We take as uncontested, that the U.S. industrialized effectively during the course of the 19th century, and Latin America did not.
Even Adolf Hitler pointed to that comparison as already well-known, in 1924.
We had reached the point, in my discussion prior to my interrupting myself or better to my having diverted my train of thought, of saying that even if the European emigrants of the first half of the seventeenth century had in general been less rapacious in intent than the (as Hitler phrased it) Mediterranean peoples who conquered the Aztec and Inca empires during the first third of the sixteenth century. . .
Even if we grant this possibility, we have to compare the eighteenth century pre-industrial stage of the British colonies with the eighteenth century pre-industrial society of Iberian colonies of Latin America.
Now it is at this point that I would like to generalize the argument. I suggest that some light may be thrown on our topic by posing rather the question, Why Did Industrialization Happen in the West and Not in China? With the understanding that there was an Industrial Revolution, and that it happened in England in the late eighteenth/early nineteenth, century.
We turn next to a Russian émigré: Robert Skidelsky is professor of political economy at Warwick University. He is the co-author, with Edward Skidelsky, of How Much Is Enough: The Love of Money and the Case for the Good Life. In the 13 March 2003 New York Review of Books he wrote:
Until about 300 years ago, periods of economic growth had always been reversed, leaving long-term income levels unchanged: the standard of living of a European agricultural worker in the 16th century was little higher than it had been in Roman times.
That is, there had been no significant change in one thousand years, mas o menos.
Robert James Alexander, Baron Skidelsky, continues in the immediately following sentence, with the work of the gloomy Englishman economist avant le mot:
In his Essay on Population (1798) the Reverend T. R. Malthus explained why. Whenever food supply grew, population grew, but even faster. This meant that income per head — or food per person — was constantly being forced back toward subsistence levels.
But from the late seventeenth century onward
continues the good baron,
“perhaps for the first time in . . . history . . . both the Dutch and the British economies . . . succeeded in increasing the per capita income of a growing population despite the continued pressure of diminishing returns in agriculture.”
— which quote is attributed to Douglass C. North [um, you know, he won the Nobel Prize] and Robert Paul Thomas, in The Rise of the Western World [Cambridge 1973], p. 2.
Malthus’s population theory
continues Baron Skidelsky immediately
was by then explaining only past history. In the century after he wrote, emigration to the Americas, the Industrial Revolution, and falling birth rates banished, or at least postponed, his “problem” in the Western European countries.
Wealth could be made to grow faster than population.
When the empirical facts do not match the theory of the day, one sees a new theory proposed.
Adam Smith, the founder of scientific economics, was the inventor of growth theory. The question he asked in The Wealth of Nations (1776) was : What laws, institutions, and public policies does a society need to experience economic growth?
Smith had no doubt that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”
— and Skidelsky commits here a minor faux pas, citing the quotation as it appears in some secondary work by what I presume is another British economic historian, John A. Hall, entitled Powers and Liberties: The Causes and Consequences of the Rise of the West (Penguin Books 1985), rather than where A. Smith wrote it. This is not simply a pedantic exercise: what he meant by the same words might be somewhat different, in the different eras or times in which he wrote them. The British economy in the 1790s, when the output of cotton thread was growing by a factor of one hundred, was quite different from that of the 1830s and 1840s, the Wonder of the World.
Over 50 years later, and well into the Industrial Revolution, John Stuart Mill listed three requirements for the “less civilized and industrious” nations to catch up with the advanced ones: better government and property laws; the “decay of superstition” and “growth of mental activity”; and hospitality to “foreign arts” (technology) and foreign capital.
The provided reference is to Principles of Political Economy, book I, chapter 13 [London 1871].
Behind these economists’ assertions lay the thought that economic growth is natural because, except for some monks and other ascetics, “love of gain” is universal. The main “obstacle to growth” was what Karl Marx called “ancient and venerable prejudices”.
–with here, no reference given at all. I suppose that a Russian émigré, speaking before an audience of professional economists, would naturally assume that everyone was quite familiar with the works of Marx.
However, these would yield to scientific knowledge. In this view, no change in human motives is needed to explain economic growth [emphasis added — mm], merely a change in the circumstances in which the self-interested motives are translated into action. Prescriptively, “scientific” economics tries to tell you what the required circumstances are.