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The great divergence
Saturday, 22 August 2009 06:56

Many people are worried about the prospects for global development.  However, it is important to remember how recent and rapid economic development has been.


From the time of Adam and Eve until the 18th century, there was very little economic development in terms of improvements in life expectancy and the quality of life – even though we “progressed” from being hunters and gatherers to peasants and then to laborers.  Indeed, primitive man ate well compared with the richest societies in the world in 1800.


Thus, most regions of the world had fairly similar levels of economic development.  They were caught in a Malthusian trap meaning that each time new technology increased the efficiency of production a little, the population grew, the extra mouths ate up the surplus, and average income fell back to its former level.





Then all of a sudden came the Industrial Revolution which saw a “great divergence” (the title of a book by Kenneth Pomeranz) in the destinies between England and Western Europe, and the rest of the world.  Rapid technological progress, like the invention of the steam engine, and the mechanization of many European industries, enabled England and Western Europe to become the richest and most powerful parts of the world -- eclipsing China, Japan and the Islamic empires.  The Industrial Revolution enabled England and Western Europe to escape from the Malthusian trap -- the efficiency of production accelerated fast enough to outpace population growth and allow incomes to rise.


How did the great divergence happen?  And why did it happen in Europe and not in China or Japan?  These issues have preoccupied economic historians for a long time, and we may well never know the answer.  In reality, it is bound to have been a combination of factors and circumstances.  Here are some of the main arguments:


. Kenneth Pomeranz argues that "geographic accidents" like the proximity of coal deposits to early British industry enabled the substitution of coal for timber, and a more capital intensive production.  The opening up of the Americas provided access to natural resources.  And trade in cotton, sugar, timber and tobacco facilitated Europe’s specialization industrial production.  African slaves that Europeans employed to exploit these resources also provided a vast new consumer base for domestic European exports.


. David Landes argues that between 1000 and 1500 Europe was fragmented, so there was no single political power to limit the development of European culture. European states were constantly competing with each other.  Europe thus developed a uniquely dynamic culture in which rulers made decisions that benefited their subjects. Britain industrialized first because of a variety of institutional factors, but most importantly because of its dynamic culture and openness to scientific experimentation. The other parts of the world that soon industrialized -- France, Germany, the United States, and Japan -- did so because of their flexibility, cultural dynamism, and willingness to embrace change and copy British models.


. Jared Diamond follows a similar line arguing that Europe's geographical placement was the key factor.  He suggests geographical fragmentation, producing the right amount of political unity, as an explanation for why Europe rather than China took the lead.


. Gregory Clark’s research suggests that the increase in England’s productivity was due to a change in the structure of the English population.  Rich English people reproduced at a higher rate than the poor, such that middle class values of nonviolence, literacy, long working hours and a willingness to save increasingly pervaded the economy and society.  (By contrast in China and Japan, the richer classes were surprisingly infertile.)  Clark argues that these middle class values could have been transmitted either culturally or genetically.


. Deepak Lal highlights cultural factors.  He argues that materialistic forces like a hospitable climate for merchants and commerce, the recognition of private property rights by the state and the applications of the “inquisitive Greek Spirit”.  He also emphasizes the role of Western individualism versus communalism.


But why did not China or Japan – with their very sophisticated civilizations – beat Europe to the gun?


Some Chinese writers have argued that the conquest by the Manchus in 1644 (the Qing Dynasty) was a major setback for China.  Thanks to inventions like paper and the printing press, China was arguably on the path toward capitalism.  But under the Manchus, the amount of cultivated land fell, gunpowder weapons and naval technology was lost almost completely, and scientific thought was suppressed.


Deepak Lal follows this line of reasoning in greater depth.  After 1433 the Chinese abandoned their navy and began to restrict foreign trade and contacts. The shipbuilding and sea-going skills thereafter degenerated.  And China remained in relative isolation until the 19th century.  This closure to the outside world amounted to a closing of the Chinese mind, comparable to that in Japan following its adoption of the policy sakoku under the Tokugawa.


While China and Japan closed their countries and their minds, in England this was the age of Shakespeare, followed by those of Locke, Newton, Hume and Smith. The sheer intellectual curiosity and creativeness of these centuries preceding the industrial revolution are in stark contrast to what was happening in the other great Eurasian civilizations.




The Great Divergence: China, Europe, and the Making of the Modern World Economy, by Kenneth Pomeranz



Guns, Germs, and Steel: The Fates of Human Societies, by Jared Diamond



A Farewell to Alms: A Brief Economic History of the World, by Gregory Clark



Unintended Consequences: The Impact of Factor Endowments, Culture, and Politics on Long-Run Economic Performance, by Deepak Lal.



The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, by David Landes



Technology in the Great Divergence, Gregory Clark and Robert Feenstra, NBER Working Paper No.8596.  www.nber.org/papers/w8595


The Post-American World, by Fareed Zakaria


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