The World Economy by the OECD Development Centre

Technological and Institutional Innovation

From the year 1000 to 1820, advances in technology were much slower than they have been since, but they were nevertheless a significant component of the growth process. Without improvements in agriculture, the increase in world population could not have been sustained.

Without improvements in maritime technology and commercial institutions the opening up of the world economy could not have been achieved. Technical advance in important areas was dependent on fundamental improvements in scientific method, experimental testing, systematic accumulation and publication of new knowledge. The long centuries of effort provided intellectual and institutional foundations for the much more rapid advances achieved in the nineteenth and twentieth centuries.

This process of cumulative advance is clearly demonstrated in the history of maritime technology and navigation. In the year 1000, European ships and navigation were no better than in the Roman Empire. The advance started when Venice created its public shipyard, the Arsenal, in 1104 to build its oared galleys and improve ship design. The introduction of the compass and the sandglass for measuring time at sea helped to double the productivity of ships. They could navigate in bad weather and make two return journeys a year from Venice to Alexandria instead of one. The Portuguese preparations for the passage to India were a major research project involving years of experimentation in shipping technology, improvement of navigational instruments and charts, applied astronomy, developing knowledge of winds, currents and alternative routes. The Dutch created a new type of factory ship for processing the herring catch at sea. They developed mass production of a cheap general purpose cargo vessel (the fluyt). The British government financed and encouraged research into astronomy, terrestrial magnetism, production of the first reliable maritime chronometer and nautical almanacs.

They also demonstrated the efficacy of sauerkraut and citrus juice in preventing scurvy. By the end of the eighteenth century ships could carry ten times the cargo of a fourteenth century Venetian galley, with a much smaller crew. The safety of long distance sea travel was also greatly improved. In their first voyages to Asia, da Gama and Cabral lost half their crew and more than half of their ships. Magellan lost more than 90 per cent of his crew on the first circumnavigation of the globe. Cook’s successful circumnavigation 240 years later approximated modern standards of maritime safety.

Until the fifteenth century, European progress in many fields was dependent on transfers of technology from Asia or the Arab world. In 1405–33, Chinese superiority in shipping technology was evident in seven major expeditions to the “Western Oceans” (see Table 2–11). Chinese ships were much bigger than those of the Portuguese, more seaworthy and more comfortable, with watertight compartments, many more cabins, and a capacity to navigate over large distances to Africa. Thereafter, China turned its back on the world economy, and its maritime technology decayed.

By the end of the seventeenth century, the technological leadership of Europe in shipping and armaments was apparent. There had also been important institutional advances. Banking, credit, foreign exchange markets, financial and fiscal management, accountancy, insurance and corporate governance (by the Dutch and British East India Companies) were more sophisticated than those in Asia, and were essential components of European success in opening up the world economy.

Within Western Europe the diffusion of technology was fairly rapid, and the technological distance between nations was not particularly wide in spite of the frequency of wars. Links were fostered by the growth of humanist scholarship, the creation of universities and the invention of printing.

In the sixteenth and seventeenth centuries, there was a revolutionary change in the quality of western science with close interaction of savants and scientists such as Copernicus, Erasmus, Bacon, Galileo, Hobbes, Descartes, Petty, Leibnitz, Huyghens, Halley and Newton. Many of them were in close contact with colleagues in other countries, or spent years abroad. This type of co–operation was institutionalised by the creation of scientific academies which encouraged discussion and research, and published their proceedings. Much of this work had practical relevance, and many of the leading figures were concerned with matters of public policy.

Diffusion of these advances outside Europe was relatively limited. There were Jesuit scholars in Peking for nearly two centuries, some of them like Ricci, Schall and Verbiest had intimate contact with ruling circles, but there was little curiosity amongst the Chinese elite about intellectual and scientific development in the West. Japanese exposure to western knowledge was more limited than Chinese, but its impact went deeper. The Portuguese and the Jesuits were in Japan for nearly a century, and there was considerable interest in European ships, maps, navigation and guns. After the Portuguese were expelled the only contact Japan had with western learning was with those Dutch East India Company officials who were scientists (Kaempfer, Thunberg and von Siebold). Although these contacts were limited, they helped destroy Japanese respect for “things Chinese” and accentuate their curiosity about “things Western” (see Appendix B).

The East India Company officers who controlled India from 1757 to 1857 had a strong streak of Benthamite radicalism, and a strong urge to modify Indian legal and property institutions. After the Indian Mutiny of 1857 and establishment of direct imperial control, these radical westernising ambitions were dropped. In Indonesia, there were somewhat similar ambitions in the period of British administration during the Napoleonic wars, but Westernisation was abandoned after the Diponogoro revolt in the 1830s.

The only effective overseas transmission of European technology and science by the end of the eighteenth century was to the 13 British colonies in North America. In 1776 they had nine universities for 2.5 million people and an intellectual elite (e.g. Benjamin Franklin and Thomas Jefferson) fully familiar with the activities of their European contemporaries. In the Spanish colonies, Brazil and the Caribbean there were more than 17 million people, but only two universities (in Mexico City and Guadalajara) which concentrated on theology and law.

However, it is clear that technical progress has slowed down. It was a good deal faster from 1913 to 1973 than it has been since. The slowdown in the past quarter century is one of the reasons for the deceleration of world economic growth. “New economy” pundits find the notion of decelerating technical progress unacceptable and cite anecdotal or microeconomic evidence to argue otherwise. However, the impact of their technological revolution has not been apparent in the macroeconomic statistics until very recently, and I do not share their euphoric expectations.