On a historical inaccuracy by Acemoglu and Robinson

On a historical inaccuracy by Acemoglu and Robinson

Luis Guillermo Vélez Álvarez

Economist

When I read the celebrated book of Acemoglu and Robinson six years ago,  the part devoted to Colombia seemed superficial, with some inaccuracies and marked by a certain ideological bias. I wondered if something similar would happen to readers in other countries whose development processes are referred to by the authors. I left this in the review I then made of the book, published in this blog[1].

My attention was also drawn to the statement that in their eagerness to maintain the extractive institutions that benefited them, the elites of some countries blocked industrialization and the introduction of new technologies that could threaten their survival.

The following is read:

“In Russia and Austria-Hungary, it wasn´t simply the neglect and mismanagement of the elites and insidious economic slide under extractive institutions that prevented industrialization; instead, the rulers actively blocked any attempt of introduce these technologies and basic investments in infrastructure such as railroads that could have acted as their conduits”[2]

And later:

“Second, he opposed the construction of railways, one of the key new technologies that came with the Industrial Revolution. When a plan to build a northern railway was put before Francis, he replied, No, no, I will have nothing to do with it, lest the revolution might come into the country”[3]

These statements did not match what I had read elsewhere.

In the case of Russia, the history of the armored train in which Lenin and his friends were transported from Germany to lead the revolution is well known. It is also known that Trotsky moved freely throughout Russia in an armed train during the civil war.  Anyway, Anna Karenina travels by train between St. Petersburg and Moscow and commits suicide by throwing herself at the wheels of a moving train.

On the Austro-Hungarian Empire, I remembered that, in his biography of Böhm-Bawerk, Schumpeter attributed the merit of having financed, as finance minister, the construction of railways, canals and ports keeping the budget balanced.  I also remembered that there were railroads in Kakania - the country of Bonadea, Leona and Diotima, the beloved of Ulrich, the man without attributes.

At the time I left things like this, thinking that if the autocrats of Russians and Austro-Hungarians had opposed the railroad, as Acemoglu and Robinson claimed, they had not been especially successful in their purpose.

Recently I found, in the also celebrated Angus Deaton book, "The Great Escape", a reference to the text of Acemoglu and Robinson and this statement that brings me back to the matter:

“Similarly, Francis I, Emperor of Austria, banned railways because of their potential to bring about revolution and threaten his power”[4]

Let's see some facts:

Francisco José I ascends to the throne in 1848 and reigns until 1916. He is emperor during the second half of the nineteenth century, during which the great expansion of the railroad in Europe. The world's first railway line opens in England in 1830, linking the cities of Liverpool and Manchester. In 1837 the Kaiser Ferdinands-Norbahn was founded, the first steam locomotive company in Austria that extends lines between Vienna and other cities of the Empire. In 1846 the first line linking the cities of Pest and Vác was inaugurated in Hungary. Between 1846 and 1868, many lines are developed by private companies. In this last year, one after the establishment of the dual monarchy, Magyar Államvasutak - Hungarian State Railways is founded. In 1884 the Royal State Railways of Imperial Austria were founded, the result of the nationalization of several private companies, some with foreign capital. At the end of the 19th century, the Empire had several thousand kilometers of railway lines. 

The Russian railways used by Lenin and Trotsky were not built by the Bolsheviks. They were there for a long time and, according to historian David Landes, were built by the Tsarist state itself. In 1917 there were more than 80.000 kilometers of railway in Russia. The extraordinary Trans-Siberian Railway, of more than 9.000  kilometers, was built between 1891 and 1904.       

“In Russia, the state assisted banking and industry, and the railroads were state-built, owned, and operated. Commerce and topography be damned. The emblematic example: the construction of the first important line, from Moscow to St. Petersburg. The tsar was asked to select the route. He took a ruler and drew a straight line between the two cities. But the tip of one finger stuckout, so the line was built with one curved section”[5]

Nor does it seem to be true, as Acemoglu and Robinson claim, that Tsarist autocracy has wanted to hamper industrialization. At least that is not what Landes says:  

“Russia, poor Russia, was the epitome of state-driven development (…) Russian industrial product rose 5 to 6 percent a year between 1885 and 1900, and again between 1909 and 1912. Railroad mileage doubled between 1890 and 1904, and iron and steel output increased ten times from 1880 to 1900. Between 1860 and 1914, Russia went from the seventh to the fifth largest industrial power in the world. No small achievement, but long forgotten, because later, after the revolutions of 1917, Communist spokesmen and their foreign adulators rewrote history so as to blacken the reputation of the tsarist regime, while throwing favorable testimonies down the memory hole”.[6]

Finally, because of the fact that an image is worth a thousand words, the map of Europe's rail network is shown at the beginning of the 20th century. The Russian and Austro-Hungarian empires do not look like the deprived railway lines that would be expected after reactionary autocracies hindered their development.

 

Europe's rail network in the early 20th century

The historical slip of Acemoglu and Robinson - welcomed by Deaton - cannot be interpreted as a minor mistake because the development theory presented in his acclaimed book depends to a large extent.

Nations progress when the virtuous circle of inclusive economic and political institutions occurs and fail when extractive institutions coincide in economic and political terms. When the combination of extractive and inclusive institutions is presented, an unstable equilibrium occurs that should lead to a revolutionary or authoritarian rupture that leads to the inclusive-inclusive combination, which leads to progress, or to the extractive-extractive that leads to backwardness. Without valid historical facts that theory does not go beyond being a tautology.

For his part, Deaton falls into error when he argues that the increase in inequality associated with economic progress can be induced by the action of those who, having benefited from such progress, those who have managed to make the Great Escape, “protect their positions by destroying the escape routes that remain behind them.” That was not the case, at least in the case of the Austro-Hungarian Empire that uncritically takes from Acemoglu and Robinson to illustrate his thesis.

LGVA

October 2019.

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[1]  https://luisguillermovelezalvarez.blogspot.com/2013/02/por-que-fracasan-los-paises-un.html

[2] Acemoglu, D. and Robinson, J.A. (2012). Why nations fail. Crown Business, New York, 2012. Page 222.

[3] Acemoglu, D. and Robinson, J.A. (2012). Why nations fail. Crown Business, New York, 2012. Page 226.

[4] Deaton, Angus. The great escape: health, wealth and the origins of inequality. Princeton University Press. USA, 2013. Page 11.

[5] Landes, D.S. The Wealth and Poverty of Nations: why some are so rich and some so poor. W-W Norton & Company. New York-London. 1998. Page: 265.

[6] Landes, D.S. The Wealth and Poverty of Nations: why some are so rich and some so poor. W-W Norton & Company. New York-London. 1998. Page: 268.