Sunday, September 09, 2007


Brad DeLong posts a terrific and fascinating paper on economic history and the history of economic thought and the generations of development economics. Two tastes:

Thus in Marx's view, economic historians and development economists were or ought to be the same. In fact, all economists and economic historians ought to be the same. In fact, everybody ought to be an economic historian: studying the social and industrial history of England, and then applying its lessons everywhere around the globe, was the most important task. Economic historians ought to rule the world, for they held the key to the lock that opened the door behind which was concealed the answer to the riddle of human destiny. There was one qualification. As a secondary task one needed to be a political historian--and not a political historian of England, but of France. As Friedrich Engels said in a revealing moment, "Generally speaking, for the economical development of the bourgeoisie England is here taken as the typical country; for the political development, France." But the politics was added-on superstructure: the economy was fundamental base.

Now the cup that Marx offered turned out to be a poisoned chalice, and I think there were three reasons for this.

First, as a matter of historical understanding--well, (the mind does boggle at the grafting of France's political history onto England's industrial one. No country, anywhere, anytime has had the political history of France and the industrial history of England. A focus on politics tends to make one anticipate revolutions and seizures of state power and expect state-led economic transformation. But thumb-fingered states are capable of only certain types of economic transformations, and the free society of wealthy and productive associated producers that Marx tried to order was simply not on the menu. Taking France's political and England's economic history leading to mass revolution that produces a left anarchy as the model, and trying to explain every deviation from that as second-order factors imposing transitory disturbances on a dominant tendency--well, that is not an easy task.


Adam Smith had said, in lecture: "Little else is required to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes and a tolerable administration of justice." For Rostow much more was required: The traditional economy. The creations of the preconditions for takeoff--an honest government, good market institutions, and commercial and financial sophistication. The "takeoff" itself--a substantial rise in the savings and investment rate made possible by the opportunities in leading sectors opened up by modern technology and financial mobilization, and that would transform the economy from an earth-bound to a sky-free creature. Followed by the drive to maturity, and the age of high mass consumption.

But in the decolonization age of the High Cold War the first priority of the Dulleses and the Rusks was to line up newly-independent countries and the older states of Latin America on the U.S. team for the great tug-of-war. And this required gaining the favor of the new princes who ruled. And as Machiavelli taught us long ago, there is nothing more difficult than being a new prince: all of one's energy must be devoted to state-building so that one does not rapidly become an ex-prince.

State-building requires that you make friends who will be your supporters, which requires that you make people who want to be your friends happy, which often means rich, which requires that you give them some other people's money, which requires that you find some other people with money whose money you can give, which tends not to be great for economic development. Rostow went with Kennedy to Indonesia. Rostow had primed Kennedy to negotiate on how the U.S. could aid Indonesian economic development. But Indonesian dictator Sukarno, stuck between a large rural land redistribution-seeking Communist movement and an army officered by the relatives of local notable landlords, did not think he could take the long view. Kennedy talked about the Peace Corps and aid and technical assistance and economic development and a South Asian Development Bank. Sukarno's response? "Mr. President, development takes too long. Give me West Irian instead"--West Irian being the western half of the island we westerners call New Guinea. Sukarno got West Irian, and the Year of Living Dangerously.

This should not have come as a great surprise. State-building, the pursuit of empire, and political organization always had an uneasy relationship with economic prosperity and growth.