Leap into Modernity – Political Economy of Growth on the Periphery, 1943–1980

by Adam Leszczyński (Author)
Monographs 378 Pages
Open Access

Table Of Content

  • Cover
  • Title
  • Copyright
  • About the author(s)/editor(s)
  • About the book
  • This eBook can be cited
  • Table of contents
  • Chapter 1. A brief history of backwardness
  • 1. Malthus was right
  • 2. Wealth and poverty in the past
  • 3. Empire and its colonies
  • 4. Slaves to barbaric superstitions
  • 5. “Our little peasant, overburdened with work”
  • Chapter 2. “A task without historical precedent”
  • 1. History
  • 2. Theories
  • 3. Politics
  • Chapter 3. Internal colony
  • 1. Land of the big bluff
  • 2. We would be sitting at a broken trough
  • 3. Mechanics of the Great Leap
  • 4. Stalin, rational modernizer?
  • Chapter 4. The Four Seas are rising
  • 1. Somebody told Mao
  • 2. Five meals a day
  • 3. The Great Famine
  • 4. Politics above everything
  • 5. Society is certainly a bit coarse
  • Chapter 5. Polish planism
  • 1. Polish poverty
  • 2. Life during the Depression
  • 3. The antiliberal 1930s
  • 4. Wartime programmes
  • 5. The road to Stalinism
  • 6. Brus, Lange, Kalecki. “The bane of reform”
  • 7. Gomułka and Gierek
  • 8. The system’s problem
  • Chapter 6. Dilemmas of the periphery: The dialectic of development in the “Third World” 1945–1980
  • 1. The black star of Africa
  • 2. Socialism is more than mere logic
  • 3. Open veins of Latin America
  • Chapter 7. Small dragons: Korea and Taiwan, 1945–1980
  • 1. Export or death
  • 2. A decaying nation
  • 3. Success in spite of rule/against the rules
  • Chapter 8.
  • 1. Malaise
  • 2. The revolution of the neoliberals
  • 3. Disillusionment with the Leviathan
  • Chapter 9. Conclusion: The politics of growth: 1943–1980
  • 1. The search for an ideal type
  • 2. Ruritania: the case of Central Europe
  • Bibliography

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Chapter 1. A brief history of backwardness

1. Malthus was right

In 1825 on orders from the British government, Englishman William Jacob travelled the length and breadth of what was then Congress Poland, Galicia and the Baltic provinces of Russia. His journey had a very practical purpose. The United Kingdom needed grain to feed the workers in its rapidly expanding industrial cities. Jacob had been instructed to determine how much grain could be supplied by the lands of “ancient Poland”, and at what prices. He was also to assess the possibilities for exporting grain through Gdańsk, East Prussia and Riga. He fulfilled these tasks brilliantly. After returning to England, he issued a comprehensive report in which he also characterized – in the style of travel narratives of the day – the inhabitants of the Polish lands.1 He noted the reluctance of the nobility to involve themselves professionally in anything outside of military service, the dominant position of Jews in commerce, and of the Germans in the skilled trades. (Germans, he noted, felt ill at ease in Poland and dreamt only of returning to their homeland once they had made their fortune.) He also devoted much attention to the Polish peasantry:

In general, this Peasantry is in a condition of great distress, and involved in debt to their lord. They are no longer slaves, or adstricti glebae. […] These people live in Wooden Huts, covered with thatch or shingles, consisting of one room with a stove, around which the inhabitants and their cattle crowd together, and where the most disgusting kinds of filthiness are to be seen. Their common Food is cabbage, potatoes sometimes, but not generally, pease, black bread, and soup, or rather gruel, without the addition of butter or meat. Their chief Drink is water, or the cheap whiskey of the country, which is the only luxury of the peasants; and is drunk, whenever they can obtain it, in enormous quantities. […] In their houses they have little that merits the name of furniture; and their clothing is coarse, ragged, and filthy, even to disgust […] Very little attention has been paid to their Education, and they are generally ignorant, superstitious, and fanatical […] All the Operations of Husbandry struck me to be very ill performed.2 ← 7 | 8 →

Jacob’s account is all the more telling if we consider its context. The reference point for the author was England – then the richest country in the world, but one with rapidly growing expanses of abject poverty. According to estimates by historians today, in 1820 the wages of workers in England were only 10 percent higher than in 1770. At the same time, we have good reason to believe that living and working conditions for most of these workers were in many respects worse than a few decades earlier.3 Soon after Jacob’s report on the Polish lands, several widely-discussed books depicting the misery of British workers were published in London; this included the publication in 1833 of a book by Peter Gaskell about English workers that provided the inspiration for Engels’ writing The Condition of the Working Class in England.4 Jacob had visited the Polish lands at an important historical moment; never before and never again during the English Industrial Revolution was there a greater contrast between the rapidly growing economy and stagnant wages (and even of deepening poverty, in the opinion of many). Both Jacob and his readers still had fresh in their memory the times of the French Revolution and the Napoleonic wars, when sudden and dramatic rises in food prices left many British workers with too little income to avoid starvation. Every few years, the country was shaken by waves of revolts by the working classes; English society, at least according to contemporary opinions, was like a volcano ready to explode. It is from such an England – the one described by Dickens, Gaskell and Engels – that Jacob travelled to Congress Poland. And once there he was struck by its poverty and backwardness.

Jacob also noted that Polish peasants worked much less efficiently than English agricultural labourers. The Englishman attributed this laziness not to any innate features found in the Polish peasantry, but to a “system of duty work” in which they had no personal investment.

[…] labour is performed in the most negligent and slovenly manner possible. No manager of a large estate can have his eye constantly on every workman; and when no advantage is gained by care in the work, it will naturally be very imperfectly executed. […] ← 8 | 9 → it appeared to me that a much greater proportion of the grain was left among the straw, than in that which has passed under an English flail.5

This brief description of the Polish countryside contains all the elements that can be found in different images of social, cultural and economic backwardness. We thus have here an inefficient and anachronistic social order (in the Polish case this was actually still a feudal system of forced labour, although the peasants had been formally freed); a rural and agricultural society, rather than an urban and industrial society divided into fixed and impermeable classes; a low level of labour productivity, outdated technology, economic stagnation and an uneven distribution of income; and finally, a low level of formal education, consumption and material culture, so low, in fact, that the filth, ignorance and misery of the peasantry aroused disgust in an observer who harkened from the centre of European civilization. Jacob was a generally dispassionate observer – as dispassionate as only the author of a thick tome on grain prices and transport costs could be. In spite of this, he could not hide his disgust. He was overpowered by it – despite being an intelligent traveller and being fully aware that the people he was describing were not to blame for their misery.

His description of the civilizational gap between the centre and periphery contains so many historical, social and economic dimensions that it is hard to encompass them all in a single definition. The eminent historian Eric Hobsbawm once said it all boils down to finding an answer to the question: “why is Switzerland richer than Albania?”6 This question only seems to be unreasonable: the two countries share similarities – both are small, mountainous, and lack natural resources and fertile soil; over the centuries, both have also experienced extreme poverty, fiercely defended their independence, and sent their young to serve as mercenaries in foreign armies out of economic need. (Switzerland does not even have access to the sea!) To answer to the above question, we have to refer back to a number of historical, religious and economic causes; the story of the evolution of both countries is a long and complicated one, which cannot be summed up in a single sentence or encompassed in a single set of numbers.

Notwithstanding, it is impossible to discuss notions of accelerated development without attempting to describe backwardness. How large was the distance that separated the centre of European civilization and those countries that were ← 9 | 10 → peripheral and backward? How can this distance be measured? How was it shaped by history?

Statistics do not provide answers to these questions. They do not reach sufficiently deep into the past – rarely further than the nineteenth century – and, moreover, they often cannot be trusted. They were not even trusted in their own time. Jerzy Jedlicki quotes the Director of the Government Commission for Internal Affairs in the Kingdom of Poland (and therefore a high official who had a good idea of how the administration under him operated), who wrote in 1860 that the data provided by the local authorities was completely unreliable. In response to a question from another office, which had doubts as to whether the data provided to it by the local administration were accurate, one dignitary he wrote: “Purely administrative centralised statistics yield accurate results only where they relate to receipts or expenditures of public money, only where they are strictly controlled and where there is accountability for falsehoods.”7 Given such thinking among contemporaries, historians should be all the more cautious about quoting these numbers.

This leaves us with indirect methods. Using sophisticated statistical methods, economists attempt to assess the gross domestic product of various countries in the past, up to the beginning of our present era.8 By means of archival research, we can attempt to determine what factors influenced earnings in different periods and in different countries: when they rose, when they fell, and what this money could buy – and this provides us with an idea of the standard of living. We can also describe the level of material culture: counting how much furniture and how many spoons, pots and other objects were listed in wills or court documents. On the basis of field work in cemeteries, we can determine the average height of people in different historical periods, with the assumption that these ← 10 | 11 → changes correspond roughly to changes in the level of nutrition and living conditions (although this relationship is not always straightforward). We can also look at wills, parish registers, and other documents, attempting to determine the average lifespan. Still, these methods provide us with few definitive answers. All of them are imperfect, and they sometimes lead to seemingly conflicting conclusions. Taken together, however, they give us an approximate image of the past.

About what is there any certainty? That Malthus was right when he described the logic of economic life in the centuries before the industrial revolution (and in many countries, perhaps still today). In An Essay on the Principle of Population, first published in 1798, Pastor Thomas Robert Malthus argued that the human economy was governed by the same rules as the “natural economy” of animals; the same criterion – the availability of food – defined the living conditions of both animals and humans.9 People, like animals, multiply as long as have enough to eat; an increase in food production, Malthus argued, will always lead to an increase in population. Therefore, an influx of new workers will cause wages, according to the law of supply and demand, to move toward a minimum, subsistence level. Sometimes this can take time – and a generation or two can enjoy a slightly greater level of prosperity. However, in a Malthusian world, a steady increase in the standard of living is impossible: technological progress only leads to population growth (assuming, as Malthus wrote, that “the passion between the sexes” is constant and the population always increases faster than food production).10

The consequences of this principle lead to interesting paradoxes. As the historian Gregory Clark How put it – perhaps with some exaggeration – the Malthusian world is from today’s perspective turned on its head: what today is an obstacle to increased prosperity, then promoted it:

In the Malthusian economy before 1800, economic policy was turned on its head: vice now was virtue then, and virtue vice. Those scourges of failed modern states—war, violence, disorder, harvest failures, collapsed public infrastructures, bad sanitation—were the friends of mankind before 1800. They reduced population pressures and increased material living standards. In contrast policies beloved of the World Bank and the United ← 11 | 12 → Nations today—peace, stability, order, public health, transfers to the poor—were the enemies of prosperity. They generated the population growth that impoverished.11

In the Malthusian world, a second paradox – social differences – also had a different meaning than today. Effectively raising the standard of living of the majority was impossible in the long run. Therefore, regardless of how much land and wealth was held by the ruling class, the standard of living of their subjects changed very little: their numbers merely rose or declined. A rise in the standard of living of the masses was always temporary, and the vast majority of humanity always lived on the brink of starvation. The biblical description of the exile from Eden, where God says to Adam: “Cursed is the ground because of you / through painful toil you will eat food from it / all the days of your life / It will produce thorns and thistles for you, / and you will eat the plants of the field” (Genesis 3: 17–18), was until very recently a good metaphor for the fate of the common man: there was no escape from it.

The key to freeing oneself from the Malthusian trap was technological progress. For real incomes to rise, food production had to increase faster than the population. For many centuries, however, technological change occurred too slowly. If we assume that the population grew at a rate equal to the pace of technological development (according to the logic of the Malthusian world), it turns out that the increase in productivity from 1000 to 1820 did not exceed an average of 0.05 percent per annum – that is, it reached only one-thirtieth of its current level.12 Differences in productivity associated with the culture of work – for example, that described by Jacob in his comparison of Polish peasants to English agricultural labourers – were most likely real, though not measurable (especially by historians today). However, they translated into only minor differences in living standards. If, for example, in the seventeenth century productivity on the Vistula was lower than on the Thames, in practice this meant only that the Polish lands were much less densely populated than those in England.13 The fact that Jacob was so deeply moved by what he saw indicated that he had travelled from a country that was already on the road to the industrial revolution, in which real wages – although still at starvation levels from today’s point of view – had ← 12 | 13 → already risen significantly.14 They would soon begin to grow at a rate previously unimaginable.15

Although a constant increase in prosperity in the Malthusian world was impossible, differences in standards of living between different countries and eras could be considerable. Experts explain these through culturally imposed restrictions on fertility – for example, a later age of marriage in northern Europe than in southern Europe or infanticide in China (according to a universal principle: the fewer the people, the greater the prosperity). There were also differences in the culture of everyday life that cannot easily be made to fit Malthusian principles. The Romans, for example, mass-produced very cheap items for daily use, and developed an extensive trade network, which meant that these items were also available to the poor in many parts of the empire.16 The study of Roman pots may seem not a very inspiring pastime, but it says a lot about the lifestyles of their users. At excavation sites from Roman times, one can find an abundance of functional kitchenware used to prepare food; elegant tableware for display and use; and amphorae, large vessels used in the Mediterranean to transport and store wine and olive oil. An outstanding archaeologist described it thus:

Three features of Roman pottery are remarkable, and not to be found again for many centuries in the West: its excellent quality and considerable standardization; the massive quantities in which it was produced; and its widespread diffusion, not only geographically (sometimes being transported over many hundreds of miles), but also socially (so it reached not just the rich, but also the poor). In the areas of the Roman world that I know best, central and northern Italy, after the end of the Roman world, this level of sophistication is not seen again until perhaps the fourteenth century, some 800 years later. […] When people today are shown a very ordinary Roman pot, and, in particular, are allowed to handle it, they often comment on how ‘modern’ it looks and feels, and need to be convinced of its true age.17

This organised world of mass production disappeared along with the invasion of the barbarians; starting from the fifth century, the items used in everyday life in Europe became more primitive, and evidence provided by archaeologists shows ← 13 | 14 → the gradual dying off of trade routes from ancient times. Meaningful evidence is also provided by Monte Testaccio in Rome, a fifty-metre high heap of amphorae shards from the second and third century A.D. According to estimates by archaeologists, the 53 million amphorae contained there are the remnants of 6 billion litres of oil imported to the imperial capital. Goods were also imported in the sixth and seventh centuries, but the quantities were minimal. “This was a society with similarities to our own—moving goods on a gigantic scale, manufacturing high-quality containers to do so, and occasionally, as here, even discarding them on delivery. Like us, the Romans enjoy the dubious distinction of creating a mountain of good-quality rubbish”, archaeologist Bryan Ward-Perkins wrote about ancient Rome.18 Researchers studying arctic ice have also recorded high levels of air pollution, produced by the smelting of lead and copper in Roman times, which immediately after the fall of the empire dropped to levels recorded in prehistoric times. These metals were not produced again on a scale similar to that in Roman times until the sixteenth and seventeenth centuries.19

Despite the well-developed organization of production and trade, and the mass production of items for daily use, Roman society continued to operate under the rules of the Malthusian economy.20 Historical estimates of per capita income show a decline between the fall of the Empire and the late Middle Ages, associated with the collapse of the imperial economic system and a decline in labour productivity.21 The population decreased even more drastically: in comparison with the days of ancient Rome, the European continent in the early Middle Ages was not only rural but empty. Since productivity had fallen, population density had declined, as well.

The paradoxes of the Malthusian economy mean that economic historians today can write seriously about what a great boon the Black Death was for Europe – the plague epidemic in 1346–1347 killed, according to various estimates, ← 14 | 15 → between a third and half of the inhabitants of the West.22 The population loss resulted in a rapid increase in wages and in the standard of living – which lasted until the population increased once again (in the case of England, this occurred only around the year 1600; the population had dropped from six to less than three million in the fifteenth century, and had reached seven million in the times of Queen Elizabeth).23 While some died because of war or plague, the income of the remaining population increased, because in practice this meant that agricultural production per capita was higher – and that was what really mattered in an economy in which more than 90 percent of the people lived in the countryside, and 70 percent made their living directly from farming.

Some historians, such as Nico Voigtländer, even believe that the plague provided the first impetus for the accumulation of capital. Since the number of people who could work the land had declined, it was necessary to come up with ways to take better advantage of those who were available, for example, by investing in improved agricultural technologies – capital had to compensate for the deficit in labour. This is only a step from the idea that the plague was one of the root causes of the Industrial Revolution, which first occurred in those areas most affected by the epidemic four hundred years earlier.24 Even the jump in income caused by the Black Death looks today like a tiny twitch of the seismograph compared to that brought about by the industrial revolution.

Yet Malthus still has something to say about the modern world. As modern-day economists have estimated, the poorest countries in the world – despite international aid, low-cost transport enabling the delivery of food to any place on earth, and giant food surpluses in rich countries – we are still unable to break out of the closed circle that he described.25 ← 15 | 16 →

In around 1640, there was probably only one place on Earth – England – where the rules described by Malthus were beginning no longer to hold true.26 This breakthrough occurred slowly. By 1800, the population had grown from six to seven million to ten million, while the standard of living had not fallen, but risen (though only very slightly: average income had increased by 0.2 percent annually, or 10 percent per generation). At the beginning of the nineteenth century, the income of the working class in England was twice as high as in 1250, and three times higher than in 1600, but only slightly higher than in the decades following the Black Death.

2. Wealth and poverty in the past

On April 20, 1697, an advertisement appeared in the newspaper Amsterdamsche Courant for a new gadget, the Zak-aardebol, or pocket globe. As advertised by its manufacturers, cartographers Abraham van Ceulen and Gerrit Drogenham, it was “very appropriate for all devotees of astronomy and other sciences, as well as [all those] who would customarily carry a pocket watch with them.” The globe was five centimetres long in diameter and was sold in a decorative leather case, in the centre of which was a tastefully and stylishly painted sky with constellations of stars – it was, according to one modern-day historian, one of the earliest geocentric representations of the heavens.27

Not without reason, the producers were looking for customers among the devotees of pocket watches (and therefore gadget lovers: like their globe, watches were then a technical novelty). The mini-globe’s ability to indicate its owner’s position in space was meant, according to its producers, to supplement a watch’s ability to indicate the time. It did not catch on, perhaps because – in contrast to the very practical watch – it remained an expensive toy. (It is known that Tsar Peter the Great bought one while visiting Holland, but he did not have to concern ← 16 | 17 → himself with costs). At the end of the eighteenth century, European watchmakers were producing 400,000 pocket watches per year. Although they became cheaper as production methods improved, they remained expensive from today’s point of view: they cost an artisan the equivalent of several weeks’ work, and served the owner – according to various estimates – for an average of four to twelve years, and thus, not very long. Nevertheless, people bought them willingly. In 1780, 70 percent of the servants in Paris had them, as did one in three workers, traders and artisans. Watches were bought during good times by many families who had nothing to put into the pot in harder times when prices were high.

The history of the zak-aardebol and pocket watches shows how difficult it is to compare the standard of living in the past with that of today. Economists can estimate per capita income and write that GDP per capita in Africa today is lower than in Western Europe in 1820 or in England in 1700, but the cognitive value of such rankings is limited: both the structure of expenses and the goods you could buy with this money vary too greatly.28

This seems obvious, but it is worth recalling for two reasons. First, it is easy to forget about the distance that separates us from the past, even the most recent past. Secondly, even today, comparisons between the standard of living in the poorest and richest countries are difficult for very similar reasons. Differences in price structures and available goods – whether these are between the past and present, or between developed and developing countries – mean that simple statements of income are misleading. Hiring a servant costs tens of dollars per month in Nairobi, a few hundred in Rio de Janeiro, and several thousand in London. These differences have grown sharper since the era of the industrial revolution. Since the industrial revolution, the disparities have increased between the rich industrial countries and the poorest countries of Africa and Asia, where some goods – for example, expert medical care – are very expensive or unavailable, while others, particularly services that do not require qualifications, such as, the work of a janitor, are cheap. Of course, Africans and Asians today do not live in medieval conditions: in 2009, every second Nigerian had a cell phone, even though his income estimated in U.S. dollars was significantly lower than that of a British citizen two hundred years ago. Nor can the difference in living standards between Lagos and London today be easily converted into monetary terms – just like the differences between Warsaw during the Gomulka era and Paris during the times of Pompidou. ← 17 | 18 →

A significant part of this difference can be reduced to technology. This is how the apartment of an intellectual in Warsaw was described two hundred years ago in one diary:

What does the homeowner lack? A telephone, automobile, electric lighting, central heating, air conditioning, gas cooker, washing machine, refrigerator, dishwasher, private bathroom with hot running water and a toilet – not to mention a computer, Internet access, mobile phone, television and a music system. This list could easily be extended. Many modern comforts were unavailable at any price; others, such as in-home music on demand, could be afforded by only a few (the emperor of Austria had his own personal opera).30 In times when doing the laundry required a day of tiring labour, maintaining a life of relative comfort demanded hard work from full-time domestic workers. The level of medical care was incomparable to that of today.

It is also difficult to compare differences in the lifestyles of the rich and the poor in the past, and not only due to a lack of data. Although we know that until the mid-nineteenth century, the average worker spent 80 percent of his income on food – roughly the same as in the Middle Ages – the consumption patterns of those even slightly wealthier underwent a much greater change. Modern-day research shows slow but steady economic growth in Europe in the two centuries leading up to the Industrial Revolution: in Western Europe the proportion of city-dwellers among the population increased from 5.6 percent in 1500 to 10 percent in 1800.31 ← 18 | 19 →

Since the beginning of the modern era, more and more exotic spices, coffee and tea had been consumed in wealthier homes. In Western Europe, beginning in the seventeenth century, even in poor homes, the number of everyday household objects rapidly increased. According to a study conducted on wills and judicial acts, in one rural province in the Netherlands, between 1630 and 1670, the average household owned 241 items (divided in 47 categories); the average for the period 1700–1795 was 538 items (divided into 71 categories).32 This is telling testimony of a revolution in consumption. Studies in England and France have yielded similar results. In these countries, the increase mainly represents imported and luxury goods: ornamented furniture (bureaus, commodes, desks, stylish sofas and chairs), luxurious tableware (often made from Chinese porcelain), clocks, paintings, curtains, and, of course, coffee and tea services. At the end of the eighteenth century, all of these items were in 80 percent of Dutch homes, although according to the estimates of economists from that century, the average earnings in the Netherlands had either decreased or remained flat. (This is further proof that statistics on income do not tell the whole story.)

Yet, a different story of how Europeans freed themselves from the Malthusian trap is told by studies on their height over the centuries. The average change in height reflects both the quality of nutrition and the degree of social inequality: in simple terms, it can be assumed that the greater the disparity in living standards between the rich and the poor, the greater the differences in height among the people of a given country and time.33 The average inhabitant of the Roman Empire measured about 169–170 cm in height. The barbarians who settled on the former Roman lands in the fifth and sixth centuries were markedly taller, which experts attribute to a diet richer in protein and the fact that the barbarians did not live in unhealthy cities – as well as, perhaps, to certain genetic differences and less distinct social differences among the Germanic tribes. Again, this information still does not tell everything about the standard of living: “A Northern barbarian living in the sixth century was tall and certainly lived relatively long, […] but in the event that he was amusement-loving and fond of consumer goods, he would most probably have preferred to live in second century Rome, write the authors of one recent study.”34 By the early seventh century, however, the Germans who had ← 19 | 20 → settled on the former Roman territories were shorter than the Romans – shorter even than those born during the collapse of the empire.

Judging from the average height of Europeans, the quality of their food varied little between 1000 and 1800, even if their lifestyle and the availability of consumer goods had changed significantly. According to the rules of the Malthusian economy, the greater the population density, the poorer the quality of nutrition, and thus, the lower the average height; these variations are noticeable, but they are not large. However, the data show a clear difference in the quality of nutrition in modern times: while almost all the Romans examined were of roughly the same height (which seems to contradict the view that there were enormous social differences in Rome), height differences among men in modern times reached 6 cm, which according to specialists reflects growing social distances and progressive urbanization, as the sanitation and general quality of nutrition in cities were terrible.35 The workers living in British industrial centres began to grow progressively taller only in the latter half of the nineteenth century, when the Industrial Revolution was already at least eighty years old.36

A decline in living standards was accompanying economic expansion on the other end of the continent, in Russia, as well, though for different reasons. New studies of lists of Russian recruits from the eighteenth century show the effects of a different but likewise interesting mechanism: in the eighteenth century – a period of unprecedented economic growth and military power in Russia – the average height of a twenty-year-old decreased by 5 cm. The economy grew, but all the benefits from increased productivity went to the state; empire-building necessitated an increase in taxes and a reduction in the standard of living of ordinary people. In this respect, Stalin was to be heir to a Russian tradition: in the eighteenth century, the shortest generation of recruits were born in the times of Peter the Great and Catherine the Great.37 ← 20 | 21 →

In the story of ideas about accelerated development after 1943, this distant historical background is important for two reasons. First of all, it shows that the relationship between expansion of the economy and production and a rise in living standards is by no means directly proportional: in the past, there have been many examples of countries where economic growth has been coupled with a decrease in the average standard of living. Secondly, it appears to show that the only path from backwardness to development (or from a “traditional” to “modern” society) is through blood, sweat and tears. This was well known long before Marx, and the authors of the concept of accelerated development after World War II also seemed well aware of this issue, although they did not have at their disposal such precise historical research as is available today.38 Widely cited was a well-known article published in 1955 by future Nobel laureate Simon Kuznets, a pioneer in research on national income, which showed a decline in average earnings in the first phase of industrialization.39 This observation had political consequences. It was easier to justify a decline in living standards during periods of state-led planned industrialization. If even England had to pass through a purgatory of working-class indigence on the way to achieving industrial might and bourgeois prosperity, then perhaps we were dealing with a regular pattern in economic development. There was simply no other path. This was an important argument, which – as we shall see – continues to return in various forms, providing justification for the growing social disparities in China and other rapidly developing countries of the developing world.

The purgatory through which England passed looks today more like a hell – an inescapable abyss. For many decades, up until the mid-nineteenth century, the wages of workers in British cities grew only slightly, while the wages of agricultural workers fell.40 Even the best-paid workers in most industries, the employees of some textile factories, for example, had to resign themselves to a drastic decline in living standards following a move from the countryside to the city. The mortality rate in cities was extremely high: in times of epidemics, which recurred regularly every few years, diseases such as typhoid and cholera were responsible for nearly every second death. In London, even in years in which there was no such pestilence, at least a third of all deaths were caused by tuberculosis. An infant born in ← 21 | 22 → the 1840s in Liverpool to parents from the upper or middle classes – a businessman, lawyer or doctor – could expect to live to the age of 35; the child of a small merchant or a shopkeeper, to age 22; the child of a mechanic or worker, to age 15, due to a very high rate of mortality not only in childhood, but at every stage of life. (In Liverpool, most workers lived in cellars. In the 1830s, as one journalist of that day noted without surprise, the “fluid matter of the court privies” flowed into several such cellars, carving out a one-metre deep channel under one family’s bed.) In addition to descriptions from the period, a range of data confirms the dreadful living conditions in cities at that time: for example, the average height of British-born recruits during this period was shorter by 5 cm than that of previous and later generations (they began to grow taller only after 1870).

In the eyes of first-hand observers, the large industrial cities of England in the first half of the nineteenth century were a chaotic maze of brothels, gin shops, beer halls, thieves’ dens, dirty courtyards, communal bathrooms, puddles, piles of garbage, cheap, crowded working-class housing made of red brick and badly lit, dangerous streets, where you could run across wild dogs, rats and – posing the greatest threat to pedestrians – bands of homeless children. Cities were noisy, dirty, and smoky; full of flies and dust in the summer and mud in the autumn and spring; there was no way to protect oneself from the ever-present fleas and lice. Even the cemeteries were overcrowded: the Church of England blocked plans to build large municipal cemeteries outside the city because of the money it earned from burials.41 Crime rose to record levels, and the police were hardly visible outside the capital. Commentators of the time wrung their hands over the prevalence of sexual promiscuity and alcoholism among the working class. When in 1830 the British Parliament allowed beer to be sold without a permit in the hope that this would reduce the consumption of whiskey and spirits, within six months 24,000 new taverns and pubs opened in urban areas. Revolts and riots were the order of the day, and the social order seemed perpetually fragile.42 Conflicts between rich and poor were brutal, and among the propertied classes, it was a commonly-held view that poverty motivated people to work and entrepreneurship, and thus had a beneficial moral influence on workers.43 Child labour became a source of moral protest quite late – even at the end of the eighteenth century, many enlightened authors still believed that children should ← 22 | 23 → work.44 According to recent studies, it is very likely that more children worked during the Industrial Revolution than before or after it.45

Peter Gaskell, author of one of the most famous books published then on the situation of the working poor, compared the appearance of factory workers with that of their parents, “ruddy and healthy” farm workers. A wide gulf can clearly be seen between an idealized image of merry rural life and that of workers vegetating in dark factories. There was a general longing for an alleged lost rural idyll.46 “Any man who has stood at twelve o’clock at the single narrow door-way, which serves as the place of exit for the hands employed in the great cotton-mills, must acknowledge, that an uglier set of men and women […] would be impossible to congregate,” Gaskell writes. He also writes at length about their short, frail build, thin hair, and unhealthy pale complexion, and even about the prevalence of flatfoot and a lurching gait; he saw their uncertain, slouching manner of walking as a sign of anxiety and feelings of rejection.47 He viewed poor living conditions as the source of what he described as widespread and, worse yet, unabashed, drunkenness and debauchery: a crowded home “in which all the decencies and moral observances of domestic life are constantly violated, reduces its inmates to a condition in nowise elevated above that of the savage.” The profanity-filled language spoken by working-class families filled him with dread. Progress, viewed up close, did not look very appealing, and, in any case, it was clear that the social price for it was extremely high.

Even if industrialization in the long term also benefitted workers, according to historian Boyd Hilton, in its early stage, it was a demographic and social disaster.48 Machines were expensive, so they needed to have as little downtime as possible in order to yield a profit. In many industries, factories operated from six in the morning until eight at night, six days a week, with short breaks for meals. The tempo of work, set by factory bells and measured by the clock, was totally unlike the rhythm of field work, regulated by nature; making the shift from one to the other was not easy.49 ← 23 | 24 →

The more advanced the technology, the more outrageous the contrast seemed to many observers between the technical capabilities of industrial society and the poverty that stubbornly refused to disappear from social life. Gaskell wrote about workers that:

This voice of moral outrage is noteworthy, even though it concerns the internal affairs of the West, which are not the topic of this book.51 The same argument, however, returned in the twentieth century (and continues to return) in discussions on development in the least developed countries, and in recent debates on development aid. In its modern incarnation, it claims that the situation today, in which a small fraction of the world enjoys a level of wealth and technological advancement that was until recently unimaginable, is a moral scandal, something that no compassionate individual could find acceptable.

In the times of the industrial revolution, poverty ceased to be a painful, manifest reality to which people had to reconcile themselves because there were no technical means for eliminating even its most drastic symptoms from social life. It became – first in the West, and after 1945, throughout the world – a disease, a moral and political problem. As a political problem, it demanded a political solution.52 ← 24 | 25 →

3. Empire and its colonies

The history of the industrial revolution in England is important to this book’s considerations for another reason: in its civilizational success – because, despite the horrors of Manchester and Liverpool, breaking out of the Malthusian “perpetual struggle for room and food”53 was a civilizational success – perhaps England was just the first on this road to development, with other societies to follow naturally in its footsteps. If this is true, the best thing a good government in a poor country can do is to follow the advice of Adam Smith: create stable, impartial institutions, and patiently await the inevitable progress of civilization. It will surely come.

But if we consider the transformation of England to have been for some reason exceptional, then the government of a country in the developing world aspiring to modernization and prosperity, has a much wider field of action. That government then has two roads before it, both of which require the wide-scale use of costly social engineering. It should either create a situation based, at least in part, on local conditions, but modelled on countries that have been successful, or it should it take the matter of modernization and industrialization into its own hands, treating England’s success as, at best, an inspiration (or a historical curiosity, since the world has changed, and history does not repeat itself). The position one takes in this matter generally coincides with his or her answer to a question that is fundamental to telling the story of theories of accelerated development: is a spontaneous escape from backwardness possible?

A review of the literature on the origins of the British industrial revolution would be longer than this book; moreover, this is not our primary concern. It is worth noting, however, the basic points in this dispute as it looks today, because attempts made in the Third World to “leap into modernity” cannot be understood without this historical context.

A textbook narrative of the origins of industry in England begins in the seventeenth century, when a rapidly growing middle class and the aristocracy associated with it became strong enough to defeat their ruler on the battlefield.54 During the Civil War in the 1640s and the glorious revolution of 1688, there was a change in England’s political institutions, with the monarchy losing a significant share of its power to parliament. The victors carried out changes in the country’s economic institutions that benefitted them – above all, stronger guarantees on property ← 25 | 26 → rights for owners of land and capital, to encourage them to invest. In the eighteenth century, the English state guaranteed (perhaps not fully, but more than others) the enforcement of contracts and public order, refrained from imposing high taxes, invested in the country’s infrastructure, and removed social barriers that prevented talented individuals from all classes from achieving success in business and social advancement (which does not mean that it was not easier for some than for others). The result was easy to predict; this led to a rise in private investment in factory buildings and equipment (and later in railroads and telegraph lines) and in “human capital” (i.e., education), and to the development of new technologies that increased productivity. The culmination of the expansion that this sparked was the industrial revolution. “That’s how it was” – this is how Daron Acemoglu, one of today’s most prominent economists specializing in economic development, summed up this story.55 You can place emphasis on different aspects of this story: recently, for example, historians have tended to emphasize the role of institutions – especially those responsible for protecting property rights and enforcing contracts and for defending citizens against arbitrary power. Economic growth, and especially the industrial revolution, as Daron Acemoglu and James Robinson note in a recently published book, was against the interests of the elites in many countries, and therefore they tried to prevent it. Institutions of power could either be “inclusive”, incorporating as many people as possible into the decision-making process, which promoted economic growth (because it was in the general interest); or “extractive”, that is, facilitating the acquisition of wealth by a narrow elite that was not interested in growth because it could weaken their power. From this relative perspective (compared to other European monarchies), the inclusiveness of England’s institutions was critical to its success.56

Other historians, such as Charles I. Jones, underscore the importance of institutions in protecting inventors, especially patent law, which guaranteed they would derive profits from their work.57 Others write about the role of capital markets, which developed in the eighteenth century, first in Amsterdam and then in London, which facilitated the financing of investments – primarily trade ← 26 | 27 → and war, but later industry, as well.58 Many authors find the roots of Britain’s growth in the Middle Ages, for example, in weaker social barriers (in comparison to those in countries on the continent) separating the aristocracy and the middle class, both of whom, generally without conflict, profited from overseas trading. Scientific rationalism, capital markets, property rights, the idea of economic freedom (invented in the eighteenth century), lower barriers between the classes than existed on the continent: all of these could have contributed to Britain’s success.59 These, in turn, were accompanied by new ideas about the sources of wealth, and the nature and role of money: the West changed its thinking about usury, and began to venerate capital.60 Technological advances and investments in education brought rapid – compared to other eras – increases in productivity in Europe, which slowly began spreading beyond its borders.61 The eminent economic historian Joel Mokyr believes that Enlightenment rationalism was of the greatest importance, because it led the British to make use of recent scientific discoveries as a means of achieving greater prosperity, and encouraged them to make new finds.62

Yet, perhaps the “English miracle” was about something completely different? There is no lack of alternative hypotheses. “By 1200 societies such as England already had all the institutional prerequisites for economic growth emphasized today by the World Bank and the International Monetary Fund. These were indeed societies more highly incentivized than modern high-income economies: medieval citizens had more to gain from work and investment than their modern counterparts did. […] The institutions necessary for growth existed long before growth itself began,” says the author of one of the most talked-about recent ← 27 | 28 → books on England’s economic success, historian Gregory Clark.63 According to his interpretation, the most important factors were work ethic and demography, in that order. In the Middle Ages, he argues, the children of the upper classes had a greater chance of survival than the children of peasants; this led to a steady “migration downward” of the habits and cultural norms prevalent in the upper classes. Peasants “from time immemorial” had been lazy and disinclined to work (they had little to gain); the children of parents from the upper strata of society, even if they did not have the social position of their parents, inherited good habits concerning work, saving and investing. Important causal factors behind Britain’s leading role in the industrial revolution should therefore be sought in the British system of inheritance, in which the eldest male heir received the entire estate. This accelerated the social degradation of his brothers and sisters, and thus disseminated among the poor masses attitudes conducive to economic development. Although studies by the same author on wages in England have been highly praised and widely quoted (here, as well), this Darwinian theory has not gained many followers.64

Robert Fogel, another noted historian, considers the most important cause of industrialization to have been a change in diet.65 Researchers of the industrial revolution agree that in the years 1760–1830 the workday for a citizen of the West was lengthened by an average of at least one-quarter. On the basis of years of detailed research on menus in France and England, the historian came to the conclusion that this success was possible thanks to better nutrition – people earlier were simply too weak and malnourished to work efficiently. The bottom 20 percent of the population was simply not suitable for factory work – food provided them with “on average, only enough energy for a few hours of slow walking.” That changed in the mid-eighteenth century, when agricultural productivity in the West suddenly increased, and colonial trade led to a fall in the price of sugar and other commodities (we should note that this view seems hard to reconcile with knowledge about the decline in height among people at that time, which seems to suggest a deterioration in the quality of their diet; Fogel attributes this to urbanization). Another historian, Nathan Nunn, using sophisticated statistical procedures, calculated the impact of the production of potatoes, ← 28 | 29 → which started to become widely available in the West in the eighteenth century, on urbanization, and consequently, on industrialization (workers in the city, even if they were malnourished, had to have something to eat).66 He concluded that the potato led to a 12 percent rise in the population in the West, and a 47 percent increase in the urban population, and therefore, that the potato contributed significantly to the industrial revolution.

Longer working hours could have also resulted, as proposed by yet another famous scholar, Jan de Vries, in a change in consumption patterns in the West.67 A growing handicraft sector was supplying the market with an expanding assortment of more and less necessary items (such as the zak-aardebol). De Vries argues that the desire to own such goods prompted first the Dutch and English, and then the Belgians, French and Germans, to work longer and more efficiently. This yielded a prototype of today’s consumer society, in which manufacturers use fashion and advertising to create needs in their customers: spiralling growth in consumption fuelled economic growth. Neither Marx, who attributed changes in work culture to the demands of the factory’s production rhythm (“the needs of capital”) and saw them as an objectification of work and the worker, nor Weber, who saw the source of this new diligence in Protestantism, were correct, according to de Vries, because: it was really about consumption. “Did people who valued leisure and autonomy find themselves forced to work harder and longer forced to abandon an ancient material culture with regret? Or did they actively participate – in their own messy, inefficient ways – in the pursuit of goals of their own that helped bring about something not fully foreseen, a new sort of economy and society?” de Vries asks.68 The answer to this question is of importance to our story because many plans for dynamic development created in the twentieth century assumed a reduction – at least in theory, temporary – in private consumption (we will return to this). Changes in work culture in modern times, however, were a fact and, in the general opinion of specialists, led to the creation of modern industrial society, first in England and then in the West.

All of these explanations assume, however, the uniqueness of England (or more broadly of the West), regardless of whether a fundamental role is attributed to religion, politics or geography. It was the unique availability of coal in the British Isles that played a decisive role, says another prominent specialist, Robert C. Allen, in ← 29 | 30 → a recently published book.69 Colonial trade in the eighteenth century in England, helped make earnings there the highest in the world; high earnings combined with “the cheapest energy in the world” sparked demand for machines, that is, technology that was energy- and capital-intensive, and which required the employment of a smaller number of expensive workers. This geo-political difference between England and the rest of the world that provided the motivation for technological advancement was fraught with consequences and shaped the lowest rungs of economic life. Allen describes the main difference in the construction of kilns in China and in England: the English kilns were cheap to build, but required large amounts of fuel and a small number of employees. The Chinese were much more complex, expensive to build and required the employment of a much larger number of people. However, they had the advantage that they wasted less energy than the English ones, because in China energy was much more expensive. In England, it was simply not profitable to build energy-efficient stoves.

Different cost calculations costs were among the key reasons for the very slow adoption abroad of English industrial inventions. In the 1860s, Englishman James Hargreaves invented a new spinning machine; “Spinning Jenny” brought huge gains in efficiency to British industry. In 1771 the first models were exported to France. However, they were installed there only in large, state-supported factories. Twenty years later, in England there were 20,000 such spinners, while in France, only 900. Why? Allen writes that in France, human labour was cheaper and energy more expensive, and therefore, the British inventions were not profitable there. A smelter modelled on a British unit, built at the request of the French government, met with a similar fate. The French did not lack raw materials or capital; they spent large sums of money hiring the best, most experienced British engineers. Production, however, was not profitable – despite the lower earnings of the workers – and the production plants failed. At the same time, in England ever-newer technical innovations were being introduced at a pace never before seen in history.70 France began to catch up with Britain effectively only in the latter half of the nineteenth century.71 ← 30 | 31 →

Similar situations will reappear repeatedly in this book. The engineers of industrial policy in countries whose economies lagged behind often learned the hard way that importing technology and offering lower – sometime several times lower – labour costs was not sufficient to build profitable industries (not to mention ones that could compete on global markets with firms from developed countries). Other costs – transport, energy, capital, differences in labour productivity – could easily compensate for the difference in the “price of a worker”. This lesson was learned by the authors of industrial policies in countries as diverse as the Kingdom of Poland in the days of prince Drucki-Lubecki, the Polish People’s Republic under Edward Gierek, and Ghana during the times of Kwame Nkrumah.

Allen argues that high wages in the cities of England were a product of colonial trade, and thus colonies played an enormous, albeit indirect, role in the British “leap into modernity”. We need to look more closely at this piece of the puzzle of the industrial revolution: it concerns a question that will return repeatedly – the moral responsibility of the West for its civilizational success. For if the wealth and industry of the West were built on slave labour and the domination of foreign peoples, this means that its civilization as a whole is morally tainted at its roots. The West has in this case an important and quite practical commitment to those on whose backs it climbed to build its power and prosperity. Moreover, in such a situation, the West’s success is not only impossible to emulate – because times have changed – but that it should not even be considered because it was attained by means that are unacceptable from a moral point of view. For this reason, countries that remain under-developed today – such a conclusion often flows from this line of reasoning – should seek their own path to development, one other than that taken by the West, at most graciously offering to accept its assistance; this is, after all, not really assistance, but redress for past wrongs.

Until at least the 1960s, the most widespread view among western (non-Marxist) historians was that, as historian François Crouzet put it, “the role of the ‘periphery’ was peripheral.”72 To the question “Why are the rich countries so rich and the poor countries so poor?”, the answer usually given was summed up by another historian as follows: “Europeans were smarter, better organized, harder working; the others were ignorant, arrogant, lazy, backward, superstitious” In the 1960s, a different answer to the same question began to appear more often: “Europeans, they say, were aggressive, ruthless, greedy, unscrupulous, ← 31 | 32 → hypocritical […] and willing to exploit others; they also had favourable geographical conditions.73

The thesis that the capital being invested in English factories derived largely from the slave trade was formulated clearly and unequivocally by economist Eric Williams in his book Capitalism and Slavery, published in 1944, though in Britain not until 1964. It was not without reason that its publication was delayed in the UK; nevertheless, it still caused a scandal: the “Williams thesis”, as it was called, became an issue of hot debate. Although Williams earned his doctorate in history at Oxford, he was black, and, in addition, came from Trinidad, a Caribbean island with a long history of slave labour; in 1956 he also became the Prime Minister of Trinidad and Tobago, and therefore a politician, which did not arouse confidence among academics; in addition, his last book, written in the 1960s, was a long indictment of the greatest nineteenth-century British historians, accusing them of being ideologists of imperialism. His emotional language also did not earn him sympathy among scholars, especially those in Britain, many of whom had been raised in the Victorian faith in the beneficial effects of the liberal empire’s reign over conquered peoples: “Negroes therefore were stolen in Africa to work the lands stolen from the Indians in America” – this sentence is a good example of his style.74

Among specialists, it was widely accepted at the time that for many European countries, their colonies had been an unprofitable enterprise. Spain and Portugal in the eighteenth century grew poorer as a result of their colonial empires, due to spending on wars overseas – which did not generate the revenues anticipated – and actually contributed significantly to the bankruptcy of France in the period preceding the revolution. Only the United Kingdom, the most aggressive and most efficient of the imperial powers, managed to turn a profit from its colonies, though in the end, these sums were not as large as previously thought. It has also been calculated that the slave trade was not extremely profitable. Revenue from this business was highly unstable, and the average return on capital did not exceed 10 percent per annum, which was only slightly higher than that which could be earned from other, safer investments.

Yet, how much – in hard currency – did England earn from this trade? Critics quickly pointed out to Williams that he relied heavily on anecdote: he cited examples of individuals or families linked to the slave trade, who later invested ← 32 | 33 → capital in industry.75 Polemicists reached for statistically grounded arguments, which revealed that profits from the slave trade accounted for only a small part of Britain’s national income; it therefore did not affect the way in which the United Kingdom marched into modernity. According to one such estimate, the slave trade in 1770 accounted for 0.54 percent of British GDP, and 7.8 percent of investment (while trade and industry comprised 38.9 percent). In 1700 the then well-known economist Malachy Postlethwayt called the slave trade “an inexhaustible source of wealth.”76

In an attempt to disprove the “Williams thesis”, another contemporary author, H.V. Bowen, came to the conclusion that income from colonial trade (including the slave trade) from 1784 to 1786 amounted to no more than 5.66 million pounds. According to his estimates, during that same period, 10.3 million pounds were invested in the overall British economy (and Britain’s GDP amounted to 140–150 million pounds). A sum equal to half of total capital investment was thus earned from the colonial trade! But not only slavery generated income: the revenues of the East India Company in Bengal from duties, taxes and trade in the eighteenth century totalled from 2 to 4 million pounds per year, though, of course, the net profit was much lower.77

Nevertheless, Patrick O’Brien, who calculated the profits derived from the slave trade, found that if slavery had hypothetically been abolished by the British in 1607, the resulting decline in real income would not have greatly impacted the level of wealth and income in Western Europe in 1807. He adds, however, that the decline in consumption would certainly have been greater than the drop in production.78 Discourse about the slave trade in the 1970s and 1980s was directly tied to the popular world-system theory expounded by Immanuel Wallerstein, ← 33 | 34 → Andre Gunder Frank and Samir Amin (they are even explicitly mentioned in Obrien’s article). It is not hard to guess the reason for interest in these technical debates and – if I may say so – their ideological stakes. If the prosperity of the West in the past depended on the exploitation of foreign peoples, in accordance with the thesis of theorists of the world systems, then a necessary condition for wealth and power of the civilizational centre is the permanent underdevelopment of the periphery.

It is also possible, as claimed by some contemporary authors, that the slave trade contributed to the British “leap into modernity” in an indirect but very important way.79 New World plantations provided cheap cotton to factories in England. England then exported its industrial products to Africa, where payment was made in slaves slated for sale in the New World, where they would work on plantations. This created the closed economic cycle of the “Atlantic Triangle”, from which not all benefited equally.80 Because the numbers of slaves working on plantations constantly diminished (the birth rate was lower than the mortality rate), the systematic import of Africans to the New World was necessary to keep the factories of Manchester running.81 Cheap cotton – which was cheap thanks to slave labour – gave British industrialists a competitive advantage over producers from the continent and the Far East. The existence of such a mechanism seems to have been confirmed in recent years by fragmentary research on changes in the prices of slaves during the eighteenth century and the structure of exports in the Caribbean; according to one study, in the crucial, initial period of the industrial revolution, up to 80 percent of exports from the Americas to Europe were produced by the work of black slaves.82

The slave trade had a devastating impact on local communities. African societies became caught up in destructive conflicts, selling captured prisoners to western traffickers.83 Mortality was high in all phases of the slave trade – from the ← 34 | 35 → moment they were caught by African brokers and transported to the coast, to the journey across the Atlantic and work on the plantation. Historians can say little about the first two legs of this journey; it is estimated that between 10 and 50 percent of the Africans captured died on the way to the coast (the longer the march, the greater the numbers who perished along the way). Statistics on mortality during transport across the Atlantic are more accurate: depending on the historical period (in the eighteenth century slaves grew steadily more expensive, so they were treated with more care) and the length of the journey, the rate ranged from 7 to 20 percent.84 The later the stage of the journey, the fewer slaves died, not only because the weakest had perished earlier, but also because, as the distance from Africa grew, they became an increasingly expensive commodity, so it was only fitting that they would receive somewhat better treatment. These are the conclusions of modern-day specialists, not merely the speculations of politically engaged intellectuals from the 1960s: through painstaking research carried out in archives around the world in the late twentieth century, historians have compiled detailed information on 34,584 slave transports between 1514 and 1866; historians estimate that this provides us today with information on more than 80 percent of all such shipments, in many cases, including the travel route, the origin of the slaves, and, of course, the mortality rate (which was meticulously recorded because settlement had to made for dead slaves; the sums involved were considerable).85 Plantation owners were incredibly rich: John Tharp from Jamaica, who died in 1805, earned revenues of 362,000 pounds annually and owned 2900 slaves.86

On Caribbean plantations, an average of 2 percent of slaves died each year. Inventories of movable assets left by planters indicate that the rest suffered from ill health as a result of exhausting work and malnutrition. In the register of slaves from plantations belonging to the Beckford estate in Jamaica, drawn up at the end of the eighteenth century, 188 of 604 young (under forty) women were described as unfit to work; the others were usually described as “weak” or “unhealthy”. Slaves also stubbornly refused to procreate. In 1780, on one plantation belonging to the same owner, only 19 live newborns were brought into the world ← 35 | 36 → by the 274 young women working there.87 The owners tried various methods to increase the birth rate among slaves; one, for example, offered a silver dollar to every mother whose baby survived its first week of life, but the results were meagre.88 Plantation owners and their agents complained that women would prolong the nursing period as long as possible in order to avoid becoming pregnant, and when this failed, they used home remedies to cause their foetus to abort.

Even if the industrial revolution could have taken place without slave labour, there are good reasons to believe that slavery had a significant impact on the subsequent fate of both the countries that exported slaves and those in which plantations were established, leaving behind a social and economic structure that perpetuated backwardness. “Institutions for exploitation are hard to change once they arise” – this is the painful lesson learned by specialists in development after World War II, as summed up by economist and historian Nathan Nunn.89 Already in 1526, Congo’s first Christian king, Alfonso I, complained in letters to Lisbon that “each day the traders are kidnapping our people,” and that “our land is entirely depopulated”.90

The harms were much greater than simple demographic losses (11 to 14 million Africans were transported to America). The slave trade favoured the disintegration of indigenous African countries and the degeneration of local social institutions: the initial suppliers of slaves were usually local rulers. The demand for slaves led to devastating wars and hostility between tribes that was remembered by later generations. When kings did not have other people’s subjects to sell, they often invented creative ways to sell their own. One Western traveller described a system of the justice invented by the chief of the Kassanga tribe in what is now Guinea-Bissau in West Africa. The king ordered people accused of crimes to undergo the “red water ordeal”. They were forced to drink a poisonous red liquid. If they wretch threw up, they were considered guilty and sold into slavery. If they did not vomit, they usually died of poisoning. The king then took control of the deceased’s property and sold his family into slavery; the ruler therefore benefited regardless of the outcome of the ordeal.91

The system of slave labour also shaped the institutions of the countries in which plantations operated. It left them with the legacy of an economy specialized in ← 36 | 37 → the export of only a few agricultural products, such as cocoa, sugar and tobacco. After independence, long after the abolition of slavery, a small elite ruled in these countries over masses living in misery with whom they shared little or nothing (starting with the colour of their skin) – certainly not any sense of a common destiny. The interests of both groups were often divergent, and the elite saw no reason to invest in improving the quality of life, which only fed feelings of fear, superiority and contempt.

Although the legacy of colonial institutions was not the same everywhere, and its balance-sheet is not clear (we will return to this issue), the verdict of historians today is merciless: countries drawn into the closed circle of the slave economy were condemned to a fate on the periphery long before people they started to think about emancipation.92

4. Slaves to barbaric superstitions

What is probably the most interesting question in the history of the “great divergence” (as one contemporary historian has somewhat awkwardly labelled it) concerns neither Africa nor the Caribbean, but rather China and India, and to a lesser extent the Arab world: Why did Europe overtake these ancient civilizations on the road to the industrial revolution?93

Such an outcome was neither obvious nor a foregone conclusion. In the year 1000, any rational observer would have placed odds on China succeeding rather than Europe, which was still poor, peripheral, and divided into dozens (if not hundreds) of rival political bodies. When Europeans were just beginning to discover in monastic libraries remnants of the knowledge of the ancient Greeks and Romans, the Chinese were inventing paper, gunpowder and the compass, as well as introducing paper money and trading on credit. China was densely populated and had a strong, centralized state that provided stability and order, a professional administration run by personnel selected on the basis of examinations (while offices in Europe were often inherited or bought), a better network of roads, and cultural norms emphasizing the value of hard work. The relations of European travellers, beginning with Marco Polo, left no doubt: they were poor guests from the backward provinces. The first European explorers risked their ← 37 | 38 → lives and health on a quest for the riches of China and India, not in the name of disinterested geographical discoveries.

In the eighteenth century, the image in Europe of the Far East – and the Arab world – changed radically: images of wealth and power were replaced by scenes of backwardness, oriental despotism and economic stagnation. While the West was becoming rich and growing in power, China94 and India seemed – up until almost the end of the twentieth century – doomed to widespread poverty. Admiration was replaced by contempt and a sense of civilizational superiority.95

Experts tried to explain this surprising reversal by means of various theories: differences in the organization of production (contrasting dynamic capitalism in Europe with the conservative, “Asian system of production”), guarantees on property rights (they were said to be stronger in Europe, which encouraged Europeans to invest), the influence of the State (either decentralised or absolutist and enlightened in Europe, and therefore not interfering in private interests; despotic and arbitrarily imposing its will on the most trivial matters in Asia), and finally, differences in religion and “the presence of the scientific spirit” (and its alleged lack among Asians). The classic form of this theory came from Max Weber, who believed that capitalism was rooted in Protestantism, and Chinese stagnation in the Buddhist and Confucian ethics that shaped that country’s rigid institutions.96 A similar diagnosis was made in regard to India.97 Institutional explanations remain popular today: the dominant view on the source of backwardness in the Arab world points to religion, which stifles the formation of scientific rationality along the lines of that in the west, and despotism, which is not conducive to the safe conduct of business.98 The same holds true for the differences between the ← 38 | 39 → United States and Latin America and the Caribbean islands. While in 1700 per capita income in Mexico and the American colonies was similar, and Haiti was probably the richest country in the world, in 1800 the United States was already clearly in the lead: its social structure and institutions were said to account for the difference in growth rates.99 Science, property rights, medicine, a rigorous work ethic: all this was said to secure the West an advantage.100

These theories, writes Robert C. Allen, were impressive in their range, but they were based on poor quality source materials. In the case of Asia, studies carried out in recent years in China raise doubts – as we will see – about most of them.101 Generally speaking, there are two clashing trends in the literature today: one tells us to look for the sources of Europe’s exceptionality and civilizational success in an increasingly distant past, for example, in the revolution in trade during the thirteenth and fourteenth centuries, which opened the West up to the world.102 The second trend emphasizes the narrow gap dividing European technology and Asian wealth in the eighteenth century: we were more alike then than we think.

The image of Asian stagnation and backwardness appeared in modern times, and – until the successes achieved by Japan, and later, China – remained present in Europeans’ image of the East. This perception was widely held, and such diverse thinkers as Adam Smith and Karl Marx shared this view of Asia. “The difference between the money price of labour in China and in Europe is still greater than that between the money price of subsistence; because the real recompence of labour is higher in Europe than in China, the greater part of Europe being in an improving state, while China seems to be standing still”, wrote Smith in The Wealth of Nations, in which he devoted a great deal of space to explaining the reasons for Europe’s superiority.103 He noted the large difference in earnings calculated in silver: “Half an ounce of silver at Canton in China may command a greater quantity both of labour and of the necessaries and conveniences of life, than an ounce at London.”104 ← 39 | 40 → However, the Chinese could survive on lower wages, because “China is a much richer country than any part of Europe, and the difference between the price of subsistence in China and in Europe is very great.”105 Smith painted a dramatic picture of the average living conditions in China:

The accounts of all travellers, inconsistent in many other respects, agree in the low wages of labour, and in the difficulty which a labourer finds in bringing up a family in China. If by digging the ground a whole day he can get what will purchase a small quantity of rice in the evening, he is contented. The condition of artificers is, if possible, still worse. Instead of waiting indolently in their workhouses for the calls of their customers, as in Europe, they are continually running about the streets with the tools of their respective trades, offering their service, and, as it were, begging employment. The poverty of the lower ranks of people in China far surpasses that of the most beggarly nations in Europe. In the neighbourhood of Canton many hundred, it is commonly said, many thousand families have no habitation on the land, but live constantly in little fishing boats upon the rivers and canals. The subsistence which they find there is so scanty, that they are eager to fish up the nastiest garbage thrown overboard from any European ship. Any carrion, the carcase of a dead dog or cat, for example, though half putrid and stinking, is as welcome to them as the most wholesome food to the people of other countries. Marriage is encouraged in China, not by the profitableness of children, but by the liberty of destroying them. In all great towns, several are every night exposed in the street, or drowned like puppies in the water. The performance of this horrid office is even said to be the avowed business by which some people earn their subsistence.106

Turning to the economy, he admits that although China seemed to have become stuck in the doldrums on its path to riches, it did not appear to be slipping backward.

Smith attributed stagnation in China to its institutions, in particular the prohibition of free trade with foreigners, and weak guarantees on property rights, which meant that at any time and under any pretext one’s property could be confiscated by an official. The same mechanism which in the eyes of classical economics explained Europe’s wealth, also explained China’s backwardness.

Marx attributed Asian backwardness to its social structures. The real theatre of history for Marx was Europe; Asia, closed in an “Asian system of production”, remained only a static decoration. In his famous articles about India (especially his article “The British Rule in India”, published in 1853), he described Hindustan society as an atomized accumulation of villages whose fate and prosperity depend entirely on the whims of a despotic administration. This had, he added, a certain justification in geography: the need to maintain complex irrigation ← 40 | 41 → systems in Asia was conducive to the emergence of a strong, centralized government. The main reason for backwardness, however, was the structure of production. Indian villages, where the cultivation of soil was combined with cottage textile production, did not allow for the development of the modern division of labour and the rise of capitalism, which thereby halted the wheel of history. According to Marx, India was wrenched from its lethargy by British imperialism, which broke up its anachronistic social structures.

Few believed in the transformative power of capitalism more than Marx. His angry tirade, full of contempt and feelings of superiority, directed at Indian traditions, though long, is also worth remembering because these ideas of Marx, as we shall see, caused trouble later for Marxists plotting the way forward for the developing world:

Now, sickening as it must be to human feeling to witness those myriads of industrious patriarchal and inoffensive social organizations disorganized and dissolved into their units, thrown into a sea of woes, and their individual members losing at the same time their ancient form of civilization, and their hereditary means of subsistence, we must not forget that these idyllic village-communities, inoffensive though they may appear, had always been the solid foundation of Oriental despotism, that they restrained the human mind within the smallest possible compass, making it the unresisting tool of superstition, enslaving it beneath traditional rules, depriving it of all grandeur and historical energies. We must not forget the barbarian egotism which, concentrating on some miserable patch of land, had quietly witnessed the ruin of empires, the perpetration of unspeakable cruelties, the massacre of the population of large towns, with no other consideration bestowed upon them than on natural events, itself the helpless prey of any aggressor who deigned to notice it at all. We must not forget that this undignified, stagnatory, and vegetative life, that this passive sort of existence evoked on the other part, in contradistinction, wild, aimless, unbounded forces of destruction and rendered murder itself a religious rite in Hindostan. We must not forget that these little communities were contaminated by distinctions of caste and by slavery, that they subjugated man to external circumstances instead of elevating man the sovereign of circumstances, that they transformed a self-developing social state into never changing natural destiny, and thus brought about a brutalizing worship of nature, exhibiting its degradation in the fact that man, the sovereign of nature, fell down on his knees in adoration of Kanuman, the monkey, and Sabbala, the cow.107

Since British imperialism is what brought capitalism to India, it was therefore a tool for progress and – in the long run – for emancipation. It would free Indians from degrading conditions which “have subjugated man to external circumstances instead of elevating man the sovereign of circumstances.” What strikes today’s ← 41 | 42 → reader is how strongly this keen critic of capitalism believed in the civilizing power of the British empire; any past (or present) apologist of the Empire could have in good conscience signed his name to this passage, though many of them would probably have expressed it in a less straightforward manner. The British had used the Chinese and Indians, but, according to Marx, in the final analysis, this served to promote progress. Imperialism was an “unconscious tool of history”.108 Engels similarly praised French imperialism in North Africa, writing about the “barbarian state of its society”.109

Marx’s opinion about China was equally tainted by Eurocentrism. In a series of articles about the Taiping Rebellion, a social uprising that lasted 15 years and left 20 million dead, he wrote about both China itself and the insurgents in manner that was openly hostile and full of prejudices. He called China a “living fossil”, and said the Taipings were interested only in replacing one dynasty with another. According to Marx, they had no social programme; they were merely a brute force bent on destruction. He wrote that rule by the Taipings, who for years controlled a large part of China, had been more disastrous for the civilian population than the governments of the imperial bureaucracy. Although Marx saw emancipatory aspirations in virtually every European rebellion or revolution, in the case of the Taipings, he did not even look for them.110

The notion of “Asian stagnation” has it supporters to this day; the eminent contemporary historian David Landes formulates it so:

The one civilization that might have surpassed the European achievement was China. At least that is what the record seems to show. […] The specialists tell us, for example, that Chinese industry long anticipated European […] in iron manufacture, where the Chinese early learned to use coal and coke in blast furnaces for smelting iron (or so we are told) and were turning out as many as 125,000 tons of pig iron by the later eleventh century—a figure reached by Britain seven hundred years later. The mystery lies in China’s ← 42 | 43 → failure to realize its potential. One generally assumes that knowledge and know-how are cumulative; surely a superior technique, once known, will replace older methods. But Chinese industrial history offers examples of technological oblivion and regression. […] It would seem that none of the conventional explanations tells us in convincing fashion why technical progress was absent in the Chinese economy […]111

Landes ultimately arrives at the conclusion that the causes of stagnation lie in cultural norms, or, as he writes, “the larger values of society.” Restrictions on individual liberty, and the pressures imposed by customs, consensus and tradition that “passed for higher wisdom” were what slowed economic growth.112 The lower social status of women also played a role. Landes writes that women were not permitted to operate as freely within the public sphere as they did in Europe or Japan, where they often worked outside the home. These differences made it difficult, for example, to put newly developed machinery for textile production into use in Chinese factories due to a lack of manpower. The greed and the arbitrary decision-making of the bureaucracy also made it difficult to conduct business. In his explanation of the situation, Chinese historian Deng Gang also refers to cultural norms – and similar issues – but his conclusions are different: between two values, stability and progress, China chose the first. As it turned out, this was only an apparent choice because, ultimately, they achieved neither progress nor stability.113

Research conducted over the last twenty years in China has radically challenged this image. China in the seventeenth and eighteenth centuries was supposed to have developed in a very similar direction – and as quickly – as Europe; it was right on the doorstep of the industrial revolution. To prove this point, historians, among other things, calculated the calorific value of the food eaten by Chinese workers in the Yangtze River delta and the functioning of the cereal markets in southern China.114 In the eighteenth century, a Chinese agricultural worker (and his family) consumed roughly the same number of calories as a British labourer at that time – 2386 in China, compared with 2349 calories in Britain; the level of detail in this technical discussion is noteworthy (historians can write long papers on the nutritional value contained in one shi of rice and how this can be compared to a European grain-based diet). Experts ← 43 | 44 → have calculated the amount of protein in the average diet of a Chinese pauper (22 grams per day throughout the year) and come to the conclusion that they ate as well as poor Europeans at that time. This meant that the level of earnings was similar – in both England and China the poor spent 80 percent of their earnings on food. The populations were also similar in size, with some 31 million people living on the Yangtze River delta, roughly the same number as in Western Europe. Revisionist historians also claim that property rights in China were in practice protected at least as well as in Europe, and that commodity markets were at similar levels of development and integration. Agricultural productivity and the average level of education rose just as rapidly in China in the seventeenth and eighteenth centuries as in the West.

Where, then, does the source of China’s stagnation and Europe’s success lie? In comparing the economic history of China and Europe, Kenneth Pomeranz, the author of one of the most talked-about books in recent years, The Great Divergence: China, Europe, and the Making of the Modern World Economy, writes:

Left to their own fate, both China and Japan in their own time would have experienced their own industrial revolution; they were on the same road as England, they merely followed it more slowly – this is the clear message here. These studies not surprisingly were subjected to harsh critique: critics argued that wages in China may have been similar to those in Britain in terms of calories, but their lower value in silver meant that a Chinese worker could buy much less than a British one. This reflected differences in non-farm productivity that were already significant in the eighteenth century, and the fact that that the Chinese economy more closely resembled the stagnant economies of eastern and southern Europe ← 44 | 45 → than those in Britain or the Netherlands.116 Similar limitations applied to the Arab world: according to recent studies, differences in the pace of urban development were already growing in the Middle Ages, when Europe was underdeveloped and Baghdad was the capital of the world.117 Growing intolerance towards religious diversity in the Islamic world was also not conducive to development.118

However, there is greater consensus on another, perhaps more important issue: if Asian countries had any chances of avoiding the Malthusian trap, these were ruined by their contact with Europeans. The fate of India provides the most telling example of this. Up until the eighteenth century, the British imported fabric from India. Some experts believe that in some parts of the subcontinent, the beginnings of industry were already present – with competitive labour markets, productivity and wages on a level similar to those in Britain (as in the case of China, wages were much lower when converted to their calorific value calculated in silver, which is why buyers profited from exports to Europe).119

In Britain, the import of cotton fabric from India was banned in 1700 by an Act of Parliament; in 1721 even the wearing of such cloth was forbidden. In spite of the efforts of British manufacturers, there were many loopholes in these laws, which still allowed domestic producers to dominate the home market. The ban on imports was abolished only in 1774, when British industry, now equipped with the latest machinery, no longer had to fear outside competition, and the ideas of Adam Smith were winning minds among the British elite. It is also of relevance that over the course of this half century, Indian producers fell into decline. In 1701 the French market was also closed off to Asian fabrics. Similar examples, as well as the successful cases provided in the nineteenth century by Germany and the United States of using high tariffs to protect industry, were later cited by many politicians and economists from the developing world as arguments in favour of economic protectionism. ← 45 | 46 →

The collapse of Indian industry was closely connected with British domination, although this was not necessarily the result of policies consciously adopted (or at least was not their main aim). Critics of the day, such as Edmund Burke, estimated that the 400,000 pounds in taxes paid by Bengal annually placed an enormous burden on the Indian economy. To this were added the costs of a corruption and incompetent administration, whose aim was to extract as much wealth from India as possible.

Administrators in the East Indian Company frequently rotated. They had enormous power over the “natives”, to whom they did not feel in any way bound. Control was exercised from a distance; the chances of detecting corruption – small; the likelihood that someone would be punished – even smaller. Colonial administrators were also perfectly aware that they had a good chance of dying from one of a number of tropical diseases before returning to their homeland. It is thus not surprising – nor incompatible with the laws of human nature – that for risking their lives working in the Company for several years, everyone – from top to bottom – wanted to earn some extra money, fas et nefas. The Company might have been generating losses on paper, but the administrators were amassing fortunes. According to contemporary estimates, Britain exported 1.5 million pounds from Bengal per year – including official taxes, profits from its trading monopoly (which the company owned) and private income; according to one Indian historian today, this sum could have totalled as much as 9 percent of GDP, enough to have a ruinous effect on any economy.120 Indian handicrafts, or, as some historians prefer to say, nascent industries, according to other estimates in 1750 could have provided even a quarter of the world’s production of industrial products. One hundred years later, it was dying. In the modern factories that were built in India in the late nineteenth century, nearly everything was British – the capital, engineers and machines. Only the workers were locals.

5. “Our little peasant, overburdened with work”

Several years after the publication in London of William Jacob’s description of his trip through the Polish lands, with its quite unfavourable description of the customs and standard of living there, another book was published in Warsaw about the customs of the Polish people written by Łukasz Gołębiowski, one of the first Polish ethnographers. The book, The Polish People, Their Customs and Superstitions (Pol. Lud polski, jego zwyczaje i zabobony), which featured the work ← 46 | 47 → of a number of ethnographers, opened with a description of the history and customs of Polish peasants:

He who calls the state of our peasants slavery, or deems them most unhappy, or accuses our fathers or us of savagery is either mistaken or claims this only for appearances (in line with what the foreign press proclaims) […] That the clothing of the peasant seemed shabby in the eyes of a foreigner, that his food was coarse and unrefined, that his cottage, compared with those abroad, was wretched, and therefore he lived in pure misery. Local circumstances and needs caused the former to grow accustomed to the latter; he maintained his health, and in his modest cottage, virtue, vigour and happiness resided with him and his family. The very goodness of the character of the Poles made that each peasant’s Master hardly threatened him, but was more a father and guardian, who built him a cottage, gave him horses, oxen and needed allowances, gave him a measure of soil, provided him with access to the forests, the fruits of his fishing, and the mushrooms and berries he collected, and accepted as modest payment for all these benefits a mild form of serfdom and small tribute to be paid regularly. […] If the peasant found himself wanting, the Master provided assistance; when ill he found solace; he received protection from any harm that someone else or an army might inflict. […] If the Master was at all moral, and the Polish peasant possesses virtue, he can rightly boast before the eyes of the whole world: that he is bound to the faith of his fathers, faithful to his Monarchs; righteousness, nobility and honesty, it seems, he drank with his mother’s milk.121

Gołębiowski admitted, though not directly, the accuracy of foreign descriptions, whose the authors looked down at Polish backwardness. In part, the origins of his idealization of patriarchal rural life can be traced to a romantic response to the social ills brought about by progress – a response that was widespread both in the West and in Poland.122 Decades later, equally lofty descriptions would issue from the pens of intellectuals in other underdeveloped countries. The belief that we may be poorer, but we are more noble and morally superior, and moreover, live in greater harmony with nature, not only served as an excuse for their own backwardness, but also as an instrument for defending national pride. In addition, it was used to justify the choice of a different path of development than the West (which was often associated with a very slow increase in overall prosperity). Convictions about the intrinsic and autonomous value of local traditions also served as a symbolic barrier against an “invasion” by the West. In the wake of technology and abundance, came a western lifestyle, and western norms and values, which many intellectuals in the developing world no longer felt was desirable: they saw it as a threat to the identity of the people to which they belonged and in whose name they wanted to speak. ← 47 | 48 →

In praising the “righteousness, nobility and honesty” that peasants sucked from their mothers’ breast milk, the Polish ethnographer admits that in the past not everything in this patriarchal idyll always went so well. At the time of the “elective kings” bad policies meant that “our peasant could be overburdened with work”: “when a nobleman sighed and, without dismounting from his horse, began to tend to his increasingly profitable farm, either the closer and more befitting the ensuing relations with the peasants became, or the heavier and swifter their subjugation.”123 In writing these words nearly two hundred years ago, Gołębiowski summed up the issue well: economics textbooks today speak of this “refeudalization” or “second serfdom” as one of the primary causes of civilizational backwardness, or, to use more neutral terms, the social and political dissimilarity of the region.124

Its initial cause was primarily economic in nature. Beginning in the late fifteenth century, the nobility profited from the export of grain (but also of other goods, such as wood and tar) to the West. However, they had trouble securing for themselves a sufficiently inexpensive, accessible and obedient workforce; the nobility therefore used its political leverage to tie peasants to the land, making their situation little better – if at all better – than that of slaves on plantations in the Caribbean. A desire to maintain access to consumer goods and the fear of losing their privileged social position also encouraged them to maximize their profits.125

Geography, politics and earlier historical events also played a role. The country had an extensive network of navigable rivers and vast amounts of land suitable for growing crops. The new feudal economy first began to appear on estates along the banks of major rivers; only later did it spread to Poland and Lithuania’s vast open spaces. Exports of cereals began to increase after the victorious conclusion to the Thirteen Years’ War (1466), after which Royal Prussia and Gdańsk were incorporated into Poland; this allowed for the safe export of goods along the Vistula river basin to the West. Polish cities were poor, and the handicrafts ← 48 | 49 → they produced were generally of low quality in comparison with those of the West; they also had limited access to markets, which hampered development. The townspeople’s goods could not compete with products imported from England or the Netherlands. They also could not impose limits on imports because their political influence was too weak. They quickly took to peddling imported goods; those who could afford to do so, strove for ennoblement. “Eastern Europe became for a long time a region complementary to the expanding West” – this is how this process was summed up in the 1960s by Marian Małowist, the specialist who is probably most often quoted by western historians in relation to the economic specificities of the region.126

By the seventeenth century, the Polish Republic found itself in a – to some extent self-imposed – “colonial situation” (as writes late Jacek Kochanowicz, an expert on the subject; the term he uses comes from the title of a much-talked about book edited by Wallerstein,127 the foremost theorist of the world system).128 Another prominent Polish historian, Jerzy Topolski, also wrote about “colonial theory” in his history of the Polish Republic.129 Not only was its entire economy oriented toward the export of a few agricultural products, the Republic’s trade had also slipped out of the hands of its subjects, and was now controlled by traders, first from Antwerp, and then from Amsterdam.130

Moreover, although the Polish manor estate (Pol. folwark) produced goods for the market, it was not really a capitalist enterprise – this is how we could sum up a long discussion that took place among Polish historians on this issue.131 What the ← 49 | 50 → manor estate produced was generally used to meet the needs of the owner, and it was in many ways a self-sufficient entity; it usually did not hire workers, and when it did hire them, it paid them more often in kind than in cash. Cash from the sale of grain and other products was spent primarily on the consumption of luxury goods, rather than on investments in the farm, which frequently did not require cash outlays. And the level of production was determined by the harvests, rather than by market needs. The Polish economy at that time can thus be described, as Kochanowicz recognized, as “an agglomeration of atomized, independent noble domains.”132 Poland was an “extreme case” of a country in which nothing, from the economic structure, to the norms of social life, was conducive to the development of entrepreneurship in the modern sense of the word. It was not fitting for a noble to engage in trade; an external dependence on colonial exports to the West was accompanied by a feudal mentality, and the “spirit of capitalism” was completely alien. This was nonetheless a rational situation: until at least the beginning of the seventeenth century, rising prices had led the nobility to earn more and more.133

Let me make here a brief digression: looking at Polish backwardness from this perspective, there is nothing surprising in the fact that Polish reformers often considered the state to be the key to overcoming it. What else could they do? There was no other force – neither internal nor external – on which to base change. The middle-class was too weak, and the nobility showed little interest in economic progress; industry, where it existed, was often founded and run by foreigners with foreign capital (which in the nineteenth century began to be an issue of growing importance in public debates). Regardless, there was very little industry on the scale of that in the West.

Efforts to carry out “top-down industrialization” in Poland have a long history – and it is mostly a history of failures. Witold Kula, probably the most prominent analyst of Poland’s backwardness, once wrote that industrialization in Poland was carried out in waves. It lacked continuity and new projects were rarely built on the achievements of previous ventures because, ultimately, little remained to show for them. In his monumental two-volume Sketches on Manufacturing [Pol. Szkicach o manufakturach, 1956], Kula analyzes some two dozen factories set up by the king ← 50 | 51 → and magnates in the late eighteenth century. The vast majority of these ventures quickly failed. They faced difficulties in terms of employees, sales, production quality, and transport; the agrarian country seemed to reject with its very essence the transplant of industry. “New forces are on the rise”, Kula wrote. “But they have failed to learn their history”.134

And while Kula writes that the role of “commercial capital” in the financing of these investments was greater than he had anticipated, the most ambitious of these ventures – a project by court treasurer Anthony Tyzenhauz to build factories on the royal estates in Lithuania – was based on unpaid, forced peasant labour. Tyzenhauz planned to use such extremely (even for those days) brutal methods to “finance” a large part of the investment. According to Kula: “Extremely labour-intensive and back-breaking irrigation work, water engineering projects, and road building, the construction of handicraft and manufacturing colonies, and the associated felling and transport of trees, the servicing of factory operations (the transport of raw materials and products, provision of lumber, and maintenance of water facilities) all these additional burdens fell on the backs of peasants.”135

Tyzenhauz’s “system”, despite complaints and protests, operated for 15 years, and provided the king with significant revenues. Proceeds from the Lithuanian economy accounted for one-third of the income in the royal coffers, and Stanisław August’s factories enhanced his prestige – providing the court with luxury goods and earning him a reputation as a protector of industry. There were many reasons for Tyzenhauz’s eventual fall – the intrigue of magnates and foreign intervention played a role – but its root cause was bankruptcy. At that time, however, this process looked different than in a capitalist economy, in which an entrepreneur is unable to repay his debts, banks refuse to loan him money, and the remaining assets of the company are eventually divided among his creditors according to rules set by law. Tyzenhauz had financial problems: he was unable to repay the loans he had taken ← 51 | 52 → out, and even the revenues he supplied to the king were declining and becoming increasingly irregular.136 Stanisław’s motivation to protect Tyzenhauz progressively weakened, and he finally allowed his political opponents destroy him.

Tyzenhauz had exploited his (or rather, the king’s) subjects, investing in various, at times prestigious, projects: for example, he redesigned the town of Sokolka in the spirit of Enlightenment-era “urban design”, which Kula summed up as: “a little parody of the rationalist urban planning of enlightened absolutism”.137 Peasants abandoned their estates. They first wrote complaints, then rebelled – and when this did not yield results, they fled en masse. Since their forced labour was the major “capital” held by feudal estates, we can say that the royal assets entrusted to Tyzenhauz underwent permanent decapitalization. This was difficult to reverse. Machines can by purchased quickly, but new people are acquired slowly over time, because they must either reproduce, or be encouraged to return. Moreover, it appears that Tyzenhauz knew this perfectly well: he long refused to supply the king with the archive and inventory of assets entrusted to his management, and when his fate was sealed, one night he packed the archive into 39 wagons (!) and “commanded his economic official to transport the goods to his estate, and in the event of pursuit, to burn or sink them.”138 A small portion of this archive has survived to the present day.

The history of this venture is worth remembering: in many twentieth-century accelerated growth projects in under-developed countries, there were attempts to make use of a similar mechanism – exercising administrative pressure to utilise capital and labour “trapped” in the countryside, as a means for providing the state with resources to undertake an ambitious modernizing investment programme. As in the case of Tyzenhauz, not only economic factors, but also issues related to politics and prestige, tended to influence investment decisions; the cost of progress achieved by these means, measured in human suffering and poverty, was frequently, as we shall see, very high.

Similarly instructive is a second attempt at industrialization in Poland – the mining companies established by Fr. Drucki-Lubecki in Congress Poland. Although in the nineteenth century capital from the state played a significant role in agriculture and forestry, as well as in light industry and, later, the construction of railways, mining consumed the lion’s share of its available resources. Investments in industry were not sufficiently remunerative to attract private capital – high transport costs ← 52 | 53 → resulted in low profits and huge investment costs. It was much more profitable to be a wholesaler or to lease taxes and excise duties. One historian studying this issue writes, “it can be assumed that if this sector of the economy had remained a field for the free play of interests, the development of industrial capitalism would have been delayed for years to come.”139

Lubecki’s industrial policy from the outset assumed of a low level of profitability: real profits in relation to capital investment were to be, according to the assumptions of the plan’s author, 2–2.5 percent a year, and thus very little for those times.140 And these were optimistic calculations. In reality, his undertakings continually lost money, in part, because the state was little inclined to control costs – building, for example, magnificent and expensive factory buildings. Lübeck, who was self-taught in terms of economics, saw industrialization as a tool for the elimination of backwardness; meanwhile, industrialization was to be financed by – apart from loans (the first major foreign loan taken out by the Kingdom in 1829 was intended for investments in mining) – a reduction in consumption. When in 1823 a tariff war began with Prussia, which had placed high duties on Polish grain exports, Lubecki – despite the very difficult situation of Poland’s indebted landowners – firmly refused to reduce taxes, explaining that investment needs came first. He also sought – without success – to establish a state monopoly on the trading of colonial goods, such as sugar, coffee and arrack (as well as wine).141 This policy was not without effects, although most were in areas other than those in which the state had invested most heavily: in the years 1820–1830, for example, textile production in the Kingdom grew by 10 percent annually.142 But these efforts were based on fragile foundations: when after the November Uprising the political conditions changed drastically, most of the projects supported by the government failed.

In 1824 Lubecki wrote in a memorandum:

Political independence must be supplemented by economic independence. Meanwhile, the industry of foreign countries is making unfair use of its advantages and keeping our [industry] underdeveloped and dependent. It is therefore necessary to break this yoke […]. Industry left alone would be unable to free itself, and therefore the government should remove these obstacles that hinder the development of production, should encourage private ← 53 | 54 → individuals to make efforts and help them […]. The government should attract suitable people to the arts and crafts, to establish some businesses and sell them later to entrepreneurs even at a discount.143

There can be no political independence without economic independence – this belief was common to many writers of economic development plans in under-developed countries. Economic nationalism (understood here in a descriptive, not evaluative sense) also provides arguments in favour of direct involvement by the state: after all, it best represented – as the authors of such theses were want to state –best represented the interests of the community. Thus, in the name of common interest you could impose high taxes on individuals – or dispossess them – arguing that progress is not made without sacrifice, and group interests outweigh those of the individual.

For a reader today, the story of Lubecki’s ventures is striking not only due to their scale and ambitions, but also due to the scale of corruption and waste they produced at the intersection of the state and private economy. Government investments enriched legions of entrepreneurs, because the government commissioned private companies for provide supplies, and to build factory halls and housing for workers. These businessmen were all guided by the same principle – to engage as little capital as possible. Moreover, in some cases, they did not supply any capital, and in some questionable cases, it turned out that the entrepreneur’s sole capital was the money deposited to secure the performance of the contract.

This led to scandals that would sound familiar to today’s readers. In one example in 1833, two young engineers bought the village of Niwka in order to build an ironworks there. Ostensibly, the location was perfect: the village was close to both iron ore and coal deposits, and to a navigable river that could power the machinery. The investors did not have the money needed to build the factory, but they had connections – the whole venture was based on good personal contacts between the two investors and Henryk Łubieński, a rich landowner and entrepreneur, and a vice-president of the state-owned Bank of Poland, which financed the investments. The further course of events is recounted by a historian as follows:

The enterprising swindlers quickly proved, the following year, to be financially incapable of bringing construction to completion. The vice-president of the Bank took steps to “save the bank credit”, but, in reality, he was bailing out his protégés and silent partners. After a somewhat inflated appraisal of the real estate was arranged, the bank repurchased the ← 54 | 55 → property, hiding the loss in the fictitious value of the purchased assets; the entrepreneurs walked away with their small capital investment along with a profit, and the Bank completed construction.144

It is still too early to ask whether such scandals – of which there was never a lack at any latitude or in any era – put into question the sense of top-down industrialization. Perhaps this should be considered an unavoidable cost of the “leap into modernity,” which, even in the most favourable conditions, has never been achieved by the hands of saints, and the history of which fails to provide many morally inspiring stories.

In 1800 the income disparities between different parts of Europe were still small. Average wages in the West were perhaps 50 percent higher than in countries such as Poland.145 But the cards in the game of progress had already been dealt, and the fates of east and west on the continent sealed. One side was destined to grow in power and prosperity; the other – to fall deeper and deeper into poverty and backwardness: in 1914 the distance was greater than a century earlier.146 There was also a growing awareness that overcoming this would require radical measures.

1 W. Jacob, Report on the Trade in Foreign Corn: And on the Agriculture of the North of Europe, London, 1826. Descriptions of Polish backwardness and poverty had been a permanent element of travel literature since at least the seventeenth century: cf. J. Kochanowicz, “Polska w epoce nowoczesnego wzrostu gospodarczego”, [in:] Modernizacja Polski. Struktury, agencje, instytucje, ed. W. Morawski, Warszawa, 2010.

2 Jacob, Report…, pp. 65–66.

3 For the most commonly cited estimate of wages in Great Britain during the Industrial Revolution, see C. Feinstein, ‘Pessimism Perpetuated: Real Wages and the Standard of Living in Britain During and After the Industrial Revolution’, Journal of Economic History 1998, no. 58.

4 P. Gaskell, The Manufacturing Population of England. Its Moral, Social and Physical Conditions, and the Changes which Have Arisen from the Use of Steam Machinery; with an Examination of Infant Labour, London 1833.

5 Jacob, Report…, p. 67.

6 Hobsbawm’s question is cited by Daniel Chirot in the Introduction to: The Origins of Backwardness in Eastern Europe: Economics and Politics From the Middle Ages Until the Early Twentieth Century, ed. D. Chirot, Berkeley–Los Angeles 1991, p. 3.

7 J. Jedlicki, Nieudana próba kapitalistycznej industrializacji: analiza państwowego gospodarstwa przemysłowego w Królestwie Polskim XIX w., Warszawa 1964, p. 20.

8 Among these, the most complete (and most often cited) estimates are those of A. Maddison (The World Economy, vol. 1: A Millenial Perspective, vol. 2: Historical Statistics, Paris 2006). Often cited are the early estimates found in P. Bairoch (P. Bairoch, M. Levy-Leboyer, Disparities in Economic Development Since the Industrial Revolution, London 1981); P. Bairoch, “Europe’s Gross National Product: 1800–1975”, Journal of European Economic History, 1976, no. 3. Maddison speaks critically of Bairoch: “Bairoch’s source notes were frequently cryptic and often cited “personal estimates” he did not publish.” (The World Economy, vol. 1, p. 628). In practice, many economic historians use their own estimates, the sources of which are not always clear, and the differences between individual authors remain considerable. Maddison devotes a large chapter to this issue.

9 T. Malthus, An Essay on the Principle of Population, as It Affects the Future Improvement of Society, with Remarks on the Speculations of Mr. Godwin, M. Condorcet, and Other Writers, London 1798.

10 Cf. also C. K. Maisels, The Emergence of Civilization: From Hunting and Gathering to Agriculture, Cities, and the State in the Near East, London–New York 1993, p. 20 ff.

11 G. Clark, Farewell to Alms: A Brief Economic History of the World, Princeton–Oxford 2007, p. 5.

12 Cf. A. Maddison, Growth and Interaction in the World Economy. The Roots of Modernity, Washington 2005, p. 5 ff.; A. Maddison, “The West and the Rest in the World Economy: 1000–2030, Maddisonian and Malthusian Interpretations”, World Economics, 2008, no. 4.

13 G. Clark, Farewell…, op. cit., pp. 14, 366–367.

14 The difference in income levels (and domestic comfort) between Eastern and Western Europe goes back much further than the Industrial Revolution, but it started to increase rapidly at that time.

15 C. K. Harley, “Reassessing the Industrial Revolution: A Macro View”, [in:] The British Industrial Revolution. An Economic Perspective, ed. J. Mokyr, Boulder–Oxford 1999, p. 161.

16 B. Ward-Perkins, The Fall of Rome and the End of Civilization, Oxford 2005, p. 88 ff.

17 Ibid., p. 89.

18 Ibid., p. 92.

19 Ibid., p. 95.

20 A. Bowman, A. Wilson, “Quantifying the Roman Economy: Integration, Growth, Decline?”, [in:] Quantifying the Roman Economy. Methods and Problems, eds. A. Bowman, A. Wilson, Oxford 2009, p. 28.

21 The most popular and most widely cited statistical data on income per capita are the estimates of A. Maddison, The World Economy. A Millennial Perspective, Paris 2006. See also A. A. Avakov, Two Thousand Years of Economic Statistics. World Population, GDP and PPP, New York 2010.

22 The decline in agricultural production in Europe was less than the decline in population: income increased. The opposite was true in Egypt, which also had not yet undergone a proto-capitalist structural transformation along the lines of that in Western Europe. S. J. Borsch, The Black Death in Egypt and England, Austin 2005, p. 15 ff.

23 J. Hatcher, J. Bailey, Modelling the Middle Ages. The History and Theory of England’s Economic Development, Oxford 2001, p. 31.

24 Cf. e.g. N. Voigtländer, H.-J. Voth, “Malthusian Dynamism and the Rise of Europe: Make War, Not Love”, American Economic Review, 2009, no. 2.

25 After analyzing the relationship between economic growth, per capita income and population, this is the conclusion reached by scholars such as D. N. Weil and J. Wilde, “How Relevant is Malthus For Economic Development Today?”, American Economic Review, 2009, no. 2

26 Cf. G. Clark, Farewell…, op. cit., p. 30. Clark’s conclusions are based on meticulous, long-term archival research on income in England from the Middle Ages to the nineteenth century; however, debate continues over when England freed itself from Malthus’ vicious circle, the shape this process took, and the extent to which it had been trapped within it earlier; cf. e.g. M. Kremer, “Population Growth and Technological Change: One Million B.C. to 1990”, Quarterly Journal of Economics, 1993, no. 3 or O. Galor, D. N. Weil, “Population, Technology and Growth: From the Malthusian Regime to the Demographic Transition and Beyond”, American Economic Review, 2000, no. 4

27 The story of the zak-aardebol is told by J. de Vries, The Industrious Revolution. Consumer Behavior and the Household Economy, 1650 to the Present, Cambridge 2008, pp. 1–4. Data on the production of watches in Europe were also taken from this book.

28 Cf. A. Wyczański, “Czy można porównywać poziom życia gospodarczego krajów w epoce przedstatystycznej?”, [in:] Badania nad historią gospodarczo-społeczną w Polsce. Problemy i metody, Warszawa–Poznań 1978, p. 53 ff.

29 K. W. Wójcicki, Pamiętniki dziecka Warszawy i inne wspomnienia warszawskie, vol. 1, eds. J. W. Gomulicki, Z. Lewinówna, M. Grabowska, Warszawa 1974, quoted in M. Janowski, Narodziny inteligencji, 1750–1831, Warszawa 2008, p. 163.

30 This comparison comes from Prof. J. Bradford DeLong from Berkeley, who was kind enough to provide me with a chapter from a book he is working on (Slouching Towards Utopia. Economic History of the World in the Long Twentieth Century, 1870–2010, unpublished).

31 E. Horlings, “Pre-industrial Economic Growth and the Transition to an Industrial Economy”, [in:] Early Modern Capitalism. Economic and Social Change in Europe 1400–1800, ed. M. Prak, London–New York 2001, p. 89; J. L. van Zanden, “Early Modern Economic Growth: A Survey of the European Economy, 1500–1800”, Ibid., p. 67 ff.

32 J. A. Kamermans, Materieele cultuur in de Krimpenerwaard in de zeventiende en achttiende eeuw, Wageningen 1999. Quoted in J. de Vries, The Industrious Revolution…, op. cit., p. 124.

33 N. Koepke, J. Baten, “The Biological Standard of Living in Europe During the Last Two Millennia”, European Review of Economic History, 2005, no. 1.

34 Ibid, p. 88.

35 Cf. J. Boulton, “‘Turned into the Street with My Children Destitute of Every Thing’: The Payment of Rent and the London Poor, 1600–1850”, [in:] Accommodating Poverty. The Housing and Living Arrangements of the English Poor, c. 1600–1850, eds. J. McEwan, P. Sharpe, Houndmills–New York 2011; and: P. King, “The Residential and Familial Arrangements of English Pauper Letter Writers, 1800–1840s”, Ibid., p. 145 ff.

36 See R. W. Fogel, An Overview of the Changing Body: Health, Nutrition and Human Development in the Western World since 1700, NBER Working Paper 16938, April 2011, http://www.nber.org/papers/w16938.

37 B. Mironov, The Burden of Grandeur. Physical and Economic Well-being of the Russian Population in the Eighteenth Century”, [in:] Living Standards in the Past. New Perspectives on Well-Being in Asia and Europe, eds. R. Allen, T. Bengtsson, M. Dribe, Oxford 2005, pp. 255–277.

38 See Chapter 2.

39 P. Kuznets, “Growth and Income Inequality”, American Economic Review, 1955, no. 1.

40 See e.g. R. C. Allen, Engel’s Pause: Pessimist’s Guide to the British Industrial Revolution, University of Oxford Department of Economics Discussion Paper 315, April 2007.

41 B. Hilton, A Mad, Bad, and Dangerous People? England, 1783–1846, Oxford 2006, pp. 574–575; I owe my descriptions of early industrial England primarily to this book.

42 J. E. Archer, Social Unrest and Popular Protest in England, Cambridge 2000, p. 40; J. Foster, Class Struggle and the Industrial Revolution, London 2005, p. 36 ff.

43 E. P. Thompson, The Making of the English Working Class, New York 1963, p. 277.

44 K. Honeyman, Child Workers in England, 1780–1820, Aldershot-Burlington 2007, p. 4.

45 J. Humphries, “Childhood and Child Labour in the British Industrial Revolution”, The Economic History Review, 2013, No. 2.

46 J. Burchardt, Paradise Lost. Rural Idyll and Social Change Since 1800, London–New York 2002, p. 21 ff.

47 P. Gaskell, Manufacturing Population…, op. cit., pp. 161–162.

48 B. Hilton, A Mad, Bad, Dangerous People…, op. cit., p. 582.

49 P. Pollard, “Factory Discipline in the Industrial Revolution”, The Economic History Review, 1963, no. 2.

50 P. Gaskell, Manufacturing population…, op. cit., p. 132.

51 It is worth noting that the wages of British workers were still the highest in the world. Compared to the rates paid in the textile factories of Manchester, a city that invoked horror in its day (one contemporary historian called it a “world shock city”) the hourly wages offered in factories abroad were only a fraction of what British workers earned: in Mulhouse in the Alsace region – 37 percent; in Zurich – 28 percent, in Rouen – 47 percent, in Vienna – 36 percent, and in Prussia – just 25 percent; see G. Clark, “Why Isn’t the Whole World Developed? Lessons From the Cotton Mills”, Journal of Economic History, 1987, no. 1.

52 Perhaps the most convincing argument on this point has been offered by philosopher and ethicist Peter Singer in The Life You Can Save. Acting Now to End World Poverty, Melbourne 2009. Cf. also L. Weinar, “Responsibility and Severe Poverty”, [in:] Freedom from Poverty as a Human Right. Who Owes What to the Very Poor?, Oxford–New York 2007, p. 259.

53 T. R. Malthus, Essay…, op. cit., p. 48.

54 This view is most often represented in school textbooks: E.g., D. Acemoglu, Introduction to Modern Economic Growth, Princeton 2008, p. 1060 and F. Crouzet, The History of the European Economy, 1000–2000, Charlottesville–London 2001, p. 110.

55 D. Acemoglu, Introduction to…, op. cit., s. 1031.

56 D. Acemoglu, J. Robinson, Why Nations Fail? The Origins of Power, Prosperity and Poverty, New York 2012; cf. also D. Acemoglu, J. Robinson, Economic Origins of Dictatorship and Democracy, Cambridge 2006, p. 350 ff.

57 Cf. e.g. C. I. Jones, “Was an Industrial Revolution Inevitable? Economic Growth Over the Very Long Run”, Advances in Macroeconomics, 2001, no. 2; in his opinion, this institutional change had a decisive impact.

58 L. Allen, The Global Financial System, 1750–2000, London 2001, p. 56, 108; cf. also The Origins and Development of Financial Markets and Institutions, eds. J. Atack, L. Neal, Cambridge 2009; cf. also C. Wennerlind, Casualties of Credit. The English Financial Revolution 1620–1720, Cambridge–London 2011.

59 W. J. Bernstein, The Birth of Plenty. How the Prosperity of the Modern World Was Created, New York 2010, p. 192; cf. also J. Goldstone, Why Europe? The Rise of the West in World History, 1500–1850, New York 2009. On the rise of the concept of economic freedom, see E. MacGilvray, The Invention of Market Freedom, Cambridge 2011.

60 F. Boldizzoni, Means and End. The Idea of Capital in the West, 1500–1970, Houndmills–New York 2008, p. 50 ff.

61 R. A. Easterlin, “Why Isn’t the Whole World Developed?”, The Journal of Economic History, 1981, no. 1.

62 J. Mokyr, The Enlightened Economy. Britain and Industrial Revolution, London–New York 2011.

63 G. Clark, Farewell to Alms…, op. cit., p. 10.

64 Other historians are cited by the reviewer in The New York Times Review of Books; cf. B. N. Friedman, “Industrial Evolution”, The New York Times, 9 December 2007. A bourgeois work ethic is also credited with having a decisive impact by D. N. McCloskey, The Bourgeois Dignity. Why Economics Can’t Explain the Modern World, Chicago 2010

65 R. Fogel, The Escape from Hunger and Premature Death, 1700–2100, Cambridge 2004.

66 N. Nunn, N. Qian, “The Potato’s Contribution to Population and Urbanization: Evidence from an Historical Experiment”, National Bureau Of Economic Research Working Paper no. 15157 from 2009.

67 J. de Vries, Industrious…, op. cit.

68 Ibid., p. 114.

69 R. C. Allen, The British Industrial Revolution in Global Perspective, Cambridge 2009;
Another author considers the availability of energy to have been “a necessary condition for the industrial revolution but it was not in itself a sufficient cause.” – E. A. Wrigley, Energy and the English Industrial Revolution, Cambridge 2010, p. 23.

70 M. Berg, The Age of Manufactures, 1700–1820. Industry, Innovation and Work in Britain, London–New York 2004, p. 23.

71 J. Horn, The Path Not Taken. French Industrialization in the Age of Revolution, 1750–1830, Cambridge–London 2006, p. 3.

72 F. Crouzet, The History…, op. cit., p. 54 ff.

73 This question and the two main responses were discussed by David Landes in his classic work on economic history The Wealth and Poverty of Nations: Why Some are So Rich and Some So Poor, New York 1998, p. xxi.

74 E. Williams, Capitalism and Slavery, Chapel Hill 1944, p. 9.

75 The debate over William’s book is described in depth in R. Findlay and K. O’Rourke, Power and Plenty. Trade, War, and the World Economy in the Second Millennium, Princeton–Oxford 2007, pp. 335–338.

76 D. B. Davis, Inhuman Bondage. The Rise and Fall of Slavery in the New World, Oxford 2006, p. 80.

77 H. V. Bowen, The Business of Empire. The East India Company and Imperial Britain, 1756–1833, New York 2006, p. 3.

78 P. O’Brien, “European Economic Development: The Contribution of the Periphery”, The Economic History Review, 1982, no. 1. His argument was, roughly speaking, as follows: colonies provided primarily consumer goods (tobacco, coffee, tea, sugar, etc.); therefore, they had a greater impact on standard of living than on economic development. The demand for such goods was very flexible: if tea was expensive, the English simply drank less – and the rest of the economy would have followed approximately the same course with little change.

79 D. Acemoglu, P. Johnson, J. Robinson, “The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth”, American Economic Review, 2005, no. 2.

80 See e.g. R. Findlay and K. O’Rourke, Power and Plenty…, op. cit.

81 Cf. Slavery and the Rise of the Atlantic System, ed. B. Solow, Cambridge 1991.

82 J. Inikori, Africans and the Industrial Revolution in England: A Study in International Trade and Economic Development, Cambridge 2002, p. 197; see also J. E. Inikori, “Transatlantic Slavery and Economic Development in the Atlantic World, West Africa, 1450–1850”, [in:] The Cambridge World History of Slavery, vol. 3, eds. D. Eltis, P. L. Engerman, Cambridge 2011, p. 650 ff.

83 The case of Senegambia is described in B. Barry, Senegambia and the Atlantic Slave Trade, Cambridge 1998, p. 107 ff.

84 N. Nunn, “The Long-term Effects of Africa’s Slave Trade”, Quarterly Journal of Economics, 2008, no. 1; R. H. Steckel, R. A. Jensen, “Determinants of Slave and Crew Mortality in the Atlantic Slave Trade”, NBER Working Paper no. 1540, 1985.

85 D. Eltis, P. D. Behrendt, D. Richardson, H. P. Klein, The Trans-Atlantic Slave Trade: A Database on CD-Rom, New York 1999.

86 T. Burnard, “The Planter Class”, [in:] The Routledge History of Slavery, eds. G. Heuman, T. Burnard, London–New York 2011, p. 191.

87 L. Mathurin Mair, “Women Field Workers…”, op. cit., p. 192.

88 B. W. Higman, Plantation Jamaica 1750–1850. Capital and Control in a Colonial Economy, Jamaica–Barbados–Trinidad and Tobago 2008, p. 220.

89 N. Nunn, “The long-term effects…”, op. cit.

90 Quoted in A. Hochschild, King Leopold’s Ghost, Boston–New York 1999, p. 13.

91 Ibid.

92 W. Easterly, R. Levine, “The European Origins of Economic Development, NBER Working Paper 18162”, June 2012.

93 K. Pomeranz, The Great Divergence. China, Europe, and the Making of the Modern World Economy, Princeton 2000.

94 Cf. e.g. E. H. Mielants, The Origins of Capitalism and the Rise of the West, Philadelphia 2007, p. 60 ff.

95 P. K. Khan Khattak, Islam and the Victorians. Nineteenth Century Perceptions of Muslim Practices and Beliefs, London–New York 2008, p. 61 ff.

96 M. Weber, The Religion of China, Detroit 1968, p. 152.

97 German edition 1916–1917, revised in 1920; English edition 1958 (M. Weber, The Religion of India: The Sociology of Hinduism and Buddhism, Glencoe 1958). Cf. also R. Swedberg, Max Weber and the Idea of Economic Sociology, Princeton 2000, p. 140.

98 The most well-known analyst of the reasons why Arab countries “lagged behind” Europe is T. Kuran, “Institutional Causes of Economic Underdevelopment in the Middle East: A Historical Perspective”, [in:] Institutional Change and Economic Behaviour, eds. J. Kornai, L. Maytyas, G. Roland, Houndmills–New York 2008, p. 63 ff.; cf. also T. Kuran, The Long Divergence: How Islamic Law Held Back the Middle East, Princeton 2010; as well as T. Kuran, Islam and Mammon: the Economic Predicaments of Islamism, Princeton 2005.

99 K. L. Sokoloff, P. L. Engerman, “History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World”, op. cit. Cf. also D. Acemoglu, J. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, New York 2012.

100 For a conservative variant of this theory see N. Ferguson, Civilization. The West and the Rest, New York 2011.

101 R. C. Allen, “Real Wages in Europe and Asia: A first Look at the Long-term Patterns”, [in:] Living Standards in the Past…, op. cit., p. 111.

102 J. L. Abu-Lughod, Before European Hegemony, New York–Oxford 1989, p. 22 ff.

103 A. Smith, The Wealth of Nations: An Inquiry into the Nature and Causes of the Wealth of Nations, Petersfield 2007, p. 123.

104 Ibid., p. 24.

105 Ibid., p. 123.

106 Ibid., pp. 85–86.

107 K. Marx, The British Rule in India https://www.marxistp.org/archive/marx/works/1853/06/25.htm.

108 P. Avineri, Karl Marx on Colonialism and Modernization, Garden City 1968, p. 125 ff.

109 Z. Lockman, Contending Visions of the Middle East. The History and Politics of Orientalism, Cambridge–New York 2004, pp. 85–86.

110 Similar opinions about India were expressed by both Marx, Engels many times; there is neither the space nor the need to quote them extensively. Modern Marxists are sometimes inclined to say that in his writings about the “Asian production system”, Marx was influenced by contemporary historians and apologists of the British Empire, especially James Mill’s History of India, and by this fact that few knew the realities of the two countries; another argument says that he described and ideal political system, and not really an existing regime (see e.g. M. Curtis, “The Asiatic Mode of Production and Oriental Despotism”, [in:] Marxism: The Inner Dialogues, ed. M. Curtis, New Brunswick 1997, p. 350 ff.) Perhaps they are right, but he still wrote what he wrote.

111 D. Landes, The Wealth and Poverty of Nations…, op. cit., p. 55.

112 Ibid., p. 56.

113 G. Deng, The Premodern Chinese Economy. Structural Equilibrium And Capitalist Sterility, London–New York 1999.

114 K. Pomeranz, “Standards of Living in Eighteenth-century China: Regional Differences, Temporal trends, and Incomplete Evidence”, [in:] Living Standards in the Past…, op. cit., p. 22 ff.

115 K. Pomeranz, The Great Divergence…, op. cit., p. 4.

116 Cf. e.g. P. Broadberry, B. Gupta, “The Early Modern Great Divergence: Wages, Prices and Economic Development in Europe and Asia, 1500–1800”, Economic History Review, 2006, no. 1; This discussion is noteworthy, although there is no space to discuss it in detail her.

117 M. Bosker, E. Buringh, J. L. Van Zanden, “From Baghdad to London. The Dynamics of Urban Growth in Europe and the Arab World, 800–1800”, Utrecht University/IISH working paper, 2008.

118 Cf. e.g. E. Chaney, “Tolerance, Religious Competition and the Rise and Fall of Muslim Science”, working paper, Harvard University, November 2008.

119 P. Parthasarathi, “Agriculture, Labour, and the Standard of Living in Eighteenth-century India”, [in:] Living Standards in the Past…, op. cit., p. 90.

120 Quoted in N. B. Dirks, The Scandal of Empire. India and the Creation of Imperial Britain, Cambridge–London 2006, p. 145.

121 Ł. Gołębiowski, Lud Polski. Jego zwyczaje, zabobony, Warszawa 1830, pp. 7–8.

122 J. Jedlicki, Świat zwyrodniały. Lęki i wyroki krytyków nowoczesności, Warszawa 2000.

123 Ł. Gołębiowski, Lud Polski…, op. cit., p. 5.

124 F. Crouzet, The History of the European Economy…, op. cit., pp. 77–78; see also e.g. Z. Wójcik, Historia powszechna XVI–XVII w., Warszawa 1991, p. 15 ff. A recent survey of these theories was carried out in J. Kochanowicz, “The Polish Economy and the Evolution of Dependency”, [in:] The Origins of Backwardness in Eastern Europe: Economics and Politics From the Middle Ages Until the Early Twentieth Century, ed. D. Chirot, Berkeley–Los Angeles 1991, p. 92 ff.

125 J. Topolski, “The Manorial-Serf Economy in Central and Eastern Europe in the 16th and 17th Centuries”, Agricultural History, 1974, no. 3.

126 M. Małowist, “The Problem of the Inequality of Economic Development in Europe in the Later Middle Ages”, Economic History Review, 1966, no. 1, p. 28.

127 Social Change in the Colonial Situation, ed. J. Wallerstein, New York 1966.

128 J. Kochanowicz, “The Polish Economy…”, op. cit., pp. 95–96.

129 J. Topolski, Gospodarka polska a europejska w XVI–XVIII wieku, Poznań 1977, p. 23.

130 A. Mączak, Między Gdańskiem a Sundem, Warszawa 1972, p. 155.

131 W której brali udział m.in. Witold Kula, Marian Małowist and Antoni Mączak. Cf. e.g. J. Topolski, “Economic Decline in Poland from the Sixteenth to the Eighteenth Centuries”, [in:] Essays in European Economic History, ed. P. Earle, Oxford 1974; J. Topolski, “Sixteenth Century Poland and the Turning Point in European Economic Development”, [in:] A Republic of Nobles. Studies in Polish History to 1864, ed. J. K. Fedorowicz, Cambridge 1982; M. Małowist, “Poland, Russia and Western Trade in the Fifteenth to the Seventeenth Centuries”, Past & Present, 1958, no. 13; M. Małowist, “Problem nierówności rozwoju gospodarczego Europy późnym średniowieczu”, [in:] Europa i jej ekspansja XVI–XVII w., ed. H. Zaremska, Warszawa 1993; M. Małowist, Wschód a Zachód Europy w XIII–XVII wieku. Konfrontacja struktur społeczno – gospodarczych, Warszawa 1973; A. Mączak, “The Social Distribution of Landed Property in Poland from the 16th to the 18th Century”, [in:] Third International Conference of Economic History, vol. 1, Paris 1968; A. Mączak, U źródeł nowożytnej gospodarki europejskiej, Warszawa 1967.

132 J. Kochanowicz, “Could a Polish Noble Became an Entrepreneur? Mentality, Market and Capital”, [in:] idem, Backwardness and Modernization. Poland and Eastern Europe in the 16th–20th Centuries, Aldershot 2006, p. 935.

133 J. Topolski, Gospodarka polska…, op. cit., p. 24.

134 Kula writes: “Disharmony between production relations and what was needed for the development of productive forces became a brake on the development of manufacturing in Poland at the time, resulting in weakness in the first area, limited “manufacturing” in the second, and the failure of the third. In the end, this was balanced out by relatively weak growth in the ultimate marker test of economic development – growth in labour productivity”; W. Kula, Szkice o manufakturach, Warszawa 1956, vol. 1, p. 32. For more on the attitudes of Polish historians – Witold Kula, Marian Małowist, Jerzy Topolski and Andrzej Wyczański – towards the problems of backwardness, see A. Sosnowska, Zrozumieć zacofanie. Spory historyków o Europę Wschodnią 1947–1994, Warszawa 2004.

135 W. Kula, Szkice…, op. cit., vol. 1, p. 419.

136 Ibid., p. 436.

137 Ibid.

138 Ibid.

139 J. Jedlicki, Nieudana próba…, op. cit., p. 32.

140 Ibid., p. 35.

141 P. Smolka, Polityka Lubeckiego przed Powstaniem Listopadowym, Warszawa 1983, vol. 1, p. 491.

142 J. Górski, Polska myśl ekonomiczna a rozwój gospodarczy 1807–1830. Studia nad początkami teorii zacofania gospodarczego, Warszawa 1963, p. 41.

143 Quoted in J. Górski, Polska myśl ekonomiczna…, op. cit., pp. 218–219.

144 J. Jedlicki, Nieudana próba…, op. cit., p. 71.

145 P. Bairoch, “Europe’s Gross National Product: 1800–1975”, Journal of European Economic History, 1976, no. 2, quoted in F. Crouzet, The History…, op. cit., p. 78.

146 Cf. e.g. A. P. Bénétrix, K. H. O’Rourke, J. G. Williamson, “The Spread of Manufacturing to the Periphery 1870–2007: Eight Stylized Facts”, IIIS Discussion Paper no. 401, June 2012.

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Chapter 2. “A task without historical precedent”

1. History

It is interesting to note that the landmark text from which the entire postwar economics of development in underdeveloped countries began was a blueprint for the future of Central Europe. This text, Paul Rosenstein-Rodan’s “Problems of Industrialization of Eastern and South-eastern Europe” appeared in the prestigious Economic Journal in 1943 and, despite what may seem like a rather uninspiring title for today’s reader, it carried an explosive ideological and political charge.147 In it Rosenstein-Rodan wrote:

It is generally agreed that industrialisation of “international depressed areas” like Eastern and South-Eastern Europe (or the Far East) is in the general interest not only of those countries, but of the world as a whole. It is the way of achieving a more equal distribution of income between different areas of the world by raising incomes in depressed areas at a higher rate than in the rich areas. […] It is a tremendous task, almost without historical precedent. There is no analogy to the process of industrialisation in the early nineteenth century for a number of reasons.148

Rosenstein proposed a model of large-scale planned industrialization that was later called the “big push” (a name he himself also adopted and used). He argued that to be effective, industrialization must simultaneously encompass several complementary industries. He argued, for example, that you could not build a giant shoe factory employing 20,000 workers in a poor Eastern European country. Such a project was doomed to failure: the factory would not have anyone to sell its shoes to because there would be no market (the shoes would not be purchased by poor peasants, who constituted three-quarters of the population). And, in order to survive, factory workers would have to be paid much more than peasants living in the countryside – because, unlike the peasants, the workers would not be able to even partially feed themselves. For these reasons, the project would soon prove to be unprofitable.

The key to success lay in the overall scale of the operation. Rosenstein-Rodan wrote: ← 57 | 58 →

Rosenstein-Rodan was not a supporter of industrialization according to the Soviet model.150 This was not because he believed that it had failed. On the contrary, like most economists of the day (including non-communists), he thought it had been a spectacular success. However, he thought that investing in heavy industry in the East would be inefficient, because the same industries in the West had a large surplus production capacity; it would be a pointless duplication.

The economist also pointed to humanitarian concerns. He considered the social costs of the Soviet model – which “squeezed” resources for investment out of its own citizens – to be too great. The people of Eastern European were living in such miserable conditions that it would be inhumane to worsen them further. This led Rosenstein-Rodan to indulge in the following psychological observation: “People (even Eastern Europeans!) are not as tough today as they used to be. Social conscience would not stand for as much misery in peace-time as was taken for granted in the Darwinist nineteenth century. Milder methods must be used.”151

A number of ideas contained in Rosenstein-Rodan’s concept later appeared in accelerated development projects. The first was that private capital was not what mattered. Investments as large and complex as those required by the “big push” were for him unattractive – due to both the long period of time required to realise their benefits, and political risks, such as war or nationalization. (Rosenstein-Rodan: “Political risks of international investment are very much greater today than in the nineteenth century, when it was assumed that certain things were ‘not done’.”152)

Capitalism was not also capable of undertaking such a great transformation for structural reasons: the projected future would be radically different from the ← 58 | 59 → past, and capitalism belonged to the past. Rosenstein-Rodan wrote, “Experience of the past is partly irrelevant, however, where the whole economic structure of a region is to be changed. An individual entrepreneur’s knowledge of the market is bound to be insufficient in this case because he cannot have all the data that would be available to the planning board [….].”153 Thus, if things took their natural, capitalist course, not only would the standard of living in underdeveloped Eastern Europe rise much more slowly than its untapped potential offered, its industrial structure, built in such a way, would be less than optimal from the point of view of social needs.

This difference reflected the superiority of rational planning over the chaos of the market. The capitalist financial markets which usually financed individual investments could not grasp (or support) massive, technologically and socially complex projects involving multiple sectors of the economy. A capitalist will not even create institutions for training industrial workers on a mass scale – because it would not be profitable. For-profit schools will only teach the children of parents who can pay, and from the point of view of society as a whole, this is obviously a loss, because it means that dormant human potential is left unrealized. Capitalists will also not build infrastructure: roads, electricity, railways. According to Rosenstein-Rodan, education and infrastructure will absorb 30–35 percent of the cost of a “big push”, so it must therefore be steered from above by the state. “The theory of growth must be very largely a theory of investment,” he wrote some years later.154 “Natura facit saltum”, he would say, in an obvious reference to a well-known saying by classical economist Alfred Marshall, who thought that leapfrogging stages of development was impossible.155

The entire project faced several perilous conundrums. First of all, it was not clear how to finance the “big push”. Rosenstein-Rodan assumed that part of the cost, which he estimated at the time to be five billion pounds, would cover the costs of an “Eastern European Industrial Trust”, which was to be established after the war, financed in part with Western loans, and in part from compensation paid by Germany (perhaps in kind, or in machines for Poland’s or Romania’s newly built industries). It was a purely hypothetical idea: some source of capital was simply necessary. As many as 3.6 billion pounds, however, was to come from Eastern Europe itself. With its national income estimated by Rosenstein at two ← 59 | 60 → billion pounds a year, he calculated it would require committing to investment 18 percent of national income annually for a number of years, roughly as much as the USSR spent during Stalin’s five-year plans. In Russia, however, it had been necessary to use police terror and drastically reduce citizens’ living standards in order for the state to collect the funds required for investment. How could this be accomplished using “softer” methods?

The second problem concerned people. Rosenstein-Rodan estimated that among Central and Eastern Europe’s 110 million inhabitants, up to 20–25 million were actually unemployed (he had in mind primarily disguised unemployment). These people, he claimed, were surplus labour: their work in the fields did not increase agricultural production, i.e., they could be employed in factories in cities without harming agriculture. The whole project therefore involved social engineering on a massive scale. The economist treated it as a completely natural part of the development process. The population was like pawns on the planner’s chessboard: people were pieces to be “placed”, “moved”,” and “taken”.

Thirdly, Rosenstein-Rodan in practice used interchangeably such notions as “industrialization”, “growth” and “income growth”. There was no hint of consideration that perhaps they were not all equivalent. He was also not interested in redistribution. He assumed that all “Eastern Europeans” would benefit from a “big push” and not merely a narrow elite.

Rosenstein-Rodan’s article was more than just an academic work printed in a prestigious journal. It was a chapter from an official report of the Royal Institute for International Affairs, prepared by the Economic Group of the Committee on Reconstruction, and an expression of the allied governments’ profound interest in the problems of the development of underdeveloped countries.

In 1941 a number of very different institutions in the U.K. were dealing with development planning – including the Royal Institute for International Affairs and the Oxford Institute of Statistics– as well as émigré governments and various informal (or semiformal) groups of economists and politicians meeting at seminars.156 In 1941 Rosenstein-Rodan also became secretary of the Committee for Postwar Reconstruction at Chatham House, where he worked with Eastern European economists. As he wrote later, he chose Eastern Europe, not because he considered it to be the most interesting or characteristic example of underdevelopment, but simply because he had “at hand” émigré governments from the region and the ability to work with the numerous Eastern European economists; ← 60 | 61 → he maintained, for example, regular contacts with a group working at Oxford, which included, among others, Michał Kalecki.157 Kalecki was considered the intellectual leader of the group, which also included Dudley Seers and Nicholas Kaldor.158 In The Economics of Full Employment, a report published in 1944 by six young economists from this circle, we can read: “the regulation of the economic process by market forces […] must be supplemented by conscious and deliberate regulation of public authorities.”159 It was a document written fully in the spirit of Keynes.160 It assumed the possibility of obtaining full employment in developed economies through macroeconomic policies and remained influenced by discussions in the U.K about planning during the 1930s by the Political and Economic Planning (PEP) think tank.161 By 1935, the PEP had already published three major reports – on construction, textiles, and metallurgy – and its journal Planning had a circulation of 2,000 copies and a readership that included almost a hundred members of parliament.162

Interest in the fate of the poorest countries had been at least partly forced upon Britain by the circumstances of war. Hitler offered countries allied with Germany a “New Order” – which in the economic sphere meant the promise that they could “eat from the German table” once the war had been won. Japan had its own “Co-Prosperity Sphere” for the peoples of Asia. Even if hiding behind platitudes about prosperity and development was the brutal exploitation of conquered peoples (and, as military defeats increased, of their allies, as well). The Allies felt obliged to present a more credible proposal.

Yet there were greater considerations involved than just politics and propaganda. The reasons for the Allies’ interest in the development of poor and peripheral countries went much deeper, and were not merely utilitarian in nature. In The Great Transformation, a study of the formation of market economies and the modern nation state published in 1944, Karl Polanyi foresaw the coming of a socialist society that would embody a spontaneous reaction to the market’s ills.163 ← 61 | 62 → “Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society,” he wrote.164 In 1942 the Beveridge Report was published in Great Britain. The document called for the creation of a welfare state, and delineated specific individual needs that should be met by society.165 630,000 copies of the report were sold.166 The war had been a cataclysm from which a better world was supposed to emerge, one free of the inequalities and injustices of the past. Such was the thinking of Paul Rosenstein-Rodan, but he was not alone.167 At almost the same time, a solution very similar to Rosenstein-Rodan’s for South-Eastern Europe was being suggested by a group at Oxford associated with the economist Kurt Mandelbaum, who proposed harnessing the “hidden reservoir of manpower in the countryside” for purposes of industrialization.168 In all of these projects, a rational, planning state was to be an instrument of social progress.169

This view was at least as much the fruit of experience as of ideology. Already during World War I, the Viennese philosopher and political scientist (and socialist) Otto Neurath had noted that in the realities of the wartime system of planning and control, governments had managed to eliminate many of the evils plaguing the liberal economy of the belle epoque, including unemployment and economic fluctuations. It turned out that the state was able to effectively mobilize resources – money, raw materials and people – and organize production on a large scale. Neurath, one of the authors of the Austro-Hungarian planning system during the war, and later an adviser and chief planner for the government of the short-lived Bavarian Council Republic, he was convinced that the state could use the same methods to effectively deal with the economy in times of peace (he also proposed the abolition of money and basing the economy on the exchange of goods, but these ideas drew far fewer supporters). The successes of German war planning during World War I had also inspired the Bolsheviks in Russia.170 ← 62 | 63 →

The lessons of World War II were even more explicit. The economies of the Soviet Union and Germany were completely controlled by the state. Although Germany had not murdered its capitalists, it had essentially incapacitated them, and could boast impressive results afterwards. In 1946 the well-known Marxist historian E.H. Carr wrote in his book The Soviet Impact on the Western World:

Carr added that the idea was a mixture of naivety and genius, and that the core idea was essentially correct, although the details were often utopian. We are all planners, he confessed, under the influence of the Soviet practice and Soviet achievements. He also wrote that the poorer the country, the more it is fated to planning, and therefore an impoverished postwar United Kingdom planned to a greater extent than the United States, modelling it on the Soviet Union’s wartime efforts.

Germany as well, despite its defeat, provided arguments for the proponents of planning and statism. In the face of destructive bombing raids and a permanent lack of raw materials, the Reich’s industrial production continued to grow in the latter half of 1944.172

Propaganda made an equally strong impression as hard numbers. Albert Speer, author of the German “armaments miracle,” was also a master of mass persuasion: he made it possible for the regime not only to continue the war (after the defeat at Moscow in 1941 many managers of the German economy agreed that the war was unwinnable and that a political resolution had to be sought), but also persuaded the Germans that they were capable of overcoming all obstacles through their collective efforts. Total mobilization of the economy was an enterprise which lay as much in the realm of social psychology as in the economic sphere itself. Beginning in April 1942, German newsreels began to show the first views of the factories that build tanks; on May 20, 1942 at a giant public ceremony publicized in the press, radio and newsreels, Franz Hahne, a worker from the Alkett tank factory in Berlin, received a high distinction, the War Merit Cross (Ritterkreuz zum Kriegsverdienstkreuz). Alongside Hahne – “Germany’s most efficient armaments worker” – thousands of other employees of the armaments industry were honoured with medals, with the highest-ranking Nazi dignitaries (including Goering, Speer and Keitel) all in attendance for this propaganda “show”. The German newsreel showed Franz ← 63 | 64 → Hahne beaming with pride as he paraded before an honour guard composed of soldiers, sailors, airmen and Waffen-SS, while the narrator’s voiceover proclaimed: “The best soldiers with the best weapons will defeat the enemy”. In 1943 such armaments-related performances had become the daily bread of German propaganda: for example, on June 5, 1943 Speer spoke at the Sportspalast in Berlin to 10,000 workers of the armaments industry while rewarding their bosses for service to the German nation.173 Germany lost the war, but the vision of the unlimited potential that could be harnesses through centrally directed, collective efforts had taken root among both the losers and the winners.

The capitalist West also quickly switched over to a centrally planned war economy. In the U.S., the state controlled prices and wages with an iron fist. A Bureau of Planning and Statistics was set up within the War Production Board to direct the economy (its chief economist and statistician was Simon Kuznets).174 Private investors were also replaced: between 1942 and 1945, net private investment amounted to minus $ 6.2 billion, which meant that private industrial plants underwent decapitalization. Meanwhile, government investment totalled $ 99.4 billion.175 The government’s armaments investment programme was enormous in scale; from 1940 to 1943, as many factories were built (mainly for armaments, but also for other branches of industry, from steel mills to rubber and chemical plants) as in the previous two decades. Yet America did not avoid the pitfalls typical of a planned economy: already in 1944, some factories were not operating at full capacity because of poorly calculated deliveries of raw materials; excessive production in some areas was accompanied by deficits in others. But in the eyes of people who still remembered the misery and absurdities of the Great Depression, the U.S. war economy functioned with impressive efficiency.

After 1945, it quickly became apparent that many previous investments did not make sense in peacetime: for example, in 1951, shipyards built at a cost of $1.4 billion could hardly find a buyer at slightly more than 10 percent of this sum.176 “Contemporaries greatly exaggerated the heroic achievements of wartime socialism,” U.S. researcher Robert Higgs concludes in relation to the war economy, adding that the waste of funds during the war, even if you consider it to be justified ← 64 | 65 → by circumstances, was gigantic.177 Perhaps this is true; it is hard to forget, however, that the war economy was what eventually pulled the United States out of the Great Depression.178 In the eyes of many contemporaries, this was an argument for the idea that liberal capitalism was an inefficient and wasteful system, and the return to it after World War I had been a gross mistake of historic proportions.179 Full employment and economic growth had been restored through state intervention, and even if consumption had not recovered to pre-Depression levels, in the eyes of many, freedom from unemployment and abject poverty was worth the price.

“Development economics – the study of how poor countries can become rich – was forever cursed by the timing of its birth after the Great Depression. That gave development economics a bias toward relying on governments, rather than markets, to create growth,” wrote William Easterly, former chief economist of the World Bank and one of the most prominent critics of development aid.180 The question of whether it was a blessing or a curse needs to be put aside for the time being; it is a fact, however, that postwar ideas about the development of underdeveloped countries drew heavily upon the means by which the West tried to cope with the Great Depression.

Many economists felt guilty: they were late in realizing the enormity of the economic collapse that followed the stock market crash in 1929, and were slow to find a way out of crisis.181 In the latter half of the 1940s, one of the main tasks the Keynesian “new economy” had set for itself was preventing a repeat of the Great Depression. After the war, Western countries all led policies of full employment and built the institutions of a welfare state. Specialists in the development of underdeveloped countries set similar targets for themselves; they also wanted to use the same instruments, and that meant, above all, state intervention in various spheres of life, beginning with planning and ending with foreign trade. This distinguished them from Keynes, whose theory postulated controlling demand, not interfering with supply.182 Like him, however, they did not believe in the market. This distrust of the market was deeply rooted and justified by the experience of recent past ← 65 | 66 → disasters. They also thought that social evolution had led to a split between profit and economic progress.

Many future specialists in development had been followers of classical economics in their youth (the roads of two Poles active in this sphere, Oskar Lange and Michał Kalecki, who had previously ascribed to Marxism, were not typical in this respect). The famous Argentinean economist Raúl Prébisch, one of the spiritual fathers of dependence theory in the 1970s and a leading supporter of protectionist industrial policy in underdeveloped countries, recalled shortly before his death:

Total war inclined people to think about a new beginning. It was clear that the world after this disaster could not return to its old routine. It had to be built on a better, more equitable basis. Paul Rosenstein-Rodan wrote then:

If we were to emerge alive, we should not return to the previous status quo but… form a better world […] Not to do enough about inequality of opportunity and poverty when our world resources are sufficient to improve the situation is the real moral crisis.184

Another noted economist of the time, Hans Singer, wrote that his mission is simply the creation of a “global welfare state”.185 This idealism was expressed in development projects and tasks that emerged during the war, and which were placed on the agendas of then-forming international organizations.

The first political statements postulating a rise in the standard of living in peripheral and underdeveloped countries came out of the circle of leftist liberals associated in the 1930s with the World Labour Organisation (who, among other things, called for providing better nutrition in the colonies of the European empires). But it was the war that gave impetus to these ideas. Already in September 1939, just days after the outbreak of war in Europe, U.S. Secretary of State Cordel Hull appointed an advisory committee, whose job was to prepare plans for the ← 66 | 67 → postwar order. The problem of the development of underdeveloped countries was taken up by the Committee in January 1941, when Roosevelt announced the “four freedoms” as the foundation of the new order: among them was “freedom from want” (next to freedom of speech, freedom of religion and freedom from fear). In the Atlantic Charter, signed in August 1941, Roosevelt and Churchill promised equal access to trade and raw materials for all countries; they wrote that “they desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security.”

Soon international organizations began to form which were designed to bring this programme into effect: the FAO (now the U.N. Food and Agriculture Organisation) in 1943, and the World Bank and International Monetary Fund in 1944. The International Labor Organization put together programmes for full employment which included colonies and dependent territories.186 In 1945 the economic development of underdeveloped countries had already become one of the main official objectives of the domestic and foreign policies of Western countries.187 It also had a leading place among the tasks of the emerging United Nations.

The rapid and successful postwar reconstruction of the West was a fourth – in addition to the two world wars and the Great Depression – important historical experience. Many economists later involved in development began their careers in offices of planning and reconstruction after the war. Dutchman Jan Tinbergen, later one of the most influential specialists on development (Nobel Laureate in 1969 and Chairman of the U.N.’s Committee for Development Planning from 1965 to 1972) had previously been (after 1945) the director of the Central Planning Bureau in the Netherlands. In the early 1950s, he began to advise the Government of India during the drafting of its first five-year plan (“the poverty prevailing in India – as a normal situation – was such a contrast [to living conditions in the Netherlands] that it redirected my thinking and main activities”).188 Western Europe rebuilt itself following the enormous destruction caused by the war in part through rational planning, and in part thanks to the injection of American capital.189 (The Marshall Plan was equal to two percent of U.S. GDP; its success only strengthened the belief – then an already well-established theory – that a ← 67 | 68 → lack of capital is the primary and most important brake on development).190 The relative ease with which Europe and Japan rebuilt themselves out of the ruins after the war, managed to maintain full employment, and quickly become richer than before the war, inclined people to optimism.191

It is difficult today to understand the mix of idealism and optimism in which new development projects were undertaken. “In a sense, all the pioneers, without exception, felt they were engaged in a battle on behalf of the underdogs of the world, – i.e., the men, women, and children of countries that were latecomers”, one of the most important protagonists in these events wrote in the 1990s.192

A look at the résumés of the economists involved helps us better understand their motivations. Tinbergen wrote, for example, that in the 1920s he abandoned physics for economics because he wanted to fight poverty.193 Others had experienced the vicissitudes of emigration: fleeing war, they had travelled halfway around the world, eventually finding jobs at British or American universities. Rosenstein-Rodan was born in Austro-Hungarian Kraków, and studied in Vienna and London; he later worked at the World Bank, and retired at the Massachusetts Institute of Technology. Albert O. Hirschman was born in Berlin, earned his doctorate in Trieste, and served – as a German-anti-fascist – in the Allied forces during the war (first with the French, then with the Americans); he later worked in the administration supporting implementation of the Marshall Plan and spent four years in Colombia as an adviser to the World Bank.

Irma Adelman worked as an economist for the World Bank, the UN, FAO and ILO, advised the South Korean government (which was then carrying out its own five-year plans) in the 1960s, and ended her career as a professor at Berkeley. She was born in 1930 to a family of a socialist-leaning Romanian businessman. Having been born into a Jewish family, and brought up in a Catholic school ← 68 | 69 → run by nuns, she carried within her, as she wrote, “a massive sense of primordial guilt, that was later reinforced by the guilt of the survivor of the Holocaust.” Years later, she wrote that the redemption of this guilt by means of the only mechanism possible – service to humanity – was the main force pushing her through life.194 In the late 1960s and 1970s, Adelman came to the conclusion, based on years of painstaking research, that economic growth does not translate into higher earnings for the poor masses in the countries of the developing world, because most of the benefits went to urban elites.195 For two years, she refused to publish these studies because she was afraid that they would serve the political opponents of development aid as an argument to cut off funds. Her compassion towards the poor, excluded and marginalised is inscribed into her biography.

“[M]y mother had brought me up to believe that anything they [the white British] can do we can do. This is not a scientific proposition, but it turned out to be true”, recalled years later Arthur W. Lewis, the first black winner of the Nobel Prize (in 1979).196 “They” were, of course, not just the British, but the citizens of the white, rich world in general. He was born in St. Lucia, and his father died when he was seven years old, leaving behind a widow and five children aged five to seventeen. Lewis left school when he was 14 years old, having completed all the requirements of the curriculum, and began working as a clerk. He later recalled in the autobiography he prepared for the Nobel Committee that the job had proven valuable because it taught him how to type, take notes and keep order.197 Lewis, a descendant of slaves, rose to the top through persistence and perseverance: he earned a government scholarship to study in Britain, and before the war became the first black lecturer at the London School of Economics. (Lewis’ interest in the history of economic development was sparked by his boss at the university, the ultraliberal Friedrich von Hayek, from whose ideas he would distance himself throughout his life.) As the son of a poor black teacher from the empire’s distant provinces, he had learned that success was possible even under the most unfavourable circumstances: it was only a matter of will and effort. When in the 1950s debate continued over how much capital underdeveloped countries were able to absorb – this was a key point in the wider debate over accelerated development – Lewis used the argument ← 69 | 70 → that it was just a matter of will. As he recalled years later: “This is not a scientific proposition, but it turned out to be true.”

2. Theories

Theoretical innovations also tended to be optimistic. The very term “economic development” was still fresh; before World War II it had been used rarely.

The concept, however, was older than words. In the nineteenth century, English literature commonly used the word “progress”, sometimes adding “material” or “economic” (for example, in the writings of Adam Smith and John Stuart Mill). “Development” began to appear sporadically at the beginning of the twentieth century: it was used by Schumpeter in a book published in German in 1911 (but only in 1934 in English), The Theory of Economic Development. In the 1920s, British economic historians and colonial administrators were also beginning to write, though not so often, about “development”.198

Polish authors wrote more frequently and eagerly about “progress”. The word itself appeared late in the Polish language, towards the end of the eighteenth century, and gained popularity during the era of Napoleon and Congress Poland: it was used by, among others, Staszic, Wybicki and Szaniawski, as well as by many journalists during the times of the November Uprising and the Great Emigration. It was also used by Mickiewicz (as counted by one tenacious literary scholar, Francis Pepłowski, it occurs in his writings exactly 58 times, and thus, perhaps, not all that often).199

Even by then, the word had become a symbol – a banner for all radical socio-political ideas. “Progress is life”, wrote the radical philosopher and economist, Henryk Kamieński. Another philosopher, Bronisław Trentowski, used the word repeatedly as part of the phrase “freedom, light and progress”.200

The word “development” appears in the Polish language still later yet, in the 1840s, and originally had a clear philosophical context, appearing in discussions of Hegel’s philosophy.

The economic sphere was only one part of the great, all-encompassing advancement of progress. “The material economy,” wrote Kamieński, “is thus a term defining and objectifying the general progress of humanity, its scientific ← 70 | 71 → embodiment. And this progress, scientifically defined and scientifically objectified, becomes material development.”201 The phrase “economic development” became prevalent in Poland during the interwar period: among those who used it was Ludwik Landau, who wrote in 1933 about “the link between wages in Poland and economic development”, and Oskar Lange, who included it in his outline for an economic programme for Poland after the war, written in exile in 1943.202 This change in terms was significant, because “development” has a different meaning than “progress”: it presupposes hidden potential that you can only develop what already exists in a germinal state.203

Landau and Lange were associated with the left. The impressive career of the concept of “economic development” stemmed not only from its ties to the Hegelian-Marxist tradition. (The words “development of production” or “development of the social economy” appear on nearly every page of the last pre-war issue of the Polish annual journal Przegląd Gospodarczy (Eng. Economic Review), published by the Central Association of Polish Industry, and thus, an institution which distanced itself from the ideas of the Left.) There was something in this notion that seemed to reach to the hidden depths of modern spirituality, and that touched upon a vision of the historical process in which not only the Marxists believed - because they were not the only ones who were deeply convinced that history was governed by universal laws; that it was a process that had a beginning and an end, and, above all, was moving in a certain direction; that the future would be, on balance, morally better than the past; and that scientific inquiry into the path that guides it was possible. Economics was, not only for Marx, but for the spirit of modernity, a record of the historical process in a crystallized, scientific form; “economic development” was the essence of economics. Its identification with “progress” was a matter of course; in the years after World War II, few people questioned this. In general, the terms “economic development”, “progress”, “industrialization” and often “income growth” were simply equated with one another. The notion that economic growth did not necessarily mean ← 71 | 72 → progress, common among nineteenth-century critics of industrial civilization, would not reach the popular consciousness until the 1970s.

Marx’s writings were among the first classical works on economics to use the phrase “economic development” in the sense given to it in the 1950s and 1960s. In the preface to the first German edition of Capital, Marx wrote:

In the next paragraph, in writing about the underdevelopment plaguing Germany, Marx uses the term in the same sense as Rosenstein-Rodan, Lange and Lewis did in the 1940s and 1950s: “Alongside the modern evils, a whole series of inherited evils oppress us, arising from the passive survival of antiquated modes of production, with their inevitable train of social and political anachronisms. We suffer not only from the living, but from the dead.”205

However, it was not until the interwar period that economists developed theoretical tools which allowed them to consider providing underdeveloped countries with a prescription for bridging the gap dividing them from the affluent West. After the war, the collapse of colonial empires and widespread aspirations for emancipation in peripheral countries opened up a vast space for experimentation.

The first technical innovation was the publishing of truly global economic statistics. In the mid-1930s, the first studies on nutrition levels had been carried out in different countries (including the colonies) at the request of the League of Nations. These showed a disastrous level of malnutrition – which was common everywhere except the rich West and a number of countries in the New World dominated by European immigrants. In 1940, a groundbreaking book ← 72 | 73 → titled The Conditions of Economic Progress was published in England by Colin Clark, a friend of Keynes’ and a participant in his seminar. In it Clark published the first global compilation of national income statistics, data that was cited for many years afterward. The gulf in income between developed countries and the developing world could now for the first time be shown in numbers – and turned out to be greater than expected.206 Clark’s book was extremely popular; as the author himself noted, illegal handwritten copies even circulated in Japan during the war.207 By 1947, Clark had been made an adviser to the Planning Commission in India, and he spent the rest of his career dealing with problems of development in underdeveloped countries. As with all new tools, including national income statistics, they were widely used and even abused: the level of national income soon became recognized as the measure of development. This tool offered numerous advantages, the most important of which was that it provided an easy means for comparing very diverse societies (although economists realized how imperfect it was as a measuring stick).

In the 1930s, economics created a new model of economic growth, which suggested – unlike classical economics, which assumed that progress took its “natural course”– that it was possible to accelerate the rate at which national income rose. A tangible example (to which we will return shortly) was provided by the USSR, while the applicable theory was constructed by two economists, Sir Roy Harrod, a Brit, and Evsey Domar, a Russian émigré. The two men formulated their models independently of one another, a true expression of the spirit of the times. Harrod, like Colin Clark, was a member of Keynes’ circle (he was even the author of a biography of him); Keynes and his theories on full employment in developed capitalist countries was the starting point for his analysis. (Keynes himself was interested mainly in developed countries, and did not express particular interest in peripheral countries, or place trust in their governments: in a confidential report on the Bretton Woods conference for the Foreign Office, he called the Third World countries participating in it “the most monstrous monkey-house assembled for years”).208

For Domar, who was born in Łódź brought up in a Russian colony in Manchuria, from which he emmigrated in 1936 to America, the starting point was Marx, and the purpose of his analysis was political in nature: he wanted to prove theoretically the inherent instability of capitalism. The two men’s conclusions, ← 73 | 74 → however, shared many similarities: the so-called Harrod-Domar model is a very simple equation for describing the relationship between income growth, the level of saving (which was equal to the level of investment), and the “capital-output ratio”, which expresses the productivity of capital (which was associated primarily with the level of technological development and was thus relatively constant at a given period in history).209

The political moral to be drawn from the Harrod-Domar model was appealing simple: the key to growth (and therefore economic development) was the level of investment.210 The more a country saves, the more it invests; the higher the level of investment, the higher the rise in economic growth, and, therefore, the future rise in standard of living. Arthur W. Lewis in his most important article on accelerated development, “Economic Development with Unlimited Supplies of Labour”, published in 1954, wrote that a fundamental problem in the theory of economic development is understanding the process by which a community which had previously saved and invested 4 or 5 percent or less of its national income is transformed into a economy in which voluntary savings are at 12–15 percent of national income or more. For Lewis fundamental to economic development was the rapid accumulation of capital, and the key to explaining each industrial revolution was a sudden, sharp rise in savings.211

Lewis based his reasoning on an analysis of economic growth in India: in the first half of the twentieth century, 4–5 percent of national income was invested, which led to growth of 1.25 percent annually. The population grew at roughly the same pace. The level of income of an average Indian thus remained on a constant, very low level. For it to rise, concluded Lewis, investment had to at least double.

In the Harrod-Domar equation, there was no place for a number of important elements found in later, significantly more complex models of growth. It was assumed, for example, that the level of production depended on just two factors – the availability of labour and capital inputs (and not, for example, the educational level of workers). It also did not take it into consideration the possibility of large injections of capital for investment from outside; accumulation always came at ← 74 | 75 → the expense of local consumption. He also did not consider the possibility that one could invest wastefully – the productivity of capital was determined by the level of technological development.

It is hard to overestimate the political consequences of this simplicity. It led experts to offer politicians, many of whom had a very limited understanding of economics, a clear goal for economic policy: the need to increase the level of investment (and thus savings). Just like the petty bourgeois who saves on food and heating, investing every penny in high-yield interest-bearing securities, the governments of Third World countries likewise had to reduce consumption in order to invest. Money “consumed” today equalled a missed opportunity for prosperity tomorrow. This led politicians and economists to an interesting question: whose consumption should be reduced? Who has to pay for growth? In 1957 Oskar Lange wrote:

Accumulation requires an appropriate social structure. In underdeveloped countries, any surplus in production – which itself is rather limited – is used by the elite on forms of conspicuous consumption. In order to change this, one needs to change society. Such thinking led development economics to assume the role of a critical social science. Lange linked this to a feudal economy:

A significant or even predominant part of the surplus product is allocated for consumption by the feudal lords and the state apparatus associated with the feudal regime, the church, court etc. We are familiar with the lifestyle of the ruling classes and strata in a feudal regime: the maintenance of a large number of servants, an unproductive “clientele”, a greatly expanded church apparatus with numerous expenses, the courts of the monarch and magnates. Surplus product was allotted to such objectives under feudalism. […] It follows that a basic condition for the development of an underdeveloped country is to eliminate feudal relations in production and the corresponding parasitic political superstructure.213 ← 75 | 76 →

Even when such a view was not expressed in the language of Marxism, as it is in Lange, the proposals made were generally similar in practical terms: the traditional elite, often additionally burdened by the sin of collaboration with the colonial metropolis, had to pay for accumulation. Economic development had to be accompanied by the social emancipation of the masses.

The realities of political life usually complicate considerably the application of this formula. If surplus production in underdeveloped countries is small – 4–5 percent – even if it is allocated to socially useful investments, rather than to luxury consumption, it will still be insufficient. Where can we obtain the missing 10 percent? Development policy planners turned to various methods. The most radical was nationalization, which allowed governments to gain full control over the investment process (and retain the earnings in the country if the nationalized industries belonged to foreigners). More often they tried to build a system of customs duties and indirect taxes, thus, placing the burden for raising capital for investment on consumption. This was all done according to the formula: we have to tighten our belts today, in order to loosen them tomorrow.

In practice, however, it often turned out that the only possible solution was to lower the standard of living of the poor. Of course, politicians may have seen this as merely a temporary solution, and were forced to turn to this option in spite of their populist rhetoric. The old elites might have been politically unjust and corrupt, but they still possessed money and influence; it rarely paid to engage in open warfare with them, as the risks were too great. You could curse them aloud, because they tolerated populist and nationalist politics as long as they did not interfere with their true interests. The people allowed themselves – for the moment – to be won over with by words. One of the most popular mechanisms for “extracting” money for investment from a poor, rural population was the nationalized monopoly purchasing of agricultural products at prices fixed by the government significantly below those on the global market (this was the case in many postcolonial countries, such as Ghana; we will return to this case). In this way, the state obtained income from villagers, who were forced to finance an ambitious modernization programme.

In the 1950s, there was an inundation of theoretical works justifying such a policy. Their authors, without exception, were sworn democrats, and many of them had leftist sympathies; all were also supporters of the emancipation of the Third World. The paradox was that the economic prescriptions they offered during their visits to governments in Africa, Asia and Latin America implicitly required authoritarian institutions; in democratic conditions, they could often ← 76 | 77 → simply not be put into practice.214 Another noted economist, Gunnar Myrdal, wrote in 1957:

There is no other road to economic development than a compulsory rise in the share of the national income which is withheld from consumption and devoted to investment. This implies a policy of the utmost austerity quite independently of whether the increased savings are engendered by high levels of profits to be ploughed back in industrial expansion or by increased taxation.215

Myrdal added that planning was necessary, and that planning had to be anti-market, because only large-scale investments involving the creation of entire industries from scratch could lead to an industrial breakthrough, and these would not be profitable from a capitalist standpoint.

The government had to involve itself in the process of industrialization: the message was clear. Ragnar Nurkse, an emigrant from Estonia and professor at Columbia and Princeton Universities, was convinced, like Rosenstein-Rodan and many other colleagues, that the only remedy for poverty in the Third World was industrialization. Otherwise, they would remain trapped indefinitely in a vicious circle of low investment, a growing population and stagnant wages. This was a commonly held view: impoverished countries were caught in “low-level equilibirum traps”, that is, their social and economic structure condemned them to stagnation.216 Another noted economist, Harvey Leibenstein, wrote in 1958 that underdevelopment is a state of “quasi-stable equilibrium”, which requires a “push” in order to reach a new state of equilibrium – where investment and the associated risk-taking are necessary in order to maintain a place on the market. Reaching this state would of course require both coordinated intervention by the state and international aid.217 ← 77 | 78 →

Unlike Rosenstein-Rodan, Nurkse believed, however, that it was not enough to invest in a number of interrelated sectors – what was needed was sustainable growth in the overall economy: the “big push” was to encompass simultaneously the whole of the economy, as a mean of breaking the vicious circle of poverty and low investment:

But where could capital for investment be obtained? Nurkse was optimistic: he believed that poor countries did not lack capital; they were merely unable to mobilize it. This hidden capital in poor countries was the labour of their people; if we add international aid to this (Nurkse often wrote about two percent of U.S. GDP, which is equal to the cost of the Marshall Plan in Europe), this should, according to Nurkse, be sufficient for a “big push”. The cheapest path to industrialization was the bring into the labour force those people living in the countryside who were de facto surplus, that is, their labour did not increase agricultural production. If villagers who were actively working sent their surplus relatives – cousins, brothers and nephews who lived with them – to work on large public construction projects, and continued to feed them there, then, according to the economist, the unproductive consumption of the surplus rural population would become productive consumption.219

The economist did not respond to questions posed to him by reviewers at the time: perhaps assigning poor villagers to new jobs would cost more than the cost of merely providing them with substinence?220 And where could money be obtained for their accommodation on construction sites? For transport? For job training? For oversight and supervision? For building materials? Finally, the crucial point: how to encourage them to work, since currently they were, Nurkse claimed, supported by relatives, and allegedly had nothing to do? Why should they work for free? Nor was it clear how many farmers and in what seasons could actually be mobilized to work – that is, how many people were really surplus. ← 78 | 79 →

Nurkse also believed – like Prébisch – that exports would not help poor countries raise capital for investment. The developing world generally exports either natural resources or agricultural products. The market demand for their goods in the rich countries of the West is limited. Increasing production would only lead to lower prices, rather than to higher incomes. One can even imagine a situation in which a country through enormous effort expands its exports of cocoa and coffee, but that its income from them is lower than before.

Foreign trade could also be harmful from another point of view. In exchange for cocoa, gold and coffee, an underdeveloped country imported machinery to produce industrial and consumer goods. According to Nurkse, however, there should be as little of the latter as possible. This is because luxury is demoralising and not conducive to savings. Nurkse believed that many consumer needs were neither necessary nor essential, and thus not truly needs. The consumption of luxury goods was just part of a play for social status. Imported luxury goods are consumed by the elite and become a status symbol. In this way, they become a widespread object of desire among a poor country’s poorest citizens – and any effort to meet these needs will weigh on the trade balance and lower the savings rate (and therefore investment).221 Imports of cars or perfume were harmful, since for the same money you could buy equipment needed for the “big push”. But can a democratic government permit such restrictions on consumption?

Arthur W. Lewis wrote about the potential benefits for poor countries of their surplus labour. In a famous and much-quoted 1954 article, he described the economy of a poor country that consisted of two sectors: a small industrial and a dominant agriculture sector, full of surplus people.222 If industrialists were willing to pay workers more than they could earn in the fields – Lewis estimated that 30 percent more would suffice – this would sufficiently compensate landless villagers for the costs and inconvenience associated with a move to the city and would be adequate to support them. Industrialists in poor countries would then be in possession of two trump cards. First, they could pay workers much less than their competitors from rich countries. Second, along with the expansion of industry, more and more workers would migrate to cities, but their earnings would not have to rise because as long as a labour surplus remained in the countryside, the cost of food (on which workers spend most of their money) would remain stable. In this way, urbanization and industrialization might proceed ← 79 | 80 → somehow “spontaneously”.223 If labour shortages began to occur in the countryside, food prices would rise, and the wages of workers in the cities would likewise have to rise; however, industry would then have become strong and competitive enough to afford these costs.

Lewis immediately faced accusations that his model assumed growing social inequality: living in cities alongside capitalists and the middle class, who were acquiring new wealth along with industrialization, would be masses of rural workers, whose salaries barely covered the costs of subsistence. Lewis thought this was painful, but inevitable: he could not see another way to accelerate growth. His research on the industrial revolution in England seemed to confirm that a temporary increase in social inequalities could not be avoided. In later books, he proposed income redistribution in the form of draconian taxes on the elites in traditional societies, namely, the landowners, but also on financial speculators and other unproductive parasites. (Lewis did not include in this category capitalists investing in industry; he had no liking for them, but he appreciated their historical role.) Although the industrialization process had to take place largely automatically, the state nevertheless had a decisive role to play. In 1952 Lewis wrote:

Planning in backward countries imposes much bigger tasks on governments than does planning in advanced countries. The government has too many things [to do] which can in advanced countries be left to entrepreneurs. It has to create industrial centers, to put through an agricultural revolution, to control the foreign exchanges more strictly, and in addition to make up a great leeway of public services and/or ordinary economic legislation. And all this has to be done through a civil service that is usually much inferior to that of an advanced country. Why then do backward countries take more readily to planning? Because their need is also so obviously much greater. And it is also this that enables them to carry it through in spite of error and incompetence. For, if the people are on their side, nationalistic, conscious of their backwardness, and anxious to progress, they willingly bear great hardships and tolerate many mistakes, and they throw themselves with enthusiasm into the job of regenerating their country. Popular enthusiasm is both the lubricating oil of planning, and the petrol of economic development–a dynamic force that almost makes all things possible.224

Lewis added that development “increases the range of human choice”. A list of similar statements could be extended virtually indefinitely. There were discussions about how to plan, in how many industries to invest, how far nationalization ← 80 | 81 → should go, and what rules to impose on foreign trade and capital flows, but nobody doubted that all this was the domain and mission of the State.

By the mid-1950s, Albert O. Hirschman had acquired a reputation as a dissident, who after his experience acting as an advisor to the Colombian government (1952–1956) began doubting the wisdom of integrated planning for the economy as a whole. In 1958 he published a book in which he announced, in contrast to Nurkse, the need for “unbalanced growth”. He believed that the state should invest in one industrial sector, which through linkages would “pull along” other branches of the economy. Hirschman was much less condescending towards his clients than many of his colleagues: he wrote about the “hidden rationalities” in forms of economic life in the Third World that were seemingly irrational to an outside observer. He gave as an example Colombia, where in many regions it was more economical to invest in air transport than to build a road (seemingly less expensive) through the jungle, as advocated by experts from the World Bank and the UN. However, Hirschman (the dissident!) was likewise convinced of the need to build industry, and that the state should provide inspiration for this (or simply do it on its own). In the spirit of the era, he thought that in backward countries hidden potential lay in the people’s skills and talents, but was held back by irrational and outdated institutions; this potential had to be freed up before the country could enter onto the shining path of growth. He ascribed a great deal of importance to cultural factors, which at that time was unparalleled, explaining the backwardness of Latinos as the result of a widespread belief in luck and the need to outwit others to get ahead in life.225

Economic development was unthinkable without political emancipation, whether this concerned the masses in underdeveloped countries, or entire nations seeking to free themselves from outside domination. This view found its fullest expression in the texts of the Argentine economist Raúl Prébisch, who would later become one of the spiritual fathers of the theory of dependency. It is no coincidence that these ideas were born in Latin America, where economic and political failure in times of independence could easily be explained as a product of imperial (and no longer colonial) domination. This was – especially from the late nineteenth to the mid-twentieth century – a very real concern. The U.S. ambassador represented not only the political but also the economic interests of his country, which did not necessarily coincide with the interests of Latinos. His ← 81 | 82 → interference in local politics and business was meticulous, painful, and often carried out with a striking lack of respect for local sensitivities and pride.226

Even countries less subject to imperial dictates, such as Argentina, suffered badly from the collapse in world trade during the Great Depression. In Latin America, as in the West, this was a formative experience – albeit in a different way. The turn of the century had brought Argentina true prosperity. The country’s standard of living was among the highest in the world, and many Argentines believed they could attain universal prosperity through the export of agricultural products. In those days, even the socialist press in Buenos Aires praised liberal free trade: in 1891, one of them attacked economic protectionism as a “tremendous capitalist barbarity” that “raises the prices of essentials and is designed to free the upper classes from paying taxes by shifting these to the shoulders of the workers.”227

The crisis brought a painful awareness not only of their own economic backwardness, but also of their dependence on foreign export markets. When the demand for their goods vanished, Latinos found themselves trapped with no way out. Latin American countries returned to 1929 levels of income very slowly, in some cases not until after World War II, which reignited demand for their exports. In the early 1930s, the GDP of Chile and Mexico fell by more than a third. This shock led people to draw conclusions: though various forms of state control over the economy were experimented with in the 1930s, only Prébisch turned his reflections into an economic theory. In the late 1940s, in a report for the recently formed UN Economic Commission for Latin America and the Caribbean, Prébisch wrote:

If by “the community” only the great industrial countries are meant, it is indeed true that the benefits of technical progress are gradually distributed among all social groups and classes. If, however, the concept of the community is extended to include the periphery of the world economy, a serious error is implicit in the generalization. The enormous benefits that derive from increased productivity have not reached the periphery in a measure comparable to that obtained by the peoples of the great industrial countries. […] The industrialization of Latin America is not incompatible with the efficient development of primary production. On the contrary, the availability of the best capital equipment and the prompt adoption of new techniques are essential if the development of industry is to fulfil the social objective of raising the standard of living. The same is true of the mechanization of agriculture. Primary products must be exported to allow for the importation of the considerable quantity of capital goods needed.228 ← 82 | 83 →

Blame for this lay in the very structure of international trade. Prébisch thought that growth in labour productivity was higher in industry than in the extraction of commodities, particularly in agricultural production. According to him, however, this difference did not lead to a decline in the prices of industrial products, as the supporters of classical economics would expect. Because workers and business owners in industrial countries had a virtual monopoly on new technology, they could also reduce the pace of its dissemination. In this way, they prevented the prices of industrial products from declining, and thereby protected their profits and living standards. Workers and entrepreneurs from peripheral countries did not have such opportunities; they had to sell their products at prices, which – thanks to this technological monopoly – were dictated by the centre.229 The more tobacco, coffee, sugar, rubber, oil, gold or diamonds manufactured, the more prices would drop on the global market.

Prébisch had in hand fresh substantive arguments in favour of his theory – a new document produced by the United Nations, the first complete statistical data on the prices of agricultural products and commodities compiled since 1860; it proved that prices did indeed fall as production increased.230 He also had strong historical arguments: two great industrial powers – the United States and Germany – during the period of intense industrialization in the late nineteenth century, strongly protected their markets. The political message of his theory was clear: development is unthinkable without the creation of domestic industry; however, suitable conditions for its growth need to be created, while also protecting the domestic market from an influx of imported goods. It is clear that industry in developed countries can produce better and cheaper goods than fledgling local producers: free competition would have bankrupted them. In an interview held a year before his death, Prébisch recalled how his theory was born:

We had to industrialize in Argentina without previously building a theory, because we needed to supply more goods to the population. But we could not pay for all the imported goods, due to the fall of our exports and the deterioration in our terms of trade. That’s the simple fact. Without any theory, the whole of Latin America did the same. From Mexico all the way down. […] [For instance,] import-substitution, not as a theoretical preference, but insofar as we cannot find sufficient markets for our exports. That’s all. ← 83 | 84 → We need to increase our income. We need to import more. Insofar as we cannot import more by paying with exports, then we have to pay with our own production.231

In this case, as well, breaking out of a vicious cycle of poverty demanded sacrifices. Prébisch did not conceal the fact that the protection of domestic industry would come, inevitably, at the expense of the citizens, who would have to pay more for poorer quality local products. But there was no other choice; the alternative was being eternally fated to the periphery. No one had promised that the road to prosperity and national emancipation would be easy.232

3. Politics

The laws governing intellectual life can be very brutal. Challenging dominant intellectual currents requires courage; those who dissent often face ridicule and barely concealed contempt. In the 1940s and 1950s, such a fate was experienced by those (very few!) who believed that planning, nationalization and statism were not necessarily the best ideas for the development of underdeveloped countries.

In 1952 a prestigious economic journal printed a critical discussion of a new UN report on development written by Herbert Frankel, a well-known economist from Oxford, (where he held the Chair in Colonial Economic Affairs). The report was prepared by a group of experts (among whom was Arthur W. Lewis) and devoted to his methods, which allowed unemployment to be rapidly reduced in the poorest countries.233 However, the report’s contents revealed something more, as Frankel wrote:

[The report] is also significant because of the unconscious expression which it gives of the climate of economic opinion in the middle of the twentieth century. Indeed, it is in itself a very interesting case study for economists, political scientists and even for philosophers, of preconceptions which are apparently current not only in the offices of governments, but also in the more cloistered retreats of academicians – preconceptions which seem at times to be developing into something like an “Official Concept of Progress” […] The authors of the report, true to the spirit of the times, do not appear to have been troubled unduly by any inconvenient difficulties of definition. To them progress is clearly progress; if it cannot be clearly seen or sensed (and reading the report one almost ← 84 | 85 → gets the feeling that it really can be), it can, at any rate, be measured in terms of national income aggregates or averages and the like, to which I refer later in this article.234

Frankel drew attention to the tendencies attributed to “human beings” by the report’s authors, and the conclusions that followed: “human beings are experimental in their attitude to material techniques, to social institutions, and so on […] The important point at issue, however, is the rate, and the cost – in terms of human life and suffering at which the process of ‘experimentation’ (in itself a very significant abstraction) is being conducted.”235

The UN experts wrote that economic development depended primarily on the actions of governments, and therefore, according to Frankel, development was “largely a matter of social will”. This was taken as a given – the economists made no effort to provide any justification for it. “It seems to me very doubtful whether a history of economic change, of innovation, or of economic growth in different societies supports this optimistic view of the role and capacities of governments,” the Oxford professor commented.236 He accused the authors of accepting authoritarian solutions and a mechanical approach. He quoted the report:

As it is we are left with the ex cathedra conclusion (par. 38) that “there cannot be rapid economic progress unless the leaders of a country at all levels – politicians, teachers, engineers, business leaders, trade-unionists, priests, journalists – desire economic progress for the country, and are willing to pay its price, which is the creation of a society from which economic, political and social privileges have been eliminated. On the other hand, given leadership and the public will to advance, all problems of economic development are soluble.”237

But what does it mean to “pay the price”? Who had to pay it? Frankel commented: “It would have been useful to have been told more exactly what the authors meant by ‘willingness to pay the price of economic progress’ Is it to be paid by the masses or by the leaders, by the young or the old, by the weak or the strong?”.

He also questioned the prescription for unemployment suggested by the UN experts: the state-sponsored building of industry, which would absorb surplus labour from the countryside. It is not known, wrote Frankel, how many people are truly surplus in the countryside, because nobody had ever made an exact count; it was not known who would buy the products produced by the newly-built industry ← 85 | 86 → (the remaining peasants in the countryside were too poor, so there would be no market for these goods). This was not what was contained in the report; one thing was – that development should take place rapidly. The word “development” was repeated numerous times and with emphasis. Recommendation No. 4 of the report, for example, stated:

Frankel commented:

This is about as useful advice as would be that of a doctor to a patient to the effect that he may be suffering from an undefined disease, and that he should therefore take any steps he thinks fit to cure it rapidly; but that, above all, he should not fail to announce publicly what he is doing about it.239

The crux of the matter, however, lay not in ambiguities, generalities and insinuations, but in the vision of development itself, the primary purpose and main criterion of which were postulated to be a rise in income. We know, Frankel wrote, that a significant portion of economic activity in different societies takes place without money; it therefore cannot be seen in statistics on national income. Thus, we cannot say for certain if a worker living in the slums of a big city “is better off” than when he lived in solidarity with his relatives and family in the countryside “with a different pattern of beliefs, hopes and ideals.” Moreover, Frankel saw the concept of “income” as an accounting term. It did not include the goals it is intended to serve – it is merely an abstract category. “Planned development” could easily mean planning citizens’ consumption (“authoritarian” decision-making), as well. From an economic point of view, the production of unnecessary objects, for example, too many locomotives or too many tonnes of steel, could increase national income, but would not increase prosperity. This risk was all the greater, since according to the recommendations of the UN report, planners were supposed to deliberately ignore market signals.

Written into the very idea of planning is, according to Frankel, “extreme oversimplification of the problem of structural change.” He reminds us that this is not a game of chess, but the shifting of whole societies onto a new track: people ← 86 | 87 → adjust to new situations slowly and with difficulty, and their reactions and needs are difficult to predict in advance.

From the perspective of hindsight, we have to acknowledge that these warnings proved all too justified. However, they went against the spirit of the times. They were also completely ignored. Frankel’s article met with an angry response; the most violent response was written by Arthur W. Lewis, one of the authors of the report being criticized.241 In response to Frankel, he wrote:

It does not emerge from his review whether he favors the economic development of underdeveloped countries; development has some painful results, of which he is fully aware, and to which he makes extended reference. It is certain that he dislikes the idea of speeding up development. For him, development is a slow process of re-orientation of attitudes and institutions, and attempts to speed it up are certain to be disastrous, if not also unsuccessful.

Every economist is familiar with the concept that every good has its cost, or price, and that it is not for economists to say whether the price is worth paying. We were asked, as technical economists, what measures were required, if development was to be speeded up, and we gave answers, to the best of our ability. I think Professor Frankel’s review may be interpreted as arguing that we should have refused to answer any such question. We should have said “Speeding up economic development is bad; its costs in human happiness exceed any material benefit that it may confer. You ought not to want it, and we refuse to have anything to do with the matter.” This is a rather unusual view of the role which the economist should play. Professor Frankel does not want to speed up the economic development of underdeveloped countries, but most member countries of the United Nations do. They asked us what measures would be required, if this end was given, and we did not think it improper to try to answer their question.242 ← 87 | 88 →

Lewis’s response is quoted here primarily because the same rhetorical techniques he used to crush his enemy here have been used successfully by followers of radical market reforms since the 1970s. Lewis distances himself from ideology; he believes that he is an impartial expert, a technocrat who is merely providing politicians with answers to their questions, and not affecting their decisions. His opponents in the discussion are pictured as pessimistic reactionaries attached to the anachronistic status quo, who in their practice show disregard for the needs of the impoverished citizens of underdeveloped countries. He also makes it clear to his opponents (and, more importantly, to his readers) who has political backing. Which side would prevail in a dispute between an aging university professor and the majority of members of the United Nations?

Thirty years after this debate, those defending the role of the state in the economy were treated in the same way – not only in relation to planning, but even regarding food subsidies, whether these were in the poorest of countries or in those with highly-developed social systems. They were strongly reproached by liberals – who, like Lewis, thought of themselves as neutral technocrats – for being enemies of development, who while posing as the ostensible friends of the poor (whom they in fact disregarded), were defenders of anachronistic and unjust institutions which bred corruption, inefficiency and wealth-destroying inflation.243 They just as easily deflected the charges of the “reactionaries”.

On a side note, the polemic between Frankel and Lewis also prompts some rather discouraging reflections on the mechanisms guiding intellectual life. Frankel has been forgotten; Lewis was awarded the Nobel Prize in 1979. From the standpoint of a public career, it is therefore safer to err in line with conventional thinking – to go along with the rest – than to be right and on your own. We cannot even rely on posthumous rehabilitation.244 Milton Friedman was luckier; his memorandum to the Government of India warning against placing too much emphasis on capital investments and relying on a naïve faith in their automatically generating an increase in wealth, is at least still remembered today.245

In the 1950s, programmes and reports dedicated to the acceleration of development in underdeveloped countries proliferated like mushrooms after a rain. In 1948, at a UN conference in Havana, countries rich and poor formally set for themselves the goal of maintaining full employment and rapid economic growth. ← 88 | 89 → In 1949 the first mission of the World Bank (then called the International Bank for Reconstruction and Development) to a third world country was sent to Colombia; Experts from various fields, from education to health, were to write a national development plan for Colombia, covering all fields of social life. After returning, they wrote in the report:

In 1951 the UN released the report, which aroused a strong protest from Frankel. A decade later, UN Secretary-General U Thant designated the 1960s as the first “Development Decade”. He set a goal for national income in developing countries to increase by at least 5 percent annually until 1970 and “continue to expand at this annual rate thereafter.” In his report on the plan, he noted:

The concept of national planning—for social as well as for economic development. This is central to all the proposals for intensified action by the United Nations system during the development decade […] Former objections to planning, based largely on a misunderstanding of the role envisaged for the private sector in most development plans, have died away. It is now generally appreciated that the purpose of a development plan is to provide a programme of action for the achievement of targets based on realistic studies of the resources available. Planning is proving to be a potent tool for the mobilization of existing and latent resources—human and material, public and private, domestic and external available to countries for the achievement of their development aims.247

Ignacy Sachs, the Polish delegate to the United Nations conference at which these ambitious plans were announced, noted then with evident satisfaction:

Symptomatic of the prevailing sentiment today is the fact that at this great gathering of scholars meeting in Geneva under the aegis of the United Nations in February 1963 to discuss the salvation of the developing world, no one tried to defend expressis verbis the concept of free competition or an unplanned economy. Delegates from socialist countries listened with some satisfaction to how American professors urged the delegations from the developing world to adopt planning.248 ← 89 | 90 →

Sachs was writing the truth; his description had nothing to do with communist propaganda. He did note with concern, however, that the various “socialisms” put into practice in the developing countries differed from the Soviet pattern – sometimes so much so that they hardly deserve the name:

Indeed, the planning projects in the vast majority of countries of the developing world did not assume total nationalization of the economy in accordance with the Soviet model. On the table were investments by the state in industry and nationalization of key sectors of the economy, especially the mining industry, but also banks and large factories. Native-born capitalists – always few in number – were often allowed to keep their property; in return, they had higher taxes imposed on them and were forced to help fulfil state plans.250 (A good example of this was the lot of the Tata family’s wide range of businesses in India. While after independence their airlines were indeed nationalized, they maintained control of the rest of their empire, which has been successfully expanding ever since.) Nationalization always remained, however, “within reach”. The government could resort to this option if it considered it appropriate and politically viable.

The delicate issue of “political profitability” frustrated planners from the outset. Economists moved in a world of ideas, models and statistics. They often did not understand that politicians had to take into account in their calculations dozens of variables that did not fit into the planners’ theories: they had to seek support from both within the country and outside of it; they faced constant competition from rivals seeking power, and finally, they had to feed their ego. Politicians also tended to handle matters in a manner dictated by (at least in part) by their country’s political culture and the existing power relations; from the point of view of the planners, these actions often seemed irrational, as they were circuitous and costly. Most likely nobody has expressed this better than Albert O. Hirschman in his writings about his experiences in Colombia (1948–1952): ← 90 | 91 →

Hirschman’s reflections were indeed exceptional; however, they came too late (his most important book was published in 1958, these recollections are from 1984). More typical was the reaction of another expert, a farmer from Oregon, agronomist, and later head of the FAO, who gave some common-sense advice to the inhabitants of a small village in the north of Thailand. Seeing their astonished faces, he told a reporter accompanying him: “If I had been able to stay in that village another few hours, we might have changed the fundamental agricultural methods for hundreds of miles.”252

While dealing with villagers was easy – or so the thinking went – politicians posed problems from the outset. Arthur W. Lewis quickly grew uncomfortable in the role of advisor to the Prime Minister of Ghana, Kwame Nkrumah. When he asked for the removal from the first Five Year Plan of several large construction projects in the capital, Nkrumah refused, reminding him that he must take into account the political consequences of the investments undertaken.253 After just two years, Lewis resigned and left Ghana embittered.

Politicians also had their biases – not always in line with economic doctrine – which planners had no choice but to take into account. Another expert, Colin ← 91 | 92 → Clark, in recalling years later a meeting with Gandhi, whom he was to advise on how to pull India out of poverty, wrote:

A few weeks after this conversation, Gandhi was assassinated, leaving Nehru free to realise his vision unimpeded. The Indian Prime Minister believed in progress and technology. “I’m all for tractors and big machinery”, he said, summing up his vision.255 Politicians were familiar with the subtleties of power, but less so with the mysteries of economics; this had its consequences. In recalling Nehru, Colin Clark complained about how some development planners had concluded that industry – any industry – automatically enriches a country.

What a disastrous error. India, under the guidance of a leading scientist, followed a most peculiar line of reasoning. Population, he pointed out, was increasing, therefore we need more food. To produce more food we need fertilizer. So far, correct. Then we must produce the fertilizer – the possibility of importing was apparently not considered. And to construct fertilizer plants we need steel. Therefore as much as possible of our available resources should go into building large steel works. Perhaps because of the extraordinary conditions under which it is produced, steel attracts emotional attributes which prevent rational discussion. Once when I was asked in India whether further investment in steel works should be undertaken, I replied that this was a problem in
comparative religion.256

The “liberal” point of view then was likewise completely caught up in the politics of the time. (The word “liberal” has been placed in quotes for a reason; in fact, the advocates of laissez-faire economics who come along in the 1970s –convinced that free trade was the only recipe for growth – were not then present among the specialists on underdeveloped countries.) A Non-Communist Manifesto –this was subtitle of a book published in 1960 by Walt Whitman Rostow, a historian and economist who, from among all the authors of theories on “catching up” earned the greatest sympathy from the market. He was also a politician and a high official ← 92 | 93 → in the Kennedy administration; he said openly that he had formulated his doctrine on growth in order to counter the global threat of communism.257

In June 1961, Rostow, then Deputy National Security Advisor, delivered a commencement address to a very special group of graduates – officers who had just completed the U.S. Army Special Warfare Center’s course in counterintelligence strategy. The graduates included eighty officers from twenty different countries, the majority of which were poor American client states in Asia and Latin America facing a military threat from leftist guerrillas. The world, he warned, had become a dangerous place. In Cuba, the Congo, Laos and Vietnam – all poor, backward countries – the U.S. administration was facing a crisis that seemed impossible to solve. Each of them, Rostow said, “represented a successful Communist breaching–over previous years—of the Cold War truce lines which had emerged from the Second World War and its aftermath. In different ways each had arisen from the efforts of the international Communist movement to exploit the inherent instabilities of the underdeveloped areas.”258

It was obvious to him that the cold war could not be won without giving the people of the underdeveloped countries the promise of a better life.259 Rostow did not deny that the communist experiment ushered in modernity, but at the price of freedom.260 He thought this was a poor trade-off, because if things were left to their natural course, you could have both one and the other. The officers being trained to fight the guerrillas in Vietnam were to become actively involved “in the whole creative process of modernization.” This was the field where the battle would be decided. Rostow’s theory would be an ideological response to the promise of a way out of backwardness that communism had brought to the ← 93 | 94 → world’s poorest countries.261 Rostow himself was not among America’s “doves”; in fact, he was said to be the one who convinced Nixon in 1972 to carry out the last wave of bombing raids on Hanoi – a needless action, since the political decision to withdraw from Vietnam had already been taken. What was at stake, he had explained to the president, was the prestige of the United States.

Rostow had written his doctorate in the 1930s on the history of the British industrial revolution. He was convinced that history repeats itself, obviously not in its details, but in the general course taken by all societies as they moved toward modernity. He thought the stages in this course were universal, as he believed, like Marx earlier, that he had discovered the universal laws of history, which he described in his book. This watershed moment Rostow called the “take-off”. Afterward, national income increases dramatically – from a few percent to a double-digit increase – and the country is on the road to modern growth. Rostow thought that the “take off” had begun earliest in England, in the second half of the nineteenth century; other countries – he named, among others, Chile and Venezuela – were now on the threshold. He described this change in words worthy of a visionary, not a scientist:

Usually from outside the society, but sometimes out of its own dynamics, comes the idea that economic progress is possible; and this idea spreads within the established élite or, more usually, in some disadvantaged group whose lack of status does not prevent the exercise of some economic initiative. More often than not the economic motives for seeking economic progress converge with some non-economic motive, such as the desire for increased social power and prestige, national pride, political ambition and so on. Education, for some at least, broadens and changes to suit the needs of modern economic activity. New enterprising men come forward willing to mobilise savings and to take risks in pursuit of profit, notably in commerce. The commercial markets for agricultural products, domestic handicrafts and consumption-goods imports widen. Institutions for mobilising capital appear; or they expand from primitive levels in the scale, surety and time horizon for loans. Basic capital is expanded, notably in transport and communications, often to bring to market raw materials in which other nations have an economic interest, often financed by foreign capital. And, here and there, modern manufacturing enterprise appears, usually in substitution for imports.262

The “take off” itself, a period of high investment and intensive development of the industry lasting several decades, could be triggered by an impulse from outside (for example, the sudden increase in demand for wood and coal in Sweden in ← 94 | 95 → the late nineteenth century); it could also, as in nineteenth-century Japan, be the result of the internal logic of the historical process. Rostow drew clear political conclusions from this – the West should stimulate development in underdeveloped countries by providing loans, technical support, and buying their goods. All this would sooner or later result in a “take off” to modernity. Communism, with its labour camps, expropriation, dictatorship and impoverished masses, was therefore, Rostow concluded, no longer needed: “the tricks of growth are not all that difficult”, he wrote.263 Rostow thought that for a “dedicated” country, the road from a traditional society to the stage of high mass consumption would take from 54 to 80 years.264

Rostow’s theory was criticized by those economists – i.e., the majority – who did not believe in the spontaneous capitalist development of underdeveloped countries. They did not perceive the fact that although Rostow differed from his more radical colleagues in terms of his political prescriptions, he in fact had a great deal in common with them: like Nurkse, Lewis, Rosenstein-Rodan (and the Poles Lange, Kalecki and Sachs) he was convinced that there could be no development without industrialization, and, following from this, that the rate of investment needed to be rapidly increased, and that all societies moved toward modernity essentially along the same path – the road staked out by the history of the West. Whether a country was a bourgeois democracy or a dictatorship of the proletariat, the essential structure of economic and social modernity was the same – because it is shaped by the division of labour in industry, and this is a function of technology, which is the same in both America and the Soviet Union. All of these economists (Marxists and non-Marxists alike) could say following Marx that developed countries merely showed what the future looked like for underdeveloped countries. They differed, of course, on many issues, especially in such nontrivial matters as the methods by which you can accelerate progress; as to the point they sought to reach, however, their thinking was the same. They shared in common a belief in progress, the fact that people were guided primarily by economic motivations, the primacy of the “base” over the “superstructure”, technophilia, a belief that there were no limits to growth, and that they represented a “scientific” doctrine. I need to make a digression here that is important for the rest of this narrative: in the 1980s, this same creed and these same structural similarities were shared by both Marxists and the ultra-liberal “Chicago school”, ← 95 | 96 → followers of the next big economic narrative. Dudley Seers, one of the most renowned specialists in development, wrote in 1979:

In the 1950s, the vitality and unprecedented prosperity of the affluent societies of the West – especially the United States – drove the imagination in a way that in postmodern times may seem incomprehensible. The transformation of a rural, traditional agricultural society into a modern, urban and industrial society (this was a sharp dichotomy in the theory of modernization) was not solely economic in nature: it was part of a wider process of modernization that included the most intimate spheres of an individual’s life – from religion and family life, to politics and the production of culture.

Sociologists and modernization theorists presented the vicissitudes and goals of this process with a certainty equal to that of economists in relation to the vicissitudes and goals of industrialization.266 Economists, moreover, read the work of modernization theorists; W.A. Lewis, for example, cited them often.267 Modernization, wrote historian Cyril E. Black, was the “process by which historically evolved institutions are adapted to the rapidly changing functions that reflect the unprecedented increase in man’s knowledge, permitting control over his environment.”268

Perhaps the most succinct definition of modernization, as it was imagined at the time, was proposed in 1959 by sociologist Edward Shills at a conference ← 96 | 97 → devoted to the “new states” in the Middle East, Asia and Africa. Shills said that one word – modernity – summed up the ambitions of underdeveloped regions:

In the new states “modern” means democratic and equalitarian, scientific, economically advanced and sovereign. “Modern” states are “welfare states,” proclaiming the welfare of all the people and especially the lower classes as their primary concern. “Modern” states are meant necessarily to be democratic states in which not merely are the people cared for and looked after by their rulers, but they are, as well, the source of inspiration and guidance of those rulers. Modernity entails democracy, and democracy in the new states is, above all, equalitarian. Modernity therefore entails the dethronement of the rich and the traditionally privileged from their positions of pre-eminent influence. It involves land reform. It involves steeply progressive income taxation. It involves universal suffrage. Modernity involves universal public education. Modernity is scientific. It believes the progress of the country rests on rational technology, and ultimately on scientific knowledge. No country could be modern without being economically advanced or progressive. To be advanced economically means to have an economy based on modern technology, to be industrialized and to have a high standard of living. All this requires planning and the employment of economists and statisticians, conducting surveys to control the rates of savings and investments, the construction of new factories, the building of roads and harbors, the development of railways, irrigation schemes, fertilizer production, agricultural research, forestry research, ceramics research, and research of fuel utilization. “Modern” means being western without the onus of following the West. It is the model of the West detached in some way from its geographical origins and locus.269

To this long quotation we need to add an important footnote. “Democracy”, as referred to here should not be understood in a narrow, formal manner – on the Western model, with a multi-party political system, a tripartite separation of powers, and civil rights guaranteed by the constitution and upheld by the authorities. While American writers on modernization theory generally held up the American system as a model (“The United States is Presiding at a general reorganization of the ways of living throughout the world” was an epigraph to Daniel Lerner’s The Passing of Traditional Society: Modernizing the Middle East in 1958), the specifics of local traditions and the historical moment left open a wide range of options.270 The will of the people could express itself in non-liberal forms of government, such as a one-party system. There was nothing extraordinary about this, especially at a time when making the leap into modernity required the breaking up of feudal social structures – and these old structures, even if doomed to oblivion, would not give in without a fight. ← 97 | 98 →

In the same year (1959), one of the most prominent modernization theorists, David Apter, analyzed the dynamics of the process by which the pursuit of modernity was pushing countries in the developing word to embrace authoritarian politics.271 He wrote about this not only without hand-wringing, but with no particular regrets. The leaders of the “new” countries, wrote Apter, face a dilemma. They must reconcile the need for universal participation in public life, necessary to maintain public support, with the need to create an integrated, disciplined apparatus of power. Only an “oligarchy” can manage such a transformation of society. “We are familiar with the radical totalitarian solution to this problem. Can we find an optimal solution which falls short a totalitarianism?”, he asked.272

Apter assumed that rapid industrialization required “tight organizational control” and therefore the need for a certain degree of authoritarian rule.

Because a government needs a great deal of trial and error in order to chart its course, its strength and structure must be relatively secure. Such strength is a function of political party support, which in turn depends upon recruitment. There is a tendency for parties to become the private patrimony of the leader. The party leader tries to alter the social stratification system by making its curve less sharp and reducing the upper strata. He needs to create a new managerial and bureaucratic elite. […] The modern nationalist movements of today attack traditional oligarchies and replace them with their own. The main difference between these oligarchies is that in the new ones recruitment is on the basis of political power, party loyalty, or expertise. Each of these categories of entry are relatively democratic.273

Authoritarianism works: Apter did not recommend it – his article is strictly descriptive in style – but he left room for no doubt:

The combination of an elite core with a mass following is the most effective for development purposes. It provides the bureaucratic cadres to run the party, the government, and act as the coordinating arm of the state, while the mass party organization provides the informational core. The differences and antagonisms between local party factions provide both competition in ideas and allow the membership to serve as a communications source.274

Apter was thus an optimist: even if democratic mechanisms in the Western sense did not work, the system was not only capable of carrying out modernization efficiently, but also of assuring certain features characteristic of democracy, including ← 98 | 99 → competition within the ruling elite and a flow of information “from below” to the government. The party, he recommended, should be decentralized in its organization, but hierarchical in terms of its communication structures. Distributing wealth to its members (and thereby maintaining their support) would ensure the government’s stability and open up possibilities for social mobility (i.e., a career inside the party apparatus). “If too strictly organized, such a party can become a punitive arm of the state. If it does, then the costs of coercion go up, and a very nasty situation can arise.”275

Such a despotic government could be effective and was better than totalitarianism because it placed fewer restrictions on political freedom. However, this price was not what was most important. Democracy was neither possible nor in fact desirable, because it was too weak, too “soft”, and the leap into modernity required a level of heroism that representative governments were unable to demand from their people. The collective aim – accelerated development – demanded precisely such a political structure; one could not conclude otherwise, but it could not be denied. “Authoritarian governments mix the proportions of nationalism and ideology so that sacrifice and self-denial are regarded as social virtues,” Apter wrote.276 The government was responsible – but not to the voters, but to interest groups, such as the urban intelligentsia and the heads of industry:

Government may become impatient with accountability, which limits the freedom and autonomy of decision-makers and tempers their decisions and their plans by potential opposition. […] Leaders search for certainty; social life becomes organized; those who go along with the regime receive benefits and rewards; purpose and direction is provided; development of the state becomes the new religion in which the dominant political party is the home of the faithful, and the messiah is the party leader who controls the government. Within this general framework there can be considerable freedom, often even political freedom […]277

Apter wrote this in 1959, so even before most former colonies had gained independence (although this was generally already at hand). He showed notable foresight: in the developing countries, alongside planning committees and government investments, single-party systems began to quickly multiply. Apter knew there was a natural tendency for non-democratic government to increase their control over the lives of citizens: “the more government controls, the more its costs rise. […] Since increasing costs must be borne by the public, there is normally a ← 99 | 100 → rise of dissatisfaction”. According to Apter, once could hope that economic development would eventually push the political system towards democracy – in some distant and undefined time in the future.278

Life would quickly verify these theories. Western economists and sociologists and politicians from the Third World entered the 1960s, the first “Development Decade”, with optimism. Success was possible. It was within arm’s reach. It could be achieved with the help of the West – but also in spite of it, if the West did not abandon its colonial habits. “What excites the imagination most and evokes the most enthusiasm in our countries, especially among the younger generations, are the lessons learned from the Soviet methods of development”, Raúl Prébisch wrote.279

This successful country was eager to share its experiences.


ISBN (Book)
Open Access
Publication date
2017 (March)
Political economy of development Economic planning Developing countries in 20th century 20th century history History of Poland Economic underdevelopment
Frankfurt am Main, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2017. 378 pp.

Biographical notes

Adam Leszczyński (Author)

Adam Leszczyński is an Assistant Professor in the Polish Academy of Sciences. He won several awards for both his historical works and publications on developing countries in Africa, Latin America and Asia.


Title: Leap into Modernity – Political Economy of Growth on the Periphery, 1943–1980