Their study
divides the earth into several interacting 'world
regions' and divides its history with three
'great world-historical events': the Black Death,
the Columbian exchange, and the industrial revolution
(xxi). As a world history spanning a millennium,
it seeks to 'avoid both the Scylla of Eurocentrism
and the Charybdis of Sinocentrism' (xviii),
harnessing an impressive amount of secondary
scholarship to do so. Their intimate familiarity
with select traditions of modern historiography
certainly makes for a unique and valuable survey
of economic history, but the jarring paucity-if
not complete absence-of primary sources and
research will put off many historians. The authors
are, however, commendably honest about this:
'There is a lot in this book… that will
be entirely unremarkable to any moderately well
trained historian' (xxvi). In effect, the great
genius of their enterprise lies precisely in
rendering a long and tumultuous period of human
history readable for economists, and for this
they deserve praise. But unfortunately the book
fails to confront economic theory where it is
at its weakest in terms of explaining the wealth
and poverty of nations.
In this context, the book's title is not incidental,
for this is not yet another celebratory history
of doux commerce. Contrary to the impression
given by many economics textbooks, the authors
argue, 'the greatest expansions of world trade
have tended to come not from the bloodless tâtonnement
of some fictional Walrasian auctioneer but from
the barrel of a Maxim gun, the edge of a scimitar,
or the ferocity of nomadic horsemen' (xviii).
So while economists all too often neglect the
violent complexities of economic history, Findlay
and O'Rourke actively aimed to structure their
history around a dichotomy lionized by the famous
debate between Jacob Viner and Eli Heckscher
over whether early modern states pursued power
or plenty (197, 228, 261, 310, 361, passim).
Historically, the authors clarify, the relation
between power and plenty was such that 'achieving
either aim would promote further achievement
of the other' (191). That said, the authors
are not afraid of applying the vocabulary and
methodological assumptions of mainstream economics
to the historical record. A 'long-run equilibrium
of sorts', we learn, was established between
the Mamluk successors of Saladin and the sultans
of Yemen (99). And while a 'general equilibrium
model' can explain the consequences of the Black
Death (117), their explanation of the Industrial
Revolution rests on a 'benchmark neoclassical
growth model' (317). In short, 'simple neoclassical
predictions' often do the trick (112).
It is quite a ride that Findlay and O'Rourke
take their readers on, their book nimbly structured
and invigorated by memorable episodes from the
dustbins of economic history. We are introduced
to the pan-continental economic benefits of
'Viking degradations' (85-86); to the consequences
of the 'Pax Mongolica'; the Florentine Francesco
di Balducci Pegolotti's remarkable statement
in the early 1340s that travel by land from
Crimea to Beijing was 'perfectly safe, whether
by day or by night' (107); and even the Sultan
Iskander Muda's 'monster galley', the most massive
wooden vessel in history, named 'the terror
of the universe', which notably failed to stand
up against Portuguese aggressors in Southeast
Asia (201). As a history of world trade in the
last millennium, the book at hand is in effect
a violent history of 'globalization', conceptualized,
however, teleologically as the gradual release
of economic forces from the shackles of natural
and political barriers. Hence the prevalence
of phrases such as 'Once Britain had finally
switched to free trade…' (377). This proclivity
is symptomatic of an unfortunate tension running
throughout the book. It is as if we are led
to believe that England's biggest historical
mistake was when, under the Tudors, the nation
stopped specializing according to its comparative
advantage of being a poor supplier of raw wool
for the textile producing hubs of the continent
and embarked on a centuries-long strategy of
emulating those same manufacturing hubs through
an arsenal of policies which included armed
aggression and heavy-handed protectionism. Adam
Smith, for one, saw the immense historical importance
of putting the Navigation Acts before free trade.
On the one hand, we are repeatedly shown how
conquests, tariffs, and state interventions
were extraordinarily effective in creating wealth
for the first world from the end of the Renaissance
to the nineteenth century (210, 301, 309, 325,
345, 423). On the other, the authors' commitment
to Samuelsonian economics leads them to downright
procrustean readings. So we learn that the Fatamids
followed 'generally enlightened policies' which
can be described 'as being of an almost laissez-faire
character' (57), and the Opium Wars are unproblematically
described as resulting in 'freer trading conditions'
(388). They speak of the 'stark division of
labour between a manufacturing core and a primary-producing
periphery' (xx), yet they seemingly lament,
discussing Communism, that 'by promoting the
development of heavy industry, the Soviet system
led to the breakdown of the traditional European
division of labor, which had seen a largely
agricultural Eastern Europe exporting agricultural
products to Western Europe, in exchange for
industrial goods' (478). Are we to believe the
Russians would have been better off supplying
Europe with grain, or perhaps as indentured
servants of the Czar? It would seem so, since
the authors also argue Prebish and Singer 'mistakenly
projected' the 'collapse' of 'terms of trade'
during the interwar period 'both backwards and
forwards in time, and argued that specialization
in primary products was harmful for developing
countries' (484). Were they and are they not?
Was Laos like England in the nineteenth century?
Is Mongolia like the United States today?
When the authors arrive at what is probably
the most important lesson of economic history
- that of the different mechanisms set in motion
by increasing returns and a large division of
labour on the one hand and diminishing returns
and monoculture on the other - they back off
from facing the unequivocal burden of proof
from 500 years of economic history. For all
their work on industrial development, the authors
retrench into the safety of what Buchanan calls
'the equality assumption' - that all economic
activities are qualitatively alike - and consequently
into the safe haven of basic neo-classical trade
theory. Here Findlay and O'Rourke follow the
example of Paul Krugman. Based on a 1923 article
by Frank Graham - a simple model showing how
nations specializing in diminishing returns
activities grow poorer under international trade
- the early Krugman told his readers how Lenin
and the classical development economists were
right. However, 'effective demand' in academic
economics soon led Krugman to disregard the
effects of diminishing returns, that were so
important to English classical economists from
Malthus to Mill, and concentrate on increasing
returns under the 'equality assumption'. Findlay
and O'Rourke also in the end disregard the theoretical
implications of a mass of historical evidence
contradicting the wisdom of today's world economic
order. The way the authors teasingly approach
the conclusion of the importance of increasing
and diminishing returns - of manufacturing and
advanced services vs. raw materials - and then
back off just before reaching the conclusion,
is an interesting study in itself. Very sadly
this reviewer's associations automatically wandered
off to consider the brinkmanship that academic
writers have had to confront with censors from
time immemorial to the East German 'Jahrbuch
für Wirtschaftsgeschichte' (Annals of Economic
History), a publication that - when similarly
stripped of mandatory ideological chaff - actually
contained much good work on economic history.
Immense work has obviously gone into this book,
and the result is truly an extraordinary synthesis
of economic history. Yet, and particularly given
what the events of the past year have demonstrated,
the authors' rigorous and hubristic theoretical
underpinnings hurt their endeavour deeply, and
a more humble approach to the past would certainly
have been in order. For, these days, it is hard
to know what to make of their argument, based
on Dani Rodrik, that while 'the World Bank and
IMF' perhaps 'used the leverage which developing
countries' debt problems gave them to push for
trade reforms as well as macroeconomic reforms',
this 'can hardly have mattered in the cases
of economic and political giants such as Argentina'
(498). An extraordinarily counterfactual statement.
Another irony is that Findlay and O'Rourke present
what England did for centuries as 'mercantilism',
while we are told 'in Taiwan, liberalization
started in 1958, when the government started
replacing quantitative restrictions on trade
with tariffs, lowering the costs of imported
raw materials, and encouraging exports'. This
is of course precisely what England and other
successful nations had done for centuries. That
Findlay and O'Rourke call such measures mercantilism
in one case and liberalization in the other
is deeply problematic, and a telling indication
of the book's underlying schizophrenia in seeking
to unite the cruel reality of the historical
record with utopian theories of market-made
economic harmony.
No doubt, students and scholars will benefit
immensely from this book, and hopefully they
can do so without downing it hook, line, and
sinker. For, their theoretical prejudices aside,
many of Findlay and O'Rourke's historical instincts
are healthy, as is evident from one of their
timeless observations: 'globalization led to
losers as well as winners' (410). But where
is the economic theory that backs this statement
up? The contingency of development, the complexities
of power and plenty, these are the lessons which
students and scholars should take home from
this history, not the parodic triumphalism to
which the book sadly clings.
* Erik S. Reinert, University of Technology,
Estonia, and The Other Canon Foundation, Norway.
Email: eriksreinert@gmail.com.
January 11, 2010.
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