W.W. Norton & Company • 1998 • 650 pages • $30.00
Randall Holcombe is DeVoe Moore Professor of Economics at Florida State University.
Economic historian David Landes explains in this book why some nations are rich and some poor by appealing to the historical record. The history is fascinating, and Landes does a good job of relating the facts.
His explanation of the wealth and poverty of nations is simple: rich nations are once-poor nations that developed market economies; poor nations are once- and still-poor nations that did not. Market economies require governments that do not interfere with people’s economic affairs except to protect property rights. Landes builds his case by recounting the history of world economic development.
Landes maintains that western European, and especially British, culture is superior to others at promoting people’s well-being. He makes the same case for the virtues of Protestantism. The Roman church found truths about nature in the scripture, so new ideas were potentially subversive. Protestant culture gave individuals more freedom to think for themselves, to innovate, and to keep the rewards of their successes. The notion that one culture is as good as another is wrong, Landes argues, at least if one judges a culture by its ability to enhance the well-being of its practitioners.
This is a big book, so as you might expect, his argument is far more involved than this. Landes notes that geographical factors played a large role in the patterns of development, and that some areas had advantages due to climate and natural resources that enabled them to develop sooner than others. But he also argues that geographical advantages, in the long run, can be disadvantages, because if wealth comes too easily, people do not have as much incentive to work hard and to use their wealth productively. When the Europeans began settling the Americas, for example, the Spanish and Portuguese gained easy wealth through territory rich in gold and silver, whereas the British territory required more work and investment. That investment, however, produced a much greater long-run payoff. Similarly, Landes argues that the oil-rich countries in the Middle East today are squandering their wealth because they came by it too easily.
The same argument applies to the industrialization of Britain, which had some natural advantages, such as coal deposits, but lacked others and in any event could capitalize on its advantages only by hard work and innovation. Before the Industrial Revolution, many areas of the world were at least as wealthy as Britain and had developed at least as much scientific and technical knowledge. China, in particular, was far ahead of Britain in many respects, but the British had one crucial advantage over the Chinese—a culture that encouraged commerce, risk-taking, and innovation. The British culture produced the Industrial Revolution, and Landes argues that no place in the world was able to industrialize without British influence.
Landes’s argument is generally convincing, but not entirely so. For example, he notes that the Japanese culture once lacked the work ethic of western Europe and was hampered by an institutional rigidity and isolationism similar to China’s. But Japanese culture changed, permitting industrialization, economic growth, and wealth. Thus, culture is not unchangeable. Moreover, “religious” aspects of culture are not tied to particular religions. The Japanese adopted the Protestant work ethic without adopting the religion. Landes’s view of culture appears tautological; the culture he champions really amounts to any one that leads to the adoption of market capitalism.
Europe was characterized by many governmental jurisdictions, creating an environment of intergovernmental competition, whereas China and Russia were vast regions without that competition. Landes notes this fact, but fails to see its importance. Is it not plausible that industrialization developed first in Europe because governments faced the prospect of losing people and capital to rival governments, thus tempering the rulers’ interference with freedom? Culture has some explanatory power, but it shouldn’t be regarded as the only factor determining the extent to which the market is free to work.
Landes’s conclusion that the ultimate path to wealth is the adoption of a market economy is unassailable. Despite his questionable assertion that culture is the key determinant in the choice between the market and government domination, his book has much to offer in its recounting of the history of world economic development and its insights on the differences among nations and cultures.
Randall G. Holcombe
Randall G. Holcombe is Research Fellow at The Independent Institute, DeVoe Moore Professor of Economics at Florida State University, past President of the Public Choice Society, and past President of the Society for the Development of Austrian Economics. His many books include Housing America (edited with Benjamin Powell) and Writing Off Ideas.
American essayist and novelist William Styron once said that “A great book should leave you with many experiences, and slightly exhausted at the end.” If we judge the late David Landes’ ‘Wealth and Poverty of Nations’ by this criterion, it most certainly fits the bill of a ‘great book’. It is a majestic display of his deep insight and vast knowledge of global economic history. It comes as no surprise, therefore, that the book has been all but universally acclaimed by literary critics.
David Landes was Professor of History and Emeritus Professor of Economics at Harvard University. His other works include Bankers and Pashas, Revolution in Time, The Unbound Prometheus and Dynasties. As one might expect, therefore, ‘Wealth and Poverty of Nations’ is no short and easy read: half a millennia of global economic history are covered in over 600 pages and 29 chapters.
Landes’ primary aim in the book is to better understand how nations have evolved to reach their current state. Landes’ main thesis of the book is that cultural traits and cultural values play a key role in determining whether a country fails or succeeds economically. As he points out in the Preface, the analysis is not one of a “multicultural, anthropological sense of intrinsic parity: all peoples are equal and the historian tries to attend to them all. Rather, [to]…understand how we have come to where we are, …[through] making, getting, and spending” (page xi).
In this sense, ‘The Wealth and Poverty of Nations’ provides a fascinating and distinctive historical angle that considers the cultural circumstances, as well as the economic trends of the time – thus, viewing economic history through a cultural lens.
Landes opens up the discussion with the premise that the old dichotomy of the West vs. the East, or better said, West vs. the ‘Rest’ has largely dissolved (page xx). The more pertinent split in today’s ‘globalised’ world is between ‘Rich’ vs ‘Poor’ countries. The common thread of questioning that is present throughout the entirety of the book is this: why have some countries come to be so poor and some so rich?
In the opening chapters Landes presses the idea that the technological and cultural advancements enabled the (relatively small) nations of western Europe to significantly punch above their weight (page 137). The Industrial Revolution in Europe brought technological innovations that had tremendous long-term impact on economic development. Basic advancements cotton manufacturing for instance, enabled the creation ‘washable’ clothes. This in turn led to better personal hygiene and therefore, better health and an increase in life expectancy. The technological advancements improved all areas of life in the Continent
Landes also points out that throughout the late 17th Century and 18th Century, England’s relative open society enabled it to flourish at a faster pace than its European counterparts, many of whom were deeply embattled with religious persecution (page 223). As a result, England managed to ‘profit from other nation’s self-inflicted wounds’ (ibid).
Yet arguably one of the most powerful and convincing arguments of the book is raised in Chapter 12 (page 175 – 181). Here David Landes reinstates Max Weber’s thesis on the Protestant work ethic. The core argument here is that the Protestant revolution in Europe brought with in a change in the role and responsibility of work. The influence of Protestant thinking encouraged people to value, creativity, hard work, timeliness, and free-thinking. This in turn acted as a catalyst for economic growth not only in Europe, but also in the early development of America (CEME’s Director, Richard Turnbull, wrote on the impact of Quakers in Quaker Capitalsim: Lessons for Today)
The latter half of the book bring the discussion back to the impact of culture on economic performance and how the two are intrinsically linked. In Thailand for example, young men are encouraged to spend a few years in religious (Buddhist) monasteries before entering the world of work. Landes argues that this sets their priorities right – and makes them more effective once the do enter the ‘materialistic’ world of work, where money plays a major role (page 517).
Landes concludes the book with a discussion on the current tensions between globalisation and the nation-state, but also the merits of free-trade and some of the benefits and dangers of international aid (Page 519-521). In a nutshell (and without giving too much away), the book argues that free trade between nations is disproportionately beneficial and foreign aid can do as much damage as it does good. Landes overarching conclusion is that the adoption of a free market economy (especially by poor countries) is the surest and safest way to long-term economic development and wealth creation.
‘The Wealth and Poverty of Nations’ leaves its reader with a completely new, and unique understanding of the role that culture plays in the historic economic development of countries. Finding criticism for this book is a challenge in itself, I have found myself nit-picking at best. One possible observation is that, even in 600+ pages, it remains difficult to comprehensively capture half a millennia of world history.
Some may say that it is too Eurocentric. Yet the book’s apparent Eurocentrism is part of the presentation and hypothesis that is put fourth – it is the angle that the author adopts rather than an inherit bias. In response to this perceived ‘Eurocentrism’ and being a ‘Westerner’, Landes himself acknowledges that, “I feel surer of my ground” (page xxi). Nonetheless, one could argue that the cultural intricacies of each geographical region can, and deserve to be explored in greater depth.
‘The Wealth and Poverty of Nations’ has become a staple in the field of economic history.
A definite read.
“The Wealth and Poverty of Nations” was published in 1999 by Abacus, ISBN-10: 0349111669, 672pp.
Andrei Rogobete is a Research Fellow with the Centre for Enterprise, Markets & Ethics. For more information about Andrei please click here.