EH.net is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

The Agrarian Origins of Modern Japan

Author(s):Smith, Thomas C.
Reviewer(s):Saito, Osamu

Classic Reviews in Economic History

Thomas C. Smith, The Agrarian Origins of Modern Japan. Stanford: Stanford University Press, 1959. xi + 250 pp.

Review Essay by Osamu Saito, Institute of Economic Research, Hitotsubashi University.

A Peasant Economy and the Growth of the Market

In the 1950s, when the late Professor Thomas Smith wrote this book, peasant farming was portrayed as a mode of production and livelihood incompatible with the market economy. Japan before Meiji was regarded as a typical example of such peasant economies. As Smith notes in the opening sentence of the book, this was to some extent true because “In the course of its long history, Japanese agriculture has in some respects changed remarkably little”: farming was a family enterprise, holdings tiny and fragmented, and cultivation methods simple — all features of a typical peasant society. Of course, there were some changes but they were never as dramatic as the agrarian changes the West experienced, so that for many scholars “it is tempting to dismiss as unimportant such changes as in fact have taken place.” Against this historiographical background, Smith argues in the book that the changes that actually took place in Japanese history, especially in the Tokugawa period (1603-1868), were in fact of great importance. His argument is that “their central feature was a shift from cooperative to individual farming” and that “if one of its causes may be singled out as especially important, it must be the growth of the market” (pp. ix-x; emphasis added).

The book is about these changes and, based largely on a body of evidence uncovered by Japanese historians, traces their social and economic consequences. It begins with a model of the traditional village society in the seventeenth century, which is set out in Part I. At the core of village society, according to that model, was a large landholder’s domestic group. It was composed of three concentric circles with the inner one being the family of the holder, the main household. The second circle consisted of a group of relatives outside the direct line of descent, and the third circle of hereditary servants and similar subordinate persons who were related to the holder by neither blood nor marriage but were nonetheless registered as part of his family group. In every village such large holder households were not many; only a few took this form of “extended family.” Other villagers were all small holders whose family form was, according to Smith, in most cases “nuclear”; and they were in all likelihood households created by partitioning. Since the partition of family land, even when practiced, was never made on an equal footing, those “new” groups of branch-family households were bound to be small holders who had to rely on resources provided by the main household as well as the village itself. Thus the structure of the traditional village was both cooperative and hierarchical, with “clusters of interdependent interests that clung together with great force and were broken up only when competitive inducements of trade began, much later, to dissolve the internal ties” (p. 54).

Such “competitive inducements” came from market growth in the countryside, which, it is suggested, was concomitant with urban growth. Thus, Smith begins Part II with a survey of the extent of commercial farming (cultivation of cotton, indigo, mulberries, oilseeds, tobacco, and other cash crops) and farm family by-employment (spinning, reeling, weaving, straw plaiting, etc.), both of which are supposed to have spread in the rural provinces during the eighteenth and nineteenth centuries. Then in the subsequent chapters Smith traces the consequent changes: how agricultural technology changed, how labor was transformed, how wealthy landlords emerged within the village society, and how the traditional ties between households dissolved. The underlying tendency in the eighteenth and nineteenth centuries was for some branch families and hereditary servants to become separate from the main household. They formed their own households. Their landholding was sometimes too small to feed themselves on the farm, but thanks to the expanding market economy, they were in all likelihood able to find either by-employment opportunities or wage jobs, or both, as former labor service was increasingly replaced by live-in servants on yearly contract, who were eventually substituted by workers employed by the day. Sometimes, especially in crisis years, they had to borrow money from large holders in the village with a parcel of land placed in pawn, which in many cases ended up with the loss of its holding right: they became tenants of the large holders. The latter half of the Tokugawa period saw their numbers increasing, but at the same time it is not unlikely that increased tenancy in turn allowed them to stay on the land. With these significant, if not revolutionary, tendencies established, Smith devotes the final chapter to relating them to the making of modern Japan, placing particular emphasis on what commercial farming and expanding labor markets taught peasants in relation to the forthcoming age of the factory.

The book’s major points, such as the supposition that the weight of non-agricultural income in the rural economy had become substantial by the early nineteenth century, have subsequently been confirmed by his own and other historians’ works (Smith 1969/88, Nishikawa 1987, Shimbo and Saito 2004). From an early twenty-first century vantage point, however, it is not surprising that the progress of research since then has made some of the other propositions no longer tenable. One such example is his description of a shift from “extended” to “nuclear” family. Each of the cooperative groups in seventeenth-century documents that he regarded as one large and complex family household was probably nothing but an estate organization accommodating several separate domestic groups together, most of which were family households in a much simpler form and possessed their own hearth and living space. As a unit of production, however, the structure of the seventeenth-century estate organization may have been not much different from what he described in the book: it was hierarchical and there were extra-economic ties between those households. On the other hand, the family form that he considered “nuclear” should now be taken to mean “stem family,” since by the term “nuclear” Smith meant a small family that had no lateral extension but tended to extend vertically. As far as the family system is concerned, therefore, there seems to have been little change throughout the Tokugawa period. What actually changed was the way in which farming was organized and its tasks carried out, which was not associated with a transformation in the system of family formation. Another point I have to make concerns the extent of urbanization and the role given to it as an engine of market growth. In the chapter on “The Growth of the Market,” Smith noted that “in the two centuries after 1600, urban population grew with astonishing speed” (p. 67). Probably it did as far as the seventeenth century is concerned, but we now know, from Smith’s own research work published later, that urban population did not grow in the one and a half centuries after 1700: Edo, Osaka and some of the castle towns even recorded a population decline. Market-led output growth — “Smithian growth” in recent terminology (named after Adam Smith) — that took place in the latter half of the Tokugawa period should now be considered “rural-centered” (Smith 1973/88; see also Shimbo and Saito 2004).

Such necessary revisions notwithstanding, The Agrarian Origins of Modern Japan remains a landmark achievement in Tokugawa economic history. It is not just because the book is still very informative and makes lucid reading, but chiefly because what Smith delineated with respect to “what changed” and “what remained unchanged” is largely accurate. Given the intellectual milieu of the 1950s and the 60s, however, this publication may have been considered a book about “what changed” only — a work fitting very nicely in the framework of modernization theses such as the rise of individualism and the transition from status to contract, since the “growth of the market,” the guiding concept of the book, has long been regarded as an important component of the modernization process.

However, Smith makes several important points that do not necessarily fit with the modernization scenarios. First, he makes it clear that Tokugawa Japan’s path of agricultural progress was distinctly different from the Western one, suggesting that they would never converge on a single model. As he describes in the chapter on “Agricultural Technology,” farm output rose with the expansion of commercial farming, which was closely associated with the more intensive use of fertilizers, widening plant varieties, proliferation of farming tools, and the extension of irrigation. The irrigation work, i.e. construction of dikes, ponds, ditches, devices for lifting water into paddy fields and for other purposes, required a substantial amount of capital, much of which was provided by overlords and wealthy merchants. At the same time, however, the construction work itself required a substantial input of labor. And all the other improvements in farming methods were also labor intensive. Some individual innovations may have reduced labor requirements per unit of cultivated land, but the overall effect was to intensify the use of labor. All this made farming even more labor intensive and the unit of farming even smaller, the characteristics that remained unchanged throughout the period from Tokugawa to Meiji. To put it differently, “the character of agrarian change [in Tokugawa and Meiji Japan] … was determined as much by what did not change about farming as by what did” (p. 208; see also Ishikawa 1978, Francks 1983).

Secondly, while Smith examines in detail the rise of landlord-tenant relations and its accompanying phenomenon of increasing differentiation of landholdings within the agrarian society, and also the processes of hereditary subordinates evolving into servants for yearly wages and of service agreements becoming from long-term to short-term contracts, thus describing a long-run transition to wage labor, he never speaks of the emergence of a wage earning class of landless agricultural labors. This may be interpreted as suggesting that those tendencies, together with the above-mentioned move towards the intensification in farming and the spread of non-agricultural by-employments in the rural districts, resulted in keeping the peasantry from disintegrating itself (Saito 1986).

Thirdly, therefore, all this “kept the agricultural population a relatively homogeneous class of small peasant farmers despite the presence of landlords and obvious differences in wealth; [and] it preserved the organic unity of the village community despite the growth of a nonfarming population within it” (p. 107). In other words, the coming of commercial farming and the associated growth of labor markets in the Tokugawa period did not signal the end of a peasant economy. Rather, in the Japanese past peasant farming evolved towards more uniformity as the market grew.

Thus, this 1959 book suggested that the Tokugawa peasant household, as an integral unit of production and reproduction, had a modus operandi distinctly different from those found for other early modern agricultural populations, and also that it emerged in the process of interactions with the growth of the market. Smith addressed this research question later when he worked on demography and on the history of time discipline (Smith 1977, 1986/88). In the first, he demonstrated how the Tokugawa peasant families tried, with a dim idea of family planning, to adjust their size and composition to alternating life-cycle stages and also changing economic circumstances, and in the second, how they developed a stringent sense of time discipline within the household in order to cope with the increased intensity of labor in farming and by-employment activities and, hence, an increased need for planning over the whole farming year. This latter point implies that Meiji Japanese workers did not need to be taught time discipline in the factory, which strongly suggests that there was continuity from Tokugawa to Meiji. In the former demographic study, Smith made a strong argument that Tokugawa peasants adjusted their family size and composition by means of sex selective infanticide. This provoked a debate, but as I have commented elsewhere (Saito 1989), the gist of his entire argument was that the Tokugawa peasant family household tried hard to balance its numbers with farm size and to secure the right composition in the family workforce, for which purpose infanticide was only one of the options accessible to the family. There were some other means of demographic adjustments such as abortion and the timing of marriage-out of non-inheriting children, as well as economic ones such as sending children, both male and female, into service in the village and in cities and towns, or getting them to take up an industrial by-employment at home. Those economic opportunities increased with the growth of the market, and with changes that accelerated after the Meiji reforms. This consideration, therefore, points to another element of continuity from the early modern to the modern period, the theme already explicit in the writing of The Agrarian Origins of Modern Japan.

Smith noted, retrospectively in the preface to a collection of essays he had published since the 1950s, that while writing on “how Japan became a modern society … with a generalized notion drawn from Western history of how much transformations occur,” he had “paid particular attention to factors that contributed to making modern Japanese society similar to but profoundly different from Western counterparts” (Smith 1988, p. 1; emphasis added). As such, therefore, his work collectively made a pioneering contribution to the on-going debates in global economic history.

References:

Francks, P. (1983), Technology and Agricultural Development in Pre-war Japan, New Haven: Yale University Press.

Ishikawa, S. (1978), Labour Absorption in Asian Agriculture: An Issues Paper, Bangkok: Asian Regional Programme for Employment Promotion of the International Labour Office; reprinted in S. Ishikawa (1981), Essays on Technology, Employment and Institutions in Economic Development, Tokyo: Kinokuniya, 1-149.

Nishikawa, S. (1987), “The Economy of Choshu on the Eve of Industrialization,” Economics Studies Quarterly 38 (December), 323-37.

Saito, O. (1986), “The Rural Economy: Commercial Agriculture, By-employment and Wage Work,” in M.B. Jansen and G. Rozman, eds., Japan in Transition: From Tokugawa to Meiji, Princeton: Princeton University Press, 400-420.

Saito, O. (1989), “Bringing the Covert Structure of the Past to Light: Review Article of T.C. Smith, Native Sources of Japanese Industrialization, 1750-1920,” Journal of Economic History 49 (December), 992-999.

Shimbo, H. and O. Saito (2004), “The Economy on the Eve of Industrialization,” in A. Hayami, O. Saito and R.P. Toby, eds., The Economic History of Japan, 1600-1990. I: Emergence of Economic Society in Japan, 1600-1859, Oxford: Oxford University Press, 337-68.

Smith, T.C. (1969), “Farm Family By-employments in Preindustrial Japan,” Journal of Economic History 29 (December), 687-715; reprinted in Smith (1988), 71-102.

Smith, T.C. (1973), “Pre-modern Economic Growth: Japan and the West,” Past and Present 60 (August), 127-160; reprinted in Smith (1988), 15-49.

Smith, T.C. (1977), Nakahara: Family Farming and Population in a Japanese Village, 1717-1830, Stanford: Stanford University Press.

Smith, T.C. (1986), “Peasant Time and Factory Time in Japan,” Past and Present 111 (May), 165-197; reprinted in Smith (1988), 199-235.

Smith, T.C. (1988), Native Sources of Japanese Industrialization, 1750-1920, Berkeley: University of California Press.

Subject(s):Markets and Institutions
Geographic Area(s):Asia
Time Period(s):19th Century

Economic History of Premodern China (from 221 BC to c. 1800 AD)

Kent Deng, London School of Economics (LSE)

China has the longest continually recorded history in the premodern world. For economic historians, it makes sense to begin with the formation of China’s national economy in the wake of China’s unification in 221 BC under the Qin. The year 1800 AD coincides with the beginning of the end for China’s premodern era, which was hastened by the First Opium War (1839–42). Hence, the time span of this article is two millennia.

Empire-building

Evidence indicates that there was a sharp difference in the economy between China’s pre-imperial era (until 220 BC) and its imperial era. There can be little doubt that the establishment of the Empire of China (to avoid the term of “the Chinese Empire” as it was not always an empire by and for the Chinese) served as a demarcation line in the history of the East Asian Mainland.

The empire was a result of historical contingency rather than inevitability. First of all, before the unification, China’s multiple units successfully accommodated a mixed economy of commerce, farming, handicrafts and pastoralism. Internal competition also allowed science and technology as well as literature and art to thrive on the East Asian Mainland. This was known as “a hundred flowers blossoming” (baijia zhengming, literally “a grand song contest with one hundred contenders”). Feudalism was widely practiced. Unifying such diverse economic and political units incurred inevitably huge social costs. Secondly, the winner of the bloody war on the East Asian Mainland, the Qin Dukedom and then the Qin Kingdom (840–222 BC), was not for a long time a rich or strong unit during the Spring and Autumn Period (840–476 BC) and the following Warring States Period (475–222 BC). It was only during the last three decades of the Warring States Period that the Qin eventually managed to overpower its rivals by force and consequently unified China. Moreover, although it unified China, the Qin was the worse-managed dynasty in the entire history of China: it crumbled after only fifteen years. So, it was not an easy birth; and the empire system was in serious jeopardy from the start. The main justification of China’s unification seems to have been a geopolitical reason, hence an external reason – the nomadic threat from the steppes (Deng 1999).

Nevertheless, empire-building in China marked a major discontinuity in history. Under the Western Han (206 BC– 24 AD), the successor of the Qin, empire-building not only sharply reduced internal competition among various political and economic centers on the East Asian Mainland, it also remolded the previous political and economic systems into a more integrated and more homogeneous type characterized by a package of an imperial bureaucracy under a fiscal state hand in hand with an economy under agricultural dominance. With such a package imposed by empire-builders, the economy deviated from its mixed norm. Feudalism lost its footing in China. This fundamentally changed the growth and development trajectory of China for the rest of the imperial period until c. 1800.

It is fair to state that private landholding property rights, including free-holding (dominant in North China over the long run) and lease-holding (paralleled with freeholding in South China during the post-Southern Song, i.e. 1279–1840) in imperial China laid the very corner stone of the empire’s economy since the Qin unification. Chinese laws clearly defined and protected such rights. In return, the imperial state had the mandate to tax the population of whom the vast majority (some 80 percent of the total population) were peasants. The state also depended on the rural population for army recruits. Peasants on the other hand regularly acted as the main force to populate newly captured areas along the empire’s long frontiers. Such a symbiotic relationship between the imperial state and China’s population was crystallized by a mutually beneficial state-peasant alliance in the long run. China’s lasting Confucian learning and Confucian meritocracy served as a social bonding agent for the alliance.

It was such an alliance that formed the foundations of China’s political economy which in turn created a centripetal force to hold the empire together against the restoration of feudalism and political decentralization (Deng 1999). It also served as a constant drive for China’s geographic expansion and an effective force against run-away proto-industrialization, commercialization and urbanization. So, to a great extent, China’s political economy was circumscribed by this alliance. Occasionally, this state-peasant alliance did break up and political and economic turmoil followed. The ultimate internal cause for the break-up was excessive rent-seeking by the state, seen as a deviation from the Confucian norm. It was often the peasantry that reversed this deviation and put society back on its track by the way of armed mass rebellions which replaced the old regime with a new one. This pattern is known, superficially, as the “dynastic cycle” of China.

The Empire’s Expansion

China’s fiscal state and landholding peasantry both had strong incentives and tendencies to increase the land territory of the empire. This was simply because more land meant more resource endowments for the peasantry and more tax revenue for the state. The Chinese non-feudal equal-inheritance practice perpetuated such incentives and tendencies at the grass roots level: unless more and more land was brought in for farming, the Chinese farms faced the constant problem of a shrinking size. Not surprisingly, the empire gradually expanded in all directions from its hub along the Yellow River in the north. It colonized the “near south” (around the Yangtze Valley) and to the West (oases along the Silk Road) during the Western Han (206 BC – 24 AD). It reached the “far south,” including part of modern-day Vietnam, under the Tang (618–907). The Ming (1368–1644) annexed off-shore Taiwan. The Qing (1644–1911) doubled China’s territory by going further in China’s “far north” and “far west” (Deng 1993: xxiii). At each step of this internal colonization, landholding peasants, shoulder to shoulder with the Chinese army and bureaucrats, duplicated the cells of China’s agricultural economy. The state often provided emigrant farmers who resettled in new regions with material and finance aid, typically free passages, seed and basic farming tools and tax holidays. The geographic expansion of the empire stopped only at the point when it reached the physical limits for farming.

So, in essence, the expansion of the Chinese empire was the result of dynamics of the Chinese institutions characterized by a fiscal state and a landholding peasantry, as this pattern suited well with China’s landholding property rights and non-feudal equal-inheritance practice. Thus, one of the two growth dimensions of the Chinese agricultural sector was this extensive pattern in geographic terms.

Agrarian Success

In this context, the success of the geographic expansion of the Chinese empire was at the same time a success in the growth of the Chinese agricultural sector. Firstly, regardless of its ten main soil types, the empire’s territory was converted to a huge farming zone. Secondly, the agricultural sector was by far the single most important source of employment for the majority Chinese. Thirdly, taxes from the agricultural sector made up the lion’s share of the state’s revenue.

Private property rights over land also created incentives for the ordinary farmers to produce more and better. In doing so, the agricultural total factor productivity increased. Growth became intensive. This was the other dimension in the Chinese agricultural sector. It is not so surprising that premodern China had at least three main “green revolutions.” The first such green revolution, the dry farming type, appeared in the Western Han Period (206 BC–24 AD) with the aggressive introduction of iron ploughs in the north by the state (Bray 1984). The result was an increase in the agricultural total factor productivity as land was better and more efficiently tilled and more marginal regions were brought under cultivation. The second green revolution took place during the Northern Song (960–1127) with the state promotion of early-ripening rice in the south (Ho 1956). This ushered in the era of multiple cropping in the empire. The third green revolution occurred during the late Ming throughout mid-Qing Period (Ming: 1368–1644; Qing: 1644–1911) with the spread of the “New World crops,” namely maize and sweet potatoes and the re-introduction of early-ripening rice (Deng 1993: ch. 3). The New World crops helped to convert more marginal land into farming areas. Earlier, under the Yuan, cotton was deliberately introduced by the Mongols as a substitute for silk in the Chinese consumption of clothing to save the silk for the Mongols’ international trade. All these green revolutions had high participation rates in the general population.

These green revolutions significantly and permanently changed China’s economic landscape. It was not a sheer accident that China’s population growth became particularly strong during and shortly after these revolutions (Deng 2003).

Markets and the Market Economy

With a fiscal state which taxed the economy and spent its revenue in the economy and with a high-yield agriculture which produced a constant surplus, the market economy developed in premodern China. By the end of the Qing, as much as one-third of China’s post-tax agricultural output was subject to market exchange (Perkins 1969: 115; Myers 1970: 12–13). If ten percent is taken as the norm for the tax rate born by the agricultural sector, the aggregate surplus of the agricultural sector was likely to be some forty percent of its total output. This magnitude of agricultural surplus was the foundation of growth and development of other sectors/activities in the economy.

Monetization in China had the same life span as the empire itself. The state mints mass-produced coins on a regular basis for the domestic economy and beyond. Due to the lack of monetary metals, token currencies made of cloth or paper were used on large scales, especially during the Song and Yuan periods (Northern Song: 960–1127; Southern Song: 1127–1279; Yuan: 1279–1368). Consequently, inflations resulted. Perhaps the most spectacular market phenomenon was China’s persistent importation of foreign silver from the fifteenth to nineteenth centuries during the Ming-Qing Period. It has been estimated that a total of one-third of silver output from the New World ended up in China, not to mention the amount imported from neighboring Japan (Flynn and Giráldez 1995). The imported silver consequently made China a silver-standard economy, eventually causing a price revolution after the market was saturated with foreign silver which in turn led to devaluation of the currency (Deng 1997: Appendix C).

Rudimentary credit systems, often of the short-term type, also appeared in China. Houses and farming land were often used as collateral to raise money. But there is no sign that there was a significant reduction of business risks for the creditor. Frequent community and/or state interference with contracts by blocking land transfers from debtors to creditors was counter-productive. So, to a great extent, China’s customary economy and command economy overruled the market one.

The nature of this surplus-based market exchange determined the multi-layered structure of the Chinese domestic market. At the grass-roots level, the market was localized, decentralized and democratic (Skinner 1964–5). This was highly compatible with the de facto village autonomy across the empire, as the imperial administration stopped at the county level (with a total number of roughly 1,000–1,500 such counties in all under the Qing). At the top of the market structure, the state controlled to a great extent some “key commodities” including salt (as during Ming and Qing), wine and iron and steel (as under the Han). Foreign trade was customarily under the state monopoly or partial monopoly, too. This left a limited platform for professional merchants to operate, a factor that ultimately determined the weakness of merchants’ influence in the economy and state politics.

So, paradoxically, China had a long history of market activities but a weak merchant class tradition. China’s social mobility and meritocracy, the antitheses of a feudal aristocracy, directed the talent and wealth to officialdom (Ho 1962; Rawski 1979). The existence of factor markets for land also allowed merchants to join the landholding class. Both undermined the rise of the merchant class.

Handicrafts and Urbanization

The sheer quantities of China’s handicrafts were impressive. It has been estimated that in the early nineteenth century, as much as one-third of the world’s total manufactures were produced by China (Kennedy 1987: 149; Huntington 1996: 86). In terms of ceramics and silk, China was able to supply the outside world almost single-handedly at times. Asia was traditionally China’s selling market for paper, stationary and cooking pots. All these are highly consistent with China’s intake of silver during the same period.

However, the growth in China’s handicrafts and urbanization was a function of the surpluses produced from the agricultural sector. This judgment is based on (1) the fact that not until the end of the Qing Period did China begin importing moderate quantities of foodstuffs from outside world to help feed the population; and (2) the fact that the handicraft sector never challenged agricultural dominance in the economy despite a symbiotic relationship between them.

By the same token, urbanization rarely exceeded ten percent of the total population although large urban centers were established. For example, during the Song, the northern capital Kaifeng (of the Northern Song) and southern capital Hangzhou (of the Southern Song) had 1.4 million and one million inhabitants, respectively (Jones et al. 1993: ch. 9). In addition, it was common that urban residents also had one foot in the rural sector due to private landholding property rights.

Science and Technology

In the context of China’s high yield agriculture (hence surpluses in the economy which were translated into leisure time for other pursuits) and Confucian meritocracy (hence a continued over-supply of the literate vis-à-vis the openings in officialdom and persistent record keeping by the premodern standards) (Chang 1962: ch. 1; Deng 1993: Appendix 1), China became one of the hotbeds of scientific discoveries and technological development of the premodern world (Needham 1954–95). It is commonly agreed that China led the world in science and technology from about the tenth century to about the fifteenth century.

The Chinese sciences and technologies were concentrated in several fields, mainly material production, transport, weaponry and medicine. A common feature of all Chinese discoveries was their trial-and-error basis and incremental improvement. Here, China’s continued history and large population became an advantage. However, this trial-and-error approach had its developmental ceiling. And, incremental improvement faced diminishing returns (Elvin 1973: ch. 17). So, although China once led the world, it was unable to realize what is known as the “Scientific Revolution” whose origin may well have been oriental/Chinese (Hobson 2004).

Living Standards

It has been argued that in the Ming-Qing Period the standards of living reached and stayed at a high level, comparable with the most wealthy parts of Western Europe by 1800 in material terms (Pomeranz 2000) and perhaps in education as well (Rawski 1979). Although the evidence is not conclusive, the claims certainly are compatible with China’s wealth in the context of (1) the rationality of private property rights-led growth, (2) total factor productivity growth associated with China’s green revolutions from the Han to the Ming-Qing and the economic revolution under the Song, and (3) China’s export capacity (hence China’s surplus output) and China’s silver imports (hence the purchasing power of China’s surplus).

Debates about China’s Long-term Economic History

The pivotal point of the debate about China’s long-term economic history has been why and how China did not go any further from its premodern achievements. Opinions have been divided and the debate goes on (Deng 2000). Within the wide spectrum of views, some are regarded as Eurocentric; some, Sinocentric (Hobson 2004). But a great many are neither, using some universally applicable criteria such as factor productivity (labor, land and capital), economic optimization/maximization, organizational efficiency, and externalities.

In a nutshell, the debate is whether to view China as a bottle “half empty” (hence China did not realize its full growth potential by the post-Renaissance Western European standard) or “half full” (hence China over-performed by the premodern world standard). In any case, China was “extra-ordinary” either in terms of its outstanding performance for a premodern civilization or in terms of its shortfall for modern growth despite its possession of many favorable preconditions to do so.

The utility of China’s premodern history is indeed indispensable in the understanding of how a dominant traditional economy (in terms of its sheer size and longevity) perpetuated and how the modern economy emerged in the world history.

References

Bray, Francesca. “Section 41: Agriculture.” In Science and Civilisation in China, edited by Joseph Needham, Volume 6. Cambridge: Cambridge University Press, 1984.

Chang, Chung-li. The Income of the Chinese Gentry. Seattle: University of Washington Press, 1962.

Deng, Gang. Chinese Maritime Activities and Socio-economic Consequences, c. 2100 BC – 1900 AD. Westport, CT: Greenwood Publishing, 1997.

Deng, Gang. Development versus Stagnation: Technological Continuity and Agricultural Progress in Premodern China. Westport, CT: Greenwood Publishing, 1993.

Deng, Gang. The Premodern Chinese Economy – Structural Equilibrium and Capitalist Sterility. London: Routledge, 1999.

Deng, K. G. “A Critical Survey of Recent Research in of Chinese Economic History.” Economic History Review 53, no. 1 (2000): 1–28.

Deng, K. G. “Fact or Fiction? Re-Examination of Chinese Premodern Population Statistics.” Economic History Department Working Papers no. 68, London School of Economics, 2003.

Elvin, Mark. The Pattern of the Chinese Past. Stanford: Stanford University Press, 1973.

Flynn, D. O. and Giráldez, Arturo. “Born with a ‘Silver Spoon’: The Origin of World Trade.” Journal of World History 6 no. 2 (1995): 201–21.

Ho, Ping-ti. “Early-Ripening Rice in Chinese History.” Economic History Review Ser. 2 (1956): 200–18.

Ho, Ping-ti. The Ladder of Success in Imperial China: Aspects of Social Mobility, 1368–1911. New York: Columbia University Press, 1962.

Hobson, J. M. The Eastern Origins of Western Civilisation. Cambridge: Cambridge University Press, 2004.

Huntington, S. P. The Clash of Civilisations and the Remaking of World Order. New York: Simon and Schuster, 1996.

Jones, E. L., Lionel Frost and Colin White. Coming Full Circle: An Economic History of the Pacific Rim. Melbourne and Oxford: Oxford University Press, 1993.

Kennedy, Paul. The Rise and Fall of the Great Powers. New York: Random House, 1987.

Myers, R. H. The Chinese Peasant Economy: Agricultural Development in Hopei and Shangtung, 1890–1949. Cambridge, MA: Harvard University Press, 1970.

Needham, Joseph, editor. Science and Civilisation in China. Cambridge: Cambridge University Press, 1954–2000.

Perkins, Dwight. Agricultural Development in China, 1368–1968. Edinburgh: Edinburgh University Press, 1969.

Pomeranz, Kenneth. The Great Divergence: Europe, China and the Making of the Modern World Economy. Princeton: Princeton University Press, 2000.

Rawski, E. S. Education and Popular Literacy in Ch’ing China. Ann Arbor: University of Michigan Press, 1979.

Skinner, G. W. “Marketing and Social Structure in Rural China.” Journal of Asian Studies 24 (1964–65): 3–44, 195–228, 363–400.

Citation: Deng, Kent. “Economic History of Premodern China”. EH.Net Encyclopedia, edited by Robert Whaples. November 7, 2004. URL
http://eh.net/encyclopedia/economic-history-of-premodern-china-from-221-bc-to-c-1800-ad/

Economic History Classics

Selections for 2006

During 2006 EH.NET published a series of “Classic Reviews.” Modeled along the lines of our earlier Project 2000 and Project 2001 series, reviewers were asked to “reintroduce” each of the books to the profession, “explaining its significance at the time of publication and why it has endured as a classic.” Each review summarizes the book’s key findings, methods and arguments, as it puts it into the larger context and discusses any weaknesses.

This year’s selections are (alphabetically by author):

Selection Committee

  • Gareth Austin, London School of Economics
  • Ann Carlos, University of Colorado
  • John Murray, University of Toledo
  • Lawrence Officer, University of Illinois at Chicago
  • Cormac Ó Gráda, University College Dublin
  • Peter Scott, University of Reading
  • Catherine Schenk, University of Glasgow
  • Pierre van der Eng, Australian National University
  • Jenny Wahl, Carleton College

Education and Economic Growth in Historical Perspective

David Mitch, University of Maryland Baltimore County

In his introduction to the Wealth of Nations, Adam Smith (1776, p. 1) states that the proportion between the annual produce of a nation and the number of people who are to consume that produce depends on “the skill, dexterity, and judgment with which its labour is generally applied.” In recent decades, analysts of economic productivity in the United States during the twentieth century have made allowance for Smith’s “skill, dexterity, and judgment” of the labor force under the rubric of labor force quality (Ho and Jorgenson 1999; Aaronson and Sullivan 2001; DeLong, Goldin, and Katz 2003). These studies have found that a variety of factors have influenced labor force quality in the U.S., including age structure and workforce experience, female labor force participation, and immigration. One of the most important determinants of labor force quality has been years of schooling completed by the labor force.

Data limitations complicate generalizing these findings to periods before the twentieth century and to geographical areas beyond the United States. However, the rise of modern economic growth over the last few centuries seems to roughly coincide with the rise of mass schooling throughout the world. The sustained growth in income per capita evidenced in much of the world over the past two to two and a half centuries is a marked divergence from previous tendencies. Kuznets (1966) used the phrase “modern economic growth” to describe this divergence and he placed its onset in the mid-eighteenth century. More recently, Maddison (2001) has placed the start of sustained economic growth in the early nineteenth century. Maddison (1995) estimates that per capita income between 1520 and 1992 increased some eight times for the world as a whole and up to seventeen times for certain regions. Popular schooling was not widespread anywhere in the world before 1600. By 1800, most of North America, Scandinavia, and Germany had achieved literacy rates well in excess of fifty percent. In France and England literacy rates were closer to fifty percent and school attendance before the age of ten was certainly widespread, if not yet the rule. It was not until later in the nineteenth century and the early twentieth century that Southern and Eastern Europe were to catch up with Western Europe and it was only the first half of the twentieth century that saw schooling become widespread through much of Asia and Latin America. Only later in the twentieth century did schooling begin to spread throughout Africa. The twentieth century has seen the spread of secondary and university education to much of the adult population in the United States and to a lesser extent in other developed countries.[2] However, correlation is not causation; rising income per capita may have contributed to rising levels of schooling, as well as schooling to income levels. Thus, the contribution of rising schooling to economic growth should be examined more directly.

Estimating the Contribution of the Rise of Mass Schooling to Economic Growth: A Growth Accounting Perspective

Growth accounting can be used to estimate the general bounds of the contribution the rise of schooling has made to economic growth over the past few centuries.[3] A key assumption of growth accounting is that factors of production are paid their social marginal products. Growth accounting starts with estimates of the growth of individual factors of production, as well as the shares of these factors in total output and estimates of the growth of total product. It then apportions the growth in output into that attributable to growth in each factor of production specified in the analysis and into that due to a residual that cannot otherwise be explained. Estimates of how much schooling has increased the productivity of individual workers, combined with estimates of the increase in schooling completed by the labor force, yield estimates of how much the increase in schooling has contributed to increasing output. A growth accounting approach offers the advantage that with basic estimates (or at least possible ranges) for trends in output, labor force, schooling attainment, and preferably capital stock and factor shares, it yields estimates of schooling’s contribution to economic growth. An important disadvantage is that it relies on indirect estimates at the micro level for how schooling influences productivity at the aggregate level, rather than on direct empirical evidence.[4]

Back-of-the-envelope estimates of increases in income per capita attributable to rising levels of education over a period of a few centuries can be obtained by considering possible ranges of levels of schooling increases as measured in average years of schooling along with possible ranges of rates of return per year of schooling, in terms of the percentage by which a year of schooling raises earnings and common ranges for labor’s share in national income. By using a Cobb-Douglas specification of the aggregate production function with two factors of production, labor and physical capital, one can arrive at the following equation for the ratio between final and initial national income per worker due to increases in average school years completed between the two time periods:

1) (Y/L)1/ (Y/L)0 = ( (1 + r )S1 - S0 )α

Where Y = output, L = the labor force, r = the percent by which a year of schooling increases labor productivity, S is the average years of schooling completed by the labor force in each time period, α is labor’s share in national income, and the subscripts 0 and 1 denote the initial and final time period over which the schooling changes occur.[5] This formulation is a partial equilibrium one, holding constant the level of physical capital. However, the level of physical capital should be expected to increase in response to improved labor force quality due to more schooling. A common specification of a growth model that allows for such responses of physical capital implies the following ratio between final and initial national income per worker (see Lord 2001, 99-100):

2) (Y/L)1/ (Y/L)0 = ( (1 + r )S1 - S0 )

The bounds on increases in years of schooling can be placed at between zero and 16, that is, between a completely unschooled and presumably illiterate population to one in which a college education is universal. As bounds on returns to increasing earnings per year of schooling, one can employ Krueger and Lindahl’s (2001) survey of results from recent estimates of earnings functions, which finds that returns range from 5 percent to 15 percent. The implications of varying these two parameters are reported in Tables 1A and 1B. Table 1A reports estimates based on the partial equilibrium specification holding constant the level of physical capital in equation 1). Table 1B reports estimates allowing for a changing level of physical capital as in equation 2). Labor’s share of income has been set at a commonly used value of 0.7 (see DeLong, Goldin and Katz 2003, 29; Maddison 1995, 255).

Table 1A
Increase in per Capita Income over a Base Level of 1 Attributable to Hypothetical Increases in Average Schooling Levels — Holding the Physical Capital Stock Constant

Percent Increase in Earnings per Extra Year of Schooling
Increase in Average
Years of Schooling
5% 10% 15%
1 1.035 1.07 1.10
3 1.11 1.22 1.34
6 – illiteracy to
universal grammar school
.23 1.49 1.80
12 – illiteracy to
universal high school
1.51 2.23 3.23
16 – illiteracy to
universal college
1.73 2.91 4.78

Table 1B
Increase in per Capita Income over a Base Level of 1 Attributable to Hypothetical Increases in Average Schooling Levels — Allowing for Steady-state Changes in the Physical Capital Stock

Percent Increase in Earnings per Extra Year of Schooling
Increase in Average
Years of Schooling
5% 10% 15%
1 1.05 1.10 1.15
3 1.16 1.33 1.52
6 – illiteracy to
universal grammar school
1.34 1.77 2.31
12 – illiteracy to
universal high school
1.79 3.14 5.35
16 – illiteracy to
universal college
2.18 4.59 9.36

The back-of-the-envelope calculations in Tables 1A and 1B make two simple points. First, schooling increases have the potential to explain a good deal of estimated long-term increases in per capita income. With the average member of an economy’s labor force embodying investments of twelve years of schooling and a moderate ten-percent rate of return per year of schooling and no increase in the capital stock, at least 17 percent of Maddison’s eight-fold increase in per capita income can be accounted for (i.e. 1.23/7) by rising schooling. Indeed, a 16 year schooling increase allowing for steady-state capital stock increases and at 15 percent per year return overexplains Maddison’s eight-fold increase (8.36/7). After all, if schooling has had substantial effects on the productivity of individual workers, if a sizable share of the labor force has experienced improvements in schooling completed and with labor’s share of output greater than half, then the contribution of rising schooling to increasing output should be large.

Second, the contribution of schooling increases that have actually occurred historically to per capita income increases is more modest accounting for at best about one fifth of Maddison’s one-fold increase. Thus an increase in average years of schooling completed by the labor force of 6 years, roughly that entailed by the spread of universal grammar schooling, would account for 19 percent (1.31/7) of an eight-fold per capita output increase at a high 15 percent rate of return allowing for steady state changes in the physical capital stock (Table 1B). And at a low 5 percent return per year of schooling, the contribution would be only 5 percent of the increase (0.34/7). Making lower-level elementary education universal would entail increasing average years of schooling completed by the labor force by 1 to 3 years; in most circumstances this is not a trivial accomplishment as measured by the societal resources required. However, even at a high 15 percent per year return and allowing for steady state changes in the capital stock (Table 1B), the contribution of a 3 year increase in average years of schooling would only account for 7 percent (0.52/7) of Maddison’s eight-fold increase.

How do the above proposed bounds on schooling increases compare with possible increases in the physical capital stock? Kendrick (1993, 143) finds a somewhat larger growth rate in his estimated human capital stock than in the stock of non-human capital for the U.S. between 1929 and 1969, though for the sub-period 1929-48, he estimates a slightly higher growth rate for the non-human capital stock. In contrast, Maddison (1995, 35-37) estimates larger increases in the value of non-residential structures per worker and in the value of machinery and equipment per worker than in years of schooling per adult for the U.S. and the U.K. between 1820 and 1992. For the U.S., he estimates that the value of non-residential structures per worker rose by 21 times and the value of machinery and equipment per worker rose by 141 times in comparison with a ten-fold increase in the years of schooling per adult between 1820 and 1992. For the U.K., his estimates indicate a 15 fold increase in the value of structures per worker and a 97 fold increase in value of machinery and equipment per worker in contrast with a seven-fold increase in average years of schooling between 1820 and 1992. It should be noted that these estimates are based on cumulated investments in schooling to estimate human capital; that is, they are based on the costs incurred to produce human capital. Davies and Whalley (1991, 188-189) argue that estimates based on the alternative approach of calculating the present value of future earnings premiums attributable to schooling and other forms of human capital yield substantially higher estimates of human capital due to capturing inframarginal returns above costs accruing to human capital investments. For the growth accounting approach employed here, the cumulated investment or cost approach would seem the appropriate one. Are there more inherent bounds on the accumulation of human capital over time than non-human capital? One limit on the accumulation of human capital is set by how much of one’s potential working life a worker is willing to sacrifice for purposes of improving education and future productivity. This can be compared with the corresponding limit on the willingness to sacrifice current consumption for wealth accumulation.

However, this discussion makes no explicit allowance for changes over time in the quality of schooling. Improvements in teacher training and teacher recruitment along with ongoing curriculum developments among other factors could lead to ongoing improvements over time in how much a year of school attendance would improve the underlying future productivity of the student. Woessmann (2002) and Hanushek and Kimcoe (2000) have recently argued for the importance of allowing for variation in school quality in estimating the impact of cross national variation in human capital levels on economic growth. Woessmann (2002) makes the suggestion that allowing for improvements in the quality of schooling can remove the upper bounds on schooling investment that would be present if this was simply a matter of increasing the percentage of the population enrolled in school at given levels of quality. While there would seem to be inherent bounds on the proportion of one’s life that one is willing to spend in school, such bounds would not apply to increases in expenditures and other means of improving school quality.

Expenditures per pupil appear to have risen markedly over long periods of time. Thus, in the United States, expenditure per pupil in public elementary and secondary schools in constant 1989-90 dollars rose by over 6 times between 1923-24 and 1973-74 (National Center for Educational Statistics, 60). And in Victorian England, nominal expenditures per pupil in state subsidized schools more than doubled between 1870 and 1900, despite falling prices (Mitch 1982, 204). These figures do not control for the rising percentage of students enrolled in higher grade levels (presumably at higher expenditure per student), general rises in living standards affecting teachers’ salaries and other factors influencing the abilities of those recruited into teaching. Nevertheless, they suggest the possibility of sizable improvements over time in school quality.

It can be argued that implicitly allowance is made for improvements in school quality in the rate of return imputed per year of schooling completed on average by the labor force. Insofar as schools became more effective over time in transmitting knowledge and skills, the economic return per year of schooling should have increased correspondingly. Thus any attempt to allow for school quality in a growth accounting analysis should be careful to avoid double counting school quality in both school inputs and in returns per year of schooling.

The benchmark for the impact of increases in average levels of schooling completed in Table 1 are Maddison’s estimates of changes in output per capita over the last two centuries. In fact, major increases in schooling levels have most commonly been compressed into intervals of several decades or less, rather than periods of a century or more. This would imply that the contribution to output growth of improvements in labor force quality due to increases in schooling levels would have been concentrated primarily in periods of marked improvement in schooling levels and would have been far more modest during periods of more sluggish increase in educational attainment. In order to gauge the impact of the time interval over which changes in schooling occur on growth rates of output, Table 2 provides the change in average years of schooling implied by some of the hypothetical changes in average levels of schooling attainment reported in Table 1 for various time periods.

Table 2

Annual Change in Average Years of Schooling per Adult per Year Implied by Hypothetical Figures in Table 1

Time period over which increase occurred
Total Increase in
Average Years of
Schooling per Adult
5 years 10 years 30 years 50 years 100 years
1 0.2 0.1 0.033 0.02 0.01
3 0.6 0.3 0.1 0.06 0.03
6 1.2 0.6 0.2 0.12 0.06
9 1.8 0.9 0.3 0.18 0.09

Table 3 translates these rates of schooling growth into output growth rates using the partial equilibrium framework of equation 1) using a value for the share of labor of 0.7 as above. The contribution of schooling to growth rates of output and output per capita can be calculated as labor’s share times the percentage return per year of schooling on earnings times the annual increase in average years of schooling.

Table 3A
Contribution of Schooling for Large Increases in Schooling to Annual Growth Rates of Output

Length of time for schooling increase 6 year rise in average years of schooling 6 year rise in average years of schooling 9 year rise in average years of schooling 9 year rise in average years of schooling
5% return 10 % return 5 % return 10% return
30 years 0.7% 1.4% 1.05% 2.1%
50 years 0.42% 0.84% 0.63% 1.26%

Table 3B
Contribution of Schooling for Small to Modest Increases in Schooling to Annual Growth Rates of Output

Length of time for schooling increase 1 year rise in average years of schooling 1 year rise in average years of schooling 3 year rise in average years of schooling 3 year rise in average years of schooling
5 % return 10 % return 5% return 10% return
5 years 0.7% 1.4% 2.1% 4.2%
10 years 0.35% 0.7% 1.05% 2.1%
20 years 0.175% 0.35% 0.525% 1.05%
30 years 0.12% 0.23% 0.35% 0.7%
50 years 0.07% 0.14% 0.21% 0.42%
100 years 0.035% 0.07% 0.105% 0.21%

The case of the U.S. in the twentieth century as analyzed in DeLong, Goldin and Katz (2003) offers an example of how apparent limits or at least resistance to ongoing expansion of schooling have lowered the contribution of schooling to growth. They find that between World War I and the end of the century, improvements in labor quality attributable to schooling can account for about a quarter of the growth of output per capita in the U.S. during this period; this is similar in magnitude to Denison’s (1962) estimates for the first part of this period. This era saw the mean years of schooling completed by age 35 increased from 7.4 years for an American born in 1875 to 14.1 years for an American born in 1975 (DeLong, Goldin and Katz 2003, 22). However, in the last two decades of the twentieth century the rate of increase of mean years of schooling completed leveled off and correspondingly the contribution of schooling to labor quality improvements fell almost in half.

Maddison (1995) has compiled estimates of the average years of schooling completed for a number of countries going back to 1820. It is indicative of the sparseness of schooling completed by adult population estimates that Maddison reports estimates for only 3 countries, the U.S., the U.K., and Japan, all the way back to 1820. Maddison’s figures come from other studies and their reliability warrants further critical scrutiny than can be accorded them here. Since systematic census evidence on adult educational attainment did not begin until the mid-twentieth century, estimates of labor force educational attainment prior to 1900 should be treated with some skepticism. Nevertheless, Maddison’s estimates can be used to give a sense of plausible changes in levels of schooling completed over the last century and a half. The average increases in years of schooling per year for various time periods implied by Maddison’s figures are reported in Table 4. Maddison constructed his figures by giving primary education a weight of 1, secondary education a weight of 1.4, and tertiary, a weight of 2 based on evidence on relative earnings for each level of education.

Table 4
Estimates of the Annual Change in Average Years of Schooling per Person aged 15-64 for Selected Countries and Time Periods

Country 1913-1973 1870-1973 1870-1913
U.S. 0 .112 0.107 0.092
France 0.0783
Germany 0.053
Netherlands 0.064
U.K. 0.0473 0.0722 0.102
Japan 0.112 0.106 0.090

Source: Maddison (1995), 37, Table 2-3

Table 5
Annual Growth Rates in GDP per Capita

Region 1820-70 1870-1913 1913-50 1950-73 1973-92
12 West European Countries 0.9 1.3 1.2 3.8 1.8
4 Western Offshoots 1.4 1.5 1.3 2.4 1.2
5 South European Countries n.a. 0.9 0.7 4.8 2.2
7 East European Countries n.a. 1.2 1.0 4.0 -0.8
7 Latin American Countries n.a. 1.5 1.9 2.4 0.4
11 Asian Countries 0.1 0.7 -0.2 3.1 3.5
10 African countries n.a. n.a. 1.0 1.8 -0.4

Source: Maddison (1995), 62-63, Table 3-2.

In comparing Tables 2 and 4 it can be observed that the estimated actual changes in years of schooling compiled by Maddison (as well as the average over 55 countries reported by Lichtenberg (1994) for the third quarter of the twentieth century) fall within a lower bound set in the hypothetical ranges of a 3 year increase in average schooling spread over a century and an upper bound set by a 6 year increase in average schooling spread over 50 years.

Equations 1) and 2) above assume that each year of schooling of a worker has the same impact on productivity. In fact it has been common to find that the impact of schooling on productivity varies according to level of education. While the rate of return as a percentage of costs tends to be higher for primary than secondary schooling, which is in turn higher than tertiary education, this reflects the far lower costs, especially lower foregone earnings, of primary schooling (Psacharopolous and Patrinos 2004). The earnings premium per year of schooling tends to be higher for higher levels of education and this earnings premium, rather than the rate of return as a percentage costs, is the appropriate measure for assessing the contribution of rising schooling to growth (OECD 2001). Accordingly growth accounting analyses commonly construct schooling indexes weighting years of schooling according to estimates of each year’s impact on earnings (see for example Maddison 1995; Denison 1962). DeLong, Goldin and Katz (2003) use chain weighted indexes of returns according to each level of schooling. A rough approximation of the effect of allowing for variation in economic impact by level of schooling in the analysis in Table 1 is simply to focus on the mid-range 10 percent rate of return as an approximate average of high, low, and medium level returns.[6]

The U.S. is notable for rapid expansion in schooling attainment over the twentieth century at both the secondary and tertiary level, while in Europe widespread expansion has tended to focus on the primary and lower secondary level. These differences are evident in Denison’s estimates of the actual differences in educational distribution between the United States and a number of Western European countries in the mid-twentieth century (see Table 6).

Table 6

Percentage Distributions of the Male Labor Force by Years of Schooling Completed

Years of School Completed United States 1957 France 1954 United Kingdom 1951 Italy 1961
0 1.4 0.3 0.2 13.7
1-4 5.7 2.4 0.2 26.1
5-6 6.3 19.2 0.8 38.0
7 5.8 21.1 4.0 4.2
8 17.2 27.8 27.2 8.1
9 6.3 4.6 45.1 0.7
10 7.3 4.1 8.4 0.7
11 6.0 6.5 7.3 0.6
12 26.2 5.4 2.5 1.8
13-15 8.3 5.4 2.2 3.0
16 or more 9.5 3.2 2.1 3.1

Source: Denison (1967), 80, Table 8-1.

Some segments of the population are likely to have much greater enhancements of productivity from additional years of schooling than others. Insofar as the more able benefit from schooling compared to the rest of the ability distribution, putting substantially greater relative emphasis on expansion of higher levels of schooling could considerably augment growth rates over a more egalitarian strategy. This result would follow from a substantially greater premium assigned to higher levels of education. However, some studies of education in developing countries have found that they allocate a disproportionate share of resources to tertiary schooling at the expense of primary schooling, reflecting efforts of elites to benefit their offspring. How this has impeded economic growth would depend on the disparity in rates of return among levels of education, a point of some controversy in the economics of education literature (Birdsall 1996; Psacharopoulos 1996).

While allocating schooling disproportionately towards the more able in a society may have promoted growth, there would have been corresponding losses stemming from groups that have been systematically excluded or at least restricted in their access to education due to discrimination by factors such as race, gender and religion (Margo 1990). These losses could be attributed in part to the presence of individuals of high ability in groups experiencing discrimination due to failure to provide them with sufficient education to properly utilize their talents. However, historians such as Ashton (1948, 15) have argued that the exclusion of non-Anglicans from English universities prior to the mid-nineteenth century resulted in the channeling of their talents into manufacturing and commerce.

Even if returns have been higher at some levels of education than others, a sustained and substantial increase in labor force quality would seem to entail an egalitarian strategy of widespread increase in access to schooling. The contrast between the rapid increase in access to secondary and tertiary schooling in the U.S. and the much more limited increase in access in Europe during the twentieth century with the correspondingly much greater role for schooling in accounting for economic growth in the U.S. than in Europe (see Denison 1967) points to the importance of an egalitarian strategy in sustaining ongoing increases in aggregate labor force quality.

One would expect on increase in the relative supply of more schooled labor to lead to a decline in the premium to schooling, other things equal. Some recent analyses of the contribution of schooling to growth have allowed for this by specifying a parametric relationship between the distribution of schooling in an economy’s labor force and its impact on output or on a hypothesized intermediary human capital factor (Bils and Klenow 2000).[7]

Direct empirical evidence on trends in the premium to schooling is helpful both to obviate reliance on a theoretical specification and to allow for factors such as technical change that may have offset the impact of the increasing supply of schooling. Goldin and Katz (2001) have developed evidence on trends in the premium to schooling over the twentieth century that have allowed them to adjust for these trends in estimating the contribution of schooling to economic growth (DeLong, Goldin and Katz 2003). They find a marked fall in the premium to schooling, roughly falling in half between 1910 and 1950. However, they also find that this decline in the schooling premium was more than offset by their estimated increase over this same period in years of schooling completed by the average worker of 2.9 years and hence that on net schooling increases contributed to improved productivity of the U.S. workforce. They estimate increases of 0.5 percent per year in labor productivity due to increased educational attainment between 1910 and 1950 relative to the average total annual increase in labor productivity of 1.62 percent over the entire period 1915 to 2000. For the period since 1960, DeLong, Goldin and Katz find that the premium to education has increased while the increase in educational attainment at first increased and then declined. During this latter period, the increase in labor force quality has declined, as noted above, despite a widening premium to education, due to the slowing down in the increase in educational attainment.

Classifying the Range of Possible Relationships between Schooling and Economic Growth

In generalizing beyond the twentieth-century U.S. experience, allowance should be made both for the role of influences other than education on economic growth and for the possibility that the impact of education on growth can vary considerably according to the historical situation. In fact to understand why and how education might contribute to economic growth over the range of historical experience, it is important to investigate the variation in the impact of education on growth that has occurred historically. In relating education to economic growth, one can distinguish four basic possibilities.

The first is one of stagnation in both educational attainment and in output per head. Arguably, this was the most common situation throughout the world until 1750 and even after that date characterized Southern and Eastern Europe through the late nineteenth century, as well as most of Africa, Asia, and Latin American through the mid-twentieth century. The qualifier “arguably” is inserted here, because this view of the matter almost surely makes inadequate allowance for the improvements in informal acquisition of skills through family transmission and direct experience as well as through more formal non-schooling channels such as guild-sponsored apprenticeships, an aspect to be taken up further below. It also makes no allowance for the possible long-term improvements in per capita income that took place prior to 1750 but have been inadequately documented. Still focusing on formal schooling as the source of improvement in labor force, there is reason to think that this may have been a pervasive situation throughout much of human history.

The second situation is one in which income per capita rose despite stagnating education levels; factors other than improvements in educational attainment were generating economic growth. England during its industrial revolution, 1750 to 1840 is a notable instance in which some historians have argued that this situation prevailed. During this period, English schooling and literacy rates rose only slightly if at all, while income per capita appears to have risen. Literacy and schooling appears to have been of little use in newly created manufacturing occupations such as in cotton spinning. Indeed, literacy rates and schooling actually appears to have declined in some of the most rapidly industrializing areas of England such as Lancashire (Sanderson 1972; Nicholas and Nicholas 1992). Not all have concurred with this interpretation of the role of education in the English industrial revolution and the result depends on how educational trends are measured and how education is specified as affecting output (see Laqueur; Crafts 1995; Mitch 1999). Moreover this makes no allowance for the role of informal acquisition of skills. Boot (1995) argues that in the case of cotton spinners, informal skill acquisition with experience was substantial.

The simplest interpretation of this situation is that other factors contributed to economic growth other than schooling or human capital more generally. The clearest non-human capital explanatory factor would perhaps be physical capital accumulation; another might be foreign trade. However, if one turns to technological advance as a driving force, then this gives rise to the possibility that human capital — at least broadly defined — was if not the underlying force at least a central contributing factor to the industrial revolution. The argument for this possibility is that the improvements in knowledge and skills associated with technological advance are embodied in human agents and hence are forms of human capital. Recent work by Mokyr (2002) would suggest this interpretation. Nevertheless, the British industrial revolution does remain as a prominent instance in which human capital conventionally defined as schooling stagnated in the presence of a notable upsurge in economic growth. A less extreme case is provided by the post-World War II European catch-up with the United States, as Denison’s (1967) growth accounting analysis indicates that this occurred despite slower European increases in educational attainment due to other factors offsetting this. Historical instances such as that of the British industrial revolution call into question the common assumption that education is a necessary prerequisite for economic growth (see Mitch 1990).

The third situation is one in which rising educational attainment corresponds with rising rates of economic growth. This is the situation one would expect to prevail if education contributes to economic productivity and if any negative factors are not sufficient to offset this influence. One sub-set of instances would be those in which very large and reasonably compressed increases in the educational attainment of the labor force occurred. One important example of this is the twentieth century U.S., with the high school movement followed by increases in college attendance, as noted above. Another would be those of certain East Asian economies since World War II, as documented in the growth accounting analysis by Young (1995) of the substantial contributions of their rising educational attainment to their rapid growth rates. Another sub-set of cases corresponding to more modest increases in schooling can be interpreted as applying either to countries experiencing schooling increases focussed at the elementary level, as in much of Western Europe over the nineteenth century. The so-called literacy campaigns, as in the Soviet Union and Cuba (see Arnove and Graff eds. 1987) in the early and mid-twentieth century with modest improvements in educational attainment over compressed time periods of just a few decades could also be viewed as fitting into this sub-category. However, whether there were increases in output per capita corresponding to these more modest increases in educational attainment remains to be established.

The fourth situation is one in which economic growth has stagnated despite the presence of marked improvements in educational attainment. Possible examples of this situation would include the early rise of literacy in some Northern European areas, such as Scotland and Scandinavia, in the seventeenth and eighteenth centuries (see Houston 1988; Sandberg 1979) and some regions of Africa and Asia in the later twentieth century (see Pritchett 2001). One explanation of this situation is that it reflects instances in which any positive impact of educational attainment is small relative to other influences having an adverse impact. But one can also interpret it as reflecting situations in which incentive structures direct educated people into destructive and transfer activities inimical to economic growth (see North 1990; Baumol 1990; Murphy, Shleifer, and Vishny 1991).

Cross-country studies of the relationship between changes in schooling and growth since 1960 have yielded conflicting results which in itself could be interpreted as supporting the presence of some mix of the four situations just surveyed. A number of studies have found at best a weak relationship between changes in schooling and growth (Pritchett 2001; Bils and Klenow 2000); others have found a stronger relationship (Topel 1999). Much seems to depend on issues of measurement and on how the relationship between schooling and output is specified (Temple 2001b; Woessmann 2002, 2003).

The Determinants of Schooling

Whether education contributes to economic growth can be seen as depending on two factors, the extent to which educational levels improve over time and the impact of education on economic productivity. The first factor is a topic for extended discussion in its own right and no attempt will be made to consider it in depth here. Factors commonly considered include rising income per capita, distribution of political power, and cultural influences (Goldin 2001, Lindert 2004, Mariscal and Sokoloff 2000, Easterlin 1981; Mitch 2004). The issue of endogeneity of determination has often been raised with respect to the determinants of schooling. Thus, it is plausible that rising income contributes to rising levels of schooling and that the spread of mass education can influence the distribution of political power as well as the reverse. While these are important considerations, they are sufficiently complex to warrant extended attention in their own right.[8]

Influences on the Economic Impact of Schooling

Insofar as schooling improves general human intellectual capacities, it could be seen as having a universal impact irrespective of context. However, Rosenzweig (1995; 1999) has noted that the even the general influence of education on individual productivity or adaptability depend on the complexity of the situation. He notes that for agricultural tasks primarily involving physical exertion, no difference in productivity is evident between workers according to education levels; however, in more complex allocative decisions, education does enhance performance. This could account for findings that literacy rates were low among cotton spinners in the British industrial revolution despite findings of substantial premiums to experience (Sanderson 1972; Boot 1995). However, other studies have found literacy to have a substantial positive impact on labor productivity in cotton textile manufacture in the U.S., Italy, and Japan (Bessen 2003; A’Hearn 1998, Saxonhouse 1977) and have suggested a connection between literacy and labor discipline.

A more macro influence is the changing sectoral composition of the economy. It is common to suggest that the service and manufacturing sector have more functional uses for educated labor than the agricultural sector and hence that the shift from agriculture to industry in particular will lead to greater use of educated labor and in turn to require more educated labor forces. However, there are no clear theoretical or empirical grounds for the claim that agriculture makes less use of educated labor than other sectors of the economy. In fact, farmers have often had relatively high literacy rates and there are more obvious functional uses for education in agriculture in keeping accounts and keeping up with technological developments than in manufacturing. Nilsson et al (1999) argue that the process of enclosure in nineteenth-century Sweden, with the increased demands for reading and writing land transfer documents that this entailed, increased the value of literacy in the Swedish agrarian economy. The findings noted above that those in cotton textile occupations associated with early industrialization in Britain had relatively low literacy rates is one indication of the lack of any clear cut ranking across broad economic sectors in the use of educated labor.

Changes in the organization of decision making within major sectors as well as changes in the composition of production within sectors are more likely to have had an impact on demands for educated labor. Thus, within agriculture the extent of centralization or decentralization of decision making, that is the extent to which farm work forces consisted of farmers and large numbers of hired workers or of large numbers of peasants each with scope for making allocative decisions, is likely to have affected the uses made of educated labor in agriculture. Within manufacturing, a given country’s endowment of skilled relative to unskilled labor has been seen as influencing the extent to which openness to trade increases skill premiums, though this entails endogenous determination (Wood 1995).

Technological advance would have tended to boost the demand for more skilled and educated labor if technological advance and skills are complementary, as is often asserted.

However, there is no theoretical reason why technology and skills need be complementary and indeed concepts of directed technological change or induced innovation would suggest that in the presence of relatively high skill premiums, technological advance would be skill saving rather than skill using. Goldin and Katz (1998) have argued that the shift from the factory to continuous processing and batch production associated with the shift of power sources from steam to electricity in the early twentieth century lead to rising technology skill complementarity in U.S. manufacturing. It remains to be established how general this trend has been. It could be related to the distinction made between the dominance in the United States of extensive growth in the nineteenth century due to the growth of factors of production such as labor and capital and the increasing importance of intensive growth in the twentieth century. Intensive growth is often associated with technological advance and a presumed enhanced value for education (Abramovitz and David 2000). Some analysts have emphasized the importance of capital-skill complementarity. For example, Galor and Moav (2003) point to the level of the physical capital stock as a key influence on the return to human capital investment; they suggest that once physical capital stock accumulation surpassed a certain level, the positive impact of human capital accumulation on the return to physical capital became large enough that owners of physical capital came to support the rise of mass schooling. They cite the case of schooling reform in early twentieth century Britain as an example.

Even sharp declines in the premiums to schooling do not preclude a significant impact of education on economic growth. DeLong, Goldin and Katz’s (2003) growth accounting analysis for the twentieth century U.S. makes the point that even at modest positive returns to schooling on the order of 5 percent per year of schooling, with large enough increases in educational attainment, the contribution to growth can be substantial.

Human Capital

Economists have generalized the impact of schooling on labor force quality into the concept of human capital. Human capital refers to the investments that human beings make in themselves to enhance their economic productivity. These investments can take on many forms and include not only schooling but also apprenticeship, a healthy diet, and exercise, among other possibilities. Some economists have even suggested that more amorphous societal factors such as trust, institutional tradition, technological know how and innovation can all be viewed as forms of human capital (Temple 2001a; Topel 1999; Mokyr 2002). Thus broadly defined, human capital would appear as a prime candidate for explaining much of the difference across nations and over time in output and economic growth. However, gaining much insight into the actual magnitudes and the channels of influence by which human capital might influence economic growth requires specification of both the nature and determinants of human capital and how human capital affects aggregate production of an economy.

Much of the literature on human capital and growth makes the implicit assumption that some sort of numerical scale exists for human capital, even if multidimensional and even if unobservable. This in turn implies that it is meaningful to relate levels and changes of human capital to levels of income per capita and rates of economic growth. Given the multiplicity of factors that influence human knowledge and skill and in turn how these influence labor productivity, difficulties would seem likely to arise with attempts to measure aggregate human capital similar to those that have arisen with attempts to specify and measure the nature of human intelligence. Woessmann (2002, 2003) provides useful surveys of some of the issues involved in attempting to specify human capital at the aggregate level appropriate for relating it to economic growth.

One can distinguish between approaches to the measurement of human capital that focus on schooling, as in the discussion above, and those that take a broader view. Broad view approaches try to capture all investments that may have improved human productivity from whatever source, including not just schooling but other productivity enhancing investments, such as on-the-job training. The basic premise of broad view approaches is that for an aggregate economy, the income going to labor over and above what that labor would earn if it were paid the income of an unskilled worker can be viewed as human capital. This measure can be constructed in various ways including as a ratio using unskilled labor earnings as the denominator as in Mulligan and Sala-I-Martin (1997) or using the share of labor income not going as compensation for unskilled labor as in Crafts (1995) and Mitch (2004). Mulligan and Sala-I-Martin (2000) point to some of the major index number problems that can arise in using this approach to aggregate heterogeneous workers.

Crafts and Mitch find that for Britain during its late eighteenth and early nineteenth century industrial revolution between one-sixth and one-fourth of income per capita can be attributed to human capital measured as the share of labor income not going as compensation for unskilled labor.

One approach that has been taken recently to estimate the role of human capital differences in explaining international differences in income per capita is to consider changes in immigrant earnings between origin and destination countries along with differences between immigrant and native workers in the destination country. Olson (1996) suggested that the large increase in earnings of immigrants commonly observed in moving from a low income to a high income country points to a small role for human capital in explaining the wide variation in per capita income across countries. Hendricks (2002) has used differences between immigrant and native earnings in the U.S. to estimate the contribution of otherwise unobserved skill differences to explaining differences in income per capita across countries and finds that they account for only a small part of the latter differences. Hendricks’ approach raises the issue of whether there could be long-term increases in otherwise unobserved skills that could have contributed to economic growth.

The Informal Acquisition of Human Capital

One possible source of such skills is through the informal acquisition of human capital through on-the-job experience. Insofar as work has been common from early adolescence onwards, the issue arises of why the aggregate stock of skills acquired through experience would vary over time and thus influence rates of economic growth. Some types of on-the-job experience which contribute to economic productivity, such as apprenticeship, may entail an opportunity cost and aggregate trends in skill accumulation will be influenced by societal willingness to incur such opportunity costs.

Insofar as schooling continues through adolescence, this can interfere with the accumulation of workforce experience. DeLong, Goldin and Katz (2003) note the tradeoff between rising average years of schooling completed and decreasing years of labor force experience in influencing labor force quality of the U.S. labor force in the last half of the twentieth century. Connolly (2004) has found that informal experience played a relatively greater role in Southern economic growth than for other regions of the United States.

Hansen (1997) has also distinguished the academically-oriented secondary schooling the United States developed in the late nineteenth and early twentieth century from the vocationally-oriented schooling and apprenticeship system that Germany developed over the same time period. Goldin (2001) argues that in the United States the educational system developed general abilities suitable for the greater opportunities for geographical and occupational mobility that prevailed there, while specific vocational training was more suitable for the more restricted mobility opportunities in Germany.

Little evidence exists on whether long-term trends in informal opportunities for skill acquisition have influenced growth rates. However, Smith’s (1776) view of the importance of the division of labor in influencing productivity would suggest that the impact of trends in these opportunities may well have been quite sizable.

Externalities from Education

Economists commonly claim that education yields benefits to society over and above the impact on labor market productivity perceived by the person receiving the education. These benefits can include impacts on economic productivity, such as impacts on technological advance. They can also include non-labor market benefits. Thus McMahon (2002, 11) in his assessment of the social benefits of education includes not only direct effects on economic productivity but also impacts on a) population growth rates and health b) democratization, political stability, and human rights, c) the environment, d) reduction of poverty and inequality, e) crime and drug use, and f) labor force participation. While these effects may appear to involve primarily non-market activity and thus would not be reflected in national output measures and growth rates, factors such as political stability, democratization, population growth, and health have obvious consequences for prospects for long-term growth. However, allowance should be made for the simultaneous influence of the distribution of political power and life expectancy on societal investments in schooling.

For the period since 1960, numerous studies have employed cross country variation in various estimates of human capital and income per capita to directly estimate the impact of human capital on levels of income per capita and growth. A central goal of many such estimates is to see if there are externalities to education on output over and above the private returns estimated from micro data. The results have been conflicting and this has been attributed not only to problems of measurement error but also to differences in specification of human capital and its impact on growth. There does not appear to be strong evidence of large positive externalities to human capital (Temple 2001a). Furthermore, McMahon (2004) reports some empirical specifications which yield substantial indirect long-run effects.

For the period before 1960, limits on the availability of data on schooling and income have limited the use of this empirical regression approach. Thus, any discussion of the impact of externalities of education on production is considerably more conjectural. The central role of government, religious, and philanthropic agencies in the provision of schooling suggests the presence of externalities. Politicians and educators more frequently justified government and philanthropic provision of schooling by its impacts on religious and moral behavior than by any market failure resulting in sub-optimal provision of schooling from the standpoint of maximizing labor productivity. Thus, Adam Smith in his discussion of mass schooling in The Wealth of Nations, places more emphasis on its value to the state in enhancing orderliness and decency while reducing the propensity to popular superstition than on its immediate value in enhancing the economic productivity of the individual worker.

The Impact of the Level of Human Capital on Rates of Economic Growth

The approaches considered thus far relate changes in educational attainment of the labor force to changes in output per worker. An alternative, though not mutually exclusive, approach is to relate the level of educational attainment of an economy’s labor force to its rate of economic growth. The argument for doing so is that a high but unchanging level of educational attainment should contribute to growth by facilitating creativity, innovation and adaptation to change as well as facilitating the ongoing maintenance and improvement of skill in the workforce. Topel (1999) has argued that there may not be any fundamental difference between the two types of approach insofar as ongoing sources of productivity advance and adaptation to change could be viewed as reflecting ongoing improvements in human capital. Nevertheless, some empirical studies based on international data for the late twentieth century have found that a country’s level of educational attainment has a much stronger impact on its rate of economic growth than its rate of improvement in educational attainment (Benhabib and Spiegel 1994).

The paucity of data on schooling attainment has limited the empirical examination of the relationship between levels of human capital and economic growth for periods before the late twentieth century. However, Sandberg (1982) has argued, based on a descriptive comparison of economies in various categories, that those with high levels of schooling in 1850 subsequently experienced faster rates of economic growth. Some studies, such as O’Rourke and Williamson (1997) and Foreman-Peck and Lains (1999), have found that high levels of schooling and literacy have contributed to more rapid rates of convergence for European countries in the late nineteenth century and at the state level for the U.S. over the twentieth century (Connolly 2004).

Bowman and Anderson (1963), a much earlier study based on international evidence for the mid-twentieth century, can be interpreted in the spirit of relating levels of education to subsequent levels of income growth. Their reading of the cross-country relationship between literacy rates and per capita income at mid-twentieth-century was that a threshold of 40 percent adult literacy was required for a country to have a per capita income above 300 1955 dollars. Some have ahistorically projected back this literacy threshold to earlier centuries although the Bowman and Anderson proposal was intended to apply to mid-twentieth century development patterns.

The mechanisms by which the level of schooling would influence the rate of economic growth are problematic to establish. One can distinguish two general possibilities. One would be that higher levels of educational attainment facilitate adaptation and responsiveness to change throughout the workforce. This would be especially important where a large percentage of workers are in decision making positions such as an economy composed largely of small farmers and other small enterprises. The finding of Foster and Rosenzweig (1996) for late twentieth century India that the rate of return to schooling is higher during periods of more rapid technological advance in agriculture would be consistent with this. Likewise, Nilsson et al (1999) find that literacy was important for nineteenth-century Swedish farmers in dealing with enclosure, an institutional change. The other possibility is that higher levels of educational attainment increase the potential pool from which an elite group responsible for innovation can be recruited. This could be viewed as applying specifically to scientific and technical innovation as in Mokyr (2002) and Jones (2002) — but also to technological and industrial leadership more generally (Nelson and Wright 1992) and to facilitating advancement in society by ability irrespective of social origins (Galor and Tsiddon 1997). Recently, Labuske and Baten (2004) have found that international rates of patenting are related to secondary enrollment rates.

Two issues have arisen in the recent theoretical literature regarding specifying relationships between the level of human capital and rates of economic growth. First, Lucas (1988) in an influential model of the impact of human capital on growth, specifies that the rate of growth of human capital formation depends on initial levels of human capital, in other words that parents’ and teachers’ human capital has a direct positive influence on the rate of growth of learners’ human capital. This specification of the impact of the initial level of human capital allows for ongoing and unbounded growth of human capital and through this its ongoing contribution to economic growth. Such ongoing growth of human capital could occur through improvements in the quality of schooling or through enhanced improvements in learning from parents and other informal settings. While it might be plausible to suppose that improved education of teachers will enhance their effectiveness with learners, it seems less plausible to suppose that this enhanced effectiveness will increase unbounded in proportion to initial levels of education (Lord 2001, 82).

A second issue is that insofar as higher levels of human capital contribute to economic growth through increases in research and development activity and innovative activity more generally, one would expect the presence of scale effects. Economies with larger populations holding constant their level of human capital per person should benefit from more overall innovative activity simply because they have more people engaged in innovative activity. Jones (1995) has pointed out that such scale effects seem implausible if one looks at the time series relationship between rates of economic growth and those engaged in innovative activity. In recent decades the growth of the number of scientists, engineers, and others engaged in innovative activity has far outstripped the actual growth of productivity and other indicators of direct impact on innovation. Thus, one should allow for diminishing returns in the relationship between levels of education and technological advance.

Thus, as with schooling externalities, considering the impact of levels of education on growth offers numerous channels of influence leaving the challenge for the historian of ascertaining their quantitative importance in the past.

Conclusion

This survey has considered some of the basic ways in which the rise of mass education has contributed to economic growth in recent centuries. Given their potential influence on labor productivity, levels and changes in schooling and of human capital more generally have the potential for explaining a large share of increases in per capita output over time. However, increases in mass schooling seem to explain a major share of economic growth only over relatively short periods of time, with a more modest impact over longer time horizons. In some situations, such as the United States in the twentieth century, it appears that improvements in the schooling of the labor force have made substantial contributions to economic growth. Yet schooling should not be seen as either a necessary or sufficient condition for generating economic growth. Factors other than education can contribute to economic growth and in their absence, it is not clear that schooling in itself can contribute to economic growth. Moreover, there are likely limits on the extent to which average years of schooling of the labor force can expand, although improvement in the quality of schooling is not so obviously bounded. Perhaps the most obvious avenue through which education has contributed to economic growth is by expanding the rate of technological change. But as has been noted, there are numerous other possible channels of influence ranging from political stability and property rights to life expectancy and fertility. The diversity of these channels point to both the challenges and the opportunities in examining the historical connections between education and economic growth.

References

Aaronson, Daniel and Daniel Sullivan. “Growth in Worker Quality.” Economic Perspectives, Federal Reserve Bank of Chicago 25, no. 4 (2001): 53-74.

Abramovitz, Moses and Paul David. “American Macroeconomic Growth in the Era of Knowledge-Based Progress: The Long-Run Perspective.” In Cambridge Economic History of the United States, Vol. III, The Twentieth Century, edited by Stanley L. Engerman and Robert E. Gallman, 1-92. New York: Cambridge University Press, 2000.

A’Hearn, Brian. “Institutions, Externalities, and Economic Growth in Southern Italy: Evidence from the Cotton Textile Industry, 1861-1914.” Economic History Review 51, no. 4 (1998): 734-62.

Arnove, Robert F. and Harvey J. Graff, editors. National Literacy Campaigns: Historical and Comparative Perspectives. New York: Plenum Press, 1987.

Ashton, T.S. The Industrial Revolution, 1760-1830. Oxford: Oxford University Press, 1948.

Barro, Robert J. “Notes on Growth Accounting.” NBER Working Paper 6654, 1998.

Baumol, William. “Entrepreneurship: Productive, Unproductive, and Destructive.” Journal of Political Economy 98, no. 5, part 1 (1990): 893-921.

Benhabib, J. and M. M. Spiegel. “The Role of Human Capital in Economic Development: Evidence from Aggregate Cross-country Data.” Journal of Monetary Economics 34 (1994): 143-73.

Bessen, James. “Technology and Learning by Factory Workers: The Stretch-Out at Lowell, 1842.” Journal of Economic History 63, no. 1 (2003): 33-64.

Bils, Mark and Peter J. Klenow. “Does Schooling Cause Growth?” American Economic Review 90, no. 5 (2000): 1160-83.

Birdsall, Nancy. “Public Spending on Higher Education in Developing Countries: Too Much or Too Little?” Economics of Education Review 15, no. 4 (1996): 407-19.

Blaug, Mark. An Introduction to the Economics of Education. Harmondsworth, England: Penguin Books, 1970.

Boot, H.M. “How Skilled Were Lancashire Cotton Factory Workers in 1833?” Economic History Review 48, no. 2 (1995): 283-303.

Bowman, Mary Jean and C. Arnold Anderson. “Concerning the Role of Education in Development.” In Old Societies and New States: The Quest for Modernity in Africa and Asia, edited by Clifford Geertz. Glencoe, IL: Free Press, 1963.

Broadberry, Stephen. “Human Capital and Productivity Performance: Britain, the United States and Germany, 1870-1990.” In The Economic Future in Historical Perspective, edited by Paul A. David and Mark Thomas. Oxford: Oxford University Press, 2003.

Conlisk, John. “Comments” on Griliches. In Education, Income, and Human Capital, edited by W. Lee Hansen. New York: Columbia University Press, 1970.

Connolly, Michelle. “Human Capital and Growth in the Postbellum South: A Separate but Unequal Story.” Journal of Economic History 64, no.2 (2004): 363-99.

Crafts, Nicholas. “Exogenous or Endogenous Growth? The Industrial Revolution Reconsidered.” Journal of Economic History 55, no. 4 (1995): 745-72.

Davies, James and John Whalley. “Taxes and Capital Formation: How Important Is Human Capital?” In National Saving and Economic Performance, edited by B. Douglas Bernheim and John B. Shoven, 163-97. Chicago: University of Chicago Press, 1991.

DeLong, J. Bradford, Claudia Goldin and Lawrence F. Katz. “Sustaining U.S. Economic Growth.” In Agenda for the Nation, edited by Henry Aaron, James M. Lindsay, and Pietro S. Niyola, 17-60. Washington, D.C.: Brookings Institution Press, 2003.

Denison, Edward F. The Sources of Economic Growth in the United Statesand the Alternatives before Us. New York: Committee for Economic Development, 1962.

Denison, Edward F. Why Growth Rates Differ: Postwar Experience in Nine Western Countries. Washington, D.C.: Brookings Institution Press, 1967.

Easterlin, Richard. “Why Isn’t the Whole World Developed?” Journal of Economic History 41, no. 1 (1981): 1-19.

Foreman-Peck, James and Pedro Lains. “Economic Growth in the European Periphery, 1870-1914.” Paper presented at the Third Conference of the European Historical Economics Society, Lisbon, Portugal, 1999..

Foster, Andrew D. and Mark R. Rosenzweig. “Technical Change and Human-capital Returns and Investments: Evidence from the Green Revolution.” American Economic Review 86, no. 4 (1996): 931-53.

Galor, Oded and Daniel Tsiddon. “The Distribution of Human Capital, Technological Progress and Economic Growth.” Journal of Economic Growth 2, no. 1 (1997): 93-124.

Galor, Oded and Omer Moav. “Das Human Kapital.” Brown University Working Paper No. 2000-17, July 2003.

Goldin, Claudia. “The Human Capital Century and American Leadership: Virtues of the Past.” Journal of Economic History 61, no. 2 (2001): 263-92.

Goldin, Claudia and Lawrence F. Katz. “The Origins of Technology-Skill Complementarity.” Quarterly Journal of Economics 113, no. 3 (1998): 693-732.

Goldin, Claudia and Lawrence F. Katz. “Decreasing (and Then Increasing) Inequality in America: A Tale of Two Half-Centuries.” In The Causes and Consequences of Increasing Inequality, edited by Finis Welch, 37-82. Chicago: University of Chicago Press, 2001.

Graff, Harvey.. The Legacies of Literacy: Continuities and Contradictions in Western Culture and Society. Bloomington: Indiana University Press, 1987.

Griliches, Zvi. “Notes on the Role of Education in Production Functions and Growth Accounting.” In Education, Income, and Human Capital, edited by W. Lee Hansen. New York: Columbia University Press, 1970.

Hansen, Hal. “Caps and Gowns: Historical Reflections on the Institutions that Shaped Learning for and at Work in Germany and the United States, 1800-1945.” Ph.D. dissertation, University of Wisconsin, 1997.

Hanushek, Eric and Dennis D. Kimko. “Schooling, Labor-Force Quality, and the Growth of Nations.” American Economic Review 90, no.3 (2000): 1184-1208.

Hendricks, Lutz. “How Important Is Human Capital for Development? Evidence from Immigrant Earnings.” American Economic Review 92, no. 1 (2002): 198-219.

Ho, Mun S. and Dale Jorgenson. “The Quality of the U.S. Work Force, 1948-1995.” Harvard University Working Paper, 1999.

Houston, R.A. Literacy in Early Modern Europe: Culture and Education, 1500-1800.

London: Longman, 1988.

Jones, Charles. “R&D-Based Models of Economic Growth.” Journal of Political Economy 103, no. 4 (1995): 759-84.

Jones, Charles. “Sources of U.S. Economic Growth in a World of Ideas.” American Economic Review 92, no. 1 (2002): 220-39.

Jorgenson, Dale W. and Barbara M. Fraumeni. “The Accumulation of Human and Nonhuman Capital, 1948-84.” In The Measurement of Saving, Investment, and Wealth, edited by R. E. Lipsey and H. S. Tice. Chicago: University of Chicago Press, 1989.

Jorgenson, Dale W. and Zvi Griliches. “The Explanation of Productivity Change.” Review of Economic Studies 34, no. 3 (1967): 249-83.

Kendrick, John W. “How Much Does Capital Explain?” In Explaining Economic Growth: Essays in Honour of Angus Maddison, edited by Adam Szirmai, Bart van Ark and Dirk Pilat, 129-45. Amsterdam: North Holland, 1993.

Krueger, Alan B. and Mikael Lindahl. 2001. “Education for Growth: Why and for Whom?”

Journal of Economic Literature 39, no. 4 (2001): 1101-36.

Krueger, Anne O. “Factor Endowments and per Capita Income Differences among Countries.” Economic Journal 78, no. 311 (1968): 641-59.

Kuznets, Simon. Modern Economic Growth: Rate, Structure and Spread. New Haven: Yale University Press, 1966.

Labuske, Kirsten and Joerg Baten. “Patenting Abroad and Human Capital Formation.” University of Tubingen Working Paper, 2004.

Laqueur, Thomas. “Debate: Literacy and Social Mobility in the Industrial Revolution in England.” Past and Present 64, no. 1 (1974): 96-107.

Lichtenberg, Frank R. “Have International Differences in Educational Attainments Narrowed?” In Convergence of Productivity: Cross-national Studies and Historical Evidence, edited by William J. Baumol, Richard R. Nelson, and Edward N. Wolff, 225-42. New York: Oxford University Press, 1994.

Lindert, Peter H. Growing Public: Social Spending and Economic Growth since the Eighteenth Century. Cambridge: Cambridge University Press, 2004.

Lord, William A. Household Dynamics: Economic Growth and Policy. New York: Oxford University Press, 2002.

Lucas, Robert E., Jr. “On the Mechanics of Economic Development.” Journal of Monetary Economics 22, no. 1 (1988): 3-42.

Maddison, Angus. Monitoring the World Economy, 1820-1992. Paris: OECD, 1995.

Maddison, Angus. The World Economy: A Millennial Perspective. Paris: OECD, 2001.

Margo, Robert A. Race and Schooling in the South, 1880-1950: An Economic History. Chicago: University of Chicago Press, 1990.

Mariscal, Elisa and Kenneth Sokoloff. “Schooling, Suffrage, and the Persistence of Inequality in the Americas, 1800-1945.” InPolitical Institutions and Economic Growth in Latin America: Essays in Policy, History, and Political Economy, edited by Stephen Haber, 159-218. Stanford: Hoover Institution Press, 2000.

Matthews, R.C.O., C. H. Feinstein, and J.C. Odling-Smee. British Economic Growth, 1856-1973. Stanford: Stanford University Press, 1982.

McMahon, Walter. Education and Development: Measuring the Social Benefits. Oxford: Oxford University Press, 2002.

Mitch, David. “The Spread of Literacy in Nineteenth-Century England.” Ph.D. dissertation, University of Chicago, 1982.

Mitch, David. “Education and Economic Growth: Another Axiom of Indispensability?” In Education and Economic Development since the Industrial Revolution, edited by Gabriel Tortella. Valencia: Generalitat Valencia, 1990. Reprinted in The Economic Value of Education: Studies in the Economics of Education, edited by Mark Blaug, 385-401. Cheltenham, UK: Edward Elgar, 1992.

Mitch, David. “The Role of Education and Skill in the British Industrial Revolution.” In The British Industrial Revolution: An Economic Perspective (second edition), edited by Joel Mokyr, 241-79. Boulder, CO: Westview Press, 1999.

Mitch, David. “Education and Skill of the British Labour Force.” In The Cambridge Economic History of Modern Britain, Vol.1, Industrialization, 1700-1860, edited by Roderick Floud and Paul Johnson, 332-56.Cambridge: Cambridge University Press, 2004a.

Mitch, David. “School Finance.” In International Handbook on the Economics of Education, edited by Geraint Johnes and Jill Johnes, 260-97 Cheltenham UK: Edward Elgar, 2004b.

Mokyr, Joel. The Gifts of Athena: Historical Origins of the Knowledge Economy. Princeton: Princeton University Press, 2002.

Mulligan, Casey G. and Xavier Sala-I-Martin. “A Labor Income-based Measure of the Value of Human Capital: An Application to the States of the United States.” Japanand the World Economy 9, no. 2 (1997): 159-91.

Mulligan, Casey B. and Xavier Sala-I-Martin. “Measuring Aggregate Human Capital.” Journal of Economic Growth 5, no. 3 (2002): 215-52.

Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny. “The Allocation of Talent: Implications for Growth.” Quarterly Journal of Economics 106, no. 2 (1991): 503-30.

National Center of Education Statistics. 120 Years of American Education: A Statistical Portrait. Washington, D.C.: U.S. Department of Education, Office of Educational Research and Improvement, 1993.

Nelson, Richard R. and Gavin Wright. “The Rise and Fall of American Technological Leadership: The Postwar Era in Historical Perspective.” Journal of Economic Literature 30, no. 4 (1992): 1931-64.

Nicholas, Stephen and Jacqueline Nicholas. “Male Literacy, ‘Deskilling’ and the Industrial Revolution.” Journal of Interdisciplinary History 23, no. 1 (1992): 1-18.

Nilsson, Anders, Lars Pettersson and Patrick Svensson. “Agrarian Transition and Literacy: The Case of Nineteenth-century Sweden.” European Review of Economic History 3, no. 1 (1999): 79-96.

North, Douglass C. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press, 1990.

OECD. Education at a Glance: OECD Indicators. Paris: OECD, 2001.

Olson, Mancur, Jr. “Big Bills Left on the Sidewalk: Why Some Nations Are Rich and Others Poor.” Journal of Economic Perspectives 10, no. 2 (1996): 3-24.

O’Rourke, Kevin and Jeffrey G. Williamson. “Around the European Periphery, 1870-1913: Globalization, Schooling and Growth.” European Review of Economic History 1, no. 2 (1997): 153-90.

Pritchett, Lant. “Where Has All the Education Gone?” World Bank Economic Review 15, no. 3 (2001): 367-91.

Psacharopoulos, George. “The Contribution of Education to Economic Growth: International Comparisons.” In International Comparisons of Productivity and Causes of the Slowdown, edited by John W. Kendrick. Cambridge, MA: Ballinger Publishing, 1984.

Psacharopoulos, George. “Public Spending on Higher Education in Developing Countries: Too Much Rather than Too Little.” Economics of Education Review 15, no. 4 (1996): 421-22.

Psacharopoulos, George and Harry Anthony Patrinos. “Human Capital and Rates of Return.” In International Handbook on the Economics of Education, edited by Geraint Johnes and Jill Johnes, 1-57. Cheltenham, UK: Edward Elgar, 2004.

Rangazas, Peter. “Schooling and Economic Growth: A King-Rebelo Experiment with Human Capital.” Journal of Monetary Economics 46, no. 2 (2000): 397-416.

Rosenzweig, Mark. “Why Are There Returns to Schooling?” American Economic Review Papers and Proceedings 85, no. 2 (1995): 69-75.

Rosenzweig, Mark. “Schooling, Economic Growth and Aggregate Data.” In Development, Duality and the International Economic Regime, edited by Gary Saxonhouse and T.N. Srinivasan, 107-29. Ann Arbor: University of Michigan Press, 1997.

Sandberg, Lars. “The Case of the Impoverished Sophisticate: Human Capital and Swedish Economic Growth before World War I.” Journal of Economic History 39, no.1 (1979): 225-41.

Sandberg, Lars. “Ignorance, Poverty and Economic Backwardness in the Early Stages of European Industrialization: Variations on Alexander Gerschenkron’s Grand Theme.” Journal of European Economic History 11 (1982): 675-98.

Sanderson, Michael. “Literacy and Social Mobility in the Industrial Revolution in England.” Past and Present 56 (1972): 75-104.

Saxonhouse, Gary. “Productivity Change and Labor Absorption in Japanese Cotton Spinning, 1891-1935″ Quarterly Journal of Economics 91, no. 2 (1977): 195-220.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Chicago: University of Chicago Press, [1776] 1976.

Temple, Jonathan. “Growth Effects of Education and Social Capital in the OECD Countries.” OECD Economic Studies 33, no. 1 (2001a): 58-96.

Temple, Jonathan. “Generalizations That Aren’t? Evidence on Education and Growth.” European Economic Review 45, no. 4-6 (2001b): 905-18.

Topel, Robert. “Labor Markets and Economic Growth.” In Handbook of Labor Economics, Volume 3, edited by Orley Ashenfelter and David Card, 2943-84. Amsterdam: Elsevier Science, 1999.

Woessmann, Ludger. Schooling and the Quality of Human Capital. Berlin: Springer, 2002.

Woessmann, Ludger. “Specifying Human Capital.” Journal of Economic Surveys 17, no.3 (2003): 239-70.

Wood, Adrian. “How Trade Hurt Unskilled Workers.” Journal of Economic Perspectives 9, no. 3 (1995): 57-80.

Young, Alwyn. “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience.” Quarterly Journal of Economics 110, no. 3 (1995): 641-80.


[1] I have received helpful comments on this essay from Mac Boot, Claudia Goldin, Bill Lord, Lant Pritchett, Robert Whaples, and an anonymous referee. At an earlier stage in working through some of this material, I benefited from a quite useful conversation with Nick Crafts. However, I bear sole responsibility for remaining errors and shortcomings.

[2] For a detailed survey of trends in schooling in the early modern and modern period see Graff (1987).

[3] See Barro (1998) for a brief intellectual history of growth accounting.

[4] Blaug (1970) provides an accessible, detailed critique of the assumptions behind Denison’s growth accounting approach and Topel (1999) provides a further discussion of the problems of using a growth accounting approach to measure the contribution of education, especially those due to omitting social externalities.

[5] By using a Cobb-Douglas specification of the aggregate production function, one can arrive at the following equation for the ratio between final and initial national income per worker due to increases in average school years completed between the two time periods, t = 0 and t =1:

Start with the aggregate production function specification:

Y = A K(1-α) [(1+r)S L]α

Y/L = A (K/L)(1-α) [(1+r)S L/L]α

Y/L = A (K/L)(1-α) [(1+r)S]α

Assume that the average years of schooling of the labor force is the only change between t = 0 and t =1; that is, assume no change in the ratio of capital to labor between time periods. Then the ratio of the income per worker in the later time period to the earlier time period will be:

(Y/L)1/ (Y/L)0 = ( (1 + r )S1- S0 )α

Where Y = output, A = a measure of the current state of technology, K = the physical capital stock, L = the labor force, r = the percent by which a year of schooling increases labor productivity, S is the average years of schooling completed by the labor force in each time period, α is labor’s share in national income, and the subscripts 0 and 1 denote initial and final time periods.

As noted above, the derivation above is for a partial equilibrium change in years of schooling of the labor force holding constant the physical capital stock. Allowing for physical capital stock accumulation in response to schooling increases in a Solow-type model implies that the ratio of final to initial output per worker will be

(Y/L)1/ (Y/L)0 = ( (1 + r )S1 - S0 ) .

For a derivation of this see Lord (2001, 99-100). Lord’s derivation differs from that here by specifying the technology parameter A as labor augmenting. Allowing for increases in A over time due to technical change would further increase the contribution to output per worker of additional years of schooling.

[6]To take a specific example, suppose that in the steady-state case of Table 1B, a 5 percent earnings premium per year of schooling is assigned to the first 6 years of schooling, i.e. primary schooling, a 10 percent earnings premium per year is assigned to the next 6 years of schooling, i.e. secondary schooling, and a 15 percent earnings premium per year is assigned to the final 4 years of schooling, that is college. In that case, the impact on steady state income per capita compared with no schooling at all would be (1.05)6x(1.10)6x(1.15)4 = 4.15, compared with the 4.59 in going from no schooling to universal college at a 10 percent rate of return for every year of school completed.

[7] Denison’s standard growth accounting approach assumes that education is labor augmenting and, in particular, that there is an infinite elasticity of substitution between skilled and unskilled labor. This specification is conventional in growth accounting analysis. But another common specification in entering education into aggregate production functions is to specify human capital as a third factor of production along with unskilled labor and physical capital. Insofar as this is done with a Cobb-Douglas production function specification, as is conventional, the implied elasticity of substitution between human capital and either unskilled labor or physical capital is unity. The complementarity between human capital and other inputs this implies will tend to increase the contribution of human capital increases to economic growth by decreasing the tendency for diminishing returns to set in. (For a fuller treatment of the considerations involved see Griliches 1970, Conlisk 1970, Broadberry 2003). For an application of this approach in a historical growth accounting exercise, see Crafts (1995), who finds a fairly substantial contribution of human capital during the English industrial revolution. For a critique of Crafts’ estimates see Mitch (1999).

[8] For an examination of long-run growth dynamics with schooling investments endogenously determined by transfer-constrained family decisions see Lord 2001, 209-213 and Rangazas 2000. Lord and Rangazas find that allowing for the fact that families are credit constrained in making schooling investment decisions is consistent with the time path of interest rates in the U.S. between 1870 and 1970.

Citation: Mitch, David. “Education and Economic Growth in Historical Perspective”. EH.Net Encyclopedia, edited by Robert Whaples. July 26, 2005. URL http://eh.net/encyclopedia/education-and-economic-growth-in-historical-perspective/

Maize and Grace: Africa’s Encounter with a New World Crop, 1500-2000

Author(s):McCann, James C.
Reviewer(s):Bogue, Allan G.

Published by EH.NET (September 2005)

James C. McCann, Maize and Grace: Africa’s Encounter with a New World Crop, 1500-2000. Cambridge: Harvard University Press, 2005. xiii + 289 pp. $27.95 (cloth), ISBN: 0-674-01718-8.

Reviewed for EH.NET by Allan G. Bogue, Department of History, University of Wisconsin.

A historian and African Studies specialist, James C. McCann has studied in Africa, conducted research there for international philanthropic agencies and written histories of Ethiopia and the African environment. In this book he describes “maize’s historical encounter with the landscapes of Africa” from introduction to its current status as Africa’s dominant food crop. Of concern also is the “implicit question” of whether the New World’s gift of this crop has bestowed a blessing (grace) upon Africa.

More important as a food source in Africa than in comparable entities maize is expected to double production by 2020. It is the world and Africa’s most adapted food crop, thriving in many environmental conditions and farming systems. Some African nations devote more than seventy percent of their cereal acreage to maize. Old African farmers were artisans adapting crop mixes to local ecology, soils, elevation, and moisture. Initially corn was a garden plant valued for early maturity and easy food preparation. In contrast, writes McCann, North America and Europe developed an industrial model pointing to monocropping and use of chemicals to overcome differences in soil capability. As a cereal in Africa, maize displaced wheat and sorghums, less often rice. A great variety of colors, field characteristics, and disease resistance developed in a process of folk selection of seed. Women gardened it; men tended it in field. It had political implications because it could feed armies or support social objectives. Early Africanization produced heterogeneity — now replaced by standardization of cultivation methods, reflecting, says McCann, the political ecology changing from local initiative, through colonialism to globalism. Some unique features remain including the fact that in Africa maize is primarily used as human food. Industrial phase maize is preferred in today’s global system, explains McCann, because it can be controlled by the state and corporate agriculture, features economies of scale, and is comparable across geography and cultures.

In his first chapter McCann introduces the maize plant, explains its American origins, its need for human care in propagation, its five major families — sweet, pop, floury, flint, and dent — and their many colors and characteristics. Africa’s maize crop increased area most strikingly in the twentieth century, particularly since 1950. In some African states it provides more than fifty percent of the food calories. “For better or worse,” writes McCann, “modern genetic alchemy has transformed maize from an obligingly adaptive vegetable crop to a hegemonic leviathan that dominates regional diets and international grain markets” (p. 21).

Documentary evidence of maize’s arrival in Africa as a “stranger” cultivar is fragmentary. Those types introduced reflected the New World contacts of the European nations whose traders worked the African coastlines. A trail of flint types also led from Seville to Venice and thence to Egypt and the Nile valley. The types and varieties later present and regional names for maize left tracks of the introduction process. The speed of acceptance varied; in some of West Africa maize became a basic part of the intercropping, rotation, and burning of pioneer forest agriculture and a slave trade staple. Here floury maize supplanted flints. But in some areas maize long remained a vegetable. With the adoption of African experiment station initials and numbers in naming new varieties it was “no longer the stranger” (p. 38}.

Having covered such introductory matters, McCann describes major features of the crop’s adoption and development in key areas of Africa beginning with the Asante in Ghana where maize fueled that tribe’s “hegemonic growth” (p. 43). Here maize produced two crops a year, fitting into the forest fallow system along with cassava. The Asante’s maize-fed army expanded tribal reach into neighboring savannahs, adapting floury maize to the drier climate. Currently quality protein maize from the Ghana Crop Research Institute is allowing a shift toward monocropping. Despite some differences with Ghana, Nigerian farmers also found that maize produced the greatest returns. But McCann cautions that diversion from “a biodiverse forest ecology to virtual monocropping may be an increasingly fragile” trend (p. 57).

Next McCann provides a discussion of maize in two peasant empires, that occupying the northeastern Ethiopian highlands and the Venetian Republic, the latter enhancing the book’s comparative dimensions. Dominant in the Mediterranean trades, the Venetian elites suffered with the opening of transatlantic connections and diverted investments into the agricultural hinterland. Here, the landlords wished their tenants to produce wheat. But due to peasant resistance and initiative, maize became the primary crop, supporting grain and livestock production and providing the peasant’s major food, a dependence that later produced the scourge of pellagra. In Ethiopia maize remained a garden plant for centuries. Despite some overlord presence, Ethiopian farmers controlled the crop selection on their plots, developing a conservative agrarian culture, its members satisfied with their mix of cereals. Maize emerged as a field crop in the twentieth century along the southern edge of the highlands where commercial production began in the 1930s and a coffee-maize economy developed after World War II. Government controls on coffee during the socialist era, 1974-1991, persuaded many to expand their maize crop, as did demographic crisis and other government policies. By 1991 half of Ethiopia’s cereal production was maize. Italy by the 1990s was the world’s thirteenth leading maize producer, its dent hybrids supporting dairy and meat agroindustries. But in Ethiopia the late turn to maize accompanied “a decline into precarious subsistence” and efforts on the part of the state and international agencies to “break traditional cropping patterns.” If a blessing in Italy, maize was not so in Ethiopia (p. 93).

Southern Africa developed two patterns of maize culture — one of small farms, often operated by women, following a subsistence strategy but also selling surplus grain in competition with large commercial farms in a national market supervised by marketing boards. Maize had arrived in southern Africa by the mid 1600s, Brazilian flints, floury types and North American dents following in sequence by 1900. Dutch settlers brought mechanized agriculture which also revolutionized hinterland native agriculture, maize replacing sorghums. Diamonds, gold, and railroads industrialized the economy and created a national grain market. After World War I, white farmers used open pollinated white dents as a cash crop that provided the “agrarian economic base of the rapid expansion of settlers’ rule in southern Africa.” By 1930 maize had superseded wheat as a cereal in northern South Africa and the families of industrial workers left behind “on impoverished farms in the black homelands” of an apartheid society lived on the local crop (p. 110). Meanwhile white settler farms grew, assisted by price controls, government credit, extension, and marketing activities that encouraged monocropping. So marked was the influence of southern Africa in maize research and administration that white dent became dominant in Africa.

McCann’s last regional story describes the successes of hybrid varieties in Rhodesia and its successor states, Zimbabwe, Zambia, and Malawi. Learning of American hybrid corn research in the 1930s, plant breeders at the Salisbury Agricultural Research Station in southern Rhodesia began to develop inbred dent lines. Working solely to sustain European-style agriculture they produced a promising parent line in the 1940s, suited to the soils of the white commercial farmers, and continued work when the Federation of Rhodesia and Nyasaland emerged. They released the phenomenally successful hybrid, SR52 in 1960. Only after creation of the Rhodesian heir states, Zimbabwe, Zambia, and Malawi did black farmers benefit from improvements in hybrid maize, although the resulting monoculture increased vulnerability to drought. Maize had somewhat different histories in the three states but all (as also Kenya) are now marked by hybrid monocropping, production for a national market, and the major presence of agricultural science.

Interspersed amid the historical accounts of maize in various settings, McCann discusses two crises in African cereal culture. In Sierra Leone in 1949 a devastating attack of American Rust on the maize crop occurred, spreading rapidly over the next several years along the West African Coast and finally reaching Southern Rhodesia, Kenya, and Tanganyika. The villain was P. polysora an American resident but left behind in the Atlantic crossing. Local plant scientists and “multilateral international agencies” rushed development of rust resistant maize and by 1953 promising strains were ready when the infection disappeared. P. polysora is now an African resident. The reaction to the outbreak, writes McCann, was that of a “mature imperial world” transitioning to one dominated by “the modern development industry and invasive multilateral organizations” (p. 121). He also describes the severe malaria epidemic that swept Ethiopia’s northwest high lands in 1998. Here the government with assistance from a Japanese philanthropic program, Sasakawa Global 2000, and the Carter Center had continued its “infatuation with improved types of maize” by encouraging the use of new hybrids, increasing production substantially (p. 186). BH 660, the major variety, tasseled late. McCann shared in research that found expansion of maize areas, using this variety, when linked with late rains, fortified the mosquito breeding catch basins with corn pollen. This supported the development of a large proportion of mosquito larvae thus reinforcing the vector of infection.

Africa’s agricultural production is increasing at two percent per year while population grows at a three percent rate. This book is an invaluable source of information on a basic element in the situation, essential reading for anyone interested in Africa’s history or current problems. In the conclusion McCann suggests that the current emphasis on maize in Africa may have a Jurassic Park effect given the narrowing of genetic flexibility entailed in monocropping hybrid maize, the possibility of plant disease outbreaks, a growing danger from mycotoxins, drought and climate change, human epidemics enhanced by population mobility, and the volatility of international markets. “It is a gloomy prospect,” he writes, “a cautionary alarm is justified” (p. 210). Threaded through the narrative is a policy critique. African plant breeders long served the needs of only white commercial farmers and by ignoring the old varicolored maizes of the black farmers they restricted future options. McCann’s ideal is biodiversity and local initiative. International philanthropic organizations are “invasive” servants of globalism. In beginning his book McCann in effect promises a benefit/cost analysis of maize’s contribution to African history and this he delivers if somewhat impressionistically. We should be grateful. But there is still an opportunity for economic historians to provide a more rigorous analysis. At a less notable level this reviewer was impressed, as will be others, by the author’s success in moving a pun-laden title past the Harvard University Press editors.

Allan G. Bogue is Professor Emeritus at the University of Wisconsin, Madison. His publications include articles and books in American agricultural history, the most recent being The Farm on the North Talbot Road (Lincoln: University of Nebraska Press, 2001).

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):Africa
Time Period(s):20th Century: WWII and post-WWII

The Spirit of Capitalism: Nationalism and Economic Growth

Author(s):Greenfeld, Liah
Reviewer(s):Lal, Deepak

Published by EH.NET (February 2003)

Liah Greenfeld, The Spirit of Capitalism: Nationalism and Economic

Growth. Cambridge, MA: Harvard University Press, 2001. xi + 541 pp. $45

(hardcover), ISBN: 0-674-00614-3.

Reviewed for EH.NET by Deepak Lal, Department of Economics, UCLA.

I found this prolix book by Liah Greenfeld, a Professor of Political Science

and Sociology at Boston University, both confused and confusing. She states

that her book attempts to answer two questions: “(1) What was the direct cause

of the emergence of modern economy; that is what explains the sustained

orientation of this economy, which distinguishes it from all others, to growth?

(2) What made the economic sphere so central in the modern, and in particular

American, consciousness that our civilization can in truth be called an

‘economic civilization’.” Her answer is “that the factor responsible for the

reorientation of economic activity toward growth is nationalism, and that the

unprecedented position of the economic sphere in the modern consciousness is a

product of the dynamics of American society, in turn shaped by the singular

characteristics of American nationalism” (p. 1).

She tries to establish these claims by extended excerpts from secondary sources

concerning economic thought and development in England, Holland, France,

Germany, Japan and the United States. In all these cases, she claims, except

for Holland, nationalism was the prime mover in creating capitalism, in

contradistinction to other sociologists and historians (Gellner and Hobsbawm)

who believed nationalism “to be caused by capitalism and

industrialization” (p. 4). As she explicitly eschews both the historian’s craft

as well as the economist’s, it makes it particularly difficult to review such a

book to an audience of economic historians. Even though many of the excerpts

she quotes are interesting in themselves — and I particularly enjoyed those

from Japan and the US — they do not in themselves provide a substantiation of

her thesis. In the circumstances the only recourse is to try and determine her

general argument and see how it matches up with the evidence from not only

economic history but also the economics of developing countries, which is

intimately linked to many of her preoccupations.

The trouble I had with the book starts with the first of the questions she has

set herself. She seeks the causes of the emergence of the modern economy, which

she sees as its sustained orientation to economic growth. But this definition

of modernity would only be applicable at best to the last 150 years. After all,

the nineteenth century classical economists were still preoccupied by the

stationary state! Moreover, this question is different from the one that Max

Weber asked and which is the title of her book, namely about the origins of

Western capitalism, which is linked to the question of the great divergence

between the ancient agrarian civilizations of Eurasia. This question in turn is

different from the subsidiary question: why within Western Europe, England

blazed the path to modern economic growth? Greenfeld’s book is largely about

this second question and not the first. This confusion is responsible for her

vacuous definition — for an economist — of modern economic growth.

Development economists and economic historians distinguish between

extensive growth — which has been ubiquitous through human history —

with output rising pari passu with population, and intensive growth,

which results in a sustained rise in per capita income. Moreover, two types of

intensive growth need to be distinguished which I like to call Smithian and

Promethean (see Lal 1998). The first can and has occurred even in agrarian

economies usually with the establishment or extension of empires, which by

bringing hitherto autarkic regions with differing resources into a common

economic space lead to the gains from trade and specialization emphasized by

Adam Smith. But as the primary factor of production in agrarian economies –

land — was ultimately fixed, diminishing returns would set in, which combined

with the Malthusian principle would end this spurt of Smithian intensive

growth. As E.A. Wrigley (1988) has rightly emphasized, it was the substitution

of mineral energy resources, which were in virtually perfectly elastic supply,

for the land-based sources of energy in the organic agrarian economy, which led

to unbounded intensive growth of the Promethean kind. It is the latter which is

the hallmark of modern economic growth.

The spirit of capitalism, which Hicks (1969) emphasized is embodied in the rise

of the merchant and a mercantile society, predates the emergence of Promethean

growth. The torch of this spirit passed from the Greek city states, the

mediaeval Italian city states, the Hanseatic league and Holland to the United

Kingdom. Greenfeld recognizes this. So clearly for her, the spirit of

capitalism, which she identifies as arising with nationalism in

sixteenth-century England, could not be merely the prevalence of this

mercantile economy. As regards Weber’s question about the date and origins of

the great divergence, I have argued (Lal 1998) that it is associated with two

Papal medieval revolutions, which generated a value unique to the West –

individualism — and all the legal infrastructure needed for a functioning

market economy (see Goody 1983 and Berman 1983). But, though perhaps

preconditions, these factors did not by themselves generate Promethean growth.

It was the spirit of capitalism allied to the switch from an organic to a

mineral energy based economy which did, in Holland and then in England — even

in their agrarian economies — from the fifteenth and sixteenth centuries and

then with the scientific revolution in England in the new industrial economy

from the eighteenth century that generated Promethean growth.

On this view, Greenfeld’s discussion of the rise and decline of the Dutch

mercantile economy will seem perverse. As she rightly notes, the Dutch grew

rich through adopting a truly mercantile capitalism (which generated Smithian

growth). What she does not emphasize (only noting it in passing) is that they

also saw Promethean growth based on using deposits of peat to convert their

organic into a mineral energy based economy (see Wrigley). Their relative

decline arose as, unlike the much more abundant mineral energy source in

England — coal — the stock of peat was soon exhausted and the Navigation Acts

impeded the importation of English coal. Greenfeld, however, attributes the

Dutch decline to a failure to foster nationalism. But here is what Angus

Maddison (2001) (whose 13 pages (pp. 75-88) provide a much more succinct and

accurate account of the rise and decline of Holland) has to say: After the

Dutch revolted against the Hapsburgs in 1580: “they created a modern nation

state, which protected property rights of merchants and entrepreneurs,

promoted secular education and practiced religious tolerance” (p. 20 emphasis

added). But this nation state did not practice economic nationalism — i.e.

mercantilism. And there’s the rub.

For Greenfeld asserts: “There was no national consciousness in the Dutch

republic, the identity of the Republican Dutch was not national, and the

republic was not a nation” (p. 96). By this she means they were not economic

nationalists, as becomes clear when she writes: “It is this difference in

perspective, in the nature of identity, that explains … why the Dutch rather

consistently … advocated free trade in the face of perfectly consistent

protectionist (or ‘mercantilist’), measures their neighbors directed against

them” (p. 101). That, in her view, the Dutch decline was due to their not being

economic nationalists (i.e. mercantilists) is made clear by the title of the

subheading that follows “The Costs of Economic Liberalism” (p. 101). This book

is thus ultimately a mercantilist tract.

Greenfeld rightly cites the great Eli Heckscher, who in his magisterial book

Mercantilism argued that mercantilism was used by the absolute

monarchies in Europe after the Renaissance to consolidate their power by

incorporating various feuding and seemingly disorderly groups, which

constituted the relatively weak states they inherited from the ruins of the

Roman empire into a nation. Its purpose, he argued, was to achieve “unification

and power,” making the “State’s purposes decisive in a uniform economic sphere

and to make all economic activity subservient to considerations corresponding

to the requirements of the State.” But, what Greenfeld fails to mention is that

Heckscher (1955) went on to show that, the unintended consequence of

mercantilism was that this attempt to use it to establish order bred disorder,

as the attendant dirigisme bred corruption, rent-seeking, tax evasion

and illegal activities in underground economies. The most serious consequence

for the State was an erosion of its fiscal base and the accompanying prospect

of the un-Marxian withering away of the state. Economic liberalization was then

undertaken to restore the fiscal base, and thence government control over what

had become ungovernable economies. In some cases — as in France — the change

only occurred with revolution (see Aftalion 1990). Paradoxically, as Heckscher

noted: “great power for the state, the perpetual and fruitless goal of

mercantilist endeavor, was translated into fact in the nineteenth century. In

many respects this was the work of laissez-faire. … The result was attained

primarily by limiting the functions of the State, which task laissez-faire

carried through radically. The maladjustment between ends and means was one of

the typical features of mercantilism, but it disappeared once the aims were

considerably limited. … Disobedience and arbitrariness, unpunished

infringements of the law, smuggling and embezzlement flourished particularly

under a very extensive state administration. … It was because the regime

de l’ordre bore this impress that disorder was one of its characteristic

features” (p. 325).

There is further evidence against the thrust of Greenfeld’s main argument that

mercantilism is needed for economic growth. We now have the experience of over

fifty years of neo-mercantilist policies in the Third World, motivated in large

part by the same desire for ‘nation-building’ — carried to even further

extremes in the former Communist countries. The outcomes have been much the

same as with the mercantilist countries of yore. The disorder bred by

dirigiste neo-mercantilist policies has led to the recent wave of

economic liberalization, which no doubt Greenfeld — judging from her epilogue

– would deplore. (See Lal and Myint 1996, and Lal 1985 and 2000.) Moreover,

nationalism was a common attribute of the ideology of most developing countries

after the Second World War. Hence, it in itself could not be an explanation for

the manifest differences in their growth outcomes. What differentiated their

performance was the extent to which they followed mercantilist policies. Though

none apart from Hong Kong followed the classical liberal policy of

laissez-faire and free trade (and its performance was perhaps the best (Lal and

Myint 1996), the closer they were to this prescription the better the outcome.

Thus neither the distant (as Greenfeld seems to claim) or more recent past (as

is implied in her epilogue) provides any justification for what it turns out is

really her main message: economic nationalism (a.k.a. ‘mercantilism’) fosters

modern growth. All the evidence is to the contrary. But, having eschewed both

history and economics, Greenfeld blithely ignores all this. Weber, the

sociologist who took account of both, would I am sure be appalled by this

travesty, which the publishers in their publicity leaflet advertise as “Moving

Beyond Max Weber”!

References

F. Aftalion (1990), The French Revolution: An Economic Interpretation.

Cambridge University Press, Cambridge.

H. J. Berman (1983), Law and Revolution: The Formation of the Western Legal

Tradition. Harvard University Press, Cambridge, MA.

J Goody (1983), The Development of the Family and Marriage in Europe.

Cambridge University Press, Cambridge.

E. Heckscher (1955), Mercantilism, 2 volumes, revised second edition.

Allen and Unwin, London.

J.R. Hicks (1969), A Theory of Economic History. Clarendon Press,

Oxford.

D. Lal (1985/2000), The Poverty of ‘Development Economics.’ Harvard

University Press, Cambridge Mass; revised second edition, MIT Press, Cambridge

Mass.

D. Lal (1988), Unintended Consequences: The Impact of Factor Endowments,

Culture, and Politics on Long-Run Economic Performance. MIT Press,

Cambridge Mass.

D. Lal and H. Myint (1996), The Political Economy of Poverty, Equity, and

Growth: A Comparative Study. Clarendon Press, Oxford.

A. Maddison (2001), The World Economy: A Millennial Perspective. OECD.

Paris.

E.A. Wrigley (1988), Continuity, Chance and Change: The Character of the

Industrial Revolution in England. Cambridge University Press, Cambridge.

Deepak Lal is the James S. Coleman Professor of International Development

Studies at the University of California — Los Angeles. His most recent book

was Unintended Consequences: The impact of Factor Endowments, Culture and

Politics on Long-Run Economic Performance (MIT, 1998). He is currently

working on a book on globalization and order.

Subject(s):Markets and Institutions
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative