What Made Europe Different

March 29, 2025 by Ralph Raico

[Editor’s note: In this selection from The Struggle for Liberty: A Libertarian History of Political Thought, Ralph Raico introduces the idea that western Europe was unique in how it approached the power of civil government and sought to limit it. As we will find later in this chapter, Raico sets the origins of the West’s embrace of freedom in the Middle Ages a period characterized by political decentralization and a salutary conflict between civil governments and church power.]

Now, the first thing to say about liberalism is that it arose in Europe, specifically in Western Christendom. This is the Europe that grew up in communion with the Bishop of Rome, at one time or another, so that the history of Europe and the history of liberalism are intimately intertwined. The question of why this should be the case has given rise to an enormous literature. This approach to trying to find out why Europe was different, why Europe was distinctive, is sometimes called the institutional approach of economic historians. This phenomenon could be called “the European miracle,” after the title of a book by one of the major authors of this approach, E.L. Jones, the Australian economic historian.1 The miracle in question consists in a simple but momentous fact: it was in Europe that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the Malthusian trap, and this enabled new tens of millions— hundreds of millions really—to survive, and it enabled the population as a whole to escape the hopeless misery that had been the lot of the great bulk of the human race in earlier times. The question is, Why Europe? Why is Europe in this way set apart from other great civilizations: China, India, Islam, and so on? Geographic factors played a role, no doubt, but I think that Mises put his finger on the essential point when he wrote the following:

The East lacked the primordial thing, the idea of freedom from the state. The East never raised the banner of freedom, it never tried to stress the rights of the individual against the power of the rulers. It never called into question the arbitrariness of the despots. And first of all, it never established the legal framework that would protect the private citizens’ wealth against confiscation on the part of the tyrants.2

Mises was not primarily an historian. In my view, on the basis of what I know, he was the greatest economist of the twentieth century. On the other hand, he had this ability to put his finger on the solution to some historical problem in a way that other professional historians weren’t able to do. We’ll see when we discuss the Industrial Revolution later on the same thing there. Now, the question is still, Why was Europe in this kind of position? Now, one of the authors in this general school of thought—it’s an international movement: Americans, British, French, or Australians—is Jean Baechler of Paris. Baechler’s pioneering work pointedly expressed this, as he said,

The first condition of the maximization of economic efficiency is the liberation of civil society with respect to the state. The expansion of capitalism owes its origins and raison d’être to political anarchy.3

We’ll see what that means. Among others who have developed this is Douglass North, who won a Nobel Prize in Economics for his work in this area in economic history. North wrote, “It was precisely the lack of large scale political order that created the environment essential to economic growth and ultimately human freedoms” in Europe.4 Now, this institutional approach was adumbrated by John Hicks, the Nobel laureate in economics in the late 1960s. But the essentials of the view were sketched by the great economic historian—now emeritus from Harvard—David Landes, who, by the way, is no particular classical liberal. But he’s a good historian in a book of his called The Unbound Prometheus. Landes said,

There were two factors that set Europe apart from the rest of the world, the scope and effectiveness of private enterprise and the high value placed on the rational manipulation of the human and material environment. . . . The role of private enterprise in the West is perhaps unique, more than any other factor that made the modern world.5

Still, why was there the scope and leeway for private enterprise? Landes also points to the radical decentralization of Europe, what Baechler had called political anarchy and this is what he writes:

Because of this crucial role in a context of multiple competing polities (the contrast is with empires of the Orient and the Ancient World) private enterprise in the West, possessed a political and social vitality without precedent or counterpart.6

Now, of course, it wasn’t a linear progression to some kind of a libertarian utopia. However, we’re talking relatively and in contrast with other civilizations. Keep that in mind. There’s radical decentralization based on a context of multiple competing polities. Baechler, as others might well have written, says that this is the crucial nonevent of European history. After the fall of Rome, no empire was able to arise in Europe to establish hegemony over the Continent. There was no universal empire, although this was tried from time to time. Instead, Europe developed into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains, and other political entities. Within this system, it was highly imprudent for any prince to attempt to infringe the property rights in the manner that was customary elsewhere in the world. And these authors—again I want to emphasize—they’re not “doctrinaire,” if you want to call it that, libertarians or free market people for the most part. They’re simply very good historians and they talk about the customary behavior of states as based on predatory taxation and continual confiscation. States throughout history have acted like the Mafia does in some neighborhoods: what they would very often do is pick out somebody who rises above the rest, who has higher assets—a successful doctor or small businessman—and then the extortion starts with him. This is what states have typically done through history: confiscations and predatory taxation. States apply taxation to the victim to the degree it’s possible. Sometimes, in the case of the late Roman Empire, taxation went beyond what even was natural, was rational, even for the predatory state. The victim died from excessive taxation or regulation and inflation.

What does the decentralization of Europe have to do with this? It created the indispensable condition for what we’re calling the European miracle and that is the possibility of exit—the term used by these scholars. For example, suppose you’re a successful businessman in Antwerp or Amsterdam, and suppose that you were pressed by the state and the state was confiscating or heavily taxing your assets. In Western Europe, you could “exit.” You could exit without leaving the whole cultural area of Christian Europe. You didn’t have to go to a totally different civilization. You could go across the North Sea to England, you could go down the Rhine river to the Archbishopric of Cologne. This possibility of exit held generally among the Italian city-states. It was very easy to go from one to another, depending on how the state was treating you there. This did not hold in every case, but it was a constant factor, and the possibility of exit created limitations to what the state could do to its productive citizens.

Now, this story goes back many centuries. It goes back into the Middle Ages and, by the way, this historical interpretation I’m giving you has also been the basis of the works of other scholars. The great Peter Bauer, for instance, in his work on economic development in Europe, vis-à-vis economic development of the third world, simply assumes this basic interpretation of why Europe grew rich.7 Paul Kennedy of Yale, in that book on the rise and decline of the great empires, assumes as his basis this interpretation.8 Or William McNeill of Chicago and his other synthetic works on European history assume this as a correct interpretation.9 And Peter Bauer said in one of his essays that this economic development goes back at least seven to eight centuries, which means the heart of the Middle Ages.10 So, we have to examine something about the Middle Ages to explain why Europe was different. In fact, it is in the Middle Ages that what we call Europe— not the geographical continent, but Europe, the civilization—came into existence.

Here, there are a number of important factors. Feudalism—that is, the European version of feudalism—played a role. In Russia, for instance, there was a nobility; however, it was based on state appointed dukes, archdukes, counts, etc. In Europe, feudalism was based on a contractual relationship between powerful lords and the king—contractual; that is, there were obligations and duties on both sides. Already, by this time, some limits were placed on what the prince or the king might do. Within each of these realms, which were relatively small anyway, there was often a struggle between powers, and this gave rise to distinctive European institutions. Again, this was part of what made Europe different.

There were representative bodies, representing the taxpayers, which didn’t exist in other civilizations. There were parliaments. In France, the Estates-General or the provincial estates. In Castile, there was the Cortes. These bodies existed throughout Europe. There was, I think, no area of Europe that didn’t have such a parliamentary representative body. Certainly, the different parts of the Low Countries did; Scandinavia also. Castile had a Cortes, as I mentioned, but there was also a Cortes in Aragon. There was a Parliament in Sicily, in Naples, and the German states, and in Hungary, and in Poland.

Princes often found their hands tied by charters of rights, which they were forced to grant their subjects. The Magna Carta is the best known of these, but there’s a famous similar document called the Joyous Entry of Brabant, which each ruler of what is today Belgium and the Netherlands and Holland had to agree to on his ascension to power. This stipulated that no new taxes were to be imposed without the consent of the various diets of the different parts of what are today Belgium and the Netherlands. No new customs contrary to the traditions of the areas were to be introduced; there were to be no foreign office holders, and so on. In other words, we had in that very important area of the Low Countries something similar to the Magna Carta

Now, perhaps more crucial than anything else in the whole distinctive development of Europe was the existence of a powerful international church whose interests were not synonymous or often really compatible with the interests of the state. Lord Acton, who was a Catholic, emphasized this, but it’s not something that you have to be a Catholic in order to agree to. It’s a question of what is actually the historical development. You could be a freethinker, you could be a Protestant, and as a matter of fact, today there are scholars who are not Christians at all who think that the role of the Catholic church was crucial. Things are different when we’re talking about the post-Reformation or especially the post–French Revolution church. At that later point, you found a state of the church coming closer to the state— coming closer especially to Catholic rulers and church and state, each using the other.

• 1

  See Jones, The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia (Cambridge: Cambridge University Press, 2003), p. 118

• 2

  Ludwig von Mises, Money, Method, and the Market Process (Norwell, MA: Kluwer Academic Publishers, 1990), p. 311.

• 3

  Jean Baechler, The Origins of Capitalism, trans. Barry Cooper (Oxford: Blackwell, 1975), pp. 77, 113.

• 4

  Douglass North, “The Rise of the Western World,” in Political Competition, Innovation and Growth: A Historical Analysis, ed. Peter Bernholz, Manfred E. Streit, and Roland Vaube (Heidelberg: Springer, 1998), p. 22

• 5

  David Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present (Cambridge: Cambridge University Press, 1969), p. 15.

• 6

  Ibid.

• 7

  P.T. Bauer, From Subsistence to Exchange and Other Essays (Princeton, NJ: Princeton University Press, 2000).

• 8

  Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Vintage, 1987).

• 9

  William McNeill, The Pursuit of Power: Technology, Armed Forces and Society since A.D. 1000 (Chicago: University of Chicago Press, 1982).

• 10

  Bauer, Dissent on Development (Cambridge, MA: Harvard University Press, 1976), pp. 277, 299–302. Bauer in several examples notes that disparities in economic development between western Europe and other regions begin in the Middle Ages. This acceleration of economic development in medieval Europe provides insight into modern economies, and Bauer concludes that “a working knowledge of European and Mediterranean economic history since the Middle Ages is helpful to the understanding of social and economic transformation in many parts of the contemporary world” (p. 277).