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When histories collide: the development and impact of individualistic capitalism

When histories collide: the development and impact of individualistic capitalism
Raymond D. Crotty
(AltaMira Press, $29.95)
ISBN 9780759101586

Raymond Crotty is probably best known to the general public for the ‘Crotty judgement’ of 1987, which may yet prove to be the country’s strongest defence against unwarranted pressures from the larger EU member states. This Supreme Court ruling, on foot of a case taken by Crotty, forced the government to accept that significant changes to EU treaties had to be ratified by referendum in Ireland. Crotty, who died just short of his 70th birthday in 1994, was a broad-ranging thinker whose thoughts were moulded by the diversity of the life he led. Though he grew up in Kilkenny city, he would spend over two decades as a farmer, completing over this period first a correspondence degree and later a master’s degree in economics from the London School of Economics. While lecturing in agricultural economics at the University of Wales, Aberystwyth, in 1966 he published Irish agricultural production, an iconoclastic book whose central proposal was to tax away the value of land. This brought him into the camp of the nineteenth-century American political economist Henry George, who argued that everyone owns what he or she creates but that everything found in nature—particularly land—belongs equally to all. George argued that the concentration of unearned wealth is the main cause of poverty. These elements were to remain central to Crotty’s thinking for the rest of his life and have had an important influence on environmentalist thinking over recent decades.After Aberystwyth, Crotty became an economic adviser to various international development agencies, including the World Bank, which brought him all over the developing world. His specific niche as an economic adviser, as he wrote himself, was based on the fact that he was ‘(a) a farmer with practical experience from livestock farming; (b) an economist with a special interest in the economic relationships between people and their livestock; and (c) an observer of all the major livestock keeping systems of the world’. He returned permanently to Ireland in 1982 to take up a lectureship in statistics at Trinity College, Dublin.His last book, When histories collide, was published posthumously in 2001. Defining development as ‘more people becoming better off and fewer people worse off’, it asks: why is it that not one of the former ‘capitalist colonised’ economies has managed to achieve sustained development? As he points out, the New World, Hong Kong and Singapore were ‘settler’ rather than ‘capitalist colonised’ economies; Japan, South Korea, Taiwan and Thailand were never colonised by the West, and colonisation of China never fully succeeded. The only other former Third World economies to develop had great natural wealth and hence cannot be viewed as development successes.And what of Ireland? Ireland’s colonisation was unusual. The country possessed none of the valuable minerals, spices or other natural resources that typically provoked colonisation. Nor did it have the virtually unlimited supplies of land that stood available when the indigenous populations of the New World were wiped out. Ireland was colonised for defensive purposes—at great cost, as he points out, to the coloniser. This, Crotty argues, as well as the early date of its colonisation and its geographic proximity to the colonising power, makes Ireland an outlier of some interest in the analysis. The book is as broad-ranging in historical sweep as Jared Diamond’s highly praised Guns, germs and steel (1997), the subtitle of which is ‘a short history of everybody for the last 13,000 years’. The two books address somewhat related questions. Diamond, an evolutionary biologist, describes at the beginning of his book how he met a charismatic local leader, Yali, while undertaking research in New Guinea in the early 1970s. Yali asked him a question that ended up plaguing him for years. ‘He and I both knew perfectly well that New Guineans are on the average at least as smart as Europeans.’ Yali asked, however, ‘Why is it that you white people developed so much cargo [the term used to describe material goods, such as steel axes, matches and medicines, whose value was immediately obvious to the indigenous peoples] and brought it to New Guinea, but we black people had little cargo of our own?’  Diamond’s thesis provides a useful introduction to Crotty’s. The most fertile regions of the earth could support denser population clusters. These are not only more conducive to innovation but also promote immunity to common diseases. Innovations and immunity could spread much more easily when these population clusters were located on the vast Eurasian land mass, with its east–west axis and few impenetrable barriers. The American and African continents, by contrast, lie on a north–south axis, yielding much greater differences in climatic and disease conditions. Mobility of people, ideas, technology and food sources was stanched by the impenetrable mountains and forests that separate North and South America, and by the Sahara and the diseases borne by the tsetse fly that divide Africa.     Crotty’s palette is similarly broad, though his questions focus on the origins of capitalism and individualism. His definition of capitalism differs from Marx’s. To Crotty it simply means a system in which capital accumulation is required by the society of the time and must therefore be incentivised. He dates its origins to the entry of lactose-tolerant (milk-consuming) tribes from the Steppes into Central and Western Europe. Their lactose tolerance (derived from factors similar to those analysed by Diamond) gave them a huge food advantage over existing indigenous peoples. But the arable quality of the land they encountered was greatly inferior to that available, say, in the Mediterranean. They were forced to store winter fodder for their cattle, and so property rights had to be recognised to incentivise individuals and small family groupings to save.  The emergence of individualism had a similar logic. A fixed land supply, given the level of technology, determined the level of population that could survive. If you survived, somebody else could not. The lactose-tolerant tribes entering Western Europe encountered sparsely populated forest areas where land was no longer a limiting factor. The size of the tribe could grow, bringing greater security: each individual was now of specific value to society.  The effects on consciousness have been analysed by psychiatrist R.D. Laing in a challenging and perhaps controversial passage: individualism ‘gives us a sense of ontological security whose validity we experience as self-validating, although metaphysically, historically, ontologically, socioeconomically, culturally, we know its apparent absolute validity is an illusion’. The connection between property rights and individualism surfaced in a recent radio documentary on the Lissadell House right-of-way controversy in which a local person, juxtaposing Sligo views with those of the new property-owners from Dublin, supposed that ‘we have a more communitarian perspective down here’.Crotty’s explanation for the undevelopment (his term for the opposite of development as he defines it) of the capitalist colonised economies is that this individualism was inappropriately imposed on communitarian societies where land remained the limiting factor. When the former colonies gained independence, the élites made sure not to overthrow the existing system but merely transferred to themselves the privileges that had formerly gone to the colonial élites. In Ireland and elsewhere the élites were primarily those who had managed to secure for themselves the titles to land. And so we come full circle back to Henry George. Crotty believes in the efficiency benefits of capitalism. He would not go along with Proudhon but can be paraphrased to the effect that ‘land is theft’—or, more precisely, that private ownership of land is unnecessary for efficiency and that the community therefore loses out. He advocates taxing away the entire value of land, which would ensure that those who rented it would be those who would work it most efficiently. He calculates that these rents, once distributed equally across all of those remaining in Ireland, would yield far more than the dole and would encourage people not to emigrate. This would reduce wage demands and allow Irish indigenous industry to flourish. He felt (correctly, as it transpired) that EU membership would shift the debate on agriculture and land use in an entirely different direction and opposed it for this and for other reasons.      There are many stimulating ideas here, even if one does not necessarily buy into everything. Why detour into prehistory to arrive at policy conclusions that Crotty had clearly reached many years ago? (A later book of Jared Diamond’s, Collapse, also begins in prehistory and ends with policy conclusions for the modern world!) And, though his option of taxing land values to zero may sound attractive, might it not plausibly give rise in the developing world to the kind of land wars seen here only a little over a century ago? Let us also not forget the legacy of Irish land redistribution. As political scientist Bill Kissane puts it in Explaining Irish democracy:

‘. . . the creation of a large class of independent farmers was a basic precondition for the emergence of a stable democratic system in Ireland. British reformism succeeded in eliminating the two social classes—the landed aristocracy and the landless peasantry—who would have had least stake in a democratic system.’

The book’s thesis, based on the author’s study of primarily agrarian societies, might also be viewed as less relevant to an industrialised world. Certainly, if current prognostications as to the continued growth of the BRIC (Brazil, Russia, India and China) economies are valid, the question that the book addresses may need to be revisited. There has emerged in mainstream economics in recent years, however, the kind of concern with institutions and their historical origins that Crotty displays. Europeans are recognised as having adopted very different colonisation policies in different colonies, leaving different institutional legacies. Of particular note is the ‘reversal of fortune’ hypothesis. Of the regions that were subsequently colonised, those that were richest in the pre-colonial era (as proxied by urbanisation and population density) have ended up poorer today. ‘Extractive’ institutions were introduced into the formerly rich regions so as to exploit their natural resources, while sparsely settled areas where European immigrants could survive developed institutions that protected the property rights of a broad cross-section of society. These are the regions that have subsequently prospered. The analysis of institutions needs to be more finely grained than in Crotty’s thesis. It is insufficient to say that Botswana has escaped the curse of capitalist colonisation simply because of the vastness of its natural resources. This ignores the ‘resource curse’ that blights most resource-rich countries in the developing world, where the very fact of their huge natural resources makes it difficult to dislodge ‘extractive institutions’.  HI

Frank Barry is Professor of International Business and Economic Development at Trinity College, Dublin.