European Miracle Flashcards by lew lee

What is the European Miracle?

The view that Europe overtook Asia vs Asia falling behind.

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Key features of the EU miracle (4) and what they enabled.

State involvement - decentralised
Private-order institutions e.g independent legal, religious, merchant class systems
Commercial revolution - increased trade & finance
Agricultural revolution - structural change

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Key players of the EU miracle (4) and why?

Italian city states- revival of trade
Portugal- the great discoveries
Holland/England- merchant capitalism e.g first stock market, central banks etc
Britain- modern economic growth

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Italian city states (3)

Venice Genoa and Florence

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3 reasons for success for the Italian States

Shipping and commerce
Agriculture and industry
Finance

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Shipping and commerce points- Italy (3)

Highly urbanised

Venice reopened EU trade after Roman Empire fall

Genoa’s navel victorious over Morocco in 1291 opened up straits of Gibraltar

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Agriculture and industry- Italy

Trade-related industries were key e.g shipbuilding, timber trades etc

Import substitution

Food productivity- countryside produce food, so cities can focus on manufacturing goods, allowing for specialisation.

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Finance- Italy (3)

Trade required a system of payment, introduced gold florins (Florence) and ducats (Venice)

Banking emerged

Overdrafts and marine insurance emerged (to ensure shipping)

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Factors for Italian success (2)

Good policy/state involvement
Good institutions

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Good policy/state involvement- Italy (3)

State directly involved in shipbuilding

And rented out to private enterprise.

State had military ships with trade convoys to ensure delivery

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Good institutions- Italy (3)

Government bond market-borrow money to build more ships

Tolerant state- lots of migration, lots of religions etc

Good organisation of agriculture, e.g food in countryside, manufacturing in cities.

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Portugal success drivers (2) and 1 hindrance

Shipping and commerce
Slavery and sugar

Agriculture and industry held back GDP

(No finance like Italy )

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Portugal shipping and commerce (2)

Overtook Italy in shipbuilding during 15C.

Made the ‘great discoveries’ and established trading ports.

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What were the great discoveries Portugal found? (4)

Cape of Good Hope (South Africa)
India
Canton
Japan

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Slavery and sugar- Portugal (2)

4.5m slaves shipped by Portugal to America
1500-1870 - 50% of slaves shipped.

Also overtook Venice as main producer of sugar

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Agriculture and industry

Institutions were poor, poor domestic investment. GDP held back

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Factors for Portugal’s success (2)

Good state involvement
Geography/luck

(State like Italy, but not institutions like Italy. Institutions were poor in Portugal which is why agriculture and industry held them back)

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Good state involvement- Portugal (2)

Prince Henry was devoted to exploring Africa

Had School of Sagres, had most advanced tools for discovery.

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Good Geography/luck for Portugal (4)

Located on Atlantic with access to Mediterranean

Ottoman-Venetian wars crippled Venice (good for Portugal as overtook Venice in sugar producing)

Great discoveries broke Venetian trade monopoly too!

Treaty of Tordseillas gave Brazil to Portugal, (luck by the dividing line of 1493) HENCE WHY THEY ALL SPEAK PORTUGUESE.

The Dutch “Golden Age” features (3)

(Start of phase 2)

Shipping and commerce
Agriculture and industry
Finance

Shipping and commerce- Dutch (3)

Amsterdam became entrepôt in NW EU (centre of import/export distribution)

Dutch fleet became biggest in EU by 16C

Replaced Portugal as the dominant EU traders in Asia by 17C (why a lot of Indonesian restaurants in Holland)

Agriculture and industry- Holland (3)

Agriculture highly productive, spillover into industry (very productive so workers could instead work in cities)

Spillovers lead to agriculture being 40% of employment, lower than rest of EU

Industry less productive than agriculture in general tho!

Finance- Holland (3)

Developed bills of exchange (internal and external)

Developed Amsterdam exchange

Issued perpetual annuities by government free of risk of default. (Risk-free, buyers of the bonds guaranteed to be paid a yield each year)

Factors for Dutch/British success (3)

Good state involvement
Good institutions
Good geography and luck

Good state involvement- Holland/England (2)

Established monopoly trading company (VOC) for Dutch and (EIC) for England. Used taxes to fund drainage and engineering (needed for flat land)

Good institutions (4) - Dutch

Tolerant state- freer peasants, freedom of religion. Good universities Low tariffs

Good geography/luck- Dutch

Used wind power to drain low lands and prevent flooding Spanish Netherlands provided defensive buffer from France. (Small part of NL was Spanish, so France would have to fight Spain)

However how did British take over Dutch in GDP/capita?

Spanish wars crippled Antwerp.

How did the British exceptionalism occur (3)

Britain acquired a massive trade empire from its rivals, (beat them all in war) allowing: Gaining access to materials, and allowed us to export our manufactured goods Undertook agricultural revolution-produced food cheaper, e.g enclose, new crop rotations etc.

Reason for success of British (exceptionalism) (5)

Large structural change Good institutions Good human capital Good credit markets (BoE) Early use of factory system and steam technology (TFP growth)

Large structural change - British

Agriculture to proto-industry to industry

Good institutions- British (2)

Strong property rights Constrained executive (Glorious revolution as in earlier topic 1688, William and Mary and Parliament)

Critical junctures (3)

Pivotal shocks that effected the economies. (some were curses, some were blessings to others) 1. Mediterranean response to plague 2. NW EU (Holland/England) respond to Great Discoveries 3. Modern Economic Growth

Phase 1 of critical junctures (2)

Mediterranean respond to Black Death. Italy took opportunity to trade overland and via Med with Asia Iberia took opportunity to break the Med monopoly via the Atlantic.

Phase 2 of critical junctures NW EU (Dutch/English)

NW EU (Dutch/England) Respond to great discoveries Holland breaks Portuguese monopoly via Atlantic English break Dutch monopoly.

Phase 3

Modern economic growth British took opportunity to sustain economic development.

Italy and 1st critical juncture

Maghribi vs Genoese traders (Collectivist v individualist) Genoese system was a step towards institutions

Characteristics comparison (2) of Maghribi (collectivist) and Genoese traders (individualist)

Maghribi -fear of collective punishment kept agents honest -no formal procedure (based on trust) Genoese -punishment by loss of profit -formal procedures (from trust to a law based system) Genoese was move towards institutions.

China and their 1st critical juncture

Internal conflict- change in government led to “turn-inwards” Turn inwards involved burning of fleet, turning away from western advances, creating gap in market for Europeans (Italy took advantage to trade via med with Asia)

NW Europe and 2nd critical junctures- How did Atlantic trade spark NWE and Eval (3)

Atlantic traders more urbanised Atlantic traders had higher per capita incomes More voyages and volumes Eval: Reverse causality? while this lead to success, institutions still mattered. Difficult to determine causation whether trade caused growth or growth caused trade

Role of Atlantic trade (Acemoglu) And Eval:

Created Smithian growth, allowing EU to increase population and urbanisation. Atlantic trade only provided SR growth (Portugal overtaking Italy) if without good institutions (shown by Portugal having poor institutions and fell behind Netherlands and Spain)

Who were less absolutist and what does this mean?

More tolerant state. Playing a role in growth. (Remember we said Dutch had freer peasants, freer religion, low tariffs and good universities)

Britain and 3rd critical juncture- When did they overtake Netherlands, how did they launch into sustained growth and the issue

Britain conquered Dutch trading empire giving a virtual monopoly. Overtook around 19C Causation issue- MEG causing trade or trade causing MEG

Modern Economic Growth (MEG) is defined by who? And what characteristics (6)

Kuznets Sustained population growth and GDP per capita growth Structural change Urbanisation and secularisation Rapid transport and communications Wide gap between rich and poor countries High TFP growth

Why did Holland not have MEG (2)

Not sustained growth. No Schumpeterian growth, more Smithian growth (remember ag being v productive leading to spillovers to industry and specialisation)

Netherlands and 3rd critical juncture. Argues if Holland was the first modern economy? Looks at an alternative definition of modern growth (with 4 characteristics) by Dr Vries and Van der Wounde

Market integration Agricultural productivity-Smithian growth (spillover into industry) Governance (state capacity) Technological change Remember MAGT