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PROPERTY AND PROGRESS: WHERE ADAM SMITH WENT WRONG Robert Brenner I. A-HISTORICAL MATERIALISM The Dominance of Smithianism During most of the first half of the 20th century, there was widespread, if not unanimous, agreement, that the way to understand the historical emergence of economic development in the West was through the theoretical lens provided by Adam Smith in The Wealth of Nations.. As everyone knows, according to Smith, the growth of output per capita takes place by way of the expan
  1 PROPERTY AND PROGRESS:WHERE ADAM SMITH WENT WRONG Robert Brenner I. A-HISTORICAL MATERIALISMThe Dominance of Smithianism During most of the first half of the 20 th century, there was widespread, if notunanimous, agreement, that the way to understand the historical emergence of economicdevelopment in the West was through the theoretical lens provided by Adam Smith in The Wealth of Nations. . As everyone knows, according to Smith, the growth of outputper capita takes place by way of the expansion of the market. This leads to the search forthe gains from trade, leading to specialization and the increase of the division of labor, aswell as capital accumulation, which together make for rising efficiency, the increase of productivity. There ensues a pattern of self-sustaining growth by way of the invisiblehand…at least so long as the economy is unfettered by rent-seeking states or other suchparasitic entities.Working with this framework, the Smithian historians of the earlier generationtook as their point of departure what they called feudal economy, which they understoodas natural economy, or production for use—literally no trade. Feudalism had emerged, asthey saw it, as a result of exogenous shocks, when a series of invasions—by the so-calledbarbarians, then the Muslims, and finally the Vikings—disrupted the great trans-Mediterranean trade routes that had long nourished the European economy, going back toRoman and Greek times. Agrarian Europe, and especially the lordly manors thatconstituted its basic cell structure, was thus thrown back into self-sufficiency and, as aconsequence of the resulting decline of specialization and the division of labor, a longperiod of stagnation.Against the background of feudal autarchy and non-growth, economicdevelopment was once again unleashed by the reestablishment of precisely those samelong distant trade routes linking Europe with the eastern Mediterranean. This was theinitial rise of the market, and it provided the basis for the initial growth of the division of labor, focused on merchant-led towns. Great industry grew up in those towns—notablyin Northern Italy and the Southern Netherlands—supplying manufactures to the trans-European market for luxuries and military goods that had formerly been procured in thethe Eastern Mediterranean or beyond—a kind of import substitution. After that, the callof urban markets brought about the transformation of the countryside, as feudal lordsreorganized their estates in a capitalist direction in order to produce and sell moreeffectively to the towns. So, especially as feudal lords, absolutist states, and mercantilistgovernments lost their capacity to prey on production and fetter growth, the economy  2proceeded from medieval commercial revolution, to early modern agricultural revolution,to modern industrial revolution.The foregoing story was, in fact, pretty much the same one that Adam Smith toldin Wealth of Nations , Book III, which is largely devoted to the rise of capitalism. Anarrative of extraordinary power, it was taken up by such ideologically and politicallydiverse thinkers as Henri Pirenne, the liberal Belgian historian, and Paul Sweezy, theAmerican Marxist economist. The picture it painted was one of more or less unilinealprogress, driven by the growth of trade. Rise of Malthusianism/Ricardianism Nevertheless, although this is sometimes today forgotten amidst contemporarycelebrations of the market, Smithianism hardly went unchallenged. From the late 1930s,and especially from the late 1940s, the discovery of the demographic factor, the role of population, completely transformed the economic historiography of the medieval andearly modern periods. For the next three decades, roughly through the 1970s, AdamSmith was left in the shade by Thomas Malthus and David Ricardo. Of course, thenewly-emergent demographic interpreters in no way denied the extraordinary growth of trade and towns that took place in medieval and early modern Europe. This had beendefinitively established by the great Smithian historians of the first half of the twentiethcentury. What the demographic interpreters did call into question was the ability of tradeand towns to bring about, in any automatic way, economic development, in the sense of thegrowth of labor productivity or per capita output.Demographic historians such as M. M. Postan thus noted that, in later medievalEurope, rural regions experiencing the greatest impact of the growing urban marketsometimes responded to the opportunity to exchange by tightening rather than looseningserfdom, opening the way to economic stagnation. Postan referred to the strengthening of villeinage in the Thames Valley, in the shadow of London, in thirteenth century England.The classic case was of course East Elbian Germany and Poland, where neo-serfdomemerged in tandem with the rise of international trade in the fifteenth and sixteenthcenturies. Commerce thus opened the way to neo-feudalism which made forunderdevelopment. In an analogous manner, other demographic historians like E. Le RoyLadurie pointed out that, while the growth of urban demand offered peasants the opportunityfor increased income, there, too, the outcome was generally the opposite of economicgrowth. Peasant involvement in the market was accompanied by subdivision of holdings,intensification of labor rather than rising investment, and falling labor productivity…thisleading not to economic growth, but to agricultural involution. 1  In the end, what the demographic interpreters ultimately accomplished was nothingless than to replace the Smithian picture of unilineal progress resulting from the gains of  1 M. M. Postan, “The Chronology of Labour Services,” Transactions of the Royal Historical Society, 4 th  series, vol. xx (1937), pp.192-193; E. Le Roy Ladurie,  Les paysans de Languedoc, 2 vols. (Paris:S.E.V.P.E.N., 1966), I, p.8..  3trade with the Malthusian pattern of cyclical stagnation driven by demographic growth.Roughly speaking, in this perspective, population was seen, a la Malthus, to growgeometrically, output only arithmetically. As population grew, peasants were obliged tooccupy ever worse land and to break up holdings, which brought about declining land-laborand capital-labor ratios. The inevitable outcome was declining output perperson…declining labor productivity As a consequence, the increased demand for food andland, driven by rising population, outran supply, undermined by weakening productivity,and there followed the famous Ricardian pattern of factor prices. Food and land prices roserelative to the prices of labor and manufactures. Landlords and farmers did well at theexpense of workers and town artisans. Increasing poverty was an unavoidableaccompaniment. Ultimately, of course, population hit a ceiling, which was enforced byfamine, disease, and late marriage. One then witnessed just the opposite pattern: fallingpopulation, relatively cheap food and land, relatively high manufacturing prices and wages.As Postan and Ladurie, as well as other great demographic interpreters likeWilhelm Abel of Germany, showed, European history from 1000 through 1700 andbeyond was understandable in terms of two great demographic cycles…ultimately drivenby population increase and declining agricultural labor productivity. 2  Phase A. Population rise from 1100 to 1300…leads to Great Famine of 1316-1317, theBlack Plague of 1348-1349, the Hundred Years War…”The General Crisis of theFourteenth Century”Phase B. Population decline in later fourteenth and early fifteenth century…”the goldenage of peasants and workers.”.Phase A. Population Rise from 1450 to 1600…leads to a population ceiling, c.1600,trans-European warfare, “The General Crisis of Seventeenth Century ”Phase B…population stagnation and decline in the later seventeeth/early eighteenthcentury.The bottom line, especially with respect to the hitherto hegemonic Smithian paradigmwas that the Malthusian cyclical pattern of secular stagnation persisted throughout mostof Europe not just during the medieval period, but into the middle of the eighteenthcentury. So much for unilineal progress. The Limits of Malthusianism/Ricardianism and Smithianism Nevertheless, the Malthusian/Ricardian model had glaring weaknesses of its own,which were more or less the mirror opposite of those of the Smithian model. TheSmithian historians had a great deal of difficulty explaining why the spectacular, longterm growth of commerce and urban industry had failed to elicit a sustained growth of agricultural productivity and failed to overcome long term economic stagnation 2 M. M. Postan, “Medieval Agrarian Society in its Prime: England,” in The Cambridge Economic Historyof Europe, volume I, 2 nd edition (Cambridge: Cambridge   University Press, 1966); Le Roy Ladurie, Paysansde Languedoc ; W. Abel,  Agricultural Fluctuations in Europe: From the Thirteenth to the TwentiethCenturies (London: Routledge, 2006).    4throughout most of Europe before the industrial revolution…hyper-commercialized,industrialized, and urbanized Flanders being a telling case in point. But, by the sametoken, the demographic interpreters were unable to explain why, from various pointsduring the early modern period, their model ceased to hold in certain limited but criticallyimportant regions of Europe, despite continuing population increase. Thus, as virtuallyeveryone recognized, from the fifteenth, sixteenth, and seventeenth centuries, theeconomies of England and the northern Netherlands began an epoch making process of what turned out to be self-sustaining Smithian growth.. In both places, the expansion of trade was accompanied by: a profound deepening of the division of labor in bothagriculture and industry; the spectacular accumulation of land and of capital; and,ultimately, the acceleration of technical change. From this point onward, in these twoplaces, the growth of output per capita was never again stymied by the growth of population, which continued--indeed radically accelerated--right through the nineteenthcentury. Simply put: the Smithians could not explain persistent stagnation in most of Europe through the middle of the eighteenth century; but the Malthusians could notexplain the take off into sustained growth in England and the northern Netherlandsduring the late medieval and early modern periods. Posing, or Failing to Pose, the Problem of Economic Development  By the mid-1970s or the early 1980s, the great historiographical conquests—andfailures—of Smithianism and Malthusianism - Ricardianism had more or less clearlyposed the fundamental conceptual and historical problem that had to be dealt with byeconomists and historians, if the field was to move forward. The challenge was toresolve, conceptually and empirically, the following two closely interrelated questions:i. Why was it that over six or seven centuries--from around 1050 to1750--despite theimpressive growth of towns and trade, most of the European economy was characterizedby two successive grand Malthusian demographically-driven cycles, marked by fallinglabor productivity in agriculture.ii. Why was it that, at different points in the later medieval and early modern period, inthe face of ongoing, indeed accelerated demographic increase, a few economies of Europe achieved a break-through to self-sustaining growth?Nevertheless, the fact remains that the economic historiography failed to confrontthis issue, and indeed has, for the most part, continued to ignore it right up to the present.Indeed, far from the transcendence of the dual legacies of Smithianism andMalthusianism, we have had instead a return—I would call it a regression--toSmithianism pure and simple. By the middle of the 1990s, as the turn to neo-liberalmarket opening became ever more pervasive on a world scale and as the US economyexperienced the supposed miracle of the New Economy, the rise of the market was onceagain being nearly universally regarded in the economic historiography of Europe andbeyond as the automatic driver of economic growth, so long as there were no political
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