We may not believe Bob Allen's provocative economic history of Soviet Russia, however. I think that Russia is enough of a "European" country that an "Asian" or "Latin American" baseline is not appropriate. Aside from the value to the world of a heavy industrial complex in Magnitogorsk in 1939 (a big aside), the Stalinist road to industrial society was not only genocidal and long-run counterproductive but medium-run stupid. But why Mehmet Ali Pasha was unable to make Egypt a cotton-spinning and -weaving center remains a fascinating question: Tom Westland: Russia vs Egypt: "In both 19th century Egypt and 20th century Russia, the path to industrial growth was blocked by a formidable swamp: subsistence agriculture...

...Both Mehmet Ali Paşa’s government and Russian thinkers from Stolypin and Witte to Bukharin and Preobrazhensky were forced to confront a classic question of development economics: should we screw the peasants? For the peasant-screwing faction, which included Preobrazhensky and Mehmet Ali Paşa, this provoked subsidiary inquiries, such as: how exactly shall we screw the peasants? And how much shall they be screwed for?...

Industrialisation in a peasant economy requires certain things. In order to set up factories, you need machines, and you need to pay for the machines somehow. If you have state-led industrialisation, as in Russia and Egypt, then the easiest way to obtain money is by taxing people—the peasants, perhaps—or, equivalently, by imposing ‘marketing boards’ for agricultural output that buy food at artifically low prices and sell at higher prices. The agricultural surplus is made to pay for the capital required to launch state-led industrialisation. What Mehmet Ali did was to impose an agricultural monopsony and food-retailing monopoly, buying up grain in the country at low fixed prices and selling it at high prices in the cities. The difference between low purchase price and high sale price was the state’s profit. Normally, this would have pushed up nominal wages in the factories, making manufactured goods expensive: except, as Laura Panza and Jeffrey Williamson argue, he owned the factories too, and so could impose real wage cuts on industrial workers....

In a famous article on the ‘price scissors’, Joseph Stiglitz and Raaj K. Sah argue that this was in fact necessary: the argument made by Preobrazhensky in the case of Russia—that you could screw the peasants and have industrial growth without screwing industrial workers as well—was untrue, since any attempt to turn the intersectoral terms of trade against the peasants by lowering grain prices would necessarily lead to excess demand for grain by urban workers. Equilibrium in the grain market could then only be restored by lowering factory workers’ nominal wages so they could afford less grain. This result, of course, depends on the economy being closed at the margin....

If we believe Bob Allen’s provocative economic history of Soviet Russia, however, a stagnant trend (albeit with high variability) in peasant consumption in the 1930s was combined with growing consumption in the cities.... The people who really got lucky here are the people who were farmers in 1928 and became industrial workers by 1939. A farmer who stayed on the land consumed about 3% more in 1939 than in 1928; a worker who had been in the city through that period consumed about 18% more at the end of that period than at the start. However, if you were a worker in 1939 who had been a peasant in 1928, then you were consuming, on average, 115% more than you were a decade prior....

Unfortunately for Mehmet Ali Paşa, even his firm grip on the hands of the ‘scissors’ was not enough to procure a viable textile industry, and most of the factories he had established were shuttered by the end of his reign. It’s traditionally argued that this was because the competition of Manchester flooded Egyptian markets with English cloth, although recently this has been disputed—after all, despite formal undertakings not to put barriers to trade, Mehmet Ali Paşa was able to use the purchasing power of the army to create a protected market for Egyptian cloth.... Which is, of course, not to say that Mehmet Ali Paşa failed entirely as an economic steward. Indeed, his introduction of new crops, like long-staple cotton, arguably made the difference between a stagnant agricultural economy and one that grew substantially over the 19th century.... That said, we still know much less than we would like about Egypt’s industrialisation and (?) deindustrialisation in the nineteenth century...


#shouldread

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