©Deirdre Nansen McCloskey | COPYRIGHTED MATERIAL

Talk about a Revolution

by Donald Beaudreaux, George Mason University
Pittsburgh Tribune-Review, forthcoming June 2011 Original Source
Filed under articles [Bourgeois Dignity] and bourgeois era

Donald Beaudreaux
What caused the industrial revolution?

Few questions in economic history are discussed and debated as much as is this one. Even if you happen to be among the small number of people who regret what historian (and Freeman columnist) Steve Davies calls "the wealth explosion" of the past couple of centuries, you must nevertheless find this question to be intriguing, for it asks about the causes of what is surely the single greatest change in human history.

For at least 70 millennia, the standard of living of the vast majority of us humans was at, or very near, subsistence. Then all of a sudden (in the great sweep of history), boom! Starting in the 18th century standards of living shoot upward not only for royalty and the landed nobility, but for everyone. And to this very day our standard of living - including our life-expectancy and measures of our healthfulness - continues to rise.


There's no shortage of answers offered to a question so momentous. Among the well-known answers that have been offered over the years are capitalist exploitation of workers; capitalist exploitation of colonies; religious beliefs that promoted savings and risk-taking; and England's 1688 Glorious Revolution that, it is said, made property rights more secure. And new answers continue to be offered, such as economist Gregory Clark's thesis, explained in his 2007 book A Farewell to Alms, that genes that fit human beings especially well for carrying out enterprise and commerce were passed down from the English nobility into the English middle-classes - thus equipping the bourgeoisie finally to do its thing.

Some of these answers are more plausible than others (with Clark's being among the least plausible). But not a single one of them is satisfactory. Not one of them explains where the industrial revolution began (northwestern Europe) or when it began (the 18th century). Another explanation is needed.

And another explanation has indeed just been offered: a change in rhetoric. This rhetoric-based thesis is offered by the great economist and historian Deirdre McCloskey in her 2010 book Bourgeois Dignity. It's a book that, like only three or four others that I've read, caused a major change in my thinking.

McCloskey reviews with awesome thoroughness all of the major (and many of the not-so-major) explanations offered for the industrial revolution. She finds all of them wanting.

Some of these explanations are more obviously flawed than others. Capitalist exploitation of workers, for instance, fails spectacularly as an explanation on a variety of fronts, not the least of which is the fact that the very people from whom the newly created wealth of the industrial revolution is supposedly extracted (the masses) are the same people who have benefitted most from this wealth explosion.

If capitalist wealth was wrenched from the bent backs and sweaty brows of the working class, then surely workers as a group would today be much poorer rather than (depending on how you count) 10 to 100 times wealthier than were their pre-industrial peasant ancestors. As McCloskey emphasizes: "modern economic growth did not and does not and cannot depend on the scraps to be gained by stealing from poor people. It is not a good business plan."

A more plausible explanation is one associated most familiarly with the Nobel economist Douglass North and his frequent co-author Barry Weingast. It's an explanation that I once accepted. According to North and Weingast, the replacement of the Stuart monarchs by William and Mary in the late 17th century resulted in more-secure property rights in England which, in turn, sparked the industrial revolution.

While everyone with a modicum of sense understands that the industrial revolution would not have happened if private property rights in England weren't secure, McCloskey argues persuasively that the Glorious Revolution - for all of its undoubted benefits - did not bring about much of a change in England's property laws or in the security of private property rights in that country. Here's what McCloskey writes on page 318 of her book:

England when at peace, which was the usual case throughout its history, was a nation of ordinary property laws, no more or less corrupt than Chicago in 1925 or the American South under segregation, places in which innovation flourished. It was so, for example, even when the Stuart kings were undermining the independence of the judiciary in order to extract the odd pound with which to have a foreign policy in a new age of standing armies and floating navies. And the amounts extracted, contrary to the Northian suggestion that the king owned everything, were by modern standards pathetically small. The figures offered by North and Weingast themselves imply that total government expenditure under James I and Charles I was at most a mere 1.2 to 2.4 percent of national income... .

[T]he Stuart kings, grasping though they were, and emboldened (as were many monarchs at the time) by the newly asserted divine right of kings, were nothing like as efficient in predation as modern governments - or indeed as were the Georgian kings of Great Britain and Ireland who eventually succeeded the Stuarts [original emphasis].

Indeed so. This explanation fails.

The mainstream economist's long-preferred explanation is capital accumulation. It fares no better than does the capitalist-exploitation thesis and the North-Weingast thesis.

According to the capital-accumulation thesis, people (for any of a variety of different reasons) began to save more. These savings were transformed into capital goods whose use increased the productivity of labor. And so the industrial revolution happened.

But as McCloskey points out, history is full of instances in which people saved just as much as was saved in northwestern Europe at the dawn of the industrial revolution, but without unleashing any revolutionary industrial forces. Moreover - and contrary to a thesis still fondly held by many people from Marxists to Reagan Republicans - economic growth does not require substantial capital accumulation. Here again is McCloskey: "A modest stream of withheld profits ... will pay for repairing the machines and acquiring new ones, especially the uncomplicated machines of 1760, and now again the complicated but capital-cheap machines of the computer age."

One by one, McCloskey patiently and persuasively explains why each of the various explanations of the industrial revolution fails.

What does best explain why the industrial revolution began in northwestern Europe in the 18th century is the fact that, for the first time in history, people then and in that part of the world began to talk about the bourgeoisie with respect. This new "habit of the lip" (as McCloskey calls it) replaced the older habit of talking about entrepreneurs and merchants as being, at best, contemptible functionaries whose services society might need in some measure but whose importance to society falls far below the services supplied by warriors, royalty, noblemen, and priests.

With merchants and entrepreneurs in 18th-century Holland and England finally accorded widespread dignity, society's best and brightest no longer avoided the world of private business in order to pursue careers at court or on the battlefield. The power of the bourgeoisie in these countries with tolerably secure private property rights was, thus, finally unleashed to revolutionize the economy - first in northwestern Europe and, continuing to today, the rest of the world.

In my next column I will reflect on some implications of McCloskey's thesis.