[Fwd: Dialogue: Frank, Landes et al #5 (1 message)]

Mon, 18 May 1998 10:36:33 -0400
christopher chase-dunn (chriscd@jhu.edu)

This is a multi-part message in MIME format.
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16 May 1998 10:57:32 -0500 (EST)
Date: Sat, 16 May 1998 10:04:30 -0500
From: manning@neu.edu (Patrick Manning)
Subject: Dialogue: Frank, Landes et al #5 (1 message)
To: H-WORLD@h-net.msu.edu
Joshua Rosembloom <rosenbl@lark.cc.ukans.edu>

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H-WORLD editor's note: This is the fifth
in a series of postings containing the
dialogue of Gunder Frank, David Landes and
others on global economic history. It is
a response by Gunder Frank to messages
received through May 15. PM
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Originally posted on H-WORLD.

Date: Sat, 16 May 1998 10:36:39 -0400 (EDT)
From: Gunder Frank <agfrank@chass.utoronto.ca>
Subject: gunder frank net response # 1 (fwd)
To: H-NET List for World History <H-WORLD@H-NET.MSU.edu>

Thank You One and All for your interest, attention, consideration and
patience with me. A family medical emergency is the real reason and David
Landes' absence the official excuse for the tardiness of this my first
general response and the delay till still later of my detailed reply.

I fully agree with Taylor and others that circa 1800 represents a
disjuncture, and that it remains to be explained by me and others. I say
'remains to be' because I disasgree with Taylor et al when they contend
that received theory has offered some satisfactory explanations. I contend
that they are not even minimally satisfactory or accetable, and under title
2 below I again summarize - in three short paragraphs - my general
reservations, written long before reading Landes's new book and your
reactions to my critique thereof.

Under title 3 below, I then append MY OWN ALTERNATIVE EXPLANATION as a
somewhat longer but still excessively short summary extract from my book
ReORIENT. Of course, that is intended as a challenge to others to join in
to the still outstanding task of constructing a holistic real world or
really holistic global/world embracing explanation, in which Ken Pomeranz
is also engaged, but alas David Landes is not [yet?].

I beg indulgence to postpone my detailed reply to critiques until I catch
up with the backlog accumulated during the above mentioned medical problem
and I sort out and put in order your responses that I have received via 5
e-mail diuscussion lists in differently assembled and packaged but also
often duplicated/ triplicated form [which I offered to David Landes also to
do for him in his absence aboad]. Then, I promise to try to address your
specific comments, critiques and related or alternative explanations [thank
you again] in a future detailed and organized 'comprehensive' reply. So
for now, here goes only what I already wrote BEFORE I read what you just
wrote, but after long-winded other discussions with some colleagies named
below.

2. SUMMARY CRITIQUE OF RECEIVED THEORY AGAIN

Received theory attributes the industrial revolution and the "rise" of the
West to its alleged "exceptionality" and "superiority." The source of the
same is sought in turn in the also alleged long standing or even primeval
Western preparation for take-off. This contention mistakes the place and
misplaces the "concreteness" of the transformation by looking for it in
Europe itself. Yet the "causes" of the transformation can never be
understood as long as they are examined only under the European streetlight
and must instead be sought under the world- wide global illumination in the
system as a whole. That turns all received theory on its head.

The argument - and the evidence! - is that world development between 1400
and 1800 reflects not Asia's weakness but its strength, and not Europe's
nonexistent strength but rather its relative weakness in the global
economy. For it was all these regions' joint participation and place in the
single but unequally structured and unevenly changing global economy that
resulted also in changes in their relative positions in the world. The
common global economic expansion since 1400 long benefited the Asian
centers earlier and more than marginal Europe, Africa, and the Americas.
However, this very economic benefit turned into a growing absolute and
relative disadvantage for one Asian region after another in the late
eighteenth century. Production and trade began to atrophy as growing
population and income, but also their economic and social polarization,
exerted pressure on resources, constrained effective demand at the bottom,
and increased the availability of cheap labor in Asia more than elsewhere
in the world. That world economic change also opened the door to the "Rise
of the West,' which smust be re-examined in terms the more important global
historical continuity instead of any and all its dis- continuities. The
perception of a major new departure in 1500, which allegedly spells a
dis-continuous break in world history, is substantially [mis] informed by a
Eurocentric vantage point. Once we abandon this Eurocentrism and adopt a
more globally holistic world or even pan EurAsian perspective,
dis-continuity is replaced by far more continuity. Or the other way
around? Once we look upon the whole world more holistically, historical
continuity looms much larger, especially in Asia. Indeed, the very "Rise of
the West" itself then appears derived from this global historical
continuity. East Asia's renewed rise to world economic prominence makes it
all the more urgent to focus on the long historical continuity of which
this process is a part.

3. GUNDER FRANK'S ALTERNATIVE SUMMARY EXPLANATION:

A WORLD DEMOGRAPHIC/ ECONOMIC/ ECOLOGICAL EXPLANATION
OF THE DECLINE OF THE EAST AND THE RISE OF THE WEST

My explanation has three related parts. A combination of demographic and
micro-/macro-economic analysis identifies an inflection of population and
economic productivity growth rates that led to an "exchange" of places
between Asia and Europe in the world economy/system between 1750 and 1850.
Microeconomic analysis of world-wide supply-and-demand relations and
relative economic and ecological factor prices can show how they generated
incentives for labor and capital saving and energy producing invention,
investment and innovation, which took place in Europe. On the other hand,
macroeconomic analysis of cyclical distribution of income and derivative
effective demand and supply in Asia illuminate the opportunity to do so
profitably in world economic terms.

This sumamry eplanation of the related "Decline of the East" and "Rise of
ther West" may be briefly elaborated as follows: The simple hypothesis is
that technological innovations were a function of demand and supply and of
relative factor prices of inputs like labor, capital, and land. Therefore
it was primarily the higher wages and relatively abundant capital in Europe
that eventually generated labor saving and energy producing technology.
This argument may be challenged by the observation [eg. by Pomeranz 1997]
that the "industrial revolution" was less labor "saving" than labor
"extending" and that it increased the productivity of both labor and
capital. Direct wage rates or costs may also have been as high [or even
higher] in some parts of China, eg. in the Yangtze Valley and the South,
though probably not anywhere in India, than in some parts of Europe,
especially England.

An unequal distribution of income generates luxury and import demand at the
top and a large supply of cheap labor at the bottom. I contended that this
was the case moreoso, and Pomeranz (1997) that it was not so, in China than
in Europe, although we agree that it probably was more unequal than either
in India. N9 But the problem of absolute, relative and world wide
comparative wage costs - in entrepreneurial calculation as in our analysis
of the same - is related also to local and regional problems of labor
allocation. And there were some economic differences in labor allocation
especially between agriculture and industry, which were related to some
institutional differences. However, it is less clear to what extent these
differences were underlying causes or of the observed allocation of labor
or whether they were only different institutional mechanisms through which
the labor allocation were organized. Particularly important differences
were: A. Bonded labor in India (Pomeranz 1997). B. Women were tied to the
village and their labor was restricted to agriculture and dopmestic
industry, eg. spinning, in China (Goldstone 1996). C. Some industrial
workers could still draw directly on some subsistence goods produced by
women-village- agriculture in China but less so in England without having
to aquire these through the market (Pomeranz 1997). D. Enclosures [to
produce more cheaper wool for textiles on more land - "sheep ate men"]
expulsed male and female labor from the land into urban un/employment in
England [and elsewhere in Europe?].

The industrial "revolution" was initiated with cotton textiles, but these
required both a growing "external" supply of cotton [for Europe - from its
colonies] and a "world" market for all in which everybody had to compete
[except China, which still had a growing and protected domestic and
regional market]. The industrial "revolution" also required and took place
in the supply and production of more and cheaper energy, especially through
coal and its use in making and using machinery to generate steam power,
first stationary and then also mobile. The critical role of coal and its
replacement of wood as a source of fuel in Britain is demonstrated by
Wrigley (1994). These sources of power technically and economically first
required [and permitted] concentration of labor and capital in mining,
transport, and production. Then they also permitted faster and cheaper long
distance transport via steam powered railway and shipping.

Investment in such "revolutionary" industrial power, equipment,
organization and the labor necessary to make them work was undertaken
wherever, but also only where, it was economically rational and possible to
do so, in terms of (A) Labor allocation and cost alternatives; (B) Location
and comparative costs of other productive inputs [eg.
timber/coal/animal/human sources of power and transport,as well as raw
materials like cotton and iron], which were related to the geographical
location of these resources and to ecological changes in their
availability; (C) capital availability and alternative profitable uses; and
(D) Market penetration and potential.

At the turn of the eighteenth-nineteenth centuries the above mentioned
factors in world economic competitive and comparative circumstances,
changes, and transformation generated the following results:

- India continued but was threatened in its competitive dominance on the
world textile market on the basis of cheap and also bonded skilled labor.
Domestic supplies of cotton, food and other wage goods continued to be
ample and cheap; and productive, trade and financial organization and
transport remained relatively efficient despite suffering from increasing
economic and political difficulties. However, supplies of alternative power
and materials, eg. from coal and iron/steel, were relatively scarce and
expensive. Therefore, Indians had little economically rational incentive to
invest in innovations at this time. They were further impeded from doing so
first by economic decline beginning already in the second quarter of the
eighteenth century or earlier; then by the [resulting?] decline in
population growth and British colonialism from the third quarter onwards;
and finally from a combination of both decline and colonialism as well as
"Drain" of capital from India to Britain. India switched from being a net
exporter to being a net importer of cotton textiles in 1816. However India
did continue to struggle on the textile market and began again to increase
textile production - by then also in factories - and exports in the last
third of the nineteenth century.

- China still retained its world market dominance in ceramics, partially in
silk and increasingly in tea, and remained substantially self-sufficient in
textiles. China's balance of trade and payments surplus continued into the
early nineteenth century. Therefore China had availability and
concentration of capital from both domestic and foreign sources. However,
China's natural deposits of coal were distant from its possible utilization
for the generation and industrial use of power, so that progressive
deforestation still did not make it economical to switch from wood to coal
for fuel. Moreover, transport via inland canals and coastal shipping, as
well as by road, remained efficient and cheap [but not from outlying coal
deposits].

This economic efficiency and competitiveness of the Chinese on both
domestic and world markets also rested on absolutely and comparatively
cheap labor costs. Even if per-capita income was higher than elsewhere, as
Bairoch notes, and its distribution was no more unequal than elsewhere [as
Pomeranz and Goldstone claim], the wage good cost of production was low,
both absolutely and relatively. Labor was abundant for agriculture and
industry, and agricultural products were cheaply available also for
industrial workers and therefore to their employers, who could pay their
workers low subsistence wages. Goldstone (1996) emphasizes one reason:
Women were tied to the villages and therefore remained available for
[cheap] agricultural production. Pomeranz (1997) emphasizes a related
reason: Urban industrial workers were still able to draw for part of their
subsistence on "their" villages, which was produced cheaply in part by the
women to whom Goldstone refers. In other words from an entrepreneurial
industrial employer and market perspective, wage goods were absolutely and
relative cheap; because agriculture produced them efficiently and cheaply
also with female labor. The "institutional" distribution of cheap food to
urban and other workers in industry, transport, trade and other services
was functionally equivalent to what it would also have been if the
functional distribution of income had been MORE unequal than it was. The
availability of labor was high, its supply price low, its demand for
consumer goods attenuated; and there was little incentive to invest in
labor saving or alternative energy using production or transport. Elvin
(1973) sought to summarize such circumstances in his "equilibrium trap."
Even so, China still remained competitive on the world market and
maintained its export surplus. Emperor Ch'ien Lung said in his 1793 message
to King George III of England "I set no value on objects strange and
ingenious and have no use for your country's manufactures" (Schurman and
Schell 1967, I:108-109).

- Western Europe and particularly Britain were hard put to compete
especially with India and China. Europe was still dependent on India for
cotton textiles and on China for ceramics and silks that Europe re-exported
and from which it profited in its [economic and/or political] colonies in
Africa and the Americas. Moreover, Europe remained dependent on its
colonies for most of the money it needed to pay for these imports, both for
re-export and for its own consumption and other use, eg, as inputs for its
own production and export. In the late eighteenth and early nineteenth
centuries, there was a decline in the marginal if not also the absolute
inflow of precious metals and other profits through the slave trade and
plantations from the European colonies in Africa and the Americas. To
recoup and even to maintain - never mind to increase - its [world and even
domestic] market share Europeans collectively and its entrepreneurs
individually had to attempt to increase their penetration of at least some
markets, and to do so either by eliminating competition
politically/militarily or by undercutting it by lowering its own costs of
production, or both.

Opportunity to do so knocked when the "Decline" began in India and West
Asia, if not yet in China. Wage and other costs of production and transport
were still uncompetitively high in Britain and elsewhere in Europe. However
especially after 1750, rising incomes and declining mortality rates sharply
increased the rate and amount of population growth. Moreover, the
displacement of surplus labor from agriculture increased its potential
supply to industry. At the same time, the imposition of British
colonialism on India reversed the perennial capital outflow to India and
turned it into "The Drain" from India and into Britain. Moreover, a
combination of commercial and colonial measures would permit the import of
much more raw cotton to Britain and Western Europe. Deforestation and ever
scarcer supplies of wood and charcoal and rendered these more expensive.

At the same time since the second third of the eighteenth century, first
relative and then absolute declines in the cost of coal made the
replacement of charcoal [and peat] by hard coal increasingly economical and
then common in Britain. The Kondratieff B phase in the last third of the
eighteenth century generated technological inventions and improvements in
textile manufacturing and steam engines [first to pump water out of coal
pits and then also to supply motive power to the textile industry]. At the
turn of the eighteenth-nineteenth centuries, the "first" A phase
[identified by Kondratieff] and the Napoleonic wars generated increased
investment in and the expansion of these new productive facilities and then
also of transport equipment. Ever more of the available but still
relatively high cost labor force was incorporated into the "factory
system." Production increased rapidly; real wages and income declined; and
"the workshop of the world" conquered ever more foreign markets through
"free trade." Yet even then, British colonialism had to prohibit free trade
to India and recurred to the export of its opium to force an "Open Door"
into China.

- Most other parts of the world still fall through the cracks of our world
economic analysis. Yet in brief, we can observe that most of Africa may
have had labor/land ratios at least as favorable to labor saving investment
as Europe. However Africa did not have an analogous resource base [except
the still undeveloped one in Southern Africa], and far from having a
capital inflow, Africa suffered from capital outflow. The same was true of
the Caribbean. Latin America had resources and labor, but also suffered
from colonial and neo-colonial capital outflow as well as specialization in
raw materials exports, while its domestic markets were captured by European
exports. West, Central Asia, and Southeast Asia became increasingly
captive markets for if not also colonies of Europe and its industry, to
which they supplied the raw materials that they had previously themselves
processed for domestic consumption and export. In the nineteenth century,
only the European "settler colonies" in North America, Australasia,
Argentina, and Southern Africa were able to find other places in the
international division of labor, and China and Japan were able to continue
offering significant resistance.

In short, changing world demographic/ economic/ ecological circumstances
suddenly - and for most people including Adam Smith unexpectedly - made a
number of related investments economically rational and profitable: in
machinery and processes that saved labor input per unit of output, thus
increasing the productivity and use of labor and its total output;
increasing productive power generation; and increasingly productive
employment and productivity of capital. This transformation of the
productive process was initially concentrated in selected industrial,
agricultural, and service sectors in those parts of the world economy whose
comparative competitive POSITION made -- and then continually re-made --
such Newly Industrializing Economies [NIE] import substituting and export
promoting measures economically rational and politically possible. Thus,
this transformation was and continues to be only a temporally localized and
still shifting manifestation of a WORLD economic process, even if it is not
spread uniformly around the world -- as historically nothing ever has been
and still is not likely. But that is another - later - story, which will
lead to the Re-emergence of East Asia in the world economy today.

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