Published by EH.NET (October 2004)
Jan Luiten van Zanden and Arthur van Riel, The Strictures of Inheritance: The Dutch Economy in the Nineteenth Century. Princeton: Princeton University Press, 2004. xvi + 384 pp. $55 (cloth), ISBN: 0-691-11438-2.
Reviewed for EH.NET by Stephen Broadberry, Department of Economics, University of Warwick.
This major work on the Dutch economy appears in the distinguished Princeton Economic History of the Western World series edited by Joel Mokyr, and fills an important gap in the English language literature on nineteenth century European economic history. Following the major project to reconstruct the Dutch historical national accounts carried out under the direction of Jan Luiten van Zanden, Professor of Economic History at Utrecht University and a senior scholar at the International Institute of Social History, there is now a much firmer quantitative basis on which to build a systematic account of the growth process in the nineteenth-century Netherlands (http://nationalaccounts.niwi.knaw.nl). Just by drawing on the new historical national accounts, van Zanden and his co-author Arthur van Riel, a Senior Economist in the Dutch Ministry of the Interior and a member of the Netherlands’ Economic Institute in Rotterdam, are able to dispel a number of myths and adjudicate on many debates. However, the authors clearly aimed to do more than quantify the existing literature, and have chosen to organize the book around an ambitious framework linking the process of economic growth and development to institutional structures and institutional change, drawing on the work of Douglass North.
The structure of the book is provided by first breaking down the “long nineteenth century” into four sub-periods, covering 1780-1813, 1813-40, 1840-70 and 1870-1913. Each sub-period is then further split into two separate chapters on institutional structures and economic developments, with the latter explained by the former. The eight main chapters are topped and tailed with an introduction and an epilogue, emphasizing the Northian framework.
There can be little doubt that the chapters on economic developments in each of the four sub-periods will become essential reading for all serious students of nineteenth-century European economic history. They provide a clear, quantitative discussion of the trends in economic growth and structural change, together with a detailed account of developments in the major sectors. I particularly welcome the full treatment of the service sector, so often neglected or reduced to the handmaiden of industry in traditional economic histories. Services clearly played a key role in Dutch economic development and fully warrant the attention that they receive in this study.
Following the tradition established by historical national accountants in many other countries, I fully expected van Zanden and van Riel to adopt a growth accounting framework to examine the different phases of economic growth in the Netherlands. However, growth accounting is eschewed here in favor of new institutional economics. Instead of explaining the phases of growth by factor inputs and total factor productivity, the authors relate then to the institutional structures outlined for each sub-period. Although I believe strongly in a link between long run economic development and institutional structures, I found myself uncomfortable on a number of occasions with the very short run nature of the linkages being proposed here. The basic idea is that the institutional structures of the Dutch Republic during the Golden Age became a hindrance during the era of modern economic growth pioneered by Britain from the late eighteenth century, and took time to change. A useful analogy is drawn with the problems faced by the British economy in adapting to the American innovations of the second industrial revolution from the late nineteenth century.
However, when dealing with shorter periods, I felt that the authors were in constant danger of turning too quickly to institutional factors to explain every development. A couple of examples will suffice to demonstrate my unease. First, for the period 1780-1813, economic stagnation is blamed on a decentralized institutional structure, which is held to have limited the ability of the Dutch Republic to raise revenue for defense expenditures, thus paving the way for naval defeat by the British and invasion by Prussian and then French troops. However, suppose the Dutch Republic had put in place the most perfect centralized institutional structures. Could such a small state have raised enough revenue to win an arms race against the major European powers with much larger populations? Second, the authors are to be congratulated on demonstrating the existence of positive per capita income growth during the period 1813-40, thus rebutting the claims of other economic historians arguing for continued stagnation. But now that we have become used to postwar reconstruction booms, should institutional change take all the credit for a bounce-back after the disruption of the previous decade? Third, van Zanden and van Riel characterize the period 1840-70 as a successful “liberal offensive,” with the state budget finally brought under control and economic liberalization achieved both at home and abroad. However, they also see this as a period of renewed stagnation. This forces them into an argument about under-investment in previous periods and specialization in the wrong sectors, which sits uneasily with the general message of a short run link between institutions and growth. It also seems to hint at the need for the growth accounting approach which has been eschewed.
The institutional chapters do contain much useful information and the emphasis on the link between institutions and growth is thought-provoking. For me, though, the real strength of the book lies in the chapters on economic developments. I particularly liked the section on Dutch development measured against a European norm, based on the Chenery-Syrquin methodology that Nick Crafts used so effectively for charting British exceptionalism during the first industrial revolution. Here, we see that the Netherlands clearly shared that British exceptionalism until 1800, with an early shake-out of labor in agriculture and a dynamic service sector. Unlike Britain, however, the Netherlands converged to the European norm during the nineteenth century. One comparative issue raised by the new Dutch historical national accounts is the timing of the British overtaking of the Netherlands, previously put at some time between 1780 and 1800 (p. 24), but now postponed until after 1820 (p. 264). A new Anglo-Dutch benchmark estimate of comparative per capita income for the early nineteenth century would now be very useful.
Stephen Broadberry is Professor of Economic History in the Department of Economics, University of Warwick and co-director of the Economic History Initiative at the Centre for Economic Policy Research, London. He has published widely on international comparisons of productivity and living standards, including The Productivity Race (Cambridge University Press, 1997) and “From the Counting House to the Modern Office: Explaining Anglo-American Productivity Differences in Services, 1870-1990”, Journal of Economic History, 2002 (with Sayantan Ghosal).