even the simpliest economic facts and concepts. We are talking here of 2 goals power and weath and 2 ideals, distributive justice and impersonal efficiency.

State intervention is like the little girl who had a little curl right in the middle of the forehead: when she was good, she was very good; and when she was bad, she was horrid. So, the state can be very useful as the servant of business. Officials have always been liable to bribes, but the growth of private salaries in expanding economies has inflated this venalization of government: men of money can buy men of power!

Why should employment for Malaysians be any less desirable than for Americans? Krugman assures one might have expected everyone to welcome this change in the global landscape, to see the rapid improvement in the living standards of hundreds of millions of people many of whom had previously been desperately poor as progress and as an unprecedented business opportunity. Another

economist claims that nations do not compete as corporations do; or that loss of export markets and jobs does not make that much difference to a rich country like the United Stated or that loss of jobs in branches that are no longer advantageous will be compensated by the creation of other jobs in other areas. The present tendency to global industrial diffusion will entail for the richer countries, a leveling down of wages, increased inequality of incomes and high levels of unemployment. No one has abrogated the law of supply and demand. Many, if not most, economists will disagree. They rely here on the sacred certaintly of gains from international trade: all benefits. Landes claims some points based on the economical history: 1. the gains from trade are unequal. As history has shown some countries will do much better than others. 2. The export and import of jobs is not the same as trade in commodities. 3. Comparative advantatges is not fixed 4. It always helpd to attend snd respond to the market. 5. Some people find it easier more agreeable to take than to make. This temptation marks all societies and only moral training and vigilance can hold it in check.

To be sure, the rich industrial countries can defend themselves by remaining on the cutting edge of research, by moving into new and growing branches by learning from others, by cultivating and using ability and knowledge. They can help the losers to lean new skills, get new jobs or just retire. Meanwhile, what about the poor countries? Rich countries pressed by the new competition. But with all their troubles they have a continuing obligation, moral even more than prudential, to those less fortunate. The one lesson that emerges is the need to keep trying.