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NEW PERSPECTIVES
ON THE HISTORY OF
POLITICAL ECONOMY

Edited by
Robert Fredona and
Sophus A. Reinert
New Perspectives on the History
of Political Economy
Robert Fredona · Sophus A. Reinert
Editors

New Perspectives
on the History of
Political Economy
Editors
Robert Fredona Sophus A. Reinert
Harvard Business School Harvard Business School
Boston, MA, USA Boston, MA, USA

ISBN 978-3-319-58246-7 ISBN 978-3-319-58247-4 (eBook)


https://doi.org/10.1007/978-3-319-58247-4

Library of Congress Control Number: 2017943663

© The Editor(s) (if applicable) and The Author(s) 2018


This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse
of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by
similar or dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, express or implied, with respect to the material contained herein
or for any errors or omissions that may have been made. The publisher remains neutral with regard to
jurisdictional claims in published maps and institutional affiliations.

Cover credit: © Photo 12/Contributor/Getty Images

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature


The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Contents

Introduction: History and Political Economy xi


Robert Fredona and Sophus A. Reinert

Genoa, Liguria, and the Regional Development


of Medieval Public Debt 1
Jeffrey Miner

Angelo degli Ubaldi and the Gulf of the Venetians: Custom,


Commerce, and the Control of the Sea Before Grotius 29
Robert Fredona

Capitalism and the Special Economic Zone, 1590–2014 75


Corey Tazzara

Theatrum Œconomicum: Anders Berch and the


Dramatization of the Swedish Improvement Discourse 103
Carl Wennerlind

v
vi   Contents

Gulliver’s Travels, Party Politics, and Empire 131


Steve Pincus

Commerce, not Conquest: Political Economic


Thought in the French Indies Company, 1719–1769 171
John Shovlin

The Economics of the Antipodes: French Naval Exploration,


Trade, and Empire in the Eighteenth Century 203
Arnaud Orain

A “Surreptitious Introduction”: Opium Smuggling


and Colonial State Formation in Late Nineteenth-Century
Bengal and Burma 233
Diana Kim

A Place in the Sun: Rethinking the Political Economy


of German Overseas Expansion and Navalism Before
the Great War 253
Erik Grimmer-Solem

Wesley Mitchell’s Business Cycles After 100 Years 289


Walter A. Friedman

On a Certain Blindness in Economic Theory: Keynes’s


Giraffes and the Ordinary Textuality of Economic Ideas 319
C.N. Biltoft

Between Economic Planning and Market Competition:


Institutional Law and Economics in the US 349
Laura Phillips Sawyer
Contents   vii

Punishment, Political Economy, and the Genealogy


of Morals 375
Bernard E. Harcourt

Epilogue 393

Index 399
Editors and Contributors

About the Editors

Robert Fredona is a Research Associate at Harvard Business School, USA,


and an Associated Member of the Centre for Evolution of Global Business and
Institutions at the York Management School, UK. Robert is interested in the
intersection of law, politics, and commerce in the pre-modern world.

Sophus A. Reinert is Marvin Bower Associate Professor of Business


Administration in the Business, Government, and the International Economy
Unit at Harvard Business School, USA. A student of political economy, Sophus
works on the long histories of capitalism, globalization, development, and busi-
ness-government relations from the Renaissance to today’s emerging markets.

Contributors

C.N. Biltoft Graduate Institute, Geneva, Switzerland


Robert Fredona Harvard Business School, Boston, USA
Walter A. Friedman Harvard Business School, Boston, USA

ix
x   Editors and Contributors

Erik Grimmer-Solem Wesleyan University, Middletown, USA


Bernard E. Harcourt Columbia University, New York, USA
Diana Kim Edmund A. Walsh School of Foreign Service, Georgetown
University, Washington, USA
Jeffrey Miner Western Kentucky University, Bowling Green, USA
Arnaud Orain University of Paris 8, Paris, France
Laura Phillips Sawyer Harvard Business School, Boston, USA
Steve Pincus Yale University, New Haven, USA
John Shovlin New York University, New York, USA
Corey Tazzara Scripps College, Claremont, USA
Carl Wennerlind Barnard College, Columbia University, New York,
USA
Introduction: History and Political
Economy
Robert Fredona and Sophus A. Reinert

The first decade of the twenty-first century, bookended by the terror-


ist attacks of 9/11 and by a global financial crisis with aftershocks still
resonating throughout the world, witnessed the clamorous and urgent
return of both “the political” and “the economic” to historiographical
debates. For some, this return could not have come sooner. Economics
(both academic and “popular”) had, many argued, largely embraced
increasingly abstract formal methods in the preceding decades. So much
so that one economic historian could recently argue that

the debate about the role of mathematics in economic theory can hardly
be said to be of much significance in the modern literature, since there are
no longer any leading economists who believe that academic economics
can be a nonmathematical discipline.1

Yet, even if this debate is truly closed, an unanswered question


remains: is mathematics enough? Whatever their role within econom-
ics as an academic field, these deracinated methods, for intrinsic but
also complex sociological and political reasons, have tended to buttress
clusters of interrelated ideological programs and proposals favoring

xi
xii   Introduction: History and Political Economy

laissez-faire policies and their global institutionalization. And these poli-


cies, associated with the so-called “Washington Consensus‚” had been
implemented with decidedly varying results.2 At the same time, the
historical profession—ideally well positioned to provide realist ground-
ing for theoretical extremes—undertook (or fell under the sway of ) its
“cultural turn‚” generally leaving historical economic analysis behind
and relegating it to an arid subfield of economics in the academic estab-
lishment.3 The sheer consequentiality of subsequent events, and what
many—including, remarkably, even the rather partial The Economist
magazine [Fig. 1]—have seen as the manifest crisis of economic theory
as such, reopened the eyes of scholars and laymen alike to the need for
a more historical (or at least more historically aware) approach to eco-
nomic phenomena.4 And, although far from moribund, the so-called
“free trade” paradigm in Anglo-American economic thought on the one
hand and the wider dominance of cultural concerns in the academic
study of history on the other are at last beginning to fragment. As the
cracks and fissures in their foundations continue to grow, it is becoming
more important than ever to rethink the historical role of politics (and,
indeed, of government) in business, economic production, (re)distribu-
tion, and exchange, not to mention in the complex array of processes
brought together under the umbrella of globalization.5 Indeed, although
career prospects for young historians remain challenging at best, leading
universities are increasingly hiring scholars working on “the history of
political economy” in addition to “the history of capitalism‚” elevating
the historical analysis of economic ideas and practices to new heights.6
To be blunt, “political economy” has again become something of an
academic catchphrase, and it is now seen to offer an important vantage
point on the turmoil of our time.
Introduction: History and Political Economy   xiii

Fig. 1  The Economist, July 18–24, 2009. Jon Berkeley for The Economist

New Perspectives on the History of Political Economy contributes to


this resurgent historiography and suggests new avenues and agendas
for research on the political-economic nexus as it has developed in the
Western world since the end of the Middle Ages. Far from procrustean,
xiv   Introduction: History and Political Economy

the volume brings together purposefully selected young and estab-


lished scholars from a wide variety of disciplinary backgrounds—his-
tory, economics, law, and political science—in an effort to continue
the ongoing reconceptualization of the origins and history of political
economy through a variety of still largely distinct but complementary
approaches—legal and intellectual, literary and philosophical, politi-
cal and economic—and from a variety of related perspectives: debt and
state finance, tariffs and tax policy, the encouragement and discourage-
ment of trade, accounting and bookkeeping, merchant communities
and companies, smuggling and illicit trades, mercantile and colonial
systems, empires and special economic zones, economic cultures, and
the history of doctrines more traditionally construed.
There are, of course, many ways of engaging with the history of polit-
ical economy, and it is purposefully not our wish to suggest that there
are right and wrong ways of so doing: Herodotus’ house can, happily, be
as vast and sprawling as Borges’ “Library of Babel.” Historiographically
speaking, it seems important to us, not only given recent trends but
also recent events, to purposefully encourage a widening of historical
perspectives. There is a time for tightly focalized volumes, surely, but
an argument can now be made for broader temporal approaches and
looser disciplinary boundaries. Though such an approach may lose
something in the way of coherence, this is, we believe, a price worth
paying when the ultimate dividend is a richness of detail and variety
of insight unlikely if not impossible inside the “box” of strict chrono-
logical and essentialist disciplinary bounds. As varied as they are, all of
the essays in this volume nonetheless share some crucial points of con-
vergence and the area of conceptual overlap is greater than the areas of
disparateness. And John Maynard Keynes was right, during the Great
Depression that marked the end of the last major period of laissez-
faire globalization, to warn against “the silliness of the doctrinaire.”7
That said, different approaches to the history of political economy
serve divergent purposes, inviting different possibilities and challenges
alike. As many have pointed out before, historians of economic analysis
have frequently pursued internalized economic genealogies, essentially
approaching the history of economics from the perspective of con-
temporary theory.8 Though the influence of the history of science and
Introduction: History and Political Economy   xv

other traditions has certainly broadened the historiography of econom-


ics in recent years, it remains that the history of economic analysis has
often been approached as a purely intellectualized trajectory from ana-
lytical falsity to truth.9 Mark Blaug, after all, called his major work
Economic Theory in Retrospect, and even as erudite and wide-ranging a
scholar as the MIT economist Paul Samuelson gave a keynote lecture to
the History of Economics Society towards the end of the Cold War in
which he forcefully argued that the

history of economics [should] more purposefully reorient itself towards


studying the past from the standpoint of the present state of economic
science. To use a pejorative word unpejoratively, I am suggesting a Whig
Economic History of Economic Analysis.10

As Sir William J. Ashley, something of a British envoy of the German


Historical School of Economics almost a century earlier, memorably
opined of such methods, they ran the risk of making the history of eco-
nomics little but “a museum of intellectual odds and ends, where every
opinion is labelled as either a surprising anticipation of the correct mod-
ern theory or an instance of the extraordinary folly of the dark ages.”11
Quentin Skinner has rightly argued that such intellectual endeavors can
be “labelled the mythology of prolepsis, the type of mythology we are
prone to generate when we are more interested in the retrospective sig-
nificance of a given episode than in its meaning for the agent of the
time.”12 Such proleptic thinking is at best idealistic (in the philosophi-
cal sense) and at worst hopelessly anachronistic, so we might be wise
to always keep in mind the historian Carlo Ginzburg’s obiter dictum
that anticipations (or precorrimenti as they are called in Italian) should
always be interpreted as questions rather than answers.13
The essays that follow are preponderantly externalizing rather than
internalizing, and if at times they do explore the “odds and ends” of
the historical record, they uniformly do so to understand rather than to
pass judgment. Beyond these caveats, however, the internalist approach,
which of course can be illuminating and which to this day has many
brilliant followers, risks being dismissive of the real causes as well as
consequences of past political economy almost by default, particularly
xvi   Introduction: History and Political Economy

as born from or applied in policy.14 Uniquely vulnerable to charges of


anachronism, as we have suggested, the method furthermore courts tele-
ology; it risks, in other words, completely losing hold of the very histor-
ical axis it purportedly seeks to embrace.15 Even the Austrian Harvard
economist Joseph A. Schumpeter, whose seminal History of Economic
Analysis in many ways remains unsurpassed, could be quick to dismiss
a long dead economist who did not pass his theoretical muster as owing
“his survival” merely to the refutations of a more famous thinker, com-
pletely ignoring that the “bad” theories in question might have had
unfortunate consequences.16 That was simply not his interest, though
there are good reasons to argue it should be ours.
Of course economic ideas often have had disastrous effects on people
when translated into policy, from François Quesnay’s failed physiocratic
reforms in eighteenth-century France all the way through Stalinist com-
munism to the famous “flaw” Alan Greenspan identified in his approach
to regulation that allowed the 2008 financial crisis to occur and the
ways in which tentative (and miscalculated) connections between public
debt and low economic growth were used to justify austerity measures
in its wake, by some accounts negatively influencing the lives of quite
literally hundreds of millions of people.17 This lattermost was, perhaps,
a moment when in the face of uncertain equilibria it would have been
humane to remember (and not only figuratively) Oscar Wilde’s admoni-
tion that “to recommend thrift to the poor is both grotesque and insult-
ing. It is like advising a man who is starving to eat less.”18 Indeed, as
several of the following essays point out, we may have just as much to
learn from the history of “bad” political economy as we do from chart-
ing the genealogies of currently fashionable ideas, and quite possibly
much more. Such studies may point to the quintessentially contingent
and political nature of much economic thinking, and, as the Columbia
economist Joseph Dorfman long ago put it,

since in the final analysis men’s minds may be read most clearly in their
actions, the practical ambitions and political interests of the molders of
economic thought must constantly be kept in view by those who seek to
understand what successive generations have put into the public record.19
Introduction: History and Political Economy   xvii

An openness to the variety of approaches and justifications currently


characterizing the history of political economy, and a rejection of the
theoretical dogmatism that has characterized much thinking about eco-
nomic matters and their history in recent decades does not mean the
volume completely lacks a central coherence. Instead, the contributors
different approaches represent complementary perspectives on some
of the central questions of economic and political life, and particularly
so regarding the nature, legitimation, contention, and neutralization
of power in a world increasingly driven by economic concerns. From
Jeffrey Miner’s opening chapter on Medieval Genoese debates regard-
ing public debt to Erik Grimmer Solem’s analysis of Germany’s violent
call for a “place in the sun” on the eve of the Great War and Bernard
Harcourt’s exploration of the genealogy of morals in the history of
political economy, the chapters offer compelling alternate narratives of
power—economic, political, military, territorial, and cultural—as they
relate to the theories and practices of political economy in the period
since economic matters first became a question of political survival.
Since, in the Scottish philosopher David Hume’s celebrated phraseol-
ogy, “trade” first became “an affair of state.”20
For Hume that moment occurred in the seventeenth century, and he
was confounded by the lack of engagement with trade by political writ-
ers in antiquity and among the “Italians.”21 We to the contrary suspect
that trade has been inextricably and momentously linked with politics
from the beginnings of recorded history, but privilege two historical
moments in Europe, the height of the so-called “commercial revolution”
of the late Middle Ages and the “Economic Turn” of the mid-eighteenth
century, which saw an explosion of printed texts and translations of a
political-economic character and which quantitatively and qualitatively
changed the scale of political-economic discussions.22 All told, trade’s
life-or-death centrality to “the state” seems as old as the state itself, how-
ever we choose to understand that term. Pierre Bourdieu’s understand-
ing of the genesis of the (modern) state as a process of the accumulation
or concentration of different species of “capital” is especially compel-
ling, but where Bourdieu sees taxation and levies at the heart of the
“economic capital” subsumed by the emergent state, we prefer to look
xviii   Introduction: History and Political Economy

at the ways the state managed commerce, giving (through privileges and
protection) as much as taking, or even liberated it.23
Financial and corporate structures in the European world developed
alongside governmental ones, and the story of the origins of political
economy is not a one-sided one, in which states or proto-states simply
regulated production and trade. Nor is it a teleological one, with the
neoliberal internationalist state waiting for us at the end. Rather, it is a
dynamic and contentious story in which the power of creditors and of
capital, and of economic ideas and practices, shaped and were shaped
by political communities. It is, in short, the story of wealth and power
in the West and the world it often violently created; of how human
beings thought about, grappled with, and overcame material hardship;
organized their political and economic communities, and struggled for
dominance on an increasingly larger global stage. With the rise of China
as an economic superpower, “state capitalism” has rushed to the center
of the economic discourse.24 But this is nothing new—the history of
state capitalism, of truly political economy, is also the history of the
global hegemony of the West over the past 700 years as well as of the
rise of the proverbial rest.25 We maintain that a good way of gaining
greater clarity with regards to this vital history—its manifest successes
and egregious limitations—is to examine the intricate ways in which
politico-economic ideas and practice intertwined in the city-states of
late medieval Italy as much as in the oceanic empires that birthed the
vexed geopolitical world in which we live. In fact, the essays contained
in this volume help tell precisely this story, through snapshots from a
truly global array of individuals, business enterprises, states, empires,
and from the idealized domain of theories themselves.
In his classic American Capitalism (1952), John Kenneth Galbraith
presented a suggestive theory of “countervailing powers” in market socie-
ties, arguing that the United States had ceased to be (if it ever had been)
a perfectly competitive market because of oligopolistic business prac-
tices, suggesting a solution in the countervailing influences of corpora-
tions, states, and trade unions.26 These would be the de facto building
blocks of much subsequent historiography, even in fields and for peri-
ods far distant from Galbraith’s own, to the extent that they eventually
came to be taken for granted: the world was made up of firms, states, and
Introduction: History and Political Economy   xix

workers.27 Today, however, these categories of analysis are increasingly


being questioned and indeed exploded, allowing for the reconstruction
of a far richer—and more nuanced—history of power in which an array
of state and non-state actors, not to mention theories, dogmas, and ide-
ologies, vie for supremacy in a world characterized by relentless economic
competition. The fact that something close to the Weberian “State” for
a time gained a near monopoly on the legitimacy of power should, as
many of the following essays make clear, not blind us to the contentious
process that gave birth to our world, the many sources of its regulation,
or the continuing relevance of non-state and trans-state power in shap-
ing it.28 The state, then, need not be the central actor in a sophisticated
history of political economy, and perhaps, some day in the future, glanc-
ing at the grim outlines of international capital in a world of diminished
nation-states and diminished discourses of legitimacy, one redolent of
an earlier and formative age, we can begin to sketch a new and compel-
ling metaphor for power, one that is plural where the state is singular: as
Herman Melville wrote to Nathaniel Hawthorne, “Leviathan is not the
biggest fish;—I have heard of Krakens.”29
For the sake of clarity, it must be said that this volume’s use of the
term “political economy” does not reflect current sectarian uses of it,
whether by Marxists or by Chicago-school public choice theorists.30
Rather, it is a conscious resurrection of “political economy” in its origi-
nal designation and a glimpse at its prehistory (and perhaps future).
Adam Smith famously defined the discipline as a “branch of the sci-
ence of a statesman or legislator” in his 1776 Inquiry into the Nature
and Causes of the Wealth of Nations, forever linking politics, economics,
and law to the legitimacy of power.31 The term ‘legitimate’ is related to
the Latin legitimus, or “lawful‚” itself in turn emerging from the etymo-
logical varieties of “law‚” meaning “rule‚” perhaps in the earliest instance
derived from Proto-Germanic or Indo-European roots signifying “put-
ting” or “laying.” So fitting is the widespread historical phraseology of
“giving” or “laying down the law” as a metaphor for conquest and a way
of conceptualizing hierarchies of power in a variety of contexts from the
commercial to the cultural. Linguistically speaking, then, law is power,
and political economy was long considered its pre-eminent “science.”32
xx   Introduction: History and Political Economy

The questions posed, in a variety of ways, by the contributors to this


volume regard the nature, legality, and consequences of such power in
historical time, as well as attempts to navigate, manage, project, usurp,
and neutralize it. Needless to say, this process is, and must be, ongo-
ing, but the intellectual history of such political economy is a topic too
important to be left to policy makers and economists unaware of this
past. This raises, however obliquely, the perennial questions of inten-
tionality and relevance in—and of—the history of political economy.
On the one hand, historians find themselves scrambling for “relevance”
in the face of the proverbial “crisis of the humanities‚” and have, per-
haps naturally, turned to the histories of capitalism and political econ-
omy en masse in the wake of the 2008 financial meltdown, not unlike
how the study of economic history came into being and has since been
strengthened during previous periods of economic crisis—theoretical as
well as practical.33 On the other hand, many historians remain deeply
vexed by such calls for “relevance‚” the pressures of “presentism‚” and
their collateral danger of “anachronism.”34
We do not pretend to speak for the contributors to this volume,
and respect deeply their individual approaches and perspectives, but
we believe that their works—independently but particularly in con-
cert—simultaneously elucidate our complex past, clarify the problems
of the present, and adumbrate future concerns. As Skinner has argued,
“if they simply ply their trade‚” intellectual historians help “prevent
us from becoming too readily bewitched.”35 And bewitched we have
been. Yet we would venture to argue that, in the vast constellation of
the history of ideas, the past plays an even more organic and integral
role for the study of political economy than for many other intellec-
tual endeavors. Already at its very outset as an academic enterprise in
the eighteenth century, “history” was considered one of the principal
sources of authority in economic debates because it grounded theories
in what many might still consider the realm of “facts.”36 As Italy’s third
professor of political economy taught his students in the early 1770s,
“There is no better way of understanding the uses of a machine‚” in his
example the politics of the world economy, “than to observe the pro-
cess of its construction.”37 Similar sentiments have frequently resurfaced
in the labyrinthine history of the subject, and the Cambridge historian
Introduction: History and Political Economy   xxi

and political philosopher Istvan Hont, one of the principal architects of


the history of political economy over the past four decades, was utterly
unapologetic about writing “with eyes firmly fixed on the challenges of
today‚” justifying his work on the grounds that “the globalization debate
of the late twentieth and early twenty-first centuries lack[ed] conceptual
novelty.”38 To study the history of political economy was, in his opin-
ion, to engage with the principal political and economic questions of
the day; as he once asked, “why else would you do it?.”39 Nor by any
means was Hont the first to suggest this: “A careful study of economic
history,” wrote business historian Edmond E. Lincoln in the vexed early
years of the 1930s, “reveals surprisingly few new ‘problems’.”40 Even
Schumpeter himself, late in life, expressed hope that the historical study
of political economy would “result in a new wing being added to the
economist’s house.”41 Though it may be an architectural pipe dream, it
remains one worthy of our attention. For, since economics cannot but
be political, its history should be considered not merely a foil against
bewitchment but the ballast of its very endeavor.42
There can be no doubt that we find ourselves now at a proverbial
crossroads of capitalism, and that many central assumptions regarding
the nature, purpose, and future of political economy are being actively
rethought across the world.43 Whether with respect to long-term
dynamics, like the recent peaking of international trade and subsequent
decline of aggregate trade flows, or to singular yet momentous events
such as Britain’s decision by popular referendum to leave the European
Union and the election of Donald Trump to the US Presidency—
symptoms and causes of what some have come to call “the Rage of
2016”—everything suggests we are living through a period of long
unprecedented change as neglected economic forces, which scientism
failed to identify and address, trigger surprising political results with real
and widespread social consequences.44 Yet this is hardly the first time we
find ourselves in this position, nor, bar the direst of recent predictions
coming to pass, will it be the last.45
In a classic study of the history of economic thought, the economist
and economic historian William J. Barber proudly proclaimed that “few
things on this earth approach immortality so closely as a taut set of eco-
nomic ideas.”46 When we are no longer so certain about the certainties,
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1898)
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