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The Global Economy > Week 2 & 3- Pre Modern Growth > Flashcards

Week 2 & 3- Pre Modern Growth Flashcards

1
Q

How was China more developed than Europe prior to the Great Divergence?

A

China was richer, more scientific, more urbanised and had a strong sophisticated government.

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2
Q

What are some inventions of China?

A

-Paper
-Gunpowder
-Compass
-Printing

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3
Q

What are some statistics about China pre Great Divergence?

A

-The Song Dynasty lead the world GDP per Capita.
-1/3 of global manufacturing output was produced in China pre 19th century.

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4
Q

When did Japan reverse the Great Divergence?

A

Japan overtook China in the 18th century and Europe in the 20th century in terms of GDP per capita.

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5
Q

What is the Revisionist view on the Great Divergence?

A

-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.

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6
Q

What is the traditionalist view on the Great Divergence?

A

-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.

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7
Q

What are the two way of quantitatively assessing views on the Great Divergence?

A

(1) Wages
(2) Income

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8
Q

How are wages used as a quantitative method of measuring the Great Divergence?

A

-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

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9
Q

Describe the nominal wage difference by century.

A

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.

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10
Q

Do the two types of wages give evidence to the Great Divergence?

A

Silver Wages- Yes
Grain wages- No

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11
Q

What is a more holistic approach to measure standards of living?

A

PPP (Wages adjusted by relative prices) to calculate a basket of goods.

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12
Q

What are the two basket of goods options?

A

(1) European Respectability Basket- 1940 Kcal and an 18C budget and diet
(2) Bare Bones Basket- 1940 Kcal and basic good foods.

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13
Q

What is the European real wage evidence?

A

-NW Europe remained rich after the plague in 1400.
-London/Amsterdam families 3-4 times subsistence.
-Rest of world low wages during 1500-1700

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14
Q

How can income be measured?

A

-Through production or expenditure

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15
Q

What ‘little divergences’ occurred within Europe?

A

1400: Southern Europe ahead until 1600
1600: Netherlands ahead until 1700
1700: Britain ahead until 20C

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16
Q

What ‘little divergence’ occurred in Asia?

A

900: China ahead until 1700
1700: India catches up to China
1700: Japan ahead until 20C

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17
Q

What are some beliefs about China as to why Europe developed ahead of it?

A

China was/had:
(1) Different demographics
(2) Poor government institutions
(3) Less urban
(4) Less agriculturally productive
(5) Expensive energy sources
(6) Less innovative

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18
Q

What demography issues did China have?

A

-Higher births/deaths
-High famine rate
-Institutions governed fertility and marriage

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19
Q

What are the components of population growth?

A

Natural Rate of Increase = Crude Brith Rate - Crude Death Rte
Crude Birth Rate = Births/Population
Crude Death Rate= Births/Population

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20
Q

How is Crude Birth/Death Rate determined?

A

BIRTH: By the fertility rates of married/unmarried woman, marriage rate and female age of first marriage.
DEATH: By war, famine and plague.

21
Q

What was England’s fertility like?

A

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.

22
Q

What was the Malthusian Theory of equilibrium forces on populations?

A

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

23
Q

What is the “Hajnal Line”

A

A line dividing NW Europe from the rest of the world in therms of family and societal structures.

24
Q

How did Chinese and European governments differ?

A

China was centralised, independent and had a lack of institutional tension
Europe had decentralised government, powerful aristocracy and churches

25
Q

What is the Theory of Bandits?

A

-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.

26
Q

How does taxation affect output?

A

-Low tax = greater production since people keep some for themselves.

27
Q

What 2 reasons demonstrate why democracy better than the stationary bandit?

A

(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.

28
Q

What is Olsen’s Government Theory on the Great Divergence?

A

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.

29
Q

What did the Glorious Revolution of 1688 consist of?

A

-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.

30
Q

Why did the Glorious Revolution matter?

A

-Government ability to borrow increased.
-Government employment increased.
-Government investment in infrastructure increased.
-Increased government role in legislature

31
Q

Why did British State capacity matter from a foreign view?

A

-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

32
Q

What is the European Miracle?

A

The view that Europe overtook Asia

33
Q

What are the key features of the European Miracle?

A

-State Involvement- decentralised
-Private-order institutions- independent legal/relgion systems
-Late medieval commerical and agricultural revolutions

34
Q

Who were the key players and how did they cause the European miracle?

A

Italian City States- revival of trade
Portugal- Great Discoveries
England/Holland- Merchant Capitalism
Britain- Modern economic growth

35
Q

How did the Italian City States thrive?

A

(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

36
Q

What was the key to Italian success?

A

(1) Good policy/State involvement
(2) ‘Good’ Institutions- Tolerance, democratic, property rights, regulated government bond market.

37
Q

What did Portugal’s great discoveries include?

A

(1) Shipping- Creation of new ports
(2) Slavery and Sugar- 4.5 million slaves shipped by Portugal. Portugal replaced Venice as main sugar producer.

38
Q

Why was Portugal successful?

A

(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

39
Q

What was included during the Dutch ‘Golden Age’?

A

(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.

40
Q

Why were the Dutch successful?

A

(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

41
Q

How was Britain exceptional?

A

(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

42
Q

What is a critical juncture?

A

Pivotal shocks to economies

43
Q

What was China and the first critical juncture?

A

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.

44
Q

How did Atlantic trade spark NW Europe?

A

-More urbanised
-Higher GDP per capita
-Rapid development of ports
-Commercialisation

45
Q

What is modern economic growth?

A

-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

46
Q

What is the difference between Schumpeterian and Smithian growth?

A

Smithian growths depends on market forces and specialisation. Schumpeterian growth focuses on innovation, entrepreneurship and technological change

47
Q

How was growth different in the UK compared to Holland?

A

UK had sustained Schumpeterian growth whilst Holland had Smithian growth.

48
Q

What are the 3 views on pre-modern growth?

A

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

The Global Economy (9 decks)

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