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How the West Grew Rich : The Economic Transformation of the Industrial World by Nathan Rosenberg and L.E. Birdzell Jr. (Basic: $19.95; 336 pp.)

January 12, 1986|Eric J. Hobsbawn | Hobsbawn is emeritus professor of economic and social history at the University of London and professor of politics and society, New School for Social Research, New York.

Like so many books in the social sciences, "How the West Grew Rich" can be read two ways: as a news story and as an editorial. In the first sense, it is a work of academic history about the transformation of Western economies since the Middle Ages, by a lawyer and an expert on the history of technology. It is written very lucidly, based on sound literature and, at least until the late 19th Century, it follows a conventional track, even as the authors shake their heads over the footprints of their predecessors, such as Karl Marx.

It is the old story of feudalism, the rise of a merchant class, the growth of trade, the development of institutions favorable to capitalist development, and the first phase of the Industrial Revolution. After 1880, the authors' personal interests rather skew their chapters in the direction of technology and the structure of the modern (American) corporation. At this point, it ceases to be useful as economic history. The strength of the book does not lie in its answers to the questions how, let alone why, the West grew rich, but rather in providing a lucid and critical running commentary on conventional interpretations.

In the second sense, "How the West Grew Rich" is a lengthy plea in favor of keeping government out of business and science, since the authors think that the separation of the political sphere from the economic is precisely what gave the West the secret of economic growth, and keeps it ahead of countries otherwise organized. It is only fair to add that the authors' distrust of politics running economics, technology et al. is directed not just against feudalism, Chinese bureaucracy and Soviet-type societies, but also against democracy. Nobody, they think, would ever have voted capitalism in; and "a society which delayed innovations by the amount of time required to reach political consensus would fall further and further behind a society which did not."

They accept that business enterprise only maximizes economic growth. It "does not make the world better in other ways than being richer." Still, they argue forcefully that welfare and other goodies have so far been best achieved as spin-offs from economic growth through market calculation and that this will continue to be so. The price to be paid willingly for this, it seems, is inequality: not a sufficient condition for economic growth but a necessary one.

About the authors' ideological manifesto, opinions will naturally differ according to political tastes, though even their sympathizers may feel that the choice today is hardly between rigidly planned command economies and decisions taken by totally autonomous firms. At the very least, the public sector of even capitalist economies is today so large in most states and the role of public authorities in the economy so substantial that the idea of business behavior governed only by free market calculation is unrealistic. Even governments that want to are in no position today to abolish expensive systems of social security. They can no more abdicate some control over crucial parts of the economy than 18th-Century Britain could (as Adam Smith knew) hand over its navy to private enterprise.

Furthermore, as the authors know, even if they pass lightly over it, government policy and direction in the 16th to 18th centuries were not irrelevant to increasing economic growth, nor are "partnerships between government and capitalists," for instance, in the form of "the peculiar institutions of military procurements" irrelevant today. In any case, some of the biggest success stories of economic growth in the capitalist world today relied on much more public planning and management than this book suggests: Japan, Brazil, post-1945 France.

Such observations do not necessarily invalidate the authors' political argument, but they get in the way of their history. For to write a book praising the principles that are said to have made the West rich is not to give an adequate account of either the how or the why.

The authors therefore find themselves sitting between chairs. For the purposes of yet another argument against government and welfare, all they need to say about feudalism and the Middle Ages is that, thank God, they are behind us. For the purposes of a book on how and why the West developed as it did, they would need to consider many questions in the minds of historians and readers that do not seem to interest them here. For instance, how and why the development of the world economy came to be dominated, for a couple of crucial centuries, by developments in one smallish offshore European island state: Britain. Experts may pick up hints about their possible views in this matter which other readers will miss. But none about another relevant question: namely, why a country so firmly committed to the principles that guarantee success according to the authors, declined so dramatically after having risen so high.

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