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Noted for February 27, 2013

FIRST DRAFT: Review of Stanley L. Engerman, Kenneth L. Sokoloff, *et al.*, *Economic Development in the Americas since 1500: Endowments and Institutions*

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Stanley L. Engerman, Kenneth L. Sokoloff, Stephen Haber, Elisa V. Mariscal,and Eric M. Zolt (2011), Economic Development in the Americas since 1500: Endowments and Institutions (Cambridge: Cambridge University Press: NBER Series on Long-Term Factors in Economic Development: 978-0521251372):

FIRST DRAFT REVIEW: Engerman and Sokoloff begin with the eighteenth-century European view of the Americas: that the smart money of the time saw extraordinary opportunities for exploitation, trade, and wealth in Latin America and the Caribbean and virtually no opportunities in North America, for:

no area north of 40 degrees latitude ever produced wealth" and such military contests as the 1756-63 French and Indian War was madness, in Voltaire's words "fighting over a few acres of snow.

The pre-1800 smart money was wrong: those who both before and since 1800 migrated to North America today see their descendants far richer than those who migrated to Latin America and the Caribbean. Why?

The conventional history of comparative New World conquest, colonization, and development has--to throw full buckets of paint at the canvas--taken one of three paths:

  1. Environmental-Determinist: there is something wrong with the climates of regions too much closer to the equator than Cambridge, MA, and New Haven, CT);

  2. Political-Heritage: there is something very right with the political institutions handed down to Britons as their entailed inheritance of the fruits of the Glorious Revolution of 1688; or

  3. Colonizer-Choice: the resource wealth of the Caribbean led colonizers to choose to create societies of plunder-extract-and-return-to-Europe where they could, and to only do the hard work of investment to build productive economies where they must.

Engerman and Sokoloff find all three of these inadequate.

On the one hand, Glorious Revolution political institutions could produce Guiana or Jamaica--or Mississippi--as well as Pennsylvania and Ohio. As Engerman and Sokoloff write:

Having been part of the British Empire was far from a guarantee of economic growth.

On the other hand, St. Louis, MO, and Cincinnati, OH, have much better agricultural possibilities as are Charlottesville, VA, and Springfield, MA. And they are at least as accessible from Europe in the eighteenth century, for the Mississippi is a very powerful potential highway.

And, on the prehensile tail, there never was any single guiding intelligence. There was no conscious actor choosing to maximize something by setting up "extractive" institutions in one colony and "developmental" institutions in another. Moreover, this puts completely to one side the fact that in any long-run maximization at all choosing to establish "developmental" institutions--if you could--creates much more wealth than choosing to establish "extractive" ones.

Engerman and Sokoloff see their key contribution in their:

specific focus on how… different environments… led to societies with very different degrees of inequality… [which] persisted… [and] affected the course of development through their impact on institutions.

Relative to the baseline provided by Canada and the Northern United States, the most important institutional divergences of the Caribbean and Latin America that they see come in the areas of suffrage, education, and land policy. In the first step, initial wealth in the first few colonizing generations leads to high inequality. In the second step, high inequality both produces a powerful elite that can restrict suffrage and produces a fearful elite that believes that broader suffrage may lead to a politics that redistributes away from them. In the third step, restricted suffrage means that popular demand for public education and for, where advantageous, Amerindian dispossession to open the frontier to family farm settlement never attains political critical mass. And, in the fourth step, a labor force without access either to land via westward migration or to human capital accumulation via education is a labor force that will receive low wages--further boosting returns to land and capital, and thus reinforcing inequality.

They see no iron laws in this pattern.

Argentina in the southern cone of South America has no silver mines and no ability to grow sugar cane. Yet Argentina's latifundia grew and persisted. Its politics of inequality were (and remain) poisonous--even though Argentina was much richer than Mexico or Brazil for the late-nineteenth and for much of the twentieth century. Universal (white) manhood suffrage came to the U.S. South with Andrew Jackson as early as it came to the U.S. North. But in the U.S. South the investments in infrastructure and in education did not follow on the same scale as in the North. And in the U.S. South the politically-favored scions of the elite had no problem aggrandizing large plantations on the navigable rivers.

But even though there were no iron laws, institutional trajectories once embarked upon became very difficult to change. "[G]overnment policies and other institutions tended to reproduce" the already-existing pattern of policy and distribution of wealth. As Engerman and Sokoloff note, political elites in Argentina, Brazil, and Chile in the second half of the nineteenth century saw the advantages of the United States's openness to immigration. They debated whether they should adopt a Homestead Act-like land policy. But, in the end, those seeking more pro-small settler policies failed to carry the political day, just as Cassius Clay and his political allies had been unsuccessful in his attempt to turn Kentucky into a free state in the generation before the Civil War.

The political power of the entrenched and unequal elite simply turned out to be too great.

This is a brilliant book, an example of what economic historians do best--better than non-economic historians, and better than non-historical economists.

It is a fitting monument to Ken Sokoloff, who is, I think, still the best of my generation of economic historians.