What Stimulated Markets from the 14th Century?

The progression (for want of a better word) of markets to develop from the hiatus was caused by the degrading (for want of another word) of the Roman Empire from the 5^th century.   And in what way is it of relevance today?

These thoughts have bothered me for sometime time since I became familiar with Adam Smith’s ‘Four Ages of man’: Hunting – he ignored gathering -, Shepherding, Farming, Commerce (Lectures on Jurisprudence, 1762-3).

Modern tales have it that commerce grew from markets and markets spread from Europe, through Asia and via the America’s and India, as warlords and Barbarism followed Savagery in the forest and plains and markets without state interference emerged (“at Last”!).   As a broad brush, I can accept that sequence; it is roughly what many modern economists preach.  It fits the image of individual entrepreneurial merchants unintentionally honing their skills in complex networks of traders, with new technologies (though many technologies were already discovered in the moribund Chinese Empires before the 5^th century).

I have discussed these sequences with many scholars, not all of them economists.  One such is Professor John Pratt, a retired graduate of Oxford (Balliol).** He is interested in Adam Smith and how development economists in, such as, the World Bank, presented Smith’s ideas (the ‘Washington consensus’). A couple of years ago, he recommended that I read about the roles of Tudor sovereigns in the development of economic activities in England – Scotland at the time was a separate country with its own sovereigns and parliament – and this may have some relevance for developing countries today, if similar roles could be found and kept corruption free.

Smith is cast by some ideologues today as totally opposed to state intervention – the so-called “night watchman” state – with the advice to leave development to markets under the guise of the so called “invisible hand”, of which I say plenty about.  But his post is not about that fallacious theory.  It is about what role do states play in economic development in the real world and in history?

One of the books that John recommended was “Economic Policy and Projects: the development of a consumer society in early modern England”, Joan Thirsk, 1978. Oxford University Press. I scanned it at the time (in June 2006, according the bookseller’s receipt) but I did not take it any further.   This week I had occasion for a longish train journey and took it with me to read.  I am glad I did.

The centuries covered, 15^th to 17^th, show a steady trend in advocacy to English governments to support “projects” that encouraged manufacturing and farming schemes that created part-time, often seasonal, jobs among the urban or rural poor.  Individually, these schemes were sources of cash to supplement the incomes of poor people from pittances to “tolerable living” standards. 

Thirsk writes: “Woad growing, for example, could raise the income from the bare wages of 3s 4d a week, to 5s or 6s, and by employing his wife and two children ‘to their great comfort’.  A new project in a village could thus transform a miserable collection of beggarly poor into a self-respecting community’ (p. 3).

Now these may be trivial sums for one family, but across a country and across many other products and processes, and over time, they represent something far more significant than the situation before they commenced.  Statistics from these periods are barely discernible today, a not uncommon feature of early developing economies.  I attended a lecture in 2008 on the first National Income Accounts drawn up for Nigeria in the 1960s where there was absolutely nothing available as data to the statisticians from the UK – so for many areas in Nigeria they appear to have visited these areas and made them up!

Looking below the absence of data, we know of the activity of regular people travelling round rural UK (and Europe) supplying the domestic markets of town in many countries:

“articles were hawked  around the countryside on the backs of pedlars, or stowed by chapmen into pack saddles, or stacked in bales and loaded on barges that passed down the river, or they were stuffed into sacks, pokes, and boxes and consigned to carriers who maintained a regular service on the road with carts and wagons, using the inns as bus-stops. … Chapmen, trowmen, higglers, and others distributed these wares more silently and stealthily than the smuggler by moonlight.”

The book is full of such interesting data and commentary, and I am working my way through it. What is clear is that government, historically, played roles in development, as well as holding development back for some periods and countries.  Intentional planning (Hayek) is a proven failure, of which socialist planning is no exception – it’s the rule that proves the rule!  Even unintentional ab lib planning can prove unhelpful and a distraction.

Tudor governments were concerned often for the wrong reasons. Mercantile criticism of imports, because it competed with domestic production (leading them to seek tariffs and prohibitions), could lead to foreign countries imposing their own bans to damage the UK’s export dependence on its import of such banned products from them.  Then it became a clamour to retaliate, retaliate!

But the ‘free-market’ ideal is just that – an ideal. We know that Adam Smith was not an ideologue on such matters.  He was a pragmatist in economic policy, almost Fabian-like: ‘the inevitability of gradualism’. 

Or as we say in Scotland: “every mickle, maks a muckle”.