False economy What’s in it for me? Understand what makes the

Consolidation of power often adversely 
impacts a country’s economic development.
It would be quite natural to presume that 
intelligent leaders would always choose 
prosperity over poverty for their countries.
Unfortunately, political elites are actually a self-
interested bunch, and this has adverse effects 
on development.
The printing press is a prime example. Invented 
in Mainz in 1445, it had spread to Strasbourg, 
Rome, Florence, London, Budapest and Krakow 
by the end of the fifteenth century.
The rulers of the Ottoman Empire were having 
none of it though. For them, the printing press 
represented a threat to their power, and so 
Muslims were forbidden to print in Arabic. It was 
only in 1727 that printing was permitted, but 
even then, religious and legal scholars were 
there on hand as part of the vetting process. The 
impact on education was significant. It is 
estimated that only about 2 to 3 percent of 
citizens in the Ottoman Empire were literate, 
compared to 40 to 60 percent in England.
Another factor in the inhibition of economic 
growth is the fear of creative destruction among 
political elites.
Creative destruction is the process that results 
from innovations improving efficiency and 
obliterating certain economic sectors. For 
instance, the development of the sewing 
machine led to the downfall of the traditional 
textile industry.
In the early nineteenth century, Emperor Francis 
I of Austria famously resisted industrialization. 
Until 1811, all new machinery was prohibited, 
and even railways were opposed. His great fear 
was that new technologies would enable 
revolution, practically speaking. Additionally, 
there was the likelihood that industries controlled 
by elites that favored the emperor would be 
compromised, resulting in the elites’ political 
collapse.
Due to this fear of the industrial revolution and 
associated 
creative 
destruction, 
Austria’s 
development floundered.
In 1883, when 90 percent of the world’s iron 
production relied on coal, Austria was still 

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dependent on far less efficient charcoal. It was 
as if the Industrial Revolution had never 
happened. In fact, when the Austro-Hungarian 
Empire collapsed after the First World War, its 
textile and weaving industries were still not fully 
mechanized.