Industrial Revolution was a country of sophisticated markets, in which profit-hungry homines economici did what they are supposed to do to help a country develop. But Britain was of course not alone in this: the Low Countries, Northern Italy, large parts of Germany, Iberia and Scandinavia at some time or another displayed unmistakable signs of rapid economic progress.
All of those outbursts of economic growth (or “efflorescenses” as Jack Goldstone has proposed to term them), however, eventually petered out. Growth occurred through relatively brief and limited periods of expansion during which the solution to a particular problem raised the ceiling of the asymptote, thus creating something of a “ratchet effect.”23 There are three classic types of explanations for this stability, and all of them depend on some form of negative feedback. One of them is standard Malthusian dynamics, still taken quite seriously in many circles. When income per capita rises, Malthusian models predict a population increase. It is then widely asserted that such a population increase at some point will run against some fixed resource, often believed to be food supply or fertile farmland, but quite possibly some other resource such as energy supply or clean fresh water. This fixity creates a concavity in the production function that, together with the Malthusian response, guarantee stability. Many scholars have seriously questioned whether this model is historically accurate.24 The best answer I can give it that its application is historically contingent on the particular situation: if all other things are equal, including the stock of human knowledge and the infrastructure of the economy, the concavity is simply ineluctable. But if these other things are not only variable but actually a sufficiently steep positive function of population – a rather strong condition – we can see how these Malthusian constraints may be overcome and eventually they have lost all relevance.
A second source of negative feedback is institutional. When economic progress took place, it frequently generated a variety of social and political forces that, in almost dialectical fashion, ended up terminating it. Prosperity and success led to the emergence of rent-seekers and parasites in a variety of forms and guises who eventually slaughtered the geese that laid the golden eggs. Tax collectors, foreign invaders, and distributional coalitions such as guilds and government-enforced monopolies in the end extinguished much of the growth of Northern Italy, Southern Germany and the Low Countries. The great commercial expansions of the sixteenth century were followed by the rise of mercantilism which, in one interpretation, was little more than an attempt to capture the rents generated by growth. What was not fully understood was that trade was not a zero-sum game, and thus an attempt to increase a share had the inevitable result of reducing everyone’s income. The Wealth of Nations was in part a
23Fernand Braudel, Civilization and Capitalism, 1981, Vol. I, p. 430.
24For a particularly trenchant recent criticism, see Julian Simon, The Great Breakthrough and its Causes, 2000.