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Economic History and Economic Underdevelopment*

Published online by Cambridge University Press:  07 November 2014

Barry E. Supple
Barry E. Supple*
Affiliation:
McGill University
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Extract

Discussing the economic backwardness of Ireland in the late seventeenth century, Sir William Petty delivered himself of an apt, if indelicately worded, opinion. “Their Lazing,” he wrote of the Irish, “seems to me to proceed rather from want of Imployment and Encouragement to Work, than from the natural abundance of Flegm in their Bowels and Blood.” He continued this somewhat unorthodox analysis by listing the factors which destroyed or frustrated the incentives to increase production in Ireland; and, in the process, he succeeded in anticipating more than one modern idea on the subject. He even dealt with visible and disguised unemployment, and recommended, along lines fashionable today, that the surplus labour be employed in the creation of capital: improving rivers and constructing roads, bridges and buildings–“works,” as he succinctly put it, “of much labour and little art.”

Although this article concerns neither Petty nor Ireland directly, the former's observations on the latter provide a useful introduction to its principal topic–the historical nature of economic underdevelopment. If we study the earlier history of today's highly developed economies, what sort of economic and social landscape do we find, and how does it compare with the structure of preindustrial economies in the mid twentieth century?

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 27 , Issue 4 , November 1961 , pp. 460 - 478
Copyright
Copyright © Canadian Political Science Association 1961

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Footnotes

*

A paper presented at the annual meeting of the Canadian Political Science Association in Montreal, 8 June, 1961.

References

1 “The Political Anatomy of Ireland” (1691), in Hull, C. H., ed., The Economic Writings of Sir William Petty (Cambridge, 1899), I, 201.Google Scholar

2 The phrase occurs in “A Treatise of Taxes and Contributions” (1662) in Hull, , ed., Writings of Sir William Petty, I, 30 Google Scholar; but the analysis and recommendation are repeated in the Political Anatomy.

3 Neither the topic nor many of the conclusions are entirely original. For discussions of the preindustrial English economy and its “underdeveloped” characteristics, see Fisher, F. J., “The Sixteenth and Seventeenth Centuries: The Dark Ages in English Economic History?”, Economica, N.S., XXIV, no. 93, 02, 1957, 2–18, particularly 17–18CrossRefGoogle Scholar; Coleman, D. C., “Labour in the English Economy of the Seventeenth Century,” Economic History Review, 2nd series, VIII, no. 3, 04, 1956, 280–95.CrossRefGoogle Scholar For a stimulating comment on capital flows and entrepreneurial behaviour in underdeveloped economies, see Rosenberg, Nathan, “Capital Formation in Underdeveloped Countries,” American Economic Review, L, no. 4, 09, 1960, 706–15.Google Scholar

4 See Kuznets, Simon, “Underdeveloped Countries and the Pre-Industrial Phase in the Advanced Countries,” Proceedings of the World Population Conference, 1954, V Google Scholar, reprinted in Agarwala, A. N. and Singh, S. P., eds., The Economics of Underdevelopment (Bombay, 1958), 147–51Google Scholar; Krause, John T., “Some Implications of Recent Work in Historical Demography,” Comparative Studies in Society and History, I, no. 2, 01, 1959, 164–88CrossRefGoogle Scholar; Krause, J. T., “ Some Neglected Factors in the English Industrial Revolution,” Journal of Economic History, XIX, no. 4, 12, 1959, 528–40CrossRefGoogle Scholar; Hoselitz, Bert F., “Population Pressure, Industrialization, and Social Mobility,” Population Studies, XI, no. 2, 11, 1957, 123–35CrossRefGoogle Scholar, reprinted in Hoselitz, Bert F., Sociological Aspects of Economic Growth (Glencoe, Ill., 1960), 115–38.Google Scholar

5 For comparisons which exemplify the attitudes described in the above paragraph, see Kuznets, , “Underdeveloped Countries,” and “Quantitative Aspects of the Economic Growth of Nations, I, Levels and Variability of Rates of Growth,” Economic Development and Cultural Change, V, no. 1, 10, 1956, 15–25 Google Scholar, particularly 23–5; Hoselitz, , “Population Pressure;” Bauer, P. T., Economic Analysis and Policy in Underdeveloped Countries (Durham, NC, 1957), 45–9.Google Scholar

6 For one (perhaps excessively obscurantist) critique of the use of theory in history, see Supple, Barry E., “Economic History and Economic Growth,” Journal of Economic History, XX, no. 4, 12, 1960, 548–56.CrossRefGoogle Scholar On economic history's role as a means of formulating questions rather than providing answers, see Gerschenkron, Alexander, “Economic Backwardness in Historical Perspective,” in Hoselitz, Bert F., The Progress of Underdeveloped Areas (Chicago, 1952), 3–4.Google Scholar On the value of comparative history, see Easterbrook, W. T., “Long-Period Comparative Study,” Journal of Economic History, XVII, no. 4, 12, 1957, 571–95.CrossRefGoogle Scholar

7 For a strong criticism of the use of national income estimates for backward lands, see Frankel, S. Herbert, “Concepts of Income and Welfare in Advanced and Under-developed Societies,” in Gilbert, Milton (ed. for International Association for Research in Income and Wealth), Income and Wealth, series III (Cambridge, 1953), 156–68.Google Scholar For an excellent attempt to systematize and resolve the relevant problems, see Kuznets, Simon, “National Income and Industrial Structure,” reprinted in Economic Change (New York, 1953), 145–91.Google Scholar

8 Higgins, Benjamin, Economic Development (New York, 1959), 10.Google Scholar

9 Such statements are not susceptible of rigorous proof, but it is possible to obtain a very rough idea of the order of magnitude involved, even though it means violating the canons of respectable statistical behaviour, by linking unrelated statistics in an unwarranted manner. In the eighteenth century there had probably been an increase of thirty per cent (conservatively estimated) in the United Kingdom's real per capita income, and a further doubling between 1800 and the 1860's (Deane, Phyllis, “The Industrial Revolution and Economic Growth,” Economic Development and Cultural Change, V, no. 2, 01, 1957, 160, 171).Google Scholar Between the 1860's and 1949–53 average real income rose by a further 150 per cent (Kuznets, , “Quantitative Aspects,” 53 Google Scholar). On these bases, average real income in the early 1950's was six or seven times as great as in 1700. Using the UN figure of $780 for the 1950's, this gives us a per capita level of $115 or $130 for 1700. Even if we allow a mere quadrupling of income (from $195 to $780), this still indicates an “underdeveloped” point of origin. Needless to say, these statistical manipulations, while the best possible if quantification is insisted upon, are probably worthless for any other purpose than obtaining a very rough confirmation of general impressions.

10 Nef, J. U., “The Progress of Technology and the Growth of Large-Scale Industry in Great Britain, 1540–1640,” Economic History Review, V, no. 1, 10, 1934, 3–24 CrossRefGoogle Scholar; The Rise of the British Coal Industry (London, 1932), I, 19 ff., 123–4, 165–89.Google Scholar

11 The East India Ccwnpany was the only joint-stock company of any appreciable size in England until the end of the seventeenth century. Even so, in 1657 it had a paid-up capital of only £370,000, although by 1683 its net assets and capital were estimated at some £1,700,000 and £740,000 respectively (Scott, W. R., The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720 [Cambridge, 1910], II, 130, 145 Google Scholar). As late as 1619 the Virginia Company had spent less than £70,000 (ibid., II, 258). The Hudson's Bay Company was launched in the 1670's with a mere £10,500 (ibid., II, 230). The Royal African Company in 1676 had a capital of only some £111,000 (ibid., II, 25–6).

12 English trade with West Africa, America and the East boomed at the end of the seventeenth century: by 1700 it accounted for some 32 per cent of imports, 15 per cent of exports, and 16 per cent of re-exports (calculated from Davis, Ralph, “English Foreign Trade, 1660–1700,” Economic History Review, 2nd series, VII, no. 2, 12, 1954, 151.Google Scholar

13 It seems generally agreed that a relative expansion in manufacturing is an integral part of the process of economic development. See Kuznets, Simon, “Quantitative Aspects of the Economic Growth of Nations, II, Industrial Distribution of National Product and Labor Force,” Economic Development and Cultural Change, Supplement to Vol. V, no. 4, 07, 1957, 10–11, 16–19 Google Scholar; Chenery, Hollis B., “Patterns of Industrial Growth,” American Economic Review, L, no. 4, 09, 1960, 635 ff.Google Scholar; First International Conference of Economic History; Contributions, A: Industrialisation as a factor in economic growth after 1700 (The Hague, 1960).Google Scholar

14 Occupational statistics for the period are almost never available and, when they are, do not engender much confidence. However, at least one survey is interesting in that (whatever the nature of his sample) the contemporary compiler was reasonably trustworthy. In 1608, of a possibly representative selection of some 17,000 adult males in Gloucestershire (admittedly a leading textile county), 46.2 per cent were engaged in agriculture and estate work, 15.5 per cent in textile manufacture, and 7.4 per cent in the production of clothing. See A. J., and Tawney, R. H., “An Occupational Census of the Seventeenth Century,” Economic History Review, V, no. 1, 10, 1934, 36.Google Scholar

15 At the end of the seventeenth century, food and raw materials accounted for roughly 20 per cent of exports. Of total imports textiles were 27 per cent; food, drink and tobacco, 34 per cent; and raw materials, 35 per cent. However, much of this was re-exported. Retained import percentages were: textiles, 24 per cent; food, drink and tobacco, 27 per cent; raw materials, 45 per cent (calculated from Davis, , “English Foreign Trade,” 151 Google Scholar).

16 Leibenstein, Harvey, Economic Backwardness and Economic Growth (New York, 1957), 40–1Google Scholar; Fisher, , “The Sixteenth and Seventeenth Centuries,” 17–18.Google Scholar

17 This assumes an arbitrary subsistence level. As classical and pre-classical writers appreciated, however, the “subsistence” level was a product of habit and custom. Richard Cantillon, in the early eighteenth century, described the different amounts of land “required for the support of a Man according to the different assumptions of his Manner of Living,” and claimed that “the Increase of Population can be carried furthest in the Countries where the people are content to live the most poorly and to consume the least produce of the soil.” (Higgs, Henry, ed. and trans., Essai sur la Nature du Commerce en Générale [London, 1931], 71–3, 83)Google Scholar

18 Quoted in Knorr, Klaus E., British Colonial Theories, 1570–1850 (Toronto, 1944), 42.Google Scholar For more scientific evidence of increasing population, see Brown, E. H. Phelps and Hopkins, Sheila V., “Wage Rates and Prices: Evidence for Population Pressure in the Sixteenth Century,” Economica, N.S., XXIV, no. 96, 11, 1957, 289–306.CrossRefGoogle Scholar Cf. Fisher, “The Sixteenth and Seventeenth Centuries,” and Coleman, “Labour in the English Economy.” Of course, a desire to alleviate poverty by encouraging emigration does not necessarily indicate a state of underdevelopment–as witness the arguments in favour of emigration in nineteenth-century England.

19 Britannia Languens (1680), quoted in Heckscher, Eli F., Mercantilism (2nd ed., London, 1955), II, 159.Google Scholar

20 See Coleman, , “Labour in the English Economy,” 283–4.Google Scholar The following paragraph is to a considerable extent based upon Mr. Coleman's excellent article.

21 One estimate is that in 1695 some 31 per cent of the population was between 15 and 35 (the estimated expectation of life) and about 51 per cent between 15 and 60. In 1951 comparable figures were 67 per cent (between 15 and the new expectation of life, 67), and nearly 66 per cent. Another computation indicates that in 1695 some 38 per cent of the population was under 15 years of age. This is quite comparable to modern underdeveloped lands. In contrast, modern figures for England, Belgium, Sweden, and France range between 21.1 per cent and 22.6 per cent. (Ibid., 284–5)

22 For a description of a small Yorkshire coalmine where the workmen regularly took four or five weeks of religious and secular holidays annually, besides a good deal of other voluntary absenteeism, see Stone, Lawrence, “An Elizabethan Coalmine,” Economic History Review, 2nd series, III, no. 1, 1950, 101–2.Google Scholar Cantillon, (Essai, p. 95)Google Scholar presumed that Protestant countries had an advantage over Catholic countries in that they had “suppressed a great number of Holy Days when no work is done in Roman Catholic countries, and which diminish the labour of the People by about an eighth part of the year.” In general the Reformation did not produce an immediate revolution in this regard in England. Habit and loyalty–not to speak of a keen appreciation of leisure–maintained the tradition of Holy Day holidays.

23 Hull, , ed., Writings of Sir William Petty, I, 192.Google Scholar

24 For a discussion of this aspect of growth as it was analysed in the literature of the eighteenth century and later, see Eagley, Robert V., “Sir James Steuart and the ‘Aspiration Effect,’” Economica, N.S., XXVIII, no. 109, 02, 1961, 53–61.CrossRefGoogle Scholar

25 Hull, , ed., Writings of Sir William Petty, I, 146, 218.Google Scholar Petty claimed that “the multitude and proportion of Alehouses … is a sign of want of Employment in those that buy, no less than those that sell the Drink.”

26 See Supple, B. E., Commercial Crisis and Change in England, 1600–1642 (Cambridge, 1959), 12, 100.Google Scholar In 1563 the government took steps (although their effectiveness may be doubted) to ensure a supply of agricultural labour for such occasions. In the Statute of Artifices of that year local magistrates and other officials were empowered to order all suitable persons to help in the harvest, “for thavoydinge of the losse of any come grayne or heye.” (Tawney, R. H. and Power, Eileen, eds., Tudor Economic Documents [London, 1924], I, 344)Google Scholar

27 Wealth of Nations (Everyman, ed., 1910), 2.Google Scholar It is often forgotten that Smith argued that the degree and sophistication of the division of labour were dependent on two factors. One was the extent of the market. The other was the availability of capital. See ibid., I, 241–2.

28 Supple, , Commercial Crisis and Change in England, 178–94, 249–50Google Scholar; Hinton, R. W. K., “The Mercantile System in the Time of Thomas Mun,” Economic History Review, 2nd series, VII, no. 3, 04, 1955, 282–3.Google Scholar

29 For a description of the sixteenth-century credit system, see the editor's introduction to Tawney, R. H., ed., Discourse upon Usury, by Wilson, Thomas (London, 1925).Google Scholar Also see Tawney, R. H., Land and Labour in China (London, 1932), 58 ffGoogle Scholar: “in all countries where farming is in the hands of small producers, the fundamental problem of rural society is not that of wages, but of credit. All over Europe, from the early Middle Ages to the nineteenth century, a long wail arose against the unconscionable extortions of the damnable sect of usurers.”

30 Edward Gibbon, Decline and Fall of the Roman Empire, chap. XXXI. For a discussion of aristocratic debts and their significance for the prosperity of the nobility, see the controversy between Stone, Lawrence and Trevor-Roper, H. R., in Economic History Review, XVIII, no. 2, 1948 Google Scholar; 2nd series, III, no. 3, 1951; 2nd series, IV, no. 3, 1952.

31 For the monetary needs of the Crown in the context of the seventeenth-century money market, see Ashton, Robert, The Crown and the Money Market, 1603–1640 (Oxford, 1960).Google Scholar

32 Sir Culpeper, Thomas, A Tract against Usury (1621), 23.Google Scholar Culpeper advocated a reduction of interest rates to encourage more productive enterprise.

33 James I and Charles I, in thirty years, sold nearly twice as much land as did Elizabeth I in forty-five years. Between 1558 and 1635 about £,2,240,000 of Crown lands were sold. Tawney, R. H., “The Rise of the Gentry,” Economic History Review, XI, no. 1, 1941 Google Scholar, reprinted in Carus-Wilson, E. M., ed., Essays in Economic History (London, 1954), 194–5.Google Scholar It should be noted that not all of this land was purchased and then left unchanged: improvements and increasing productivity both resulted from such transactions. On the other hand, the money derived from sales was most frequently not placed in productive uses.

34 Notestein, W., Relf, F. H. and Simpson, H., eds., The Commons Debates, 1621 (New Haven, 1935), II, 422.Google Scholar

35 Here and subsequently in this paper, I am indebted to Professor Rosenberg's article, previously mentioned, which analyses patterns of investment in terms of the rationality of choice.

36 Cf. Stone, , “An Elizabethan Coalmine,” 105 Google Scholar (“enterprise in the Elizabethan period with the price of capital at 10% often simply did not pay”).

37 See Warren C, Scoville, The Persecution of Huguenots and French Economic Development, 1680–1720 (Berkeley and Los Angeles, 1960), 383–4.Google Scholar

38 Price, W. H., The English Patents of Monopoly (Boston, 1906), 161.Google Scholar

39 This sort of thing was not confined to, nor at its most extreme in, England. France, for example, particularly during and after Colbert's time used the devices of privilege and government aid in a widely varied attempt to start and maintain a host of pretentious industrial and mining enterprises. In general, the entrepreneurial search for security and reaction to risk deserve wider application and analysis. See Easterbrook, W. T., “The Climate of Enterprise,” American Economic Review, Papers and Proceedings, XXXIX, 05, 1949, 322–35Google Scholar; “Long-Period Comparative Study,” 573–5.

40 See, for example, Hoselitz, Bert F., “Entrepreneurship and Economic Growth,” American Journal of Economics and Sociology, XII, no. 1, 10, 1952 Google Scholar, reprinted in Sociological Aspects of Economic Growth (Glencoe, Ill., 1960), 142, 149–56.Google Scholar “Native traders and money lenders are fully imbued with the ‘drive to amass wealth.’ They often are engaged in very risky enterprises; they gamble on long odds; they are sharp bargainers and clearly intent on exploiting any economic situation to their fullest advantage.”

41 For analyses of French industrial retardation in terms of the repercussions of social structure and values on French entrepreneurship, see Landes, David S., “French Entrepreneurship and Industrial Growth in the Nineteenth Century,” Journal of Economic History, IX, no. 1, 05, 1949, 45–61 CrossRefGoogle Scholar; Sawyer, J. E., “The Entrepreneur and the Social Order: France and the United States,” in Miller, William, ed., Men in Business (Cambridge, Mass., 1952).Google Scholar For a criticism of this view, see Gerschenkron, Alexander, “Social Attitudes, Entrepreneurship, and Economic Development,” Explorations in Entrepreneurial History, VI, 1953–1954, 1–19, particularly 9–12.Google Scholar Subsequent issues of Explorations carried on the controversy.

42 For a stimulating analysis of the problems of entrepreneurship with respect to growth and in terms of inducement, see Albert O, Hirschman, The Strategy of Economic Development (New York, 1958).Google Scholar Cf. Gerschenkron, , “Social Attitudes,” 13.Google Scholar

43 The problem of how growth can ever result in an environment which offers little or no inducement to growth-oriented investment has been “solved” by advocates of balanced growth–who favour a massive transformation of the environment by a simultaneous proliferation of investment, creating profitable and interdependent investment outlets for capital.

44 The influence of an evolving market, both domestic and international, on the English industrial revolution, has come in for some emphasis in the last few years (see, for example, Habakkuk, H. J., “The Historical Experience on the Basic Conditions of Economic Progress,” in Dupriez, L. H. [ed. for International Economic Association], Economic Progress [Louvain, 1955]Google Scholar; Berrill, K., “International Trade and the Rate of Economic Growth,” Economic History Review, 2nd series, XII, no. 3, 04, 1960, 358–9Google Scholar; also the discussion in Past and Present, no. 17, April, 1960). This might play its part from the side of demand–through an increase in population or the attainment by the European market for British goods of a critical size. Alternatively, the steady improvement in English commerce may itself have created the type and size of market necessary for long-term commitment to industry. In addition, it should be remembered that the coastal configuration and river system of England, when supplemented by canals, gave English producers a decided advantage in terms of transport. England, after all, is the supreme example of an economy which managed an industrial revolution without the aid of railways.

45 This part of the argument is indebted to Professor Alexander Gerschenkron. See his “Economic Backwardness in Historical Perspective,” in Hoselitz, , ed., The Progress of Underdeveloped Areas, 3–29.Google Scholar

46 For a recent analysis of the role of expectations, see Smithies, A., “Rising Expectations and Economic Development,” Economic Journal, LXXI, 06, 1961, 255–72.CrossRefGoogle Scholar

47 Wealth of Nations, I, 299.Google Scholar