Home > neoclassical economics > Private property and capitalist industrialization

Private property and capitalist industrialization

from David Ruccio

Neoclassical economists fetishize certain institutions—especially the sanctity of private property—as the necessary conditions for economic development.

However, recent research suggests that Germany achieved capitalist industrialization not on the basis of private property but because of its absence.

Specifically, economic historian Eckhard Höffner argues that Germany caught up with England because it did not institute copyright law. 

Höffner has researched that early heyday of printed material in Germany and reached a surprising conclusion — unlike neighboring England and France, Germany experienced an unparalleled explosion of knowledge in the 19th century.

German authors during this period wrote ceaselessly. Around 14,000 new publications appeared in a single year in 1843. Measured against population numbers at the time, this reaches nearly today’s level. And although novels were published as well, the majority of the works were academic papers.

The situation in England was very different. “For the period of the Enlightenment and bourgeois emancipation, we see deplorable progress in Great Britain,” Höffner states.

Indeed, only 1,000 new works appeared annually in England at that time — 10 times fewer than in Germany — and this was not without consequences. Höffner believes it was the chronically weak book market that caused England, the colonial power, to fritter away its head start within the span of a century, while the underdeveloped agrarian state of Germany caught up rapidly, becoming an equally developed industrial nation by 1900.

Even more startling is the factor Höffner believes caused this development — in his view, it was none other than copyright law, which was established early in Great Britain, in 1710, that crippled the world of knowledge in the United Kingdom.

Germany, on the other hand, didn’t bother with the concept of copyright for a long time. Prussia, then by far Germany’s biggest state, introduced a copyright law in 1837, but Germany’s continued division into small states meant that it was hardly possible to enforce the law throughout the empire.

One by one, the cherished myths of neoclassical economics—of private property, free markets, and so on—are being dismantled by the reality of economic history and of the current crises.

  1. August 8, 2012 at 12:13 pm

    Very interesting, and your concluding position is similar to my impression Benjamin Franklin, who felt an individual’s idea was usually a result of social mingling and unfettered conversation.

  2. August 8, 2012 at 12:49 pm

    The dismantling of the neoclassical notion of supply is – and hence of the neoclassical notion of the law of supply and demand – and hence why there is no neoclassical notion of price formation, may be found in the paper “A Mathematical Demonstration of Why Neoclassical Theory is Wrong”, available at http://www.macroambiente.com.br/downloads/newdown/eng/mathematica_demonstration.pdf. Despite all the shortcomings neoclassical people must defend its microeconomics because it is necessary to support another fake idea – that the stock of money variation causes prices to vary.
    Gerson P. Lima

  3. Ulrik
    August 8, 2012 at 4:16 pm

    I think this only shows that “intellectual property” is a bad idea; not that private property of material goods is a bad idea.

    Copyright and patents are – patently! – stupid ideas, as should be clear to all by now, since it has been argued and demonstrated many times both theoretically and empirically.

  4. charlie thomas
    August 8, 2012 at 9:08 pm

    why are there no analyses of the extraordinary economic growth of China in comparison to other economies? isn’t that fact the absolute death knell for capitalist rationale for economic prosperity?

    • Garrett Connelly
      August 9, 2012 at 11:34 am

      China is State capitalism practicing dominion over the earth. The resulting rapid growth and planetary destruction exactly mirrors other corporatist economies in the early phase before easy resources are wasted on illusory wealth generation for a temporarily fortunate few.

      Modern democracy includes the economy and economists will begin leading when their inquiries become actual scientific experiments with verifiable results in growth in cultural wealth and planetary health via positive “externalities.”

  5. Fernando Fandiño
    August 8, 2012 at 11:35 pm

    This once again proves we are immersed in a big game of opulent versus the day by day middle class. There is no interest to preserve the middle class but for the rich to become more controlling and the rest of society to live in dispare.
    Forgive my ignorance since I am not an economist but could it not br that the “housing bubble” could have been controlled by modifying estate taxes and mortgage length? Imagine a 60 year loan assumable by the descendants and no taxes on primary residences upon death. We won the cold war but we are losing people sentiments.

  6. robert r locke
    August 9, 2012 at 5:29 am

    Answer: Those who benefit from Western economies do not want anything that questions their dominance discussed, hence Chinese success is interpreted, without serious analysis, as an extention of the West’s free enterprise economic system — the triumph of capitalism over socialism..

    • Garrett Connelly
      August 9, 2012 at 1:40 pm

      Most people also omit analysis which includes holding the nation together after opium wars and attempted division by western imperialism and Japanese oppotunism as being the defining system parameter.

  7. robert r locke
    August 9, 2012 at 2:32 pm

    Correct. Chinese biggest problem is, however, demographic. We recognize it today with 1200000000 people living in a country the size of the US. The problem was already there in the late 18th century, which led to internal collaspe under presssure from the outside. To survive the current regime must raise the overall standard of living to acceptable levels, or run the risk of succombiing to revolt from with. That more than state capitalism explains China’s world grasp for imports to secure the country’s material needs.

  8. Herb Wiseman
    August 9, 2012 at 11:14 pm

    In their book The Trouble With Billionaires, Brooks amd McQuaig talk about how wealthy people often believe that they are special and created their wealth through their own smarts and work without acknowledging the huge contribution of the many people who went before them nor the laws of the country that allowed them to monopolize the technology they used.

  9. henry1941
    August 10, 2012 at 5:54 am

    The teachings of Calvin might have something to do with the way that capitalism developed in the Anglo-Saxon world.

  10. October 19, 2012 at 1:01 pm

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