mechanization of weaving, had his house burned down by
Luddites in 1753. James Hargreaves, inventor of the
“spinning jenny,” a complementary revolutionary
improvement in spinning, got similar treatment.
In reality, the artisans were much less effective than the
landowners and elites in opposing industrialization. The
Luddites did not possess the political power—the ability to
affect political outcomes against the wishes of other groups
—of the landed aristocracy. In England, industrialization
marched on, despite the Luddites’ opposition, because
aristocratic opposition, though real, was muted. In the
Austro-Hungarian and the Russian empires, where the
absolutist monarchs and aristocrats had far more to lose,
industrialization was blocked. In consequence, the
economies of Austria-Hungary and Russia stalled. They fell
behind other European nations, where economic growth
took off during the nineteenth century.
The success and failure of specific groups
notwithstanding, one lesson is clear: powerful groups often
stand against economic progress and against the engines
of prosperity. Economic growth is not just a process of
more and better machines, and more and better educated
people, but also a transformative and destabilizing process
associated with widespread creative destruction. Growth
thus moves forward only if not blocked by the economic
losers who anticipate that their economic privileges will be
lost and by the political losers who fear that their political
power will be eroded.
Conflict over scarce resources, income and power,
translates into conflict over the rules of the game, the
economic institutions, which will determine the economic
activities and who will benefit from them. When there is a
conflict, the wishes of all parties cannot be simultaneously
met. Some will be defeated and frustrated, while others will
succeed in securing outcomes they like. Who the winners
of this conflict are has fundamental implications for a
nation’s economic trajectory. If the groups standing against
growth are the winners, they can successfully block
economic growth, and the economy will stagnate.
The logic of why the powerful would not necessarily want
to set up the economic institutions that promote economic
success extends easily to the choice of political institutions.