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The Economic Rise and Fall of the Great Powers: Technological and Industrial Leadership since the Industrial Revolution

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The article looks at Schumpeterian growth. What makes nations rise is their ability to use technological progress to create growth industries. But industrial leadership does not automatically translate into future industrial leadership, as technological progress means that the key industries never remain the same. I compare Britain, France, Germany, the U.S. and Japan during five periods of industrial leadership, from the Industrial Revolution until today, to analyze why certain nations have been better able to rise to industrial leadership, and stay there, than others. The theoretical framework blends Joseph Schumpeter and Mancur Olson's work to yield three theoretical propositions which receive broad empirical support. First, human capital is crucial. Second, the state must prevent vested interests from blocking structural economic change. Third, the states that have managed to do so have been characterized by political consensus and social cohesion. This is because consensus and cohesion provides the state with more autonomy for independent policy-making.
World Political Science Review
Volume 3, Issue 2 2007 Article 1
The Economic Rise and Fall of the Great
Powers: Technological and Industrial
Leadership since the Industrial Revolution
Espen Moe
University of Science and Technology (NTNU), Trondheim, Norway, espen.moe@svt.ntnu.no
Originally published as Espen Moe, Stormakters økonomiske vekst og fall: Teknologisk og indus-
trielt lederskap, 1750-2000, Norsk Statsvitenskapelig Tidsskrift ˚
Argang 2006, Nr 01, pp.46-74.
Reprinted with permission from Norwegian Political Science Association.
Produced by The Berkeley Electronic Press.
The Economic Rise and Fall of the Great
Powers: Technological and Industrial
Leadership since the Industrial Revolution
Espen Moe
Abstract
The article looks at Schumpeterian growth. What makes nations rise is their ability to use
technological progress to create growth industries. But industrial leadership does not automati-
cally translate into future industrial leadership, as technological progress means that the key in-
dustries never remain the same. I compare Britain, France, Germany, the U.S. and Japan during
five periods of industrial leadership, from the Industrial Revolution until today, to analyze why cer-
tain nations have been better able to rise to industrial leadership, and stay there, than others. The
theoretical framework blends Joseph Schumpeter and Mancur Olson’s work to yield three theoret-
ical propositions which receive broad empirical support. First, human capital is crucial. Second,
the state must prevent vested interests from blocking structural economic change. Third, the states
that have managed to do so have been characterized by political consensus and social cohesion.
This is because consensus and cohesion provides the state with more autonomy for independent
policy-making.
KEYWORDS: innovation, Schumpeter, states
1. Introduction
Long-term growth and development is one of those topics that continues to
fascinate us—economists, historians, economic historians, sociologists, political
scientists—maybe because what at first glance seems so simple to a great extent
still persistently eludes us. Or because the consequences are so great in scope:
Small differences in growth rates between different countries will in the long term
gravely change the balance of power between them. The leading powers of today
are not the same as 250 years ago, among other things because the growth
industries of today are not the same as then. Industries rise and fall, and as a
consequence different states have exercized economic leadership at different
historical moments. These are also the states that have dominated world politics—
Spain, the Netherlands, Great Britain, the United States.
This is an article about rise and fall. Why have some countries been so
much better than others at achieving success within the world’s core industries?
Why do countries fail to translate leadership in one core industry into leadership
within future ones? And why are some better than others at this? Does fall follow
inevitably from rise, or can it be prevented?
In the following, I suggest an underlying dynamic that purports to explain
these long-term cycles. This is a dynamic where success does not necessarily
breed success, but often failure. I combine Joseph Schumpeter and Mancur Olson
to produce a theoretical framework where the onus is on the slow and steady
build-up of rigidities in the economy, vested interests gaining political power, and
in the process making it ever harder for the state to undergo necessary structural
economic change. As a core industry experiences rapid economic growth, it
becomes politically influential. This influence is used to block policies that go
against the interests of the industry. Hence, only states that are able to prevent
vested interests from becoming powerful enough to block structural change, may
entertain hopes about future industrial and economic leadership.
While the main focus is on vested interests, I suggest a potential solution
in the shape of political consensus and social cohesion. Only states characterized
by strong political consensus and/or social cohesion have the strength and relative
autonomy to resist the power of vested interests. Hence, economic success is a
story about how vested interests have been prevented from depriving the state of
its autonomy and how those countries that have managed this are countries
characterized by consensus and cohesion. Following the theory section, I include
brief empirical evidence from five core industries—cotton textiles, iron,
chemicals, car manufacturing and industries drawing on information and
communication technologies (ICTs)—over five time periods, to provide a
tentative test and support for the overall argument.
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Moe: The Economic Rise and Fall of the Great Powers
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2. A Theoretical Framework
In one sense, the point that different time periods have been characterized by
different growth industries is trivial. The growth industries of yesteryear are not
the same as those of today. It would have been odd if the cotton textile industry of
the Industrial Revolution was still the world economy’s main engine of growth. In
a different sense, the point is not equally trivial. This is an argument that
privileges certain industries over others for the reason that they are deemed more
important for overall growth and development than other industries: First, in
general they have been industries drawing on generic technologies. Hence, they
have had multiplier effects on the economy through their contribution to other
sectors. Second, these are industries that have drawn upon technological
breakthroughs. This has allowed major productivity improvements, and stemming
from technological breakthroughs, the growth of entirely new industries.
The above is a very Schumpeterian view of growth and development;1 that
is growth based on technological innovation, knowledge, and human capital.2 The
Schumpeterian economy is cyclical, always in flux, and characterized by shocks
and disequilibria rather than a steady walk towards economic equilibrium.
Schumpeter adopted the Russian economist Kondratieff’s view of the world
economy as going through successive waves of industrial revolutions of
empirically 50–60 years each. While for most scholars (including Schumpeter)
this is far too deterministic a view of the economy, there is more than just a rough
consensus that through most historical epochs, certain core industries and
1 Without downgrading the importance of other kinds of growth, there are several reasons to focus
on Schumpeterian growth. Traditional neoclassical theories—the dominant economic framework
for the past 50 years—can only account for a very modest amount of long-term growth.
Abramovitz (1956) and Solow (1956) provided early attempts at growth theories that only
illustrated the inability to provide a satisfactory explanation of growth. The model could only
explain 10–20%, the residual accounting for the remaining 80–90%. This approach has since been
refined, yielding far better results (e.g. Mankiw, Romer and Weil 1992), but has met with criticism
from other scholars (e.g. Dinopoulos and Thompson 1999:137pp; Grossman and Helpman
1994:28p). Economic analyses in any case routinely attribute such significant portions of overall
growth to technological progress that Schumpeterian growth is important enough to justify a focus
exclusively on this (e.g. Kim and Lau 1994; Moe 2007)
2 This implies that there are several kinds of growth. Mokyr (1990) produces the following
typology: 1) Investment-led, or Solovian growth (after Robert Solow)—economic growth takes
place when capital accumulates more rapidly than the growth of the labor force, thus leading to
higher output per capita through increased productivity. 2) Smithian growth, based on commercial
expansion, also known as gains from trade—a more specialized division of labor leads to
productivity growth. 3) Growth based on scale or size effects.
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technologies have been particularly important for a country’s growth and
prosperity.3
Why cannot just every country start employing these new technologies
right away? This is the perspective taken by a host of textbook economic theory.
Technology is a public good. Once invented, it is there for everyone to use (e.g.
Fagerberg 1994:1149). However, diffusion of technology is never immediate.
New and revolutionary technologies do not give rise to growth industries just
anywhere. Being technologically ahead of the competition radically improves
your chances of being industrially ahead as new technology effectively serves as
an entry-barrier against other actors. Hence, industrial leadership is inextricably
linked to technological leadership. Countries that have mastered the core
technologies of a particular historical era, and have been successful in setting up
industries based on these technologies, are the ones that have forged ahead, grown
in power and stature (e.g. Freeman and Perez 1988; Reinert 1993). Thus, my
focus is not only industrial leadership, but technological and industrial leadership.
Schumpeter views the economy as characterized by long-term economic
cycles, driven by the growth of one or a few leading industries. When these
industries saturate, the world economy drifts into a structural depression that can
ultimately only be resolved when (or if) new growth industries, based on
breakthrough technologies, provide the world economy with a new industrial
engine. In Schumpeter’s (1942:81pp; 1983 [1934]) own terminology: The world
economy goes through “waves of creative destruction”. Depression leads to the
destruction of old firms and industries, but also to the creation of new ones. For a
country to be economically successful in the long run, both creation and
destruction must be allowed to occur. When the core industries of the past no
longer yield the profits and investment opportunities they once did, the country
needs to move on. Seeking to prevent the phase of destruction only leads to the
silting up of economic rigidities and long-term stagnation.
The industries singled out in this article, are industries that have been
instrumental in the rise of some countries, and in the demise of others. They in
other words symbolize both creation and destruction.
3 A number of scholars have identified the same core industries. Freeman and Perez (1988:50pp)
single out five technoeconomic paradigms, of 50–60 years each, from the Industrial Revolution on
towards today. These were based on cotton textiles, iron, steel, electric industry (including
chemicals), oil and consumer durables, and computers and microelectronics. Similar core
industries can be found with Bairoch (1982), Gilpin (1987), Hobsbawm (1969), Landes (1998),
Modelski and Thompson (1996), Rostow (1978).
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2.1 Rise and Fall, Vested Interests, and the Role of the State
There are many examples that instead of future success, economic success instead
breeds failure. If a country has invested heavily in one set of industries based on
one set of core technologies, these investments cannot necessarily be translated
into new industries based on new technologies. British industrial experiences
derived from leadership within cotton textiles could not easily be taken advantage
of by a nascent chemical industry a century later. And the bigger the difference
between the old and the new industries, the bigger the chance that the industrially
dominant power of the past will not be the dominant power of the future (Gilpin
1996: 413).
Because technological change has been the main engine of industrial
growth, one of the clues to great power success lies in human capital.4 But
diffusion is also important. Innovations need to be diffused into the overall
economy as fast and painlessly as possible. Producing the best experts in the
world counts for precious little if the state is unable to make good use of them
(e.g. Freeman 1995; Lundvall 1998). While technology does indeed spread,
diffusion is often slow, in particular across borders. Hence, human capital must be
the first variable in our framework.5
Schumpeter needs to be supplemented with Mancur Olson (1982; 2000).
Olson does not have Schumpeter’s cyclical understanding of the economy. His
focus is on the overall economy, not on specific technologies or industries.
However, Olson provides the mechanism by which Schumpeter’s long-term
shocks, macro trends and creative destruction occur. Structural economic change
4 Background conditions like well-functioning markets, property rights and infrastructure are also
crucial. Growth on any scale has rarely been the outcome in countries where property rights were
systematically abused. But if we were to analyze the causes of present-day growth and
development in industrialized countries, property rights would give us little leverage for the
obvious reason that most countries are already doing fairly well in this respect (there is no
variation on the independent variable!). Hence, as long as the countries are fairly developed, we
need to look beyond background variables to explain success or failure.
5 Human capital is no neat and easy variable. There are a number of different indicators, and it
should not be taken for granted that the same indicator works equally well for each and every time
period and industry. The 18th century British cotton industry does not put the same requirements
on human capital as present ICT-based industries. In a day and age where the sciences were still
not extremely advanced and the technologies relatively simple, basic training was relatively more
important than it is today. With today’s highly sophisticated technologies, this is no longer good
enough. Hence, comparing Japan and the US with respect to ICT-based industries, a focus on
higher education would be more pertinent than one on basic literacy. Also, it was often the case
that the human capital most relevant to industry came from sources outside of the established
educational framework. This was especially important in Britain up until the mid-19th century.
Thus, what is important is to what extent a country produced human capital that was relevant to
industrial development, and not where this human capital was produced.
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is always a thorny process, and routinely meets with resistance from vested
interest groups that feel threatened by change.6 As an industry grows to become
economically prosperous, it normally also acquires political influence through
lobby groups and politicians speaking on its behalf. As it becomes organized, it
becomes capable of speaking with a strong, unified voice. Thus, institutional
stability leads to institutional rigidity. Societies that have had to start over again,
reforming their institutions and breaking up old monopolies of power and
economic vested interests, are the ones that have been economically prosperous.
Stability leads to a silting up of vested interests, to stasis, sclerosis and to an
inability to shift the status quo, as the country gradually drifts into economic
obscurity (Olson 2000).
Olson emphasizes that if the economy is controlled by vested interests, it
loses its ability to change and adapt. This argument can easily be translated into a
dynamic rather than a static argument. Technologies come and go, and industries
and vested interest groups come and go with them. Unlike in the Olsonian world,
Schumpeter’s first mover is not institutional stability or rigidity, but technological
change (or its absence). When technological change is allowed to take place,
Olsonian sclerosis (from the silting up of institutional rigidities) will not occur.
When the process of creative destruction is blocked, it will.
Rigidities may silt up in the Schumpeterian world as well—because of
vested interests rising from the implementation of new technologies. But even
new technologies mature, soon becoming commonplace and obsolete. As this
happens, the state needs to actively protect and promote new technologies and
industries while young and vulnerable, against competition from abroad, and
against vested interests attached to old and established technologies and
industries. Neither Schumpeter nor Olson would have argued like this; they
thought that the state should stay out of the economic sphere. Also, if government
protection becomes permanent, we are stuck in an Olsonian trap where vested
interests have again been allowed to grow powerful. Towards the end of a
technology or an industry’s product cycle (e.g. Vernon 1966), it is important not
to support it, as this will impede upon structural change, channel resources away
from new and promising industries, and harm the chances of future success. Still,
there must be a role for the state. No one else can prevent industries from
becoming so powerful that a few decades down the line, they themselves have
6 There will always be vested interests resisting change. New knowledge displaces existing skills
and technological change leads to losses for those that have invested heavily in the old technology.
Hence, potential losers have routinely sought to set up obstacles in order to obstruct innovation
(Mokyr 1990; 1998:51pp): 1) Outright physical resistance against new technology—riots, strikes,
the physical destruction of machinery. 2) Laws and regulations restricting the implementation of
new technologies, as well as barriers of entry—guilds, trade unions, labor unions, lobby groups,
state monopolies etc. 3) Lobby groups that have managed to shield themselves against foreign
competition through protection and favorable treatment, like tariffs and subsidies.
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enough influence to block future structural change, and to prevent new and
promising industries from arising.
2.2 Political Consensus and Social Cohesion
The primary mission of the state becomes a balancing act—preventing vested
interests from blocking structural change. For short, it needs to prevent
technological progress from creating the forces of its own destruction. Or to frame
it in terms of Schumpeter, the state must see to it that both the “destructive” and
the “creative” aspects of creative destruction are allowed to play themselves out.
What works today will in all likelihood not work equally well in 50 years.
But some states seem persistently better than others at this. How is the
rising state different from the falling? A plethora of arguments can be found—
strong vs. weak, democratic vs. authoritarian, centralized vs. decentralized, etc.7
However, very different regimes have been able to achieve economic—states as
dissimilar as laissez-faire Britain and US, authoritarian Germany and Japan. A
common denominator is hard to find if the measure applied is too rough. As
analytical tools, strong vs. weak and so on seem too blunt to hold much promise.
Hence, the key to whether or not a state can successfully control its vested
interests has to do with a different kind of strength, namely that of cohesion
(which I divide into political consensus and social cohesion). My suggestion is
that the more cohesive the state, the greater the chance of preventing vested
interests from gaining control over the state. And the greater the chance that the
state will rise to achieve technological and industrial leadership.8
The reason why cohesion is crucial is that without it, policies of structural
economic change will scarcely be undertaken. One might imagine long-term
economic growth to be among the highest priorities of a state. It is not (e.g. De
Long 2000:139p)! Instead, politics consists of a myriad of minor and seemingly
trivial decisions. Before any decision can be made on large-scale, abstract and
7 Epstein (2000) argues that historically limitations to sovereignty, and the inability to enforce a
unified, non-discriminatory regime is what held most states back. Only a centralized state could
realistically create growth and development. Mokyr (1990) instead suggests that centralized states
also have a greater capacity for decisively screwing up. They can more easily adopt anti-
technology regulations, and more effectively cater to vested interests than a less centralized state.
While strong states may be better at implementing change once they have decided on it, it may be
easier to find the willingness to do so in weaker states.
8 This argument distinguishes between strong states and strong powers. Strength as a power rests
on economic and military might, strength as a state on the social bonds that hold the country
together. Of the two superpowers, only the US was strong as a state, although both were
supremely strong powers (Knutsen 1999:168). The Soviet Union was fraught with corruption,
instabilities, a stalling economy and a less than convinced population.
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overarching issues, countless minor concerns have to be satisfied. True,
technological change and long-term growth are concerns, but mainly of high-
flying rhetoric, and with a focus often decidedly short-term (as in re-election).
This is true of present-day democracies, where politics often comes down to
administration, bureaucracy and negotiations, but also true in authoritarian
regimes of yesteryear, where military issues would normally take priority over
issues of growth. Survival is the most immediate concern of most regimes. The
likelihood of survival diminishes radically when controversial decisions with
potentially grave redistributive effects have to be made (e.g. Pierson 1996). The
likelihood that the state will pursue policies of structural economic change
without solid backing either in the parliament or the people, is small indeed.
Cohesion applies to both conditions within the regime and to the overall
population. Political consensus applies to the ruling elites,9 social cohesion to the
people.10 Political consensus makes it harder for vested interests to pursue
continued protection, and it makes it less risky for political parties or other
decision makers to pursue policies with potentially large redistributive effects.
Social cohesion in the people makes it less risky for political parties or other
decision makers to pursue with potentially large redistributive effects. Consensus
and cohesion means less room for vested interests to exploit footholds and
fragmentation within the polity.
2.3 Methodology
Why does technological and industrial leadership often not translate into future
leadership? The arguments of Schumpeter and Olson suggest three main reasons.
For technological and industrial leadership, a country needs to fulfill two
conditions. First, it must have a human capital advantage. Second, it must have
weak and fragmented vested interests. Countries that have fallen from leadership
9 Strong and permanent political alliances and the lack of political fragmentation is one situation in
which the power of vested interests can be neutralized. This applies to democracies, but equally
well to authoritarian regimes, although in a different way. Here, one would instead focus on what
kind of power alliances the ruler needs to satisfy in order to stay in power. Even the most
authoritarian dictator needs a support base on which his power rests. Political consensus should
therefore be important in dictatorships as well.
10 The reasoning is as follows: 1) A lack of political consensus and/or social cohesion makes it
easier for vested interests to pursue their own agenda. Lack of consensus makes it easier to exploit
disagreement and fragmentation between political parties and other decision makers. A lack of
cohesion makes it more risky for political parties to implement policies with potentially large
redistributive consequences (as in concrete losers, and not so concrete winners). 2) Political
consensus and/or social cohesion makes it easier to pursue structural economic change, that is
implement policies that are in the interest of society as a whole, but that go at the expense of
powerful vested interests.
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(or failed to rise) are as a rule countries with strong vested interests, able to force
their preferences on the political leadership.
Either human capital or a lack of vested interests is not in itself sufficient.
The absence of vested interests will be of little benefit if the human capital base is
insufficiently developed to take advantage of opportunities arising from new
technology. Likewise, if vested interests are strong enough to block change, the
country will still not be able to provide conditions conducive to the establishment
of new industries, regardless of human capital. Further, there is a third condition
that also needs to be fulfilled: High levels of political consensus and/or social
cohesion. In the final analysis, this means that what makes a country rise to
technological and industrial leadership is the combination of a high value on the
human capital variable and a low value on the vested interests variable, but that
this low value is contingent on a high value on the consensus and cohesion
variable.11 Consensus and cohesion is thus crucial because it works through the
vested interest variable.
All three variables are hard to operationalize. They are not easily
quantifiable, and singular indicators may not provide a valid representation. It is
also a problem that the empirical analysis stretches 250 years back in time and
contains comparisons between countries and industries from different time
periods. The quality of data (especially quantitative data) deteriorates dramatically
when going far back in time, making rigid testing difficult.
On the face of it, human capital seems easily operationalizeable. However,
there is a multitude of human capital indicators, and it is impossible to find one
that is equally valid independently of time period and industry. Hence, rather
eclectically, I have sought to assess to what extent the human capital produced in
each country was relevant to that particular industry, and to what extent it is
possible to trace a link between human capital and industrial leadership for each
and every industry. Thus, what is important is not the absolute level of human
capital (if even measurable), but how the country compared to its closest rivals.
Indicators on vested interests, consensus and cohesion exist, but are not
well developed. For the vested interest variable, I have sought to identify the
major political issues pertaining to economic policymaking (and that actually had
economic effects), whether or not significant vested interests blocked change, and
11 It should be noted that a high value on the consensus and cohesion variable does not by
necessity yield a low value on the vested interest variable. Consensus and cohesion does not
guarantee that the right decisions will be made, only that the state has the necessary autonomy to
make these decisions. The state could easily be consensual and cohesive around the “wrong”
decisions, like for instance about protecting the existing industrial structure against change.
Hence, consensus and cohesion is a necessary condition for the state to be able to curb the power
of vested interests, but not in itself sufficient.
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whether or not a state actively resisted such interests.12 For consensus and
cohesion, a multitude of data exists for the postwar years.13 However, for most of
the earlier cases this does not apply. Ultimately, I have had to make overall
assessments of both vested interests and consensus and cohesion based on my
reading of the literature. I have done my best to shy away from controversy,
relying on data that the overwhelming majority of scholars in the field should be
able to agree with. Yet, the assessments, evaluations and conclusions are all mine.
12 I am not a priori identifying particular vested interests. Still, certain vested interests seem more
relevant than others, namely economic interests. In particular; have political elites been receptive
to the needs of new and vulnerable industries, or have these industries been at the mercy of
policies tailored to the needs of the established industries? For each time period, I have identified
the major economically and industrially related political issues, relevant vested interest groups,
and to what extent they were successful in influencing government policies. Hence, industrial
lobby groups figure prominently, whether lobbying for or against protection, for change in the
education curriculum, etc. The variable contains both a deductive and an inductive component. It
is deductively derived from theory, but since there are a multitude of vested interests and no a
priori selection criteria, selection can only be accomplished inductively, through a thorough
examination of the historical record.
13 I have divided the variable into two components—consensus and cohesion. A state
characterized by both consensus and cohesion is better off than a state that is low on consensus
and high on cohesion. But whether “low on consensus and high on cohesion” is better or worse
than “high on consensus and low on cohesion”, strikes me as an empirical rather than a theoretical
question. While I believe that the literature presents quite clear indications as to the values on the
variable, I have tried to shy away from controversial interpretation.
Political consensus: I am looking at broad consensus as to the major economically and
industrially relevant political issues among the ruling elites. For practical purposes, this means the
government and parliament, but it is not always this simple, especially with less representative
regimes. Bismarckian Germany was less than democratic, but there were still very obvious
alliances supporting the regime. The Kaiser was closer to omnipotence than most Western
monarchs, but a lot of wheeling and dealing went on behind his back. When a ruler relies on
implicit political alliances in order to remain in power and to implement policies, “ruling elites”
becomes a very fluid notion.
Social cohesion: The bonds that tie a country together (Knutsen 1999:168). Societies
founded on networks of trust and cooperation help realize the human potential (OECD
2001b:39p). Putnam (1995a; 1995b) laments what he sees as a decrease in social capital in the
US, and Fukuyama (1995) focuses on how successful economies are characterized by a high
degree of trust. Dayton-Johnson (2001:8, 35, 59) defines it as the degree of “interconnectedness
and trust among a group of people”. I have sought to make overall assessments as to the general
level of cohesion in the people based on the historical literature, and the evidence of trust, the
record of unrest and turbulence in the population. However, as reliable and valid data on social
cohesion are harder to get hold of than for political consensus, privilege has been given to
consensus.
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3. The Industrial Rise and Fall of the Great Powers
For the next part of the article I analyze nine cases for five different time periods
and industries, combining the comparative and the historical method.14 With one
exception (the car industry), I juxtapose one positive and one negative case for
each time period and industry. The time periods and industries are late 18th to
early 19th century cotton textiles, early-to-mid 19th century iron, late 19th to early
20th century chemical industry, early-to-mid 20th century automobile industry, and
finally, late 20th century ICT-based service industries. For each time period and
industry, I compare the lead economy for that period against another great power
that fared distinctly worse. Hence, for cotton textiles and iron, I juxtapose British
success and French relative failure. For chemicals, I contrast German success with
British failure, and for ICTs, I compare US success and Japanese misery. The one
exception is the car industry, where I only look at the rise of the US, without
making more than tacit comparison. The reasons for this will become clear later.
This design ensures considerable variation on the dependent variable, for
each time period and for all the cases put together. This makes it easier to draw
reliable inferences. This cannot be a conclusive test, both because the variables
are loosely defined and because space constraints severely limit the amount of
empirical material included. Still, as long as the values on the dependent variable
are systematically matched by the values on the independent variables (and
backed up by a historical narrative), it greatly increases the theory’s plausibility
and enhances its prospects ahead of more rigorous testing.15
3.1 Cotton Textiles
No industry is more closely associated with the Industrial Revolution than the
cotton textile industry. Based on a number of British innovations starting in the
1760s (spinning jenny (1764), water frame (1769), mule (1779)), productivity
increased to such an extent that by the end of the century, a mule would produce
200–300 times more than a normal spinning wheel (Brose 1998:36; Landes
1969:85; Mokyr 1999:21p). Cotton textiles accounted for 40% of British exports,
and while roughly on a par with France prior to the French Revolution, by the end
of the Napoleonic Wars, Britain had left France far behind, with a raw cotton
consumption that was now four times that of France (Hudson 1992:183; Modelski
and Thompson 1996:99).
14 For this, I employ Mill’s (1904:253pp [1843]) Method of Indirect Difference. For a more
extensive treatment of this, empirically and methodologically, see Moe (2004).
15 In Eckstein’s (1975:108) terminology, this is a plausibility probe. The results are not conclusive,
but sufficiently rooted in data to warrant more rigorous testing.
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3.1.1 The British Cotton Textile Industry
Britain had a distinct human capital advantage over France, one that did however
not rest on formal education. England had only two universities—Oxford and
Cambridge—both in decline, and neither showing any interest in technology and
science. The only English institutions of higher learning that showed any interest
in technology and industry were the religious Dissenter academies, and a
disproportionate amount of industrial champions received their education in such
institutions, as well as in the more practically oriented Scottish universities. The
advantage thus lay in the informal education sector, and in the ability of Britain to
make good use of available knowledge for industrial purposes. Learning
happened through scientific journals and in scientific societies,16 which brought
together people with ideas, skills, and money, translating technological
breakthroughs into industrial ventures (Freeman and Louçã 2001:180; Mokyr
2002:43pp; Pyenson and Sheets-Pyenson 1999:321). Links between scientists,
inventors, and entrepreneurs were stronger than anywhere else, making Britain far
better than France at utilizing existing knowledge for practical purposes (Ashton
1997:12pp [1948]; Evans 1983:108; Mokyr 1990:241; Perkin 1969:68pp). And
despite the failings of the education system, Britain was endowed with a large
number of mechanically skilled people—far more than France. While these were
not people that could perform great scientific feats, they were many, and they
were prolific at tinkering and experimenting, and at applying scientific knowledge
developed elsewhere (Jacob 1997:165pp; Landes 1999:153; Mokyr 1990:240).
Vested interests was a minor problem. Guilds had been weak since the
Glorious Revolution (1688). Rent-seeking was also only a minor problem as the
role of Parliament made lobbying a slow and cumbersome process (Mokyr 1990;
Morgan 1999:46; Root 1991:338pp). While there had been a prohibition on the
import of Indian cloth and calicoes since the late 17th century, this had for
political reasons (not economic!) developed into a loophole whereby cotton textile
manufacturers located in Britain for all practical purposes was given protection
and favorable regulations by the state—very much against the interests of the
dominant industry of the day, wool. While it is hard to credit British politicians
with any conscious industrial policy, political outcomes still persistently went
against powerful vested interests and in favor of cotton textiles (Landes 1969:82;
O’Brien, Griffiths and Hunt 1991).
16 The first of these societies was the Royal Society of London, founded in 1662, publishing the
scientific journal Philosophical Transactions as early as 1665. During the 18th century, a host of
similar institutions sprang up in other cities as well, as Liverpool, Birmingham, and Manchester
(Pyenson and Sheets-Pyenson, 1999:321).
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Cohesion, and in particular political consensus, made it easier for Britain
to resist its vested interests. Much of the 18th century had seen “a robust social
consensus anchored in a distinct and relevant political mythology…forged on the
anvil of large-scale war…this consensus rendered England self-confident,
productive and strong” (Knutsen 1999:107). War (primarily against France) had
played a major role in forging a British identity (Colley 1992). British ruling elites
were characterized by major political consensus. Developments during the mid-
century had led to a more or less unanimous and unequivocal pro-industry
stance.17 Riots were violently clamped down by soldiers, and the death sentence
was introduced for certain industry related offences (like tampering with bridges
and mines). Petitions to ban new technology were persistently rejected by
Parliament. Labor organizations were banned if perceived as threatening the
advance of technology, and ancient statutes and regulations were removed
(Colley, 1992; Freeman and Louçã, 2001:178; Mokyr, 1990; 2002; Morgan,
1999:46).
3.1.2 The French Cotton Textile Industry
France failed, despite far more conscious industrial policies. An activist education
policy sought to promote the sciences for the purpose of creating industrial
growth. France had more than 20 universities. The Académie Royale des Sciences
was founded as early as 1666. By the late 18th century, France was the world’s
center of science, with the École Polytechnique the finest science school in
Europe (Ahlström, 1982:30p; Keck, 1993:117; McCloy, 1977:410 [1946]).
However, unlike Britain, France dismally failed to diffuse this knowledge.
Scientists worked either for the political establishment or against it. In Britain,
they simply worked—with no hidden political agenda. French scientists depended
on personal relations with the political establishment, as engineering knowledge
was the property of the state, in the service of national interest. One would invent
something, then get an academy or learned society to look at it—intellectual
activity had little practical application (Crouzet, 1990:31; Jacob, 1997:139;
Landes, 1994:649; Mokyr, 1990:242pp; 2002:74). Consequently, diffusion
occurred mainly through French industrial espionage and through the hiring of
skilled British artisans. With the French Revolution, this source of diffusion
disappeared. The technological gap had been modest prior to the Revolution. By
the end of the Napoleonic Wars, France was using equipment that had already
17 At the start of the Industrial Revolution, Britain faced widespread resistance in the form of riots
and attacks against new machinery (Hobsbawm 1969:67; Mokyr 1990:256pp; Morgan 1999:46;
Pugh 1999:40). Hence, we have to be ambiguous with respect to social cohesion. More important
is the decisiveness with which the riots were suppressed.
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been obsolescent in Britain for more than two decades (Crouzet 2003:234; Jacob
1997:178p).
Vested interests was a considerable problem. While guilds had weakened
substantially since the 1750s, a network of craft guilds and small producers
supported by local authorities in general opposed technological innovation, and
would often be strong enough to resist labor-saving inventions. Rent-seeking was
rampant. With the king not facing up to any parliament, secrecy shrouded the
wheeling and dealing of pressure groups and government, away from the public
sphere. Consequently, French economic policies were a cobweb of favoritism and
vested interests (Bossenga 1988:696; Mokyr 1990:259; Root 1991). Unlike
Britain, France did not support cotton textiles, putting a total ban on the sale of
cottons (O’Brien, Griffiths and Hunt 1991:418), even if during the 17th century,
Colbert and Richelieu had actually tried to encourage cotton manufacture. Instead,
industrial policy favored the already dominant wool industry.
A complete lack of both consensus and cohesion made reform impossible,
and allowed vested interests to effectively veto economic policy-making. Late
18th century France saw massive uprisings against new technology, in particular
against the nascent cotton textile industry.18 But unlike Britain, the state was too
weak to assert itself in favor of industrialization. The ancien regime’s attitude
towards new technology was highly vacillating. French kings sought reform,
realizing that they were stuck with a system that perpetuated huge budget deficits
and hampered growth, but met with fierce resistance from the privileged classes.
A lack of political consensus among the ruling elites made crucial reforms
impossible. Attempts at introducing a property tax and abolishing the guilds
(1776) created large-scale tension, with clergy, nobility, magistrates, craftsmen,
merchants and urban people all uniting against it. Hence, for structural change,
the king would have to side against the forces from which he normally derived
support, and with forces that were hostile towards him. Social cohesion was not
strong enough for the king to jeopardize the implicit alliance with the privileged
classes and instead seek support from reformist elements in the bourgeoisie.
Reform affected the privileged classes enough to arouse their resistance, but not
the bourgeoisie to such an extent that they could be drawn upon for support. A
complete lack of political consensus made it impossible to implement structural
economic reform, no solution possible short of revolution (Furet 1992:51p;
Hoffman and Rosenthal 2000:442pp; Magraw 1999; Mokyr 1990:258pp;
2002:270; Price 1993:71, 139; Wright 1995:34pp). The Napoleonic Wars
exacerbated the problems. France already lagged behind Britain, and by the time
of peace, Britain’s lead had become insurmountable.
18 Although because of the endemic level of riots all over France towards the end of the 18th
century, it is hard to know to what extent riots were directed against the introduction of new
technology, or against the regime in general.
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3.2 Iron
Iron was the second major early Industrial Revolution industry, and many of the
breakthroughs stem from the same time period as the revolution in cotton textiles.
Still, it was not until after the Napoleonic Wars that iron became the driver of the
economy (Greasley and Oxley 2000:109, 114). Also, from the 1830s onwards,
iron became of ever more important because of the links between iron, coal,
steam power and railroads. This provided Western European economies with a
crucial mid-19th century boost.
3.2.1 The British Iron Industry
This also symbolizes the high-water mark of British economic and industrial
dominance, fueled by an iron industry head and shoulders above the competition.
By 1850, Britain produced half the world’s iron and two thirds of the world’s
coal. France never came close.
The British human capital story is essentially the same as for cotton
textiles. The education system changed little. No system of primary education was
introduced, with opposition to reform from the Church, landlords and Tories.19 In
any case, formal education was of little importance to iron, and again, the British
advantage stemmed from other skills. Men like Smeaton, Wilkinson, Watt and
Trevithick—responsible for some of the most important breakthroughs of the
era—were all very well connected with the scientific societies. They did not have
much formal education, but were well-read in technical matters, possessing an
abundance of “technical literacy” (Mokyr 2002). The Newcomen steam engine
would never have materialized without the theoretical ideas of Boyle, Torricelli
and others.20 Watt derived much knowledge from interaction with scientists in
Glasgow (Brose 1998:45p; Landes 1969:104; Mokyr 2002:72). Neilson’s hot
blast drew on courses in chemistry, again from the university in Glasgow (Mokyr
2002:84pp).
Britain successfully combated its main vested interest—agriculture. By the
end of the Napoleonic Wars agricultural interests had grown more powerful than
before, and were strongly represented in Parliament by the Tories. Boosting
production during the war in order to deal with Napoleon’s blockade led to Corn
19 Conservatives feared that mass schooling could lead to revolution (also, it was expensive and
not necessary); the Church feared that reform implied secular education and godlessness (Lindert
2001; Vincent 2000:31).
20 At the same time, it is probably also true that many of the advances within steam engine
construction—Watt, Trevithick, Woolf—were accomplished through a combination of
experimenting and good mechanical intuition, without really having the epistemic base for it
(Mokyr 2002)
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Laws being imposed in 1815 in order to protect landed interests against foreign
imports. The landed interests controlled the state, blocking every attempt at
repeal, especially in the 1830s and onwards, as economist crisis hit the country
hard. Overproduction in industry (in particular in iron, but also in coal) combined
with a structural crisis affecting iron badly and with government policies
artificially restricting the expansion of markets, in particular foreign markets. The
crisis was not resolved until the 1840s Tory cabinet of Robert Peel went against
what was normally perceived as the party’s own vested interest, by systematically
reducing and abolishing customs duties, culminating with the 1846 Corn Law
repeal (Bairoch 1993:21; Lloyd-Jones 1990; Schonhardt-Bailey 1991:547).
Another example of powerful vested interests being defeated losing out, is the
battle between canals and railroads.21
The mid-19th century was a turbulent period in Britain. Still, compared to
France, Britain was calm and stable, and as time passed, Britain became calmer,
France not. Whigs had long been pro-industry. However, it took the political
consensus of Whigs and Tories to repeal the Corn Laws. Only a conservative
government, itself seen as part of the vested agricultural interests could be strong
enough to go against these same interests.22 While the Tories were by no means
united, it is still remarkable that a full third of all Tory MPs voted for a repeal that
they had been massively against only four years earlier (McKeown 1989:356;
Pugh 1999:69p).
By 1832 Britain was on the brink of social revolution. Hence, social
cohesion was at an all-time low. But whereas France underwent two actual
revolutions, stifling economic growth and preventing any stability, Britain opted
for reform. Protest and dissent was channeled into institutionalized forms, with
the 1832 extension of the franchise a key reform. It led to increased legitimacy for
the ruling elites, with the middle-class now playing a crucial role in maintaining
the social and political stability of the regime. Post-1832 regimes could rely on a
groundswell of cohesion in the populace very much unlike in France, and policy-
making could be pursued without the fear of revolution. In 1848, when Europe
was plagued by revolution, Britain saw no upsurge in unrest (Evans 1983:218;
Perkin 1969:393pp; Pugh 1999:48pp; Tilly 2004:163).23
21 Unlike in France, the British state came down on the side of railroads right away. See for
instance Harris (1997:685p), Freeman and Louçã (2001:194).
22 This episode nicely illustrates how policies of structural change can be politically risky. The
Tories split, as two thirds of the party voted against the repeal. Those that voted for, including
Peel, subsequently left the party.
23 True, political unrest lasted throughout the 1840s, with the Chartist movement (1837–48)
mobilizing hundreds of thousands in bitter protests, demanding universal suffrage, abolition of
property qualifications on MPs, etc. But 1848—the year of European revolutions—was also the
year that Chartist rallies subsided. On one occasion, the government recruited 100,000[!]
volunteers to prevent a Chartist demonstration from becoming violent.
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3.2.2 The French iron Industry
With France as well, the human capital story is much the same as for cotton
textiles. The education system changed little, and with the exception for
Napoleon’s reign, the state was indifferent to elementary schooling. Also, France
was deeply split between secular revolutionaries and a very conservative and anti-
revolutionary Catholic Church (Cipolla 1969:78; Furet 1992:334p). The French
Revolution led to higher education reform, with a greater emphasis on science and
technology, but while the Grandes Écoles produced excellent engineers, they did
not provide industrial education. Skills were particularly deficient in machinery,
where technological change was stifled by a lack of the scientific and
technological knowledge found in Britain (Brose 1998:46; Trebilcock
1981:194p). But diffusion was still the biggest problem. Linkages between
science and industry were absent. Government attempts to promote diffusion—
prizes for the emulation of British technology, special societies to encourage
technological progress, large industrial fairs—were no success. French scientific
literature (e.g. Carnot (1824)) was ignored, while second-hand translations
attracted much interest in Britain. Attempts at importing steam engines were
persistently frustrated by academic scientists (Brose 1998:49; Jacob 1997).
Diffusion of coke smelting took place through British ironmasters, in 1785
resulting in the first coke-blast furnace on the Continent. But the Revolution put a
stop to further diffusion, and by the end of the Napoleonic Wars, this was one of
only two French furnaces to produce coked pig iron. Further, puddling and rolling
did not appear until after the wars, when it diffused through Welsh craftsmen.
Thus, France languished three decades behind the British iron industry (Freeman
and Louçã 2001:160; Landes 1969:140; Mokyr 2002:88).
Vested interests was a huge problem. Early 19th century France was
characterized by a string of weak governments. Hence, vested interests could
largely run free. A number of industries obtained tariff protection, and while this
probably saved the iron industry in the short run, it allowed a host of inefficient
iron works to survive. A government commission stated outright that lower tariffs
would unjustly harm those that had entered into business with the expectation that
tariffs should be upheld. Hence, tariffs should be understood solely in terms of
protecting the existing industrial structure (Landes 1969:201, 216; Trebilcock
1981:170; Wright 1995:146p). Some tariffs had distinctly contradictory
consequences. Being scarce in coal, France was highly dependent on imports.
Yet, in response to pressure from coalminers, tariffs were placed on coal imports,
worsening the situation for iron miners who depended on coal for iron-smelting.
The construction of a railroad network was another huge problem. Here, it was
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the railroad bureaucracy (the Corps des Ponts et Chaussées)—deeply entrenched
in the state itself—which blocked change. 24
A main reason for the inability to curb vested interests was a complete
lack of consensus and cohesion. Governments had very little autonomy. Staying
in power without triggering revolution was itself hard enough, without having to
challenge vested interests as well. While France did undergo periods of apparent
stability, whenever crisis occurred, no groundswell of social cohesion in the
people was there to support and uphold the regime. Every economic crisis
triggered fears of revolution, with actual revolutions occurring in 1830 and 1848,
and Louis-Napoleon performing a coup d’etat in 1851 (Price 1993:160pp;
Trebilcock 1981:187; Wright 1995:146p). Also: To the extent that a political
consensus actually did exist, this was not a consensus about structural change, but
rather about preserving the political and economic status quo. This is hardly
surprising, as government was at its strongest when it was most closely in tune
with the king, which for all practical purposes meant being strongly conservative
and opposed to change. The exception to the rule was Napoleon III, who had
more autonomy than any French ruler since Napoleon. This enabled him to go
against vested interests both with respect to tariff policies, railroad construction
and financial reform, which was beneficial to iron. Still, at this point it was far too
late to catch up with the British iron industry.
3.3 Chemicals
The late 19th century saw a host of new industries, significantly more knowledge-
intensive than prior industries. One of these was the chemical industry, which
became of great importance to late 19th century and early 20th century economic
growth. This is the industry that best signals the waning of Britain as a dominant
power, and the rise of Germany. In 1850, Britain had the largest chemical industry
in the world by virtue of producing detergents, bleach, soda etc., for its giant
textile industry. And while the first synthetic dye was invented in Britain (1856),
almost all subsequent inventions were German. By the late 19th century, the
German share of the synthetic dyes world market amounted to roughly 85%.
24 An efficient railroad network would have been a solution to France’s geographic problems,
which was of particular relevance to iron. However, because of the influence of the railroad
bureaucracy construction of railroads was centralized, complemented by expensive canals, and
held to such high standards that construction was far slower and costlier than elsewhere in Europe.
It was also determined by political rather than economic and industrial concerns, hence regularly
bypassing the most important industrial areas. Instead of a decentralized network, France ended up
with a hub-and-spokes system, all (rail-)roads leading to Paris. This would not change until
president Louis-Napoleon in an 1851 coup d’etat installed himself as Emperor Napoleon III.
Financial reform would also have to wait until then (Smith 1990; Trebilcock 1981:150pp, 169,
184pp).
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3.3.1 The British chemical industry
In terms of human capital, Britain was now struggling. In 1870 Parliament made
elementary education universal—very late compared to most other countries
(Lindert 2001; Chambliss 2003). The higher education system also improved
painfully slowly. British industry was constantly hampered by not having access
to trained managerial and technical personnel. The government took little
initiative to make education more relevant to industrial development. Even in the
late 19th century, the universities perceived of applied research as clearly
subordinate to ‘pure’ science (Donnelly 1986:204p; Hobsbawm 1975:59). At
Oxford and Cambridge, the grand total of Bachelor of Science honors degrees
awarded between 1880 and 1900, was a measly 56 (Murmann 2003:55). Scientific
and technical training did expand, but compared to Germany, British efforts were
meager. By the end of the 19th century, Britain spent £26,000 on universities for
all purposes.25 Prussia alone spent £476,000. In 1872, the University of Munich
had more trained chemists than all of Britain! In organic chemistry research, in
1882 Germany produced 574 scientific abstracts, Britain 59. By 1913, Britain was
outnumbered ten to one with respect to engineering students (Berghoff and Möller
1994:269pp; Brose 1998:86; Horstmeyer 1998:246; Keck 1993:119; Murmann
and Landau 1998:38pp).26 The foremost British experts were still world-class.
However, Germany had far more of them (Donnelly 1986:220).
Vested interests had now become a problem, preventing reform in at least
three areas. Religious and aristocratic interests torpedoed education reform. First,
they could not see why it mattered (after all, in the past it had not). Second, they
were afraid of awakening the masses. Third, it would cost a massive amount of
money. Also, there was no pressure for education reform from the industry (Evans
1983:324; Hobsbawm 1962:30; Hoppen 1998:597pp; Lindert 2003:330). The
second area was patent legislation. The existing legislation was adapted to the
needs of the old industries, among other things not distinguishing between
product and process. The consequence was uncertainty as to what a patent
covered. Did it cover for instance the rights to produce “the color red”, or the
rights to the process used to produce that color? This led to extensive litigation as
to which firms had the rights to produce what colors, and workable rules were not
in place until 1865. Until then, British firms spent more time in court than in the
laboratory (Murmann 2003:87pp)! Third, vested interests dominated the tariff
issue. As the rest of the world shifted towards protectionism, Britain stuck with
free trade. Protectionist voices rose in the 1880s, but no strong British
25 However, keep in mind that as of yet neither Oxford nor Cambridge were funded by the state
(Murmann 2003:55).
26 Germany produced 3,000 graduate engineers per year, England and Wales only 350 (Hobsbawm
1969:182).
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protectionist movement arose until the early 20th century (Bairoch 1993:27; Brose
1998:81). The chemical industry definitely preferred tariffs, but unlike cotton
textiles, it did not speak with any unified voice, and did not have spokesmen in
Parliament. Instead, the textile industry, which wanted access to cheap and high-
quality German dyes, lobbied heavily for free trade. And British dyestuffs were
also countered by natural dyers and colorists, who used their strong trade
organizations to lobby for free trade. As a consequence, British alkalis suffered
from tariffs imposed by Germany, and exports to the US came to an almost
complete halt following US tariff increases on a number of inorganic chemical
products. For all practical purposes, old vested interests had sent British
chemicals tumbling (Chang 2002:38; Horstmeyer 1998:235pp; Murmann
2003:193).
A combined absence of consensus and cohesion made it very hard to
pursue policies of structural change. There was no political consensus around
education reform (Hoppen 1998:598p; Lindert 2003:330; Pugh 1999:101). With
respect to patents, a chemical industry lacking in high-skilled and prestigious
experts, was unable to push for an adequate patent system, when other and more
powerful vested interests were going against this (Murmann 2003:187pp). On
trade, protectionism was associated with high food prices, starvation and the
selfish interests of the landed aristocracy. The major new groups that received
voting rights with the 1867 franchise extension were strongly pro-free trade. That
the Liberal party was the dominant party, and at the same time staunchly free
trade, made tariff reform impossible to such an extent that the Conservatives
shunned the issue even when in power, aware that it would lose them the next
election. This duly happened in 1906. Even at a stage when British industries
were struggling, with the economy in obvious decline, raising the tariff issue led
to a Liberal landslide, pushing tariff reform into the indefinite future (Judd
1996:187pp; Klug 2001:221; Pugh 1999:115, 145).
3.3.2 The German chemical industry
In terms of human capital, Germany (or Prussia) had by far the best education
system of the day, both in primary and in higher education. In 1772, Prussia was
the first European country to make free compulsory primary education universal
(Crouzet 2001:137; Keck 1993:121). The system was reorganized after Prussia in
1806 was routed at the Battle of Jena. The humiliation led to the modernization
and decentralization of the education system. German academies of science had
existed since the 18th century (Chambliss 2003; Keck 1993:117p). In addition,
technical schools provided education in chemical-technical subjects, and the
1830s saw the rise of the polytechnic. Fierce competition between sovereign
German states meant that nearly every German university ended up with at least a
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small chemistry institute, giving Germany a much deeper pool of talent and
resources than other countries (Lenoir 1998:23p; Murmann 2003:76; Rocke
1993:54p).27 Still, the real expansion of higher education started in the 1870s
(Keck 1993:119; Murmann and Landau 1998:38).28 The first R&D laboratory was
set up in the 1870s, and within a decade, all major German manufacturers had in-
house laboratories with permanently employed academically trained chemists
performing industrial scientific research. Connections between universities,
technical universities and industry were close, stemming from an awareness of the
importance of science and industry to the German state. Professors often taught at
both universities and technical universities and took on consultancy work for
industrial firms. From the mid-1880s, the chemical industry even sponsored
reform at universities and technical universities in order to reshape the curriculum
to better reflect the demands of the industry (Horstmeyer 1998:246; Lenoir
1998:25; Meyer-Thurow 1982:376; Murmann and Landau 1998:39p; Rosenberg
1998:209).
The German state was quite effectual at preventing old vested interests
from blocking the rise of the chemical industry and was eagerly supporting the
new industry. But success also had to do with a relative lack of old vested
interests. Germany had no powerful textile lobby. Religious opposition to secular
education was only modest, and since the education system was decentralized, the
Junkers were unable to block education spending, bar in the eastern parts of
Prussia. Instead, the German state was instrumental in aiding rather than blocking
the chemical industry, through funding—for education in general, but also by
subsidizing the R&D laboratories that dye firms were lobbying for (Keck 1993;
Murmann 2003). The chemical industry also got the patent law that it lobbied
for,29 and the tariff regulations that it wanted.30
27 The fragility of the British talent pool can be witnessed by the fact that when Prussia in 1865
convinced Professor Hofmann to come back to Berlin from London, the British chemical industry
never recovered (Murmann 2003:76).
28 12 new universities were set up between 1870 and 1918 (Wehler 1985:125).
29 No patent law originally existed; hence German firms could pouch experts, copy, borrow and
steal, with their competitors abroad embroiled in costly and time-consuming litigation because of
old-fashioned patent regulations. And since Britain did offer patent protection, German firms
could patent there, locking out the competition, without providing the same rights to foreign firms
in Germany (Horstmeyer 1998:239; Murmann and Homburg 2001:194pp; Wehler 1985:32). In
1877, when Germany got its patent law, the lobbying of the German Chemical Society managed to
secure for the industry a clause allowing process patents only, not product patents. Thus, it made it
impossible to patent something along the lines of “the color red” (Freeman and Soete 1999:90;
Murmann and Homburg 2001:199).
30 However, it is worth noticing that the organic chemical industry was not interested. Thus, the
organic dye industry managed to get an exception from the general tariff increases in 1879 and
1882, whereas the inorganic alkali industry was successful in getting what for it was a much
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Social cohesion was hardly the reason why German governments could
pursue autonomous economic policies. Arch-conservative Junkers, breakneck
speed industrialization and a rapidly growing Socialist party made for a society
rich in social challenges. Political consensus also seems a less fruitful variable
than in the other cases. Bismarck ran Germany on a day-to-day basis, avoiding
political alliances, seeking as best he could to balance highly diverging political
interests against each other, among other things switching from free-trade to
protectionism more or less overnight because of a need for new political allies,
rather than from any change of conviction. Economic problems were subordinate
to political problems. However, at the same time, the government bureaucracy
was filled with experts that were supportive of science and industry. Thus, while
not articulated in actual government policy, a strong consensus in favor of
industry did exist. Still, the two most important points explaining why old and
established vested interests could not dominate German economic policy-making
was that established vested interests were far weaker than in for instance Britain,
and that the new and rising industries were stronger, better organized, could draw
upon a mass of highly-skilled and prestigious experts, and consequently much
more easily able to gain the ear of German policymakers than their British
colleagues (Freeman and Soete 1999:90; Murmann 2003:167; Murmann and
Landau 1998:40; Schulze 1998:183).
3.4 The automobile industry
Of the five industries included here, the automobile industry is the exception. It
had a massive impact on the world economy, at a time when old industries were
stagnating. The technological breakthrough that enabled the growth in the car
industry—mass production—had truly revolutionary effects. The assembly line in
1914 enabled Ford to reduce the time it took to manufacture a Model T by 88%
(Brinkley 2003:153)!31 But is this Schumpeterian growth? The technology that
revolutionized the industry was not a product technology, but a process
technology. It allowed for faster and cheaper production, not for an improvement
of the actual product. Success depended less on technological sophistication than
on bringing relatively familiar technologies as cheaply as possible to as many as
possible.32 Hence, success depended on Smithian—demand, access to capital,
needed tariff increase. This almost completely shut out British exports, although the transition to
more advanced technological processes was also crucial.
31 From 12 hours 30 minutes to 1 hour 32 minutes (Brinkley 2003:153).
32 Granted, towards the late 1920s, General Motors surpassed Ford as a consequence of having a
far wider line-up of cars (Brinkley 2003). However, other factors were more important. Ford was
not surpassed by GM because GM was in possession of technologies that were out of reach for
Ford, but because Ford chose not to employ these technologies. Even if the car has undergone
extremely rapid changes, this has seldom brought one manufacturer a decisive advantage over the
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market size—rather than Schumpeterian variables. For this reason, I look only
briefly at one country—the US, accounting for 70–90% of the world’s pre-World
War II production (Modelski and Thompson 1996:102).33
In terms of human capital, US primary education was on a par with the
best, but Europe was still ahead in higher education and in the sciences (Goldin
2001; Mowery and Rosenberg 1993). However, this was of little importance to
the car industry, which compared to other industries, was not very research-
intensive. Still, the US benefited from an education system that emphasized
engineering and the wide diffusion of mechanical skills. The machine tools used
by Ford were created by highly skilled mechanics, but not by people with
anything resembling Ph.D.s (Cowan 1997:228; Freeman and Louçã 2001:272,
283; Mowery and Rosenberg 1993). Also, the US benefited from path
dependencies, as it had an advantage over Europe stemming from mass
production of sewing machines and bicycles, and from precision machine tooling.
All involved a kind of human capital missing in Europe (Cowan 1997; Hounshell
1984).
The vested interest argument has some explanatory power, but not as
much as for the other cases. Infrastructure was one area in which vested interests
might have interfered. A proper road network, repair shops, gas stations, etc. were
all requirements for the car industry to become a genuine mass consumption
industry. And the 1920s saw the US completely transformed in terms of highways
and buildings. True, government infrastructure expenditures were modest by
current standards (Miller 2003:190; Moss 1995:138). At the same time, “road
building gave the auto industry a larger government subsidy than railroads
received in their entire history” (Leuchtenburg 1993 [1958]:184).34 The US was
dominated by labor-intensive industry, resulting in a pressure for high tariffs.
However, the car industry was highly capital-intensive, preferring global free
trade in order to maximize the size of the market. This battle was not resolved in
favor of capital-intensive industry until the 1930s (Ferguson 1984:78pp; Hiscox
2002:59p). Hence, old vested interests eventually lost out. But at this stage, the
others. In the car industry, you have not had to be the technological leader as long as you have
been able to compete on price.
33 It is hard to find obvious countries to compare the US with. Rather than failure, the car industry
is an example of both European and Japanese success, but with a later starting point than the US.
But this was not because the US car industry was more sophisticated. On the contrary, on the
whole European cars were technologically more advanced. When after World War II Europe
introduced mass-production techniques on a large scale, catch-up was more or less immediate, and
by 1960 Western Europe accounted for 40% of the world’s automobile production. The growth of
Japan was even more extreme (Freeman and Louçã 2001: 279; Modelski and Thompson 1996:
102). In the automobile industry, diffusion has been exceptionally rapid and monopoly profits hard
to reap. Dominance has only to a limited degree had to do with technological advantage.
34 By 1929, total expenditures on roads and streets (local, state and federal) amounted to $1.4
billion a year, or a full 2% of US GNP (Heilbroner and Singer 1994:128).
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US had for two decades already been the supreme leader in mass production car
manufacture, and the explanatory power of the argument seems limited.35
Smithian arguments about demand, market size and access to capital seem to have
the greater explanatory power.
If the vested interest argument is low on explanatory power, then this must
also be the case for the consensus and cohesion argument. True, a political
consensus, going against the vested interests of traditional US industries, did
emerge. The Republicans left their traditional protectionist political platform in
1928. And while the Democrats ran on their first high-tariff platform ever during
the same election, four years later, Roosevelt came down on the side of capital-
intensive industries. By 1936, the political consensus had decisively shifted in
favor of capital-intensive industry (Ferguson 1984; Hiscox 2002). However, once
again, it should be emphasized that at this stage the US car industry had already
reigned supreme for a couple of decades. Hence, the consensus argument seems to
have only modest explanatory power compared to Smithian arguments.
3.5 Information and communication technology (ICT) industries
This section must by default be somewhat speculative, as developments in the
ICT sector are still very much on-going. It is a difficult sector to do justice to for
another reason as well. A distinction must be made between industries
manufacturing ICT equipment and the services employing such equipment. While
ICT manufacturing industries have exhibited stellar productivity growth rates,
these are industries that pulled together are too small to have much of an impact
on the overall economy. Instead, the main impact on overall growth and
productivity growth from ICTs stems the application of ICTs in the services. As
ICT using services account for more than a quarter of total GDP, far above
average productivity growth rates in this sector has considerably impacted overall
growth. This is where the US has leapt ahead (van Ark and Inklaar 2003:11; van
Ark, Inklaar and McGuckin 2003:17; Yusuf and Evenett 2002:105). In terms of
ICT manufacture, the US and Japan are both winners, but in terms of utilizing
ICTs in the service industries, the US has been a spectacular success and Japan a
laggard.36
35 On the other hand, the car industry actually managed to avoid most of the tariff increases.
Hence, tariffs on cars did not follow the overall pattern, and was down to 10% by 1930 (Freeman
and Louçã 2001:263).
36 For both the US and Japan I have chosen to emphasize consensus over cohesion, as there is not
that much separating the two in terms of cohesion, and since quantitative indicators yield
inconclusive evidence (e.g. Dayton-Johnson 2001:4; Fukuyama 1999; OECD 2001c:44). This may
well be a secular trend within this variable: Cohesion has increased to such an extent that for most
Western societies, it is no longer a problem for the state. Then again, while a low level of cohesion
no longer leads to social revolutions, it may still lose you the next election!
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3.5.1 US ICT industries
The US human capital record is good. During World War II, the US dramatically
increased funding for its higher education system,37 which was perpetuated by the
onset of the cold war. Science-based industries were accompanied by a system of
research universities, developing from mediocrities into some of the world’s
finest science institutions (Mowery and Rosenberg 1998:23, 30pp, 46; Nelson and
Romer 1996:49). A recent world university ranking showed American universities
holding the first 17 spots (the highest ranked Japanese university 105th)
(Kalaitzidakis, Mamuneas and Stengos 2001:18pp). Links between academia and
industry have been strong, leading to the rapid diffusion of technology and to its
industrial application. The state has been involved, primarily through government
procurements, contracts and R&D funding, which after the war secured the US a
first-mover advantage in most ICT industries (Castells 2000a:68; Langlois and
Steinmueller 1999:21p; Mowery and Rosenberg 1998:134pp, 165).
Rather than being curbed by vested interests, the US ICT sector received
special favors. As US ICT industries were instantly competitive, no infant
industry protection was necessary, even if government procurements were
helpful. But as Japanese competition stiffened (late 1970s onwards), the
perception that US high-tech industries were undermined by foreigners playing by
different rules, created widespread support for the protection of high-technology
industries.38 Clinton perceived of a role for government as supporting strategic
industries, in particular ICTs (Gilpin 2000:232pp; Krugman 1994:266; Langlois
and Steinmueller 1999:58). However, ICTs have been essential to the economy,
not as manufacturing industries, but by enhancing overall industrial productivity,
in particular within the knowledge-intensive services. Hence, the primary obstacle
against structural change has come from vested interests resisting deregulation
and liberalization in the services, in particular with respect to financial reform.39
Economic deregulation and liberalization occurred earlier and faster in the US
than elsewhere. Two service industries gained in particular by applying new
ICTs—IT and finance (Castells 2000a:148; Rosecrance 1999:146).
For the past decade, US politics has not seemed consensual. But
throughout Carter, Reagan, Bush and Clinton, interest groups have been unable to
block certain policies, namely policies of deregulation and liberalization. In this
37 Federal R&D expenditures soared from $83.2 million (1930 dollars) in 1940 to $1,313.6 million
in 1945, with the Department of Defense accounting for roughly a third of this (Mowery and
Rosenberg 1993:39).
38 Although there is disagreement as to how much a number of these initiativesactually helped
(Gilpin 2000:232pp).
39 Lobbying activities failed, both during Carter, Reagan, Bush and Clinton. Clinton even extended
these policies abroad, putting pressure on foreign governments in order to achieve an open and
deregulated world economy (Castells, 2000a:142).
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area, political consensus has been strong, and presidents from different parties
have taken on each others’ legacies.40 There has been broad agreement on low
tariffs, removing foreign investment restriction, getting rid of quotas and
monopolies, deregulating capital markets, private ownership and competition in
banking and telecommunication. Here, Clinton could rely on a healthy amount of
consensus in both parties (Castells 2000a:140pp; Micklethwait and Woolridge
2004:117pp; Rosecrance 1999:146).
3.5.2 Japanese ICT industries
Japan has also spent vast resources on human capital. Among the results are very
impressive mathematics and science literacy (15-year olds) figures, with the US
quite far behind (OECD 2002:69pp, 158). At the same time, concerns have been
raised that the Japanese system while good for an era of mass production
technologies and industries, does not work equally well for ICTs. It is clear that
education and training must be made more conducive to creativity and
entrepreneurship (Barker and Goto 1998:258; Castells 2000b:265; OECD
1999:50; Rosecrance 1999:110). Castells (2000b:251p) makes the point that the
Japanese science system is good at adapting technology, but not at generating it:
Universities are “degree-granting bureaucracies, primarily aimed at cultural
reproduction and social selection, not centers of innovation and training for
autonomous thinking.” The Japanese system is unable to generate a critical mass
of researchers and programs for radical innovations, despite a wealth of
engineering graduates. Japan is still geared towards mass-production and
manufacturing, and is far better at producing super-computers than it is at
computer-mediated communication (Castells 2000b:250pp; Odagiri and Goto
1993:87p).41
ICTs enjoyed special favors from the state in Japan as well, specifically
targeted by MITI. Government help contributed to rapid catch-up in the ICT
industries, even if it is unclear exactly how much. But while highly proficient at
mass-producing high quality ICTs, Japan has failed to utilize these in the services,
and so with respect to deregulation and liberalization, reform has met with
40 Clinton, who explicitly declared to reverse 12 years of Republican policies, instead extended on
important parts of it. It was Clinton who proclaimed “the end of welfare as we know it” and “the
end of big government” (Micklethwait and Woolridge 2004:117pp). Friedman (1999:106)
describes the economic differences between Clinton and Dole during the 1996 presidential
campaign as only slight. They both accepted that they were subject to international flows of
capital, and that deviating from the preferences of international investors would harm the
economy.
41 Although, it should be added that on a number of higher education indicators, Japan stacks up
well against for instance the US—e.g. figures on research scientists per 10,000, R&D spending as
a percentage of GDP, basic research as percentage of GDP (OECD 2001b; Yusuf 2003:179).
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stubborn resistance from vested interests. First, an “iron triangle” constituted by
the Liberal Democratic Party (LDP), the bureaucracy and vested interest groups,
has actively prevented structural reform. Linkages between these actors are close
and cemented, and the reforms have met with extreme resistance. Second, the iron
triangle has been protecting a “dual economy”. A highly efficient and
internationally competitive export-oriented manufacturing sector coexists with a
distinctly low-level productivity domestic manufacturing and service sector
protected by regulations and subsidies (Grimond 2002; OECD, 2001a:44;
Sakakibara 2003:ix, 42pp). Vested interests have made it excessively difficult to
implement anything but incremental change, and sectors that in the US have
undergone dramatic productivity improvements have remained largely
unchanged. This includes a sheltered banking system, where loans have been
handed out based on quasi-contractual relationships rather than on profit
evaluations, resulting in a stunning amount of bad loans and a persistent high
level of bad debts. The extent of the bad debt has been downplayed in order to
make it politically feasible for the government to help out leading banks and
customers. Any structural reform would be costly to banks, depositors and
taxpayers (and the politicians), and the presence of such interests have prevented
substantive structural reform.
The reason why vested interests have been so powerful in Japan is a lack
of political consensus, although in a somewhat different way than for the other
cases. The LDP reigned unchallenged for four decades, without much political
opposition from the Diet. But this is only political consensus in the sense that it
has left power with one party. The government, including the Prime Minister, has
normally been under complete control by the party organization. Politics is
conceived by the Party, in conjunction with the bureaucracy and with vested
interests. Bills may be drafted by the government, but with the instruction of Party
committees or research groups.42 PMs come and go, controlled by faction leaders
behind the scenes – people devoted to protecting the status quo rather than
promoting reform (Castells 2000b:225pp; Grimond 2002; Sakakibara 2003:47pp).
To quote Grimond (2002): “Its [LDP] two main purposes – rent-seeking and self-
perpetuation through electoral success – have both flourished under the status
quo. Almost every interest-group imaginable is represented within its ranks, and it
takes care to look after them.”43 Hence, the LDP leadership has rarely been pro-
reform. Small shopkeepers—mom-and-pop stores—are the backbone of Japanese
42 When the bill is drafted, another LDP organ approves it before it goes to the LDP General
Council for final approval. Similar processes take place with respect to the budget (Grimond 2002;
Sakakibara 2003:47pp).
43 It also rests on a gerrymandered election system where rural districts are grossly
overrepresented compared to urban ones (on average somewhere like 5:1) (Grimond 2002).
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retailing. They are also the backbone of the LDP (Lewis 2004:46p; Sakakibara
2003:138p).
Regulations are responsible for the low level of productivity in the non-
export sectors, but reform would have put thousands of firms out of business and
hundreds of thousands out of work. The Japanese economy is more genteel than
the US, but also less efficient at Schumpeterian creative destruction, and less well
adapted to structural change. Emphasis has been on safeguarding the weak rather
than closing down inefficient firms. Cuts in the labor force have been marginal,
with no major restructuring of business taking place (Castells 2000a:191;
Friedman 2000:60; Fukuyama 1995:165; Gilpin, 2000 281p; Gordon, 2003:327;
Grimond, 2002). The service sector in particular has given rise to an enormous
amount of bad bank loans. It is here that we find what The Economist (2004:81)
labels “‘zombies’ – companies that are competitively dead, but sustained by their
banks, continue to walk the Earth and give healthier firms nightmares.” As long
as politics is shaped largely by the actors of the iron triangle, rather than by the
government, it is exceedingly hard to muster the necessary political consensus to
go against these very same interests. Because vested interests have been able to
block deregulation, liberalization and opening Japan up to an integrated, global
economy, those sectors that have had the potential to utilize ICTs the most
intensely—banking and other financial services—have been deprived of the
opportunity and incentive to do so, in the process falling far behind the US
(Gilpin 2000:280; Gordon 2003:325; Rosecrance 1999:124).
4. Conclusions
In this article I have tried to approach one of the genuine macro questions of the
social sciences. The question can be phrased in a number of ways. In a narrow
sense, it can be interpreted as an attempt at making inferences about the causes of
long-term technological and industrial growth in a small number of great powers
over a limited time period. However, broader interpretations are possible. On the
one hand, the article is an attempt at making general inferences about the rise and
fall of the great powers. The links between International Relations and
International Political Economy are obvious, but are far too often ignored. The
rise and fall of the great powers is closely linked to the economic rise and fall of
the same powers, in turn linked to their technological and industrial rise and fall—
especially so in a world where Schumpeterian growth is becoming ever more
important. The article introduces a logic that can explain why the rise of a great
power will not go on forever, but instead often lead to decline, independently of
war and foreign politics. For only one example of the strong correlation between
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the rise and fall of the great power s and their economic rise and fall, see
Modelski and Thompson (1996).
On the other hand, the article is also an attempt at making inferences about
long-term growth and development irrespective of geography or time frame. Do
the results apply only to the great powers? There is no reason to assume that the
logic of the framework is limited these only. There is no reason why it should be
any less important for smaller powers to prevent vested interests from wresting
away control of economic policy-making. However, what is reasonable to
assume, is that smaller powers to a lesser extent are able to achieve actual
industrial leadership. Yet, breakthrough technologies are very often generic
technologies. Hence, countries can reap huge rewards from applying these
technologies to improve the productivity of new and existing industries, even if
they are not in a leadership position per se. Which means that it is important to
encourage the growth of human capital and new technology also for a small
country. However, what it might imply is that smaller countries should rely more
on the diffusion of knowledge rather than the actual production of it, as the new
knowledge and technologies is more likely to arise from larger countries. In any
case, the logic of the argument stands, great power or not.
Further, these are problems that are of continuing relevance, and there is
no reason why this relevance should decrease in the future. Elected politicians are
under ever greater pressure to come up with fast and easy solutions to societal
problems—and preferably without any negative consequence to a simple human
being (unless you want to lose the next election). This is a political and economic
context that makes structural change hard to implement, and which leaves vested
interests with a large playing field. A number of European economies are already
struggling with serious structural problems. These will not just disappear. The
consequences are serious and potentially wide-ranging.
More concretely, the article has presented a theoretical framework for the
understanding of long-term economic growth and development with a focus on
Schumpeterian growth, combining Schumpeter’s argument with Mancur Olson.
The utility of the theory has been demonstrated through empirical
evidence from nine case studies in five core industries for five different time
periods. Due to obvious space constraints, no exhaustive account can be given of
each case. And while I have tried to shy away from controversial assessments, it
must be up to the reader to accept or reject my evaluations. Also, when the
empirical material spans several centuries, easily operationalizeable variables are
hard to come by. Hence, while more rigorous analysis needs to be undertaken, the
cases included here provide encouraging support for the theory on all the
variables. They illustrate how the rise and fall of the great powers follow an
overall pattern of development. This pattern does not play itself out in exactly the
same way for each and every country, industry and time period (which is not to be
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expected), but the general theoretical mechanisms seem to be very similar across
both time and space.
Only one (US automobile industry) of the cases deviates markedly from
the pattern, and it does so primarily because it is a case of Smithian rather than
Schumpeterian growth. Hence, the US car industry should not be seen as a
falsification of the theory, but as a reminder of its limits: Even if technological
progress is becoming an ever more important part of economic growth, it is not
necessarily so that Schumpeterian growth is always more important than other
kinds of growth. In any case, Britain, France, Germany, the US and Japan
illustrate the theory for the four other industries and time periods. The leaders all
had decisive human capital advantages over their competitors (even if human
capital was not always derived from formal education institutions). Vested
interests proved decisive for a country’s ability to pursue policies of structural
change. And it was quite a lot easier for countries characterized by high degrees
of political consensus and social cohesion to go against the influence of vested
interests. France succumbed to vested interests continuously blocking structural
change, and political elites were far too weak to do anything. Britain was
successful at breaking vested interests through political consensus on several
occasions, but was unable to do so towards the end of the 19th century, when new
industries posed challenges very different from those that the system was
designed to cope with. In the same period, Germany’s rise to prominence was to a
great extent aided by the fact that their old vested interests were relatively weak,
making it easier for new industries to find political favor. In the US, a political
consensus developed against labor-intensive industries, and more recently,
political consensus over deregulation and liberalization enabled the US to come
up with institutional arrangements far more conducive to growth in the service
industries than in Japan.
The framework receives substantial empirical support, from both the
positive and the negative cases. The rise and fall of the great powers is ultimately
linked to a combination of elements: A country needs a solid human capital base
in order to secure for itself the ability to leap technologically ahead. The country
then needs to prevent vested interests from blocking structural economic change.
Only countries that have been able to prevent vested interests from locking the
state into an obsolescent status quo, have been able to succeed. Finally, making
decisions that go against powerful vested interests is politically risky. Only states
characterized by a high degree of political consensus and/or social cohesion are
strong enough to pursue economic policies independently of powerful vested
interests. Only such states can realistically expect to be ready to accept the
challenges presented by new and promising technologies and industries.
One important implication stems from both the theory and the empirical
cases: The future is never won once and for all. The framework establishes a
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mechanism whereby past success can very easily lead to future failure, but where
failure does not follow as a necessity. The future needs to be won, over and over
again.
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... For example, Veblen (1915) thinks that technology, militarism, and patriotism contributed significantly for the rising of the German Empire. Schumpeter (1950 andMoe 2007) emphasizes innovations furnished by the leadership of the entrepreneurs as the most important factor behind the rise and decline of capitalism. Innovations and their unimpeded diffusion will increase investment, employment, and income, creating development, prosperity, and greatness in the innovating nations. ...
... When innovations and technological advances are no longer forthcoming, great nations will fall. Mancur (1982 andMoe 2007) points out that the vested interests such as trade unions and lobbyists, among other forms, usually contribute significantly for the decline of great powers, because they block new structural economic changes affecting their interests negatively but influencing the whole nation positively. Kennedy (1987) attributes the decline of great powers to economic weakness and military overstretch. ...
... Wolfe concludes that the best proposal for greatness is to rebuild political parties and civil institutions that are connected with people. Moe (2007) has successfully combined Schumpeter's view on innovations and technological leadership which are the cause behind a rising industry and a nation with Olson's explanation that the decline in a nation's greatness is explained by the existence of vested interests that block new economic changes. Moe's thesis, which is actually Veblen's theory of sabotage reformulated in the concept of 'block', contends that greatness can result if two fundamental conditions are available. ...
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This paper develops a well-integrated general theory of the rising and falling of great powers, or dynasties, furnished by Ibn Khaldun. He contends that there are two essential foundations for a rising dynasty. The first one is the social cohesion or the solidarity among the motivated people of the dynasty, and the second foundation is the availability of tax revenues generated by the free market economy. As the business economy grows, the government is able to generate large revenues from small tax rates. The collected funds will partly be spent for developing a strong army capable of defending and expanding the dynasty. But once the leadership of the dynasty becomes weak, solidarity is disintegrated. Wasteful (luxurious) expenditures require the government to impose new taxes and to increase others. Consequently, business enterprises and people lose cultural incentives to work and invest. This will force the government to cut spending on an already overstretched army. Once the capacity to obtain funds is weakened and solidarity is disintegrated, the great power will collapse. This paper will also attempt to demonstrate the influence of Ibn Khaldun's analysis on an American's view for greatness and to provide several significant implications relevant to recent time.
... These observations may reveal the emergence of Brazilian "fisiologismo" (Montero 2005, p. 64), meaning that public authorities increasingly depend on their clientele. Apparently, the availability of governmental steering capacity does not only serve the advancement of public welfare, but may also be abused to protect vested interests 4 (Moe 2007). One may conclude that the ideal of "embedded autonomy" seems hard to sustain. ...
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While both India and Brazil are seriously affected by the HIV/AIDS epidemic, each country has chosen a different approach to providing affordable pharmaceutical treatment. Whereas the Indian government has paved the way for market-driven solutions, Brazilian public authorities are strongly involved in the research and production of HIV/AIDS medication. Brazilian regulations permit comprehensive and free provision of HIV/AIDS drugs, whereas the majority of the affected population in India does not receive adequate pharmaceutical treatment. To explain the different policy outputs, we draw on the developmental state literature. Efficient decisionmaking structures, a devoted bureaucracy, and effective policy instruments enable public authorities to provide public goods even in the context of relative scarcity. We show that the assumptions of developmental state theory have to be complemented by the assessment of civil society actors' potential to trigger governmental interventions in the market.
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This book describes and analyzes how seven major high-tech industries evolved in the USA, Japan, and Western Europe. The industries covered are machine tools, organic chemical products, pharmaceuticals, medical devices, computers, semiconductors, and software. In each of these industries, firms located in one or a very few countries became the clear technological and commercial leaders. In a number of cases, the locus of leadership changed, sometimes more than once, over the course of the histories studied. The focus of the book is on the key factors that supported the emergence of national leadership in each industry, and the reasons behind the shifts when they occurred. Special attention is given to the national policies which helped to create, or sustain, industrial leadership.
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On the basis of prosopographical information on 1,324 German and 1,328 English businessmen active in six large provincial towns between 1870 and 1914 this article compared their collective biographies. In doing so several orthodox views on the circumstances of their social and professional lives are challenged. Special attention is paid to recruitment patterns in terms of generational composition as well as regional and social origins. After observing businessmen's education and training, the tendency for German and English entrepreneurs to be involved in processes of gentrification is questioned, and the degree to which they adhered to middle-class lifestyles is examined. Finally, their positions in political and public life are contrasted.