Pseudorasmus draws attention to an excellent essay by Davis Kedrosky on the consequences of the Glorious Revolution. Far from ushering in Industrial Revolution and an era of property rights, laissez-faire capitalism, and parliamentary democracy, as claimed by the institutionalists like Douglass North, it was a messier transition.
The institutionalist narrative was something like this - the Parliament introduced restraints on executive authority, protected property rights, encouraged entrepreneurship, promoted fiscal responsibility, created representative government, and thereby ignited the Industrial Revolution. But reality was different.
Consider this on the laissez-faire narrative,
The system of “private bills” (in the House of Commons) meant that politicians and local legal changes were essentially up for sale, and these acts composed an astonishing 70 percent of all legislation. In the early eighteenth century, special interests repeatedly won out. The Calico Acts of 1700 and 1721 restricted first the import and then the sale of printed cotton, a flagrant capitulation in favor of the wool and silk industries in the face of competitive innovations. Under an Act of 1729, beer brewers were forced to secure licensing from local magistrates, ending a once-open system for a century. Alcohol distributors continued to be favored with tariffs on French wines, while the Corn Laws were not repealed until 1846, and even included an export subsidy until 1815. After the passage of the Bubble Act of 1720, the formation of joint-stock companies was difficult and subject to strict Parliamentary approval. Oligopolies, enforced through licensing, mandatory inspections, and price controls, were often promoted for revenue-raising purposes, as their concentration eased the collection of the excise.
On representative government,
Landowners remained the paramount faction in national politics and, until the end of the nineteenth century, they were the economic winners of industrialization. Already buoyed by rising land values around coal and water power sites, they continued to extract significant rents from their legislative dominance. As tax receipts accelerated—five times faster than national product—during the eighteenth century, the land tax barely changed. The aristocracy passed on the costs of fighting Britain’s wars to the commercial middle class through the excise and customs, the extraction of which was aided by a quadrupling in the size of the fiscal bureaucracy. On finding that 179 of 189 millionaires dying between 1809 and 1859 were landed, Rubinstein (1981) remarked that “an observer entering a room full of Britain's 200 wealthiest men in 1825 might be forgiven for thinking that the Industrial Revolution had not occurred.”
On property rights, which were supposed to have lowered expropriation risks and transaction costs, and thereby encouraged investments, risk taking and entrepreneurship,
Landownership... had been secure since the Middle Ages under the common law, and was enshrined in the Magna Carta agreed at Runnymede in 1215. Small farmers and great landowners alike regarded property rights as sacrosanct and fundamental to English freedom, and these rights could be held or transferred at will, thanks to a constellation of competing courts. By the mid-eighteenth century, agricultural expansion had been taking place for 200 years on that basis. But this security was not static; between 1750 and 1830, Parliament passed 5200 acts of enclosure, converting communal property over open fields, commons, and wastes (21 percent of the kingdom) to private forms regardless of opposition. This was not a restriction per se, but rather a transition from particularized—where assets can be used and transferred by a small set of people defined extra-economically—to generalized rights. Enclosure may have failed to generate significant short-term growth, but it did reduce feudal ownership patterns based on membership in certain social strata and created larger, contiguous blocs of land over which tenants had control over investment and cropping choices. Tellingly, enclosed farms were more likely than open to have introduced the new experimental crops of the late agricultural revolution—turnips, clover, and sainfoin. Parliament also intervened to remove land from “equitable estate,” which prohibited holders from mortgaging, leasing, or selling most of their plots.
This on the role of Parliamentary mandates in promoting infrastructure development, albeit by limiting certain property rights,
The Whigs generally represented urban financial interests and manufacturers, and in their thirty years of ascendancy, they promoted infrastructural developments—turnpikes, canals, river extensions—that tended to open up the domestic market. They were also recognized as more creditworthy by public bondholders, as reflected in interest rate movements... Acts established “statutory authorities” empowered to build, maintain, and operate public infrastructure and services and secure funding through taxes, debt, and tolls. These organizations replaced inadequate governmental entities lacking revenue-raising abilities and eminent domain, such as the sewer commissions that in the seventeenth century had to maintain river navigation without the ability to tax users or purchase land along the banks. Turnpike acts, for example, created trusts that could levy tolls on roads and mobilize labor (or the equivalent in taxes) from communities alongside them. These organizations could issue debt and equity secured by tolls, which could be claimed by bondholders if default occurred. Crucially, if landowners on the route attempted to obstruct construction by refusing to sell their plots, the trusts could appeal to commissions that forced a sale at a juridically-determined “fair price.” The mechanism eliminated the hold-up problem and was “legal origin for modern laws concerning eminent domain.” Similar solutions were devised for the construction of bridges and canals. The total number of estate, statutory authority, and enclosure acts increased from 30 per year during the 1600s to 400 by 1800. The novel characteristic of eighteenth-century landed property rights appears to have been flexibility, not rigid security.
Similarly, contrary to conventional wisdom, the role of patent protections may have been exaggerated,
Before the system was reformed in 1852, taking out a patent in England alone cost £100 and over three times that for the United Kingdom as a whole. Moser (2007) showed that at the Crystal Palace exhibition of 1851, only 11 percent of British exhibits (and 16 percent of award winners) had successfully filed. Patents were frequently violated, a practice facilitated by judges who often deemed the holders monopolists. And in many cases, they were right to think so; Thomas Savery’s steam engine patent blocked Thomas Newcomen from getting one for his far more successful device, while James Watt used his own to delay the development of the high-pressure steam engine. “Caveats” allowed speculators to express the intention of filing a patent in an area, prohibiting future applications with actual content. Mokyr—following Nye (1991)—suggests that the importance of the system may have been that a few famous examples led inventors to innovate in the expectation of securing a patent, but which didn’t actually grant the hoped-for monopoly rights. Instead, the technical information could be freely disseminated and used. Once again, as with land use, the achievement of the British state appears to have been a fortunate flexibility, not rigid adherence to guarantees.
This summary of the distributional coalitions as described by Joel Mokyr and John Nye,
They argued that a “distributional coalition” emerged in English politics during the eighteenth century, uniting “Big Land” and “Big Commerce” in a “centralized government structure” dedicated to ripping up the feudal ancien regime and replacing it with a uniform national regulatory framework. Private acts solved hold-up problems in land use and—through infrastructural development—created a single national market, one in which inefficient local monopolies would be wiped out by firms operating with the latest technologies on a country-wide scale. Rent-seeking moved away from the regional to the Parliamentary level, preventing the installation of internal tariff barriers of the kind that plagued many Continental economies. Legislation ceased to be primarily redistributionary—exemplified by the repeal of the Calico Act in 1774—and pursued, if not the national interest, at least those of the critical wealth-holding factions represented in government. The Glorious Revolution’s establishment of Parliamentary supremacy made the body the uncontested rule-maker in the land, able to elastically supply the demand for economic reorganization.
Once these largely un-coordinated set of forces set the industrial revolution in motion, it unleashed a flood of deregulation and liberalisation,
Statute of Artificers repealed 1814, the enumeration clauses of Navigation Acts in 1822, artisan exports in 1824, machine exports in 1843, the Bubble Act in 1825, the Corn Laws in 1846—the turning point had been reached. Liberalization was a response to the inadequacy of mercantilist and patronage-based legislation in a modernizing industrial world. Even the entrance of manufacturing interests into Parliament was probably a result of their economic success, not a precondition for it... Langford (1991) called it “a great bog of uncoordinated lawmaking, ever expanding but always unplanned.” We must also distinguish between factors that facilitated industrial change and factors that drove it. And for the latter, we need to look at different forces—at Britain’s precocious urbanization, international commercial success, and manufacturing productivity. If there were institutional sources, they lay elsewhere and operated over a much longer period than the century-and-a-half separating the coronation of William and the Congress of Vienna.
Fascinating read.
No comments:
Post a Comment