Smithian Framework

Can a Smithian framework be used to analyse the importance of the Atlantic economy to the 18th century British lead over France?

In 'The Nature and Causes of the Wealth of Nations' Adam Smith explains his theoretical approach to economic development, forming a model in which much focus is placed on the role of an economically encouraging government. The conclusion of this essay is dependent on the interpretation of 'Smithian framework' used to explore the analysis of the importance of the Atlantic economy. In assessing this question, a smithian framework is taken to mean the four steps by which Adam Smith outlines the journey toward economic growth, these being the establishment of good government, or falling transport costs, the resulting growth of a broad trade market, a geographical division encouraging regional specialisation, and finally a rise in general income. In this sense, there are qualities of the 18th century world that can be easily applied to the steps within the smithian framework, seeming to suggest that the model can effectively be used to analyse the importance of the Atlantic economy to the British lead over France. However, it is also evident on further analysis that there are underlying qualities that the smithian framework fails to assess in this context, including the impact of nature upon the success of a state, explored through the assessment of population, ecological differences and epidemics. The expansion of Atlantic trade led to a more powerful merchant sector of society, which in turn allowed for a stronger political force to encourage a government that acted in economic interest. In this sense, it could be argued that the Atlantic economy was in itself the cause of the first stage of smithian growth within England. As members outside of the English Royal circle gained capital, they also gained power which could be utilised politically. Alternatively, in France, it seems that much of the economic benefits of Atlantic trade were for the Monarch and his close allies. Economic historians like North and Wiengast have explored the extent to which it was institutional changes, not Atlantic trade that accounts for the British rise over France. They suggest that it was the successful dethroning of Charles II and James I that created a precedent for future monarchs, and ensured there would be no irresponsible rule. The transition from forced loans, dominance of royal prerogative and the royal influence over jurisdiction to a crown that had to gain parliamentary authorisation and rule under fair jurisdiction within Britain was the reason that economic growth followed. France remained somewhat absolutist with unreformed institutions, those that were economically prosperous within society, like the protestant Huguenots were defeated and supressed by the king. It has been argued that Atlantic Trade is therefore less important to the Smithian model than first assumed, instead of being the starting point of economic growth in Britain; it was a product of the institutional changes that followed the Great Revolution. However the Smithian model can be used to analyse the importance of the Atlantic economy to the 18th century lead of Britain over France in a different way. One could argue that the creation of more efficient ship designs and the ability to enter into the Atlantic economy through trade is the process of Smithian growth in itself. New ship designs can be understood as the alternative stage one of Smiths model, in which transportation becomes easier. This leads to increased trade, area specialisation between not only regions within nations, but nations themselves; evident in the distribution of production through Europe, Poland exported grain, more proto-industrial nations like Britain and the Netherlands exported manufactured goods. The economy then benefits. It is clear that access to Atlantic trade would benefit an economy; non-Atlantic ports in Spain had slower growth than inland western European cities. Yet when turning to the explanation of the British lead over France, the smithian model is less useful in explaining such different economic growth. Robert Allen explored the nature of the economy pre-Atlantic trade. A smithian framework suggests that with access to transportation and government acting in economic interest income would increase. France, like Britain had access to the Atlantic sea, so it was not transportation that held back their economy. Many historians have suggested that the absolutist nature of the French Monarch when contrasted with the parliamentary governing in Britain is the key difference that resulted in a British economic lead. However Allen explores the actual impact of the French Monarch on the economy, he concludes that there was not a lack of property rights in France but in fact property was too protected; the state could not implement irrigation systems as land owners held too much power over their individual land. One could argue that the people were preventing the state from promoting economic growth. He also notices that Britain had begun its economic domination before the Great Revolution, displacing popular products like Italian wool before 1688. It can be suggested that a parliament is not necessary for a protection of property and incentives to prosper to grow; it is simply one way out of a variety of alternatives. British merchants had been protected in early modern times not by parliaments but by royal courts creating copyhold and beneficial leasehold tenures. It seems from this angle of assessment that the Smithian model, whilst adequately explaining the economic growth of Britain, fails to explain why France was not equally as prosperous in terms of Atlantic trade. As the smithian model fails to explain fully the British rise over France, the issue must be approached with alternative reasons that caused an economic difference between them. Population is an area entirely neglected by the Smithian model that had an influence on the growth of both economies. French population was three or four times that of Britain, this illustrates that intercontinental trade would have had to be a multitude bigger in France to have the same per capita impact. Smith's model of economic growth fails to factor in. Similarly the changes in population within Britain and France change their economic stability as industries experience a decline in input and demand. The Black Death is a crucial point in history that must be addressed when analysing population in relation to the economy. France recovered very quickly, this contrasted with the struggle to recover in Britain led to the development of two very different agricultural systems. British farms had to learn to adapt to less labourers per hectare of land than they had relied on, this resulted in a fall in the production cost of crops, and an increase in inter regional trade to gain supplies of things that a small farming team could not manage internally. Not only did this make farm production cheaper, it led to an influx of people able to work in other industries. France had maintained a higher labour to land ratio, and this was less favourable for profit. The assessment of population and its impact on the agriculture industry show an effect of the economy that is not catered for within the Smithian Model, this reasserts the previously mentioned point that although the model can be used effectively to explain the growth of Britain, and it contains flaws when used to compare said growth to that of France. At first site, the smithian model appears to be suitable to explain the importance of Atlantic trade in the economic advancement of Britain over France in the 18th century, as it reflects upon the perceptions of early modern government, and the apparent institutional differences between the two nations. The model also explores the impact of Atlantic trade on economic growth as a result of greater transportation possibilities. However, there are a number of areas that the model fails to explore and flaws within the analysis when it is applied to France in particular. Despite being an absolutist monarchy state, French merchants did have property rights, as aforementioned, perhaps to many property rights. They were protected and there were arguably incentives to prosper economically. Similarly, in England there were property rights instilled not by a parliament, but by the royal court. Smith's model suggests that fair government is needed for economic growth to begin, but evidence proves otherwise in the instance of Britain and France. Between two countries that had equal access to Atlantic trade, it is their other qualities that have to be explored to understand the reasons for the economic differences between them, something a smithian model does not do. One must turn to the geographical, ecological, and population differences between the two nations to properly understand why Britain rose over France. It is a combination of the basic differences between the two nations, when faced with Atlantic trade that resulted in their different responses.

Bibliography: o Smith, Adam, An inquiry into the nature and causes of the wealth of nations, ed. K. Sutherland (Oxford, 1993).

o Allen, Robert C., `The great divergence in European wages and prices from the Middle Ages to the First World War`, Explorations in Economic History, vol. 38, 4 (2001), pp. 411-47.

o Epstein, Stephan R. Freedom and growth : the rise of states and markets in Europe, 1300-1750 (London, 2000).

o North, D.C. and Weingast, Barry R., `Constitutions and commitment: the evolution of institutional governing public choice in seventeenth-century England`, Journal of Economic History, vol. 49, 4 (1989), pp. 803-32.

o O`Brien, P.K., `Path dependency, or why Britain became an industrialized and urbanized economy long before France`, Economic History Review, vol. 49, 2 (1996), pp. 213-49.

o Acemoglu, Daron, Johnson, Simon and Robinson, James, `The rise of Europe: Atlantic trade, institutional change, and economic growth`, American Economic Review, vol. 95, 3 (2005), pp. 546-79.

o Allen, Robert C. `Progress and poverty in early modern Europe`, Economic History Review, vol. 56, 3 (2003), pp. 403-43.