The Record of Global Economic Development

Published by EH.NET (March 2003)

Eric L. Jones, The Record of Global Economic Development. Cheltenham, UK

and Northampton, MA: Edward Elgar, 2002. xviii + 226 pp. $90.00 (cloth), ISBN:

1-84064-806-6.

Reviewed for EH.NET by Morris Altman, Department of Economics, University of

Saskatchewan.

Throughout his illustrious scholarly career, Eric Jones has made significant

contributions to both world and English economic history. In this vein, this

book contains contributions to both general and local economic history, albeit

the bulk of this text deals with issues raised in his European Miracle

(1981), relating to world economic development. This discourse on questions is

here further contextualized by more contemporary English and Australian

economic history.

A key objective of this book is to show that (p. vii) “plain economic history

can help pick out the more durable of the arrangements that favour growth.” He

argues that the conditions favoring long run growth are largely political and

include competitive markets, free trade, decentralized institutions, democracy,

the rule of law, and property rights. These themes surface throughout the text,

although free trade and anti-protectionism are the more dominant ones. This is,

in part, a response to the contemporary anti-free trade and anti-globalization

‘populism’ that has gained force in recent years. In his focus upon the

importance of political factors to the growth and development process, Jones

joins a growing literature on the subject exemplified in the work of North

(1990), Olson (2000) and, of course, Jones (1981). Additionally, Jones takes

aim at the thesis that ‘culture matters’ with regards to either promoting or

impeding long run economic growth. Culture, he contends, ultimately adjusts to

economic change. Jones’ critique of the ‘culture matters’ perspective, however,

is largely focused upon a critique of Deepak Lal-type (1998) theses that East

Asian values are superior to ‘Western’ values in terms of facilitating,

fostering, and maintaining socio-economic development.

More generally, Jones critiques the view that the development of the West was

and is a product of ripping-off the rest of the world and related to this view,

that free trade, markets, and capitalism are bad for growth, socio-economic

development and, more generally, for improving the well-being of all members of

society, including workers and peasants. Development, argues Jones, is a

product of the right institutions, just as development failure is largely a

product of failures in constructing institutions that are conducive to the

process of growth and development. This book makes for a provocative read,

raising important questions for all who are interested in questions of

contemporary economic development.

The Preface to this book serves as an excellent introduction to what is

discussed in the text, as Jones succinctly summarizes the thrust of each

chapter. The book is divided into four parts. The first deals with long-term

economic development, the second with protectionism and free trade, the third

with East Asian Development (where the culture-related discourse is focused),

and the fourth deals with adjustments to more recent global economic changes,

with a focus on the Australian experience.

Jones argues, in Chapter One, that economic history of the long dur?e-type has

a lot to teach us about those conditions that facilitate the process of both

extensive and intensive economic growth. Thus, economic history is not simply

of esoteric scholarly interest, but should also be of vital interest from a

public policy perspective. He raises concerns about most quantifiers — Angus

Maddison being the clear exception — as greatly exaggerating the importance of

nineteenth century growth and of those who maintain that the West developed

first fortuitously or because of its exploitation of the less developed

economies, causing the actual underdevelopment of the latter. Jones argues that

it is important to note that extensive growth — output simply keeping pace

with population growth and some urbanization — was and is an important facet

of growth since it indicates important changes in economy and society, such as

investment in infrastructure, new technology, and new crops, which served to

avoid Malthusian crises. Such growth has taken place for centuries prior to the

dramatic tipping over into intensive growth in the West during the nineteenth

century. Thus, intensive growth flowed from the far-from-static extensive

growth societies. However, for intensive growth — increasing per capita output

— to occur and be sustained required, as ‘first order conditions,’ political

stability and the security of property. Also of importance were the rule of law

(and the related decrease in arbitrary and royal power) and good information

markets (and the related decrease of censorship). For intensive growth to

occur, elites could no longer engage in taxing the marginal product at high

rates, thus shifting from a regime of rent seekers to a regime that accrues

income from the increasing marketization of society.

Chapters Two and Three further elaborate upon the themes planted in Chapter

One, pointing out in the process that finding that the West developed first is

not indicative of Western triumphalism and chauvinism as some of the critics of

Jones’ European Miracle would have it. Rather, understanding and

recognizing the fact that the West was the first to engage in sustained

intensive growth, to be followed by Japan, allows us to glean some of the

general conditions necessary for the process of sustained socio-economic

development. He points to the importance of decentralized political

institutions which allowed for the politically and economically oppressed to

flee (thus the importance of labor mobility) and the importance of increasing

markets which allowed for significant ‘Smithian’-based intensive growth. He

points out, for example, that China blocked exploratory market expanding and

enhancing activities. Such negative state intervention was not possible in the

much more decentralized Western Europe. Jones also underlines the importance of

political pluralism, the rule of law (equality before the law) and a free press

for sustained intensive growth. Only under such an institutional regime can

systematic economic and political errors be critiqued and corrected. Also of

importance are the incentives for growth provided by a regime wherein

individuals have a right to retain the fruits of their labors. Jones also

maintains that culture, in terms of particular values, was not important to the

rise of the West. Rather values change to accommodate economic development.

However, this rather dismissive perspective on culture pays little heed to the

contemporary ‘culture matters’ literature (Harrison 1992; Harrison and

Huntington 2000), which points to the importance of institutional change as

necessary to the development process, where the latter is affected by the norms

and mores of society, especially by the decision makers of society.

Long run agricultural development is the focus of Chapter Four. Jones argues

that agricultural growth was a product of both supply and demand changes, very

often a product of independent changes in supply, related to intercontinental

crop and animal transfers, new methods of farming, trade flows, and

institutional innovations. Agricultural progress is also related to the

breaking up of large estates into smaller units thereby releasing

entrepreneurial energies, mechanisms for facilitating the transfer of new ideas

(including education), and incentives to adopt new ideas. Jones critiques the

view that the importance of long run world agricultural exchange should largely

be measured in terms of the convergence of agricultural prices. Rather, he

argues one has to determine counterfactually what might have occurred to

agricultural prices, population growth, and standards of living in the absence

of the type of international agricultural exchanges that transpired from the

sixteenth century. He argues that these exchanges allowed for an unprecedented

increase in population, which marked a significant economic achievement. Thus,

the ‘Age of Discovery’ was not an era dominated by rent seeking, but rather of

highly significant economic advance. Jones views agricultural protectionism as

a key deterrent to further agricultural progress and views the agricultural

protectionism in the contemporary West as damaging the economic well-being of

the population of both developed and less developed economies.

Chapters Five and Six focus on different aspects of protectionism. In Chapter

Five, focusing on contemporary England, Jones addresses the issue of

multifunctionality — unpriced positive spillovers from agricultural production

— as a raison d’?tre for the protection of uncompetitive agricultural sectors.

Jones argues that, on the contrary, there is no evidence of such positive

externalities. Indeed, farmers tend to generate significant negative

externalities, which are only exacerbated by protectionism. Moreover,

protectionism itself comes at a huge direct public expense, including keeping

too much land in agriculture as opposed to providing more tourist space —

urbanites escaping to ‘pristine’ rural settings — which is what the market

demands but which protected farmers will not provide. Resources are

misallocated at the expense of the general public. In Chapter Six Jones argues

against linguistic protection wherein society subsidizes the learning and

spread of ‘dead’ or dying languages at the expense English, which has become,

for historical reasons, the lingua franca, of the world economy. Jones argues

that linguistic nationalists are largely rent seekers who pay little attention

to the opportunity costs incurred by the larger society by their policies. He

argues, for example, that efforts to dissuade the use of English are

particularly damaging in terms of reducing the mobility of labor, increasing

transaction costs, and negatively impacting productivity. The losers in the

game of linguistic nationalism are the people at large — not the elites. Jones

does not argue against the preservation of local cultures and languages per se

as much as critiquing such policies when they interfere with learning proper

internationally understood English where the latter enhances the capacity of a

society as a whole to develop and prosper.

At this point it is important to note that Jones’ critique of protectionism is

narrowly focused on agriculture and language, although he maintains that the

absence of protectionism is a key cause of growth and development. He pays no

heed to the literature which points to the potential importance of selective

protection in newly developing economies to their development process and to

the clear positive correlation, pre-World War Two, between protection and

intensive growth (Bairoch 1993; O’Rourke 2000). The same can be said for the

rapidly developing East Asian economies after the Second World War. In a world

where comparative advantage is dynamically affected by learning-by-doing, for

example, temporary protection can serve as a development tool (Altman 1999).

Related to this is the unanswered question of how should less developed

economies respond to the protectionism of the more developed economies? Should

the less developed world choose the route of unilateral free trade or should it

use its own protectionism, in certain instances, as a tool for bargaining for a

more even tariff-related playing field?

In Chapters Seven, Eight, and Nine Jones critiques the perspective that culture

matters to the process of economic development in the context of East Asian

development. He intends to critique the view that culture either impeded or

caused economic development as opposed to political factors. Moreover, Jones

apparently identifies the ‘culture matters’ perspective with the notion that

culture is immutable. Instead he argues that culture can changes and does as

economic variables change. Economic change yields cultural change and ‘good’

culture can be learnt. Once again, Jones’ views do not contravene the

contemporary culture matters school which views cultural change as possible and

institutional change as key to economic change. In these chapters Jones argues

that for contemporary East Asia to flourish economically requires a more

pluralistic society, with a freer press, and a more independent judiciary — in

a word to be less authoritarian. This increases the capacity for society to

self-correct. He argues that one reason for the current crisis in East Asia has

been that these economies have not gone far enough down the road towards a more

pluralistic and less authoritarian society. He also maintains that the current

crisis demonstrates the failure of the statist approaches to development

adopted in many of the East Asian economies, inclusive of Japan. However, can

one important (financial) crisis, in itself, undermine the hypothesis that an

activist state in a mixed market economy can play a positive role in the

process of economic development, where such activism is positively related to

decades of unprecedented intensive economic growth in key East Asian Economies?

Should one pay heed to the policies of the IMF which, some have argued, played

a critical role in causing and exacerbating the recent East Asian crisis

(Stiglitz 2002)?

In Chapter Ten, Jones discusses the failure of the Australian economy to move

fast enough into the service sector as compared to other developed economies

and relates this to protection and inadequate investment in education. Chapter

Eleven, exploits a narrative on the rise of the supermarket in Australia to

discuss the hypothesis that structural change involving the destruction of the

smaller shop is somehow bad for society and economy. Jones argues that the rise

of the supermarket is in part a product of consumers choosing to shop at these

food retail outlets, which have dramatically increased the quantity and quality

of choices afforded to consumers. He also argues that the supermarket has

changed in response to dramatic shifts in consumer tastes over time. Efforts to

protect the old forms of food retailing would, Jones argues, only negatively

impact upon consumer well-being.

In Chapter Twelve Jones presents a highly polemical critique of the

anti-globalization forces and, on the other side of the coin, a strong defense

of market capitalism. He argues that the available statistics clearly show that

over the course of the past one hundred years most of the world’s population

has seen its socio-economic position improve in absolute terms, indicated by

improvements in life expectancy for example, and the absence of major

Malthusian crises which had plagued the world in previous centuries. Jones

argues that free trade and globalization are the means to resolve the world’s

socio-economic problems. But undemocratic institutions, especially NGOs, led by

misguided individuals, have seriously damaged the capacity of markets to

resolve problems of poverty and overall economic underdevelopment, by attacking

growth and freer trade as unequivocal forces of evil. The anti-globalization

activists, argues Jones, effectively serve the interests of rent-seekers both

at home and abroad, not those of the poor and dispossessed. In this instance,

one must contextualize Jones’ polemic in terms of the narrative presented in

previous chapters wherein markets and trade yield widespread benefits, which

can be sustained only in the context of an appropriate institutional setting.

It would also be important to note that although the NGOs are undemocratic so

are the multinational corporations who are lobbying for a particular path of

competitiveness, which involves lower wages and related benefits to labor and

an overall deterioration in labor standards and working conditions. This is

deemed to be the only path possible for capitalist development to take. The

evidence clearly shows that this is not the case. There indeed exist multiple

paths to competitiveness (Altman 2002). But then the NGOs, however misguided

about the great potential contained in capitalism for fostering and promoting

the human good, serve as a countervail to those who would maintain that

capitalism and globalization require that the population at large must see

their socio-economic position deteriorate (Stiglitz 2002). Needless to say,

Jones makes an important point in underlining the dangers posed, from the point

of view of institutional design and long run intensive growth, by misinformed

and misguided critiques of capitalist production and trade.

Overall, Jones’ most recent book represents an important contribution to the

literature on the role of institutional design in economic growth and

development and the contribution which economic history can make in furthering

our understanding of some of the key forces underlying the process of economic

growth.

References:

Altman, Morris (1999), “Free Trade and Protectionism.” In P. O’Hara, ed.

Encyclopedia of Political Economy, vol. 1 (London: Routledge), pp.

372-375.

Altman, Morris (2002), Satisfaction and Economic Performance (Armonk,

NY: M.E. Sharpe Publishers).

Bairoch, Paul (1993), Economics and World History: Myths and Paradoxes

(Chicago: Chicago University Press).

Harrison, Lawrence .E. (1992). Who Prospers? How Cultural Values Shape

Economic and Political Success (New York: Basic Books).

Harrison, Lawrence E. and Samuel P. Huntington, eds. (2000). Culture

Matters: How Values Shape Human Progress (New York: Basic Books).

Jones, Eric L. (1981), The European Miracle: Environments, Economies, and

Geopolitics in the History of Europe and Asia (Cambridge/New York:

Cambridge University Press).

Lal, Deepak (1998), Unintended Consequences: The Impact of Factors

Endowments, Culture, and Politics on Long-Run Economic Performance

(Cambridge, MA: MIT Press).

North, Douglass C. (1990), Institutions, Institutional Change and Economic

Performance (New York: Cambridge University Press).

Olson, Mancur (2000), Power and Prosperity: Outgrowing Communist and

Capitalist Dictatorships (New York: Basic Books).

O’Rourke, Kevin (2000), “Tariffs and Growth in the Late Nineteenth Century.”

Economic Journal, vol. 110, pp. 456-43.

Stiglitz, Joseph E. (2002), Globalization and Its Discontents (W.W.

Norton and Company).

Morris Altman is Professor and Head, Department of Economics, University of

Saskatchewan, Saskatoon, Saskatchewan, Canada. He has published extensively in

both economic history and economic theory. His most recent article are: “Staple

Theory and Export-Led Growth: Constructing Differential Growth,” Australian

Economic History Review, 2004 (forthcoming) and, with Louise Lamontagne,

“On the Natural Intelligence of Women in a World of Constrained Choice: How the

Feminization of Clerical Work Contributed to Gender Pay Equality in Early

Twentieth Century Canada,” Journal of Economic Issues, 2004

(forthcoming).