The Historical Society, Boston University

There is a newly found interest among economists in the issue of what Eric Jones two decades ago called “The European Miracle” and what Kenneth Pomeranz more recently termed “The Great Divergence.” Even in an age in which Eurocentrism, triumphalist or otherwise, has fallen out of favor, the most radical social scientists have to concede that whatever one might think of its causes, modern economic growth has transformed the world. This is equally true for countries that experienced economic growth early and in large doses and those hopeful or frustrated societies who are now known as “developing economies.”

How did it all begin? Economists have increasingly demanded an answer from historians, threatening that if they do not get one, they will supply one themselves.[1] The story they tell is that the Industrial Revolution started in the late 18th century and (with a lag) prompted what they call “modern economic growth.” Before the Industrial Revolution the world was “Malthusian” and experienced little, if any, economic growth. In the 19th century the West started suddenly to grow, making (almost) everyone in it rich. This was accompanied by growing investment in human capital (mostly education), inducing people to have fewer (but better educated) children, and sustained technological progress, reinforcing the process of growth.

Historians can poke endless holes in these stylized facts. There was more growth in the premodern economies than economists suppose, and evidence that the world was in a “Malthusian trap” before 1750 is decidedly mixed. The connection between education, economic growth, and human fertility is hugely complex and differs across various Western societies. The details reveal a far more nuanced and subtle story than the crude stylized facts that inspire economists to build their models. But the basic story must be right: whether the world economy before 1750 was indeed in a stasis or not, there can be no doubt that economic growth as we know it is a novel phenomenon. For instance, income per capita in the UK in 1890 was about $4100 in 1990 international dollars. It grew in the subsequent years by an average of 1.4% per year. Had it been growing at that same rate in the previous 300 years, income per capita in 1590 would have been $61, which clearly is absurdly low. Whatever the exact cause, the century of the pax Britannica witnessed the departure of the Occident Express with the British car in the lead. The train ride took the Western world to unprecedented prosperity, leaving much of the world behind on the platform. By 1914 the current division between rich and poor countries, termed by one wry economist “twin peaks,” had been created.[2] A century later it is still there in rough lines, and whereas some nations have been able to hop across the chasm, it is hard to deny that the chasm between rich and poor economies is a signal characteristic of our planet. And there is no sign it is getting any narrower.

How are we to think of this? Should we think that there was something defective about societies such as Paraguay, the Philippines, or Cameroon which prevented them from growing? Or was there something unique about the Western experience in the 18th century that mutated and created a new kind of society, unlike anything seen before? This way of phrasing the question may seem to some similar to whether a zebra is white with black stripes or vice versa. Yet if we do not want to think of much of the world as failures, we are forced to think about a unique event that occurred in the West before the Industrial Revolution. One approach is to postulate that all economies have the potential to grow, but that obstacles prevented them from realizing this potential until the Industrial Revolution. What we have to search for above all is something that helped dissolve these “blocking factors” which before 1750 imposed upper bounds on the economic growth of preindustrial society.[3]

In my view, the Enlightenment is one factor that could have made the difference. The Enlightenment combined a belief in the possibility and desirability of social progress with a faith in rationality and the ability of knowledge to improve the human condition. It resided firmly in the realm of discourse, rhetoric, persuasion, and beliefs. Oddly enough, few economists have made explicit attempts to connect ideological and intellectual changes with economic development. Most economists tend to believe that changes in power, technology, income, and prices determine economic outcomes, and in the end they, not ideology or beliefs, are “exogenous variables.” Ideological change does not affect economic history, some economists believe, because it cannot be verified; it is “a grin without a cat.”[4] A growing number of economists, led by Nobel laureate Douglass North, have begun to demur with regard to this view. What people believe about one another, or about their physical environment and its creator, has an impact on how they go about their lives, what they aspire to, and on the institutions they create. Moreover, because technology and institutions are changed by a fairly small number of people, the beliefs of the elite and the leadership matter more than public opinion or the ideology of the common man. The Enlightenment was a movement of elites: the literate, the educated, and the powerful. Yet these were the people responsible for the crucial changes that made the take-off” into sustained growth possible.

Let me address two points. The first is the myth that the Industrial Revolution was purely British affair, and that without Britain Europe would still be largely a subsistence economy. The historical reality was that many if not most of the technological elements of the Industrial Revolution were the result of a joint international effort in which French, German, Scandinavian, Italian, American, and other Western innovators collaborated, swapped knowledge, corresponded, met one another, and read each other’s work. The technological basis of the Industrial Revolution was no more confined to Britain than the Enlightenment was confined to France, although it was in Britain where its first successful products emerged. The second point to note is that the real difference between the Industrial Revolution and other episodes characterized by a clustering of macroinventions was not just in the harnessing of steam or the sudden rise to prominence of cotton in the 1780s. While the impact of the great inventions of the years of Sturm and Drang on a number of critical industries stands undiminished, the most important difference between the Industrial Revolution and previous clusters of macroinventions is not that technological breakthroughs occurred at all, but that their momentum did not level off and peter out after 1800 or so. In other words, what made the Industrial Revolution into the “Great Divergence” was the persistence of technological change after the first wave. The first wave was followed after 1820 by a secondary ripple of inventions that may have been less spectacular, but these were the microinventions (extensions and improvements to earlier breakthroughs) that provided the muscle to the downward trend in production costs. The second stage of the Industrial Revolution adapted novel ideas to new and more industries and sectors, and eventually these are the ones that show up in the productivity statistics: the perfection of mechanical weaving after 1820; the invention of Roberts’s self-acting mule in spinning (1825); the extension and adaptation of the techniques first used in cotton to carded wool and linen; the continuing improvement in the iron industry through Neilson’s hot blast (1829) and other inventions; the continuing improvement in steampower, raising the efficiency and capabilities of the low pressure stationary engines, while perfecting the high pressure engines of Trevithick, Woolf, and Stephenson and adapting them to transportation; the advances in chemicals before the advent of organic chemistry (such as the breakthroughs in candle-making and soap manufacturing thanks to the work of Eugene- Michel Chevreul on fatty acids) and the introduction and perfection of gas-lighting; and the breakthroughs in engineering and highprecision tools by Maudslay, Whitworth, Nasmyth, Rennie, the Brunels, the Stephensons, and the other great engineers of the second generation.

How, then, did the Enlightenment bring all this about? I propose two complementary mechanisms: the first focuses on what I have called the “Industrial Enlightenment”; the second on what may be called the “Institutional Enlightenment.”

There was an important part of the Enlightenment that was obsessed by “the useful arts,” regarding them as indispensable in bringing about the progress that Enlightenment philosophes believed in and hoped for. The power of knowledge, enunciated by Francis Bacon (deeply admired by Enlightenment thinkers), was at the center of attention. Progressive manufacturers, landowners, and administrators embraced Kant’s proposed slogan for the Enlightenment, sapere aude (dare to know). Specifically, the Industrial Enlightenment contained three elements. One was the insistence on understanding the natural regularities that lay beneath operating techniques and made them work. If such principles could be understood and generalized, it was reasoned, techniques could be improved, extended, and applied to new areas. In his famous essay on “Arts” in his Encyclopedie, Diderot noted that “it is clear from the preceding that every ‘art’ [technique] has its speculative and its practical side. Its speculation is the theoretical knowledge of the principles of the technique; its practice is but the habitual and instinctive application of these principles. It is difficult if not impossible to make much progress in the application without theory.”

A second element of the Industrial Enlightenment concerned the diffusion of and the access to existing knowledge. The philosophes fully realized that knowledge should not be confined to a select few but should be disseminated as widely as possible. Some Enlightenment thinkers believed this was already happening: the English philosopher and psychologist David Hartley (1705–1757) believed that “the diffusion of knowledge to all ranks and orders of men, to all nations, kindred and tongues and peoples . . . cannot be stopped but proceeds with an ever accelerating velocity.” Again, Diderot perhaps said it best: “We need a man to rise in the academies and go down to the workshops and gather material about the [mechanical] arts to be set out in a book that will persuade the artisans to read, philosophers to think along useful lines, and the great to make at least some worthwhile use of their authority and wealth.” The idea was that in addition to improving existing techniques, workers be exposed to what economists call . . . Enlightenment thinkers began slowly to realize that “freedom” included the freedom to innovate and not have one’s machines smashed by Luddites or prohibited by authorities. “best-practice” techniques. The somewhat naive view was that if only artisans and farmers could see how the best of them carried out their practice, they would adopt these and progress would occur.

Third, the Industrial Enlightenment sought to facilitate interaction and communication between those who controlled propositional knowledge and those who carried out the techniques contained in prescriptive knowledge. The philosophes of the Enlightenment echoed Bacon’s call for cooperation and the sharing of knowledge between those who knew things and those who made them. This type of interaction is exemplified by such organizations as the Lunar Society, in which manufacturers and engineers rubbed shoulders with scientists and medical doctors. Jean Antoine Chaptal, the French chemist and politician (1756–1832), made a distinction between savants and fabricants and stressed the importance of their communication. Not only would this place the knowledge of scientists at the disposal of artisans, it would also bring to the attention of scientists the problems faced by farmers, sailors, and artisans, and help set the agenda of natural philosophy. Needless to say, some of the most prominent members of the Industrial Enlightenment— such as Benjamin Franklin, Count Rumford, Claude Berthollet, Humphry Davy—combined the features of the inventor and the scientist. But other inventors had recourse to reading technical works and manuals that became increasingly available after 1815, or talking to scientists in the so-called philosophical societies.

As a result, the Industrial Revolution of the 1760s and 1770s did not fizzle out the way earlier waves of technological progress had. By drawing upon an ever-growing basis of knowledge and understanding of natural regularities and phenomena, engineers, mechanics, chemists, pharmacists, and others concerned with production efficiency could keep up the rate of invention, which led to the advances in steel, chemicals, and electricity that mark the “second” Industrial Revolution. Not all this knowledge was “correct” (by our standards), and none of it was complete. Much of it was based on a very partial understanding of the physics and chemistry in question. But it was much more than had been there in 1700. Moreover, the growing “flow” of inventions itself kept enriching the knowledge base on which it drew, thus creating a “positive feedback effect.”

The second mechanism I am suggesting concerns political and social ideology and might be called the “Institutional Enlightenment.” Mercantilist thought had been based on the notion that economic activity was a zero-sum game, among nations as much as among individuals. The notion that mutual exchange at market prices, the allocation of resources to wherever they yielded the highest return, and free entry and exit into trades and mobility between them actually enriched the entire economy—whereas monopolies, exclusions, arbitrary taxes, and tariffs imposed a cost on society—had a lengthy gestation. Adam Smith’s The Wealth of Nations, one of the most persuasive documents ever published, summarized and popularized many decades of thought. Equally important,

Enlightenment thinkers began slowly to realize that “freedom” included the freedom to innovate and not to have one’s machines smashed by Luddites or prohibited by authorities. Enlightenment thinkers and the politicians inspired and informed by them slowly started to fight the uphill battle against privileges and exclusionary rules. In some absolutist countries their efforts depended on the goodwill of the ruler: the work of Joseph von Sonnenfels in Austria and Pedro Rodriguez de Campomanes in Spain to weaken guilds and enhance occupational freedom and unregulated markets depended on the goodwill of their monarchs and was more often than not cast aside. The fate of the reforms (the famous “six edicts”) proposed by Turgot upon his appointment in 1774 was sealed soon enough when Louis XVI fired him two years later; but the suppression of the guilds and the abolition of labor services were passed without a second thought—together with a plethora of other Enlightenment inspired reforms—after 1789.

The French Revolution and the ensuing wars created an institutional response in other European nations. Many of them realized that restrictions on labor and occupational mobility, unstandardized weights and measures, internal tolls and tariffs, unequal taxes, badly defined property rights, and other medieval debris encumbered economic performance. The best example is Prussia, where many of the post-1806 reformers explicitly acknowledged their debt to Adam Smith and the Enlightenment. In areas where the French influence was too little or too late, or where internal resistance to Enlightenment ideas was strong, the Institutional Enlightenment did not have the desired impact, and economic “rationalization” did not get far. In those regions—Iberia, Southern Italy, Eastern Europe—economic development was slow.

In Britain things were different. The Institutional Enlightenment did not need the shock therapy administered by Napoleon’s armies. In the 17th century Britain had attained the institutional nimbleness that allowed it to change the rules of the game when these were realized to be harmful, without the dependence on the goodwill of an absolute monarch. Thus when the road network was deemed inadequate, turnpikes emerged; when the Calico Acts or the Statute of Apprentices and Artificers were deemed to be obstacles to economic performance, Parliament abolished them (1774 and 1811, respectively). Luddism was mercilessly suppressed and innovation, if not actively encouraged, surely was looked on favorably. After 1820, with the ascent of the “Liberal Tories” under William Huskisson, Britain began slowly to move toward freer trade, though it took three more decades to get there. On the whole, the process was smoother and easier in Britain than on the Continent, but the difference was one of degree. By contrast, nothing of the sort occurred in China, the Ottoman Empire, or Africa.

It should be emphasized that the various institutions that needed to be reformed were not just tossed out as anachronistic relics of past ages; somebody usually stood to benefit from them and fought tooth and nail to retain them. This was even true for the bewilderingly complex system of weights and measures that the rationalizers replaced with the metric system.[5] It was true a fortiori for the guilds, the tax exemptions, the price controls on bread, and the rights of common fields and free pasture. What economists call “rentseeking” (economic activity meant to redistribute rather than to create wealth) had been the hallmark of the ancien régime. While no society has ever been without it, the attitude toward it can be of prime importance. In order to overcome the resistance of vested interests, often concentrated and well-organized, policy makers had to be persuaded that it was in the national interest to carry out the reforms. By 1800 or so, mercantilist thought was being replaced in the minds of Europe’s leaders by Enlightenment ideas, whether they got them first hand from The Wealth of Nations or from some other source.

Economic historians ignore ideology and cultural beliefs at their peril. It seems ironic that economic science today should settle for a historical materialism in which beliefs and knowledge have no autonomous existence, in which rhetoric, argument, persuasion, and the intellectual life of nations have no impact on institutional change. Whether or not the Enlightenment “caused” the American and French Revolutions, it is hard to think of their courses without the power of enlightened ideology. To quote one rather influential 20thcentury economist: “I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas . . . . soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”[6]

Joel Mokyr is Robert H. Strotz Professor of Arts and Sciences and professor of economics and history at Northwestern University. His The Enlightened Economy: An Economic History of Britain, 1700–1850 will be published by Penguin Press in 2004.

[+] Some of the material in this paper is adapted from my books The Gifts of Athena: Historical Origins of the Knowledge Economy (Princeton University Press, 2002) and The Enlightened Economy: An Economic History of Britain, 1700–1850 (Penguin Press, 2004), and my paper “Thinking about Technology and Institutions,” presented at the Macalester International College Roundtable, “Prometheus’s Bequest: Technology and Change,” October 10–12, 2002.

[1] For instance, Oded Galor and David Weil, “Population, Technology, and Growth,” American Economic Review 90 (2000): 806–828; Robert E. Lucas, Jr., Lectures on Economic Growth (Harvard University Press, 2002); Charles I. Jones, “On the Evolution of the World Income Distribution,” Journal of Economic Perspectives 11 (1997): 19–36; and William Easterly, The Elusive Quest for Growth (MIT Press, 2001).

[2] Danny T. Quah, “Twin Peaks: Growth and Convergence in Models of Distribution Dynamics” The Economic Journal 106 (1996): 1045–1055.

[3] On the matter of “growth as a normal condition” and the blockages and obstacles to it, see especially Eric L. Jones, Growth Recurring (Oxford University Press, 1981) and Stephen L. Parente and Edward C. Prescott, Barriers to Riches (MIT Press 2000).

[4] Robert B. Ekelund, Jr. and Robert D. Tollison, Politicized Economies: Monarchy, Monopoly, and Mercantilism (Texas A&M University Press, 1997), 14.

[5] Kenneth Alder, “A Revolution to Measure: The Political Economy of the Metric System in France,” in M. Norton Wise, ed., The Values of Precision (Princeton University Press, 1995).

[6] John Maynard Keynes, The General Theory of, Employment, Interest, and Money (Harcourt, Brace, 1936), 383–84.

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