Capitalism, Ideas, and Evolution
This is one of the most interesting articles I’ve read in a long time, continuing Nicholas Wade’s streak of finding fascinating and unexpected theories. The theory seems overly broad and sweeping, like something Jared “I’m a Geographic Determinist” Diamond would write, but it seems a bit more historically grounded, it’s thought-provoking, and it makes an entry in several debates that are important not only for world history, but also for current affairs:
- It breaks down a simplistic Marxist view of Europe entering a new stage of History first and therefore being able to push everyone else around.
- Coupled with findings that a) even pre-industrial home manufacturing in England was being transformed in the early 1700s by “capitalist” production methods (systematization; an emphasis on efficiency, etc), and b) that forms of capitalism were emerging in the Middle East and Southeast Asia before European contact, this theory moves us back from a materialist emphasis on technology to a view that ideas DO matter. (But only sort of, since Clark argues the ideas come from evolution.)
- This is in turn awesome because it brings us back to the old question, “why didn’t the Middle East industrialize?” You could answer this by saying “well, of course they couldn’t, because they didn’t have the same resources of iron ore, coal, and hydropower that Europe did, and this answer does get us somewhere. BUT, if capitalism and industrialization are more about applying new ideas to the methods and resources you already have, then isn’t the question still open? And the article, at least, doesn’t satisfactorily explain why Clark’s theory proves that England in the 18th century, of all places, had this evolutionary epiphany.
This is not meant to be a post that’s only interesting to me, so I hope other people will weigh in with their thoughts–especially Wayne and Kyle, what’s an economist’s perspective on this?
on August 11th, 2007 at 12:18 pm
I’m very sympathetic to the idea that cultural norms (what are referred to as social institutions) play a huge role in development. I think it’s an underexamined factor in explaining growth. I don’t know about this whole genetic thing but the idea that demographic shifts caused a larger proportion of society to subscribe to more productive habits seems pretty big to me. That said, the article makes it sound like he’s a little too quick to brush off political/legal institutions and their impact. Social institutions may have caused Anglo economies to take off, but then how do you explain the differences in the standard of living for North and South Korea, East and West Germany, or Taiwan/Hong Kong and China?
While they do have an impact, geographic location and natural resources are not determinant factors when it comes to economic growth. They are neither necessary (see Hong Kong) nor sufficient (see Africa). Legal and social institutions aren’t sufficient by themselves either, but they are necessary.
In this framework, I don’t know enough about the Middle East to say why they didn’t industrialize. I know the opposition to interest is a huge problem (industrialization is all about investment, after all) but I don’t know what other issues there are.
on August 11th, 2007 at 6:58 pm
I agree with you, he seems a little quick to disregard other factors.
Can you really discount the role of geographic factors on the develoment of Hong Kong? I don’t know that much about its history, but wasn’t it the main port for shipping opium into China and tea out of China? Without the capital and history of investment from that trade, I wonder if they would have gotten off the ground?
I’m also not convinced that the Islamic opposition to interest was all that important, because a) there were lots of Christians and Jews who did invest, b) Christians used to have similar qualms about interest, and b) there are traditionally plenty of ways to actually charge interest without being illegal. My favorite is that the creditor would agree to give the debtor an interest free loan, but only on the condition that the debtor simultaneously bought a bar of soap…for about 120x its fair market value.
on August 12th, 2007 at 1:30 pm
Clearly Hong Kong’s location and history helped it’s development. But if the institutions hadn’t been right it would have stagnated like the rest of China. I don’t mean to imply that natural resources or geographic location don’t have any impact on growth. Someplace like Arizona is going to have more growth potential in the mining industry than in forestry. But it’s the institutions that are going to let you get the growth.
I didn’t mean to blame all of the Middle East’s problems on the interest ban, it was just the one issue I could think of off the top of my head. The methods they come up with to get around the ban are pretty clever, but they aren’t as flexible as more modern financial instruments. So you’re right, they are able to take and give loans but the financial market is still impared.
on August 12th, 2007 at 4:59 pm
Point taken on Hong Kong.
My point on interest is just that I think without other factors, they could’ve gotten around it as easily as Europeans did, but I don’t really know much about this issue.