Week 7: European Catching up 1870-1913 Flashcards
Growth facts in Europe 1870-1913?
-Sustainable growth in much of Europe
-More developed countries in Europe doubled their levels of income per head
-Significant growth in less-developed Southern and Eastern Europe
What is intensive growth?
-Hours worked per year fall everywhere
-More capital per worker
-Better use of capital and labour -> TFP (total factor productivity) growth
Why did Europe have intensive growth?
-Leading industrial nation was Britain
-Catch-up potential in other European countries
What does Abramovitz, say what catch up growth is?
Leading nation: more capital, modern technology, highest productivity
Followers: less capital, inferior technology, lower productivity
“Room to move”: Potential to converge to the frontier
What does Abramovitz say facilitates catch up growth ?
-depends on institutions, finance, and human capital to work
-Roles for government and private sector
What are social capabilities (Abramovitz idea)?
- how people, organisations respond to economic opportunity
-society’s ability to adopt and implement new technologies, organize production efficiently, and maintain institutions that support economic activities
-no one knows how to measure it
What backs up social capabilities?
-Temple and Johnson
-Index of social, political, economic indicators forecasts growth
Difference between Britain and Europe?
-Early reduction in family farming.
-Commitment to free trade.
-Big overseas lender
-Cotton textiles most important industry
Agriculture employment fall stats?
-Across Europe it falls , but Britain is an outlier
What does a smaller share of people in agriculture lead to?
-higher GDP pc
-productivity in farms rises as less productive people leave
-low prod agriculture into industry
-urbanization
Rise in farm productivity stats?
-Productivity growth in farms goes up across Europe
-Still low relative to overall productivity in U.K
How important was industrialization (industry from agriculture) in Europe?
Rising importance 1870-1913, growing industrial path
-Except for Spain
How did Europe Catch up?
-Gerschcenkron
-‘Substitution for missing prerequisites’
Examples of substitution for prerequisites?
- Germany
-Italy
-Russia before 1914
How did Germany substitute for prerequisites?
-Zollverein (customs union for German States)
-Financial intermediation: universal joint-stock banks and regional public saving banks
What did Zollverein do?
-Eliminate internal tariffs, common external tariff
-Bigger domestic market, protection for new German industries from outside
-Development of large, export-oriented, cartelised industry
What did Financial intermediation do in Germany?
- universal joint-stock banks - fill missing markets (Deutsche Bank)
-regional public saving banks - local savings –> local investment
How did Italy substitute for prerequisites?
-Private investment banks with foreign capital
-Industrial development primarily in Northern Italy
Why is Northern Italy more industrially developed?
-Proximity to European markets and trade routes.
-better infrastructure, such as railroads and ports.
-Higher levels of education, skills, and entrepreneurship compared to the South.
-Supportive government policies that favored industrial hubs in the North
Britain vs Germany in 1913
-UK still the richest country in Europe
-UK still the most “advanced” economy in terms of agriculture/industry/services mix
-Higher productivity in agriculture & services
-Germany overtakes Britain in manufacturing productivity
-Britain remains dominant in trade
Britain vs Germany in manufacturing facts 1913?
Britain retains leadership in older sectors
Germany has advantages in newer, more scientific sectors
Europe catching up to Britain relative to U.S?
Europe catching up slowly to UK but falling behind US over 1870-1913
What happens if follower countries successfully catch up?
growth and convergence in wages and per capita incomes
What does Abramovitz argue are issue with this catch up process?
-The catch-up process is neither linear nor guaranteed, as it depends on the interplay of social capability, facilitating factors, and international interactions.
