David Landes (1998) about the Wealth and Poverty of Nations
Landes’ book is well-known in the world of economic history. It is much used at universities as textbook, and therefore it deserves a methodological account. Most economic historians are storytellers rather than model makers. Actually this is not a proper dual; it should not be one or the other. Stories can only be told systematically if the teller has a systematic analysis in mind. This analysis functions as a scope – be it a micro- or a macro-scope.
When reading Landes’ book I’ve tried to find which analysis has laid at the basis of his stories. Unfortunately I could not find a general analysis, in which the book is rooted. On a more specific level I found a number of elements, which might be considered as important cornerstones for such an analysis. In the following we will first discuss the role of geography and culture according to Landes. Then we review the way he interprets the different styles of colonisation between Northern and Southern European countries. At last I will discuss Landes’ views on science and the role it has played in the economic history of the world. I finish this essay with a few critical comments on the methodology of the book.
Geography and Culture
In contrast to people such as Daron Acemoglu (2012), Landes considers climate as an important factor. A moderate climate with regular and modest rainfall makes agriculture to a profitable business. This makes it possible for a region to create a labour surplus, which could try to find employment outside the agricultural sector. Two major examples were the profession of trader and of craftsman. These people could escape from the rural areas, where the nobility ruled the lives of the landless peasants. They lived increasingly in villages, towns and cities – outside the control of the medieval governance systems.
Landes considers also culture as an important development factor. Again Acemoglu and others deny its relevance, but do not offer a clear-cut analysis of this concept. It makes falsification impossible of course. Landes talks about the relevance of readiness and willingness of people to improve their material situation, which are cultural variables. At one point Landes’ explanations are quite similar with those of Acemoglu:
- Some countries are governed by a dictatorial ruler and his elite. They use the economy as an instrument to improve their status and wealth. The ordinary people are exploited and work at the service of the elite. In international relations they are inclined to conquest and exploit other economies. The building of a large empire is the ultimate goal, so as to dominate large parts of the world.
- Other countries have more decentralised systems of governance. The culture is more democratic, which means that individual persons have a series of inalienable rights. The government is supposed to be responsible to maintain these rights, rather that rule these individuals in an arbitrary way.
Besides this similarity there is a significant difference between the two scholars. Acemoglu denies the importance of culture and stresses the relevance of institutions. For Landes, however, culture is decisive. Since both authors are not offering the reader an explicitly formulated analysis, based on carefully defined concepts, it is important to see whether they really differ in their views on development.
We define culture as the common understanding of a group of people of their situation. The main themes in life that need a common understanding are the relationships between parents and their children, between man and woman, between boss and subordinates in whatever organisation and the relationship between individual and community. When answering the question why Europe was the first region were really a take-off took place, Landes refers to the process of decentralisation and individualisation of societies. The Magna Charta in Britain (1215), the Renaissance and the Reformation are events and processes, which reflect the cultural change that made structural economic growth possible – less hierarchy and top-down and more democracy and bottom-up. According to Landes a line can be drawn between North-Western and South-Eastern Europe, that divides Europe in two culturally different pieces. The first region appeared able to leave the medieval legacy of hierarchical thinking behind. The second region is still highly affected by structures of governance, in which an elite is exploiting the mass of the people.
According to Acemoglu structures of governance are institutions, which can function well, irrespective the culture of the people. His famous example is Nogales, a town located on the USA/Mexican border. The Northern part of Nogales is American in its institutions, but Mexican in its culture, while the Southern part is Mexican, institutionally as well as culturally. In terms of GDP per capita, however, the Northern part is much richer than the Southern part. Ergo, culture is irrelevant; it’s all institutions!
Do Landes and Acemoglu really differ in approach? I don’t think so. For both holds that they do not offer a theoretical analysis, which makes it difficult to find out what really causes their difference. To me clarification of the relationship between the two concepts helps a lot.
As we defined above is culture a common understanding of a series vital relationships between humans. Institutions are rules of behaviour, derived from a particular common understanding. So, it is never culture or institutions, but always and culture and institution. In social practice culture and institutions are interacting. In a social-dynamic model culture is permanently changing under the influence of a permanently changing institutional framework, and vice versa.
Let’s go back to Nogales. Both parts are characterised by a mix of different cultures. Now the formal structure of Nogales-North has become American, the actual culture is slowly changing from less American to more American, at the cost of Mexican influence. In practice institutions as well as culture are mixes of ideal-types of theoretical ideas about what is culture and what are institutions. Moreover, practical phenomena are always mixes and never in equilibrium.
Styles of Colonisation
For Acemoglu (2012) colonisation is everywhere and always characterised by conquest, domination and exploitation. In Landes (1998) we see an important difference in style between North-European and South-European colonizers. He extensively describes the attitudes of the Spanish conquistadores with respect to Latin America. Acemoglu follows his interpretation to a large extent. The Spanish are looking for domination so as to enlarge their empire, and for robbing as much gold as possible to finance the wars they are fighting in Europe. Spanish culture was to a large extent typical Southern at that time. The Portuguese increasingly imitated Spanish behaviour: robbing rather than trading. According to Landes however, the British and the Dutch were different. Their behaviour was primarily focussed on trade rather than domination. Of course, they also were tough and rude; especially in case the local rulers were aggressive or not willing to trade. Also Northern people were well aware that their weapons were superior. So, when using the ideal-typical difference between domination and trade, were the Northern people more trade-minded than the Southern ones, who were more domination-minded.
How to explain this difference? As already said, we must find this cultural difference in the regions were the Latin/medieval order was maintained (South) rather than gradually changed into an order, which was influenced by Judeo-Christian beliefs (North). These beliefs appear a protest against hierarchy, inequality and the idea that the elite had absolute knowledge. During the Roman empire the Roman-Catholic Church turned increasingly from a typical Northern to a typical Southern institution with a very important role for itself in the preservation of absolute knowledge about God and the way ordinary people should live their lives. Most of the time this church cohabitated with the nobility in their common attempt to maintain the status quo.
People, who lived on a relatively large distance from Rome, and were educated sufficiently to become traders and artisans developed an attitude of protest against the central rulers – in terms of religious beliefs as well as in terms of politics or doing business. Hofstede (1980) argues that the border through Europe that separates the regions, which belonged to the Roman Empire and those who did not, clarifies current cultural differences between North and South Europe. Within the Roman Empire its influence becomes stronger the more the region is located closer to the centre. The British process of decentralisation (from 1215 on), the Reformation in Germany (1517) and the Dutch fight against the Spanish (1568 – 1648) are nice examples illustrating the growing cultural gap.
In the Bible, in particular in the Old Testament, we read already about the Jewish people, who are warned by their prophets for accumulation of clerical as well as political power. The Protestant reformation is based on that idea. God is ‘identical’ to power, and the will of god can only be discovered by individual believers who educate themselves by studying the Bible and doing research into every problem area. Nowadays the Dutch are still famous because of their Polder model: this reflects perfectly well the Protestant idea of democracy and equality: “Thou shall consult rather than oppress the Other”.
The Role of Science
Landes considers the emergence of Western science as a major stimulus to individual initiative and enterprise. During a long period the Roman-Catholic Church ruled the world of ideas. During the Renaissance an increasing number of individuals developed ideas about nature, independent of clerical dogma. Hobbes (1651) belonged to the first, who developed a modern political philosophy, although of a conservative kind. Later more liberal and more socialist philosophers were following. Their philosophies appeared the basis for a productive social science. In the field of natural science (beta-science), some of the opponents of clerical influences were empiricists. They denied the role of ideas and considered reality as something materialistic. Scientific – that is, empirical – research had to establish stable empirical relationships. This type of knowledge could function as the basis for all sorts of action, also political action, meant to improve the human condition. It would make religion and philosophy superfluous, thereby ending so much conflict that characterises human history.
According to most philosophers of science this project has failed. Reality is too complex to be understood by a limited number of stable empirical relationships. Moreover, knowledge is the result of a confrontation between the subject of the researcher and his object of research. This result will always reflect the subjectivity of the researcher to a certain degree. If many different researchers find the same results, they might approach objectivity, but we will never know to what degree. An important implication is that there is always room for new ideas that leads to analyses and theories, which produce more realistic pictures. In the literature of scientific philosophy reality is considered as an open system, a characteristic which can only be understood by researchers with an open mind. One should never approach reality just in one way – many interpretations are good candidates. In a free market for ideas they all compete in their attempts to construct the most realistic explanation.
Landes claims to apply the historical approach. He does not explicitly formulate in which this perspective differs from other perspectives. Now and then he takes distance from the typical economic theory, which has produced theories, such as the trade theory of Ricardo about comparative advantage. As far as I have understood Landes well, the historical approach suggests that there are very long run developments. North-West Europe still profits from events, which occurred many centuries ago. Even the Roman Empire, which ended in the 4th century AC, has still its effects. In the traditional evolutionary approach it is technological change rather than cultural change being the prime mover of economic history. May be this is the reason why Landes does not portray himself as an evolutionary economist. But lock-in investments, hysteresis and path dependence are typical evolutionary concepts, which could be used also by Landes.
As we know neoclassical economics stresses the role of technology in the process of economic development. To improve the wealth of the country education and research & development should be stimulated.
In geographical economics the role of geography is emphasised. Moderate climates offer humans more means of living than tropical regions. It means that it is very difficult for areas with extreme climates to copy the life style of people living in the moderate territories.
In most social economics and economic sociology culture is seen as the decisive factor. Some cultures stimulate private initiative, while other cultures are ‘teaching’ to be humble and to accept what the natural rulers are doing. It goes without saying that institutions, which do not reflect the prevailing culture, will adjust until the institutional framework perfectly reflects culture..
In institutional economics, and more precisely the Original Institutional Economics, institutions play a key role in economic development. They frame the actions, and even the preferences of the people. In other words, culture is primarily an endogenous variable. A long period of ruthless oppression make people belief that this is the natural order and that they can better accept it rather than keep on trying to change the unavoidable.
Every approach has its own bias. That makes it so difficult to execute empirical research on the basis of one of the perspectives just mentioned. We need a more comprehensive perspective. Can we consider the historical approach as an example of such perspective? So far the only book I know, which offers at least a description of a historical process is Lenski (1970). He calls his approach technological evolutionism. The title suggests that technological change is the motor of all progress. But what is technology? The concept has a materialistic connotation: motorcars, computers, tables and chairs, for instance. But an important aspect of technology are the (theoretical) ideas behind these material constructions. Moreover, technology can refer to the ideas about human behaviour and about the functioning of human organisations and societies. Technological progress then means that our ideas are increasingly effective in reaching our goals – technically, psychologically, socially and economiclly. Landes is not clear about the structure of knowledge and of technology. My advice for Landes will be to improve the text in this respect, so as to make the text even more valuable than it is now already.
Acemoglu, D., J. A. Robinson (2012), Why Nations Fail, London: Profile Books Ltd.
Landes, D. (1998), The Wealth and Poverty of Nations, New York: W. W. Norton & Company.
Lenski, G. E. (1970), Human Societies: A Macro Level Introduction to Sociology, New York: McGraw-Hill.
Dr. Piet Keizer
Utrecht University School of Economics
The definition of culture and of the decisive themes in life are based on work by famous sociologists and psychologists, such as Zygmunt Bauman and Carl Jung.