«EHES WORKING PAPERS IN ECONOMIC HISTORY | NO. 13 Agricultural Productivity Across Prussia During the Industrial Revolution: A Thünen Perspective ...»
EHES WORKING PAPERS IN ECONOMIC HISTORY | NO. 13
Agricultural Productivity Across Prussia During the Industrial
Revolution: A Thünen Perspective
Humboldt-University Berlin and CEPR
EHES Working Paper | No. 13 | January 2012
Agricultural Productivity Across Prussia During the Industrial
Revolution: A Thünen Perspective
IAMO Halle Nikolaus Wolf, Humboldt-University Berlin and CEPR Abstract This paper explores the pattern of agricultural productivity across 19th century Prussia to gain new insights on the causes of the “Little Divergence” between European regions. We argue that access to urban demand was the dominant factor explaining the gradient of agricultural productivity as had been suggested much earlier theoretically by von Thünen (1826) and empirically by Engel (1867). This is in line with recent findings on a limited degree of interregional market integration in 19th century Prussia.
JEL Codes N53, O43, O47, Q13, R12.
Keywords: Prussia, Agricultural Productivity, Industrialisation, Market Access Notice The material presented in the EHES Working Paper Series is property of the author(s) and should be quoted as such.
The views expressed in this Paper are those of the author(s) and do not necessarily represent the views of the EHES or its members I. Introduction The literature on the historical origins of differential economic development, especially the debate on the “Great Divergence” between Europe and Asia (Pomeranz 2000) has recently sparked a new interest in the roots of differential development within Europe. A growing number of empirical studies (Clark 1987; Allen 2001, 2009, pp. 25-56; Pamuk 2007) supports the older historiography’s thesis that an emerging gradient of economic development from North-West Europe to the East of the continent unfolded from about the Late Middle Ages onwards (Gerschenkron 1962; Pollard 1981). However, our knowledge of the factors that can account for this divergence is still rather limited. In this paper we will explore to what extent agriculture mattered for this differential development across the European continent. Specifically, we consider the case of 19th century Prussia, a state that was then spanning over nearly 1200 km from regions located today in Belgium to regions in today’s Russia.
Agriculture plays a dominant role in explaining the historical roots of Central and Eastern European backwardness (Warriner 1939; Wallerstein 1974; the contributions in Aston and Philpin 1985; Chirot, 1989; Gunst 1996). In turn, differences in agricultural productivity feature prominently in this debate. Taking Great Britain’s development as the role model for 19th century-Europe a preceding agricultural revolution is often considered as a ‘conditio sine qua non’ for successful industrialisation elsewhere in Europe. In this view governmentally enforced liberal agrarian reforms that created an institutional framework for capitalist agriculture based on free labour and private ownership of land were seen as an essential pre-condition to trigger urbanisation and industrialisation. Without it Central and Eastern Europe failed to catch-up to the West (paradigmatically Komlos 1989).
On the other hand, it has long been argued that causation might run the other way: demand from cities with non-agricultural activities such as crafts, proto-industry, trade, and later on industry generated incentives for an intensification of agriculture. Early prominent exponents of an (urban)demand induced agricultural development were the classical economists, notably Adam Smith (1776) and Johann Heinrich von Thünen (1826). These classical ideas have recently been invoked again to explain the rise of North-Western Europe to the world’s most productive agricultural region until 1800 (De Vries 1974; Wrigley 1987, 1988; Grantham 1989a, 1999; Kussmaul 1990; Hoffman 1996; Van Zanden 1999; Allen 2000, and notably Campbell 2010). Obviously, the same argument can be applied to the performance of farming outside of North-Western Europe. In this view, a lack of ‘thick-market externalities’ resulting from expanding urban-industrial agglomerations (Krugman
1991) might have prevented a more dynamic agricultural development.
On the following pages we consider the interaction between agricultural and wider economic development in the context of Central and Eastern Europe. More specifically we want to do two things. First, we aim to map the differences in agricultural development at a fine level of geographical detail across large parts of the continent in a strictly comparable way. Second, we want to test, to what extent the observed pattern can be explained by differences in access to urban (or non-agricultural) demand as opposed to other factors such as institutional differences and their legacies or variation in natural conditions.
We argue that the Kingdom of Prussia is well suited to shed light on these issues, because we have good data on a lot of regional variation along all the crucial dimensions: agricultural productivity, access to urban demand, quality of soil, and institutional legacy. After the congress of Vienna in 1815 Prussia was the only European Empire which simultaneously encompassed regions belonging to the European ‘growth nucleus’ in the North-West as well as regions that were part of the ‘CentralEastern periphery’. Prussia was spanning over nearly 1200 km from areas left of the Rhine which today belong to Belgium (Eupen-Malmedy) to the Memel territory east of the river Neman which is now divided between Lithuania and Russia. The detailed statistics provided by the Prussian state on its very different regions can be readily compared.
The Prussian data also allows us to explore the effect of institutional variation on agricultural development. To start with, Prussian agrarian reforms were not only seen by Lenin in his theory of the ‘Prussian way’ but equally by many liberals and 20th century-historians as most successful in inducing capitalist agricultural and industrial growth compared to other Eastern European Empires like Austria-Hungary and the Tsarist Empire (Boserup 1972). The Prussian state of 1815 encompassed not only regions that had experienced such liberal reforms, but also regions affected by very different forms of agrarian reforms in the late 18th century and the beginning of the 19th century. In the newly gained large Western and Eastern (Baltic) territories the Prussian reform legislation after 1815 legalized the results of various preceding policies to abolish the Agarverfassung (agrarian institutions) of the ‘ancien regime’. Thus, we find nearly the entire possible spectre of ways to replace the Grundherrschaft (seigniorial system) and Gemeinheiten (commons) by a system of full private property ownership covered within the Prussian state after 1815. This stretched from expropriation of peasants without any seigniorial compensation, through different ways of abolishing seigniorial rights against peasants’ redemptions to their former lords in money or land, to the abolition of seigniorial rights without any redemption to the nobility as result of the French revolution. In consequence, due to different historical legacies, there was a strong and persistent variation in terms of average farm sizes from small family farms predominant in the West to large estates in the East, especially east of the river Elbe (“East-Elbia”). Hence, despite its regional diversity the Prussian reform legislation after 1820 created a rather uniform legal framework for the entire Prussian Kingdom literally from the river Maas to the river Nemen, which took these historical legacies in terms of property rights as given. For that reason agricultural performance can be analysed under the condition of a uniform institutional framework founded on private property of land and liberalised labour markets but with significant variation in institutional legacies as reflected in farm sizes.
Our analysis is based on a highly standardised data set comprising the entire Kingdom of Prussia. On behalf of the Prussian government the Prussian statistician and scholar August Meitzen collected and published in four out of eight volumes on more than 2000 pages agricultural statistics covering all of Prussia, disaggregated into 342 Prussian counties in 26 administrative districts and 8 provinces before the border changes after the wars of 1864 and 1866 (Meitzen 1868ff). Until now a quantitative analysis of this excellent data is still outstanding. This data allows us to consider several indicators for agricultural productivity in a cross-section around 1865 at the county level. A notable feature of the data is that it provides a direct measure of the profitability of land, i.e. of land rents for various types of farm land subdivided by soil quality. It also includes demographic and economic indicators at a regionally highly disaggregated level. This is related to the fact that the data have been collected in the course of re-estimating the Prussian land tax 1861/65 (Grundsteuergesetz vom
21. Mai 1861), which aimed at taxing the income derived from land holdings deliberately under consideration not only of variations in soil fertility but also market access. Hence, in difference to nearly all existing historical studies this enables us to analyse the determinants of that share of agricultural output that was actually marketed, which should be the relevant variable to study the interaction between agriculture and general economic development.
In the next section, we will put our ideas in the context of the (large) earlier literature on agricultural productivity and development of Prussia. Section III describes our data on agricultural productivity and its spatial pattern across Prussia around 1865. In section IV we present data on several candidate factors that might explain the observed pattern, including a measure of access to urban demand, soil quality and institutional legacies. Section V presents a simple theoretical framework in the spirit of von Thünen (1826). This framework delivers some testable hypotheses to guide our empirical analysis in section VI. We estimate the key hypotheses; especially that – controlling for several other factors - agricultural productivity will be largely a function of access to demand outside of agriculture, where aggregate productivity is largely driven by changes in crop mix and changes in factor intensity. This section also contains robustness checks, notably instrumental-variableestimates to deal with possible endogeneity bias in our estimates. We summarize our results in section VII and conclude with an outlook on further research.
II. A brief review of the literature on Prussia We argue in this paper that agricultural productivity across Prussia is best explained in the framework of a land-use model building on von Thünen (1826). This is in stark contrast to the conventional perspective that prevails in the literature on Prussia. Until the 1970s the historiography on Prussian agrarian reforms and agricultural development 1800-1870 was strongly influenced by the institutional economics approach of the Younger Historical School represented by scholars like Georg Friedrich Knapp (1887), Max Weber (1906) and Werner Sombart (1903). Besides making the liberal agrarian reforms responsible for the rise of an East Elbian rural proletariat as a result of legalized mass evictions of peasants these authors were convinced that the development of highly productive capitalist large estates in the East allowed to feed the growing (industrial) German population in the West (Sartorius von Waltershausen 1923, p. 124). In this literature, agricultural productivity in the East is considered to be superior to that in the western part of Prussia, albeit this claim has never been backed by much empirical evidence. Overall, 19th century Prussia was seen as a successful ‘Continental’ twin of England by realizing an intransigent but highly effective growth policy, which - despite high social costs in the medium run - represented an alternative way to escape the Malthusian trap. It provided the labour force for German industrialisation and created a domestic market for consumers industries as well as for food.
This institutional approach has been challenged. To start with, East German historians have shown empirically that East-Elbian agricultural growth accelerated long before the agrarian reforms (Harnisch 1984, 1986). A reform-induced agricultural take-off could not be identified. Moreover, recent studies on the Prussian province Westphalia have shown that agrarian reforms had little impact on growth or structural change in farming within that region. Instead, before and after the reforms the dynamics of market integration processes played the decisive role. After 1830 the different pace at which regions began to participate in supra-regional trade, with the fast expanding urban-industrial demand centres concentrated at the Ruhr, explains more than anything else the pronounced regional differences of agricultural growth within Westphalia. The extension of the railways was of decisive importance for the speed of a region's agricultural development. Regional agricultural growth as well as farming intensity was highly correlated to proximity to the demand centre increasing the number of “cash-products”, which could be profitably produced for the market. Moreover, the pronounced regional growth differences within Westphalia cannot be explained in terms of differences in the fertility of the soil. Rather, the decisive factor was that not all areas were similarly affected by access to the Ruhr (Kopsidis and Hockmann 2010; Kopsidis 2006, pp.