A. Gerschenkron, ‘The Approach to European Industrialization: A Postscript’, in Economic Backwardness in Historical Perspective (USA: Harvard University Press, 1962) pp 353-364

[page 353] Europe in the 19thC was a continent in which many different states were at many different states of backwardness. The degree of backwardness had a distinct impact on the way in which the state developed economically. The variations in the course and character of their industrialisation can be surmised in six propositions.

  1. “The more backwards a country’s economy, the more likely was its industrial8isation to start discontinuously as a sudden great spurt proceeding at a relatively high rate of growth of manufacturing output.
  2. [354] The more backwards a country’s economy, the more pronounced was the stress in its industrialisation on bigness of both plant and enterprise.
  3. The more backwards a country’s economy, the greater was the stress upon a country’s stress on producers’ goods as against consumers’ goods.
  4. The more backwards a country’s economy, the heavier was the pressure upon the level of consumption of the population.
  5. The more backwards a country’s economy, the greater was the part played by special institutional  factors designed to increase supply of capital to the nascent industries and, in addition, to provide them with less decentralised and better informed entrepreneurial guidance; the more backwards the country, the more pronounced was the coerciveness and comprehensiveness of these factors.
  6. The more backwards a country, the less likely was its agriculture to play any active role by offering to the growing industries the advantages of an expanding industrial market based in turn on the rising productivity of agricultural labour.”

The countries of Europe could roughly be split up into three groups, advanced, moderately backwards and very backwards. Although not a discrete scale, the effects of number 5 can be seen in qualitative differences in industrialisation.

[355] In moderately backwards countries Factories were directed with banks towards capital and entrepreneurial guidance; in very backwards countries they were directed by banks and the state.

[356] There are historical similarities across all successful industrialisations. England is like Germany is like Russia. But there are big differences which are important to examine. In moderately backwards Germany capital was directed by banks whereas in very backwards Russia the state played a large role in directing capital.

Certain things are held to be essential for industrialisation; the abolition of archaic modes of agricultural production with a concomitant increase in productivity; the creation of an influential elite materially or ideologically interested in economic change; the necessary social capital in an area’s residents; a value system favouring entrepreneurial endeavour. [357] However, there are considerable conceptual and empirical problems with a simplistic modernisation story of industrialisation.

It is difficult to say whether certain preconditions are in fact necessary for industrialisation to occur. Industrialisation may have begun in Russia even without the abolition of serfdom, for example, yet it is commonly held that the end of serfdom was a necessary condition for the onset of industrialisation.

Just because something was necessary for industrialisation in one country, for example England, it does not mean it is necessary for industrialisation in all countries. Empirically this is true, either the preconditions for English industrialisations were not present in late industrialisers or were present to a very small extent.

[358] Therefore, to some extent countries substituted for these missing preconditions, as described in point 5 above. Capital for enterprise in advanced countries could have been provided by previously accumulated wealth, in backwards countries banks and states created similar conditions in the course of industrialisation which were not present because of their backwardness. [359] This substitution was not necessarily a conscious substitution; people groped for effective methods and substitutions were created as needed.

Gerschenkron’s approach allows him to “predict” what he expects to find, and give him the ability to test his theory. He looked Italian industrialisation, where as a moderately backwards country he expected to find banks playing a central role in the process, he did indeed find banks playing a central process in Italy’s industrialisation. This method of industrialisation was imported from Germany where it had already proved successful.

[360] Gerschenkron’s work is an attempt to explain the deviations from England’s method of industrialisation. It uses the degree of backwardness as an organising concept. Russia’s industrial structure was shaped by its backwardsness, it focussed on capital goods because it had to import much productive technology and because technological development in the immediately preceding period had been more focussed on capital goods. [361] However, as well as this economic factor, capital goods were favoured for political reasons, for improving the Russian states backwards war making apparatus.

[362] The Bulgarian experience, which saw no industrial take off, shows us that lacking the correct institutions it is possible to miss out on industrialisation. [353]There are advantages to backwardness because the stock of knowledge on which can be drawn increases, but there are also disadvantages and it is easy to miss the opportune moment for industrialisation as Italy did.

[364] The degree of backwardness may not be the defining characteristic of how a country will industrialise, but it remains a very useful  conceptual tool.

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About Left Outside
I blog, I drink, I study at the LSE, I work at a wine shop.

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