History of Economic Development
by Jack Powelson
While a Visiting Scholar at Harvard in 1980, I began writing a book that was ultimately named Centuries of Economic Endeavor. For fourteen years I labored on it until it was published (University of Michigan Press, 1994). It received rave reviews in ten scholarly journals (one reviewer even said I was "the new Max Weber," a well-known sociologist). In the first two years thousands of copies were sold. So I waited for The New York Times to call me for my opinion on some related news issue, as they often do to economists. After two years, sales dropped precipitously, and the Times hadn't called (they still haven't).
I compared my book with many others on economic development and boldly decided mine was the best. Why, after a roaring start, had it been such a flop in the market? Several possibilities popped into my mind, among them that it was radically different from current theories. Economists have generally thought that development happens in a decade or two, and they can make it happen. My book said it happened slowly, over centuries, and no one can make it happen.
Despite its "popular" prose, economists were my target. But the book went out of print, and the copyright has just reverted from press to author. I still think I have some new ideas that ought to be heard. So, in a short time I will put them on the web, under a new title: The History of Wealth and Poverty: Why a Few Nations are Rich and Many Poor. In the meantime, I propose to you an abridged (and edited) version of the first six pages of Chapter 1. Here it is:
Why do Japan, northwestern Europe, North America, and Australia and New Zealand lead the world in economic development, and why are their prosperity, infrastructure, and standards of living far, far greater than those of the less developed zones?
The ultimate explanation of economic development I will argue thus lies not in economic factors, such as land, labor, and capital, or even in social forces, such as education, religion, and entrepreneurship. Rather, all these will be added when most people learn, as the Japanese and northwestern Europeans did, that it is good business to be just and considerate toward one's neighbors; to solve quarrels peacefully; to be held accountable for the efficient use of resources; and to abide by modes of behavior hereafter called institutions that have been negotiated and agreed by interested parties.
More than in other regions, as far back as the twelfth and thirteenth centuries many corporate economic interest groups were being formed in northwestern Europe and Japan. At first these included guilds, churches, fief holders, village assemblies, and armies. Over the centuries political parties, labor unions, farmers' unions, consumer cooperatives, lobbies for industries, and more were added. Each interest group possessed a structure by which it might negotiate as a body with other interest groups. A society of many corporate interest groups will be called a pluralist society in this book. Other types of pluralism such as many educational systems, religions, and ethnic groups followed. Corporate interest groups did exist in other parts of the world, but they did not form the critical mass necessary for power and economic development.
In this book, power means the ability to influence or direct the behavior of others. Power is an economic good, either a capital good like machinery (capable of yielding other products for its possessor) or a consumer good (enjoyed for its own sake). It has costs and benefits. The costs may be monetary, but they may also lie in other sacrifices, such as the number of fellow citizens killed in war. Power is tradable for money or for other goods, and one may hold more or less of it. Thus power shares the major attributes of other economic goods and services.
In both Japan and northwestern Europe, the methods, rules, and instruments of policy and exchange were fashioned primarily by powerful corporate groups that possessed interests in common. Money and banking, commercial law, rules of the market, corporate enterprise, government bureaucracies, and ultimately parliamentary democracy were created in this way. Furthermore, in Japan and northwestern Europe, plus cultural descendants of the latter, the institutions of economic development are held in place by a balance of power among interest groups, which have created an interlocking society. The institutions so fit into each other, like pieces in a jigsaw puzzle, that none can be displaced without the whole society unraveling. Groups with a preponderance of power have vested interests in many of the institutions, so they prevent the unraveling.
As nobility, kings, or church competed with one another in northwestern Europe and Japan, peasant groups might ally themselves with either side, demanding greater power or freedom if their side won. If their side lost, they would bide their time until the next occasion. These arrangements, across social clusters, will be called vertical alliances. Reference will also be made to vertical communication, vertical contracts, vertical negotiation, vertical bargaining, and the like. The application of vertical alliances to enhance power is referred to as leverage. The power-diffusion process consists in repeated instances of vertical alliances with leverage, hundreds and thousands of times over centuries, with power becoming incrementally more balanced each time. "More" balanced means that lower-level groups gained in their ability to thwart (or promote) the goals of upper-level groups. In no society has this process led to a complete balance of power, nor would one even know what "complete" would be.
Up to medieval times, power was centralized in a few elites everywhere in the world, in ways similar to those found in less developed zones today. But in northwestern Europe and Japan, over time it became diffused among more and more persons and organized groups. The pertinent question becomes not why power is still centralized in less developed zones today but why it became less centralized in today's more developed zones.
Power diffusion in Japan and northwestern Europe was initiated in similar ways, and it continued in matching ways for at least seven centuries. In the next five chapters I will show examples of how both societies developed a growing balance of power among economic interest groups and how this balance led toward institutions that were both equitable and growth-promoting. Power diffusion also fostered liberal economic attitudes, along with parliamentary democracy, widespread ownership of assets, and decentralized decision making. These are what led to durable economic development.
Why Europe and Japan? Why not Africa and Asia? We can only guess. My guess is in the book, so you'll have to read it to see. I've run out of space here.
I hope this abridgment will lead Friends to want to read the book. It is no longer in print, but the publisher of The Quaker Economist has made an electronic edition available on the web. Click here to read the book.
Sincerely your friend,
Readers' Comments:Note: Please send comments on this or any TQE, at any time. Selected comments will be appended to the appropriate letter as they are received. Please indicate in the subject line the number of the Letter to which you refer! The email address is tqe-comment followed by @quaker.org. All published letters will be edited for spelling, grammar, clarity, and brevity. Please mention your home meeting, church, synagogue (or ...), and where you live.
I am looking forward to getting at the web text and spending some time on this. Maybe I'll get a copy of the original from Amazon and have you sign it for me. I am sure it will be recognized as a classic eventually.
As a journalist, I know how uneven the attention of media is to the events and ideas that shape (or could shape) the world. So I feel no surprise that The New York Times or any other news publication of national and international stature failed to notice Professor Powelson's seminal work, Centuries of Economic Endeavor (University of Michigan Press, 1994)... The book challenged my limited and naive understanding of economics with authority rather than mere didacticism. Professor Powelson failed mention in Letter No. 119 that not only was he a visiting scholar at Harvard when he began research for the book, but he is also an alumnus. His rigorous and deeply taught sense of history, both in and out of the West, informs his thinking about economics in that book and others. So I am grateful that the unsentimental and singularly clear notions offered in Centuries of Economic Endeavor refuse to die. Like the author, who is not young, nor dying. Long may they live.
Roger Williams, Fort Myers, Florida.
Perhaps the Spirit wants your knowledge and insights to have larger audiences than even the NY Times could offer. By not being a "conventional" best seller, your words are now yours, again. You can now decide to put them on the World Wide Web and soon anyone can access it. Thank you for the gifts you have given us all and especially the ones you have given to me. Blessings and Love,
Your interesting analysis reminded me of Prince Peter Kropotkin's argument against Darwin's belief that evolution was driven by "survival of the fittest." Kropotkin favored "Mutual Aid" as the major force in natural selection; the more aid individuals of a species rendered each other the more likely the species was to survive and flourish at least among the more developed members of the animal kingdom. It also reminded me of Nietzsche's dictum that all philosophy (and economics?) is moral autobiography. Good Quaker, moral man, "nice" theorizing? Maybe the rest of academia is comprised of somewhat less moral souls, so that's why it didn't catch on (smile).
John Janda, Orange County (CA) Friends Meeting.
Years ago I read a book written by Max Dimont, a Frenchman. The title was Jews, God, and History. One of the issues in this book aligns well with the thesis of TQE #119. One of Dimont issues explored was Jewish trade and how it flourished around the known world in medieval times because of assumed common values among Jews. This assumption allowed trade with individuals that one would never meet, but the common (assumed) values allowed one to proceed with the commercial venture; and to be compensated as expected. It does not address the Japan side of the equation, but is solid on Europe. I assume many of our evolved commercial practices have some root in this widespread trading experience. It may be worth one's time to look up this book.
Chester Freed, Camden (DE) Friends Meeting.
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Copyright © 2005 by John P. Powelson. All rights reserved. Permission is hereby granted for non-commercial reproduction.