Published by EH.NET (July 2007)
Espen Moe, Governance, Growth and Global Leadership: The Role of the State in Technological Progress, 1750-2000. Burlington, VT: Ashgate, 2007. ix + 308 pp. $100 (hardcover), ISBN: 978-0-7546-5743-9.
Reviewed for EH.NET by Peter T. Leeson, Department of Economics, George Mason University.
There is no shortage of research examining the sources of prosperity. In Governance, Growth and Global Leadership, political scientist Espen Moe of the Norwegian University of Science and Technology contributes to this research, but does so by way of analyzing a more specific, and thus more manageable, contributor to wealth creation: technology.
Moe argues that three key factors explain why some countries have achieved this progress, emerging as global leaders of industry, while other have not: human capital, government’s ability to resist catering to vested interests, and “political consensus and social cohesion.”
Through these factors Moe aims to marry “Schumpeterian growth theory” ? the idea of a simultaneously creative and destructive growth process ? with Mancur Olson’s theory of special interest groups to create a general framework that sheds light on the history of technological change.
The marriage is a fruitful, if familiar, one. In order for technology to advance and economies to grow, governments must permit innovations and individuals must have the human capital to apply them. The problem is that older, well-established producers have incentives to block such invention since it often destroys the market positions they enjoy. If old industrial leaders are able to capture the state, government will raise barriers to change, privileging the status quo and thwarting technological progress.
Governments that can resist the pressure to cater to such interests facilitate the process of creative destruction and with it economic growth. Those that cannot resist the pressure stifle this process and encourage economic stagnation. “Political consensus and social cohesion” enter the picture by creating the conditions of broad-based support among political leaders and the populace for economic policy that allows new producers to compete openly with old ones, or by adding to the pressure that vested interests apply to government to preserve existing arrangements.
The core framework here is not “new;” but great originality in the context of the voluminous literature that examines economic growth and development is difficult to achieve. More importantly, theoretical innovation is not Moe’s goal. The application of this framework to the history of technological progress is both novel and interesting and serves the author’s primary purpose, which is an empirical one.
To make his argument Moe considers nine case studies of technological progress or stagnation between 1750 and 2000. His case studies are presented in the context of five substantive chapters. Each of these is devoted to a different industry, presented chronologically in terms of its economic significance.
Chapter 2 contrasts England and France’s experience with the cotton textile industry during the First Industrial Revolution. Chapter 3 again considers England and France, but in the context of the iron industry in first half of the nineteenth century. In chapter 4 Moe compares German and British technological success in the chemical industry between the second part of the nineteenth century and World War I. Unlike the previous chapters, chapter 5 examines only one country ? the U.S. ? and the rise of the automobile industry in the interwar period. The sixth and final substantive chapter contrasts American and Japanese progress in the information and communications technology (ICT) industry from the Cold War era until the turn of the new century.
These case studies persuasively point to the important (primarily negative) role of government in facilitating technological progress, namely through resisting pressure from industrial stakeholders to undermine Schumpeterian entrepreneurs or privilege the status quo. Likewise, they effectively highlight how “political consensus and social cohesion” reduced or applied this pressure, enabling or preventing technological advance. Overall, the evidence Moe musters does a nice job of illustrating the utility of his proposed Schumpeter-Olson marriage in the context of the history of technological progress and growth.
I have only one noteworthy complaint. In light of the importance that both vested interests and human capital play in Moe’s framework, it would have been useful if his analysis focused more on how government can and has used “human capital building” to cater to vested interests and block Schumpeterian growth. Although, as chapter 6 discusses for example, state-led research and development has figured prominently in ICT development in a number of countries, we cannot, prima facie, take this human capital building as a positive force contributing to technological and developmental progress.
Like all other government activities, state-sponsored research and development, education, and so on, are subject to traditional public choice concerns and may be used by political actors to cater to vested interests or nefariously guide the process of technological change in other ways. In short, technological “progress” encouraged by government may not reflect economic progress in that it may constitute an inefficient use of resources.
A technology that could not support itself without state-subsidized R&D, for example, but because of this R&D “makes it” and eventually comes into wide use is not necessarily a “win” from the standpoint of economic development. For one thing, we never enjoy the alternative, potentially superior technological innovations that would have come along if R&D resources had been allocated according to market forces instead of political criteria.
This objection notwithstanding, Governance, Growth and Global Leadership tells a compelling story of technological progress since 1750. Economic historians, particularly those with a strong interest in economic growth and development, will enjoy it.
Peter T. Leeson is the BB&T Professor for the Study of Capitalism at George Mason University. His recent research explores the law, economics, and organization of pirates (http://www.peterleeson.com) and has been covered in the New Yorker and the Financial Times.
|Subject(s):||Industry: Manufacturing and Construction|
|Geographic Area(s):||North America|
|Time Period(s):||20th Century: WWII and post-WWII|