How did Western Europe’s demographic history set it apart from other regions and lead up to modern economic growth? What was special about Western Europe, something which didn’t appear in other well-developed world regions, such as China? How do demographics impact growth and prosperity?
The demographic fate of today can also be studied by investigating past patterns and delving into economic history. The understanding of this article can be enhanced by reading about Britain’s rise as an industrial power and the rise and fall of the Spanish empire. Another noteworthy piece is an article on the inherent features of capitalism, which make it an evolutionary system fulfilling human needs.
Adam Smith vs Joseph Schumpeter
Before I move on to describing the specific features of European demography in the Middle Ages and Early Modern Period, which were one of the direct causes eventually inducing a growth take-off, I believe a few words of context are needed.
When we speak about the Malthusian Period, before the Industrial Revolution and the simultaneous (or prior) changes in demographic behaviour, we usually say that it didn’t experience any economic growth as a general rule.
This is a simplification for several reasons. Firstly, there were specific regions and times when per capita growth did occur, such as during the Renaissance in northern Italy, during the Dutch Golden Age or in England in the centuries before the Industrial Revolution. But this wasn’t modern economic growth, due to two main factors. First, it wasn’t sustained for a very long period (and wasn’t sustainable). Second, it was so-called Smithian, rather than Schumpeterian, growth. The difference is a fundamental distinction in economic history.
As I have argued before, and this is common knowledge in the field of economics, technological progress has always been the underlying cause of growth, both in Malthusian and post-Malthusian times. The difference between these two periods was how technological progress impacted economic growth (directly or indirectly) and whether economic growth generated a sustainable feedback loop for more technological progress. Smithian growth was mostly about population growth. An improving technological level, under Malthusian rules of the game, led to population growth rather than per capita increases in income. But a larger population enabled further specialisation in the productive process, which led to efficiency gains, and allowed for obtaining a critical mass of population size for some technologies to be feasible. Thus, indirectly, technological progress sometimes led to increases in per capita income, albeit sporadically and without creating a feedback loop.
Meanwhile, Schumpeterian growth, first attained in Europe, and ultimately the economic phenomenon which decided its economic primacy, acted directly on income per capita, producing population growth as a by-product of its dynamics. Schumpeter style growth is characterised by the leading role of efficiency gains caused by technological progress and innovation, not by population growth.
If so, what were the conditions specific to North-Western Europe, which allowed it to leave Malthusian constraints, and other world regions, far behind?
The European Marriage Pattern
In his seminal paper, John Hajnal described a phenomenon unique to Western Europe, which in many ways broke the established rules supposedly guiding human demographic behaviour in the Malthusian era. While before demographers and economic historians assumed that it was the rich who first limited fertility, this specific fertility and nuptial behaviour was first pioneered by the poor. While the quality-quantity trade-off, as in having less children but investing more in their education, was supposed to be a reaction to incentives recently in place right before and during the Industrial Revolution, this same behaviour was found to exist as early as the late Middle Ages and early Modern Period. So what was this marriage pattern exactly and why is it a key to understanding the origins of sustained growth?
The European Marriage Pattern (EMP) was behaviour based on late and non-universal marriage, something which contrasted heavily with the predominant demographic and household formation of the Malthusian era.
It was, perhaps unconsciously, a fertility limiting strategy (older parents can have less children during their reproductive lives) and was also, to some extent, based on the premise that a marriage should be formalised when the young (or not so young) couple could be economically self-sufficient, which in most cases meant income generated both by men and, amazingly, women, selling their services on the labour market.
A very good description of this phenomenon can be found in the important book by Jan Luiten van Zanden, “The Long Road to the Industrial Revolution: The European economy in a global perspective, 1000-1800“:
In brief, it was a reproductive strategy developed by wage earners – male and female – and it was embedded in a larger institutional framework in which market exchange and trust in the functioning of markets were of fundamental importance. Not only did wage income become a very large part of household income, but these households also had access to capital markets and to markets for consumer goods, a large part of which they did not produce themselves, as their main income consisted of wages. At the same time, they developed new strategies for long-term survival to enhance their success and that of their children in the new market environment. Among these strategies were increased investment in formal schooling, in training as apprentices or as servants in other households, and in social capital to ameliorate the problems attendant on old age or single parenthood. The result was a society in which 30 to 60% of the population was partly or completely dependent on wage labour (men, women, and children), in which markets permeated all aspects of economic life, and in which small, conjugal households became increasingly interwoven with a social infrastructure which sustained their reproduction. This society emerged in the late Middle Ages in the North Sea region, in England and the Low Countries in particular.
The same author goes on to claim that the dynamism of this social institution was the key factor in explaining the success of the region of Europe in question. In short, three conditions made the EMP possible and at the same time were its success factors:
- consensus versus parental authority in forming unions,
- the features of intergenerational transfers of property and
- access to the labour market.
The first point, emphasis on consensus between the spouses as opposed to a marriage arranged by the father, led to the conclusion that marriage was, in fact, a contract between equals, at least in theory. This in turn meant that the bargaining position of women increased greatly and they could limit the fertility of the marriage itself, as many studies have found lower desired fertility levels among women than their respective figures in men. The same social phenomenon meant that parents didn’t have much power over their children and couldn’t force or coerce them, as was the case in nearly all the rest of the world, to live with them, take care of the house and support them in old age. Thus, they hired other peoples’ children as servants, expanding the labour market, to which we will return.
The second enabler of the EMP, the way intergenerational transfers of wealth were handled in North-Western Europe, further eroded parental authority. Europe as a whole afforded its women as early as the Middle Ages broad rights linked to inheritance, as opposed to other major regions of the world, such as India, China and Japan. In Southern Europe these rights were more limited, where a daughter’s share of the inheritance was transferred to her upon her marriage in the form of a dowry, with a set of limitations on how this could be used and how it would be disposed in the event of her becoming a widow. Meanwhile, in Northern Europe, a daughter typically received her inheritance at the end of her parents’ marriage, but with the important condition that this part of wealth was considered to be hers and, in the event of becoming a widow, a woman could fully benefit from this wealth. The key difference here influencing demographic behaviour was the form of holding wealth. In the South, a dowry was brought into the marriage and, while it was considered separate from the wealth of her husband, a widow had little rights to it after his death, whereas in the North the two sources of wealth, from the bride’s and groom’s families, were brought together into a common marital fund, to a share of which the widow had access should her husband die. This in turn gave her incentives to increase the size of the common marriage funds.
In the South, a woman’s wealth was more or less fixed no matter what she did, while in the North her efforts could lead to profits which she could actually enjoy. These marriage practices had a very real effect on the age of marriage and independence from parents, as best described again by van Zanden:
Firstly, we claim that there was probably a direct relationship between marriage age and property transfer between parents and children, and one that did not only influence the parents’ desire to marry off their girls as soon as possible, but also had impact on the brides’ possible wish to postpone the marriage. If women had a right on part of their parents’ inheritance without having to marry, there was no financial incentive for hurrying into marriage. In contrast, the southern dowry system created incentives for both parents and the girls to marry young; women acquired their share in the estate as dowry (which was to return to the wife after her husband’s death); moreover, the size of her dowry was also dependent upon the goodwill of her parents, which created the leverage for parents to control the marriage process. Thus in areas with partible inheritance, where women were certain about their share of the parent’s cake, women could wait. We even may suggest that they used this time in a useful way by collecting some funds to make themselves more attractive as a marriage partner. In those areas where women were dependent on marriage to receive part of the parent’s cake, this process could be shortened by marrying. One could argue that dowry systems were also more paternal; it is here however that again the mutual consent argument comes into play: the presence of the Catholic Church – at least in theory – assured that also in the South of Europe, women had a right to decide upon their marriage partner. One could argue – on the basis of evidence for example England – that in the North girls did also get endowments without or before getting married (Smith, 1986). This only reinforces our argument as it could only diminish the importance of other marriage-related property transfer and thus make marriage age even less important in relation to intergenerational property transfer. The essential aspect of this argument hence is that property transfer in the North may have been more ‘detached’ from the event of marriage than in the South, which also fits into the picture of the consensus marriage, neolocality and the high number of singles in the North.
In short, in the South women had an incentive to marry early and their parents, likewise, wanted to marry them off soon. In the North the opposite was true and that is where the EMP emerged. Furthermore, in the South women had no real incentive to work, as their share of wealth was fixed, while in the North their effort could be rewarded.
And yet, women in the North couldn’t have been as independent as they were in the late Middle Ages and early Modern Period, and couldn’t consequently alter fertility behaviour, if it weren’t for not only the opportunity to work, but also a broad and deep labour market. The rise of such a labour market is often linked to the Black Death, which from the year 1348 dramatically changed Europe’s population and economy. While before that date the continent was a capital-scarce and labour-abundant economy, these relations reversed with the massive scale of tragedy which unfolded.
This in turn greatly increased real wages and created demand for women to also enter the labour market, which had dramatic workforce shortages. Again, due to the incentives for work in the North and disincentives in the South, real wages remained sustainably high in the long term only in England and the Netherlands, and female participation in the workforce rose in those countries, while in other regions very much afflicted by the Plague, such as northern Italy, women remained outside the workforce.
Thus, in the Netherlands in the 16th century as much as 60% of the working population derived their income from wage labour, with much lower levels in Southern Europe and levels as low as 1-2 percent in Ming China, the largest economy of the time. Furthermore, nowhere in the world except North-Western Europe was female labour common. This had profound consequences for the power dynamics between generations:
The expansion of the labour market, especially for women, fundamentally changed the power balance between generations. In China and elsewhere households were organized around the collaborative exploitation of a farm, and the material basis for the authority of the father was his control over productive resources. If, as happened in northwestern Europe during the late Middle Ages, the household did not own any substantial productive resources, the economic basis for parental authority was undermined. Moreover, if at the same time young adults gained access to a labour market, and it was possible to live in another household as a servant or maid, to be a casual day labourer in agriculture, to migrate to cities for the summer or a longer period – when, in short, young people had a variety of options to escape the authority of their parents, the power balance between generations would have to be fundamentally affected. Young adolescents, those older than 16 or 18, would be able to earn a considerable surplus over what they needed for subsistence: they could work hard, had probably finished their training, but their level of consumption was still relatively low, and they did not have the fixed costs that come with setting up a household. It was in the interest of parents to bind them to the household, as they were net contributors to the family income. At the same time, the youthful labourers were very attractive to employers, and often found it relatively easy to find jobs once labour markets were relatively well developed. This suggests that the rise of the EMP and the changing power balance between generations may to a large extent have been caused by the growth of labour markets and the proletarianization of the working population in town and countryside of late medieval Europe. This dramatic change was made possible by the doctrines of the Church: they gave the necessary ideological support to the emancipation of the young (women), but the growth of the labour market created the material basis for it.
Thus the European Marriage Pattern, which before 1348 and the Black Death was just a niche nuptial possibility for the poor, became near-universal for everyone but the rich, who had assets enabling them tighter control over their offspring.
The EMP and Economic Development
The EMP was a specific adaptation of household structures and marriage patterns to market opportunities. As such, it included a longer period of wage labour and apprenticeship before forming a union, which in turn led to higher human capital accumulation. This was one way in which the EMP prepared Britain for the Industrial Revolution. Secondly, marriages based on consent rather than parental authority shifted the behaviour of parents. Before this change, working-age couples invested their surplus in supporting their elderly parents. Yet with the EMP, and ‘love marriages’, they no longer lived with their parents and had a smaller number of children, which induced heavy investment in the learning and general human capital accumulation of their offspring, further putting in place a system of accumulating human capital over the generations.
New parents were freed from the burden of caring for their parents, as was the case in India and China, and had the means (acquired via the labour market) to invest in their children. This was also possible because North-Western Europe had developed dynamic capital markets, where households could save for their retirement, rather than depend on their children.
The rules of the game changed:
The measure of success in this new environment was no longer to succeed the father in managing the family farm (and continuing the lineage), but was linked to success in the market economy through maximizing the income that could be earned by wage labour. In such an environment investing in the education of children became critical.
Thus literacy rates rose significantly, as the economy of England and the Netherlands now had incentives for systematic accumulation of skills. Furthermore, trust in institutions and the markets was key to the survival of nuclear families, without the support of extended family networks. This led to developing better institutions and deeper markets, another key ingredient for economic take-off. The same broader markets were also co-created by households saving on the market, the capital market, for their old age. This is turn made available a much larger stock of capital than in other regions of the world, which depended on children as their old-age insurance.
As a result of the changes in demographic behaviour I describe above, North-Western Europe entered a sustainable pattern of human and physical capital accumulation. This spawned modern growth in two ways: it increased labour productivity (as there was more physical capital per worker and workers had higher levels of human capital) and, more importantly, the growing stock of human capital moved the economy to a new equilibrium, where technological progress was now a sustainable phenomenon and moved income per capita at a higher rate than population growth. The Industrial Revolution, which was a series of labour-saving or labour-enhancing inventions, was a logical step in a high-wage economy with an abundance of capital. And once a critical mass of human capital had been achieved, its accumulation, and incentives to invest in less children but of a ‘higher quality’, became firmly entrenched.
As a consequence, Schumpeterian growth overtook Smithian growth and England entered a period of modern economic expansion. Increased labour participation by both sexes, more investment in human capital, a strong development of labour and capital markets, all linked to the European Marriage Pattern and its quantity-quality trade-off, changed incentives for good and freed North-Western Europe from Malthusian constraints.
This article is an edited version of the original post which first appeared on the author’s blog: www.janfabisiak.com