Cover Story Africa
To think that a land not larger than the size of Ghana can think of strategies, ruses, mechanisms, and brutalities to control one- quarter of the world as their colonies (all painted in pink on the map at the time) beggars belief. But they did it! Poor at the time Henry VII ascended the throne, as Defoe
shows above, Britain and the other poor nations of Europe clearly saw that there was an important connection between the produc- tion structure of the few wealthy city-states and their riches. Te wealthiest city-states – Florence, Venice and those in the Low Countries – had dominant market power in three different areas. In economic terms, they enjoyed the type of position that allowed increasing profits, real wages, and taxable income. “Te Netherlands at this time was a laboratory where it was
possible to observe the mechanics of economic development,” says Reinert. “To the contemporary observers, it seemed clear that innovations and affluence were the results of the many windows of opportunity for invention outside agriculture, the falling unit costs of production and the increasing returns found in urban city activities, the extent of division of labour, and the many dif- ferent professions creating affluence as a product of synergies.” Te European countries observed early on that generalised
wealth was found only in areas where agriculture was absent or only played a marginal role, or where it came to be seen as an unintended byproduct when many diverse branches of manufac- turing were brought together in large cities. “In the 1500s,” Reinert explains, “manufacturing represented
about 30% of all employment in Holland. Venice had 40,000 men employed in the shipyards (the arsenale) alone. Each [of these states] controlled an important market for a raw material, salt in Venice and fish in Holland. Even in its early stage of de- velopment, and still relatively poor, Venice always fought hard to keep its dominant position in the salt markets. “Tird, both had built up a very profitable overseas trade.
Te first prosperity in Europe was based on triple rents that were all conspicuously absent in the poorer European states. Wealth had been created and maintained behind huge barriers to entry created by superior knowledge, by possessing a large variety of manufacturing activities that created systemic synergies.” Is Africa listening? Perhaps it needs to be repeated that for
England (or Britain) to get out of poverty, Queen Elizabeth I placed a blanket ban on the export of English raw wool, when she realised that Britain had sufficient capacity to process the raw material at home. And in so doing, she choked the life out of the rich and sophisticated woollen cloth manufacturers in Venice, Florence and Holland whose work and wealth depended heav- ily on English raw wool exports. Te raw material thus retained in England was processed into finished cloth by the newly em- powered English woollen cloth manufacturers, thereby creating wealth at home, with all its multipliers, which over time made England (or Britain) the richest country on earth, a country en- vied, imitated, and emulated by others. As Reinert says: “Several English historians point out that
the industrial policy plan of the Tudors was the real foundation of England’s later greatness. But on the continent [of Europe] this plan was to have significant consequences. Florence was one of the states hardest hit by the English competition. Te Florentines tried to make do with Spanish wool, and they tried to diversify from wool production to silk, but the English policy
14 | April 2011 New African
was so successful that the golden age of Florence was definitely over... As the German economist, Friedrich List, put it in 1841: ‘For several hundred years, England’s economic policy was based on a simple rule: import of raw materials and export of industrial products. To be wealthy, countries like England and France would have to emulate and copy the economic structures of Venice and Holland…” List’s work was very influential on European thought at the
time and his books were translated into many languages. Today, he is credited with the crystallisation of the toolbox that developed Britain and Europe, which was used in Japan from the Meiji res- toration in the 1860s and even as late as the 1960s in South Korea (Chang’s homeland), and has been used in recent years in China and India. Te same toolbox was used in France where Jean Bapiste Colbert (1619-83) became famous for spearheading the develop- ment of French industry and the infrastructure that united the country. “In effect,” says Reinert, “what Enlightenment econo- mists called emulation, rather than ‘comparative advantage’ and ‘free trade’, lies at the heart of successful development. In this context, emulation means imitating in order to equal or excel.”
Do as they do Our star economists, Chang and Reinert, are in perfect agreement
Henry VIII (right) followed his father Henry VII’s example and banned the export of unfinished cloth. Below: Daniel Defoe, novelist, spy, economist
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