The Secret Of Britain'S Success

Joseph Needham, a historian of science and technology, asked why the industrial revolution took place in Britain, which has always attracted the attention of economic historians. Joel Moker is a famous scholar in this field. In the enlightenment Economy: a new theory of British economic history, he made an in-depth and systematic analysis of the economic development of Britain in a century and a half after 1700. The author believes that, in addition to geographical factors and the generally accepted arguments of market, political and social roles, the origin of modern economic growth largely depends on people's cognition and beliefs and how these beliefs affect their economic behavior. In other words, thanks to the enlightenment, technological innovation and institutional reform have achieved synergy, which is the root of modern economic growth.

Before 1700, Europe was still a region dominated by agricultural economy and lagged far behind China. In the following century and a half, the British economy experienced profound changes. By 1850, Britain's population had more than tripled, with urbanization (in terms of population) reaching 45%, an increase of 27% over 1700. When Britain held the World Expo in 1851, it had become an undisputed world economic leader. Thanks to the industrial revolution, the modern economic growth that people call today began in Britain.

The secret of British success is the goal of this book. Different from other works, the author does not only analyze from the perspective of pure economics. As we all know, from Portugal, Spain, the Netherlands to the United Kingdom, they all had developed shipping industry, international trade related industries or commerce at that time. The market has played a good role in the allocation of resources. The author points out that the engine driving such development is usually business and institutional improvement, and technology is only an auxiliary power. Getting rid of the Malthusian poverty trap through better technology is only one aspect of the British economic transformation. Inspired by Douglas North, more and more economic historians begin to attach importance to institutional factors, namely, the rules of economic games, the beliefs behind such rules, and whether people abide by such rules.

The author keenly points out that the number one enemy of economic growth is not population pressure, but various "rent seekers". Britain is also slowly developing into a more open, more competitive and more economic choice society. By the time Queen Victoria ascended the throne, Britain had developed into a desired free market economy, and rent-seeking activities were gradually eliminated. A system or society that breeds rent-seeking behavior is obviously unable to obtain efficiency and fairness. A successful economy depends on good institutions that provide the right incentives for business, finance and innovation. Of course, it is impossible for us to design a universal "optimal" system, which should adapt to changes in the environment. We can see that the system came into being, and many of them played an important role in promoting it at that time. However, one defect is also contained in it, that is, the system path constraint. Some systems that later became out of date are difficult to change. Therefore, it is important that institutions be flexible and able to change with the changing environment. The above rules as well as the minimum cost of these two rules can be determined when necessary. This concept of cost includes both economic cost and social friction cost, the latter is not only more likely, but also lasts longer. It is difficult for people to accept such changes when their own interests are damaged, and there is great resistance from vested interest groups.

North also pointed out that institutional change is not because it is efficient, but because the ideas and beliefs of the key people who support them have changed. In fact, the mainstream ideas put forward by key figures have influenced the formulation of government policies, the government's support for innovation and the corresponding adjustment of relevant institutional arrangements, so as to provide better support for the transformation that the free market can not provide. For example, a number of power textile machinery factories in Bolton were attacked in 1826, and the government quickly mobilized to maintain order and protect the property of these factories adopting new technologies; in the 1830s, the government supported the construction of the railway, despite the lobbying and obstruction of the owners of the carriage, the canal company and the toll road company. Britain was the first to implement the protection of private property (including intellectual property rights such as patents). By the middle of the 19th century, Britain had become the world's factory and undisputed technology leader. With its economic achievements, Britain became the first country dominated by factories, and then led by railways, forming the first huge industrial city proletariat. With the help of the industrial revolution, the city of London established its financial hegemony and dominated the international banking industry for decades.

The peak of British economic growth began to enter the plateau period with the economic development of continental Europe catching up with that of Britain in 1914. After that, Britain became an "ordinary member" of industrialized countries. As early as the early 19th century, the United States also realized the protection of private property rights and free market economy, and gradually became a new economic overlord in a broader and more abundant land. The development of the United States is also carried out at two levels: one is the game with nature. This is a very useful inspiration in terms of economic growth.

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