------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (July 2007)

Espen Moe, _Governance, Growth and Global Leadership: The Role of the 
State in Technological Progress, 1750-2000_. Burlington, VT: Ashgate, 
2007. ix + 308 pp. $100 (hardcover), ISBN: 978-0-7546-5743-9.

Reviewed for EH.NET by Peter T. Leeson, Department of Economics, 
George Mason University.


There is no shortage of research examining the sources of prosperity. 
In _Governance, Growth and Global Leadership_, political scientist 
Espen Moe of the Norwegian University of Science and Technology 
contributes to this research, but does so by way of analyzing a more 
specific, and thus more manageable, contributor to wealth creation: 
technology.

Moe argues that three key factors explain why some countries have 
achieved this progress, emerging as global leaders of industry, while 
other have not: human capital, government's ability to resist 
catering to vested interests, and "political consensus and social 
cohesion."

Through these factors Moe aims to marry "Schumpeterian growth theory" 
-- the idea of a simultaneously creative and destructive growth 
process -- with Mancur Olson's theory of special interest groups to 
create a general framework that sheds light on the history of 
technological change.

The marriage is a fruitful, if familiar, one. In order for technology 
to advance and economies to grow, governments must permit innovations 
and individuals must have the human capital to apply them. The 
problem is that older, well-established producers have incentives to 
block such invention since it often destroys the market positions 
they enjoy. If old industrial leaders are able to capture the state, 
government will raise barriers to change, privileging the status quo 
and thwarting technological progress.

Governments that can resist the pressure to cater to such interests 
facilitate the process of creative destruction and with it economic 
growth. Those that cannot resist the pressure stifle this process and 
encourage economic stagnation. "Political consensus and social 
cohesion" enter the picture by creating the conditions of broad-based 
support among political leaders and the populace for economic policy 
that allows new producers to compete openly with old ones, or by 
adding to the pressure that vested interests apply to government to 
preserve existing arrangements.

The core framework here is not "new;" but great originality in the 
context of the voluminous literature that examines economic growth 
and development is difficult to achieve. More importantly, 
theoretical innovation is not Moe's goal. The application of this 
framework to the history of technological progress is both novel and 
interesting and serves the author's primary purpose, which is an 
empirical one.

To make his argument Moe considers nine case studies of technological 
progress or stagnation between 1750 and 2000. His case studies are 
presented in the context of five substantive chapters. Each of these 
is devoted to a different industry, presented chronologically in 
terms of its economic significance.

Chapter 2 contrasts England and France's experience with the cotton 
textile industry during the First Industrial Revolution. Chapter 3 
again considers England and France, but in the context of the iron 
industry in first half of the nineteenth century. In chapter 4 Moe 
compares German and British technological success in the chemical 
industry between the second part of the nineteenth century and World 
War I. Unlike the previous chapters, chapter 5 examines only one 
country -- the U.S. -- and the rise of the automobile industry in the 
interwar period. The sixth and final substantive chapter contrasts 
American and Japanese progress in the information and communications 
technology (ICT) industry from the Cold War era until the turn of the 
new century.

These case studies persuasively point to the important (primarily 
negative) role of government in facilitating technological progress, 
namely through resisting pressure from industrial stakeholders to 
undermine Schumpeterian entrepreneurs or privilege the status quo. 
Likewise, they effectively highlight how "political consensus and 
social cohesion" reduced or applied this pressure, enabling or 
preventing technological advance. Overall, the evidence Moe musters 
does a nice job of illustrating the utility of his proposed 
Schumpeter-Olson marriage in the context of the history of 
technological progress and growth.

I have only one noteworthy complaint. In light of the importance that 
both vested interests and human capital play in Moe's framework, it 
would have been useful if his analysis focused more on how government 
can and has used "human capital building" to cater to vested 
interests and block Schumpeterian growth. Although, as chapter 6 
discusses for example, state-led research and development has figured 
prominently in ICT development in a number of countries, we cannot, 
prima facie, take this human capital building as a positive force 
contributing to technological and developmental progress.

Like all other government activities, state-sponsored research and 
development, education, and so on, are subject to traditional public 
choice concerns and may be used by political actors to cater to 
vested interests or nefariously guide the process of technological 
change in other ways. In short, technological "progress" encouraged 
by government may not reflect _economic_ progress in that it may 
constitute an inefficient use of resources.

A technology that could not support itself without state-subsidized 
R&D, for example, but because of this R&D "makes it" and eventually 
comes into wide use is not necessarily a "win" from the standpoint of 
economic development. For one thing, we never enjoy the alternative, 
potentially superior technological innovations that would have come 
along if R&D resources had been allocated according to market forces 
instead of political criteria.

This objection notwithstanding, _Governance, Growth and Global 
Leadership_ tells a compelling story of technological progress since 
1750. Economic historians, particularly those with a strong interest 
in economic growth and development, will enjoy it.


Peter T. Leeson is the BB&T Professor for the Study of Capitalism at 
George Mason University. His recent research explores the law, 
economics, and organization of pirates (http://www.peterleeson.com) 
and has been covered in the _New Yorker_ and the _Financial Times_.

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