IV – Necessary conditions

Parts I, II and III.

We are often in the habit of calling the modernity virus “Westernisation”, for the simple fact that it occurred first in North West Europe. From this unique spontaneous beginning it spread elsewhere, in fact nearly everywhere. Many human developments like paper, the wheel, gunpowder, the stirrup, writing and the number 0 likewise began in a single spot and spread, but the uniqueness of origin is only because the independent discovery is less probable than seeing someone else use it once it has been discovered elsewhere.

Subsequently, industrialisation may not be particularly Anglo-Dutch in itself. It is just that a wide range of conditions necessary for the spontaneous beginning of industrialisation happened there first, and then spread. If time was run again, randomness may result in those condition arising elsewhere, even while history remains relatively similar up to that point. But the modern world would look very different, and there might be no concept of “Westernisation”.

Lets have a shot at creating a list of these conditions in a society that individually may be necessary but insufficient to allow the modernity virus to begin spontaneously, but taken together may be sufficient to see the independent spawning of industrialisation. After this, industrialisation/modernity becomes self propelling. These are conditions that have existed in many countries over the years, but may have only all come together in the West Germanic countries at the beginning of the modern or growth era.

I stress that it is difficult to try and differentiate what was necessary and what was merely a feature. Just because something was a feature of Anglo Dutch derived modernity does not necessitate it. When I say “modernity” I mean a sustained rise in living standards. Things like textile mills and steam engines may (or may not) only be local colour from our corner of the multiverse.

The first, which I won’t number is the society must have agriculture.

1/ A religion or other form of ethics that vindicates the pursuit of wealth or other material interest. Traditional religion often involves the pleasing of spirits or other supernatural forces in return for worldly gain, but a striking similarity between many world religions is the attack on or dismissal of the material world. Buddhism does this by highlighting the ephemeral nature of worldly delights, and Abrahamic religions dismiss the material world as a transient stage before the more important afterlife (or second coming of Jesus/Isa in Christianity and Islam)[fn1] extending to the notion of the world as a prison in Gnosticism. Religions or ethical codes that allow for materialism may be a necessary condition for two reasons. Firstly, you need to want to achieve something in the material world to do so, even if it takes other conditions to make this possible. Secondly, as argued by Hobbes, Voltaire and Smith, if you care for material things, someone else, particularly infidel, is far more valuable as a trading partner than as a way to prove one’s piety through violence. This provides a measure of necessary stability. Examples of such codes would be Renaissance Humanism in Florence, various philosophers during the Enlightenment or, if you believe Weber, an unintended by product of specific Calvinist theology.

2/ The existence of durable private institutions and organisations for sharing risk and the legal basis for doing so. The commercial basis for industrialisation may need larger organisations than single proprietor businesses or small partnerships in order to achieve economies of scale, networks and reputations, share risk and achieve far longer duration than the lifespan of the founders. Only organisations like this can make the investments required for industrialisation. Timur Kuran argues that the relative decline of the Middle East in the early modern era was due to (otherwise admirable) aspects of Islamic law that hindered the creation of such organisations beyong temporary partnerships. These organisations can take many forms, for example the theoretically communal local governments that became Township and Village Enterprises during China’s early industrialisation. The archetypical example in our world however, is the joint stock, or limited liability company that arose in the West Germanic countries, such as the British East India Company.

3/ Closely related to the above, developed financial systems (including accounting). These are also necessary to share risk and provide capital for any investments that are necessary for industrialisation. These arose in Venice (particularly after adaptation of modern mathematics from Islam) and were widely taken up to provide insurance for the shipping lines of the Dutch and English trading fleets, and adapted to the public companies that developed at the same time. Perhaps unexpectedly, this bears almost no relation to traditional attitudes towards usury.

4/ A given level of technological development to allow industrialisation – note I don’t think a “reason” society is necessarily part of this, or the social practice of science (which has not been necessary for technology). Given technology can (and has) been transferred rapidly and easily though out history, any Eurasian society after say 1500-1600 would have been able to access the same technological stock as North West Europe, particularly if they had the trade networks outlined below. Whilst essential, we can overestimate the role of technology because our images of smokestacks and factories, but these have generally followed rather than preceeded modernity.

5/ Coal, rivers suitable for hydroelectricity or some other easily exploited source of energy.

6/ The existence of a mercantile constituency for those in power. If those gaining merchant and commercial wealth are a threat to those in power (for instance if they are a feudal ruler or their constituency gains its wealth from land), they will be suppressed or fought, and laws will be prejudicial against commercial activity (the late Ming and the Qing dynasties of China spring to mind). If they are part of the support for those in power, they will push for laws favourable to their activities (and unexpectedly society at large) – this includes interaction with point 2, they can influence laws to extend the life of their firms. The merchant class may merely be lucrative to a monarch, or they may actually be part of the government, as in Venice or the parliamentary Whigs in Britain. If they provide support (especially financial), they will be encouraged. There traditionally has been no real ethical merit to either opposition or support. Commercial behaviour only brings widespread prosperity under particular conditions (something stressed by Smith but often forgotten by those who quote him) which did not exist until the beginning of the modern age. It was a choice between two rent seeking classes, one of which, in conjunction with other conditions unexpectedly brought great wealth to the world. Political stability is also required to allow long term investments to be realised.

This condition can be confused by the rhetoric that these constituencies use. For instance, those in Britain used rhetoric of liberty in their self interest whilst desiring a society that was no more liberal than contemporary Iran. Whilst this rhetoric eventually became to be applied to things that actually constitute freedom (whilst being used by segregationists and Rhodesians along the way), this was after the phenomenon we wish to describe.

A sub condition of this is the existence of trading networks that help create the class and provide a conduit for new technologies/ideas to enter the country to be exploited. It also increases demand for a product to exported, which may be manufactured. In the loss of trade routes, an existing class may become land based (as with Venice after the fall of Byzantium). A trading network can also develop out of a pirate tradition, as in England.

We could also list cities, since cities allow innovation to thrive, but I think this comes with the merchant classes anyway.

We can quibble with any one of these (I actually have quibbles with all of them), or add some more, but I think this is one plausible list for discussion’s sake.

Any society in which these conditions happen to come together at the same period would have had a chance, maybe even a probability of spontaneously beginning industrialisation and the modern age. From then on it is very likely that other countries close to these conditions would contract industrialisation through rapidly expanding trade before the same mix of conditions could appear there and produce another spontaneous beginning. As it turned out, these conditions first appeared at the same time in North West Europe and we subsequently think of the modernity virus as a Dutch/British phenomenon, and of industrialisation as “Westernisation”.

But isn’t inevitable and but for a few quirks of history, it could have happened elsewhere. In fact, the above conditions were nearly all present in another country in the 17th century. In another world, the industrial revolution may have arisen in Japan, and we would talk of Easternisation. That’s something I’ll speculate on in the next post.

[fn1] Islam, founded my a merchant as it was, says much nicer things about commercial behaviour than most, but retains an other worldliness.

About Richard Tsukamasa Green

Richard Tsukamasa Green is an economist. Public employment means he can't post on policy much anymore. Also found at @RHTGreen on twitter.
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Paul Frijters
Paul Frijters
10 years ago

I find many of the distinctions you make unhelpful. Distinctions are always imperfect, but there are degrees. If you want to say that modernity started in Northern Europe means to me you really need to define modernity as something you could indeed attribute to that region and not to any other. To define modernity as a wealth increase is then quite useless because history has seen many periods in which quite large populations rose above subsistence for quite long periods of time. The Roman Empire had such periods, as had the Chinese in the centuries that their agriculture went through a boom. Arguably, it includes the early Middle Ages when the population pressure was low and half the year was spent on leisure. Etc, etc. Similar things can be said about the notion of ‘industrialisation’. The first industrial revolution was probably the emergence of pottery, over 10,000 years ago. To call the advent of iron and bronze metallurgy anything but an industry seems silly since we still call it an industry today.

I would hence urge you to redefine your question into something more clearly unique and hence more debatable. Perhaps you should define modernity as the advent of the modern nation state which is traced to France, England, and Germany. The only thing wrong with that is that you are going to have to leave out the Netherlands where the dominant central administration is of much later vintage.

Paul Frijters
Paul Frijters
10 years ago

richard,

I find this supposed structural break mainly mythical. Who knows whether we will again return to subsistence when the cheap energy runs out? If centuries of good living in history dont count as a structural break, who is to say we have really made the break now? And besides, to characterise 16th century Holland/Brittain as emerging from subsistence is just not true. They were already middle-income regions, on a par with the middle income regions of the Italian city-states of 2 centuries earlier!

“They’d just be bit parts in a far longer symphony that had been playing for thousands of years.”

which is indeed exactly how I think about such things, but it doesnt mean the whole symphony isn’t interesting and worth dissecting into useful abstractions.