The Soviet reform experience is a repository of ostensible lessons. But are we learning the right ones? My new essay assesses one debate: the role of "entrenched interests" in the failure of Soviet economic reform and the USSR's ultimate demise.

In the 1910s, the Dodges weaponized their legacy minority stake in Ford, suing to try and prevent Ford from building what would become arguably the greatest production facility in world history to that point: the River Rouge complex. Their lawsuit claimed it was improper and a poor use of funds for Ford to reinvest into the business by expanding capacity, and profits should instead be (almost) entirely distributed as dividends. That those same Dodges by then had their own car company may have been a small factor. Henry Ford carried on his merry way, aiming “to spread the benefits of the industrial system,” and basically bought them off. The passage in this book is a bit of tortured reading. In that this is less an investor vs producer issue, I think, than a rival engaging in subversion. Nonetheless Ford’s way was largely antithetical to Eastern investor and shareholder preferences. And Ford, until his death, explicitly spurned them as well as the public markets.

As Hülegü's armies met the walls of Baghdad winter 1257-58, it was not just an encounter between the Mongols and Abbasid Caliphate, but of the human, financial, material, and technological resources of north China, central Asia, Russia, the Caucasus, and Iran against those of Iraq.

Stalin "resigned so often the ritual could well have become tiresome for those subjected to it."

Liberal-rules based enjoyers: China must take part in a system based on rules and law China: stands up an increasingly legalized export control apparatus in large part mimicing the American one Liberal-rules based enjoyers: NOT LIKE THAT

Incredible things are happening on X

The great British historian Chris Wickham passed away this week. In April 2017, I published (in Spanish) a review of his book Medieval Europe, titled “The Middle Ages: Fiscal Capacity, State Strength, and Economic Growth.” In his memory, I reproduce the same review but translated into English. This past week, later than I should have, I finished Chris Wickham’s Medieval Europe. Readers of this blog may remember that I have occasionally mentioned my admiration for an earlier work of Wickham’s, Framing the Early Middle Ages, and for his incredible ability to synthesize our knowledge of the early Middle Ages in Europe and the Mediterranean world, both conceptually and geographically. Since that monograph, I have regularly worked my way through every new book by Wickham, and it has always been an experience with an extraordinary intellectual payoff. Medieval Europe is no exception. The amount of material condensed into 352 pages is so extraordinary that, merely to absorb even a minimal amount of its detail, I have had to let a few other obligations slide over the last few days. The end result has led me, almost by necessity, to write this post. Before continuing, however, I should warn our readers. Medieval Europe is an uncompromising academic monograph. The prose is clear and, on many occasions, brilliant in its precision, but this is not a book to take to the beach for a little light entertainment that requires no thought. Wickham is not going to tell you about Eleanor of Aquitaine’s love affairs. He is going to tell you how the fiscal capacity of the Anglo-Saxon kingdoms before the Norman conquest of England in 1066 would prove crucial to the evolution of the political economy of northern Europe in the centuries to come. This is not a world of lances and tournaments; it is a world of productive systems and administrative structures. But even within contemporary historiography, questions of representation and understanding, the construction of mentalities, or exercises in collective memory play, for Wickham, a secondary role compared with modeling the material foundations of a society. Perhaps it could hardly be otherwise, since Wickham has never hidden his conviction about the usefulness of the more classical Marxist historiographical tradition and its insistence on the primacy—though not the exclusivity or determinism—of material explanations, especially when compared with the favorite themes of the cultural turn. Paradoxically, this is a point of contact between that Marxist tradition and mainstream economists like me, who also assign a place of preeminence to factors such as technology and the institutions it creates in the development of societies (this is an argument I developed more calmly in a post on G. A. Cohen many years ago). As a friend of mine says, ironically but with some truth, we neoclassical economists are right-wing Marxists. And as such, we have much to learn from Wickham’s work. In particular, there is the central role played by fiscal structures in political forms and in their evolution over time. For Wickham, it is above all the collapse of the fiscal capacity once enjoyed by the old Roman Empire in the West that explains the weakness of its successor states during the first centuries of the Middle Ages. Without fiscal capacity, one cannot finance a standing army or an efficient administration; and without these two instruments of power, political structures eventually fracture. The only way to finance military activity without taxes on land or on the (minimal) trade that existed is to grant land to nobles and knights in exchange for military service. Although the feudal revolution of the eleventh century (which, despite recent historiographical advances and the qualifications they have introduced into older conceptions, Wickham still regards as a useful interpretive framework) was not inevitable, it was a very likely consequence of early medieval land politics. As Wickham reminds us, Marc Bloch was the author who most eloquently explained that this policy of financing states by handing land to elites is inherently unstable: the more land a sovereign grants in order to build a winning coalition among the elites, the less land remains to distribute as future payments and, therefore, the more difficult it becomes to maintain the stability of the coalition. To illustrate the power of this argument, Wickham recounts what happens in those parts of the Roman Empire where fiscal capacity does not collapse and which today we anachronistically call the Byzantine Empire (its inhabitants always called themselves Rhōmaîoi, or Romans in Greek). The continuities in political, economic, and ideological structures with late antiquity are far stronger than in the West and, with them, the future of these societies would be very different. In two chapters central to the book’s argument (3: “Crisis and Transformation in the East, 500–850” and 9: “1204: The Failure of Alternatives”), Wickham insists on the crucial need to understand Byzantium and its successor states (the caliphates and the Ottoman Empire) in order to understand what happens in western and northern Europe. Counterintuitively, there is much more that is “Roman” in the domains of Mehmed II than in Tudor England, Valois France, or Trastámara Castile. To reinforce this idea, the book goes on to explain how only the slow and gradual reconstruction of fiscal capacity makes possible the emergence of organizations such as the kingdoms of England, France, and Castile that I mentioned in the previous paragraph and that would shape the centuries to come. But these kingdoms are very different creatures from Rome, Byzantium, or even the Merovingian and Ottonian states. They are experiments in government in which the consent of an important part of society (lords, urban elites, ecclesiastical potentates, and often relatively modest landowners) is indispensable to the exercise of fiscal power. And this consent would crystallize, to a large extent, through parliaments. These parliaments are an institution without parallel anywhere else in the world. They probably appear first in Spain, with the Cortes of Alfonso IX of León in 1188, as a combination of monarchical weakness and fiscal necessity. Their key feature, which Wickham perhaps does not emphasize enough, is their own legal personality. This legal form—so important in a Europe rediscovering classical Roman law as a central organizational technology—makes them radically different, in both their legitimacy and their persistence over time, from the old Germanic assemblies so common in Merovingian Europe and from the royal councils that rulers have had throughout history. The conflicts between kings and parliaments would become a fundamental axis of European history until the ultimate victory of the latter, sometimes concealed beneath other garb, centuries later. But already in the thirteenth century we see, especially in England, the idea that the oligarchy is fundamentally involved as a co-director of public life, in forms, practices, and understandings that do not exist in the Islamic world, India, or China in the same centuries. The reorganization of state power during the twelfth and thirteenth centuries thus appears not in opposition to the cellular structure of European politics, but as a counterweight to it. More powerful states sharpen the need of lords, cities, the Church, and even peasants to defend their own spheres of action, thereby creating a social dynamism whose long-run consequences would be incalculable (however often Wickham repeats, somewhat half-heartedly, that he does not want to cross the Rubicon into such a triumphalist interpretation). The best example of this idea is England. It is no accident that England is probably the best-organized state in medieval Western Europe (the famous 14.5 kilograms of wax used every week to seal letters in the English chancery in the mid-thirteenth century) and, at the same time, the state in which a relatively broad oligarchy has most systematically penetrated the co-direction of public affairs. Parliament and the Common Law—as Dicey explained to us decades ago—popular sovereignty (or, at this point, elite sovereignty) in Parliament and the effective rule of law embodied in the Common Law do not contradict one another, as superficial commentators so often claim; they reinforce one another. There is no Henry III without Henry II, numerically or conceptually. But—and this is a road Wickham does not want to travel either, though I am quite willing to explore it—it is also no accident that England is the birthplace of the Industrial Revolution. If there is one thing we have learned from the recent and vibrant literature on state capacity, it is that state power and markets are not opposites in the process of economic growth (an interesting and comprehensive survey of the literature appears here, by Noel Johnson and @MarkKoyama; Mark, incidentally, is very critical here of some of Wickham’s interpretations of the economic evolution of late antiquity). Far from being substitutes, as is too often argued in a thoroughly ahistorical way from both sides of the political debate, states and markets complement one another, sometimes in subtle ways. Growth emerges when states can provide defense against society’s external and internal enemies; when states ensure that the rule of law is supreme (including, in a substantive conception of the rule of law, respect for property rights); when states create an integrated internal market; when states build infrastructure (or make its construction possible); when states provide education (or ensure its provision); when states create the conditions under which financial markets can function. All of this costs money—a lot of it. In eighteenth-century England, perhaps around 10 percentage points of GDP in tax revenue. Today, at least 20; and if we include social transfers, which redistribute risks that markets often cannot insure because of asymmetric information and without which society could not function properly, probably 30 or 35 points. England does not grow in the eighteenth century because property rights were particularly well protected. It grows because, compared with France, the Parliament born of the Glorious Revolution of 1688 can create the Bank of England, finance the battle fleet, impose land enclosures, or force the construction of railways against the opposition of localities that the railways will drag out of their backwardness. The road to Manchester’s cotton mills runs through the hills of Blenheim: there is no James Watt without a John Churchill. At the same time, the historical evidence is crystal clear that when states try not to complement markets but to replace them, the result is disastrous. Strong states create internal markets in which automobiles can be sold; substitutionist states want to build automobiles themselves. Worse, by trying to do what they cannot do well, far from strengthening state power, they paralyze it through constant struggles among dozens of pressure groups over the rents created by state activity. We need only look at the modern states of Europe. Is Spain a strong state? It is certainly a large state, but not one capable of stopping constant regulatory capture, ensuring the unity of its internal market, or providing a high-quality education. Robust property rights require a powerful power of eminent domain, but a powerful power of eminent domain can succeed only alongside robust property rights. At present, we have neither. I imagine these are not the conclusions Wickham himself would draw from his book, and I am almost certain he would object to most of my inferences. My response, however, is that when one writes a book as magnificent as this one, one must be aware that the text takes on a life of its own, and that the conceptual avenues, interpretive frameworks, and cognitive structures of reference it reveals can take the reader to unexpected places. We are slaves to our own logics.

Two lines of plausible significance in European historical development: 1) The Rhine-Danube line: Roman empire's northern border which closely tracked those two rivers 2) The Hajnal line (conceptual): European marriage pattern wherein women married late and many never married

Defense of Shanghai and Nanjing in 1937 wiped out Chiang’s most elite and loyal army divisions. His new army, painstakingly trained with German help, was “a decade in the making” and “the foundation of his independent power.” A major consequence was much diminished autonomy.