Samuel Cohn: Global Social Trends

Low Tech With High Growth: Australian Sheep Farmers and Norwegian Fishermen

Show the Way

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Creating economic development is not always as hard as we think it is.

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In the standard stereotypes, economic growth comes from technological superiority. England invented textile factories. Germany invented superior steel. The United States invented cars and computers. A nation sells these high tech products for high prices and gets rich. If a nation does not have technological superiority – we think of it as sort of doomed. Yeah, yeah, yeah, India and China are getting technology. But it took them decades. If you are a gloom-and-doomist, Sub-Saharan Africa doesn’t have a prayer because its technological levels are low.

 

Making a fetish of technology makes one believe that poor countries are destined to be poor. It takes decades and decades to generate a technological edge.

    

Economic growth can occur perfectly nicely using strategies that do not involve particularly elaborate technology. Several nations in the West became fully developed using precisely such low-tech strategies. Australia became the third richest nation in the world by 1850 using one simple low-tech industry: sheep farming. They raised sheep; they sheared the sheep. They put the wool in bags. They shipped the bags to England. There was nothing terribly skilled about any of this. It moved Australia from having a negligible economy in 1830 to third richest in the world by 1850.

    

Just to show this wasn’t a fluke, New Zealand did a similar thing. Imitating the Australians, they went into sheep farming too. They became third richest nation in the world by 1870. By that date, Australia was the number one richest nation in the world. They got lucky and discovered gold. With no gold, they would have been stuck as “tied for third” with New Zealand. There are a lot of African nations today who would love to be tied with someone else as third richest nation in the world.

    

Norway became fully developed based on plain ordinary fishing. They were somewhat ecologically lucky on the fishing. In the nineteenth century, large schools of fish regularly migrated in January from the Atlantic Ocean to the Arctic Ocean turning the corner at Northern Norway. At this point, the fish were barely a quarter of a mile off shore. Teams of fishermen could just get into rowboats, row out into the middle of the fish, throw their nets out and catch all the fish they could possibly want.

    

The fishing was totally low-tech. Rowboats were good enough to do the job. No one needed a big expensive ship with decks or a motor. Working a net was not hard. The fish had to be dried in order to be sold – but this was simple. Drying was about as difficult to do as cooking, and everyone knew how to do this.

    

What did Norway do with the fish? The Spanish, the Portuguese and the Latin Americans eat a lot of dried codfish, where it is called bacalao or bacalhau. The Norwegians became the dominant supplier of bacalhau. The French eat smaller amounts of the same under the name morue. In Eastern Europe, they liked their fish salted and pickled. Norway stuck the codfish in a barrel, added vinegar and sold pickled fish in the Baltic. . In 1853, an Oslo pharmacist invented cod liver oil. Cod liver oil turned an otherwise useless by-product of fish preserving into a marketable commodity that could command a premium price.

    

The Norwegians also catch a lot of sardines. Here, they made a mild innovation. In 1879, a Bergen industrialist developed a method for canning sardines. Soon Norwegian sardines, a product that was otherwise difficult to sell, were being packed with olive oil or with tomato sauce and were being marketed around the world. Meat was expensive in the nineteenth century. Canned sardines represented a way for poor people to get protein at a reasonable price; they were an immediate welcome addition to the global diet.

    

How did wool and fish turn Australia and Norway into industrialized economies? The secret was the consumer goods that the Australians and the Norwegians sold to sheep farmers and fishermen who were newly prosperous from wool or fish sales.

    

The easiest explanation is for Norway. Norway in the nineteenth century was dirt poor. They had no coal or steel for manufacture. The country is mountainous, so agricultural conditions are harsh. They were colonized first by Denmark, and then by Sweden. Both nations damaged the Norwegian economy by valuing their own foreign policy objectives over Norwegian trade. The country mostly consisted of semi-self-sufficient farmers who had little money and were reduced to making their own food, clothing and housing. There was not much of a customer base.

    

When the fishermen got rich from the codfish runs, they used their money to buy consumer goods. They did not need to invest in fancy boats. Rowboats were perfectly adequate for their needs. They already had access to all the equipment they needed. So there was no reason not to blow their entire paychecks on consumption. Their consumption jump-started Norwegian industrialization.

     

The fishermen would sail down from Northern Norway to Bergen in the South to sell their fish. They would buy consumer goods to take home. Northern Norway is cold, so clothing was particularly popular. They bought lots of gloves, coats, and socks. Before the Fishing Boom, most Norwegians did not wear underwear. In winter, long underwear is particularly effective at keeping people warm. The demand for outerwear and underwear promoted the development of a textile industry, with Norwegians manufacturing for Norwegians. The fisherman also wanted preserved food to vary their Spartan winter diets. They wanted housewares. All of this stimulated a diversified Norwegian manufacturing economy. This economy exported little, but covered the needs of Norwegian residents.

    

The Australian wool boom had a smaller industrial boom because it occurred in the nineteenth century when manufacture was less developed globally. But there was a comparable increase in diversified economic activity as sheep farmers and sheep traders spent their money on whatever local goods were available for the having.

    

Why did simple industries produce such extensive growth for Australia and Norway? One factor may have been that these nations were relatively egalitarian, and a large percentage of the population was able to share in the boom. Australia did not have a wealthy aristocracy that dominated access to land or money. It was a penal colony where convicts were shipped to Australia and essentially dumped on the shore. With no landed aristocracy, no one had more access to land or sheep than anyone else. When the wool boom started, a large percentage of the population was able to get in on the action and make money from sheep raising. This meant that a very large percentage of the population had its disposable income go up, and a large percentage of the population was able to consume locally made market goods.

    

Norwegian growth was also based on egalitarianism. Norway had had some land reform in the eighteenth century. The social inequality was not as bad as that in Spain or Latin America, but it was getting worse in the nineteenth century. However, regardless of what happened on land, no one had any special claims on the sea. Rich or poor, landed or unlanded, anyone who wanted to take a boat out to fish was both legally and technically able to do it. The boats were small enough to be easily affordable. (Four people generally shared a boat. A fisher only needed enough money for a quarter of a rowboat – no big deal.) So when the fishing boom came, just as in Australia, lots and lots, of people benefitted from it. With consumption going up for a large number of people, this meant lots of demand for new manufacture.

    

So the trick for creating economic growth through consumption seems to be creating a situation where a lot of poor people have their income go up.

    

There are many ways this could happen and ways this might not happen.

    

Would an agricultural boom produce consumption based growth in Modern Africa? In Africa, some of the best commodity land is owned by wealthy speculators, many of them foreign.

    

If the profits are all going to rich Chinese or Europeans, China or Europe will see the consumption boom but not Africa.

    

If the money is going to rich locals, that is better because some of their consumption will be local. If they buy imported luxuries, again Europe and America get the money.

     

If the farming is all capital intensive with giant machines, rather than people, processing the crops, not many poor people get to participate in the boom. This keeps the Type II multiplier fairly low.

    

What about labor intense manufacturing? If this hires a lot of people and wages are higher than those that would have existed otherwise, then this could produce a consumption boom. Unionization and fair trade could make this even more effective if it increases the overall amount of money that ends up in the wallets of poor people.

    

Even government welfare payments could make this happen, although one would want to look at the evidence more carefully before making a final call on this point. Any transfer of funds from other sources to the poor will help increase the Type II multiplier and produce consumption-based economic growth.

    

Some readers might object that the money to fund the welfare payments might be pulled from other areas that might be more beneficial, such as savers who invest or other important forms of government expenditure. The relative merit of encouraging Type II Consumption based growth versus other kinds of growth would need to be looked at empirically.

    

But the Australian and Norwegian data suggest that Type II Consumption based growth is the real deal – and it is enough to make a country fully developed. Is this the best way to create economic development in the Global South today or even spur economic growth in the Global North?

    

No one really knows – but Australia and Norway certainly suggest this is an option worth considering.

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