Matt Ridley: Free movement of genius was crucial to Europe’s prosperity

The Italian referendum and close-shave Austrian election are symptoms of a continent that may be teetering on the brink of political disintegration. It’s just possible that an empire may be collapsing before our eyes, as the Habsburg and Ottoman empires did before it, in or around the same neighbourhood.

With the rise of nationalist parties in Italy, Austria, Hungary, Poland, the Netherlands, France, Germany and Britain, the possibility that the Brussels union has fomented, rather than suppressed, nationalism can no longer be dismissed.

The Habsburg empire, which also tried to make a whole out of linguistically and culturally diverse parts, and ended in a war sparked by Serbian nationalism, is an unhappy precedent. The European Union may be encouraging precisely what it was founded to avert.

True, it is an empire without a hereditary emperor, founded on high ideals of peace and prosperity. But at least initially, Napoleon’s empire was also founded on the principle of replacing old regimes with a more meritocratic and modern system.

Against this background, it is worth recalling that the leading theory among economic historians for why Europe after 1400 became the wealthiest and most innovative continent is political fragmentation. Precisely because it was not unified, Europe became a laboratory for different ways of governing, enabling the discovery of regimes that allowed free markets and invention to flourish, first in northern Italy and some parts of Germany, then the low countries, then Britain. By contrast, China’s unity under one ruler prevented such experimentation.

It is generally assumed that it was Charles, Baron Montesquieu who first articulated this theory, in De L’Esprit Des Lois (1748). In contrast to the great empires of Asia, he remarked, Europe’s “many medium-sized states” had incubated “a genius for liberty, which makes it very difficult to subjugate each part and to put it under a foreign force other than by laws and by what is useful to its commerce”.

I think David Hume got there first, however. In his 1742 essay Of the Rise and Progress of the Arts and Sciences, he mused on why China’s “considerable stock of politeness and science” had not ripened, and blamed the fact that it was one vast empire, so “the authority of any teacher, such as Confucius, was propagated easily from one corner of the empire to the other. None had courage to resist the torrent of popular opinion.” By contrast, Europe is the continent “most broken by seas, rivers, and mountains” and so “the divisions into small states are favourable to learning, by stopping the progress of authority as well as that of power”.

Whoever first thought of it, the idea has gained almost universal agreement among historians that a disunited Europe, while frequently wracked by war, was also prone to innovation and liberty — thanks to the ability of innovators and skilled craftsmen to cross borders in search of more congenial regimes.

In The European Miracle (1981), Eric Jones claimed that “Against the economies of scale that large empires could offer, the decentralisation of Europe’s states-system offered flexibility and a family of experiments in government decision-making”. Since then, the historians Nathan Rosenberg, Paul Kennedy, Jared Diamond and Joel Mokyr have all echoed the same point in books. Mokyr, in a 2007 essay, pointed out that Paracelsus, Comenius, Descartes, Hobbes and Bayle “survived through strategic moves across national boundaries”. He could have added Gutenberg, Columbus, Papin, Voltaire and more to his list.

In the early 18th century an ambitious chemist and would-be alchemist named Johann Friedrich Böttger showed up at the court of Augustus the Strong, elector of Saxony, claiming to have discovered how to make gold. He was promptly imprisoned in a castle by the prince lest he move on and offer his technology to a rival ruler — thus illustrating Hume’s point. Böttger did not of course know how to make gold, but he did work out how to make fine porcelain to rival China’s. The castle was called Meissen.

During the 18th century, Britain experimented with a light tax burden compared with the Dutch Republic. Dutch businessmen moved to Britain in large numbers, bringing with them their technologies and ideas. In China, they could not have escaped uniform taxes, at whatever level they were. The differential between the Dutch Republic and England narrowed, suggesting that the Dutch authorities were trying to hold taxation back to slow the exodus.

In other words, free movement of genius was crucial to Europe’s success. Perhaps equally important was the free movement of skilled artisans. Jones noted that “the Murano glassmakers spread their arts across Europe despite severe penalties threatened by the Venetian authorities”. But there was a crucial difference from what the European Union means by free movement of people today. These people were moving not because the rules were the same everywhere, but because they were different. The European Commission’s obsession with harmonisation prevents the very pattern of experimentation that encourages innovation.

Whereas the states system positively encouraged governments to be moderate in political, religious and fiscal terms or lose their talent, the commission detests jurisdictional competition, in taxes and regulations. The larger the empire, the less brake there is on governmental excess.

So, an ambitious genetic engineer, who has devised a way in the laboratory to suppress agricultural pests and eradicate disease-carrying mosquitoes, by releasing genetically modified males that cause infertility among their offspring, has nowhere to go within the EU to find a regime that will license his experiment in the wild. Like Columbus leaving Genoa for Spain, he goes to the United States instead, eventually selling his British-born business to an American company that can afford to build a GM-mosquito factory in Brazil to combat the zika and dengue viruses. This is a real example: the company is called Oxitec.

In effect, the European continent is saying to innovative thinkers the opposite of what it said for centuries. Where once it signalled that they could exile themselves and take their ideas with them to sow in more fertile ground, now it is saying: it does not matter how far you move within Europe, we want to be sure you can never escape the same rules. With east-west and north-south differences within the EU building, that feels increasingly like a tension that must break in the years ahead.

Matt Ridley, a member of the British House of Lords, is an acclaimed author who blogs at www.rationaloptimist.com.