Edited by Ram Mudambi, Pietro Maria Navarra and Giuseppe Sobbrio
Chapter 2: Competition of Political–Economic Systems and Ideological Neutrality as Conditions for Viable Economic Development
Peter Bernholz 1. WESTERN CIVILIZATION AND CAPITALISM Present Western civilization has developed out of a medieval society strongly characterized by the supreme values of Christianity and by some influences stemming from Greek–Roman antiquity. It is not without reason that several crusades against Muslims and Slavs and persecutions of heretics like the Cathars took place during this period. Emperor Henry IV had to bow to Pope Gregory VII with bare feet in the snow at Canossa in 1077 after he had lost his power because of excommunication. However, there existed one important characteristic of Western Europe which set it apart during the Middle Ages: secular and spiritual power were never combined and there existed strong military and foreign policy competition among many more or less independent princes and (free) cities. And this seems to have made a decisive difference. We know now that secure property rights, a reliable and enforceable contract law, generally the rule of law, not too high taxes, not too many regulations and stable money are preconditions for efficiency, innovation and economic growth. But how did it happen that these conditions were introduced in Europe? Why should the ruling elite in an autocracy agree to strong and secure property rights, to minimal state intervention, to a strong limitation of taxes, and thus of its own powers to command and to take away goods at their own discretion? It seems that the ‘New Economic Historians’ have tried with a certain success to answer these questions (North and Thomas,...
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