Jared Rubin looks at the literature which says that European states fought many wars, that this required them to add “state capacity,” and this in turn produced economic growth. He concludes,
while the war argument has many merits, it needs to be complemented by other arguments for “why the West got rich.” Specifically, we need to understand i) why Europe was so fractionalized in the first place, and ii) why northwestern Europe pulled ahead first. As I noted at the beginning, I think that combining the war argument with ones that look at other aspects of political institutions (especially legitimacy!) and certain aspects of culture paints a more complete story.
Pointer from Mark Thoma. Read Rubin’s whole post. A few quick points.
1. For libertarians, the idea that state capacity is important for economic growth is hard to swallow. But it may be correct. Remember your North, Weingast, and Wallis.
2. I am looking forward to Rubin’s discussion of “certain aspects of culture.” As you know, I take the view that mental-cultural factors are under-emphasized in most of the disciplines that study human behavior, including economics.
You can’t really have freedom of contract without a state willing and able to help enforce commercial contracts. I seem to recall that sometimes merchants in China would have to pretend someone had been murdered to get a judge to see them and adjudicate their commercial dispute. The exam system might have ensured a fairly competent bureaucracy but they were also 1/10 the number of the bureaucracies of Britain or France in 1800 without enough manpower to enforce complicated commercial arrangements between strangers.
It does not seem so surprising that war would be seen as contributing to innovations that fuel economic growth. One could argue that it was military “complacency” post-Vietnam that underlies the decline in dynamism decried by Tyler Cowen. National defense spending as a percentage of the US budget declined steeply over roughly the same time period that he sees a lack of dynamism. http://www.usgovernmentspending.com/spending_chart_1935_2020USf_XXs2li111mcn_30f_Defense_Share_of_Federal_Spending
The richer states of Western Europe also liberalized earlier, though. They abolished serfdom earlier, granted religious toleration to dissenters, and tried to facilitate trade overseas. As you look from west to east, what you see is richer, freer states in the west, poorer, more authoritarian states in the east. Correlation doesn’t equal causation, of course, and even if there was causation, it’s not clear which direction the arrow runs: did Western Europe become free because it got richer? Or did it become rich because it was free? Still, I think I think it’s next to impossible to argue the basic point that using the force of law to keep big fractions of your population locked into low-skill tenant farming for some aristocrat was not conducive to economic growth and remains a primary reason why the east fell behind the west.
According to Nico Voiglander and hans-Joachim Voth (Journal of Economic Perspectives-2013) death rates for the USSR during WWII were 15%, in Poland 17%, and in the UK and US, less than 1%. “In contrast, the Religious wars in the late 16th century France and the Thirty Years War in Germany claimed approximately 20 and 33 percent of the population.” High death rates increased the land to labor ratio and raised the relative wage rate. This change in relative prices helped bring about capital/labor substitution and energy/labor substitution that helped drive the industrial revolution. Rising incomes also made it easier for governments to raise taxes which enabled them to engage in more war.
Yes, good point. The Black Death contributed to the same effect, also.
War, relative to other state activities, also has a much higher accountability factor — winning battles. The state that’s winning is “better”. Leonardo, and others who had city state patrons, was most valued & payed at the time for his ideas on war making.
There is likely also a cultural feedback loop where those proud of and willing to fight (kill AND die) for their culture were more often winning in wars. Thus, post war the more proud culture was more likely to have dominated, and spread.
Everybody loves a winner – still. Tho the Dems seem to be elevating “losing victimhood” into some sort of morally superior position.
I’m a libertarian, and I’m not remotely surprised that state capacity is important for economic growth. Libertarianism is not at all the same thing as anarchism, and this is the essence of why.
There are a number of ways to think about this, but perhaps the easiest is to think of a country as property owned by the state. Now apply libertarian principles to this private property and you realize that regulations and taxes, for example, are equivalent to rules and rent charged by the owner of a mall – and, of course, libertarians are all about the rights of mall owners to regulate behavior on their property and to charge rent to those operating businesses in the mall.
Libertarianism, in this construct, would recognize that the state has the right to make rules and regulations, and to charge taxes. But, it would argue that a pro-liberty bias in the rules and taxes is best for both the residents and the state. It’s a bias, not an absolute. It’s a claim that “why not?” must have a good answer, not just “because I say so”. But a mall with no rules at all will not be a nice place to do business. A mall with no security will not be a good place to do business. A mall with poor infrastructure will not be successful. Rules, and security, and infrastructure are necessary, and have costs that must be paid through rents.
A libertarian mall operator will provide infrastructure and charge rents to cover the cost – but may not gold-plate the place or charge exorbitant rents. A libertarian mall operator will allow a wide range of business models and goods and services in the mall – but may insist on fair dealing, limits to the use of amplified advertising announcements, etc. A libertarian mall operator may allow a wide range of business models – but have security services to prevent theft and protection rackets and forced takeover of neighbors’ spaces from emerging as “business models” in the mall.
Libertarianism is a directional recommendation for policymakers. It is a viewpoint on preferred government policy – not anarchism!