Why are some countries richer than others? This is one of the oldest questions in economics and also one of the most contentious.

One explanation which has gained in popularity in recent years is that theft and colonial domination are the main drivers of national prosperity. While this theory does have appeal if you’re trying to find a substitute for original sin, the evidence that conquest is a reliable method of becoming lastingly rich is scant. Producing some of history’s most rapacious conquerors did not transform Mongolia into a centre of development and South Korea’s lack of colonies hasn’t prevented it overtaking Britain in GDP per capita.

Another explanation is geographic factors allowing for early industrialisation. Those regions blessed with easily accessible coal seams such as Britain and the low countries were able to benefit from first mover advantage. It is undeniable that the Industrial Revolution and its consequences have hugely enriched the world and that some countries have been able to take earlier advantage than others but this is not the whole story. Even in 1600, long before industrialisation and Empire, Mughal India’s GDP per capita is estimated to have only been 60 per cent of Britain’s. This and other data would suggest the industrial revolution widened a pre-existing gap between the ‘West and the Rest’ rather than creating it. To understand how this gap emerged we must look back beyond the 18th century.

I recently interviewed Dr Robert Portass, a historian of medieval economics at Lincoln University, whose work provides a fantastic insight. Using evidence from charters (essentially contracts and deeds of exchange) he sheds light on the relations between peasants in northern Spain from the 9th to 11th century. He finds evidence for a thriving market in land between peasants as well as evidence for them producing surpluses for sale. This contradicts both the notion that the entrepreneurial instinct only emerged in the early-modern period and that peasants would only aim for subsistence when left to their own devices.

These charters also contain over 100 references to peasants owning watermills or, in some cases, shares in multiple mills. This is significant as building a mill required a substantial investment of time and resources. In order to justify the initial outlay peasant owners must have been reasonably sure they would enjoy the benefits of their investment for a protracted period of time. The fact that they did build mills in such numbers is evidence that property rights were already deeply entrenched – why bother investing in a mill if a lord can just come along and seize it?

Less written evidence survives outside Spain but is clear that across much of western Europe mills were widespread and often owned by common people. The Domesday Book records over 6,000 in England alone. It has been convincingly argued that this greater density of immovable capital in the medieval West allowed it to surpass the Middle East, where property rights were less secure.

The idea that strong property rights lead to greater investment in capital which leads to prosperity should not be particularly controversial. But when so many wish to turn economics and history into a morality play it’s a case we must keep making.

The Future of African Trade

From corruption at the border to weak property rights, trade across the African continent faces a range of stubborn challenges. With the implementation of the African Continental Free Trade Area on January 1st 2021, African states have an opportunity to break free from the shackles of economic nationalism that have plagued large swathes of the continent for centuries.

As a project of the Institute of Economic Affairs and the Vinson Centre for the Public Understanding of Economics and Entrepreneurship at the University of Buckingham, The Initiative for African Trade and Prosperity (IATP) is guided by a core belief that free trade is the most effective way to alleviate poverty, promote individual liberty, and advance prosperity.

The IATP works with a plethora of local actors advocating for free trade on the ground. Check out the Meet the IATP Partners series to learn more!

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IEA at the Economics Society Conference

Education Coordinators Matthew Prescod and Megi Cara participated in the Economics Society Conference and were joined by Reem Ibrahim and one of our new interns, Jeanie Lee. The conference was held collaboratively by University College London, London School of Economics, and Warwick University.

At the conference, which drew over 150 students, the team promoted the IEA’s student programmes and distributed publications, including An Introduction to Economic Inequality and The New Great Inflation.

Book Club with Jennifer Burns

Date: Tuesday 30th January 

Time: 17:30 drinks, 18:00 discussion start

Location: IEA (2 Lord North Street, Westminster, London, SW1P 3LB)

Topic: ‘The Future of UK Trade Policy after Brexit’

Speakers: 

• Tom Clougherty (Executive Director at the Institute of Economic Affairs)

• Catherine McBride (Fellow at the Centre for Brexit Policy)

• John Springford (Associate Fellow at the Centre for European Reform)

• Julian Jessop (Independent Economist and Economics Fellow at the Institute of Economic Affairs)

Format: Drinks reception & panel discussion

Dress code: Business casual or smart casual 

RSVP: Please RSVP to [email protected] or call 020 7799 8910