I'm revising my theory of the industrial revolution based on recent readings. In particular, I'm now looking at key precursors, and from Deirdre McCloskey I learn that culture is the key and culture changed in the Netherlands before it did in England.
The more I think of it, the more I'm convinced that McCloskey is on to something significant.
But I think she has missed key precursors – e.g. the Scholastics in Spain (who owed their ideas to Italian St. Thomas Aquinas (1225-1274) – who in turn got his ideas from ancient Greeks – who in turn got their ideas from ancient India). Not only had these thinkers discovered the modern laws of economic value, they were beginning to upturn the edifice of royal divine power by demanding individual liberty – probably in response to the excesses of the inquisitions prevalent in Portugal and Spain. The Jesuits (members of the Society of Jesus) opposed the idea that kings have any divine rights. Francisco Suarez (1548-1617) declared that man is by nature free and that political organisation is a conscious creation of members of the society who agree voluntarily to limit some of their personal liberties.
The Scholastics were protesting the growing wealth and power of kings which came from the discovery of India (and eliminating the Muslim middlemen who now went into long-term decline).
And McCloskey has missed the ONE-OFF PERMANENT INCREASE IN EUROPEAN WEALTH from cutting out Muslim middlemen in the European trade with India.
And she has missed the fact that the discovery of India would never have taken place without Henry the Navigator's pathbreaking scientific innovations.
In my current view, the following are the direct precursors to the (British) Industrial Revolution:
a) Portugal invents new seafaring equipment 
Blocked from moving to the West by Ptolemy's Geography, and to the South and East by the Muslims, Europe was boxed inside its dreary shores for hundreds of years, languishing in poverty. But then:
In 1419 Henry had retreated to Sagres, an isolated promontory in Algarve in southwest Portugal where, leading a celibate life of austere study and research, he had collected a group of geographers and astronomers and cartographers and shipbuilders to plan a systematic programme of scientific exploration. Under his direction, Henry’s research group had improved the compass, developed the caravelle (a small, rakish ship with fore-and-aft sails and a large rudder that was especially manoeuvrable against the wind) and had constructed novel star maps and other navigational aids, including superior charts. Henry had created the science that had powered first the Portuguese and then the Spanish to global dominance. [Kealey]
b) Portugal finds India. Its kings become super rich 
This has been shown in my previous blog post. Also:
The spices, like the gold from Senegal, were for the Portuguese only a catalyst for further trades. Slaves were as profitable as spices and gold, and, once the Portuguese had mastered long-distance navigation in search of slaves, spices and gold, they expanded into the even more valuable trades of Newfoundland cod, Brazilian sugar and many others. The Portuguese had been driven to master long-distance navigation only by necessity – that mother of invention – but thereafter their invention powered them to ever-greater wealth, and no last-minute trade renegotiations could compensate the Italians for their technological obsolescence. [Kealey]
c) Spain, in its deep jealousy of Portugal, gambles on Christopher Columbus 
When it became increasingly clear that the Portuguese would find a way to reach India, Spain, intensely jealous, finally gambled on funding Columbus (whose requests for funding had been declined by almost all European kings). Of course, Columbus was searching for yet another route to India! Without Indian spices, Europe might still be a poor corner of the world, like sub-Saharan Africa.
Then in 1488 Dias returned to Lisbon from the Indian Ocean. Horrors! The Portuguese were about to capture the spice trade. After more study by more experts and after some tough negotiation with Columbus – Who was going to keep the profits from the trip? – Queen Isabella of Castile graciously changed her mind, entrusting him with the command of three caravelles, the Santa Maria, the Pinta and the Nina. On 3 August 1492 Columbus left Seville in southern Spain, a week later he left the Canaries, and on 12 October he heard the lookout cry ‘Tierra! Tierra!’. [Kealey]
d) Martin Luther rebels against corrupted Pope in the dying days of Renaissance 
Renaissance power and wealth had led to the Papacy become deeply corrupted. This set off a rebellion against authority. This event was at least partially independent of increasing Portuguese power, which was rapidly reducing Italian wealth in the 1510s.
e) Scholastics rebel against increasing power of kings [1500s]
The Portuguese and Spanish kings were becoming seriously rich (e.g. Spanish Armada, 1588) but their people were not getting better. The Scholastics now came in, challenging the divine rights and powers of kings.
f) The mix of Protestant AND Scholastic ideas was first influential in the Netherlands [early 1600s]
The Netherlands began to experience the benefits both of a less powerful Church (Protestant) and less powerful kings (Scholastic – Catholic), and for the first time in the history of the world, a genuine culture of FREEDOM took hold. In my view, Scholastic ideas were FAR MORE important than Protestant ideas, since they emphasised the importance of the individual. Locke was to later merely give expression to such thoughts. The Dutch now started becoming rich on their own initiative, the first "shopkeeper" community of the world. (And of course, we know that the Dutch were trying to establish a trading foothold in India at the same time as the British. So there is evidence of their increasing sea power.)
g) The English become really jealous of the Dutch [mid-late 1600s]
Netherlands was the haven of liberty in Europe before Britain became free. Even John Locke happily took shelter in Netherlands against the oppressions of British kings. According to Deirdre McCloskey,
The important change was not psychological (as for example Max Weber argued in 1905), or economic (as Marx argued in 1848), but sociological and political. Only by consequence were they economic.
Joyce Appleby observed that “envy and wonder stimulated a great deal of economic thinking in England during the middle decades of the seventeenth century. . . . The sustained demonstration of . . . Dutch commercial prowess acted more forcefully upon the English imagination than any other economic development.”
Around 1600 on a big scale in pioneering Holland some of the elite began to Revalue the town and its vulgar and corrosive if liberty-using creativity. By the 1660s the Dutch cloth merchant Pieter de la Court was declaring that “a power of using their natural rights and properties for their own safety . . . will be to the commonalty. . . an earthly paradise: for the liberty of a man’s own mind, especially about matters wherein all his welfare consists, is to such a one as acceptable as an empire or kingdom.” No aristocratic empires or kingdoms, please.
I like the cultural explanation of the industrial revolution. It fits in well with the Schumpeterian perspective of entrepreneurship and growth. It also fits in with Veblen's theory of the leisure class – (or the pretense of leisure).
In summary it is NOT just the "institutions" of free societies (e.g. banking, inheritance laws, property rights) that predict the rapid increase a society's wealth (although these institutions are vital for without them entrepreneurship cannot function), it is the culture of freedom, dignity and even (I would argue) a vulgar culture of tasteless fashion and trivia, that drives wealth.
Societies that shun vulgar and tasteless displays of wealth are unlikely to become rich.
The good thing is that in India the previous conservative culture (in which even the rich only wore the same dhoti as the poorest person) has given way to a boisterous, loutish culture in which there is now a rat race to make the world's BIGGEST HOUSE!
And now apparently another industrialist wants to make an even bigger one.
Well, that's good news. Wealth is ultimately underpinned by just two things (a) open, free mind and (b) passion to be rich.
Without a passion to succeed, there can be no innovation, no creation, no wealth.
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