Investment, Deficits, and the Transition from Feudalism to Capitalism: An Exploratory Heterodox Analysis and Conjecture
Investment in capital, new technology, and agricultural techniques has not been considered endeavors worthwhile in a medieval economy because of a lack of strong property rights and no incentive on the part of lords and barons to lend money to or grant rights peasant farmers. Therefore, the medieval economy and standards of living at that time often have been characterized as non-dynamic and static due to insufficient investment in innovative techniques and technology. The capital investment undertaken typically would have been in livestock, homes, or public investment in canals, bridges, and roads, although investment in the latter would have been hindered by a fragmented political system of fiefdoms and lack of a unified national government. During the mercantilism era, these conditions are claimed to have improved, although much investment and economic activity are deemed to center around trading and small producers. This paper attempts to demonstrate empirically that a productive and sufficient level of public and private investment out of accumulated capital income, taxation, and rents does not have a real impact on economic per capita growth until around the 1600s in Britain perhaps due to the beginning of a strong, central government, increased property rights as well as to the level of capital, tax, and land income achieving an adequate threshold amount. This would also be about the time of capitalism’s ascent as the dominant economic system in England. Even then, dramatic increases in investment and economic growth do not appear until the late 18th Century when investment as a share of the economic surplus reaches a sufficient threshold. According to the heterodox economics and exploratory analysis done in this paper, the types of investment, threshold amounts of investment out of profits and rents seem to matter when it comes to a growth path raising GDP per capita and net national income to higher levels.
Lambert, Thomas E., "Investment, Deficits, and the Transition from Feudalism to Capitalism: An Exploratory Heterodox Analysis and Conjecture" (2020). Faculty Scholarship. 516.