Tyler Cowan agrees with me about the probability of stagnation and
about the importance of consumer goods but he doesn't explain the
uninterrupted downwards cascade of consumer goods that was required
to keep economic growth going during the last 300 years (and the
counterflow of social status upwards). Also he sounds very
America-biased. Why didn't Europe succeed as well? Russia and Ukraine
had (have) equally large regions of grain-growing soil (more fertile
than America's). Poland and Germany had (have) vast coal mines.
Why should England, a pokey little island with relatively modest
agriculture and coal, start the industrial revolution at least a
century before anywhere else?
Well, I'd tell him if asked. England had a high density of merchant
banks in London (echoed in no more than a half-a-dozen other northern
European ports and two ports in the Mediterranean). England also had
provincial banks which existed nowhere else in Europe or Asia. It was
the to-ing and fro-ing of finance between these two types of banks,
and the sophisticated development of bill-broking which enabled the
earliest industrial projects to get off the ground. Also the
industrial revolution never really got into its stride until a fierce
100 year debate had ended with the decision in 1844 that the pound
had to be gold-backed in order that credit was generous but also kept
within bounds.
America has all the virtues that Cowan ascribes to it but, most of
all, America was able to copy our model of provincial banks very
early on (long before they developed in Europe) and was able to tap
into large loans from the London merchant banks (via New York) to get
major industrial projects and the railways off the ground.
Keith
At 13:47 13/09/2012, Ed wrote:
Interesting review by Andrew Coyne in today's Ottawa Citizen of
Tyler Cowan's "The Great Stagnation". In part, Coynes says the following:
... Cowen argues that slow growth is more the old normal than the
new: Median incomes in the United States have been moving sideways
for the better part of four decades, as have most measures of productivity.
While others have made much the same point, Cowen locates that
decades-long slump in a still larger historical frame. Indeed, it
may not be the era of stagnation that is the anomaly, but the long
period of rapid growth that preceded it.
For the first three centuries or so of European settlement, he
argues, America enjoyed the benefits of a number of "low-hanging
fruit." It had an abundance of arable land, for starters, which
settlers could claim for free - and not only land, but resources. As
the Industrial Revolution took hold, it had access to a similar
abundance of labour, as millions left the farms for the cities; as,
later, it could call upon seemingly endless re-serves of skilled
labour, as more and more of these new workers went on to get an education.
And, perhaps most critically, it profited from a truly astonishing
series of inventions, from electricity to the light bulb to the
automobile to the telephone. Much the same story could be told of
other industrial countries, of course. But nowhere did land, labour
and technological progress combine to produce such enormous wealth
as in America.
Read more:
<http://www.ottawacitizen.com/business/What+slow+growth+wasn+result+cause+crisis/7233960/story.html#ixzz26LvAUCJ9>http://www.ottawacitizen.com/business/What+slow+growth+wasn+result+cause+crisis/7233960/story.html#ixzz26LvAUCJ9
Reminds one of Keith Hudson's argument that growth is based on new
consumers goods that everyone wants, but it would appear that
Cowan's argument is much broader.
Must buy the book.
Ed
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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