Capitalism’s Unique Innovation Machine: Historical Evidence
The bourgeoisie … has created more massive and more colossal productive forces than have all preceding generations together. … The feudal organization of agriculture and manufacturing industry … hindered production instead of developing it. … [I]nto their place stepped free competition accompanied by a social and political constitution adapted to it.
—Marx and Engels, 1847
[by 1920] the astonishing thing was that the son of the millionaire ever succeeded in graduating, for previously ignorance had been one of the privileges of the wealthy classes. Now, however, they were forced to apply themselves to their studies like everyone else. The leveling process was equally noticeable in the life of the aristocracy and the great families. Sons of these families now made their careers in offices, or went into banking, the export trade, shopkeeping, or the liberal professions. A half-century earlier, any such careers would have been thought dishonorable.
—de Meeüs, 1962, p. 357
This third part of the book takes a preliminary look at the bottom line of our discussion: What does it all add up to for the economy as a whole? Part I and portions of part II have sought to contribute some analysis of the free-enterprise growth process, viewed from the microeconomic side. I have contended that this is where one must look to discover the critical attributes of the capitalist growth process that account for its unparalleled accomplishments. But that is not enough. Even if we were to prove that each of the components, individually, works in the right direction, it would not follow that taken together they still do so. At least abstractly, it is surely possible that the success of one of these components can turn out to interfere with the effectiveness of another. To get to the heart of the matter, we are forced to abandon the microscope and turn to the telescope. We have to consider how the pieces hang together, recognizing that here the macroeconomic orientation must take control.
Accordingly, part III provides both theoretical models and historical evidence related to the capitalist growth process. As it turns out, there are relationships among elements of the macroeconomy in which success of one of capitalism’s growth components handicaps the success of another key attribute. But before we get to the modified macromodels in the following two chapters, which show this and offer other insights, I will review some pertinent historical material that deals with economies, some ancient and some more recent, some with outstanding records of invention but generally poorer performance in terms of subsequent innovation. This historical material provides further insights into the nature of the influences that affect innovation and its contribution to growth in economies of different types.
This chapter looks at some of the most relevant historical episodes in order to explore the relation between the record of invention of the past few centuries and the extraordinary growth performance of the competitive market economies. There were apparently no forces in any earlier society comparable to those that promote innovation in the capitalist economies. Although, as is so well known, several previous societies have had remarkable records of invention, none of them seems to have had institutional arrangements capable of driving decision makers forcefully toward the next stage—the innovation step that puts the invention to substantial economic use. Indeed, in China and the classical world, powerful influences were at work in the opposite direction, most notably sabotage by governmental institutions and the low esteem accorded commercial and productive activity (at least outside of agriculture). In other periods, competition was systematically, if imperfectly, suppressed—as under the guild system—so that there was little role for an aggressive weapon such as rivalrous innovation. What incentive remained was severely handicapped by the fact that the notion of progress of any sort, let alone technical progress, was foreign to the ways of thinking for long periods of time, for example during the early Middle Ages.1 Historians have suggested that in such periods, if the attention of a contemporary had been drawn to the change that was actually going on, that person might well just have denied it.
The historical episodes that will be reviewed also underscore a critical point. The availability of human capital may be necessary but is surely not sufficient by itself to ensure a firm connection between invention and economic growth. This requires, in addition, a set of powerful incentives, such as the free market provides, to ensure a continuous flow of inventions and their transformation through the innovation stage into a direct contribution to productivity and output growth.
I begin with a review of some remarkable facts about relatively recent European economic history that suggest not only why earlier forms of economic organization failed to provide the powerful pressures that enforce innovation under modern capitalism, but how these alternative economic systems systematically impeded innovation. This surely helps to explain why the Industrial Revolution required so much more time to take over the economies of a number of countries on the European continent, and why their growth lagged that of the United Kingdom for so long.
THE SERVILE ECONOMIES OF EIGHTEENTH- AND NINETEENTH-CENTURY EUROPE
Noted historian Jerome Blum, who is the primary source of the material in this section, referred to the bulk of the nations in continental Europe before the mid-nineteenth century as the “servile states” (Blum, 1978). By this he meant that these countries, including France (up until the revolution), the Germanic states, the Habsburg lands, Denmark, Poland, and Russia, retained the institution of serfdom, a number of them until the 1850s. This was not a peripheral phenomenon because some 80 percent of the labor force was then employed in agriculture, and most agricultural workers were subject to rules of serfdom of varying degrees of severity. It will not surprise the reader that, according to contemporary reports, when serfs carried out the labor obligations they owed to their lords they did so with a minimal outlay of effort. Serfs determinedly resisted any attempts at change, fearing that it was just a way to reduce their meager incomes or to extract additional work from them. What may be more unexpected is that the vast preponderance of seigniors (the nobles) also resisted innovation, including those innovations that promised substantial increases in productivity.
As I review the history of these “servile states” to look for an explanation of the resistance to innovation by the noble landed proprietors, I will note the marked contrasts with institutions in England, where the local version of serfdom had, in fact, largely disappeared by the end of the fifteenth century. Similarly, in the American colonies and, afterwards, in the United States—apart from the institution of slavery and a limited number of indentured servants—agriculture was carried out on a free-market, competitive basis from the beginning of European white settlement.
In the eighteenth and nineteenth centuries the vast majority of the labor force everywhere was agricultural. That was true in the United States as well as in Great Britain. This helps to explain why the first half-century of the Industrial Revolution in Britain achieved such negligible growth rates (estimates run to 0.03 percent per year growth in per capita GDP from approximately 1780 to 1830). Certainly, in the countries where serfdom still prevailed, pursuits that were not agricultural engaged a small minority of the labor force:
Estimated ratios of rural populations: France, 85 per cent in 1789, Switzerland, 68 per cent in 1800, Germany, 80 per cent in 1800; Denmark, 80 per cent in 1769, Poland, 72 per cent ca. 1800, Hungary, over 90 per cent ca. 1800, Estonia, 84 per cent in 1782, Russia, 92 per cent in 1851. (Blum, 1978, p. 3; Blum’s references omitted)
Even in these countries there were some free laborers, but the great preponderance of the workers who were employed in agrarian pursuits were subject to some sort of serfdom. This generally meant that the individual was tied to the land and was not permitted to change location or occupation without permission of the lord who held that land. Moreover, a serf generally owed the seignior a variety of services, notably a fixed period of labor per week on the lord’s own land.
The explanation for the inefficiency of the labor obligation in all of the servile lands lay in the fact that it was compulsory and that the workers received no pay. The peasants knew that no matter how poorly they performed the labor service, the seignior had no recourse. There were no wages for him to reduce or withhold, nor could he discharge the workers, since then he would lose whatever labors they did accomplish for him. The peasants took no interest in the task assigned to them; they tried to do as little as they could; indeed, according to Albrecht Thaer, they considered it a point of honor to cheat the seignior in the performance of the obligation. (Blum, 1978, p. 319)
Blum also reports the remarkable determination of the serfs to resist productivity-enhancing change. To put it in modern terms, both product and process innovations were opposed and long delayed, if not thwarted altogether. Workers fought the adoption of new and soil-regenerating crops, whose rotation with the more usual agricultural produce vastly enhanced output over what the traditional fallow field system could provide. They battled the introduction of new products such as the potato and other migrants from the New World, which offered far more nutrition per hour of labor and per unit of land than the traditional bread grains. They sought to prevent the introduction of foreign breeds of sheep, even though they demonstrably offered more wool as well as more meat. This resistance can be attributed to massive ignorance and conservatism. But it can also partly be ascribed to fear that any change would increase the exploitation of the serf by the master, as it had in the past.
The endeavors of parish priests, and of seigniors, agricultural societies and governmental agencies to spread the practices of progressive farming met with even less success among the peasants than it did among the masters. Most seigniors met the recommendations with apathy. Peasants actively resisted them. Those who had insecure tenures, or who lived in villages that periodically redistributed holdings, saw no advantage in investing time and money to make improvements whose benefits they might not enjoy. Anyway, few of them, no matter what their tenure, had the available capital resources needed to make improvements. They reasoned, too, that most of the increased product that improvements might bring would be taken from them by increased demands from their seigniors. They were suspicious of the propagandists, who were all of the upper orders of society. Experience had taught them to be wary of those who for so long had exploited and scorned them, and who now suddenly assumed the guise of their benefactors. They realized that enclosure of common lands, and consolidation of scattered strips, would work severe hardships on the poorest villagers, who depended so much upon the right to pasture their few cattle on commons and fallow fields. Ignorance and superstition, and their constant companion, fear of anything new, also had much to do with their rejection of any and all improvements. An official of Zurich reported in 1787 that the peasant’s “preconceived opinions bristle at everything which lies outside his obsolete way of thinking, and through hardheadedness, obstinacy, and uncooperative behavior, he often makes even the best arrangements in-effectual and useless.” The pressures of conformity had considerable influence, too. The adoption of a change, even a relatively minor one, involved abandonment of customs and traditions that formed part of the fabric of village life. It took a strong will to withstand the criticism, and even the opprobrium, of neighbors that an innovation would bring, and to survive their ridicule if the innovation did not succeed. (Blum, 1978, p. 292)
As already noted, it was not only the peasants who resisted innovation; their masters did so as well. The seigniors’ rejection of productivity-increasing innovation has at least two explanations. The first is found in the historical circumstances of the era, which encompassed both the pretensions of the rulers to absolute monarchy and the spread of enlightened despotism. Both of these goals created a chasm between the kings and their aristocracy. It was, after all, only the nobles who could possess power sufficient to curb or even thwart the absolute rule of king or emperor, and it was they who perceived themselves as having most to lose when an enlightened monarch undertook to reduce the harshness of the institution of serfdom or sought to abolish it altogether. The seigniors had every reason to fear any change as yet another opportunity for the monarch to curb their powers.
For us, the second reason for aristocratic opposition to innovation is more directly to the point. There was no competitive market mechanism to force the landed nobility to battle for superiority of performance in terms of productivity or product quality. Their lands continued to yield income that was largely unaffected by direct rivalry of other landed proprietors. Although this income was often insufficient for their prodigious spending habits—leading to frequent bankruptcy, impoverishment, and forced sales of properties, particularly in the nineteenth century—this seems to have provided little incentive for competitive marketing behavior. There was a group of “improving landlords” who adopted new methods, new breeds, and new products, sometimes with substantial financial reward. But, unlike in England, on the Continent these were relative rarities; they had little effect on the market for agricultural products and did not distract most of the nobility from their customary pursuits by forcing them into a competitive innovation race.2
Whether directly involved in agricultural production or whether the receiver of rents and seigniorial dues, the usual noble of the servile lands did not look upon his property as an enterprise to be run for profit. He considered its primary function to be the support of his household—his family and domestic staff. Only the surplus left after meeting his needs went to the market. That included the surplus from his payments in kind, as well as the surplus from his own production. … Conspicuous consumption and ostentatious display were matters of great moment to a nobleman. They could determine his social and political status among his peers and affect his own and his family’s fortunes. And so the usual noble showed scant interest in investment in improvements to increase the productivity of his property. That would postpone present consumption, and most nobles did not think in those terms. In any event, the many petty seigniors who in the best of times barely managed to make ends meet, and who lived always in fear of ruin, could not afford to invest for future gains. …
There were, of course, proprietors who were market-oriented and who wanted to make a profit from their estates. Nobles invested in business enterprises, too; some of the great families of France had money in Flemish mines, forges and iron works, and in the colonial trade. Many proprietors in Schleswig-Holstein, in the Baltic lands, in Prussia and Silesia and in Bohemia were active producers of grain and other commodities for the domestic market and for export to western Europe. The provincial nobility of Bordeaux, Rennes, and Toulouse had long been actively engaged in production for market and were shrewd, profit-oriented businessmen. And there was a small, but as history was to prove, a very influential group of noble proprietors scattered through the servile lands who led in the introduction of innovations designed to increase the productivity of agriculture as well as the revenues of the proprietors.
Whatever their interest or lack of it in commercial agriculture, the fact was that in every land nobles or large renters were by far the chief suppliers of farm goods to the market. The peasants, overburdened by their obligations, were barely able to support themselves from their labors, and usually had little left over for sale. (Blum, 1978, pp. 160–61)
As with innovating entrepreneurs in other fields, the numbers of these “improving landlords” were strikingly small. Careful examination by Michael Confino found only seven instances in all of Russia of efforts to introduce improved agriculture in the last three decades of the eighteenth century. The number increased during the first half of the nineteenth century, but was still a tiny fraction of the many thousands of Russian proprietors. In Hungary in the first half of the nineteenth century, not more than twenty to twenty-five landowners employed progressive methods on their properties. A small number of French proprietors, principally from the highest levels of the nobility, applied the teachings of the new husbandry to their land. Most landowners showed no interest in the innovations. (Blum, 1978, p. 285)
The bottom line is that the servile states of the European continent emphatically lacked the competitive market pressures for innovation that in England and, later, the United States arguably drove the economy toward rapid growth.
TECHNOLOGICAL ACHIEVEMENTS IN ANCIENT ROME
A second instructive historical case is that of ancient Rome, a society that apparently produced a good deal of invention but little innovation. A variety of inventions are credited to Rome, notably in construction. The vestiges of Roman roads, Roman aqueducts, and Roman baths continue to impress tourists. Roman water mills were fairly sophisticated devices. The society even produced a working steam engine. However, none of these seems to have been employed systematically for productive purposes.
The explanation appears to be reasonably clear. Several respectable avenues were open to those Romans who sought power and prestige. Indeed, they had no reservations about the desirability of wealth or about its pursuit (see, for example, Finley, 1985, pp. 53–57). So long as it did not involve participation in industry or commerce, there was nothing degrading about the acquisition of wealth. Persons of honorable status had four primary and acceptable sources of income: landholding (not infrequently as absentee landlords); booty and ransom from aggressive military enterprises; money lending (“usury”); and what may be described as political payments, including what we would call “bribery.” Finley writes:
The opportunity for “political moneymaking” can hardly be overestimated. Money poured in from booty, indemnities, provincial taxes, loans and miscellaneous exactions in quantities without precedent in Graeco-Roman history, and at an accelerating rate. The public treasury benefited, but probably more remained in private hands, among the nobles in the first instance. …
Nevertheless, the whole phenomenon is misunderstood when it is classified under the headings of “corruption” and “malpractice,” as historians still persist in doing. Cicero was an honest governor of Cilicia in 51 and 50 B.C., so that at the end of his term he had earned only the legitimate profits of office. They amounted to 2,200,000 sesterces, more than treble the figure of 600,000 he himself once mentioned (Stoic Paradoxes 49) to illustrate an annual income that could permit a life of luxury. We are faced with something structural in the society. (1985, p. 55)
On the Romans’ attitudes to the promotion of technology and productivity, Finley cites Vitruvius’ monumental work on architecture and technology in whose ten books he finds only a single and trivial reference to means of saving effort and increasing productivity. Finley then reports:
There is a story, repeated by a number of Roman writers, that a man—characteristically unnamed—invented unbreakable glass and demonstrated it to Tiberius in anticipation of a great reward. The emperor asked the inventor whether anyone shared his secret and was assured that there was no one else; whereupon his head was promptly removed, lest, said Tiberius, gold be reduced to the value of mud. I have no opinion about the truth of this story, and it is only a story. But is it not interesting that neither the elder Pliny nor Petronius nor the historian Dio Cassius was troubled by the point that the inventor turned to the emperor for a reward, instead of turning to an investor for capital with which to put his invention into production? (1985, p. 147)3
The vigor of inventive activity that nevertheless characterized Roman society has already been noted. By the first century B.C., Alexandria, the center of technological invention in the Roman empire, possessed virtually every form of machine gearing that is used today and, as already noted, had a working steam engine! But these seem to have served largely as what amounted to elaborate toys. The steam engine was used only to open and close the doors of a temple. Rome also had the water mill, arguably the most critical pre-eighteenth-century industrial invention, because it provided the first significant source of power other than human and animal labor: “[I]t was able to produce an amount of concentrated energy beyond any other resource of antiquity” (Forbes, 1955, II, p. 90). Like steam in more recent centuries, the water mill promised a leap in productivity in the Roman economy—and apparently actually delivered it during the eleventh, twelfth, and thirteenth centuries in Europe. Yet, according to Reynolds (1983, p. 17), the knowledgeable Vitruvius, writing in about 25 B.C., listed water mills in a section of his great work devoted to “rarely-used machinery.” And Finley (1985, pp. 35–36), citing White, reports that “though it was invented in the first century B.C., it was not until the third century A.D. that we find evidence of much use and not until the fifth and sixth of general use. It is also a fact that we have no evidence at all of its application to other industries (i.e., other than grinding of grain) until the very end of the fourth century, and then no more than one solitary and possibly suspect reference to a marble-slicing machine near Trier.”
In an economy in which commerce and industry were disreputable activities, in which rent-seeking and destructive enterprise were the respectable avenues to wealth, and in which one hears nothing of markets characterized by vigorous competition entailing innovative commodities and production processes, the evidence suggesting substantial technical stagnation does not seem extremely surprising.
THE ASTONISHING INVENTIONS OF MEDIEVAL CHINA
The impressive set of inventions produced in ancient China, mostly in the T’ang (A.D. 618–906) and Sung (A.D. 960–1126) dynasties, constituted one of the earliest prospective revolutions in industry. Among the many Chinese technological contributions one can list paper, movable type, the water wheel sophisticated water clocks, and, of course, gunpowder. But those are only the beginning of the list. Mokyr (1990a) adds the spinning wheel, which “appeared about the same time in China and the West—the thirteenth century (possibly somewhat earlier in China)—but advanced much faster and further in China … a small multispindle spinning wheel, not unlike Hargreaves’ spinning jenny” (p. 212); a mechanical cotton gin; hydraulic trip hammers (eighth century); ship construction techniques that permitted the production of vessels “much larger and more seaworthy than the best European ships”; the sternpost rudder; superior sail designs providing far greater maneuverability than Western ships could muster before the fifteenth century; porcelain; the umbrella; matches; the toothbrush; playing cards; and many, many others.4
But in China, as in Rome, these inventions strikingly failed to serve as the basis for the growth and spread of industry throughout the economy, even during the times of the country’s greatest prosperity (see, for example, Liu and Golas, 1969).5 Commerce did flourish, but there seems to have been little upheaval in the production of nonagricultural goods, such as a switch in production from the artisan’s shop to the factory. It would, no doubt, be unreasonable to expect to find the satanic mills of nineteenth-century Birmingham and Manchester in medieval China. But the remarkable number and variety of water mills that crowded the banks of the Seine and dotted the landscape of southern England in the later Middle Ages (see below) seem also to have been missing from the Chinese countryside. It is noteworthy here that, as in Rome, the technical know-how was available in impressive abundance but seems never to have led to any commensurate addition to the ability and willingness of industry to make use of that knowledge.6
The explanations for this lack parallel those I offered for the case of Rome, but include others as well. Perhaps most notable was the propensity of government to expropriate and exploit for its own purposes any inventions that the bureaucracy had not succeeded in suppressing. In China, as in many kingdoms of Europe before the guarantees of the Magna Carta and the revival of towns and their acquisition of privileges, monarchs commonly claimed ownership of all property in their lands. Consequently, and particularly in China, when the sovereign was in financial straits, confiscation of the property of wealthy subjects was considered appropriate. It has been claimed that this led those with resources to avoid investing them in any sort of visible capital stocks, and that this, in turn, was a substantial impediment to economic expansion.7
Innovation of a practical sort was also frowned upon by the bureaucracy, which was, however, willing enough to take over for its own use any novel product or process that had escaped its vigilance. Balazs tells us of:
the state’s tendency to clamp down immediately on any form of private enterprise … or, if it did not succeed in putting a stop to it in time, to take over and nationalize it. Did it not frequently happen during the course of Chinese history that the scholar-officials, although hostile to all inventions, nevertheless gathered in the fruits of other people’s ingenuity? I need mention only three examples of inventions that met this fate: paper, invented by a eunuch; printing, used by the Buddhists as a medium for religious propaganda; and the bill of exchange, an expedient of private businessmen. (1964, p. 18)
In addition, Imperial China reserved its most substantial rewards in wealth and prestige to those who climbed the ladder of imperial examinations, which were heavily slanted to “impractical” subjects such as Confucian philosophy and calligraphy. Successful candidates were often awarded high rank in the bureaucracy, a social standing denied to anyone engaged in commerce or industry—even those who gained great wealth in the process (and who often used their resources to prepare their descendants to contend via the examinations for a position in the scholar bureaucracy). In other words, the prevailing “rules of the game” for Imperial Chinese economic activity seem to have been heavily biased against the acquisition of wealth and position through competitive and productive behavior. The avenue to success lay elsewhere.
Because of the difficulty of the examinations, the mandarins (the scholar-officials) rarely succeeded in keeping such positions in their own families for more than two or three generations.8 The scholar-families devoted enormous effort and considerable resources to preparing their children through years of laborious study for the imperial examinations. During the Sung Dynasty, these were held every three years, and only a few hundred persons in all of China succeeded in passing them each time (Kracke in Liu and Golas, 1969, p. 14). Yet, regularly, some persons not from mandarin families also attained success through this avenue.9 Wealth was in prospect for those who passed the examination and who were subsequently appointed to government positions. But the sources of their earnings had something in common with those of the Romans.
Corruption, which is widespread in all impoverished and backward countries (or, more exactly, throughout the pre-industrial world), was endemic in a country where the servants of the state often had nothing to live on but their very meager salaries. The required attitude of obedience to superiors made it impossible for officials to demand higher salaries, and in the absence of any control over their activities from below it was inevitable that they should purloin from society what the state failed to provide. According to the usual pattern, a Chinese official entered upon his duties only after spending long years in study and passing many examinations; he then established relations with protectors, incurred debts to get himself appointed, and then proceeded to extract the amount he had spent on preparing himself for his career from the people he administered—and extracted both principal and interest. The degree of his rapacity would be dictated not only by the length of time he had to wait for his appointment and the number of relations he had to support and of kin to satisfy or repay, but also by the precariousness of his position. (Balazs, 1964, p. 10)
Perhaps as a result of recurrent intervention by the state to curtail the liberty of the merchant class and take over any accumulated advantages it had managed to gain for itself through enterprise, “the merchant’s ambition turned to becoming a scholar-official and investing his profits in land” (Balazs, 1964, p. 32). Once again, we find no sign in this economy of a vigorous competitive market in which innovation is a primary weapon.10
A PUZZLING COUNTEREXAMPLE: AN EARLY INDUSTRIAL REVOLUTION IN THE LATER MIDDLE AGES
There is, however, a historical episode suggesting that innovation can sometimes explode without the presence of competitive market pressures. By the end of the eleventh century in Europe, the Dark Ages had given way to a new set of circumstances. The revival of the towns was well under way. Towns, as entities, had acquired a number of privileges, including some protection from arbitrary taxation and confiscation, and an independent labor force made up of runaway serfs who had been granted their freedom after the requisite one year and a day. The anarchic military activity of the barons—formerly a dominant mode of wealth-accumulating free enterprise—had at least been impeded by the Church’s pacification efforts, including the “Peace of God” and the (later) “Truce of God” in France, Spain, and elsewhere. Similar changes were taking place in England (see, for example, Cowdrey, 1970), though free-enterprise military activity by the barons lasted at least through the Wars of the Roses, and Jones (1987, p. 94) suggests that it continued into the reigns of the earlier Tudors in the sixteenth century. Finally, a number of activities that were neither agricultural nor military began to yield handsome returns. For example, the small group of architect-engineers in charge of the building of cathedrals, palaces, bridges, and fortresses were able to live in great luxury in the service of their kings.
A good deal has been written about the successful industrial revolution of the late Middle Ages and the accompanying commercial revolution sparked by inventions such as double-entry bookkeeping and bills of exchange (see De Roover, 1953). It seems to have contributed (as did the considerable changes in agricultural methods) to widespread, though probably modest, increases in living standards. Its two-century duration makes it as long-lived as the more recent Industrial Revolution (see Gimpel, 1976; White, 1962; and Carus-Wilson, 1941).
Perhaps the hallmark and most remarkable technological feature of the earlier industrial revolution was that extraordinary source of productive power, the water mill. These mills covered the countryside in the south of England and crowded the banks of the Seine in Paris (see, for example, Gimpel, 1976, pp. 3–6; and Berman, 1986, pp. 81–89). They were not only simple grain-grinding devices. Rather, they accomplished an astonishing variety of tasks and used an impressive range of mechanical devices and sophisticated gear arrangements. The water mills crushed olives, ground mash for beer production, pressed cloth for paper making, sawed lumber, and hammered metal and woolens (as part of the “fulling” process, which cleaned, scoured, and pressed woven woolen goods to make them stronger and more tightly woven). Water mills also were used to produce coins, polish armor, and operate the bellows of blast furnaces.11
Their mechanisms showed many forms of ingenuity. Gears were used to transform the vertical circular motion of the efficient form of the water wheel into the horizontal circular motion of the millstone. The cam (a piece of wood, metal, or some other solid protruding at right angles from a rotating shaft such as the axle of the water wheel) served to lift a heavy hammer. This was pivoted like a seesaw, and the cam let it drop by its own weight, repeatedly and automatically (this mechanism was apparently also known in antiquity, but may not have been used then with water wheels). A crank handle extending from the end of the axle transformed the circular motion of the wheel into the back and forth (reciprocating) motion required for sawing or the operation of bellows. By the beginning of the fourteenth century, according to Gimpel (1976), sixty-eight mills were in operation along less than one mile of the banks of the Seine in Paris, and these were supplemented by floating mills anchored to the Grand Pont. The activity in metallurgy was also considerable—sufficient to denude much of Europe of its forests and to produce a rise in the price of wood that forced recourse to coal.12
As White sums up the technological accomplishments of the period, “the four centuries following Leonardo, that is, until electrical energy demanded a supplementary set of devices, were less technically engaged in discovering basic principles than in elaborating and refining those established during the four centuries before Leonardo” (1962, p. 129).13 The most sophisticated product in this era of mechanical skill and knowledge was the mechanical clock, which appeared toward the end of the thirteenth century. For the first time, humans could tell the time even when cloudy skies prevented use of the sun dial, or when freezing temperatures stopped the water clocks.
In sum, the twelfth–thirteenth-century industrial revolution was a surprisingly robust affair, and it is implausible that improved rewards to industrial activity had little to do with its vigor. Yet there seems to be no reason to ascribe the revolution to competitive-market pressures. Indeed, a prime incentive for such technical advances may have been the monopoly they gave their owners. Such monopoly rights were sought and enforced by private parties (Bloch, 1935, pp. 554–57; Brooke, 1964, p. 84) and by religious organizations. It is a striking fact that the leaders in this industrial revolution were not primarily capitalists struggling to accumulate personal wealth, but the monasteries, notably the Cistercian abbeys.
Historians tell us that they have no ready explanation for the entrepreneurial propensities of this monastic order.14 Constance Berman, in a personal communication, suggests that this may all have been part of the twelfth-century monastic drive to reduce or eliminate manual labor in order to maximize the time available for the less onerous religious labors—a conclusion with which Bloch (1935, p. 553) concurs.15 But the evidence indicates strongly what avid entrepreneurs the monasteries were. They accumulated vast tracts of land; the sizes of their domesticated animal flocks were enormous by the standards of the time; and their investment rates were remarkable. And in all this they were vigorous in their pursuit and exercise of monopoly power—being known, after the erection of a Cistercian water mill, to seek legal intervention to prevent nearby residents from continuing to use their animal-powered facilities (Gimpel, 1976, pp. 15–16). The Cistercians were fierce in their rivalrous behavior and drive for expansion, in the process not sparing other religious bodies—not even other Cistercian houses. There is “a record of pastoral expansionism and monopolies over access established by the wealthiest Cistercian houses … at the expense of smaller abbeys and convents … effectively pushing out all other religious houses as competitors” (Berman, 1986, p. 112).
Even where private enterprise rather than monastic activity operated the water mills, pursuit of monopoly rather than competition was characteristic. It has just been noted that a very important use of the water wheel was in the laborious process of fulling. In earlier days this had been done by human hand (or foot) and a good deal of the activity had been carried out in London. However, the absence of swift streams in the city put urban fullers at a competitive disadvantage to the mill-using fullers in the countryside. In 1298 (in the reign of Edward I) the London fullers consequently undertook a lawsuit, asking the King for protection, and claiming that if the country mills were permitted to continue their activity there would be “grave damage” to the men employed in the city. The King rejected their request but did offer them some concessions to ease their difficulties (Carus-Wilson, 1941, pp. 55, 58).
The records describe a profusion of monopoly-preserving litigation related to water mills (see, for example, Gimpel, 1976, chapter 1). These included cases in which the mill owner sought to enforce a monopoly by securing a prohibition on the use of human-powered mills by rivals and even by consumers. In other instances, upstream and downstream users fought for the water’s power, battling over the dam sites and the height of the dams. One case is reported to have dragged on for more than a century; it was settled, finally, only by the bankruptcy of one of the parties, thereby illustrating one of the strategic approaches still used by litigating rent seekers: by imposing sufficient financial pressure upon the other party (or threatening to do so) one can hope to destroy the opponent or force its surrender, regardless of any decision by the court.
CONCLUDING COMMENT
The historical examples provided in this chapter can easily be supplemented by others. In chapter 5, a few remarks were offered on the Soviet economies, showing how they, too, were characterized by institutions that impeded innovation and growth. All of these cases consistently support two conclusions. First, no earlier or alternative recent form of economy seems to have had as its main driving mechanism free competitive markets, using innovation as a prime weapon. Second, the examples show that the absence of such a free and rivalrous market need not prevent the exercise of ingenuity and the appearance of remarkable inventions. But they indicate, with one noteworthy exception, that its absence does seem to weaken or even undermine the subsequent innovation steps—the steps that lead to widespread use of the inventions to fuel rapid economic growth.
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1. Moreover, that period was characterized by severe distrust of any inquiry into facts and explanations, let alone anything that might be considered to resemble research. Such activity was suspect because it constituted “prying into God’s secrets.”
2. Still, something surely did happen to increase agricultural output on the Continent before the end of serfdom, since the famines that caused regular widespread starvation throughout continental Europe as late as the end of the seventeenth century seem largely to have ended by the eighteenth. The explanation can perhaps be found in rising productivity in the Netherlands and England and the resulting availability of cheaper products from abroad, though in an economy making little use of money this explanation is not very persuasive. There also seems to have been an improvement in the climate at the time, which may have made a major contribution to agricultural productivity.
3. To be fair to Finley, we may note that he concludes that it is not really interesting. North and Thomas (1973, p. 3) make a similar point about Harrison’s invention of the ship’s chronometer in the eighteenth century (as an instrument indispensable for the determination of longitude). They point out that the incentive for this invention was a large governmental prize rather than the prospect of commercial profit, presumably because of the absence of effective patent protection.
4. Needham (1964a, 1964b, 1981) provides the classic description and analysis of Chinese technology and invention. A briefer but excellent discussion is in Mokyr (1990a, chapter 9).
5. Also, as in Rome, none of this was associated with the emergence of a systematic body of science involving coherent theoretical structure and the systematic testing of hypotheses on the basis of experiment or empirical observation. Here, the thirteenth-century work in England of Bishop Grosseteste, William of Henley, and Roger Bacon was an early step toward that unique historical phenomenon—the emergence of a systematic body of science in the West in the sixteenth century (see Needham, 1956).
6. The following discussion is entirely consistent with that in Landes (forthcoming in 2002), though I had not seen the latter when my discussion was first written.
7. See Balasz (1964, p. 53); Landes (1969, pp. 46–47); Rosenberg and Birdzell (1986, pp. 119–20); and Jones (1987, chapter 5).
8. See Marsh (1961, p. 159) and Ping-Ti Ho (1962, chapter 4 and appendix).
9. See, e.g., Marsh (1961) and Ping-Ti Ho (1962) for evidence on social mobility in Imperial China.
10. The essence of the matter is that in medieval China, as in the Soviet Union, the problem was not just absence of an innovation machine but, worse still, the presence of a mechanism that served to thwart innovation if not to prevent it altogether. Thus, Landes (1998, pp. 341–42) tells us for the Chinese case: “The would-be modernizers were thwarted … not only by brittle insecurities but also by the intrigue of a palace milieu where innovations were judged by their consequences for the pecking order. No proposal that did not incite resistance; no novelty that did not frighten vested interests. At all levels, moreover, fear of reprimand (or worse) outweighed the prospect of reward. A good idea brought credit to one’s superior; a mistake invariably meant blame for subordinates. It was easier to tell superiors what they wanted to hear. … Imperial China is not alone here. The smothering of incentives and the cultivation of mendacity are a characteristic of large bureaucracies, whether public or private [business corporations].” The remark about large corporations is, of course, valid but, unlike despotisms, the market constrains the effects by causing disaster for firms that are paralyzed by bureaucratic resistance to effective change.
11. For a more complete and systematic list of the remarkable variety of applications of the water wheel, see Reynolds (1983, pp. 77, 94).
12. Other historians assert, however, that this did not occur to any substantial degree until the fifteenth or sixteenth centuries, with some question even about those dates; see, e.g., Coleman (1975, pp. 42–43).
13. As already noted, science and scientific method also began to make an appearance with contributions such as those of Bishop Grosseteste and Roger Bacon. Walter of Henley championed controlled experiments and observation over recourse to the opinions of ancient authorities, and made a clear distinction between economic and engineering efficiency in discussing the advisability of substituting horses for oxen. And that obstreperous monk Roger Bacon displayed remarkable foresight when he wrote, circa 1260:
Machines may be made by which the largest ships, with only one man steering them, will be moved faster than if they were filled with rowers; wagons may be built which will move with incredible speed and without aid of beast; flying machines can be constructed in which a man … may beat the air with wings like a bird … machines will make it possible to go to the bottom of seas and rivers. (Quoted in White, 1962, p. 130).
14. See, e.g., Brooke (1964, p. 69), and also a personal communication from Constance Berman; but see Ovitt (1987, especially pp. 142–47).
15. I have been able to construct some hypotheses to account for the apparently superior entrepreneurship of the Cistercians. The most plausible story is that, by the time in question, attitudes toward labor had changed in other monastic orders. They now held that the labor religious doctrine required the monks to perform could legitimately consist entirely of religious labor, e.g., that of scribes and illustrators of manuscripts. The more onerous tasks in the fields and elsewhere needed to keep the monastery going could then be performed exclusively by hired “lay brothers.” According to this account, the Cistercians lagged in acceptance of this view and continued to demand hard physical labor from the members of the order. That provided the incentive for them to seek labor-saving technical improvements, because they were permitted to devote any time saved in this way to more pleasant religious labor. Landes (1998, p. 58) writes: “One might have expected that organized spirituality … would have had little interest in technology. Surely the Church, with its view of labor as penalty for original sin, would not seek to ease the judgement. And yet everything worked in the opposite direction: the desire to free clerics from time-consuming earthly tasks led to the introduction and diffusion of power machinery and, beginning with the Cistercians, to the hiring of lay brothers (conversi) to do the dirty work.” I must admit that this hypothesis is not overwhelmingly convincing and the evidence for it is marginal, though Dr. Berman commented that it was not implausible.