The First Industrial Revolution in Britain, toward the end of the eighteenth
century, and the Second Industrial Revolution in Germany and the United
States, approximately 100 years later, shared the distinction of generating
new products and processes ... economies that did not begin industrialisa-
tion until about the twentieth century tended to generate neither, their prod-
ucts and processes being based on older technology ... [they] transformed
their productive structures and raised their incomes per capita on the basis
of borrowed technology. (1989:3)Patent protection played only a minimal role during the historical experi-
ence of today’s developed countries. Beginning in the 1760s, a stream of tech-
nological innovations in British textiles transformed the industry. Even during
the Industrial Revolution England was not good at rewarding innovation.
Leading pioneers of industrial innovation such as Richard Trevithick, George
Stephenson and Humphry Davy captured very few social rewards from their
enterprise; many others even died in poverty as innovations quickly leaked to
imitators, leaving behind little opportunity for financial reward. The story of
coal was typical, in that benefits went to consumers rather than innovators.
Between the 1700s and 1860s coal output increased nearly 20 times but the real
price of coal was one-third lower in the 1860s than the 1700s (Clark,
2007:237). In Switzerland,one of the most innova tive centres for medical
research, no patent law existed until 1888 when patent protection of mechani-
cal inventions was first allowed. Patent law came into being partly as a
response to the threat of trade sanctions by Germany for Swiss use of their
chemical and pharmaceutical inventions. Only in 1954 did Switzerland
acquire a patent law comparable to other then-developed countries and chem-
ical substances still remained unpatentable until 1978. Before the 1850s many
others,including Britain, France, and the Netherlands, had patent laws but
allowed their nationals to take out patents on imported inventions. The
Netherlands abolished its 1819 patent law in 1869 to increase competitiveness
in industry (Chang, 2003).
Policy towards institutions
Policy advice regarding institutions typically revolves around a conventional
view associated with the World Bank and Hernando De Soto (among others),
which emphasizes the strengthening of property rights, legal reform and insti-
tutional change. A more radical alternative (accumulation by dispossession)
emphasizes the need to ensure the ease of transferring property rights.
Property rights for the poor
Hernando De Soto has famously and influentially placed the creation of prop-
erty rights for the poorest at the centre of his thinking on development. De Soto
222 Patterns and Determinants of Economic Growth