Week 2 & 3- Pre Modern Growth Flashcards
How was China more developed than Europe prior to the Great Divergence?
China was richer, more scientific, more urbanised and had a strong sophisticated government.
What are some inventions of China?
-Paper
-Gunpowder
-Compass
-Printing
What are some statistics about China pre Great Divergence?
-The Song Dynasty lead the world GDP per Capita.
-1/3 of global manufacturing output was produced in China pre 19th century.
When did Japan reverse the Great Divergence?
Japan overtook China in the 18th century and Europe in the 20th century in terms of GDP per capita.
What is the Revisionist view on the Great Divergence?
-EUROPE = ASIA pre 18C
-Divergence was a product of 19C increasing returns. This was likely the result of coal, colonial policy and historical shocks (Opium Wars).
-Emphasis on resources advantages/constraints. I.e. negative colonial rule or European trade networks.
-Empirically based on ‘grain’ wage comparisons (goods based transactions) between Europe and Asian regions.
What is the traditionalist view on the Great Divergence?
-EUROPE > ASIA pre 18C (focus on North West Europe)
-NW Europe ahead due to institutions.
-Emphasis on commercial expansion, urbanisation, agricultural productivity, higher wages and cheaper energy.
-Empirically based on ‘silver’ wage (money) comparisons.
What are the two way of quantitatively assessing views on the Great Divergence?
(1) Wages
(2) Income
How are wages used as a quantitative method of measuring the Great Divergence?
-Traditionalists argue this comparison doesn’t make sense.
-Consider ‘silver wages’ not ‘grain wages’ as the price of food is lower in LDCs and manufactured goods more expensive in LDCs too.
-Comparison is easier through conversion into currency and price adjustment through comparable baskets of goods
Describe the nominal wage difference by century.
15C- Silver wages begin divergence.
16C- South Indian silver wages 1/5 that of England.
17C- Grain wages low but comparable
18C- Asian wages diverge from European.
Do the two types of wages give evidence to the Great Divergence?
Silver Wages- Yes
Grain wages- No
What is a more holistic approach to measure standards of living?
PPP (Wages adjusted by relative prices) to calculate a basket of goods.
What are the two basket of goods options?
(1) European Respectability Basket- 1940 Kcal and an 18C budget and diet
(2) Bare Bones Basket- 1940 Kcal and basic good foods.
What is the European real wage evidence?
-NW Europe remained rich after the plague in 1400.
-London/Amsterdam families 3-4 times subsistence.
-Rest of world low wages during 1500-1700
How can income be measured?
-Through production or expenditure
What ‘little divergences’ occurred within Europe?
1400: Southern Europe ahead until 1600
1600: Netherlands ahead until 1700
1700: Britain ahead until 20C
What ‘little divergence’ occurred in Asia?
900: China ahead until 1700
1700: India catches up to China
1700: Japan ahead until 20C
What are some beliefs about China as to why Europe developed ahead of it?
China was/had:
(1) Different demographics
(2) Poor government institutions
(3) Less urban
(4) Less agriculturally productive
(5) Expensive energy sources
(6) Less innovative
What demography issues did China have?
-Higher births/deaths
-High famine rate
-Institutions governed fertility and marriage
What are the components of population growth?
Natural Rate of Increase = Crude Brith Rate - Crude Death Rte
Crude Birth Rate = Births/Population
Crude Death Rate= Births/Population
How is Crude Birth/Death Rate determined?
BIRTH: By the fertility rates of married/unmarried woman, marriage rate and female age of first marriage.
DEATH: By war, famine and plague.
What was England’s fertility like?
18C: CBR = 30/100
FAFM: 23.1
10-15% of women never married
Fertility appears to link to wages before 18C but then becomes disconnected.
What was the Malthusian Theory of equilibrium forces on populations?
POSITIVE CHECKS:
-Events that increased mortality (war)
-Mechanism of lower income nations
-Asia relied on positive checks
PREVENTATIVE CHECKS:
-Events that lower fertility (later marriage).
-Mechanism of higher income nations
-Western Europe relied on preventative checks
What is the “Hajnal Line”
A line dividing NW Europe from the rest of the world in therms of family and societal structures.
How did Chinese and European governments differ?
China was centralised, independent and had a lack of institutional tension
Europe had decentralised government, powerful aristocracy and churches
What is the Theory of Bandits?
-In a world of anarchy, there is no incentive to produce above subsistence.
-Free rider problem prevents cooperation on security.
-A bandit monopolises theft (tax).
-As such the bandit becomes stationary so it can tax regularly.
How does taxation affect output?
-Low tax = greater production since people keep some for themselves.
What 2 reasons demonstrate why democracy better than the stationary bandit?
(1) Production argument- Marginal Benefit and Marginal Cost occur at a lower tax rate as society is run like an autocrat.
(2) Competition argument- Leaders have an incentive to sacrifice some revenue to win elections.
What is Olsen’s Government Theory on the Great Divergence?
Europe’s transition to democracy aligned with the English ‘Glorious Revolution’ in 1688. As such this transition to democracy may have caused the Great Divergence.
What did the Glorious Revolution of 1688 consist of?
-William of Orange took the thrown from James II at the request of the British parliament to realign the power of the English constitution.
-Due to restored balance of power, the government became more credible.
-The glorious revolution led to credible property rights, protection of wealth and elimination of confiscatory government.
Why did the Glorious Revolution matter?
-Government ability to borrow increased.
-Government employment increased.
-Government investment in infrastructure increased.
-Increased government role in legislature
Why did British State capacity matter from a foreign view?
-Increased borrowing expanded the navy and armies- increasing trade and empire.
-Strong state institutions.
-Military and political changes generated technological changes leading to the Industrial Revolution
What is the European Miracle?
The view that Europe overtook Asia
What are the key features of the European Miracle?
-State Involvement- decentralised
-Private-order institutions- independent legal/relgion systems
-Late medieval commerical and agricultural revolutions
Who were the key players and how did they cause the European miracle?
Italian City States- revival of trade
Portugal- Great Discoveries
England/Holland- Merchant Capitalism
Britain- Modern economic growth
How did the Italian City States thrive?
(1) Shipping/Commerce
(2) Agriculture/Industry- Trades in shipbuilding and imports. High food productivity resulted in industry specialisation.
(3) Finance- Trade required system of payment between cities so banking emerged as money-changers. Overdrafts emerged
What was the key to Italian success?
(1) Good policy/State involvement
(2) ‘Good’ Institutions- Tolerance, democratic, property rights, regulated government bond market.
What did Portugal’s great discoveries include?
(1) Shipping- Creation of new ports
(2) Slavery and Sugar- 4.5 million slaves shipped by Portugal. Portugal replaced Venice as main sugar producer.
Why was Portugal successful?
(1) Good state involvement- centre for navigators
(2) Good Geography/Luck- Ottoman-Venetian wars crippled Venice so trade orientated around Africa. Portugal was guarenteed Brazil
What was included during the Dutch ‘Golden Age’?
(1) Shipping- 16C Dutch fleet was largest and replaced Portugal as dominant trader in Asia in 17C
(2) Agriculture/Industry- Highly productive. By 1700, 40% of population were employed in agriculture- low at the time.
(3) Finance- Developed bills of exchange. Established Amsterdam Exchange- oldest securities marlet.
Why were the Dutch successful?
(1) Good state involvement- monopoly trading companies (Dutch East India Company and East India Company) in 1600. Organised community tax raise to fund engineering.
(2) Good institution- Free flow of knowledge, low tariffs, universities and freedom of religion (1579)
(3) Geography- Utilised wind to drain lands
How was Britain exceptional?
(1) Acquired huge trade empire from rivals- supply to raw materials and export of manufactured goods
(2) Agriculture Revolution- Enclose, crop rotation, selective breeding.
(3) Structural change to industry
(4) Good institutions- Property rights from the GR
(5) Good human capital
(6) Good credit market (BoE)
(7) Use of factory system and steam
What is a critical juncture?
Pivotal shocks to economies
What was China and the first critical juncture?
Internal conflicts made China ‘Turn inwards’ away from Western advances.
Merchant activities were viewed less positively due to a rise in Confucianism.
Therefore, gap in the market for Europeans to enter.
How did Atlantic trade spark NW Europe?
-More urbanised
-Higher GDP per capita
-Rapid development of ports
-Commercialisation
What is modern economic growth?
-Sustained growth in population and GDP per capita
-Evidence of structural change
-Urbanisation and secularisation
-Rapid transport/communications
-Wide gap between rich and poor nations
-High growth in efficiency
What is the difference between Schumpeterian and Smithian growth?
Smithian growths depends on market forces and specialisation. Schumpeterian growth focuses on innovation, entrepreneurship and technological change
How was growth different in the UK compared to Holland?
UK had sustained Schumpeterian growth whilst Holland had Smithian growth.
What are the 3 views on pre-modern growth?
GREGORY CLARK- All nations Malthusian before IR. No real wage difference until IR.
KEN POMERANZ- China ahead until IR. Grain wages show NW Europe and China had growth
ROBERT ALLEN- NW Europe escaped Malthusian trap in 17C. Claims of early European miracle
