Shutting down the party

The study of history is constrained by the need to focus on a limited series of events.  The ability to interpret those events is further constrained by what else the historian knows about subjects relevant to those events.  Economic, political, sociological and other areas of knowledge can all be helpful.  Awareness of similar patterns of occurrence in different places or at different times brings further help in interpreting events.  Such an example is presented in an F.A. Hayek book,  The Fatal Conceit: 
   (full pdf, review)

Governments strong enough to protect individuals against the violence of their fellows make possible the evolution of an increasingly complex order of spontaneous and voluntary cooperation. Sooner or later, however, they tend to abuse that power and to suppress the freedom they had earlier secured in order to enforce their own presumedly greater wisdom and not to allow `social institutions to develop in a haphazard manner' (to take a characteristic expression that is found under the heading `social engineering' in the Fontana/Harper Dictionary of Modern Thought (1977)).
 
If the Roman decline did not permanently terminate the processes of evolution even in Europe, similar beginnings in Asia (and later independently in Meso-America) were stopped by powerful governments which (similar to but exceeding in power mediaeval feudal systems in Europe) also effectively suppressed private initiative. In the most remarkable of these, imperial China, great advances towards civilisation and towards sophisticated industrial technology took place during recurrent `times of trouble' when government control was temporarily weakened. But these rebellions or aberrances were regularly smothered by the might of a state preoccupied with the literal preservation of traditional order (J. Needham, 1954).

This is also well illustrated in Egypt, where we have quite good information about the role that private property played in the initial rise of this great civilisation. In his study of Egyptian institutions and private law, Jacques Pirenne describes the essentially individualistic character of the law at the end of the third dynasty, when property was `individual and inviolable, depending wholly on the proprietor' (Pirenne, 1934:I1, 338-9), but records the beginning of its decay already during the fifth dynasty. This led to the state socialism of the eighteenth dynasty described in another French work of the same date (Dairaines, 1934), which prevailed for the next two thousand years and largely explains the stagnant character of Egyptian civilisation during that period.

 Similarly, of the revival of European civilisation during the later Middle Ages it could be said that the expansion of capitalism - and European civilisation - owes its origins and raison d'etre to political anarchy (Baechler, 1975:77). It was not under the more powerful governments, but in the towns of the Italian Renaissance, of South Germany and of the Low Countries, and finally in lightly-governed England, i.e., under the rule of the bourgeoisie rather than of warriors, that modern industrialism grew. Protection of several property, not the direction of its use by government, laid the foundations for the growth of the dense network of exchange of services that shaped the extended order.

 Nothing is more misleading, then, than the conventional formulae of historians who represent the achievement of a powerful state as the culmination of cultural evolution: it as often marked its end. In this respect students of early history were overly impressed and greatly misled by monuments and documents left by the holders of political power, whereas the true builders of the extended order, who as often as not created the wealth that made the monuments possible, left less tangible and ostentatious testimonies to their achievement.

Another example of drawing upon several elements of knowledge in order to interpret history is provided in the Rodney Stark book,  How the West Won: The Neglected Story of the Triumph of Modernity:

Command economies began with the earliest empires and have lasted in many parts of the modern world – they still attract ardent advocates.  But command economies neglect the most basic economic fact of life: All wealth derives from production.  It must be grown, dug up, cut down, hunted, herded, fabricated, or otherwise created.  The amount of wealth produced within any society depends not only on the number involved in production but also on their motivation and the effectiveness of their productive technology.  When wealth is subject to devastating taxes and the constant threat of usurpation, the challenge is to keep one’s wealth, not to make it productive.  This principle applies not merely to the wealthy but with even greater force to those with very little – which accounts for the substantial underproduction of command economies.

The author goes on to give a specific example from China where a strong government brings a period of meaningful growth and development to a close: 

Late in the tenth century an iron industry began to develop in parts of northern China.  By 1018 the smelters were producing an estimated 35,000 tons a year, an incredible achievement for the time, and sixty years later they may have been producing more than 100,000 tons.  This was not a government operation.  Private individuals had seized the opportunity presented by a strong demand for iron and the supplies of easily mined ore and coal. 

…

Soon these new Chinese iron industrialists were reaping huge profits and reinvesting heavily in the expansion of their smelters and foundries.  The availability of large supplies of iron led to the introduction of iron agricultural tools, which in turn began to increase food production.  In short, China began to enter an “industrial revolution.”

But then it all stopped as suddenly as it had begun.  By the end of the eleventh century, only tiny amounts of iron were produced, and soon after that the smelters and foundries were abandoned ruins.  What had happened?

Eventually, Mandarins at the imperial court had noticed that some commoners were getting rich by manufacturing and were hiring peasant laborers at high wages.  They deemed such activities to be threats to Confucian values and social tranquility.  Commoners must know their place; only the elite should be wealthy.  So they declared a state monopoly on iron and seized everything.  And that was that.  As the nineteenth-century historian Winwood Reade summed up, the reason for China’s many centuries of economic and social stagnation is plain: “Property is insecure.  In this one phrase the whole history of Asia is contained.”

When government maintains law and order without smothering commerce and innovation, people can greatly improve their circumstances.  That balance has rarely been sustained.