Why Europe Rose And Others Did Not

This essay originally appeared as “The Theory of Economic Development and the European Miracle” in The Collapse of Development Planning, edited by Peter J. Boettke.\
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Among writers on economic development, P.T. Bauer is noted both for the depth of his historical knowledge, and for his insistence on the indispensability of historical studies in understanding the phenomenon of growth (Walters 1989, 60; see also Dorn 1987). In canvassing the work of other theorists, Bauer has complained of their manifest “amputation of the time dimension”:

The historical background is essential for a worthwhile discussion of economic development, which is an integral part of the historical progress of society. But many of the most widely publicized writings on development effectively disregard both the historical background and the nature of development as a process. (Bauer 1972, 324–25)

Too many writers in the field have succumbed to professional overspecialization combined with a positivist obsession with data that happen to be amenable to mathematical techniques. The result has been models of development with little connection to reality:

Abilities and attitudes, mores and institutions, cannot generally be quantified in an illuminating fashion.… Yet they are plainly much more important and relevant to development than such influences as the terms of trade, foreign exchange reserves, capital output ratios, or external economies, topics which fill the pages of the consensus literature. (Ibid., 326)

Even when a writer appears to approach the subject historically, concentration on quantifiable data to the neglect of underlying institutional and social-psychological factors tends to foreshorten the chronological perspective and thus vitiate the result:

It is misleading to refer to the situation in eighteenth -and nineteenth-century Europe as representing initial conditions in development. By then the west was pervaded by the attitudes and institutions appropriate to an exchange economy and a technical age to a far greater extent than south Asia today. These attitudes and institutions had emerged gradually over a period of eight centuries. (Ibid., 219–20)1

At the root of the approach criticized by Bauer there appears to be a methodological holism that prefers to manipulate aggregates while ignoring individual human actors and the institutions their actions generate. Yet, “differences in people’s capacities and attitudes and in their institutions are far-reaching and deepseated and largely explain differences in economic performance and in levels and rates of material progress” (Ibid., 313–14; emphasis added).

Bauer’s critique thus draws attention to the need to study both the centuries of European history antedating the Industrial Revolution and “the interrelationships between social, political, and legal institutions” in that period (Ibid., 277).2 Here his assessment links up with an impressive body of scholarship that has emerged in recent years emphasizing precisely these points.

The “European Miracle”

While it would be wrong to suggest the existence of any monolithic analysis, a number of scholars concerned with the history of European growth have tended to converge on an interpretation highlighting certain distinctive factors. For the sake of convenience, we shall, therefore, speak of them, despite their differences, as forming a school of thought. The viewpoint may be referred to as the “institutional” — or, to use the title of one of the best-known works in the field — the “European miracle” approach.3

The question is: why Europe?

The “miracle” in question consists in a simple but momentous fact: It was in Europe — and the extensions of Europe, above all, America — that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the “Malthusian trap,” enabling new tens of millions to survive and the population as a whole to escape the hopeless misery that had been the lot of the great mass of the human race in earlier times. The question is: why Europe?

One possible answer, which has long enjoyed powerful support in intellectual circles in the West and among officials in underdeveloped countries, was heavily influenced by socialist and even Marxist tenets.4 It accounted for Europe’s extraordinary growth largely by the more or less spontaneous advance of science, combined with a “primitive accumulation” of capital — through imperialism, slavery and the slave trade, the expropriation of small farmers, and the exploitation of the domestic working class. The conclusion was clear. The extraordinary growth of Europe was at the expense of untold millions of the enslaved and downtrodden, and the European experience should serve decision makers in underdeveloped countries more as a cautionary tale than an exemplar.

The contributors to the newer model, however, reject this venerable legend. Concerned as they are with comparative economic history, they have sought for the origins of European development in what has tended to set Europe apart from other great civilizations, particularly those of China, India, and Islam. To one degree or another, their answer to the question, why Europe? has been: Because Europe enjoyed a relative lack of political constraint. As Jean Baechler, in a pioneering work, pointedly expressed it:

The first condition for the maximization of economic efficiency is the liberation of civil society with respect to the state…The expansion of capitalism owes its origins and raison d’être to political anarchy. (Baechler 1975, 77, 113; emphasis in original)

The Uniqueness of Europe

John Hicks partially adumbrated this approach in the late 1960s (Hicks 1969).5 In A Theory of Economic History, Hicks laid out the “chief needs” of the expanding, mercantile phase of economic development — the protection of property and the enforcement of contracts —

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