What were Napoleon's 3 fatal mistakes?

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Germany owes its modernization and industrialization to the French occupiers, was a steep thesis. Economists are now voicing their doubts. How important were the reforms?

“In the beginning there was Napoleon” - with these words Thomas Nipperdey introduced his German history of the 19th century. Many historians consider the influence of the Corsican and the French occupation on Germany's development to be a decisive change in the course. Important reforms were inspired by the French model, others were implemented in Prussia as part of a “defensive modernization”. After the defeat by Napoleon, the Prussian reformers realized that their country could only get back on its feet economically and militarily and hold its own against French power through radical modernization.

The reforms initiated directly and indirectly by the French occupation are also a subject of research among economists who examine the influence of institutions - i.e. the framework conditions - on economic development. Four years ago, the American Economic Review published a sensational article by Daron Acemoglu (Massachusetts Institute of Technology), Davide Cantoni (University of Munich), Simon Johnson (Sloan School of Management, MIT) and James A. Robinson (Harvard University ). They stated that they were able to test and prove the thesis in an econometric model for the first time that the reforms implemented by the French occupying power in the areas on the left bank of the Rhine and in western Germany were decisive for the later industrialization.

The article by Acemoglu & Co. made waves. Especially because it's not just about a historical question. Ultimately, their thesis was that radical “Big Bang” reforms that come from outside and are even enforced by force can have long-term positive effects in an underdeveloped, backward country. If one accepts this thesis, it could have far-reaching consequences for development policy.

But now the paper by Acemoglu & Co. has been heavily attacked by two other economists in the current issue of the “Journal of Institutional Economics”. ACJR (that's how they abbreviate the Acemoglu team) have made fatal mistakes: On the one hand, they have incorrectly dated important reforms, which makes their econometric results insignificant. On the other hand, they would have neglected the crucial role of coal mining in industrialization. Both together invalidate the thesis of Acemoglu & Co., claim Michael Kopsidis (Leibniz Institute for Agricultural Development and Transition Economies in Halle) and Daniel W. Bromley (University of Wisconsin).

Let's take a closer look at both studies. Acemoglu's researchers have constructed a reform index that shows significantly higher values ​​for the French-occupied territories than for the non-occupied countries west and east of the Elbe. In the wars after the revolution, the French occupied mainly the areas on the left bank of the Rhine. There was looting and chaos, but also politically and economically significant reforms. In addition to the Rhineland and Palatinate, which were under the direct control of France for nineteen years, Napoleon established satellite states in Westphalia and elsewhere.

The Acemoglu researchers highlight four areas of reform: first, the introduction of the Code Napoléon, which brought equality before the law and more political and economic freedom, second, the abolition of serfdom, third, agricultural reforms, and fourth, the abolition of the guilds that previously competed in handicrafts and hampered industry. The earlier these reforms came into effect in an area, the higher the reform index. Then Acemoglu & Co. consider the degree of urbanization as a result variable. It represents the level of prosperity (and indirectly for industrialization).

After complicated regression analyzes and econometric tests, they see their thesis as verifiable: The removal of the old feudal-corporatist structures by the French led to a stronger economic upswing in the West German areas - but only after a considerable delay. In the data from 1850 there is still nothing to be seen of higher urbanization rates. Only in 1875 and 1900 one can see a stronger development in West Germany than in the unoccupied areas west and east of the Elbe. This was due to the long-term effects of previous reforms, which played a "significant role ... in creating an environment conducive to innovation and entrepreneurship".

The two critics are not convinced by the theses of the paper and the alleged econometric evidence. Acemoglu's model is flawed, important reforms have been incorrectly dated, and the main cause of industrialization - namely the role of coal deposits - is being overlooked, criticize Kopsidis and Bromley. Why, they ask, should it have taken 50 years for the French reforms to have any visible effect? The occupation time was rather short. Only five percent of the German population lived under French rule for more than six years. According to Kopsidis and Bromley, the explanatory power of the institutional reforms is insufficient to explain the pattern of industrialization in Germany. That would only succeed if one grasped the concentration of coal in the Ruhr area as the most important raw material for heavy industry, which experienced an upswing after 1840 with the expansion of the railways.

With the attack on the celebrated Acemoglu paper, the debate is revived as to how strongly external institutional reforms accelerated Germany's way into economic modernity. Coal arguably also played an important role. But she alone was far too little. Russia, for example, had plenty of coal and iron ore as well as masses of cheap labor - and yet there was hardly any attempt at industrialization there in the 19th century, simply because the old feudal-agrarian order was preserved and prevented the rise of new entrepreneurial pioneers.

Literature:

Daron Acemoglu et al .: The Consequences of Radical Reform: The French Revolution, American Economic Review, December 2011

Michael Kopsidis, Daniel W. Bromley: The French revolution and German industrialization: dubious models and doubtful causality, Journal of Institutional Economics, September 2015

The article was first published as “Sunday Economist” in the Frankfurter Allgemeine Sonntagszeitung on November 22nd.

 

Keywords: code civil, Daron Acemoglu, defensive modernization, institutions, coal deposits, Napoleon, heavy industry, Thomas Nipperdey
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