Poor yields, backward technology, and overuse of natural resources: The Keys to England’s economic success?

Poor yields, backward technology, and overuse of natural resources: The Keys to England’s economic success? If we could imagine a race starting between various parts of the world 450 years ago, England would not have seemed too likely a choice to be in the lead 300 years later and still so near the front today. As a peripheral part of a relatively unimportant part of the world – northwestern Europe- it would have seemed a long shot at best. Yet here we are with England having reached a point in history when it is hard to even accept the suggestion that it has not always been either dominant or at least very near the top. In the following I argue that England’s rise to economic power in large part was due to its running up against various constraints and then effectively dealing with them. As this small island’s population grew, the three main constraints it encountered were poor agricultural yields, to some degree related to this, backward technology and perhaps most importantly rapidly depleted lumber supplies as a growth in numbers encouraged the over harvesting of this renewable resource. Rather than look at England in isolation I propose to use a comparative approach. In particular I will contrast England’s experience with that of Japan’s, China’s, and India’s 450 years ago. At the start of this imaginary race, any one of these would have appeared far more likely winners. Poor Yields Northwestern Europe’s temperate and humid climate is well suited to the cultivation of rain-fed dry land cereals such as barley, oats, and wheat. Focusing on wheat what must be kept in mind is how relatively low its yields are, especially compared to rice. Although even now the differences are striking, historically the gap in yields was even greater as the English and other northern Europeans used less efficient broadcast sowing and square moldboard plows until the eighteenth and nineteenth century. Even with modern technology, wheat yields about 70% of the tonnage per acre that rice does. Each pound of wheat provides only half the calories per pound that rice does. Letting C= the total # of calories per year per person required, letting cO equal the calories provided per pound of cereal crop, and LO equal the pounds per acre yield then you have the following: app=C/(cO*Lo) where app = acres required per person to sustain them with a particular crop for a year. Further using the subscripts R and R to denote rice and wheat COW = ½ COR and LOW = .7 LOR. The above implies that the app for wheat is almost three times as much as it is for rice. Conservatively, to support someone using wheat requires almost three times the land area that rice requires.* Given wheat’s lower yields per acre, Europe’s greater reliance on animal power was more a matter of necessity rather than being the hallmark of greater efficiency.* Given that wheat was such a land hungry crop, as the number of mouths to feed and the number of bodies to clothe, shelter and keep warm increased, England responded in part by clearing and draining more land. Increasingly, as this avenue closed off, England also adopted more labor intensive and land saving techniques, many that the English were able to borrow from foreign sources. Opening up of new lands New arable land was created in two ways: forest land was cleared and wetlands (fens) were drained. An indication of how rapidly England’s forest land was cleared and therefore its forest reserves depleted is that the price of timber rose 500% between 1450 and 1650. Wood provided the heat and the building materials to warm and house an increasing population while forest land cleared of timber by squatters and the like opened up land for feeding and clothing England’s growing population. At any rate, with this growing demand, exploitation of this renewable resource very easily exceeded its sustainable level. England’s stock of timber reserves fell. The stock of arable land was also increased by draining wetlands; the fens and marshes of East Anglia in particular. The General Drainage Act of Parliament (1600) asked lords of manors and those holding common field rights to surrender a portion of their land “…for enclosure by investors in the drainage works” (Richards, p.214). Almost immediately tens of thousands of acres of fenland were converted into arable land.* Both the clearing of timberlands** and these wetlands encouraged the development of drainage technologies. As England’s rising numbers necessitated these infrastructural projects they also made them more feasible, the labor to carry them out was more readily available and their financial costs could be shared by a larger number of people. More intensive farming methods As the costs of extending the margin of cultivation increased (as fresh supplies of land disappeared) technologies to increase yields per acre on existing land were more frequently adopted. Just as Japan prior to WWII was sometimes referred to as the England of Asia one could here refer to England as the Japan of Europe in that it was able to use technologies, developed elsewhere to its advantage.* Examples of such imported technologies are the Rotherham (or Dutch ‘bastard’) plow, and the rotary winnowing machine. Arguably, these along with the seed drill are of Asian,* or more specifically Chinese, origin. Regardless of their origin, the importance of such technologies in raising yields per acre is significant. Broadcast sowing or planting seed by hand was incredibly inefficient. As Hobson notes “…much of the crop was lost since some of it landed in the hollows which led to clumping of the plants that then had to compete for light, moisture and nutrients” (Hobson p. 203).* Although such technologies were embodied in more elaborate tools they also required more labor to build, maintain and operate. Their raison d’être was first and foremost to raise yields per acre, to save on the land that was growing increasingly scarce. Overuse of natural resources: the importance of coal. As I’ve already noted England’s rising numbers drove up the price of wood (and therefore its derivative charcoal.) Although not as easily at hand as wood and although less pleasant smelling than wood or charcoal it was found in abundance in England and ably served as a substitute for wood and charcoal. In the absence of coal, more careful labor intensive methods of production could have been adopted one might suppose. For example, wood scraps—normally discarded—could have been gathered up and added to the fires used to bake bread or bricks, make beer or forge iron. Also, agricultural residues, dried dung, and the like could be used as well. It is because the energy content of these materials is either the same (as in the case of scrap wood) or lower (for example, crop residues because of their higher moisture content per pound) that the same or more labor would be required to gather these materials. Although this was not initially of much importance coal’s energy is far higher than wood or charcoal. Both in terms of the BTUs of energy an acre of coal can provide compared to an acre of wood (its area grade) and in terms of the BTUs of energy a ton of coal can provide compared to wood, coal is far superior.* The fact that coal was at least as good a source of thermal energy as wood or charcoal, did not compete significantly with agriculture and livestock for land and freed increasingly precious wood supplies for building was what was key early on. Jevon’s Spring “Coal stands in truth not beside but entirely alone all other commodities. It is the material energy of the country - the universal aid - the factor in everything we do. With coal almost any feat is possible or easy; without it we are thrown back into the laborious poverty of early times” (Jevons, 1.3) As already mentioned, coal is a far superior source of thermal energy compared to wood. If so much better and found in such abundance one might question whether it was out of ignorance or simply a blind adherence to tradition that the English chose to use wood and charcoal rather than coal. Of course, just as in any other production process, the choice of one input over another is based just not on the input’s overall productivity but is also based on its relation cost. As the appendix to this essay illustrates, the far greater productivity of coal as a fuel source was irrelevant until the price of wood and charcoal had risen sufficiently. However, once England started to exploit its coal reserves, crossed this threshold or in Jevon’s words once the energy stored up for millennia in coal – like the energy stored up in a spring – was released, the benefits of coal as a fuel source became increasingly obvious. Benefits of coal I: Transportation, economics of scale, the conversion of thermal energy into mechanical energy. Transportation Costs Because of its weight grade, all else being equal, the use of coal as a fuel source lowers transportation costs. Say a wagon could be used to haul either 2000 pounds of wood or the same weight in coal. Either will cost X units of currency to transport. The weight grade of coal is twice that of wood. Let a = the weight grade of wood so that b = the weight grade of coal = 2a. The cost per BTU of energy shipped in wood’s case will be X ÷ (2000a) while the cost per BTU of energy shipped in coal’s case will be X÷(2000·2a) = ½ cost per BTU of wood. One might object that the weight grade of charcoal is much closer to coal than is wood. However, as Pomeranz notes charcoal was a very difficult thing to transport and could realistically only be carried by wagon a few miles before it broke apart and became dust. Besides this, the process of making charcoal was an incredibly time consuming and skilled job. One needs only read Diana Muir’s excellent description of the process of making charcoal to appreciate this.* Economics of scale The area grade of coal is an average ten times that of wood. Therefore, in a square mile coalfield one can mine the same BTUs of energy that one could gather from 10 square miles of forest. Having to cover such a wide area to gather fuel implied wagons and tools that men or, at best, draft animals could carry. Imagine laying track for the horse-drawn wagon way that was the precursor to the modern train. A length of track linking one square mile of forest land to a port, costing the same to build and maintain, would bring only one-tenth the fuel that the same length of track would deliver if it linked a coalfield to that same port. Such an investment in track would lower the relative cost of coal still further. Coalfields that invested in deeper shafts and that therefore from a given area could mine and ship an even greater volume of coal along a given wagon way would experience even greater cost savings. And any industry – such as iron – that was heavily dependent on fuel for its production, it would be able to increase its scale of operations, perhaps considerably, as the forward linkage between coal and that sector was tightened. Even though metal production in England might have seemed typical of a competitive industry, one key assumption made in theory did not hold in practice. Producers forging metals often could not count on being able to obtain as much fuel as they needed at either the going rate or at any price. “Charcoal causes many ore miners to lie unwrought for the want of fuel” so one petitioner wrote to the Privy council in 1623 (Nef, 274). The lack of a reliable supply beyond a certain point meant that given technology and resource costs producers’ total cost curves had slopes that rose exponentially beyond a certain point. In contrast, a producer could locate his works near a coalfield confident that as much coal as he required – at a price – could be had. The risk of substantial capacity standing idle “for want of fuel” being less, larger more efficient facilities could be built. Although facing a higher degree of operating leverage, the total cost curves of such coal based works, once a certain point scale of operations was passed, would have lower total costs that rose far less rapidly as the market for metals grew. Technological Change Coal has all those characteristics which entitle it to be considered the best natural source of motive power. It is like a spring, wound up during geological ages for us to let down…. Coal contains light and heat bottled up in the earth, as Stephenson said, for tens of thousands of years, and now again brought forth and made to work for human purposes (Jevons, VIV, 43) For the reasons I’ve just outlined – its lower cost of transport per BTU of energy and the economics of scale and greater linkages it fostered – coal, as a source of thermal energy was significant. Once, with the steam engine, a reliable method of converting thermal energy into mechanical power was developed, coal’s significance increased more still. For the first time in history the rate of technological progress became far less a combination of necessity and luck but more a steady continuous phenomenon. Jevon’s spring was let down and technological change became a matter of closing the sizeable gap between the potential energy of coal (and other fossil fuels) and the amount being harnessed. Better harnessing of this energy meant more intense heat and pressure which meant more machines made out of proportionately more metal and out of stronger metals – the increasingly “endogenous nature of tech progress therefore was because of the fact that in the age of iron and steam technological progress became much more a matter of exploring the chemical and physical properties of metals and fuels. And the iron machine that were made, the bricks that were used to build the factories in which they were built and the steam used to power machines used coal. In contrast to a wood based economy (or organic economy as E. A. Wrigley referred to it) a coal or mineral-based economy was one in which technical progress tended to feed upon earlier advances. In Wrigley’s “organic” economy growth was based largely on advances in the division of labor; specialization growth where “Each step taken made the next step a little more painful to take since each round of expansion necessarily increased pressure on the land by raising the demand for industrial raw materials as well as food, in the system as a whole negative feedback tended to prevail.” (Wrigley, 73-79). A mineral-based economy, however, is one characterized by power growth. Here ”…freed from dependence on the land for raw materials, positive feedback could exist over a large and growing sector of economic activity. Each step taken made the next easier to take. The system as a whole could gain an increasing momentum of growth” (Wrigley, p.74) Sir John Hicks described the industrial revolution “…as the rise of modern industry not of industry as such”. He goes on to explain what sets the two apart was in modern industry the advent of technologies “… which made it possible to produce consumer goods by means of a combination of fixed capital and labor rather than by labor alone”. This is quite unsatisfactory. It suggests that any place in the world could have been home to the industrial revolution. It suggests that at the starting line of the economics race hundreds of years ago all runners were evenly matched. Swept under the rug are the vital questions of what material the machines that drove the industrial revolution were made of, what fuel powered them and how close at hand the material for industrialization were. Sadi Carnot demonstrate that perpetual motion, a 100% efficient engine that never had to be refueled was a physical impossibility and thus laid the groundwork for the second law of thermodynamics. However, under the crush of rising numbers and the competing demands for land England was forced to tap its substantial reserves of mineral energy and in the shift to power growth unleash the potential of perpetual invention.* The benefit of coal II: complementarities and late industrialization (backwardness) Economists are taught to think in terms of trade-offs. Of necessity this means that in the wake of change there will be winners and losers and that in the wake of change, the pursuit of self-interest (competition with others) raises the chances of being counted among the winners. For example, if tastes or technology changes in favor of a certain industry the more attuned one is to this “fact”, the more quickly individuals respond, the fewer who will be crushed by the shift that is about to unfold or is taking place. Coordinated efforts, where individuals act not unilaterally but wait to see what others are doing, by slowing down the adjustment process, hamper the system’s efficiency. Looking at it this way you could consider as a corollary to the benefits of self-interest the idea that “he who hesitates is lost”. Over the years however economists have increasingly recognized that despite the very real benefits of self-interested behavior there are many cases where the pursuit of self-interest (competition), especially when rational individuals (and their families) of necessity must stop to consider what others will do, leads to outcomes that are inferior to what more considered, more deliberate cooperative behavior can achieve. Not being able to rely on others, not being able to coordinate individuals’ actions fails to generate optimal outcomes, even in a competitive environment. This fact that often our decisions complement one another (that they are complementary to one another) creates the potential for coordination failure. When such complementarities, as they are called, are strong the seemingly small and inconsequential decision taken by a few have the potential to generate substantial differences over time. Most economists, in the middle or near the end of their professional lives, are often not more than dimly aware of the increasing use of the concepts of complementarities and coordination failure. I would imagine that few economic historians, regardless of their age, are too aware of them. When, for example in discussing the implications of his book The Great Divergence Pomeranz notes that his argument “…makes for an awkward marriage between history and economics” (Pomeranz, p. 280) he reveals why historians studying the question of historical economic development need to be more aware of recent advances in development economics and growth theory. England’s development provides many example of complementarities and coordination failure as does the lack of meaningful development beyond a certain point in other parts of Eurasia. I would like to turn to a few examples to illustrate. Why England’s industrial revolution happened when it did. Assume that little coal is being mined despite the fact that most are aware of its many advantages over wood as a fuel source. Say that a landlord has a shallow seam of coal on his land and suspects that he has a great deal more deeper below the surface. He can casually mine the coal the shallow seam, if and when a market exists, or in anticipation of significant growth in demand, he could start to seriously mine coal on his property. Starting up such an operation means a commitment to fixed costs that will have to be met regardless of what sort of market develops . As a result of all this he faces the following payoff matrix NMG MG CM 2 4 EM -2 8 Where NMG = No market growth CM = Casual miming MG = Market growth EM = Expanded mining Note that while PO(CM/NMG) > PO(EM/NMG) that PO(CM/NMG) < PO(EM/MG). A game with such a structure where CM/NMG = a, EM/NMG=b, CM/MG=c, and EM/MG=d and where PO(a) > PO(b) but PO(c) < PO(d) is called a coordination game. (The abbreviation PO stands for payoffs). Similarly a brewer can burn either wood or coal to make beer. He might face the following payoff matrix (assuming that the cost of the price of beer and wood remain the same.) BW BC CM -4 -8 EM -3 -2 Then PO(BW/CM)=-4>PO(BC/M)=-8 while PO(BW/EM)=-3 < the payoff of BC given EM. For either the landlord or the brewer there are two equilibriums. For the landlord it is best to stay with casual mining if he fears that no significant growth in the market for coal will materialize. The brewer best stick to wood to fuel his fires if he has little reason to think that he could find coal in abundance. In this example the pessimism of the potential suppliers and buyers of coal mean that unless the payoffs somehow change, casual and occasional marketing of coal and a preference for burning wood will continue. Even if all concerned were well aware of coal’s greater potential this would be true. One could well wonder why it would take centuries for an economy of such an abundant supply of a superior fuel source to realize this and begin to exploit it. I trust it becomes easier to understand if one considers the situation from the perspective of the decision making agents in this story. Unless the payoffs change, the would-be mine owner will never starting mining coal unless he is reasonable confident that a large enough market for his coal is there. Similarly, the brewer has no desire to use coal as more than a stop gap. It is far better for him to continue to use the fuel source he has always used and knows he can rely on. Lacking enough demand for coal supplies remain low, lacking much of a supply there is little demand. In England’s case, it is only with population growth, that the growing demand for fuel and the phenomenal increases in wood prices that the payoff structure of the second table above changed (growth in the market for coal as the price of wood and charcoal rose sharply) making the decision to buy coal rather than wood the optimal choice. Even without the payoffs for potential mine owners changing, there was greater confidence that there would be enough of a market for the output of their mines. The risks of expansion significantly lowered, expansion took place. The abundant supplies of a substitute fuel source for wood and charcoal, its superior quality in most important respects as a source of thermal energy, and a geography – “ready access to coastal and riverine transport” - that as John Richards has described “…made it feasible to ship coal over considerable distances ...” hen meant that it took relatively less of a spark to set into motion the sort of linkages that the concept of complementarities is trying to capture. (Richards, p.228) Japan, China and India As an island nation, Japan had similar advantages to England in terms of rivers and coastline, but had relatively coal, had adjusted to the scarcity of wood and experienced relatively less population growth beyond a point. China also suffered a severe timber shortage and had abundant supplies of coal. However, the ease with which these sources could be worked was less and the relatively higher costs of transport from its source to where it was most needed stood in the way of tapping into these reserves. Finally, India like China has reserves of coal but much like the U.S. well into the nineteenth century had abundant supplies of wood and charcoal. Given the climate of its population centers there was also considerably less need for heating fuel. The advantages of being backward Before WWII a comparison sometimes was made between Japan and England. *Japan – an island nation focused on trade and expansion – was referred to as the England of Asia. With regards to England and the role of invention I’d like to draw on the comparison John Hobson has made between England and Japan, a comparison that warrants referring to England as the Japan of Europe. England, like Japan, rapidly grew and developed by adopting and improving on foreign technologies. Many of the key technologies that allowed England to grow arguably were of foreign origins; the seed drill, the Dutch ‘bastard’ plough, and the rotary winnowing machine were all imports. Similarly, such key technologies as ships with bulkheads and watertight compartments, suspension bridges, Kery’s flying shuttle, Hargrave’s spinning jenny and Ackwright’s water frame were imported technologies or adaptations of imported technologies. Not surprisingly given Asia’s importance in world trade and industry most of the technologies were directly, or at one remove, of Asian origin.* Needham lists 26 technologies that arguably were transmitted from China to the west and were key in the latter’s development. Following Needham, Boserup has argued that England had the opportunity to borrow technologies from previously more advanced parts of the world.* Unless one is willing to argue that the British Isles were cut off from the rest of the world it seems hard to argue that England achieved all that it had in terms of these key inventions on its own. Also, while not overlooking the considerable amount of ingenuity and hard work involved in learning and innovating there is often direct evidence of borrowing. There is no question, for example, that Jeremy Bentham’s brother Sir Samuel Bentham introduced improvements to the design of British naval ships, such as watertight compartments, after observing large Chinese ships in Siberia. Similarly, Bentham was responsible for the first iron-built bridge over the Thames. This too was inspired by Chinese practice. There are numerous other examples of such borrowings as well. There is also indirect evidence of the borrowing of technology from the East as well. Jethro Tull’s seed drill, although differing in design from Chinese and Asian precursors seems to have been influenced by Asian seed drills. John Hobson notes that the basic principles Tull outlines in his Horse-Hoeing Husbandry (1773) “…were almost a word for word reproduction of those laid out in the original Chinese manuals dating back to the third century B.C.E.” (p.205). In America, Whitney’s cotton gin or saw-toothed gin was “invented” only 60 or so miles from the Georgia Sea Islands where slaves ginned the long staple cotton that grew there (but did not grow on the mainland) with roller gins or churkas. Churkas had been in use for millennia in India. It is hard to believe that as Whitney puzzled over how to seed or gin shorter staple cotton he know nothing of roller gins, that he was completely unaware of churkas. The benefit of a technological lag is that a certain (perhaps large) fraction of the groundwork for needed development has been laid. Although disinterested in the stock of technical knowledge elsewhere before it is really relevant, before there is a pressing need, as the need to save labor, natural resources, or capital present themselves the incentive to search for solutions, to become more inquisitive naturally increases. Economies where technologies have already been developed, that with some modification might be of use then means that half the work has already been done. The smaller the gap between the technologically advanced economy and the one lagging behind and searching for answers, the easier the job of adapting foreign technologies will be. The more sophisticated and specialized to local circumstances the harder it may be to expect individual producers, acting alone to conduct such searches. Regardless of the potential benefits to all concerned, a yawning gap between best practices techniques found elsewhere and local circumstances (such as the skilled labor needed to adapt foreign technologies to the local economy or a reliable inexpensive source of power to operate technologies embodied in machinery) may make it appear from an individual’s perspective as though it is not worth the cost. At the same time that there is the potential for substantial growth in a very short period of time, late industrialization means that a much more coordinated effort is needed for the reasons just outlined. Paradoxically this will especially be the case where the technological gap is greatest and an economy’s history and geography are such that the stock of human capital and its natural resources are quite low. With many geographic (and geological) advantages at the time of the Industrial Revolution when England turned eastward to borrow technologies the gap was far from being all that substantial. Also the relative sophistication of these technologies was not all that high. Therefore, in the Japan of Europe, the payoffs to inquisitive producers were often sufficiently high to require little of the coordination and support that Japanese producers needed a century later when the gap had grown considerably. Familiarity breed success In a paper published in 1998 in the AER Goodfriend and McDermott develop a model where the rate of growth in an economy’s stock of human capital per capita and therefore this economy’s growth in real per capita income is a positive function of its familiarity with an economy, often a more advanced one, producing a specialized good. All else being equal, familiarity is a function of “…geographical proximity, active commercial relations, and a common language and culture” (G and McD). While not for a moment ignoring the negative aspects of both England’s and Japan’s expansion into the rest of the world both economies were remarkably willing to ignore cultural and language difference as well as distance. Familiarity increases the rate of growth in human capital and therefore income by increasing the effectiveness of the effort devoted to learning. The less familiar producers are with another economy that it wishes to borrow technology from the slower and more difficult the process of adopting these techniques. In Goodfriend and McDermott’s model they develop familiarity is captured by k, the “familiarity parameter”. This figure can range from 0 to 1 with 0 representing absolute ignorance and 1 absolute familiarity. As they note “A value of k near 0…indicates that technical knowledge from abroad flows poorly, so that hands on domestic production of specialized goods greatly facilitates learning. Lack of familiarity acts as a brake on the international flow of ideas. In effect, our familiarity parameter governs the extent to which technological spillovers are geographically concentrated” (p.6). Essentially, what Goodfriend and McDermott are arguing is like saying that the more familiar one is with the “language and the culture” of stringed instruments, say the violin, the less time you would have to experiment with an erhu to produce a piece of music. The two most important conclusions one can draw from Goodfriend and McDermott’s model are (1) that there is a critical degree of familiarity needed for increased trade to benefit that economy in terms of a “learning productivity” and (2) that increased familiarity on the part of one economy with another (for example, the European economy with economics of South and East Asia in the early modern period or Japan with the west in the last century and a half) will at a minimum help to close the gap in real per capita income between that country and the technological leader. For any country that was either behind or on par with the technologically more accomplished economy to overtake the latter it (1) had to have a high enough level of familiarity with the dominant economy to begin with (2) this level had to increase and (3) the dominant country had to have a relatively low degree of familiarity with the other country. The reason for the dominant economy having less interest in the other economy is a result of its dominance. As Goodfriend and McDermott note, producing a large share of the world’s specialized goods the dominant economy “would have little interest in the less-developed economy.” And although they focus on the relevance of their model on Japan’s 20th century rise relative to the west it is hard not to think of Asia (China and India in particular with 56% of world manufacturing in 1750. See Robert Marks, The Origins of the Modern World, p. 123) with its silks, spices, porcelain and cotton goods as the dominant economy with little reason to pay much attention to Europe, especially England, 3 million “strong” with its wool, wheat, pewter and leather.*