Economic Development and the Evolution of Government in Pre-Industrial Europe

Abstract

In pre-industrial Europe, government and the economy developed together, each influencing the other. The development of each was shaped by competition. Governments competed for territory, principally by means of war. Their success depended primarily on their ability to mobilize resources. So governments that could tap the resources of thriving economies had an advantage over governments that could not. Of course, whether or not an economy thrived depended to no small extent on the nature and conduct of its government. This nexus of government, war, and economy generated a sort of cycle. A period of peace allowed economies to develop and grow. This economic growth increased the resources available to governments, enabling them to embark on military adventures. War and the means used to finance it depressed economic activity and eventually starved governments of resources. This made it impossible for them to continue fighting. Peace then returned and the economy slowly recovered. This set the scene for another cycle. Economic growth and war were both self-limiting. It is this political-economic cycle much more than the demographic-economic cycle of Malthus that has been the main obstacle to sustained economic progress.

Keywords: war and growth, pre-industrial Europe, government and economy

JEL Classification: N43, H10, H69, O57