This post is part of the Monster Carnival 2022 – Why Early Modern History Matters Now. Philipp Rössner is Professor of Early Modern History at the University of Manchester and works on the history of commerce, capitalism, and economic thought in Britain, Germany, and Europe more broadly, from the late-medieval period to the present day.
Build(ing) Back Better – An idea developed a long time ago
As usual, history – whilst not exactly repeating itself – keeps coming back; often from unexpected corners; and things that may seem innovative, original or inventive on the surface turn out, upon second inspection, to be old wine in new bottles. The new UK industrial policy (Build Back Better) is, in fact, such an example. Based on “collaboration between industry, science and government,” focused on strengthening urban life (the 21st century global way of life, as it seems) and creativity, it centres on “Strong and active government investing massively in science and technology, coupled with a dynamic enterprise economy.” This paradigm echoes the “Cameralist” model of capitalism, occasionally also known as “mercantilism”: a model developed in early modern Europe, popularised and practiced in the German speaking lands, but widely adopted in Sweden, Denmark-Norway, Finland, even Portugal and Spain. Cameralism amounted to something like an early modern mainstream political economy and early ideology of growth. Radically pro-innovation, pro-market, pro-creativity and pro-government at the same time, it aimed at achieving lasting economic change and development through proactive government intervention; simultaneously enhancing the quality of economic activities (focusing on employment, adding value and raising productivity) and of economic life. This included, apart from mission orientated industrial policy, wider measures of public welfare including clean streets, safe roads, and sound quarantine rules in times of pandemics. The Cameralist model laid the foundations for the wealth of nations and significantly helped Europe undergo the crucial transitions toward industrialisation and modern economic growth.
The Political Economy of Transformation and Growth – The Case of Early Modern Cameralism
As I argue in a new book, early modern Germans were generally literate and well-trained; manufacturing was ubiquitous, and German entrepreneurs were involved in global trades. But in terms of living standards, income levels and trade connectivity Germany was hampered by a general crisis and the disastrous Thirty Years War, lagging behind France, Netherlands and England (after 1707: the UK). But the toolkit to move out of the development trap was there. Since the Renaissance but especially during the seventeenth and eighteenth century Cameralist political economy – extending far beyond the German-speaking countries covered under the unwieldy umbrella also known as ‘Holy Roman Empire’ – became increasingly focused on achieving economic growth through new outlooks on the open human future, proactively interventionist government helping the economy through providing well-designed markets, supporting manufacturing and other high value adding activities; well-regulated monetary systems, and strategies aimed at stimulating the level of circulation or – in contemporary economic lingo – increasing the “vivacity” of economic life. A centrepiece was the creation of productive and efficient manufacturing landscapes transforming nations from simple-life agrarian into increasingly literate, productive, urbanised and industrialised capitalist commonwealths.
Cameralist political economy thus made a signature contribution to the wealth of nations. During the nineteenth century Germany became one of the leading industrial powers.
Lessons for Today
Cameralism also provides a way of learning from history. Specific recommendations include:
- Capitalism is probably the best way to maximise economic welfare. But it must not be confused with laissez-faire or light-touch government bound to make countries competitive by haphazard bouts of deregulation. If it is to work well, capitalism needs strong rules, committed politicians (or administrators), and heavy-weight government.
- But: in order to achieve lasting growth and transformation policy must target the “right” economic activities and choose the right regulatory tools. With the commitment to “attract the globally brightest people and developing the regulatory system in a way that supports creativity and innovation” the UK government is on the right track. Yet, recent debates have often been overshadowed by Brexit, fisheries and other economic activities either marginal or even deleterious to UK income, output and productivity growth. What last bit of industrial strength remained post-world war two was killed by the Thatcher administration, and it is unclear to what extent the financial market sector – which is often erroneously called an “industry”– will be able to maintain and support UK wealth, incomes and productivity in the long run.
- Target economic activities that are resilient and historically crisis-proof (not necessarily financial markets). “UK businesses have a good record in creating jobs”, but the UK is suffering from comparatively low productivity levels. Since 2007 productivity growth has all but stalled. Are the jobs being created therefore the right ones? Supporting the creative industries is good; but there must be manifest and strong links between creativity and productivity. Target those value-added activities that embody high skills, and which are technology-intensive and require workers that are well trained (and well-fed).
- Strengthen non-HEI tertiary education. The UK punches above its weight globally in terms of the share of the workforce having a university education. UK academia is world leading. Yet, internationally UK productivity has staggered. There is little prima facie evidence suggesting a strong correlation between HEI education and income or productivity levels. Instead, only “18% of adults have a vocational qualification, compared to the OECD average of 27%”. A culture of high-powered non-HEI tertiary education must be resurrected. Creativity, skill and “material literacy” (the ability to understand, work with and transform physical matter into something useful) is not something you likely pick up at a university. The contribution made by useful, not university, knowledge in the vocational (craft-based) industry sector has been much more significant in long-term economic growth and making the first industrial revolution British..
- Rebuild manufacturing industry (or industries that create tangible value, because it is usually tangible value-added, or industries working with economies of scale that generate long-lasting economic growth). As the first industrial nation the UK once was the workshop of the world. These days, value added in manufacturing and industry contributes less than ten per cent to GDP; the UK competes at the same level as Angola or Afghanistan. In 1990 it was 17 per cent still – today’s figure for Germany (2020). But manufacturing still contributes significantly to the UK work force, at twice its contribution to value added (this is the other side of the productivity gap). Manufacturing is especially important for economically weaker regions in the north and northwest (which the BBB strategy targets). Reducing the UK economy’s susceptibility to trade shocks arising from global instability, politically risky economic powers, and insecure commodity chains can likely be achieved through a rigorous focus on value-orientated domestic industrial policy. This is also what some economists have pointed out recently (such as Mariana Mazzucato working at UCL); but the historical connections have not usually been made (an exception is the work by heterodox economist Erik Reinert). Clever governance in the twenty-first century would aim at generating and circulating – rather than distributing and trading – wealth.
- Regulate your markets well. Be prepared to intervene at an early stage by designing markets well in the first place; rather than having to counter-steer and fend off bad market outcomes ex post. Dashing out large levels of government subsidies and support afterward may come costlier than making the right decisions in the first place.
- Last but not least: Make people happier. Happiness was the main developmental goal defined in early modern Cameralist political economy. Happiness was achieved through well-managed monetary landscapes and goods markets, and productive industrial landscapes.
Why do we not define policy that way in the twenty-first century?Disclaimer. If you google “cameralism” you may come across an obscure modern ideology that goes by the name of Neocameralism. It should be noted that this has nothing to do or in common with historical cameralism as defined previously.