The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor

by David S. Landes

  44. Cf. Livingston, “Gentleman, Theory of the.” This cultivation of superiority to the material also found expression in the memoirs of British travelers to the United States. Whereas in the eighteenth century it was England that was the object of criticism or admiration because of its social mobility and material success, in the nineteenth century the United States incarnated these virtues and vices and became the object of scorn and condescension by snobs and fortune hunters alike.

  45. Abramovitz and David, “Convergence and Deferred Catch-up,” pp. 26-27. The sixteen advanced countries grouped for comparison are twelve European leaders: Austria, Belgium, Denmark, Finland, France, Finland, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, plus the U.K.; plus Australia, Canada, and Japan.

  46. Ibid., p. 27, Table 1.

  47. See Steven A. Holmes, “Income Disparity between Poorest and Richest Rises,” N.T. Times, 20 June 1996, p. A-l. Also Keith Bradsher, “More Evidence: Rich Get Richer,” ibid., 22 June 1996, p. A-31. Paul Krugman, Pop Internationalism, is cutting in his rejection of those who would argue that the retreat of the United States is linked to the advance of international competitors. Yet I find a similarity to the earlier instances of loss of leadership.

  48. Robert Samuelson, “Is There a Savings Gap?” Newsweek, 17 June 1996, p. 56, citing a study by the McKinsey Global Institute.

  49. Lewchuk, American Technology, p. 117.

  50. Quoted ibid., p. 117. Of the three leading producers in the prewar years, only Great Britain fell substantially short of home demand. France shipped more than half its output abroad and was the leading exporter in the world.

  51. Ibid., pp. 171-72.

  52. For a case study in dysfunctional management, going back to the interwar years, sec ChiTh, “Deconstructing Nuffield.” On leisure preference, Church notes (p. 572) Nuffield’s annual months-long voyages to Australia, on a slow boat well equipped for deck quoits.

  53. Pollard, Development of the British Economy, pp. 242-43.

  54. Cf. Channon, Strategy and Structure, p. 109: “…their strategy did not appear promising for the long-run development of the British automobile industry.”

  55. Church, “Deconstructing Nuffield,” p. 578, n. 127.

  56. Pollard, Development of the British Economy, p. 400.

  57. Church, Rise and Decline, pp. 77,104,115, and passim; and his “Effects of American Multinationals.”

  58. Pollard, Development of the British Economy, p. 401.

  CHAPTER 27

  1. Kindleberger, Financial History, p. 407: “I regard the German monetary reform of 1948 as one of the great feats of social engineering of all time.”

  2. On those last days, see Toland, The Rising Sun.

  3. On these ritualistic encounters, cf. Halberstam, The Reckoning, p. 310.

  4. I take the phrase “global city-state” from Murray and Perera, Singapore.

  5. “A Survey of Multinationals,” The Economist, 24 June 1995, p. 4.

  6. M. Richardson, “Malaysia Readies a Crackdown on Illegal Workers,” Int. Herald-Tribune, 7 October 1996, p. 4.

  7. On Indochina, cf. Murray, Development of Capitalism, p. 619, n. 345. He cites Rene Dubreuil, De la condition des Chinois et de leur role economique en Indochine (Bar-sur Seine, 1910), p. 71: “When the French administration was installed in Cochin China, it discovered that the Chinese…were a priceless help in carrying out its colo-nialization…. In order to get…[the Vietnamese] to change their habits and ill-will, to educate them in the field of commerce and to make them take out of their earthen jars the piasters needed to sustain our administrative machine, we needed an intermediary living side-by-side with them, speaking their language and marrying women of their race. That intermediary was the Chinese. The Chinese is flexible, skillful, without prejudice, and loves gain.”

  8. Pan, Sons of the Yellow Emperor, p. 247; see, on much of this, ch. 13: “Cultural and National Identities.”

  9. Ohmae, End of the Nation State, 179. On renewed trouble in Indonesia, see: Int. Herald Tribune, 11-12 January 1997, p. 1.

  10. These and the preceding figures from Rohwer, Asia Rising, pp. 228-29.

  11. Thus Naisbitt, Megatrends Asia, p. 17: “The Chinese are coming. Asia and much of the world today is shifting from Japanese-dominated to Chinese-driven.” If Naisbitt is right, the period of Japanese leadership will be one of the shortest in history. But what will follow? Where is leadership in a world of global enterprises?

  12. Achavanuntakul, “Effects of Government Policies,” p. 9. According to the World Bank, inflation ran at 9.2 percent from 1970 to 1980, 4.2 percent from 1980 to 1992.

  13. On all this, see Thomas L. Friedman, “Bangkok Bogs Down,” N.Y Times, 20 March 1996, p. A-19; and Kaplan, Ends of the Earth, pp. 380-82. The problem is aggravated by extensive and growing use of coal fuel, much of it lignite—the worst kind. On motorcades: Int. Herald-Tribune, 9 January 1997, p. 2.

  14. On Model T diversity, see Flink, “Unplanned Obsolescence.”

  15. Cusumano, Japanese Automobile Industry, p. 7.

  16. I take this from Cusumano, pp. 18-19. He notes that whatever reservations may have been felt in some quarters, the Bank of Japan, the Japan Development Bank, and the Industrial Bank of Japan lent large sums to keep Nissan, Toyota, and Isuzu out of bankruptcy in the late 1940s. Had MITI not won the argument, he writes, “postwar Japanese (and world) history would have been considerably different” (p. 19).

  17. These figures from Cusumano, pp. 4-5.

  18. The best and most readable source here is Halberstam’s The Reckoning. Forget the economists and economic historians. Halberstam understands the industry, but even more he understands the people in it. See also, along similar lines, Lacey, Ford.

  19. From Womack et al., The Machine That Changed the World, p. 118.

  20. Friedman, “Beyond the Age of Ford.” Cf. Piore and Sabel, The Second Industrial Divide.

  21. On the difference between size and flexibility, see Landes, “Piccolo e bello. Ma e bello dawero?”

  22. Dertouzos et al., Made in America, p. 180. Not that Japanese technical strategies were homogeneous from one company to another. Nissan and Toyota, for example, show significant differences—the former closer to the American pattern; the latter given to more flexible methods. Cf. Cusumano, Japanese Automobile Industry.

  23. Abernathy and Clark, p. 36, speak of “fascinating parallels but ultimately sharp contrasts.” Cf. Cusumano, Japanese Automobile Industry, ch. 5, on the Toyota production system and the extraordinary career of Taiichi Ohno, who came to autos from the mother firm (Toyoda automatic looms), saw everything anew, and transformed the character of mass production.

  24. Halberstam, The Reckoning, pp. 43, 50.

  25. Cf. Womack et al., The Machine That Changed the World, p. 109, on the Honda Accord.

  26. See Johnson, Japan, p. 31.

  27. On much of this, see Tabb, The Postwar Japanese System, p. 160.

  28. Cf. Keith Bradsher, “Cost-Cutting Strategy,” N.T. Times, 17 March 1996, p. A-1, on the pros and cons of the strike at the Dayton, Ohio, brake plant of General Motors.

  29. Cf. Stopford and Strange, Rival States, pp. 84-85.

  30. N.T. Times, 13 May 1983, p. D-3.

  31. Holusha, “Detroit’s New Labor Strategy.”

  32. See Keith Bradsher, “New Union Tactics,” N.T. Times, 10 March 1996, p. A-16.

  CHAPTER 28

  1. Cf. Ishac Diwan, “Hard Time for More Labor Economics,” Forum (Newsletter of the Economic Research Forum for the Arab Countries, Iran & Turkey), 2, 2 (July-August 1995), 1-3; and N. Fergany, “Unemployment in Arab Countries: The Menace Swept Under the Rug,” ibid., pp. 4-5.

  2. Bulmer-Thomas, Economic History of Latin America, p. 278.

  3. The U.N. International Drug Control Programme, in its first World Drug Report, estimates the trade in illicit drugs at $400 billion—about 8 percent of total world trade. Between 28 and 53 percent of Bolivia’s export revenues are estimated
to come from narcotics; some 6 percent of Colombia’s GDP—Financial Times, 26 June 1997, p. 4. Guesses all.

  4. For a fascinating insight into the fairy-tale economics of the Socialist countries, in this case, the German Democratic Republic, see Merkel and Miihlberg, eds., Wun-derwirtschaft.

  5. Feshbach and Friendly, Ecocide in the USSR, ch. 4; Kaplan, Ends of the Earth, p. 277; David Filipov, “A Sea Dies, Mile by Mile,” Boston Globe, 23 March 1997, p. A-1.

  6. Filipov, “In Chernobyl Soil, Fatalism Thrives,” Boston Globe, 21 April 1996, p. 17.

  7. Cf. Josephson, “‘Projects of the Century’” p. 546 and passim.

  8. Shcherbak, “Ten Years of the Chornobyl Era,” p. 44. See also Marples, Social Impact; Medvedev, Truth About Chernobyl; Michael Specter, “10 Years Later, Through Fear, Chernobyl Still Kills in Belarus,” N.T. Times, 31 March 1996, p. A-l.

  9. Davidson, Black Man’s Burden, p. 216.

  10. World Bank, Adjustment in Africa, p. 17. See also the Bank’s World Development Report 1997: The State in a Changing World. One difficulty with these numbers is that the margin of error is huge. On the one hand, African authorities make up figures as needed. On the other, all manner of parallel economic activities escape measurement. Do these biases even out?

  11. Kamarck, Economics of African Development, p. 17.

  12. H. J. Spiro, Politics in Africa, cited in Kamarck, Economics, p. 48.

  13. Davidson, The Black Man’s Burden, p. 197.

  14. On all this, see Platteau, “Food Crisis in Africa.”

  15. Ibid., p. 451.

  16. Some welcome this premature urbanization as the seedbed of modernity, democracy, and business enterprise. Cf. A. Frachon, “L’Afrique n’est plus rurale,” Le monde, 10-11 November 1996.

  17. Cf. Dasgupta, “Population, Poverty, and the Local Environment.”

  18. J. C. McKinley, Jr., “Anguish of Rwanda Echoed in a Baby’s Cry,” N.T. Times, 21 February 1996, p. A-8. See also Howard W. French, “Migrant Workers Take AIDS Risk Home to Niger,” N.T. Times, 8 February 1996, p. A-3.

  19. Havinden and Meredith, eds., Colonialism and Development, p. 276.

  20. Ibid., p. 278.

  21. I take this from Evelyn Waugh’s account, Tourist in Africa, p. 98.

  22. Ibid., p. 99.

  23. Roberts, “The Coercion of Free Markets,” p. 224; also Davidson, Black Man’s Burden, p. 217.

  24. An educated and traveled police captain in Mali, quoted in Biddlecombe, French Lessons, p. 247.

  25. George B. N. Ayittey, “The U.N.’s Shameful Record in Africa,” Wall St. J., 26 July 1996, p. A-12.

  26. According to Ayittey, the United Nations estimated that some $200 billion was shipped from Africa to foreign banks in 1991 alone—equal to 90 percent of sub-Saharan Africa’s GDP. Ibid.

  27. H. W. French, “Personal Rivals Fight to Finish in War in Zaire,” N.T. Times, 6 April 1997.

  28. Barbara Crossette, “U.N., World Bank and IMF Join $25 Billion Drive for Africa,” N.T. Times, 17 March 1996, p. A-6. The New York-based African Observer denounced the scheme as a charade, cooked up by Boutros Boutros-Ghali by way of promoting his campaign for renewal as secretary-general of the UN (if so, it didn’t help)—Ayittey, “U.N.’s Shameful Record.”

  29. N.T. Times, 17 March 1996, p. A-6.

  30. These data from the World Bank, World Development Report 1994.

  31. As of 1993. Field, Inside the Arab World, p. 135, notes that the sum matched the country’s foreign debt as of that date, so that people were able to dream of owing nothing. If they could put their hands on that money.

  32. On this, see Abdelaziz, “Une economic paralysee.”

  33. Field, Inside the Arab World, p. 134.

  34. Fisk, “Sept journees ordinaires,” p. 7.

  35. Cardoso and Faletto, Dependency and Development, p. 216. In all fairness, the text may read better in Spanish.

  36. Matt Moffett, “Foreign Investors Help Brazil’s Leader Tame Its Raging Inflation,” Wall St. J., 15 December 1995, p. A-l.

  37. Ibid. On the assumption that the quotes are translations, I have taken the liberty of changing the language ever so slightly without changing the meaning.

  38. Sebastian Edwars, “Why Brazil Is Not Mexico—Yet,” Wall St. J., 26 July 1996, p. A-13.

  CHAPTER 29

  1. On the negatives and “excesses” of technology, see Salomon, Le destin technologique.

  2. See Holton, Einstein, History.

  3. Islamoglu-Inan, “Introduction,” p. 222. In a witty, understated excursion on the subject, Khoo Khay Jin suggests that among the sources of this preeminently Western crise de conscience is “the collapse of the socialist project in thought and reality.” H-World @ h-net.msu.edu, 31 October 1996.

  4. Thus Tavakoli-Targhi, “Orientalism’s Genesis Amnesia.”

  5. Islamoglu-Inan, “Introduction,” p. 229.

  6. Cf. Hall, “A Theory of the Rise of the West,” p. 231.

  7. On the proliferation of what Ferdinand Mount calls “Endist” books, see his review “No End in Sight,” TLS, 3 May 1996, p. 30. He writes: “One thing is common to this grand cacophony of prophecy and prescription: the refusal to pause and consider, with even the appearance of care, any arguments of their opponents or any weaknesses in their own.”

  8. B. Biggs, chairman, Morgan Stanley Asset Management, cited in Kaplan, Ends of the Earth, p. 297.

  9. Cf. Dasgupta, “Natural Resources.” This speaks of a third stage, the “Age of Substitutability”: “In this final Age, economic activities will be based almost exclusively on materials that are virtually inexhaustible, with relatively little loss in living standards” (p. 1128).

  10. Cf. Edward A. Gargan, “A Year from Chinese Rule, Dread Grows in Hong Kong,” N.T. Times, 1 July 1996, p. A-l; and Peter Stein, “China Is Slow to Handle Issues on Hong Kong,” Wall St. J., p. B7D.

  11. Compare the precautions of Russian firms, setting up headquarters in Cyprus to get away from the crime and potential chaos at home. Mark M. Nelson, “Economic Fugitives,” Wall St. J., 9 May 1996, p. 1.

  12. Krugman, Pop Internationalism, p. 70.

  13. Wealth of Nations, Book II, ch. 3.

  14. N.T. Times, 19 June 1996, p. D-5: “Moulinex [French maker of household appliances] Is Shifting Production to Mexico.” Not all: four of eleven plants, 2,600 of 11,300 jobs. The firm had suffered a loss of 702 m. francs for the year ended 3/31, after a loss of 213 m. a year earlier.

  15. Pop Internationalism, p. 50.

  16. Cf. ibid., pp. 112-13, which says that even a successful “strategic trade policy” would add no more than 1/15 of 1 percent to American national income. This puts such policy “as an issue in the same league as pricing policies for ranchers and miners operating on federal land.” I disagree. Insofar as government can promote competitiveness, it should, on the principle that more knowledge and better performance are contagious. And insofar as government is leasing federal land for less than market value, it should stop, on the principle that successful rent seeking is a bad habit and also contagious. The only real argument against government intervention is that it often botches the job. And that’s also contagious.

  17. Cf. Uchitelle, “Like Oil and Water.” This article is a comparison of the economics—content and tone—of Lester Thurow and Paul Krugman.

  18. Among the more recent contributions are the essays in Krugman, Pop Internationalism, which denounce protectionism and other efforts to manage trade. Krugman is especially severe toward his intellectual adversaries, defining “pop internationalism” as “glib rhetoric that appeals to those who want to sound sophisticated without engaging in hard thinking.” Cited in review by Charles Wolf, Jr., in the Wall St. J., 1 June 1996, p. A-12.

  19. For a skeptical view of market efficiency and a defense of the advantage of government intervention, see Kuttner, Everything for Sale.

  20. See le Masson, Faut-il encore aider?, p. 145.

  EPILOGUE 1999

  1. Cf
. Fay, The Collapse of Barings, p. 123.

  2. It is a good rule to avoid the word “miracle” in speaking of economic achievement, though in all fairness, critics are less inclined to condemn such use in the Asian than in the European context. European “miracles” are decidedly out of fashion.

  3. Cited in Henderson, Asia Falling, p. 7.

  4. Henderson, Asia Falling, p. 7, Table 1. It is not clear whether this is growth in real (deflated) terms.

  5. “The question is whether we have to bow to their pressure. These are not pressures from governments but [from] individuals who are not elected by anyone, whilst we are a sovereign country, having a government elected by the people.” Gill, Asia under Siege, p. 160.

  6. Gough, Asia Meltdown, p. 68.

  7. For a statement of this position, see Frank, ReOrient.

  8. The eighteenth century poses a special problem to this school. Western economic and political pre-eminence would seem clear-cut, but a number of scholars would now argue that the real mover in world growth at that time was China, whose huge population made it the focus of international trade. Among the proponents of this thesis: Kenneth Pomeranz, Gunder Frank, William McNeill. I do not question the size of the Chinese market, nor the volume and value of its industrial output. But that was not where the innovations were taking place that changed the world. We have a real disagreement here about the nature and causes of historical change.

  9. See Landes, Bankers and Pashas, ch. i.

  10. On the negative aspects of fast and furious enterprise, see Luttwak, Turbo-Capitalism. Economists point out that he is not an economist, hence unauthoritative. But I think he makes many good points.

  Bibliography

  Abdelaziz, Malika. 1993. “Une économie paralysée,” Courrier international, 156 (28 Oct.): 12.