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August 18 - November 17, 2021
We will conclude by illustrating, with the example of the Maya city-states, how growth under extractive institutions is limited not only because of lack of technological progress but also because it will encourage infighting from rival groups wishing to take control of the state and the extraction it generates.
The domestication of maize, for example, began when humans gathered teosinte, the wild crop that was maize’s ancestor.
Farming emerged independently in several places around the world. In what is now modern Mexico, societies formed that established states and settlements, and transitioned to agriculture.
By 1330 the population had again increased by another 50 percent, to 110,000; Venice was then as big as Paris, and probably three times the size of London.
One of the key bases for the economic expansion of Venice was a series of contractual innovations making economic institutions much more inclusive. The most famous was the commenda, a rudimentary type of joint stock company, which formed only for the duration of a single trading mission. A commenda involved two partners, a “sedentary” one who stayed in Venice and one who traveled.
In 1082 Venice was granted extensive trade privileges in Constantinople, and a Venetian Quarter was created in that city. It soon housed ten thousand Venetians. Here we see inclusive economic and political institutions beginning to work in tandem.
These political reforms led to a further series of institutional innovations: in law, the creation of independent magistrates, courts, a court of appeals, and new private contract and bankruptcy laws. These new Venetian economic institutions allowed the creation of new legal business forms and new types of contracts. There was rapid financial innovation, and we see the beginnings of modern banking around this time in Venice.
But there was a tension in all this. Economic growth supported by the inclusive Venetian institutions was accompanied by creative destruction. Each new wave of enterprising young men who became rich via the commenda or other similar economic institutions tended to reduce the profits and economic success of established elites.
Most important, they banned the use of commenda contracts, one of the great institutional innovations that had made Venice rich. This shouldn’t be a surprise: the commenda benefited new merchants, and now the established elite was trying to exclude them.
Long-distance trade became the preserve of the nobility. This was the beginning of the end of Venetian prosperity.
By 1500 the population had shrunk to one hundred thousand. Between 1650 and 1800, when the population of Europe rapidly expanded, that of Venice contracted.
Roman citizens created the republic by overthrowing their king, Lucius Tarquinius Superbus, known as Tarquin the Proud, around 510 BC.
One of the major findings of this project, and others preceding it, was that there was a distinct increase in atmospheric pollutants starting around 500 BC. Atmospheric quantities of lead, silver, and copper then increased steadily, reaching a peak in the first century AD. Remarkably, this atmospheric quantity of lead is reached again only in the thirteenth century. These findings show how intense, compared with what came before and after, Roman mining was. This upsurge in mining clearly indicates economic expansion.
Rome’s armies during the Republic consisted of citizen-soldiers who were small landowners, first in Rome and later in other parts of Italy. Traditionally they fought in the army when necessary and then returned to their plots. As Rome expanded and the campaigns got longer, this model ceased to work. Soldiers were away from their plots for years at a time, and many landholdings fell into disuse. The soldiers’ families sometimes found themselves under mountains of debt and on the brink of starvation. Many of the plots were therefore gradually abandoned, and absorbed by the estates of the
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The rising instability was evident from the layout and location of towns and cities in the empire. By the third century AD every sizeable city in the empire had a defensive wall.
In Gaul before the Romans had arrived in 125 BC, it was usual to build settlements on hilltops, since these were more easily defended. With the initial arrival of Rome, settlements moved down to the plains. In the third century, this trend was reversed.
Suetonius tells how the emperor Vespasian, who ruled between AD 69 and 79, was approached by a man who had invented a device for transporting columns to the Capitol, the citadel of Rome, at a relatively small cost. Columns were large, heavy, and very difficult to transport. Moving them to Rome from the mines where they were made involved the labor of thousands of people, at great expense to the government. Vespasian did not kill the man, but he also refused to use the innovation, declaring, “How will it be possible for me to feed the populace?”
In the Americas, for example, which had been cut off from Europe around 15,000 BC by the melting of the ice that linked Alaska to Russia, there were similar institutional innovations as those of the Natufians, leading to sedentary life, hierarchy, and inequality—in short, extractive institutions.
“Thou aimest high, Master Lee. Consider thou what the invention could do to my poor subjects. It would assuredly bring to them ruin by depriving them of employment, thus making them beggars.”
major innovations such as Lee’s stocking frame machine also threaten to reshape political power. Ultimately it was not concern about the fate of those who might become unemployed as a result of Lee’s machine that led Elizabeth I and James I to oppose his patent; it was their fear that they would become political losers—their concern that those displaced by the invention would create political instability and threaten their own power.
His son, Henry VIII, then implemented through his chief minister, Thomas Cromwell, a revolution in government. In the 1530s, Cromwell introduced a nascent bureaucratic state. Instead of the government being just the private household of the king, it could become a separate set of enduring institutions.
the metallurgical industry had flourished around Birmingham because monopolies were weak there and newcomers to the industry did not have to serve a seven-year apprenticeship, as they did in other parts of the country.
Redistributing the tax burden was not the only pro-manufacturing policy that Parliament supported. A whole series of acts and legislations that would expand the market and the profitability of woolen textiles was passed.
technological innovations in the manufacture of cotton cloth would play a central role in the Industrial Revolution and fundamentally transform society by introducing the factory system.
English exports, led by cotton textiles, doubled between 1780 and 1800.
The woolen industry had been organized in a very different way, by “putting out” materials to individuals in their homes, who spun and wove on their own. Most of those in the woolen industry were therefore ill equipped to switch to cotton, as Foster did. Newcomers were needed to develop and use the new technologies. The rapid expansion of cotton decimated the wool industry—creative destruction in action.
Given the highly absolutist and extractive Ottoman institutions, the sultan’s hostility to the printing press is easy to understand. Books spread ideas and make the population much harder to control.
Absolutism is rule unconstrained by law or the wishes of others, though in reality absolutists rule with the support of some small group or elite.
Spain was forged in 1492 with the merger of the kingdoms of Castile and Aragon via the marriage of Queen Isabella and King Ferdinand.
The last Arab state on the Iberian Peninsula, Granada, fell to Spain at the same time Christopher Columbus arrived in the Americas and started claiming lands for Queen Isabella and King Ferdinand, who had funded his voyage.
At the time of the merger of Castile and Aragon, Spain was among the most economically successful parts of Europe. After its absolutist political system solidified, it went into relative and then, after 1600, absolute economic decline.
in 1500 standards of living were probably at least as high in China as they were in Europe.
The reasoning of the Ming and Qing states for opposing international trade is by now familiar: the fear of creative destruction.
The heavy focus of the heer on killing and wounding reflects the almost constant state of warfare between diya-paying groups and clans. Central to this was blood wealth and blood feuding.
The Somalis also had a written script, but unlike the Ethiopians, they did not use it.
Part of the story is that the citizens resisted the use of writing because they feared that it would be used to control resources, such as valuable land, by allowing the state to claim ownership. They also feared that it would lead to more systematic taxation.
Though they seem remote to us today, the Moluccas were then central to world trade as the only producers of the valuable spices cloves, mace, and nutmeg.
Just as African societies took aggressive advantage of the economic opportunities presented by the slave trade, they did the same with legitimate commerce.
So the abolition of the slave trade, rather than making slavery in Africa wither away, simply led to a redeployment of the slaves, who were now used within Africa rather than in the Americas.
The dual economy between the Transkei and Natal is in fact quite recent, and is anything but natural. It was created by the South African white elites in order to produce a reservoir of cheap labor for their businesses and reduce competition from black Africans.
the success of the modern sector relied on the existence of the backward sector, which enabled white employers to make huge profits by paying very low wages to black unskilled workers.
To reach this verdict Judge Collins didn’t apply British law; he ignored it. This was the first civil case adjudicated in Australia.
Convicts were given a set of tasks to do, and if they had extra time, they could work for themselves and sell what they produced.
As the French Revolution erupted, a successful young businessman, Mayer Amschel Rothschild, lived in the Frankfurt Judengasse. By the early 1780s, Rothschild had established himself as the leading dealer in coins, metals, and antiques in Frankfurt.
The French Revolution thus prepared not only France but much of the rest of Europe for inclusive institutions and the economic growth that these would spur.
By 1890 Japan was the first Asian country to adopt a written constitution, and it created a constitutional monarchy with an elected parliament, the Diet, and an independent judiciary. These changes were decisive factors in enabling Japan to be the primary beneficiary from the Industrial Revolution in Asia.
take away law, and the royal prerogative . . . might flood back upon their properties and lives.
It is highly significant that the English state stopped censoring the media after 1688.
There was conflict over each step, and the outcome of each was contingent.
Roosevelt turned his attention to the trusts. He argued that the prosperity of the United States was based on market economy and the ingenuity of businessmen, but at the same time,
