Sunday 27 March 2011

Niall Ferguson: Why the West is history

I thoroughly enjoyed Niall Ferguson's gleeful baiting in Episodes 1 and 2, but he went off the rails a bit in Episode 3 of his series Civilisation: Is the West History, incorrectly titled "Property". His explanation of why the North American economies had been so much more successful that the South American ones, boils down to this:

A. In South America, the leaders of the original conquering armies allotted all the land to themselves in huge great estates. If you owned the land, then you also owned all the native tribes which lived on that land, so you had ready made slaves.

An autocratic, self-interested government which can direct the people to do what it wants is not going to be very successful economically (for the same reasons as the Soviet Bloc was not very successful) and even worse, after Bolivar et al fought for the independence of these countries from Spain and Portugal, nothing much really changed, it was just a new boss replacing an old boss.

Democracy never really took hold in these countries, they alternate between communist and populist presidents, interrupted by military coups. He reckoned that all these problems went back to the fact that most of the land is owned by such a small percentage of the population.

B. In the USA, he looked at the example of South Carolina (he makes us assume that something similar went on in most British colonies) and explained that whoever got their first didn't just declare that all the land belonged to themselves, they were a bit more subtle about it.

The system was that anybody (i.e. English peasants) could turn up in SC, work as an 'indentured servant' for an existing landowner for a certain length of time (wasn't quite clear how long, but must have been at least ten years) and after that, the government would allocate him some land (between 50 and 200 acres, from memory, depending on other factors, women got less than men) and the right to vote (all males who owned more than 50 acres had the right to vote).

This, he said, led to a 'property owning democracy' (more correctly, a 'land owning democracy') and as history has showed us, this worked much better than the South American non-land owning democracy. He hinted right at the end of the programme that the USA had a 'dark secret' namely that they had their own underclass, African slaves, who were in exactly the same position as the native South Americans.

So far so good, that all seems perfectly plausible - it has always puzzled me why there should be such a disparity between e.g. the USA and Mexico (Mexico counts as South America for these purposes, being a former Spanish colony).

C. So which vast chunks of the story did he deliberately omit or overlook?

1. Was the SC system not a pyramid scheme? It only works as long as there is new land for "them" (whoever "they" may be) to parcel out.

2. Was each generation of new arrivals in SC not in a subtle way a slave? Being forced to be an 'indentured servant' for an incumbent for ten or more years sounds like slavery to me, albeit time-limited.

3. He contrasts USA with South America and correctly concludes that a land-owning democracy is better than a non-land owning democracy; and a democracy is better than an autocracy or dictatorship (glossing over the other possibility - a land-owning non-democracy). Wouldn't it have been better to give new arrivals to SC the vote from Day One?

4. He did not dwell on Tom Paine's alternative vision for parcelling out land, which was instead of the incumbents using this free source of wealth to buy new arrivals into time-limited slavery, new arrivals would merely pay market rent for the amount of land they could put to good use themselves. To the extent that this market rent was more than enough to pay for the core functions of the state (which were minimal in those days), the rest would have been dished out again as a Citizen's Dividend - so even if a new arrival owned no land in the literal sense, he would have had an economic interest in it (everybody would get a pro rata share of the total rental income).

5. Niall F explained what the starting position was in North and South America a couple of hundred of years ago, and then fast-forwarded to the contrast between the gleaming sky scrapers of New York and the slums of South America. There are of course slums in the USA and gleaming new sky scrapers in South America as well of course, but this is a million miles (and several hundred of years) away from the original model of self-sufficient farmers in the British colonies.

6. The 50-acre cut off for the right to vote may have made sense (in their terms) three centuries ago, but nowadays it would be a nonsense. A single acre of Manhattan would be worth as much as a ten thousand acre farm out in Wyoming (or whatever the relationship is). And he glossed over the fact that as long as governments protect and guarantee land ownership without taxing it (and especially if they tax incomes, even of the landless, to pay for things which benefit land owners) there is a natural tendency for land ownership to become more and more concentrated (with the banks doing their best to make sure this happens).

7. So although the starting points in North and South America may have been very different, the end result is that North America is becoming more and more like South America; and if democracy never really worked in South America because a vote isn't worth much to a landless peasant, doesn't the value of the right to vote in the USA become worth less and less over time as land ownership becomes ever more concentrated in ever fewer hands (the banks are indirectly the biggest landowners of all, because they collect the rental value in the form of mortgage interest and repayments)?

8. Isn't the original SC model much the same Home-Owner-Ist pyramid scheme as governments in the UK (and elsewhere) still run today - you start your adult life as a landless peasant, and for the rest of your working life you have to hand over half of what you earn to the government in taxes, who spend a third of it on themselves; a third on things which benefit land owners and the remainder on welfare (to compensate those whom the system leaves by the wayside and to pay old age pensions to people who have been through the mill).

And of the remaining half of your income, you have to spend half of that on paying for the right to 'own' a tiny patch of land. At least in SC they were honest about it - work as a slave for ten years and then you can become a slave-owner yourself.

Just askin', is all.

We'll see whether Niall F redeems himself in the next episode about slavery. The fact that the Union states 'freed' slaves first; became an industrial power and hence defeated the Confederate states illustrates, yet again, that slavery is economically very inefficient (see also contrast between North America and South America as summarised above).

37 comments:

Old BE said...

You are right that there is only so much land so the state can only ever hand out free land for so long. You are also right that at the moment it is very difficult for land to be distributed from the rich to the poor, and often much easier for it to transfer the other way. Isn't there a case, then, for some kind of state mechanism for distributing the land back the other way? You would no doubt argue that a land tax would discourage hoarding, but why not also a mechanism for the state to give the landless a hand up in trying to buy some for the first time?

Mark Wadsworth said...

BE, schemes like MIRAS or George Osborne's "first time buyer" gimmick don't help FTBs to buy themselves a house, all they do is help FTBs to take out larger mortgages than they otherwise would have done.

I'm with Tom Paine on this one - hence my current blog slogan: "From each according to his wants to each according to his needs".

If you "want" to live in a nice big expensive house, or trade from the best location on the high street, then by all means do so - providing you stump up the LVT. A little bit gets spent on core functions and the rest is dished out again, so by definition, everybody has an income sufficient to pay for his "needs" (i.e. an average value home or a smallholding, or however you choose to spend it).

Mark Wadsworth said...

BE, or to clarify that, it's not the "land" that's important as much as the rental income it generates. Getting a bit of rental income via Citizen's Dividend is in economic terms exactly the same as being a small landlord.

dearieme said...

"The fact that the Union states 'freed' slaves first...": eh? What do you mean?

Bill Quango MP said...

I think you may have missed a major point.

South America was much more heavily taxed and controlled than North America. This shows up even more clearly in North America itself where the very small colonies of the Dutch and British ended up taking over the much larger French and Spanish ones. The British in particular were largely left alone by the crown . And by the standards of the day a subject in a colony was much more likely to own land, become part of the legislature and have the vote than in the home country.
It is free citizens that create wealth. Slaves do not, having no vested interest to do so.
The slave holding Virginias, for example, {slaves being the only possible way to make money from the tough work of pre mechanisation tobacco farming} had a fraction of the factories, roads, rail and middle classes of Industrial, slave free, New York state.

The parcelling out of land explains the growth of the current USA. Also explains why the indigenous people were never able to form their own kingdoms. The settlers kept on pressing westwards.
But I believe freedom was the big driver. Freedom also being a requirement for land.

Trooper Thompson said...

I think the difference between North and South America was not in the plan, but in the failure of that plan in the North. It was mostly carved up, with the intention of introducing a feudal system (with much variation between the different colonies - so much so that you cannot talk about SC without explaining the differences in the other colonies), but due to the constant resistance from the settlers to paying quitrents, and the differences between the colonies, which meant that people could move elsewhere (and consequently the most oppressive places stagnated) the feudal system failed.

Trooper Thompson said...

@ Bill,

"the very small colonies of the Dutch and British ended up taking over the much larger French and Spanish ones."

the French colonies were large in area, but much smaller in population.

chefdave said...

Niall Ferguson is an extremely talented man, I've read two of his books now (Empire, the Ascent of Money) and they were both well researched and well executed. But, I don't think he's fluent in Georgist economics and without a basic understanding of the importance of land no account of human history will ever be complete (imo).

If the West is now in terminal decline it's a direct result of our abusive relationship with the land, unless this theory is at the heart of his new series (which I doubt) it'll just be another ineresting product that boosts his own bank balance but fails to deal with our collective Achilles Heel.

Bill Quango MP said...

Trooper Thomson.
They were. One reason that the French colonies never got the numbers arriving is that they were really just an extension of French mainland with the added disadvantages of being extremely dangerous too. No point crossing the world to start a new life if the tax,legal religious and political/monarchist burdens were the same as staying at home.

Mark Wadsworth said...

D, IIRC, the American civil war was between "Union" states and "Confederate" states. Wiki appears to concur.

BQ, for sure, the British model was a better way of doing things that the French, Spanish, Portuguese model (which leads us on to yet another dilemma - Protestant countries seem to be far more compatible with democracy than Catholic ones...)

As per your second comment, the French colonies were merely an extension of what went on in France. My observation is that the original British/US model is slowly converging with the South American one (or indeed the old European one).

"But I believe freedom was the big driver. Freedom also being a requirement for land."

Freedom is a requirement for land; and land is a requirement for freedom. The two appear to be inseparable (see also: modern Russia).

TT, yes, as I said, for some reason Niall F focussed on SC as just one example. But the freedom to move from areas with the most repressive political-economic system to the ones with the least repressive may have helped. But as soon as all land is nominally owned by somebody, we are back to square one.

Remember: the NIMBYs own very little land in a literal sense (in terms of surface area) but control vast tracts of other people's land in a political sense by making bloody sure that nothing gets built on The Hallowed Green Belt.

CD, Niall F does seem very knowledgeable, but as you suggest, he simply does not put 2 and 2 together to make 4.

He appears to think (from the little evidence available) that the fact that 'land ownership' and 'the right to vote' was relatively evenly distributed in the USA a couple of centuries ago (compared to anywhere else, at least) guarantees the economic success of the USA for ever more.

It probably did, back in the day, but as land ownership has become almost as concentrated in the USA as it is in South America, surely that advantage has almost disappeared?

Sean said...

Personally I think its a cultural Protestant/catholic thing.

You can see the results of the catholic social democratic corporatist mess that is Eire...and in truth its always been that way.

Mark Wadsworth said...

S, the Protestant/Catholic thing is borne out in practice (certainly on a political level), but the most avidly Home-Owner-Ist countries (UK, USA and Australia) are also the most Protestant (or secular) ones.

It is only Spain and Rep Ireland* who are anywhere remotely as Home-Owner-Ist as us, and they have the bankrupt banking system/overweening State to prove it.

* Other theories say that Home-Owner-Ism was such an easy sell in Rep of Ireland because of their collective, historic aversion to the English land owning class; therefore, if yer average Irishman can 'own' a little bit of land, he is now 'free'. Problem is, instead of being a serf to an English landowner, he is now serf to a bank.

James Higham said...

When the state owns and metes out property, it's the beginning of the end.

Bayard said...

"Remember: the NIMBYs own very little land in a literal sense (in terms of surface area) but control vast tracts of other people's land in a political sense by making bloody sure that nothing gets built on The Hallowed Green Belt."

Mark, you've got your Metro-goggles on again. Green Belts are a tiny fraction of the land area of the UK.

Bayard said...

"Was the SC system not a pyramid scheme? It only works as long as there is new land for "them" (whoever "they" may be) to parcel out"

Not according to Wikipedia it wasn't. The indentured servants worked without wages to pay off their passage to America, not for the right to a piece of land. Some of them were convicts whose sentence was so many years of unpaid labour, the money for which was paid up front to HMG by their "employer".

Mark Wadsworth said...

JH: "When the state owns and metes out property, it's the beginning of the end."

Exactly! But remember...

a) There is plenty of physical land in the UK, enough for 1 acre per citizen. The reason why most households make do with paying vastly over the odds for one-tenth of an acre is because the NIMBYs prevent others from turning low value farmland (£5,000 per acre) into high value developed land (£500,000 per acre).

b) The core function of The State is to protect and guarantee land 'ownership'. Land 'ownership' and 'the state' are two sides of the same coin. You cannot have one without the other.

B: The Hallowed Green Belt is roughly a tenth of the surface area - twice as much again as the bit used up by existing homes and gardens. And in turn, only one-eighth of farm land is Hallowed Green Belt. The HGB is there for the benefit of NIMBYs and not there in the interests of 'food security'.

And whatever the legal niceties, occupying and dishing out physical land is a pyramid scheme.

DNAse said...

"Green Belts are a tiny fraction of the land area of the UK"

True but it's not so much the size of the land that counts, its the location premium.

Mark Wadsworth said...

DNAse, it is NOT true, see my reply to Bayard.

In England, the HGB is thirteen per cent of the available land, which is roughly as much as the entire developed percentage. More tellingly, the size of the HGB doubled between 1979 and 1993, the era in which Home-Owner-Ism took off as the predominant economic-political philosophy.

Bayard said...

"And whatever the legal niceties, occupying and dishing out physical land is a pyramid scheme."

Well, no, to be a pyramid scheme, you have to start with a single owner of the "good" (land, cleaning products, chain begging letter, whatever), who passes or sell this onto a small number of others, who comprise the next layer, who then each pass/sell the good onto a number of others in their turn. As the layers go down, so they get bigger and this produces the pyramid. Here we have a single entity (the state) who "owns" all the land, the original inhabitants not sharing the same concept of land ownership, parcelling it out to many recipients, who then effectively sit on it, not immediately passing it on to anyone. It may be morally dodgy, but it's not a pyramid scheme.

"The reason why most households make do with paying vastly over the odds for one-tenth of an acre is because the NIMBYs prevent others from turning low value farmland (£5,000 per acre) into high value developed land (£500,000 per acre)"

Come on, Mark, you know this isn't true. Do you think all the NIMBYs emigrated last time we had a price crash in housing and it was possible to buy a house for little more than its rebuild cost? Might the reason most households make do with paying vastly over the odds for one-tenth of an acre not be because we have a bubble in property prices which has, in reality, nothing to do with NIMBYs, as the experience of Spain and Ireland shows?

dearieme said...

"D, IIRC, the American civil war was between "Union" states and "Confederate" states." Indeed it was, but you seem to have misunderstood what happened. When Lincoln issued his Emancipation Proclamation, it freed only the slaves in the Confederacy, which he did not control; the slaves in the Union states, which he did control, were not freed by it.

AntiCitizenOne said...

Personally I believe that American success was predicated on two things.

Low/no State taxes on transfers (although there were harmful tariffs).
Low population density meant low private taxes.

This prevented both state and private rent seeking and thus a strongly growing economy.

Steven_L said...

US foriegn policy in South America is no different than in say, the Middle East.

The point is to keep them weak and divided, at each others' throats. the US no more wants a united South American superpower then it does an Arab one.

It's not just about 'home-owner-ism'. 'gun-owner-ism' counts just as much, if not more.

AntiCitizenOne said...

Sites for hoplophobes and the conspiracy faithful --> that way.

Mark Wadsworth said...

B: "Do you think all the NIMBYs emigrated last time we had a price crash in housing and it was possible to buy a house for little more than its rebuild cost?"

No I don't think they had all emigrated. The key to Home-Owner-Ism and NIMBYism is that it flies in the face of logic and does not 'work', even by their miserable standards. But it is still true to say that the stated aim of Home-Owner-Ism is to keep house prices going up in a straight line for ever (which is of course impossible).

D, I never mentioned the EP. What does that have to do with it?

AC1, I'm not sure that's relevant or even true. Would you say that Wyoming is more successful that California because of it's lower population density?

SL, I'm not sure whether that's relevant.

Gordo said...

Heresy time:

North America was settled by white men and women who had white children and created white countries.

South America was, with a few exceptions, settled by white men who bred with Amerindian women creating a mixed, Mestizo, race.

Look at Mexico today; the ruling elite are ethnic Spanish, lower down there are the Mestizos, at the bottom are the Indians.

These are simple facts.

I thought Professor Ferguson's 'Pity of Watr' was brilliant, but he is now an establishment historian, and perhaps one whose personal relaitionships preclude him seeing the bloody obvious.

Anonymous said...

The problem with Latin America was the Roman Catholic church's attitude to education.
They did not encourage in the same that Protestant churches did.
This was of course because the RC did not encourage reading the Bible in your own language but in Latin until the mid 20th century.

Mark Wadsworth said...

G, I don't see how that's relevant. I thought yesterday's episode "Medicine" was very good (which would have appealed to eugenecists, which would appear to include you), he explained how the colonial powers treated Africans, but only mentioned the word "land" a single time.

Anon, yes, we've covered that.

Ross said...

Dearieme- Most members of the Union had abolished slavery at state level before the war, whilst it's true that technically the upper South states that remained in the Union were allowed to keep their slaves after the Emancipation Proclamation.

I realise you know all this, but I don't think it makes Mark's statement inaccurate.

Gordo- Argentina was settled by whites and is still largely crap. I'm not saying the racial make up of the Americas has no effect but there are other bigger factors at play.

Gordo said...

To be honest Mark I haven't seen it, I am working abroad at the moment. But I continue to believe that the race of the people to a great extent determines the way the country is governed, to invert the established wisdom: culture is a construct of race.

Mark Wadsworth said...

G, yes, I used to believe that (and it's difficult not to) but Jared Diamond explained there is a bit more to it than meets the eye.

Gordo said...

Everyone should read Dr. Diamond's book 'Guns, Germs and Steel' but should also read Dr. David Duke's 'My Awakening'.

This will give both sides of the argument, It ain't rocket science so the intelligent layperson can then make up their own mind.

DBC Reed said...

Arrived rather late at this one but MW's comparison between mortgages and indentured servitude is very apt and one I used to make myself once without it registering.
Remember they could not get enough indentured servants to work the land in the U.S,hence the importation of slaves (who were in many cases more expensive).Also there was a second wave of indentured servitude after the abolition of slavery which saw Chinese and Indian people being transported all over the place ,often doing the work the freed slaves were looking to do.There was a long simmering animosity in the W.Indies and trouble broke out bteween the etnic groups in Fiji quite recently.
Not all indentured labourers got land on completion but it was often incorporated in a so-called Redemption Clause .

Robin Smith said...

Slavery is my favorite topic. I look forward to what he says. He does seem to have trouble connecting his own observed facts when it comes to the land though.

Its all been written about with great clarity 130 years ago. Why do we keep going round in circles on it. I guess we have done enough reading? Read this before watching:

The Law of Human Progress

Its pretty certain to reasonable people.

Bayard said...

"Everyone should read Dr. Diamond's book 'Guns, Germs and Steel"

There's a fascinating piece in there about how the Chinese could have had an industrial revolution in the C15th and conquered the world, but the emporer decided not to.

dearieme said...

"the Chinese could have had an industrial revolution in the C15th and conquered the world": so could the Romans a millenium and a half earlier.

Mark Wadsworth said...

DBC, RS, there are lots of ways of enslaving people...

B, D, yup, both Jared D (leftish) and Niall F (rightish) said that about China, so I shall assume it to be true.

Bayard said...

"so could the Romans a millenium and a half earlier"

AFAIK, the reason why the Romans and the Greeks before them didn't have an industrial revolution was the lack of a cheap, readily available energy source.