In the early 1800s the two sets of pioneers met. The Russians controlled Alaska until 1867 and more to the point, at the end of the eighteenth century, even established a settlement at Fort Ross only 100 kilometers north of the future San Francisco. The Russians therefore played an important and fairly protracted role as colonizers of North America.

The ultimate failure of Russian settlement in America, vividly highlighted by the extinction of the California colony of Fort Ross in 1839-41 and the sale of Alaska to the USA in 1867, illustrates the fact that a frontier of acquisition does not automatically become a frontier of permanent settlement.

In microcosm Russian America illustrates both the initial problems of an area of new settlement and the particular difficulties of Russian colonization in distant areas under unpropitious circumstances. The harsh environment and remoteness of the settlements led to a serious supply problem with food shortages becoming particularly acute, despite the miniscule size of the Russian population (at a maximum size of 1,823 in 1839) in three different periods: at the very beginning of the nineteenth century, during the 1820s and again in the mid-1850s.

Initially the returns from the fur trade offset the risk of food deficiencies. The furs of die sea otter and the fur seal provided the revenue to finance necessary purchases of supplies. These furs were immensely valuable, the pelt of the sea otter being worth approximately six times that of the fur seal and 40 times that of the sable, hitherto the most valuable pelt available to the fur market. Progressive depletion of the fur-bearing animals weakened the trade. Moreover the closure of the Chinese ports to Russian ships until the mid-nineteenth century meant that trade in furs had to go through Kyakhta south of Lake Baikal, with an attendant increase in distribution costs. Traders of other nationalities, particularly Americans, could therefore outcompete the Russians. As a consequence of these two difficulties, fur exports from Russian America began to decline in the nineteenth century.

The decline led to a search for new staples, unsuccessfully in the case of whaling and coaling, more successfully but still on an insignificant scale in the case of ice, fish and timber. Import substitution was tried in shipbuilding and food production. The settlement at Fort Ross and the attempted settlement of Hawaii, in 1815-17, represented attempts to solve the food problem directly. Even manufactured commodities were traded with the Californians until British and American competition halted this exchange. The overland supply route through Irkutsk and Baikalia or circumnavigation supply routes from Kronstadt were so expensive that purchase from American traders off the coast from the early 1800s, from Alta California about a decade later, and then from the Hudson Bay Company, particularly between 1839 and 1849, proved a better proposition. Sources of supply changed continually in an effort to increase reliability and reduce cost.

Foreign competition in the fur trade and trade in manufactures; unaccustomedly strong native resistance from the Kolashes who destroyed New Archangel in 1802; labor shortage aggravated by constraints on migration, by disease and privation among both the Russians and the natives; the unfamiliar maritime mould of the colony; the restrictive monopolistic charter of the Russo-American Company which controlled the colony; and the traditional administrative and technological backwardness of the Russians, all contributed to the financial difficulties of the colonies and the decision to withdraw before being thrown out by force. Vulnerability to fluctuations in food supply was the key to failure (Gibson 1976; Kushner 1975). A high level of risk in a poor resource environment prevented permanent settlement.

Elsewhere settlement was successfully completed, albeit at different speed in the two continents. The extreme rapidity of settlement in the USA reflected both the absence of significant negative elements, as indicated above, but more positively a liberal policy of land distribution and a very rapid increase in population. The latter [rapid increase in population] in its turn reflected a much more benign natural environment stimulating significant immigration and supporting a very high rate of natural increase of population. At its peak, shortly after the end of the formative period, American population grew at a rate of over three per cent a year. Even at its maximum after the acceleration of the nineteenth century, the Russian population grew at scarcely more than half this rate, at 1.75 per cent. In the eighteenth century it probably grew at one per cent a year. In both societies crude birth rates reached as high as 50/1,000; the differences lay in mortality rates, both in their level in a typical year and the frequency and severity of demographic crises.

In Russia settlement lagged seriously behind acquisition. James E. Davis points the contrast neatly by asserting that the combined population of just three states hurriedly carved from the wilderness (Ohio, Illinois and Indiana) today exceeds the total population of all of Soviet Siberia, a frontier for centuries. Often the population figures for America west of the Appalachians and Russia east of the Urals are quoted as evidence of the superior achievement of the Americans in converting acquisition into settlement (Parker 1972).

Within a century of the end of the formative period, peripheral population had overtaken core population within the USA. The implied movement of people and change in economic balance make it scarcely surprising that the frontier has loomed large in American life and mythology.

By contrast in Russia even as late as 1914, more than 300 years after the formative period ended, there existed a rough equality between core and peripheral populations. The more sedate rate of change reflected both the difficult environment of much of the periphery, particularly Siberia, and the institutional constraints on the rate of 'internal' colonization exercised by the core. In its turn this slow shift reduced the economic significance of the periphery and its potential for changing the nature of core institutions.

From the time of Frederick Jackson Turner, many American historians have stressed the influence of the frontier on the political, social and economic organization of the United States. Billington has argued that the impulse of the frontier was unique to the USA because of the combination of 'a physical environment conducive to exploitation by the relative propertyless individuals and the invading pioneers equipped by tradition to capitalize fully on that environment' (Billington 1968: 77). Similarities were recognized between the physical environment of the USA and Russian Siberia, a parallel which could be extended quite easily to include other areas of Russia in the earlier frontier zones. While recognizing, in the Russian case, institutional modifications resembling those on the American frontier, Billington argues that 'the newcomers were so restrained by absolute rules and tyrannical traditions that they were incapable of developing the go-ahead spirit that thrived on the American frontier' (1968: 79).

The frontier thesis is a classic case of the tail wagging the dog since it underplays the influence of core institution[s?] on the pace and pattern of pioneering. The distinct differences in the way the two societies evolved, even during the pioneer phase, reflected the nature of the core areas.

In America frontier areas were largely opened up by free settlers operating within an economic system rapidly becoming more market oriented. Land was cheap and freely available. A substantial group of specialist pioneers emerged, smoothing the way for the more cautious.

In Russia steadily increasing government regulation of society -- effective by the end of the sixteenth century -- allowed control over internal colonization. At least until the end of the eighteenth century, the serf system was used as a means of government-controlled colonization of the new aras of settlement in the southern steppe. There was a little supplementation by government-encouraged foreign immigration at the end of the eighteenth and beginning of the nineteenth centuries.

In Russia there might exist a contradiction between the demands of the service-and-serf state and local frontier requirements. There might even be a contradiction in laws that tied peasants to the village but allowed them to settle if they reached new lands (Yaney 1972: 148-9). However, fugitives were rapidly reabsorbed into the serf system. The existence of the frontier did not 'free up' institutions.

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ENTRY INTO THE COMMERCIAL AND INDUSTRIAL PHASES

The entries into the commercial and industrial phases are the key transitions of modern economic development. [NB! the industrial phase is only very briefly dealt with in this book] The present book treats with the former [commercial phase] rather than the latter [industrial phase], partly on the supposition that the latter [industrial] grew out of the former [commercial]. The dating of both transitions is a subject of much controversy in both America and Russia.

In theory it might be possible to define a threshold level of marketed produce adequate to represent entry into the commercial phase. However there is no one moment of entry, rather a transitional period during which the characteristics of the new phase are established. There is no one-to-one relationship between such a proportion and the significance of commerce. Neumark has rather neatly indicated the irrelevance of mere numbers: 'with regard to frontier expansion, what has to be stressed is not so much the extent qf self-sufficiency as the significance of exchange with the outside world; and 'even if the frontiersmen were 99 per cent self-sufficient, it was the one per cent that tipped the scale, for it constituted the minimum factor in the frontiersmen's economy.' The one per cent might be represented by firearms or salt essential to survival [and available only through the commercial market].

Even armed with a threshold figure, properly defined, we are confronted with a serious empirical problem; the lack of statistical data which would allow us to compare the proportion of output marketed in colonial America or early Russia and to note changes in die proportion over time. Similar problems arise if we try to define a simple threshold for the industrial phase, as say the share of the labor force engaged in manufacturing.

It must also be noted that there may be a significant overlap between the different phases. Regions may be opened up deliberately to exploit the market potential of their products, or even to allow the processing of raw materials. The spread of cotton culture across the American south is an example of the former [deliberate exploitation of market potential]; the establishment of the Urals iron industry by Peter the Great at the beginning of the eighteenth century a nice illustration of the latter [promotion of raw materials processing].

Very often the story of market growth is told in terms of the production of a growing surplus, or in other words in terms of supply side influences. It may be much more helpful to tell the story in terms of demand factors. Supply decisions may be made deliberately in an endeavor to satisfy a particular level and pattern of demand. The demand may be inherited from the Old World by immigrants who consciously break their pre-existing accommodation to modest levels of consumption. Or the demand may be imposed directly from above, as in Peters attempt, at the beginning of the eighteenth century, to westernize the tastes of the Russian nobility.

In both cases there was a persistent tendency for expenditures associated with consumption to outrun the capacity to raise revenue. In the Americas this showed itself in a likelihood that the value of imports ran ahead of exports and that the balance of trade was in the red. In Russia the problem was much more limited as it involved the balance of payments of the gentry with other groups in Russian society rather than with the balance of trade at the national level. The national balance of trade appears to have been persistently in the black (Attman 1981a, 1981b).

There were a number of ways in which the shortfall in revenue could be met. The import of capital is necessarily a temporary expedient. In the case where the problem was limited to one group of the population, the government could affect a redistribution of income in favor of the relevant group. Increasingly in Russia it did just that by establishing credit institutions which lent to the nobility on the security of the serfs they owned.

The other two possibilities involve the search for an export staple and the process of import substitution often considered mutually exclusive options. Typically the former [export] has been associated with movement into the commercial phase and the latter [import] with movement into the industrial phase since attention has been concentrated on the substitution for imported manufactured and capital goods. Because of the constraints of market size and factor supply, imported substitution in these areas was initially less successful than the search for a staple. Allegedly the former [export] depended on an external market orientation, the latter [import] on the development of a domestic market. However there are spread effects from the development of an export staple to import substitution. Moreover import substitution in foodstuffs and agricultural raw materials began very early but has been largely neglected.

Because of the relative unavailability of quantitative data on domestic production and exchange, a focus on external trade is probably inevitable. However the role of external trade must be placed in a proper perspective. First, there is little doubt that the share of output trade externally declines in both economies during the period when statistics allow some quantitative assessment. More important, the decline in external trade is more than compensated by a rise in domestic trade.

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Table 2.3:
US exports as a percentage of GNP
(current dollars), 1710-1848

Rough estimates for early years             %

1710-20                                                   20-30
1775                                                        15-20
1790-1800                                               10-12

Gallman GNP data
1834     43                                               6.2
1839-47                                                   5.9
    Source: R. Lipsey, in Davis et al.: 554

For Russia the statistics are very limited. It is clear that several abortive periods of rapid external trade growth occurred, in particular those following the opening of Archangel in the late sixteenth century, the creation of St Petersburg in the early eighteenth century and the advent of the railways in the second third of the nineteenth. The value of exports per head seems never to have reached anything like the American levels.

Moreover after the initial stimulus given by the railways to the export trade during the 1880s domestic trade began to rise faster than exports, at least according to railway statistics. Later a decisive and permanent downturn in the proportion of GNP exported occurred as a result of the events associated with the Revolution of 1917.

A second reason for playing down the role of external trade is that the growth of domestic trade is more important to the transition from the commercial to the industrial phase. The triumph of a 'pure' cash crop such as tobacco might be represented as the intrusion of foreign commercial institutions into a dependent economy and an obstacle to the industrial transition. Russian external trade was clearly dominated by foreigners.

We need therefore to coincide the main outlines of growth of the domestic market in America and Russia. Existing evidence suggests that frontier societies are characterized by a much higher level of market involvement than is usually assumed. Settlers in both societies desired to enter the market as early as was feasible, consistent with the objective of making secure their own subsistence. Such an objective was more easily achieved in a diversified economy based on subsistence crops. The security of subsistence rested most significantly on the level of yields and on transport access. Initial accessibility is highly correlated with the level of market involvement; as improvement in access occurs, there is an increase in that involvement. Since colonial America was favored by a benign resource endowment and a good transport system, its involvement hi trade began early and was much greater than in Russia.

In the past much has been made of the importance of inter-regional trade. Douglass North has emphasized inter-regional links in the USA between the north-east producing and selling to other regions manufactured goods and commercial services; the south exporting cash crops and selling raw materials to the north-east; and the west selling foodstuffs to both. Jerome Blum has described a less complex two-region model for Russia, with its origins in the eighteenth century, as with the American model. The relative fertility of the south and the greater labor availability in the north and center allowed a regional exchange of foodstuffs for manufactured goods or commercial services.

However, recent work, while not rejecting out of hand the kind of links indicated, has very much played down these inter-regional links at such early dates, stressing the large degree of self-sufficiency within regions, induced by high transport costs and the importance of intra-regional markets.

In the network of local exchange, three groups stand out as important: urban dwellers; new settlers, soldiers and other transients; and the rural landless or near landless, including professionals, craftsmen, retailers, innkeepers and day laborers. In looking at the level, and growth, of domestic trade, particularly in foodstuffs, we need to consider the importance of these groups. Traditionally the urban population has been the main focus of attention.

The level of urbanization in eighteenth century Russia and America appears to have been broadly similar. The most frequently quoted statistics include a very low level of Russian urbanization with a significant decline, not only after the dissolution of the Kievan confederation but also between 1400 and 1600. In 1600 the level of urbanization appeared as low as two-to-three per cent. In the eighteenth century the level was apparently still low, below four per cent at the beginning, and rising only slowly to about four per cent in 1800. Such figures reflected largely Kizavetter's calculation of posad population, the officially designated urban population, of just over three per cent in the early eighteenth century, and Miliukov's of just under four per cent in the late eighteenth. However other groups, principally nobles and peasants, lived in the towns. On this basis Kabuzan and Rozman have recalculated that as much as eight per cent of the population lived in urban areas in 1780, but the figure is probably exaggerated.

Rozman's interpretation of this relatively high level of urbanization stresses the highly developed structure of central places for a pre-industrial economy and the resulting efficiency of movement of resources from the lowest to the highest level. However there is a far more satisfactory explanation. The level of [Russian] urbanization was relatively high at an early date because of the military-administrative role of the towns and the stress on service and revenue functions for town dwellers. Even in the eighteenth century most towns in the south, east and west were primarily centers of administrative and military control. Only in the center and north did the commercial role of the towns become significant. De Vries has pointed out that Rozman's urban network reflects the administrative needs of a well-ordered military state in which cities stand in a well-defined position of subordination or domination vis--vis one another. The urban hierarchy did not imply economic integration.

It is interesting to note that Moscow and St Petersburg stand out very markedly from an expected linear rank-size distribution of cities, being much bigger than predicted (de Vries 1984: 262), although elsewhere in Europe during the early modern era of urbanization the largest cities tend to fall below the predicted size (de Vries 1984: 256). The reason for [the large size of these two cities] is clearly not the linking of these cities with a wider European urban network but the concentration of administrative functions in a highly centralized state.

In 1800 the level of urbanization in American was similar, if not a little lower, at six per cent. However the Middle Colonies and New England were more urban. The main difference however lay in the potential for future growth. The urban hierarchy in America was already well integrated economically. Russia was to see a slow and steady increase in urbanization up to 1913, rapid de-urbanization and an urban explosion only after 1929. America's urban population rapidly overhauled Russia's, first in relative and then in absolute size. By 1850 the urban share of America's population was up to 15 per cent and reached 40 per cent by 1900, whereas the Russian share was ten per cent in 1863 and 12.9 per cent in 1897 (Rashin 1956: 98). The rate of urbanization in America exceeded W.A. Lewis' threshold rate of three per cent by a very significant amount, reflecting both the abundance of resources and the high potential for urbanisation in the American population.

However the significance of urbanization during the early period of economic development has been much exaggerated. Brady has argued that in the America of the 1830s, even the assumption of a disposable income in the towns triple and in the village double that in the farms would generate consumer expenditure in the countryside accounting for over three quarters of the total, since at the time 89 per cent of households were situated in the countryside. She concludes, 'Rural households in a real sense, were dominant in the market for consumer goods until the twentieth century.'

We need to focus more closely on the new settlers and rural landless. Clearly the more rapid the rate of opening up, the greater the demand for supplies to tide the new settlers over the initial years. New settlers could not produce enough to feed their families for at least two years. The relatively very rapid settlement of America both promoted, and was based on, market development.

Both demand and supply considerations worked to increase the landless proportion of the rural population, but again more rapidly in America than Russia. In Russia the whole social and economic organization of rural life, with its partible inheritance and repartition, with its passport control and communal organizations, tightened the bond to the land. The payment of obrok [ID] also imposed a tax on wage employment. A more abundant resource endowment and better transport access in America encouraged diversification of economic activity. The landless group constituted a potential urban population, reckoned to be as great as one third in the northern and middle colonies and one fifth in the south, but probably much smaller in Russia.

Closely associated with entry into the commercial phase and the appearance of a landless rural population was the spread of proto-industrialization. In the pre-industrial era there was significant proto-industrialization in both Russia and America, that is, in Perlin's words the appearance of "pre-factory industrialization of all kinds in town and country, workshop and home, oriented to a commercial market, be it regional, national or overseas" (Perlin,Frank| "Proto-Industrialization and Pre-Colonial South Asia" [E-TXT] ). Perlin refers to proto-industrialization as 'commercial manufacture', which puts the emphasis on the key element in proto-industrialization, the conversion of normal household production of goods and handicraft materials of various types for own consumption to market production. However we shall deal with the whole issue of industrialization later in this section.

Can we generalize about the extent of market involvement in the two economies? The literature on the level of market involvement is lopsided -- substantial for colonial America and exiguous for early Russia, reflecting undoubtedly the relative significance of that involvement

On America the overwhelming weight of opinion has shifted from the frontier tradition of largely self-sufficient and independent pioneering fanning to an early and significant market involvement. For late colonial America, limiting the calculation to the sum of items with good statistical bases -- commodity exports, invisibles and coastal exports -- we have a figure of $2.1 per head, which represents a proportion to average income per head of about 20 per cent. Making a conservative allowance for coastal invisibles and demand from the three domestic groups indicated above, we could increase the figure to $3.9, which represents about 30 per cent of total income per head. A division between external and domestic marketings gives values of $1.7 and $2.2 respectively, indicating the greater importance of the latter [domestic].

Since the three groups referred to were highly concentrated in New England (urban and rural landless) and the Middle Colonies (urban, rural landless and new settlers), the level of domestic and total marketings was much greater for the north than for the south, despite the latter's [the south's] advantage in exports. The relative decline in external trade compared with domestic markets disadvantaged the south and favored the north.

Particular studies tend to confirm the picture presented above, which suggests a likely proportion of output marketed at the end of the colonial period of at least 30 per cent. Robert Mitchell suggests an idealized progress of a frontier area from less than ten per cent of total produce marketed during the short pioneer period to over a third, or one half or more, after a short interval; in the case of the Shenandoah valley, about 40 years. James Lemon indicated a level of grain marketings in south-east Pennsylvania of at least 40 per cent, for a period clearly beyond the pioneer phase. Both areas were favored by good natural environment but not by strikingly good accessibility.

Very little is known in quantitative terms about the internal trade of Russia, although in absolute volume it was quite large. The early stress on such essential articles as salt tends to suggest its limitations (Smith, R.E.F. and Christian 1984). Most early exchange was through local markets. However, much of the Soviet literature is concerned with the evolution of a national market which, following a remark of Lenin's, was traditionally dated to the seventeenth century. Recently the inadmissibility of such an early dating has been recognized and the appearance of a national market postponed until at least the 1760s, still a rather premature dating.

Until recently such assertions were based on qualitative rather than quantitative evidence. However qualitative factors suggest that genuine market involvement must have been limited by significant restricting factors; the small size of the surplus, poor transport and by the extra-market supply of key groups in the population. A number of more rigorous studies of inter-regional trade made recently have shown that national markets for a number of commodities, most notably grain, are largely a nineteenth century creation, as is the linking of these regions with international trade.

The only hard statistics we have apply to grain marketings, grain being the principal export in the nineteenth century and until shortly before the revolution the major commodity carried on the Russian railways [MAP]. These statistics refer to the second half of the nineteenth century, and suggest a significant increase in the proportion of output marketed after the construction of the railways and a period of stability thereafter. The share rises from about 20 per cent to just under 30 per cent between the 1880s and 1913, by which time domestic marketings were rising faster than exports (White 1975; Gregory 1980). Clearly the figure is relatively low and is unlikely to have been higher in a period when transport difficulties were greater and grain production more concentrated in low yielding areas. Broadly speaking, it corresponds with the level of marketings in colonial America, suggesting a much slower penetration of the market.

Entry into the commercial phase, reflecting internal rather than external marketings, occurs in America probably by the end of the colonial period, significantly earlier in some parts of New England and the Middle Colonies and very much later in broad areas of the South. In Russia such an entry comes only at the end of the nineteenth century after major transport improvement. Such an entry was part of a process by which the two continents were economically developed largely on the basis of their own resources.

Entry into the industrial phase came very much later than is often thought. First it is necessary to be precise as to what is meant by entry into the industrial phase. Such entry is achieved when mechanized factories have become the typical locus of industrial production in a significant number of industrial sectors. The key criterion is the nature of the power source. When power can only be delivered in large discrete amounts, as is the case with water or steam power, the emphasis on large factories becomes inevitable. However industrial activity does not begin with factory production, nor does a marked acceleration of industrial production begin with the introduction of the factory system.

Broadly speaking industrial production occurs in three stages which can be associated with our three phases of opening up, commerce and industry; first, the largely self-sufficient family factory involving production for home consumption; secondly, 'commercial manufacture', either cottage industry working on the domestic or putting out system, or artisan workshop and 'non-mechanized' factories; and thirdly, mechanized factories. Stage two includes what is commonly called 'proto-industrialization'. However, this is usually conceived of as a particular kind of transitional industrial activity located in the countryside in competition with more long-established urban industry. Clearly proto-industrialization requires some prior market development but gives a very significant stimulus to that development, particularly in rural areas where the vast majority of the population live. Typically proto-industrial activity involves small-scale production in units with few workers, fewer man 15 say, working sometimes only part-time and equipped with little capital, particularly since the main source of power is either animate or if inanimate, organic. However, commercial manufacture is not incompatible with productivity gains arising from increasing specialization and increased intensity of labor input.

The amount of proto-industry is hard to measure. There is general agreement that the high costs and risks of urban concentration checked the level of urban industrial activity and population before the nineteenth century, encouraging a massive growth in the share of rural non-agricultural population, that is, the population dependent on proto-industrial employment. According to de Vries, the proportion [of wage labor in the European population] rises from 20 per cent during the early sixteenth century to 40 per cent by 1800.

There is little doubt that both Russia and America shared in this process. Both displayed features encouraging proto-industrialization -- rapid population increases, areas of low relative fertility and land hunger, a short growing season or labor regime allowing long slack periods. After a substantial beginning in the eighteenth century Russia became in the nineteenth century a major center of proto-industrialization. The spread of industrial activity among the peasants of the central provinces has been well documented. In that region such activity had apparently become general by 1800. In Russia as a whole kustar industry (peasant handicraft industry) predominated for most of the nineteenth century, outside the cotton industry and the Urals iron industry. On the eve of Emancipation, at least half of industrial production was derived from kustar industry.

In America industrial by-employment [i.e., employment in both farm and manufacturing work] was similarly almost universal, particularly in those colonies which later became the main centers of industrial activity, in Pennsylvania and New York, in Massachusetts and the smaller colonies of Connecticut and Rhode Island.

Such industrial activity was typical before the general introduction of the factory system. Decisive entry into the factory industry phase came from the 1880s in the USA and from the 1930s in Russia, which raises the question of explaining the Russian delay.

We can conclude this review by considering briefly the evidence on the rate and nature of economic growth in early modern America and Russia. From the earliest data considered both economies were experiencing, considerable expansion. Much of the early growth resulted from the cultivation of more land and exploitation of new resources combined with an increase in the total labor force, reflecting population growth. However some intensive growth existed from the beginning. An increase in scale raised productivity levels by encouraging specialization, both regional and occupational, and by reducing transaction costs. Entry into the commercial phase represented a significant shift to intensive growth, entry into the industrial phase a reinforcement of that intensive growth.

Once again the statistics on colonial America are very much better than those on early Russia. The general consensus is that even in the eighteenth century population growth accounted for more than 75 per cent of the increase in aggregate economic output. According to Alice Hanson Jones income and wealth per head seem to have already reached quite high levels within 25 to 30 years of settlement. Thereafter growth was slow and steady, gradually accelerating from 0.3 per cent p.a. between 1650 and 1720, to 0.4 per cent between 1725 and 1750, and 0.5 per cent between 1750 and 1775. New England represents an exception, showing a relatively rapid rate, about one per cent per annum in the seventeenth century but declining in the eighteenth, reflecting perhaps the pressure of population on a poor resource base (T.L. Andersen 1975).

Even in New England income levels seem to have attained the English level by 1700. By the 1770s the typical American family had almost certainly attained the highest material standard of living in the world, prompting Alice Hanson Jones to claim, 'over two hundred years ago, our colonial forefathers enjoyed living standards, however sparse, that are still only the aspirations of a majority of the families inhabiting this globe in the 1980s. On a relative and comparative basis, therefore, America has always been an affluent society -- achieved, it might be added, with a population in 1776 already a third the size of Britain's.

The statistics which exist for Russia suggest an early beginning to the transition. The base income levels were low both absolutely and relatively, reflecting the constraints of a hostile environment. Between 1861 and 1914 Russian agricultural growth was to an equal degree extensive and intensive. Earlier but patchy statistics suggest that intensive growth had been occurring for at least a century. However growth of agricultural output per head still reached only 0.5 per cent p.a. in the period 1861 to 1914.

In both Russia and America there is a long history of economic expansion. Although some intensive growth occurs early, the transition from extensive to intensive growth was a gradual process, with Russia lagging about a century behind America, in the attainment of similar growth rates of income or output per head. [...]

[...]

Chapter 9:211-219
A General Model of an Uncertain and Insecure World

This book can be regarded either as an analysis of America in the Russian mirror and of Russia in the American mirror; or alternatively, as a generalization about the nature of economic development based on two important case studies, the generalization emerging from the particular comparison.

Under the heading of general remarks this chapter will summarize the main conclusions of the comparison. Under the heading of continuity and discontinuity, it will try to generalize these conclusions as a new theoretical framework for understanding the process of economic development. It will conclude with broad interpretative comments on the later development of Russia and America in the context of the preceding conclusions and generalizations.

A sample of only two makes perilous the task of generalization since an extended comparison may negate these conclusions. However it is comforting that in a number of important respects the general conclusions conform to a new set of tentatively formed views about economic development.

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GENERAL REMARKS

Modern economic development does not begin and end with the so-called industrial revolution. Many economies grew impressively in the pre-industrial era. Both economies considered here have displayed strong secular impulses to expansion. Such impulses originated in the growth of population within a large area of cultivable land containing a wide variety of resources and in technical and organizational improvement within the international economy, particularly in economics linked to Russia and America. Moreover before significant industrialization, American income levels were already amongst the highest in the world.

Among economic historians the implicit basis of analysis of economic development has begun to change significantly. There has been a growing tendency to interpret economic development as in some way the normal state of affairs, rather than as an exceptional experience, and to recognize that the change of approach requires a further shift away from explaining the onset of economic development by the satisfaction of certain necessary prerequisites, or by the appearance of a unique set of favorable economic and social features, to the need to explain its absence by the presence of significant obstacles to that economic development. Even where the obstacles have not prevented development they have certainly shaped the institutional framework of that development.

In one school of thinking there has been a tendency to find these obstacles in the external economy, a tendency understandable in terms of the human propensity to blame somebody else for one's own failings, but unjustified in that the sheer marginality of these economic links makes such a stress rather puzzling (O'Brien 1980). Again the particular Russian and American experiences reinforce the need to get the focus of interest back onto domestic factors.

It is necessary to consider obstacles which are strictly speaking non-economic, in this context geographical or political. By excluding consideration of such factors the now-dominant school of the new economic history has failed to confront properly the issue of development. The economic dynamism of any society is largely determined by a complex interaction between physical and human environments. Consequently the narrow focus of the new economic historian must be widened.

Although in one sense or another both America and Russia have been considered resource-rich countries -- that is, a favorable natural environment has stimulated economic advance -- there is little doubt that the advantage both in terms of resource endowment and vulnerability to risk lay with America. Translated into different terminology, America was favored by high potential average income per head both in absolute terms and relative to Russia; it was also less likely to experience instability in that income.

More specifically, with regard to phase movement the agricultural potential of America was greater, both in terms of meeting subsistence needs and in generating a surplus which could be marketed. A good natural transport infrastructure aided commercialization. By contrast Russia's movement into the commercial phase was hampered by an inappropriate combination of climate, soil and inaccessibility reinforced by an unstable environment. In addition Russian industrialization was hampered by poor location-of relevant raw materials, a lack of 'soft energy' sources and of an indigenous supply of raw cotton.

Moreover the much greater frequency of harvest failure and famine, of epidemic and of violence in Russia relative to America led to immediate destruction of scarce human capital but also to a risk environment which discouraged investment in all kinds of capital.

A society which has accommodated to a small and unstable surplus, and to frequent shocks and high risk, may require some trauma to break that accommodation and considerable means to do so quickly; a society which has accommodated to a large surplus and relatively rapid growth requires only slight 'ecological' pressure to redirect economic activity to reinforcing existing growth. It takes little imagination to place Russia as an example of the former and America of the latter. Although the physical environment did not prevent the economic development of Russia and America it did have a powerful influence often obscured by its early provenance.

Of course every society has available to it an institutional and attitudinal inheritance from source countries or even its own past. Russia and America shared a European inheritance but the exact nature of that inheritance differed sharply. America not only participated as one member, and an increasingly important member, of a multi-cell state-system, largely based on the Atlantic world, but even in microcosm aped that structure internally during the colonial period. Eastern Europe diverged from the Western European model because it did not share its feudal background of decentralized power. In significant ways Russia was intermediate between Europe and Asia. While it was not an 'oriental despotism' of the hydraulic Wittfogelian type, or even the modified Jonesian variety, it was clearly not fully European. It showed some characteristics of both; [Russia] participated in the economic and political successes of Europe but with a marked distortion of the relevant social and political structure and system of economic management.

Since institutions and attitudes can be modified to suit a particular environment, areas of new settlement are not invariably 'fragments' of the source country in arrested development. The institutions and attitudes evolve in their own particular way, as happened in America. Oddly Russia's periphery conformed much more to the Hartz model. The notion of a formative period has allowed us to expand the Hartz model to take account of environmental factors.

The Hartz model is but one version of the diffusionist model, whose central contention is that political and economic systems, most notably those associated with the industrial revolution, are exported from country to country by some seemingly irresistible process. One variant of the diffusionist approach already considered briefly sees the interaction as hindering rather than promoting economic development. Significant unease has developed with this model. The important shift in emphasis is to focus attention on the domestic response rather than the external stimulus.

The key relationship in the maintenance of economic development is that between the structure of government and that of economic institutions. In the past the complementarity of the relationship between government and market has often been obscured. However the institutional structure of a society is hard to change, except in further elaboration of the principles underpinning the existing structure. The forces of social inertia have to be reckoned with, although it must be granted that inertia can refer to the momentum of a body already in motion.

A consideration of the political factor in economic history may therefore reveal the nature of the obstacles limiting economic development and clarify the relative significance of elements of continuity or discontinuity in the two societies. The next section dwells at some length on the political factor.

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CONTINUITY AND DISCONTINUITY

The excessive attention devoted to the Russian Revolution in 1917, and the consequent specialization of historians' interest in isolated Tsarist and Soviet periods, highlights the tendency to exaggerate the importance of discontinuous as against continuous elements in history. The discontinuous is clearly more dramatic, and therefore more interesting. Similarly a stages approach to economic history, even the adoption of the label 'industrial revolution', tends to stress the importance of decisive turning points. History rarely in practice displays such marked discontinuities. More recently attention has been drawn to continuities, an emphasis less surprising when the field of analysis is widened to include institutional structures and attitudinal sets. In this book it has been argued that deep (or in North's terminology, fundamental) institutions are molded during a critical formative period. Change, thereafter, is usually limited to reform of the surface, or secondary, institutions, which rarely amounts to fundamental restructuring. Once the basic principles of organization of an economy are established it becomes difficult to change them; socio-economic equilibrium is established.

The risk environment is one of the chief molding influences on attitudes and institutions. The central theme of this book is that risk reduction is a necessary precondition for phase movement, although the nature of relevant risk changes with the phase. Entry into a particular phase depends on the reduction of the aggregate risk characteristic of that phase below a threshold level, defined according to the unique characteristics of particular economies. A desire for security, particularly in the context of a high level of risk, is a significant force making for social inertia.

The role of government is critical to risk mitigation and/or management and therefore to economic development. The government can play either a positive or a negative role, as so well illustrated by E.L. Jones in The European miracle. The American government played a very positive role on the West European pattern. The Russian government, faced with a much higher aggregate level of risk, was successful in dealing with pioneer risk but at the cost of developing a structure and policies unconducive to entry into the commercial and industrial phases. In terms of managing a high level of risk, the Russian government has been very successful but the costs in terms of pressure on the population [have] been high.

It is possible to develop a model which explicitly conceptualizes our ideas and explains the speed of phase movement and more specifically how much government intervention such movement demands. The degree of government intervention might be produced by the interaction of two ratios influencing motivation. Such ratios are notional but illustrative of a method of analysis; they indicate the strength of the external stimulus and the domestic response.

First, there is a ratio of the income per capita of the leader economy to the actual income per capita of the country studied. This ratio is sometimes called the degree of relative backwardness (Gerschenkron 1962); it is a measure of a particular kind of power risk which becomes increasingly important with phase movement, vividly illustrated by recent obsession with growth league tables. The income per capita of the leader reflects the technology, institutional framework and resource position of that economy. Actual income per head reflects the existing technology, resources and institutions in the economy under study.

A second ratio contrasts the potential income per capita with actual income. We might call this the degree of achievement of potential. Potential income reflects the use of available resources and relevant technology within an ideal institutional framework and factor supply situation. It also takes account of instability in the environment.

As a general rule governments are concerned about the degree of relative backwardness, individuals about the possibilities for profit or higher income; therefore the former [government], at least implicitly, often explicitly, looks to the level of backwardness and changes in this ratio, the latter [individual] to the level of, and changes in, the degree of achievement of potential.

In terms of the two ratios [described above] Russia and America were in strikingly different situations at the end of the eighteenth century. Russia was a country more or less reaching its full potential but lagging behind other countries because of its resource position; that is, it was characterized by extreme relative backwardness and a high degree of achievement of potential. Moreover it was characterized by significantly high levels of risk and, because of limited resources, by a relatively low level of the risk threshold.

America on the other hand constituted a 'forward' economy but one with very favorable resources even at the existing technological level; that is, America was characterized by a low degree both of relative backwardness and of achievement of potential. Moreover actual risk was low and threshold risk levels high.

Three stages of government reactions to backwardness can be distinguished. The first stage is one in which a 'preliminary' consciousness of backwardness, or dependence, becomes significant, a consciousness experienced by key government and other important interest groups. The mechanism of transmission may be dramatic, for example military defeat, or more gradual, as through economic demonstration effects. Indeed we could argue that the consciousness of backwardness is equivalent to becoming aware of a vulnerability to particular kinds of aggregate risk, a presentment of significant and more widespread power risk. Income superiority may not be adequate to avoid such a feeling; a lag in inter-phase movement itself constitutes backwardness or dependence, since the latter [backwardness] threatens the former [dependence].

The second stage involves the adoption and implementation of key reforms by the government in order to remove significant obstacles to economic development. Some of the measures represent a direct attempt to mitigate or manage risk, others an attempt to remove institutional adaptation to a previously high risk environment. Some of the reforms may be dramatic, such as the emancipation of the serfs, others may involve the rearrangement of surface institutions, such as the laws relating to the nature of business enterprise.

If the economic system is still unresponsive, a third stage may involve -- and that may be the case if it is already close to achieving its potential income -- the deliberate forming of a strategy of phase movement, in particular industrialization, with a coherent program of fiscal, monetary and commercial policies; this stage may culminate in a high level of direct government participation in the economy. Ultimately an economy may be fully controlled, at least in theory, and planned by the government.

The emancipation of the serfs and slaves in the 1860s illustrates the difficulty of fundamental change, despite the symbolic importance attached to the act in both historiographies. The lateness of the reform relative to our analysis simply helps to reinforce the main conclusion. It is enlightening to start with what the reforms failed to do -- they failed to change the nature of existing organization of production or the commodities produced, or even to reform significantly the immediate conditions of labor supply. Undoubtedly they failed to disturb the conditions under which risk was concentrated on the former serfs or slaves. In both cases the reform ran counter to the interests of the strongest group in the countryside, principally the owners who were reluctant participants. In Russia the reform had to be carried out by the ex-serfowners, in America it was imposed from outside. The ex-slave or serf owner managed to adapt the reforms to their own interests; in the one case stripping away the land or increasing cash payments, in the other replacing the slave relationship by an overtly racist relationship (Ransom and Sutch 1977). In both cases, after emancipation the ex-slaves lacked full civil rights and full de jure, or indeed de facto, ownership of the land. The economic system based on slave or serf labor had been perfectly viable and for the owner highly desirable (Fogel and Engerman 1974). After emancipation the agricultural sector, divested of labor, entered a long period of stagnation. The former owners sought to recreate its main features as exactly as possible: plus a change, plus c'est la mme chose [the more things change, the more they remain the same].

Classification by phase indicates the existence of key transitional periods, that is, some increase in discontinuous elements. There may be critical moments when stressed areas are about to move into a new phase, or when they may miss out on the opportunities available. However the weight of social inertia determines how those critical moments, or Sternstunden in Gerschenkon's terminology, are confronted.

A critical movement may be heralded by a disadvantageous movement in the ratio referred to above; by an increase in relative backwardness or by a decrease in the achievement of potential. The latter [decreased achievement of potential] may reflect either an increase in potential income, as transaction costs decline in a context of better provision of public goods, or a decline in actual income as population pressure on resources increases. A dense population may be threatened by greater harvest fluctuations, outbreaks of epidemic disease, urban fires and violent outbreaks. Temporarily the level of commercial risk may rise. There may be more market reversals and an increase in their significance as the level of debt rises.

Relative backwardness impinged on the government and associated interest groups at key stages in the history of America and Russia. The relevance of income or output per head was less significant than differences in the phase, or in a dependency relationship. America experienced such a crisis in the 1760s and 1770s, despite relatively high income levels. Russia experienced a repetition of such crises at varying intervals, but most dramatically under Peter the Great and after the Crimean War.

The symptoms of stress are vividly illustrated by the problems of two regions in particular, although in both cases there is some controversy concerning the exact level of stress. The two examples are New England before the War of Independence (Lockridge 1970; D.L. Jones 1981; Gross 1976; Hall 1982) and the central agricultural region of Russia from the 1870s (Egiazarova 1959). Both regions display the same deteriorating economic conditions. A sustained rise in population began to change the relationship between people and resources. The average size of land holdings apparently declined precipitately as the distribution of available land was completed. Diminishing returns and falling income levels characterized such a period. Competition from new areas of settlement exacerbated the difficulties.

The options available to a stressed area are three; regression into Nurkse's 'low-level equilibrium trap', maintenance of the status quo with an adjustment to the existing situation, or movement into a new phase. The first [option] follows from a failure of population increase to moderate and the continuation of existing production methods. Adjustment [second option] might result from a reduction of population growth which in this context would involve a reduction in birth rates and an increase in emigration. The third, most successful option, would involve either an intensification of agriculture or a diversification of economic activities, comprising commercialization or proto-industrialization. A positive response might combine the latter two options [the second and the third].

A successful transition to the commercial phase depends upon a positive interaction of the resource and risk environment, and an appropriate institutional structure. A good resource position makes for a low risk threshold and a dense government structure. On its own, dense government helps to lower actual risk. A good resource position and a low risk environment prompts a high level of exchange and market development.

In New England the double safety valve of migration and commercialization allowed a positive response. The nature of the nuclear household and impartible inheritance encouraged the former [migration]; good income levels and transport facilities encouraged the latter [commercialization]. Although reactions in these two areas was swift, other responses were much slower. Up to about 1840 change in agricultural production methods was slow, the increase in agricultural productivity slight; however there was some diversification to livestock. Proto-industrialization occurred more rapidly and factory industrialization began as early as the 1820s. Fertility levels began to decline only well into the nineteenth century.

It is possible to revive at least part of a diffusionist model [ID] since the problem-solving mechanism, having evolved in a stressed area, is available to be exported elsewhere. The merchants who established the institutional patterns appropriate to the commercial phase also operated outside New England (Hall 1982).

The center of Russia saw the same combination of commercialization and migration, but in a more limited way. Migration was very often temporary rather than permanent; the link with the village was never broken. The evolution of a proper market system was hindered by the reinvigoration of forced labor by commerce and the brittleness of market demand.

Phase movement however was by no means invariably accompanied by an abrupt transition. The emphasis on critical moments and stressed areas implicitly exaggerates the significance of discontinuous elements. Moreover choice of option was greatly influenced by the weight of the past.

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