Cultural Continuity in Advanced Economies: Britain and the US versus Continental Europe (review)

Spanning North America, Continental Europe, and Britain, Cultural Continuity in Advanced Economies attempts to make a comparative, long-term historical account of why the balance of power between the State and the market varied so much from one economy to another. Drawing on classical texts in economic and political thought, Gustav Schacther and Saul Engelbourg argue that despite the significant changes in the State commitment to sustain economic and industrial development over the last three-century time period, a set of continuities can be tracked in both the Anglo-American and continental European experience clearly leading back to their own philosophers and political thinkers, from Adam Smith to Jean Jacques Rousseau. Although a historical transition from feudalism to capitalism could be supposed to compact together Britain and the Continental European economies, the authors suggest that Smith's economic man and conception of public will as the sum of individual needs aligned with the British and the Americans and marked a striking contrast between the Anglo-American world and Continental Europe. Here, prevailed a conception of power and government as acting on behalf of the people according to a social contract between the ruling class and the ruled, embedded in the State economic activities to promote social cohesion by means of economic advance.

Following the evolution of State interventionist policies from the eighteenth through the twentieth century, the authors contend that, on the one side, laissez faire policies dominated the American and British experiences disguised as a State limiting itself to provide private economic players with the legislative framework to make the individual construct his own welfare. On the other side, since as early as pre-revolutionary France and long before the unification in Germany and Italy, politics and bureaucracy took the lead in forging economic growth in Continental Europe. Three chapters are devoted to summarizing the national developments in these four countries to account for this overall picture; one more is dedicated to the specific historical experience of railroad construction during the nineteenth century, mostly to make the case for a breaking difference between the USA and Britain, and accounting for the nineteenth-century experience at large.

What could be defined as the distance between a pragmatic and ideological view, led the British to adopt laissez faire principles regardless of the high impact this command had on the rate of economic development, and the Americans had to resort to state intervention against the background of industrialization. In fact, leaving out the most striking cultural gap between Continental Europe and the Anglo-Saxon world in railroad construction, namely the difference between a private undertaking whose market efficiency was being implemented by the State and a public service in return for taxes, what the authors deduce from the historical experience of railroad construction is a clear-cut difference between Britain and the USA. Due to its ample home capital market, British laissez faire, with very few exceptions in the twentieth century, shaped a three century—long set of economic policies consistent with trade liberalization, limited government spending and conservative tax policies restricting the British state to set up regulatory policies conceived as a function of market efficiency. On the contrary, in the US a very limited capital market made entrepreneurs resort to the State to fund infrastructural and industrial investments. In the US, federal and state power initiatives to fund and promote railroad construction demonstrate how within a Smithian view of capitalist society and economic development a more pragmatic and varying relationship between the State and the business community came to be shaped in the New Continent.

The British case is exemplified further with reference to Continental Europe. Since the eighteenth through the mid-twentieth century, the French, German, and Italian states adopted a mercantilism merging trade protectionism from foreign markets and state subsidies for the export industries. By this means, the State shaped a basically...