Mailing from the Quaker Economist

The History of Economic Development
While a Visiting Scholar at Harvard in 1980, I began writing a bookthat was ultimately named Centuries of Economic Endeavor. For fourteenyears I labored on it until it was published (University of MichiganPress, 1994). It received rave reviews in ten scholarly journals (onereviewer even said I was "the new Max Weber," a well-knownsociologist). In the first two years thousands of copies were sold. SoI waited for the New York Times to call me for my opinion on somerelated news issue, as they often do to economists. After two years,sales dropped precipitously, and the Times hadn't called (they stillhaven't).I compared my book with many others on economic development and boldlydecided mine was the best. Why, after a roaring start, had it beensuch a flop in the market? Several possibilities popped into my mind,among them that it was radically different from current theories.Economists have generally thought that development happens in a decadeor two, and they can make it happen. My book said it happened slowly,over centuries, and no one can make it happen.Despite its "popular" prose, economists were my target. But the bookwent out of print, and the copyright has just reverted from press toauthor. I still think I have some new ideas that ought to beheard. So, in a short time I will put them on the web, under a newtitle: "The History of Economic Development." In the meantime, Ipropose to you an abridged (and edited) version of the first six pagesof Chapter 1. Here it is:Why do Japan, northwestern Europe, North America, and Australia andNew Zealand lead the world in economic development, and why are theirprosperity, infrastructure, and standards of living far, far greaterthan those of the less developed zones?The ultimate explanation of economic development--I will argue--thuslies not in economic factors, such as land, labor, and capital, oreven in social forces, such as education, religion, andentrepreneurship. Rather, all these will be added when most peoplelearn, as the Japanese and northwestern Europeans did, that it is goodbusiness to be just and considerate toward one's neighbors; to solvequarrels peacefully; to be held accountable for the efficient use ofresources; and to abide by modes of behavior--hereafter calledinstitutions--that have been negotiated and agreed by interestedparties.More than in other regions, as far back as the twelfth and thirteenthcenturies many corporate economic interest groups were being formed innorthwestern Europe and Japan. At first these included guilds,churches, fief holders, village assemblies, and armies. Over thecenturies political parties, labor unions, farmers' unions, consumercooperatives, lobbies for industries, and more were added. Eachinterest group possessed a structure by which it might negotiate as abody with other interest groups. A society of many corporate interestgroups will be called a pluralist society in this book. Other types ofpluralism--such as many educational systems, religions, and ethnicgroups--followed. Corporate interest groups did exist in other partsof the world, but they did not form the critical mass necessary forpower and economic development.In this book, power means the ability to influence or direct thebehavior of others. Power is an economic good, either a capital goodlike machinery (capable of yielding other products for its possessor)or a consumer good (enjoyed for its own sake). It has costs andbenefits. The costs may be monetary, but they may also lie in othersacrifices, such as the number of fellow citizens killed in war. Poweris tradable for money or for other goods, and one may hold more orless of it. Thus power shares the major attributes of other economicgoods and services.In both Japan and northwestern Europe, the methods, rules, andinstruments of policy and exchange were fashioned primarily bypowerful corporate groups that possessed interests in common. Moneyand banking, commercial law, rules of the market, corporateenterprise, government bureaucracies, and ultimately parliamentarydemocracy were created in this way. Furthermore, in Japan andnorthwestern Europe, plus cultural descendants of the latter, theinstitutions of economic development are held in place by a balance ofpower among interest groups, which have created an interlockingsociety. The institutions so fit into each other, like pieces in ajigsaw puzzle, that none can be displaced without the whole societyunraveling. Groups with a preponderance of power have vested interestsin many of the institutions, so they prevent the unraveling.As nobility, kings, or church competed with one another innorthwestern Europe and Japan, peasant groups might ally themselveswith either side, demanding greater power or freedom if their sidewon. If their side lost, they would bide their time until the nextoccasion. These arrangements, across social clusters, will be calledvertical alliances. Reference will also be made to verticalcommunication, vertical contracts, vertical negotiation, verticalbargaining, and the like. The application of vertical alliances toenhance power is referred to as leverage. The power-diffusion processconsists in repeated instances of vertical alliances with leverage,hundreds and thousands of times over centuries, with power becomingincrementally more balanced each time. "More" balanced means thatlower-level groups gained in their ability to thwart (or promote) thegoals of upper-level groups. In no society has this process led to acomplete balance of power, nor would one even know what "complete"would be.Up to medieval times, power was centralized in a few eliteseverywhere in the world, in ways similar to those found in lessdeveloped zones today. But in northwestern Europe and Japan, overtime it became diffused among more and more persons and organizedgroups. The pertinent question becomes not why power is stillcentralized in less developed zones today but why it became lesscentralized in today's more developed zones.Power diffusion in Japan and northwestern Europe was initiated insimilar ways, and it continued in matching ways for at least sevencenturies. In the next five chapters I will show examples of how bothsocieties developed a growing balance of power among economic interestgroups and how this balance led toward institutions that were bothequitable and growth-promoting. Power diffusion also fostered liberaleconomic attitudes, along with parliamentary democracy, widespreadownership of assets, and decentralized decision making. These are whatled to durable economic development.Why Europe and Japan? Why not Africa and Asia? We can only guess. Myguess is in the book, so you'll have to read it to see. I've run outof space here.I hope this abridgment will lead Friends to want to read the book.Sorry, however, it is no longer in print. But just wait a bit, andyou'll find it free, on the web, with links from the TQE home page(http://tqe.quaker.org/) and from my academic home page(http://spot.colorado.edu/~powelsoj.Sincerely your friend,Jack Powelson