The provision of capital is generally recognized to be one of the main problems of countries undergoing the process of industrialization. This is true also of the special case of Great Britain, the first country to experience an industrial revolution. In the British case, however, it is important to note that much capital had been accumulated even before the 1760's, the decade when industrial growth began to accelerate and to change its direction. Most of this earlier capital was invested in commerce, in finance, in farming, and in stocks of manufactured goods and raw materials, and what was noteworthy in the next two generations was, not so much the absolute (and probably also relative) growth in the quantity of capital, but a change in its composition: the emergence, for the first time, of large concentrations of fixed capital.

Geographers and city planners, endeavoring to explain or foretell changes in urban population, sometimes use an approach called basic-nonbasic. A basic factor is one which brings in money from outside of the city and which usually sells its products beyond the city limits. The nonbasic factor furnishes services and supplies to the city. Thus a factory would normally be a basic factor, while grocery stores, barber shops, and similar institutions, together with most professional groups, would be nonbasic. A factory employing a thousand workmen would add to the city not merely the workmen's families but about an equal group of nonbasic families, perhaps a total of six or seven thousand persons. This concept is a very useful one in modern society and is worth testing for its possibilities for medieval settlements.

In developing the subject of this paper, “American Economic Growth before 1840,” I shall, relying for the most part on familiar materials, propose the hypothesis that economic growth per capita in the thirteen colonies of Britain in America advanced at a relatively rapid rate from about 1710 to 1775.1 shall also suggest that the level of living remained relatively low in these colonies as late as about 1710 and that for the new nation output per capita over the years 1775 to 1840 improved slowly if at all.

If one views economic development as the purposeful management of resources through time, an action program must perforce concern itself with utilizing natural resources as fully as possible; with improving the quality and effectiveness of the present and the future supply of human resources; and with changing and perfecting the technological processes whereby natural and human resources are combined. The keys that can open the treasures of economic progress are therefore forged in the schoolroom, the laboratory, the inventor's shop, and the research institute. We take this for granted today because the burgeoning teaching and research apparatus is now much more evident in a physical, financial, and workforce sense than in any previous context. But the difference between our era and earlier experiences with economic development is not absolute; in the past as in the present, whenever economic progress quickened it was a consequence of new insights and a new knowledge, of novelty in thought and action, in short, it was the usufruct of an educational awakening.

According to W. W. Rostow, “the introduction of the railroad has been historically the most powerful single initiator of take-offs,” having “three major kinds of impact on economic growth during the take-off period,” namely, lowering transport costs and bringing new areas and products into the market; developing a major new export sector; and leading on to the development of modern coal, iron, and engineering industries. But though all these three can be traced in mid-nineteenth-century Britain, the railways are not accorded the role of initiator in that country since, in the Rostow schema, the take-off had already occurred before the invention of the locomotive. The size of the investment in Britain's railways is such, however, that it is worth examining their impact, even if this was not so overwhelming as in some other countries.

The honorable program chairman has appended to my paper a title I had not entirely foreseen, and this drove me to modify my line to some extent. I had toyed with the idea of taking a long look at a short period in the fifteenth century, when the Genoese did all they could to adjust to shrinking opportunities and to find new markets in the place of those they were losing. This will still take about one half of my time, if only because it dovetails with the paper of Harry Miskimin. But if Genoa has to be considered as a test case for market expansion, we cannot restrict ourselves to the years when the going was not so good.

Critical readers of The Public Lands. Studies in the History of the Public Domain, edited by Vernon Carstensen, whatever the merits of its other features, cannot but be struck by the fact that separate charts showing interest in the public lands—as evidenced first by income from sales and second by the total of land entries in acreage—differ so widely. One explanation for some of the difference is that Arthur H. Cole, in compiling the data for the charts showing income from sales, seems to have used the calendar year, whereas the chart showing original land entries is based on the data for the government fiscal year. Another difficulty is that the Cole chart is prepared from manuscript schedules in the old General Land Office and they do not coincide with the published data in the Annual Reports of that office.

Never in history has man successfully invented a device, an instrument, a machine, or a structure without creating a demand for performance far beyond the capacity of the original design. The acceptance of an innovation starts a continuous stream of improvements in the product or in its manufacture that leads to larger, more powerful, or more efficient models; and the widespread diffusion of a product almost automatically implies the evolution of a broad range in the dimensions of serviceability. The increase in the size of the product is an important aspect of industrial growth. At the beginning of the nineteenth century, very few sailing vessels of 300 tons were produced in American shipyards. When the clipper ships were finally outmoded, the largest were at least ten times that size. The first American-made steam engines before 1810 included some that were large for the time, around 100 horsepower. By 1865, engines of 1,000 horsepower were in use, and by 1880 the size had been increased to 4,000 horsepower.

The general sentiment of Congress toward resumption of specie payments had become more and more desultory, not to say negative, during the early part of the 1870's. Nevertheless, the Resumption Act was passed in 1875, and resumption of specie payments at the pre-Civil War parity occurred on schedule in 1879. Observers have slighted this incongruity. Passage of the Resumption Act has come to be regarded as a true reflection of Victorian sentiment; ultimate resumption in 1879 was the proof of the pudding.2 What seems to have been lost in this rationalization of cause and effect is the generally unfavorable light in which resumption was being viewed in the middle 1870's, the alternatives that were available in lieu of resumption, and some of the forces of “immorality” that made these alternatives attractive.

The revolution of 1848, by ending the system of serfdom, had created the basic conditions of Hungary's industrialization; however, since the revolution had remained incomplete and the War of Independence had been lost, the ensuing suppression by Austrian absolutism and the considerable feudal survivals proved a strong barrier to the way of social and economic progress. The Austro-Hungarian monarchy, a product of the Compromise of 1867, offered somewhat more favorable conditions for economic development. Nevertheless, the structure of the dual monarchy kept Hungary's industrialization within rather narrow limits: the absence of independent statehood and the existence of a common customs area with Austria exposed the Hungarian market to devastating competition from Austria's more advanced manufacturing industry; and since these circumstances helped to consolidate the political and economic power of the large landowners, the capital accumulating within the country served above all the capitalist development of agriculture. So towards the end of the nineteenth century, nearly half a century after the bourgeois revolution, Hungary was still a wholly agrarian country whose major exports were foodstuffs and agricultural produce. The rapid development of manufacturing industry began as late as the last decade of the nineteenth century and continued until the beginning of World War I, over a span of some twenty-five years.

Spain ascended to dazzling heights in world affairs during the sixteenth century, thrust there by her political, military, and economic might. Until the seventeenth century began, her position seemed unassailable. Then, with agonizing helplessness, she slipped into a humiliating cycle of decline which persisted until only a shell of her greatness remained one hundred years later. Viewing Spain in such depths of misery, few observers could have guessed that her melancholy drift had ended when Charles II (1665–1700) died and Philip V (1700–1746) succeeded him in 1700. Yet as the Austrian lineage thus came to an end and the Bourbon dynasty began, Spain entered a new epoch marked by the unusually enlightened participation of government in Spanish economic affairs.

That the Black Death of 1348–1349 disrupted the economies of Europe during the later middle ages is not open to doubt. That the economic effects of the plague varied from sector to sector is perhaps equally indubitable. The diversity of its impact upon various economic sectors reveals itself both in contemporary evidence and in the fiery controversies generated by modern economic historians, each basing his argument on conflicting statistics or inferences drawn, often without careful regard, from disparate sectors. It is thus not accidental that even the most cursory review of the literature concerning the period after the plague will unearth a surprising lack of agreement among the specialists.

In an earlier article, I pleaded for a reappraisal of the Old Poor Law. Despite what all the books say, the evidence that we have does not suggest that the English Poor Law as it operated before its amendment in 1834 reduced the efficiency of agricultural workers, promoted population growth, lowered wages, depressed rents, destroyed yeomanry, and compounded the burden on ratepayers. Beyond this purely negative argument, I tried to show that the Old Poor Law was essentially a device for dealing with the problems of structural unemployment and substandard wages in the lagging rural sector of a rapidly growing but still underdeveloped economy. It constituted, so to speak, “a welfare state in miniature,” combining elements of wage-escalation, family allowances, unemployment compensation, and public works, all of which were administered and financed on a local level. Far from having an inhibitory effect, it probably contributed to economic expansion. At any rate, from the economic point of view, things were much the same after 1834 as before. The Poor Laws Amendment Act of 1834 marked a revolution in British social administration, but it left the structure of relief policy substantially unchanged.

If successful prediction were the sole criterion of the merit of a science, economics should long since have ceased to exist as a serious intellectual pursuit. Accurate prognosis is not its forte. The real strength of the discipline lies in another direction—namely, in its apparently limitless capacity to rationalize events after they happen. This helps explain the indifference of most economic theorists to “the lessons of history”; men to whom all things are possible have little to learn from experiments conducted in the laboratory of time. It also helps explain the indifference of most economic historians to abstract theory; what have they to learn from a subject that “yields no predictions, summarizes no empirical generalizations, provides no useful framework of analysis”?

In September 1928, two eminent economists with an interest in price history met and conversed at Hanover, New Hampshire: Sir William Beveridge and Edwin F. Gay. The former was Director of the London School of Economics and the latter, Professor of Economic History at Harvard University. For some time Sir William had been conducting research in medieval English manorial records and had already amassed data on price movements of English commodities. Moreover, he seems to have shared Gay's long-held views that broader research was needed to provide carefully selected and critically handled long homogeneous series of commodity prices and wages for a number of countries.

This paper is the latest contribution to the now considerable literature dealing with the putative depression in the later middle ages. In particular, Harry Miskimin's present monetary analysis is an extension of the recent exchange in the pages of the Economic History Review, involving him and his colleague, Robert Lopez, and their dissentient, Carlo Cipolla. The striking characteristic of this stimulating reconstruction is the reconciliation of some of the seemingly inconsistent or dissonant data adduced by previous writers. While every effort to clarify the operative factors and to establish cause and effect relationships in this disputed subject of Renaissance economic patterns is gratefully received, and while I personally am inclined toward the “depressionist” or at least “stagnationist” position in the current controversy, I am regretfully not entirely satisfied with the argument of this paper. My unease can be explained in part and, I would hope, will be communicated, by a few observations relating to the graphs which illustrate the text.