*Why Nations Fail*, Chapters 7 and 8

Meeting Name: Jagongbi (Let’s Study Liberalism and Soar)

Book Title: Why Nations Fail

Scope: Chapters 7 and 8

Date and Time: Tuesday, November 19, 8:30 PM

Location: Online, Naver Whale ON

Participants: J, mori, Jayu, Bontureon, Tiberius, Sora

Written by: mori

Chapter 7 Critical Juncture

The reason the Industrial Revolution first took root and developed most fully in England was its inclusive economic institutions.

These economic institutions were built on the foundation of the inclusive political institutions brought about by the Glorious Revolution.

Groundbreaking ideas

- The “cap-knitting decree”

-> 1589

William

& stocking frame

& invention of the knitting machine;

but the queen and king refused the patent.

They feared that if unemployment increased, it would lead to political instability.

The main reason living standards did not steadily improve from the Neolithic Revolution to the Industrial Revolution was fear of creative destruction.

Technological innovation brings prosperity to human society,

but it replaces the old with the new and destroys the economic privileges and political power of certain classes.

- Elites whose political power is threatened become an especially formidable obstacle to adopting such innovations.;

this is why new actors are needed to introduce radical innovation.

Persistent political conflict

- Two characteristics of the English Parliament at the time;

1. Parliament represented a broad range of interests, not just elites close to the king.

2. Members of Parliament stubbornly opposed royal efforts to expand power.

It became the central axis in the struggle against the Crown.

- The Tudor dynasty’s efforts at centralization;

disarming the nobility,

introducing bureaucratic government,

and weakening the Church by confiscating church lands.

By concentrating governmental institutions at the center, inclusive political institutions became possible for the first time.

- Through this process, governmental institutions were centralized and momentum grew for broader representative politics.

The process of centralizing political power often tends to lead to absolutism, because the king and his advisers can seize power and suppress other power groups in society.

As discussed earlier in Chapter 3, this is one reason people oppose the centralization of governmental institutions.

However, resistance to such tendencies also meant that the centralization of governmental institutions in England, as under the Tudors, helped strengthen voices calling for at least a basic level of pluralism.

- Unable to stop the concentration of power at the center, the nobility and local elites shifted strategy and demanded a say in how that centralized power would be used.

In other words, Tudor policy did not merely succeed in centralization, one pillar of inclusive institutions.

It also indirectly contributed to pluralism, the other pillar of inclusive institutions.

The Statute of Monopolies

- James I, the first Stuart king, pursued absolutism;

there were as many as 700 monopoly items.

- Control over trade;

the royal authority to grant monopolies was an important source of revenue;

to stop this, the Statute of Monopolies was passed in 1623.

- His son Charles I;

forced loans,

ship money

- In 1640, while at war with Scotland, he lacked military funds, so the Short Parliament (3 weeks) ->

the Long Parliament (1640–1648);

domestic monopolies were abolished

(ship money was also repealed).

- After the civil war, Charles I was executed, and a republic was established

-> Cromwell’s dictatorship

- 1660

Cromwell died, and the monarchy was restored.

- 1688

Another civil war broke out against James II, who sought to establish absolutist monarchy;

William of Orange declared constitutional monarchy.

The Glorious Revolution

1689.2

Bill of Rights;

ambiguity

(it lacked means of enforcement).

But William gave up all existing rights

(including customs revenues).

- Once Parliament directly controlled expenditures, it willingly raised taxes and made investments.

Abolition of monopolies

- Parliament became the new arena for determining economic institutions, and it successively reformed economic institutions and government policy, laying the groundwork for the Industrial Revolution.

- In 1689, the British Parliament abolished the hearth tax

and began taxing land.

- Financial reform;

1694 founding of the Bank of England

- Parliament continued the process of centralization begun under the Tudors.

The relationship between centralization and pluralism;

before the Glorious Revolution,

Parliament opposed a government trying to gather resources and pursue efficiency because it was uncontrollable.

- With the expansion of the tax base, the size of government also expanded;

the government’s capacity to increase revenue through taxation improved.

- After 1688, the government began in earnest to take on a modern form.

- After 1688, talent was valued more than political logic in appointing government officials, laying a strong foundation for running the state.

The Industrial Revolution

- Transport revolution;

the stability and efficiency of private property rights improved greatly, leading to a major increase in investment in toll roads.

- 18th-century land reorganization

(the second enclosure? 1750–1820);

before that, there had been the misconception that all land in England legally belonged to the Crown.

A great deal of land could not be properly used because of numerous archaic private property rights and tangled ownership claims.

- Fierce petition wars

(to preserve vested interests);

sumptuary laws, &

laws meant to encourage domestic handicrafts in the kingdom and employ the poor more efficiently, &,

the Calico Acts

- 1736

Manchester Act

(preventing the expanded application of the Calico Acts);

a victory for a new interest group opposed to the wool industry

- Navigation Acts;

for more than 200 years after 1651;

laws designed to help England’s private sector monopolize international trade

Accelerating technological innovation

By 1760, all these factors combined and created synergy;

steam engine innovation,

ironmaking,

the textile industry,

and transportation.

- Creative destruction redistributed political power, leading to movements demanding repeal of the Corn Laws,

universal suffrage,

and the secret ballot;

the Peterloo Massacre

-> Reform Acts,

repeal of the Corn Laws

Why England?

Causes of the Glorious Revolution

- Political conflict between absolutist monarchy and opposing forces

- Diverging paths between East and West after the Black Death

- Magna Carta had great influence in Western Europe but was useless in Eastern Europe

- A key point of divergence was the expansion of Atlantic overseas trade;

whether the Crown could grant monopolies over overseas trade

- The coalition of forces led to the creation of the Whig Party

The breadth of this coalition meant that the demand for pluralistic political institutions was equally great.

The Glorious Revolution is called a monumental event because it was led by this broad coalition whose power had grown.

The continued strengthening of inclusive political and economic institutions was also made possible by the empowerment of this broad coalition.

In England’s case, the decisive factors in the birth of pluralism and inclusive institutions were historical contingency and a broad coalition.

Chapter 8 Obstacles to Development

The absence of a centralized government, or weak centralization, hinders the spread of industrialization just as much as an absolutist regime does.

- The Industrial Revolution created a critical juncture, but why did so many countries miss the opportunity for industrial development?

Ban on printing

1445

Germany: Gutenberg invented the movable-type printing press

1485

Ottoman Empire: Sultan Bayezid II issued a decree banning Muslims from printing in Arabic

1727

The printing press was introduced to the Ottoman Empire.

Ahmed III issued a decree allowing the establishment of a printing house;

every printed book had to be censored by

&

kadis

&

and three religious legal scholars.

- Printing increased literacy.

Printing was seen as a threat that could destroy the existing order in which elites monopolized knowledge.

- What the sultan and religious groups feared was the creative destruction that printing would bring.

An absolutist regime refers to a government that thoroughly ignores the law and the wishes of other groups.

Without a centralized government capable of maintaining order and enforcing private property rights, inclusive institutions cannot take root.

- Without this precondition, industrialization cannot even take its first step.

An obstacle to the spread of industrialization equal to absolutism is the absence of a centralized government or weak centralization.

- But there are many cases where the process of centralization instead produces the opposite outcome: an even harsher absolutist regime;

1725

the absolutist regime led by Peter the Great

A small but important difference

- Spain’s absolute monarchy became stronger;

the royal fifth tax,

confiscation of Jewish land,

expulsion of the Moriscos, descendants of Arab inhabitants

- Spain’s absolute monarchy caused insecurity in private property rights

- Even trade within the Americas was heavily regulated

- Unlike the English Parliament, the Cortes of Castile and Aragon mainly represented major cities, not the outskirts or rural areas

- The Revolt of the Comuneros;

demands for reform of the Cortes and expansion of its powers.

The royal army brutally suppressed it.

Afterward, the Cortes revived only after Napoleon’s invasion 150 years later.

The small difference that determined the divergent fates of England and Spain was the strength and character of representative institutions,

and the critical juncture was the discovery of the Americas.

Concerns about industrialization

- Hungary and Poland within Habsburg lands were the heart of Eastern European second serfdom

- The Habsburg economic institutions were sustained by the feudal order, serfdom,

and trade restrictions such as monopolies

- Two forms of opposition to innovation;

1. banning factory construction to prevent industrial development

2. opposing railroad construction

No revolution in Russia

- Russia’s economic institutions were based on serfdom

- Serfs had to work three days a week on the lord’s land without pay.

They could not move residence, had no freedom of occupation, and could be bought and sold at the landlord’s whim.

- Russia’s ruling class also feared creative destruction, industry,

and railroads

- Nicholas I even banned industrial exhibitions

and opposed railroads

Ban on shipping

- China led the world during the Song dynasty (960–1279) through numerous technological innovations.

- China’s ban on overseas trade was not lifted until 1567.

The absolutism of Prester John

- Ethiopia was not exposed to the critical junctures England experienced.

- Ethiopia’s condition today, unlike England’s, is due to the survival of absolutist rule until recent times.

The particularity of Somali society

- Even until around the 19th century, many parts of Africa lacked a government capable of maintaining even the minimum level of law and order, one of the preconditions of a modern economy.

- Somalia;

the harmful consequences produced by the absence of a centralized government

- Units within clans called diya

(blood compensation)

payment groups

Without a centralized government to enforce private property rights and maintain order, the broad dispersion of power did not lead to inclusive institutions.

- The Takali Kingdom in northwestern Somalia;

although both the royal family and the people could have adopted Arabic script, they did not use it.

;

the people rejected writing because they feared the government would use claims of ownership to control valuable land and other precious resources.

;

the ruling elites who opposed centralization also rejected writing because written records are difficult to reverse

(preferring oral communication in order to maximize discretion)

Persistent underdevelopment

Absolutism is not the only form of extractive political institution,

nor is it the only factor that impeded industrialization.

For inclusive political and economic institutions to be established, a certain level of centralization must be achieved so that the government can enforce law and order,

guarantee private property rights,

and invest in the public sector when necessary to encourage economic activity.

- Just as absolutist regimes reject change, opposition to centralization

was driven by a deep fear that allowing change would transfer political power from the current ruling class to new individuals or groups.

Therefore, just as absolutism blocks movement toward pluralism and economic change, in countries without centralized government, traditional elites and clans that hold power play that same obstructive role.

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Original title: <국가는 왜 실패하는가> 7장, 8장

Author: Jayujuui 입문 독서토론모임

Date: 2024-11-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=reading01&pn=2&idx=27100