The Great Divergence Flashcards
What is the Great Divergence?
A term that describes the development in the last part of the 18th Century where some regions of the world entered a world with modern economic growth, while others got left behind.
Western Europe, North America and Australia grew exponentially in terms of economy, military and technology, while other parts of the world did not.
What is the Needham Puzzle?
Why did this exponential growth happen in Europe and not for instance in China, which until this gap was at least on equal footing with Europe regarding both development and innovation?
Which four primary groups of causes are often mentioned in regards to the Great Divergence?
- Luck, endowments, geography
- Institutions
- Reformation and its ethics
- Cultural norms, innovation and science
What are some of the common arguments of the role of luck, endowments and geography in regards to the Great Divergence?
Allen:
Expensive labor and cheap coal in Britain made energi-intensive innovation profitable
It was attractive to use energy instead of man-labor (which was expensive) → incentive to develop solutions that replaced labor with machines → onset of industrial revolution
Pomeranz:
China had the same incentive to substitute man-labor with machines and coal (since they were as developed as Britain in the 18th century), but there was just no accessible coal nearby (as was the case in Britain).
Same incentives as Britain BUT lack of resources.
What are some of the common arguments of the role of reformation in regards to the Great Divergence?
Weber’s original argument:
- Protestant revolution
Protestant regions in Europe did better than catholic ones
- Protestant work ethic: they work hard, because they believe they will be rewarded in the after-life
NB: No one believes this today.
Newer arguments:
- Human capital: Protestants new how to read and write → higher productivity
- Separation of church and state: when the state could no longer attribute their actions to the church and God, they actually needed to be good leaders and produce results → higher productivity
- Re-allocation of resources: Resources is allocated from protestant purposes to secular purposes (e.g. public goods) in protestant countries compared to catholic countries → higher productivity
What are some of the common arguments of the role of institutions in regards to the Great Divergence?
Growth is dependent on institutions
- Institutions: E.g. legal protection, property rights
Investments (and thereby growth) is dependent on institutions
-Narrow corridor: You want a strong state, that creates good opportunities for economic growth, but not that strong, that they can expropriate you
Limitations on monarchy
- Institutions emerge in countries, where wealth owners have substantial checks on the monarchy.
- E.g. When you have parliaments consisting of affluent upper class, institutions that favor property protection and growth will emerge, since it is in their interest
- Creates a credible commitment
What are some of the common arguments of the role of culture and innovation in regards to the Great Divergence?
Intellectual changes in Europe
- Different arguments that agree that something intellectually changed in Europe - broadly the society started supporting the explorations and commercial innovations that came with the industrial revolution
- This did not happen in China and the muslim world.
What are some of the common arguments of why the industrial revolution did not break out in China?
Drop in innovation in Ming and Qing dynasties
Weak property rights and patronage structures
- The state blocks progression
- NB:These arguments have a hard time explaining why China today has catched up to Europe: they still don’t have property rights - everything is state owned.
Opposition to change: interlocking elite interest
Blocks progression and keep things at status quo
