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«ECONOMIC EPOCHS AND THEIR INTERPRETATION Chapter 1 of Phases of Capitalist Development, Oxford University Press, 1982 (Copyright Angus Maddison) This ...»

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Chapter 1 of Phases of Capitalist Development, Oxford University Press, 1982

(Copyright Angus Maddison)

This study is concerned with the economic performance of advanced capitalist countries. Since

1820 the total product of the countries considered here has increased seventy-fold, population nearly fivefold, per capita product fourteen-fold and real per capita consumption almost tenfold. Annual working hours are down by half and life expectation has doubled. The main engine of growth has been technical progress, with capital formation as the major instrument by which it was exploited to increase output.

The reasons for the vigour of capitalist performance can be more clearly apprehended when we contrast its driving forces with those of earlier times.

The rough schema of Table 1 divides past experience into six historical epochs and shows the major determinants of economic performance in each of these. In this evolutionary sequence the three factors of production (natural resources, labour, and capital) have been increasingly augmented by technical progress and education. The efficiency of resource allocation has been improved through better division of labour. From time to time, some countries increased their income by plundering or exploiting others, particularly in the period of ancient imperialism and merchant capitalism, but this has not been an important factor in capitalist progress.

With the exception of Japan, all the advanced countries are European or (like Australia, Canada, and the USA) are off-shoots of Europe, so the present review of economic epochs refers mainly to

European conditions. In the past 1,500 years, European countries have been through four epochs:

“agrarianism”(500-1500), “advancing agrarianism” (1500-1700), “merchant capitalism” (1700-1820), and “capitalism” (1820-till now).

This categorisation is meant to be a rough description of the progressive evolution of the major forces determining production potential. It is not intended to d escribe specific forms of property, class relationships, or modes of exploitation which figure in Marxist presentations of growth stages (1). It is set out in broadly chronological order of the evolution of production potential, but all countries have not moved in steady succession through all these stages. Some have skipped a stage; there have been cases of relapse; and there has been coexistence of economies operating in different modes.

In terms of characteristic amplitudes, the long-term trends of economic performance in the last four epochs are compared in Table 2. For the period since 1820 the magnitudes are reasonably well established in the evidence presented in Appendices A and B of Maddison (1982). They show very much faster growth than the earlier periods, for which the per capita estimates are conjectures. However, it is unlikely that per capita growth rates could have been quicker in 1500-1820 than is suggested, for they imply a per capita level (in 1985 US prices) of only $500 in 1500 (about the same level as in Bangladesh today) and the.25 growth postulated for 1700-1820 is roughly the same as that in the UK for that period.

Advancing Agrarianism After the collapse of the Roman Empire and its communications system, Europe relapsed into agrarianism. For a millennium there was little net progress in population and none in per capita income.

Within this generally stagnant situation there were sizeable fluctuations. There were two major declines in population with subsequent recoveries. The first population drop came after the fall of the Empire in a wave of epidemic disease in the sixth and seventh centuries, and the other in the fourteenth century after the bubonic plague epidemic known as the Black Death. There is some evidence that when population fell after these demographic catastrophes, the standard of living rose temporarily because there were several decades during which there was more land available per capita. Hence the demographic and living standard fluctuations were of an inverse character, meaning that the output trend was probably smoother than either of its components (2).

Table 1 Determinants of Production Potential in Six Economic Epochs Epochs Output a function of

–  –  –

N = natural resources N' = natural resources appropriated and maintained N'' = natural resources developed and augmented L = raw labour L' = labour force with bare modicum of skills, defensively oriented elite unlikely to generate or absorb new technology L'' = ordinary labour with a modicum of skills plus an efficient bureaucratic military elite L''' = labour force with formal education and the on-the-job training, scientific-technical and militarybureaucratic elite K = moderate stock of working capital, investment sufficient to take care of replacement and widening (provision of stock for additional workers) K* = as for K, but with greater investment in roads and urban facilities K' = as for K, with very gradual expansion of fixed capital per head (deepening) K'' = as for K', except that capital deepening is more important K''' = moderate stock of working capital supplemented by much bigger stock of fixed capital. Investment in all types of capital (replacement, widening, and deepening) is a major vehicle for transmitting technical progress. Technical progress tangible and perceived as compared with K' and K'' where it was present but imperceptible s = economies of scale and specialization, particularly through international trade p = plunder (unrequited levies on products and manpower of colonized areas) p' = gains from monopolistic trading privileges p'' = residual gains from colonialism

–  –  –

For 1500-1700 the rate of progress was also very poor by present standards, but clearly better than in the previous millenium. There were no further demographic setbacks on the scale of the Black Death, though the pace of population growth was a meagre crawl in spite of high fertility. Per capita output grew at too slow a pace to be perceptible to contemporaries. Nevertheless population of these countries grew by half in these two centuries, and per capita output may also have risen by half, though productivity rose less because the increased output required longer working hours.

The above interpretation of the situation under advanced agrarianism is similar to that of analysts such as Kuznets and Landes, who have suggested that the long run trend of European living standards and productivity was positive from 1500 to 1700, and perhaps for several earlier centuries (3). It is a more dynamic interpretation than that of historians such as LeRoy Ladurie and Abel, who take a grimmer view of performance in this period, because they are disciples of Malthus.

Thomas Malthus (1766-1834) first published his views on factors determining economic performance in 1798. He portrayed the general situation of humanity as one where population pressure put such strains on the ability of natural resources to produce subsistence that equilibrium was attained only by various catastrophes - such as famine, disease, and wars - which brought premature death on a large scale and which he described as “positive' checks. Later he advocated introduction of “preventive” checks, such as sexual abstinence, as the only way to avoid such calamities.

Malthus's influence has been strong and persistent, in part because of the forceful rhetoric in which he first couched his simple argument. Thus, while no one would consider his theory as valid for the capitalist epoch, many respectable historians consider it applicable to earlier periods. Here is a sample of his style of argument: “The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction; and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague advance in terrific array, and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world” (4).

In fact, the situation after 1500 was not as Malthus suggested, even though most economies were operating under a low-income ceiling because of slow technological progress. The population was indeed subject to mini-famines when bad weather occurred, but not to endemic food shortages lasting over periods of many decades or longer, as some of his disciples suggest.

There are several reasons for disagreeing with Malthus, which are worth stating in view of the persistent popularity of his ideas.

1. European fertility was not at a biological maximum, but already reflected the operation of preventive checks on a significant scale. Unlike Asian countries, Europeans generally lived in conjugal rather than extended families, and in order to sustain living standards marriage did not take place at puberty but in the mid-twenties. Sexual restraint before marriage was enforced with reasonable success by a priesthood who set an example of celibacy, so that a substantial fraction of the population was celibate. These habits changed temporarily when Europeans emigrated to countries with abundant land, but their existence in pre-capitalist Europe has been firmly established by recent French and British demographic research (5).

2. “Average” living standards were well above subsistence. In all countries there was a substantial hierarchy of rulers, upper, and middle classes. The size of this group varied between countries for institutional and political reasons. For England in 1688 we have Gregory King's estimates which show average income per head of almost £8 but the poorest quarter of the population (cottagers and paupers) survived on a consumption level only 28 per cent of this (6).

3. There was still a margin of unused land, and it is clear from existing demographic studies that there was migration within Europe. There were much bigger reserves in America, Australia, Siberia, and Africa, which were to offer possibilities for international migration at a later period.

4. The intensity with which land was cultivated could be expanded considerably in most cases by greater per capita labour inputs (7). In the Middle Ages there were very long off-seasons in which little work was done, and a great deal of land lay fallow. Later generations worked harder, reduced the fallow area and increased land productivity by pushing agricultural practice closer to that in horticulture.

5. Some of the major demographic setbacks cited by Malthusian pundits for this period (e.g. in the seventeenth century) were not due demonstrably to pressure of population on land but to different causes, such as disease or war. A fundamental weakness of the Malthusian argument is that its central thesis is based on the land-labour dichotomy, but death from disease and war are often used as evidence as if these catastrophes were ultimately due to food shortage.

6. Finally, the advancing agrarian economy was not one of complete technological stagnation. Medieval innovations had included windmills, horseshoes, horse harness, heavy ploughs, the haystack, the scythe, marling, fertilization, and the three-field rotation system. These innovations spread rather gradually, but they were certainly helping to increase agricultural output in northern Europe by 1500-1700.8 Innovation was much slower in this epoch than it is now because the main locus of production was in agriculture, where innovation was too risky for most of the participants and often inhibited by tenure institutions. In urban handicrafts, guild restrictions also limited possibilities for change. Entry to skilled occupations was carefully controlled and technical knowledge was regarded as a mystery not to be shared with those outside the recognized confraternity. But the literate group of the population was no longer confined to a priesthood training to conform with tradition rather than to innovate. After the introduction of printing around 1500, diffusion of knowledge was speeded up, and written communication took place in the vernacular rather than in Latin.

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