Baten - A - History - of - The - World - Economy - Summary 2023-09-19 22 - 49 - 48

20/02/2023, 10:56 Baten - A History of the World Economy Summary
Baten - A History of the World Economy Summary
1) North Western Europe
Summary of key points:

North Western Europe
Early Growth and Modernization:
Britain and the Netherlands benefited more from global trade as over the years they
developed institutions that better limited the power of kings which resulted in larger
share of the profits left for the merchant class and led to the little divergence
Development of the European marriage pattern meant that people would marry later in
life and allowed for development of skills prior to that. This allowed people to be more
productive and have less children both of which would raise wages in the long-run
Reformation led to higher investment in education which raised literacy rates and
helped in developing human capital
Two opposing views why Industrialisation happened in the UK: 1. Allen argues that it
was labour substitution due to high wages. 2. Mokyr argues that it was due to scientific
institutions and the experimentation of enterpreneurs
The Spread of the Industrial Revolution in the 19th Century:
After 1800 economic growth started to pick up due to diffusion of technology from the UK
to other parts of Europe. Areas of specialization depended on proto-industry and the
available resources. The development of better institutions after the Napoleonic wars
also could have played a role in the subsequent industrialization. This coupled with
falling transport costs and liberalization led to economic growth.
Different countries specialized in different commodities over this period.
Countries that were more willing to have agricultural tariffs had lower improvements in
their standards of living due to higher food prices.
The 20th Century Rollercoaster: 1914-45
Many countries were badly hit by WW1, while neutral nations somewhat benefited from
exports.
Countries that had weaker economies prior to 1929 did better after as they were quickly
forced off the gold standard and were able to devalue their currencies and therefore
increase exports.
The spread of electricity increased economic growth.
Rising popularity of social democratic parties laid the foundations of the welfare states.
Peace and Welfare: 1945-2010
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After WW2 there was substantial economic growth in Europe due to the new stability
which lasted until the oil crises.
There was big growth in the welfare state in many countries which helped reduce
inequality during the period.
EEC lowered cross-country tariffs encouraged liberalization.
The growing wages resulted in high inflation.
After the election of Thatcher, there was a policy reversal and more market-friendly
reforms were implemented that led to another period of growth which lasted until 2007.
More In depth Summary
Early Growth and Modernization:

- One of the main Questions is why the NW region became such an economic
powerhouse before the IR
- Before 1600, Ireland was the European powerhouse
- From the 13th and 14th centuries, Britain and the low countries begun to develop fastest
and after 1600 overshadowed the old meditteranean economic core
- Although Portugal and Spain were first to the Asian trade, Britain and Netherlands
profited more in the long run
- One reason for this is that there were better institutions that were ‘conductive to growth’
as they had a state that encouraged monopolies and chartered companies in the private
sector
- (Buringh and Bosker, 2012) discuss how previous medieval wars lead to different
institutional outcomes for England and Netherlands as they had institutions where
parliament has a more dominant power than elsewhere in Europe meaning there was
less power for the king. This small institutional divergence lead to a small economic
divergence in NW Europe
- In the late middle ages the European Marriage Pattern EMP emerged and caused a
further NW divergence
- The EMP is where in NW Europe, women and men selected each other voluntarily which
resulted in later marriage and more singles in the population. This meant that women
would have children later and would be able to increase the quality of their own skills so
they could earn higher wages. This lead to lower fertility as the opportunity cost of
children was higher and so the population did not increase as much and so wages
remained higher
- (Voigtlander and Voth, 2012) argue that this also lead to higher quality rather than
quantity of children leading into better quality human capital formation in the economy
- Capital markets also improved at this time with money being lended to houses at
reasonable interest rates (Van Zanden, De Moor and Zuijerduijn, 2012)
- There was also increased land market flexibility
- (Jan de Vries and Van der Woude, 1997) say that Netherlands was the first country to
undergo modern economic growth
- They say it started from the black death and ended at the start of the 19th C.
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- They say it was caused by increased literacy rates, human capital quality and the level
of human capital accumulation
- The Dutch East India Company was established in 1602 and was very successful with
trade and allowed the Netherlands to prosper
- This lead to increased trade between Asia, Europe and also to America via transatlantic
trade routes
- (Acemoglus et al, 2015) says that ‘it was the dynamic development of the Atlantic
economy that contributed to the rise of England as the new core of the World economy
after 1650’
- The Proceeds of growth had unequal distribution (Allen, 2001) and th Netherlands and
England became very unequal between the rich and the poor
- Although inequality was on the rise, there was still increased education levels shown by
literacy and numeracy rates
- The Industrial revolution that started in Britain was as a result of its urban sector, with
well developed markets and institutions that was aided by a highly skilled and productive
labour force
- (Allen, 2009) says it was as a result of labour substitution from capital that was aided by
low fuel costs such as coal and high wages
- (Mokyr, 2002) says that it was induced by enlightenment of entrepreneurs that
encouraged experimentation
- Industrial revolution was summarised by an increase in steam power, growth of the
factory system, increase of industrial employment and an expansion of industrial
exports.
- These all lead to rapid GDPpc growth
The Spread of the Industrial Revolution in the 19th Century:

- The Early 19th C. growth was special as it occurred not just in Britain but NW Europe as
a whole
- (Bolt and VanZanden, 2014) data shows that from 1500-1800 there was almost no GDP
growth until growth starts after 1800
- Growth was faster in NW Europe than the rest of Europe which lead to divergence up to
1870
- The new growth came with diffusion of technology across Europe starting with Belgium
followed by other Areas such as Germany, France Switzerland. This lead to
developments in the proto-industry
- The proto-industry was the foundation for the larger scale machine intensive industrial
revolution that would precede (Power moved from water to coal and steam)
- Areas with high levels of agricultural productivity such as in the Netherlands had less
incentive for structural change so industrial growth came later 1860
- An alternative interpretation of the growth was the ending of the Napoleonic wars which
lead to more stable political institutions that could facilitate economic growth in Europe
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- (Acemoglu et al, 2011) says that other policies such as a ‘highly rationalisable legal
system’ the ‘European state’ and policies to reduce transport costs lead to increased
trade through freeing international markets
- Steamships and train begun their expansion in 1830s which reduced transport costs
- Communication developments increased market integration
- Liberalisation of trade in 1850/60s and abolition of corn laws further increased market
integration and trade
- These factors all lead to ‘modern economic growth’ in NW Europe at the start of the 19th
C. based on British technology and French institutions
- Belgium profited the most throughout the 19th C. as it a small, open industrial export
lead country that competed with Britain
- Denmark also profited through becoming a leading agricultural export lead economy and
through internal industrial developments
- (Maddison, 2001) states that both Denmark and Belgium saw GDPpc increase threefold
- UK and Netherlands started the 19th C. with the highest real incomes and also saw
GDPpc double
- (O’Grada, 1995) discusses how a famine in 1845-47 lead to outward migration in Ireland
to USA which declined the population resulting in higher GDPpc
- France had a lower GDPpc at the start of the 19th C.
- (Hoffman, 2003) says that this lower starting point for France was caused by higher
transaction costs that did not help economic growth and were made worse through
fragmented property rights
- During the 19th C. France modernized its institutions and invested in schooling causing
a GDPpc convergence with britain by the end of the century
- Another key event was the ‘catching up’ of Scandanavian countries caused by two main
factors. High levels of human capital formation and democratic institutions
- Democratic institutions existed through persistence of the ‘Era of Liberty’ in 1719-72
- Denmark specialised in agricultural exports, Norway developed through shipping,
Sweden developed into an industrial economy and Finland exploited its timber
resources.
- Finland was strictly by harvest failure in 1867- 68 which prevented growth (Hjerppe,
1989)
- (O’Rourke and Williamson, 1999) said that this region benefited from globalisation that
lead to migration inflows of skilled workers
- International trade with the Scandanavian region and Britain grew and continued
- After 1870, German economy grew at a faster rate than Britain
- Globalisation and falling transport costs converged transatlantic wages and prices
between Europe and America
- (Tracy, 1989) says that Netherlands and Britain committed to free trade policies which
was different to the rest of Europe and helped facilitate growth as their industrial sectors
did not need protecting
- Cheap imports of food and rapid industrial growth lead to increased standards of living
for NW Europe
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The 20th Century Rollercoaster: 1914-45

- Belgium and North France never fully recovered from WW1
- Scandinavia and Netherlands remained Neutral and profited from the high demand
driven by the war that was increased from a lack of competition
- The poor and middle classes suffered from the war as trade with the US for grain was
stopped due to German naval forces
- International markets seized and transport networks stopped creating a goods scarcity
- Sweden, Denmark, Norway and the Netherlands had financial sector issues caused by
sudden deflation in 1920-21 where Central banks had to step in to rescue banks
- Netherlands had a modest financial crisis with limited effect on growth and employment
- Belgium also had very little impact
- Britain had higher impacts from the Great Depression as it returned to the Gold Standard
which limited its monetary policy
- In the 1930s there was a correlation between previously weak economies and those who
had less of an impact from the Great depression. This was because they were forced off
the post war gold standard and so when the deflationary shock hit, they were able to run
loose monetary policy and correct for this.
- For Belgium and netherlands who remained on the gold standard, the impact persisted
for longer
- Although there was war, the NW European region modernized in the interwar period as
labour productivity growth was faster due to the rapid spread of technologies
- Electricity facilitated growth in the interwar period
- There was a social and political reform in the interwar period as women were able to
vote. This was shown by a Polity IV score of nearly 10 in 1920-30
- There was growth of the welfare state and trade union movement in this period
Peace and Welfare: 1945-2010

- After WW2, ‘the world economy as a whole entered a new phase of stability, rapid
growth and extension of the welfare state’
- The NW European region profited from this new stability
- There was shift away from coal to electricity and Nordic countries profited from new
sources of energy
- Growth generally persisted until the 1970s oil crisis broke the cycle
- 1945-1970s was known as the Golden years in this region and there were many
institutional changes
- The European Economic Community was established that aimed to set up a customs
union and sync tariffs
- All countries in Europe saw a growth in the welfare state
- Policies relied upon national cooperation and reform to be successful and the higher
welfare spending was paid through progressive taxation which reduced inequality
- The Golden years were different from before as rapid growth actually reduced inequality
as opposed to widening inequality in previous eras of growth
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- The only issue is profit margins for firms were pressured as wage rises lead to falls in
margins
- In response to this, they increased exports (facilitated by EEC liberalisation), increasing
investment and increasing prices
- This lead to inflation and given the tight labour market, this lead to further wage rises
- This lead to a wage-price spiral in the 1960s that continued into the 70s
- In the netherlands, there was the Dutch disease as an overvalued exchange rate from
gas exports lead to crowding out of the manufacturing export industry
- The oil crisis lead to a period of stagflation
- Margeret Thatcher's power in 1979 was a symbolic end of the postwar period for Britain
as she argued wages were too high and declining industries needed to be closed. This
caused clashes with unions.
- Thatcher claimed the state had to step back from regulation of the economy and allow
the market to work
- 2008 crisis showed the issues with a minimal public intervention liberalised approach to
regulation in the economy
- This extreme switch by Thatcher was not extreme in the rest of continental Europe
- This lead to higher inequality in Britain relative to the rest of Europe
- From the 80s onwards, the industrial sector declined and there was a structural shift
towards the services sector
- Education, healthcare, banking and insurance became the main employment areas in
the economy
- This was as the 1990s ICT revolution came into effect causing a structural shift in
employment
- Banking benefitted the most from the new technology and liberalisation if international
capital flows around the world
- This lead to a general boom in the 1990s for NW Europe
- This boom ended with two steps. 1. The burst of the Dot Com bubble that collapsed the
stock market in 2001-2 2. The Financial crisis of 2007-9
- These ended the long 30 year period of growth
2) Southern, eastern and Central Europe
● Central Europe became rich during second industrial revolution.

● Explains what factors affected success during second industrial revolution.
● Explains what affects numeracy.
● Shortly explains growth trends post WW2
● Examples of how geography matters economically
● Examples of how wars and disease hurt economically.
● Examples of how institutions matter economically.
Author: Joerg Baten
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Pointers - these areas haven’t actively been researched upon an which is surprising as these
regions were actually racing towards higher standards of living whilst the Industrial Revolution
unfolded in Britain
National incomes of Spain and Italy might have been higher than in the UK in 1500 and Italy
might have had higher education levels. Generally, people migrated from the north to south
(especially Italy) at this time, not other way around.
SE led in productive capacity and education during the late medieval and early modern periods.
Numeracy- an important indicator in determining and comparing the human capital development
for these regions
SE was dominant in terms of National Income as well
Only after beginning of 16th century: North-west Europe had highest numeracy rates in Europe.
Before it was southern Europe.
(van Zanden et al. 2012): “Spain was likely also a world leader in quasi-
parliamentary participation during the Middle Ages” (Quote) → growth.
Why was Italy rich?

● High population densite and urbanisation - earl developments of cities (venice and
Genoa)
● Venice important city economically -- How? Relatively safe military due to geography.
● Acemoglu and Robinson (2012): Venice had institutions which permitted
successful entrepreneurship → created growth.
○ In rest of Europe, wealthy merchants excluded newcomers (A&R 2012)
○ Joint stock capital firms -- institution which helped trade in venice (A&R 2012)
○ Tuscany developed a highly successful and skill intensive textiles industry in the
17th and 18th century
● Developments in banking (institutions) and textile industry (technological advantage).
Why did Italy fall behind North west?

● Military conflicts often by major foreign powers.
○ Political fractionalisation reduced ability to defend militarily.
● Italy far away from new international trade routes.
● There was a shift of world trade to North Western Europe
● Alfani (2013): argues 17th century plagues hit Italy harder than rest of Europe.
● Property rights more secure in NW.
● Acemoglu and Robinson (2012): Venice became aristocratic. Rich families excluded
newcomers
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East-Central relatively high standards of living around 16th-17th century, as measured by

height.
Malinowski (2013): if real wages measured for both urban and rural areas, Poland comparable
to England. Both before and after around 1600, English real wages were higher. Hence golden
age.
How were standards of living high in East-Central?

● Low population density.
● Immigration encouraged -- many of which were Jewish and this led to settlement of more
and more skilled labourers.
● Polish parliament put constraints on executive.
Why did this change later?

● National policy dominated by landed nobility which pursued rent-seeking.
● Wars (including civil wars), disease.
● Forced labour by large landowners, called “the second serfdom”.
● 17th and 18th century the government became more extractive
● By 17th century grain exports to western Europe started (industrial goods in exchange,
which went to nobility). Less food for locals and so nutrition and health worsened
● Russia faced permanent military challenges from the polish, swedish, the ottomans and
the pastoral tribes and excess returns from the harvest were utilized by the army giving a
relatively low nutritional stature in 18th century- 19th century
What affects numeracy?

● Land inequality → lower numeracy (elites prevent public financing of primary
education).
○ Combination of not caring about peasants and fearing land reform/revolution.
○ Seen in Southern Italy, Russia.
○ One of the PRIMARY reasons for differences in Europe.
● National education policy. Low education spending → less numeracy
(surprising, right?)
○ Especially low in the Ottoman Empire. Low fiscal capacity → had to
spend all money on just military and bureaucracy - we see this when
Armenia and Georgia (originally rule by persian and then ottoman
empires) are taken over by the russians and numeracy increases
● Personal status. Serfdom/slavery, e.g. in Russia and Poland, hurts numeracy.
● Religion. Becker and Woessmann (2009): Protestants had to read the bible →
higher numeracy.
● Proximity to trading ports → higher numeracy
Notes on numeracy
● Numeracy precedes literacy as a rule of thumb -- first stage of human capital
improvement.
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● Numeracy increased very quick in Eastern Europe between 1810 and 1850.
● Western Hasburg had the highest recorded level of numeracy and the lowest were
observed in the Balkan countries (under the Ottomans) due to low education investment,
a small central budget and a military preference.
During the late 19th century, central Europe overtook south and east economically.
● Italy started off 19th century with higher GDPpc than Germany, Austria and Portugal.
● East and SE Europe grew during late 19th century, but hurt by war, civil war and
revolution during early 20th century.
There is a variation in speed for all development indicators – while relatively high numeracy and
school enrolment levels were reached quite early, gains in income and stature increased quite
slowly during the 19th century
What affected which countries did well during second Industrial revolution?
● High human capital
○ Enabled advanced industries, such as chemical and electro-technical →
small share of employment during 19th century, but innovations
influenced other fields.
● Access to trade routes
● Institutional quality
● Fiscal capacity to build infrastructure.
○ Russian government invested heavily in railroads, banks, imported technologies.
Largely state-led industrialisation.
● Industrial development that had begun in north western Europe- especially in England
and Scotland- during the 18th century diffused to central and eastern Europe during the
second half of the 19th century
● Central and Eastern Europe grew at a better rate (russian empire invested heavily)
Examples of sources of growth during second industrial revolution:

● Agricultural efficiency improved
○ Chemical industry → developed new fertilisers.
○ Machinery improved. From wooden to iron ploughs in poor areas. Threshing
machines in richer areas.
● Lower transport costs → food imports from America, Russia → higher real
wages and nutritional levels.
● Service sector growth
○ UK: service sector employment grew by 9%, industry by 2% (p 58-59)
○ Switzerland: service sector employment from 16 to 28 pp (p 59)
○ Broadberry and O’Rourke (2010): stronger relationship between national income
and service sector employment than industry employment.
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The first era of Globalization, 1850-1913
Globalization mainly became visible in the economic markets of labour, capital and goods.
Integration in labour markets was of primary importance- migration from Old World to New
World.
SE and EE migration occurred in decades before WW1- Italian emigration extremely high
Emigration from poor parts of SE and EE relatively low initially mainly because of different types
of transportation, social and psych costs- the friends and family effect also imp
Did emigration to the Americas cause brain drain in Europe?

● Stolz and Baten (2012): Many jews left Russia, which reduced the human capital level.
● Mid 19th century German emigration caused by famine. Emigrants were less
skilled than average population → no brain drain.
Economics effects of WW1 and interwar years:

● Post WW1 era of deglobalisation followed
● Europe lost market share to US and Japan. Many countries industrialised →
doubling of industrial plants during WW1.
● Russian revolution → expansion of heavy industry and education. However,
collectivisation → harvest failures (in eastern europe).
● Ritschl (2002): unsustainable foreign lending + war reparations caused less
investment + austerity policies → Germany hit badly by Great Depression.
● Nazi German autarkic policies tried to subtitute most imports not directed to
military products (cancelled all imports except iron ore) → mortality rates rise
in large cities even before WW2.
Gold standard:
● Return to gold post WW1 driven by ideology.
● Helpful normally due to investments protected against currency devaluations
→ important for capital mobility before WW1.
● The earlier you left gold standard, the better prospect of recovery
(Eichengreen and Sachs 1995)→ devaluations meant you could export
cheaper + deflation discouraged investment and consumption.
WW2 and the costs of war:

● German industrial capacity increased during war, but this did not help since it was
directed towards military production.
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● In German-occupied territories, WW2 caused destruction of physical capital and low

investments.
European economic boom during 50s and 60s:

● All European economies except eastern Europe became service sector economies, with
ca 60% service share of GDP -- growth from structural change decreased over time.
● Predecessor institutions to EU helped economic integration - free markets.
● Capital shortage no problem - relatively mobile.
● Labour shortage no problem - “Gastarbeiter” (guest workers) in Germany from southern
Europe contributed to growth.
● Technological diffusion from US.
● Keynesian policies smoothed business cycles.
● Growth was initially due to the shift from agriculture to industry and service sectors.
● Development of Eastern Europe- strong growth in USSR and Yugoslavia(socialist
system here in particular led to stronger growth), both experienced high growth rates in
income and education during the 1950s
Stagflation of 70s and 80s:

● High growth ended with oil shock of 1973.
● Remembered for combination of low growth and high inflation.
● Crafts and Toledo (1996): low growth not just due to oil prices, but due to less
technological convergence with US. Europe had largely caught up.
● Also lower growth due to rise of environmentalism and some sacrifice of growth for
sustainability - mostly in richer parts of Europe.
Economics in 90s and 00s:

● Transformation from socialism to capitalism substantially hurt GDP. Higher crime, lower
life expectancy.
● Deepening European political-economic integration.
○ Introduction of common currency → lower intra-European transaction
costs and increased mobility.
● Solow (1987): limited productivity increase of ICT in most industries.
Conclusion
● Considerable variability in important development and welfare indicators over a period of

time i.e. the indicators showed positive and negative signs of growth in different periods
th
● 19 century central Europe ahead of the its counterparts but growth stranded due to the
the two world wars
● 1950s-1960s – a true golden age for many European countries
● EE- socialism imposed strong constraints on economic development
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3) United States and Canada
Introduction
● United States and Canada have been among the richest nations in world for past two
and a half centuries – shown by GDP on Figure 3.1
● They’re endowed with large amounts of fertile soil and natural resources
● They’re large land mass allowed migration from all over the world in order to take
advantage of these resources
● Both countries have managed to avoid wars on home territories however participation in
wars have slowed down their progress
● Broad-based educational systems at elementary school in the mid-1800s then to high
school level in early 1900s and broad-based university opportunities after WW2
○ This allowed the populations’ development leading to productivity
Pre-colonial development
● People lived in relatively small groupings of hunters and gatherers throughout the
continent with lifestyles strongly tied to their environments
● Native Americans
○ Located in Eastern part of North America

○ Often trapped game in forests and produced some maize and other crops
● North-West Indian tribes
○ Sited near rivers and ran to the sea often

○ Had stable food sources
● The Plains Indians
○ Often travelled over large swaths of territory

○ Hunted and Gathered at same time
● Many of these tribes got nutrition mainly from meat and other sources were not typically
harmed by diseases
● One measure of net gain from nutrition after losses due to work and disease as children
is adult height
○ The Plains Indians in 19th century were among the tallest populations in the
world (Steckel and Prince 2001)
European Colonisation
First Contact
● Started with Norsemen in 10th century along the north-east seacoast of Canada
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● Was short-lived possible due to

○ similarity of outputs produced in Scandinavia and northern Canada
○ problems navigating trade routes at the time
Migrations from Europeans

● North American path of development heavily influenced by migrations of Europeans from
Spain, England, France and Netherlands
● Spaniard Hernando Cortez first arrived in the Aztec nation in Mexico in 1513
○ His discovery of gold, silver and successful takeover over the Aztecs incentivised
more Spaniards to come over
● English, French and Dutch explorers discovered that the areas that became Canada and
the US were lands with enormous diversity of natural resources.
● Settlers from these countries began establishing colonies along the Atlantic coastline
and further inland along larger rivers
● After some fighting, the local Indian tribes made peace with the settlers or more often the
tribes moved westward.
○ This happened for nearly 3 centuries
Development of a ‘Staple’
● Staple Definition: Produced regularly or in large quantities
○ Stable crops include wheat and rice for example
● One key to colonial expansion was the development of a ‘staple’ that was demanded in
the trade with Europe and its colonies
○ In early 1600s, Virginia expanded its tobacco production with indentured servants
and increasing number of slaves after 1660
○ South Carolina produced rice from slave labour
○ Canada offered fur, timber and fish
○ New England’s tall trees used in ship production
○ Pennsylvania and middle colonies produced many foodstuffs
○ Colonial cities specialised in trading services
● Over 1700s, Data shows increases in market integration that slowed and interrupted
when wars broke out (Dobado-Gonzales et al. 2012)
● See Map 3.1 for most important imports and exports c. 1750
Influence of Stables
● Stables influenced structure of political economy and regional differences in early 1800s.
● Slavery dominated tobacco, rice and later cotton agriculture in the south.
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● Income distribution skewed heavily to plantation owners with large share of slaves and
sizeable group of middle-class farmers
● The plantation owners of 1780-1860 were one of the wealthiest people in the world on
the value of the slaves they owned
● These owners insured their children had proper education, didn’t push for widespread
public education and many southern planters banned the education of slaves
● These gains of slaveholding diminished over time and governments eventually banned
slavery in the late 1700s
● Outside the south, production of stables (wheat and foodstuffs) was characterized by
smaller family farms which led to more equal income distribution than in the south
● Many northern states offered private elementary schools after 1800 and public education
by the 1840s
Creating and independent nation with a broad range of economic freedoms

Gaining Independence
● After the French and Indian war ended in 1763, the English gained hegemony along the
eastern seaboard north of Florida and further inland in many areas
● The English Crown and Parliament had previously regulated colonial activity and trade
loosely
● After the war, these regulations became more strict – sought to increase the colonists’
share of the tax burden of England’s defence of the colonies after the war
● The colonists that eventually became the US protested against these changes and put
up temporary trade embargoes against England
● Tensions escalated with every new regulation and after shots were fired in April 1975 in
Lexington and Concord in Massachusetts, a revolution erupted
● In 1776, a Continental Congress of representatives from each English colony outside
Canada sent a Declaration of Independence to King George III
● By 1781, the American colonists had managed to outlast the British and gain their
independence
Aftermath of Independence
● Dissatisfaction with problems around a loose confederation of states in the 6 years
following the war led to a Convention in 1787 which led to the American Constitution
○ The American Constitution has become arguably the most important political and
economic document in world history
○ In combination with the Bill of rights, added after the Constitution, it established a
wide rate of individual rights and freedoms not granted by any government
before:
■ Protection of private property
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■ Patents and copyrights

■ Free speech
■ Freedom of the press
■ Freedom of religion
■ Right to sign contracts without government interference
■ A representative democracy
■ Right to trial by a jury of one’s peers
■ And a series of other individual rights too numerous to name
○ The document gave the national government the right to collect some taxes
The economy from 1790 to 1914

Industry Shift
● In Early 1800s, North America was largely agricultural with more than 80% of the
population farming
● Most manufacturing started with transformation of raw materials with lumber and saw
mills, textiles etc
● Americans borrowed and sometimes stole methods of textile manufacturing from
England at the time
● American textile manufacturers fared best when protected from foreign competition
through Jefferson’s embargoes on trade during Napoleonic Wars
● Rapid economic from rich resource endowments which came after exploiting coal
deposits and then oil deposits in late 1850s
US territory expansion
● Purchase of Louisiana Territory in 1803
● Florida in 1819
● The Gadsden purchase in 1850s
● Alaska in 1860s.
● Forcibly took land from Mexico to create Texas (1830s)
● Canada settled in British Columbia are in late 1840s
Industry Changes
● With more land available, migration shifted westwards typically along same latitudes.
○ This allowed number of farmers to keep growing but tertiary and secondary
sectors grew much faster (e.g manufacturing, services, transportation etc)
○ By 1860, share of farm population fell from 80% to 50% in US
● Cotton production accounted for large share of all American exports from expansion
○ No more slaves could be imported after 1808 but slave population grew rapidly
as the free population in the south
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Population growth, 1800 – 1940

Population
● Most of economic growth of real GDP in NA (North America) prior to Civil War was from
expansion of population
● Ample land and heavy reliance of farming made birth rates higher than in Europe and
ample supplies of food and less crowding of population made lower death rates as well
● Population was also supported from migrants especially during famines in Ireland and
Germany in late 1840s and early 1850s
● From colonial period through 1930s, population growth slowed from about 3-3.5% per
year to 2% per year by 1900. The crude birth rate declined from 55 births per thousand
people c. 1800, to 30 by 1910, to 19 in 1940 (Atack and Passell 1994: Table 8.2)
Birth Rates
● Birth rates higher on farms than in cities but declined overall
● Farm families with more incentives to have children for help with farming
● Biological and technological changes allowed farmers to rely less on labour and was
accompanied by falling birth rates
Death Rates
● Declined from 25 per 1000 people in 1800 to 11 by 1940
● Most dramatic short-run spike in death rates was in the Spanish Influenza epidemic of
1918 when the death rate spiked from about 14 to 18 per thousand in less than a year
● Decline in infant mortality even worse as number of infant deaths per thousand live
births fell from over 200 prior to 1850, to 120 in 1900, to 43 in 1940
● After Civil war, decline in death rates came from improved diets and standards of living
● Improvements in water treatment and sanitary facilities in cities caused dramatic drops in
death rates after 1890
○ Similarly, basic public health education relating to sanitation and in hospitals and
a variety of basic techniques led to declines in disease and mortality
● On the medical front, most of the gains came from the development of new vaccines and
the pasteurization of milk
● The decline in death rates associated with medical improvements tended to come after
1920 with vast improvements in medical science
Immigration
● After the Civil War in 1865, possibility of high earnings in American and Canada led to
large increases in number of immigrants
● This can be seen in Fig 3.3 where real GDP per capita was higher in Canada and US
than in Europe at the time.
● The English, Irish, Welsh, Scottish, Germans, French and Scandinavians dominated
immigrant groups prior to 1890 bringing different skills such as mining and
manufacturing which was taught to the American workers
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○ A large share became entrepreneurs

● Immigration boom eventually slowed by political and economic restrictions
○ Chinese and Japanese immigrants excluded from US by federal laws in 1882
and 1907 respectively
○ WW1 contributed to slowed immigration
○ In early 1920s, nativist sentiment in the US led to immigration restrictions
■ These were specifically targeted at slowing immigration from southern
and eastern Europe
● Within past 30 years, share of immigrants has risen based on
○ large legal and illegal inflows from Latin America
○ Acceptance of refugees from war-torn countries
○ Expanded immigration from East Asia
Adult Heights
● Evidence on average adult height in large samples can be used as an alternative
measure of relative standards of living because people are taller when they have
better nutrition as children and are not stunted by childhood diseases
● The average heights are shown on Fig 3.4 and were substantially higher than in
the rest of the world for most of the nineteenth century
Long Run per capita growth

Estimates
● Conjectural estimates of growth in income per capita suggests longer term growth rates
from roughly 0.5 to 1 per cent per year to around 1.6% per year between 1840 and 1860
○ The rate implies doubling of income per capita every 40 years in the US
● Multiple studies have shown that average heigh for people born between 1820 and 1860
fell during the ante-bellum period
● Growth rates in US and Canada are on of the few advanced nations where standards of
living has grown high enough to withstand depressions and slowdowns.
○ In many nations around the world, advances over periods of time have been
wiped out by wars and depressions and stagnant periods (North et al. 2009: ch.
1)
Agriculture
● National measures of agricultural productivity per acre didn’t grow fast between 1800
and 1930 but this isn’t the entire story
○ Trial and error with various seeds led to developments of a variety of crops
■ E.g mixture with Mexican strands with existing strands of cotton led to
higher amount of cotton that could be picked in a day
■ New strains of wheat allowed different regions to produce wheat as well
○ Cross breeding cattle and sheep expanded their produce
○ Technological improvements (e.g steel ploughs, mechanical reapers) after 1840
let farms increase their acreage (Olmstead and Rhode 2008)
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Impact of Agricultural expansion

● The expansion of agriculture allowed more people to be fed, new technological and
organizational innovations and immigrant labour helped fuel one of the most impressive
expansions in industrial activity in world history
● The boom was fuelled by coal
● From 1840 through 1910, transportation costs were cut by expansions of railroads
through the nation
Steel’s Effect on Firms and Workers

● US steel capacity expanded rapidly after 1860
○ US ranked 4th in the world in 1970
○ World leader by 1910 with capacity larger than next three countries combined
● This led to new inventions and improvements in existing inventions that lifted the
standard of living
○ E.g telephones, electric lights, automobiles, oil refining etc
● Many firms benefitted from this (economies of scale) with better communication helping
nationwide operations
● Many workers shared the success of firms as they were typically the highest wages in
the world
● In most cases, workers were not represented by unions due to a large supply of workers
competing for the same job
Shortfalls
● Between 1865 and 1914, the US and Canada became increasingly interconnected with
the world economy with labour and capital moving in and out
● This globalisation halted with WW1 and the rest of the world economy retracted over the
next 30 years during the Great Depression of 1930s and the devastation of WW2 that
followed until 1945
● The US had more success at returning to the gold standard that fell apart after 1930s.
● After WW1 and a recession in early 1920s, the US domestic economy grew relatively
rapidly with low inflation until 1929
● The US went through a rapid housing boom between 1920 and 1926 due to housing
construction delay during WW1 combined with rising demand for housing associated
with rising incomes
The destructiveness of Wars

● The expenditures and losses of life form the 4 years of Civil War amounted to war costs
roughly equivalent to a full year of real GDP
● Major benefit of the war was the manumission of slaves
● During the world wars of the 20th century, North Americans fared better than the rest of
the combatants
● Aside from the attack at Pearl Harbor on 7 December 1941, neither world war was
fought on North American territory
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● Americans and Canadians joined the fight relatively late and so didn’t suffer large losses
like other combatants who lost between 55 and 100 million lives, millions of refuges and
huge amounts of physical capital
○ The Americans therefore recovered after the war much faster than Europeans
WW2
● In WW2, the effect was much larger as North American participation lasted 2 to 3 times
as long.
● Before the war, production shifted from civilian goods to war-time goods and at the peak
of WW2, war production accounted for 40% of US GDP.
● Large amounts of resources were allocated to the war. Many goods were rationed,
prices and wages controlled and many durable consumer goods were no longer
produced
Post-War Era
● After WW2, US spent large number of resources on defences for the non-Communist
world.
● During Ronald Reagan’s presidency in 1980s, US increased defence spending from
<5% of GDP in late 1970s to above 6% of GDP
● Terrorist group ‘al-Qaeda’ used commercial airlines to destroy the World Trade Center
and part of the Pentagon on 11 September 2001.
○ This caused President George W Bush and Congress by taking a ‘war on terror’
sending troops into Afghanistan
● Combination of tax rate cuts, Bush’s willingness to expand government spending for
compassionate conservatism and the waging of 2 wars, contributed to a return to federal
budget deficits of between 1.5 and 3.5 % of GDP between 2001 and 2008
Productivity advances after the war

Discoveries
● Even with military affairs, there were enormous changes in the domestic economy.
● US experienced 2 rapid eras of growth in productivity
○ 1950 – early 1970s
○ Late 1980s - mid 2000s
● Driven my invention and innovations e.g
○ Televisions, personal computers, internet, smartphones, etc
● Advances in biology, chemistry, astronomy, numerous other sciences led to amazing
discoveries e.g
○ Heart transplant, hip replacements, cancer treatments and other medical
advances
● Allowed people to live pain-free and active lives at increasingly advanced ages
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Human Capital
● Canada and US both focused on educating large segments of their societies. Both led
the world in numeracy measures (Fig 3.5)
○ Figure is based on the share of people who report their ages without heavily
reporting multiples of 5 and 10 until around 1840
● 1900 – the average American has a sixth grade education
● 40 years later, 50% of Americans of the appropriate age were graduating from high
school.
● Also offered great opportunity to college
○ College graduate rate rise to 30% from 5% from those born in 1900 to early
1980s.
● Both US and Canada have high quality universities that attract top students from around
the world which help boost the labour force, particularly in science and engineering
○ A disproportionate share of these students have become leading entrepreneurs
in companies that have grown among the largest in North America.
● North American lead in education had been eliminated by 2000s with many countries
around the world investing to catch up in university and graduate education (Goldin and
Katz 2008, Field 2011)
Business Cycle
Introduction
● The US economy might best be described as following a path of long-term growth in per
capita income with occasional downturns and some serious drops. The US economy has
gone through numerous fluctuations and financial crises. The Great Depression of the
1930s was likely the worst drop in terms of percentage output.
● Major downturns occurred in the mid- to late 1830s, the mid-1870s, the early 1890s,
1907–08, the late 1970s and early 1980s, and 2007–09, with shorter and weaker
downturns in other periods. Problems in the financial sector were associated with some
of these downturns, but the direction of causation was as often from the real sector to
the financial sector as it was the other way around.
Role of Banks
● Canada and the US have maintained strong banking and financial systems.
● In many situations in the nineteenth century, and again in 1907–08, clearing houses in
major cities played a role in maintaining stability by insuring that stronger banks provided
liquidity to the weaker banks in the face of bank runs
● In the Reemployment Act of 1946 the US federal government took responsibility for
ensuring economic growth, low unemployment and low inflation and the economy
performed quite well over the next twenty-five years.
● Real GDP per capita between 1947 and 1969 rose about 2.6 per cent per year with only
three years of negative growth, inflation measured by the GDP deflator rose 2.5 per cent
per year and the unemployment rate averaged about 4.7 per cent.
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● The second longest expansion in American history occurred in the 1960s. Economists
had become confident that they could smooth the business cycle mostly with Keynesian
fiscal policy, particularly after the Kennedy tax cut in the early 1960s appeared to
stimulate the economy. In hindsight, the tax cut looks more like a supply-side tax rate cut
because the deficit actually was smaller during the cut.
Oil price surge 1970s

● Overconfident economic policymakers faced their comeuppance in the 1970s. The long
understood negative relationship between inflation and unemployment represented in
the Phillips curve no longer held in the 1970s, when the combination of both high
unemployment and high inflation, known as stagflation, became common. The Nixon
administration tried to stop the inflation with wage and price controls, but these at best
slightly delayed the rise in inflation.
● The Organization of Petroleum Exporting Countries (OPEC) nations doubled oil prices
between 1973 and 1975 and again in the late 1970s.
● The Federal Reserve responded by using expansionary monetary policy to try to reduce
unemployment in the short run.
○ Economic models of adaptive expectations and rational expectations developed
in the late 1960s and early 1970s predicted that these attempts would just lead to
more inflation with at best temporary effects of reducing unemployment. They
were proved right, as inflation rates neared 10 per cent along with unemployment
rates above 9 per cent in the late 1970s and early 1980s.
Housing Crisis
*Pretty detailed section so skip this section if not related
● Of course, once policymakers and businessmen become convinced that they have the
answer to smoothing the business cycle, new troubles appear in a different form. In
response to the dot com bust in stocks and the recession that followed, Alan Greenspan
and the Federal Reserve drove interest rates down and many people shifted to investing
in housing.
● The Clinton and Bush administrations and Congress pressured Fannie Mae and Freddie
Mac to purchase and guarantee riskier mortgage loans in an attempt to increase home
ownership among minorities and lower income groups.
● Meanwhile, investment banks thought they had developed new ways to diversify risk and
limit risk on mortgages by combining large numbers of home mortgages into mortgage
backed securities (MBSs) that were backed by the value of the homes. These were then
combined into collateralized debt obligations (CDOs) to spread the risk further.
● Finally, the owners of the CDOs and others could buy insurance on these CDOs in the
form of credit default swaps (CDSs). With housing prices rising rapidly, particularly in the
south-west and Pacific coast and major cities, losses on resales of foreclosed homes
were not as large. Thus, the MBSs, CDOs, and CDSs seemed less risky, and ratings
agencies gave these securities high ratings because they were backed by real homes
that retained much of their value even when borrowers defaulted on the loans.
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● When housing prices began tumbling in 2006, the investors and investment banks
began to discover that their new methods protected them against the risk associated
with specific investments but not against wholesale declines in a broad range of the
assets. By December 2007 the economy moved into recession, and the stock market
began a decline that led values to fall by more than half from its new all-time peak that
month.
● In 2008 the US federal government helped bail out the financial sector by merging failing
investment banks into other financial groups, taking over insurance giant AIG, becoming
the conservator for Fannie Mae and Freddie Mac, taking ownership stakes in banks and
automobile companies and providing Federal Reserve credit for the first time to a broad
range of companies. The problems in the US spilled over to banks throughout the world.
Canadian banks were level-headed enough to stay mostly out of the fray and Canada’s
economy performed relatively well.
● The US officially came out of recession in early 2009, but the unemployment rate
remained at 9 per cent or above to September 2011, and above 8 per cent to May 2012,
before finally falling below 6 per cent in 2014.
● The share of working age population employed fell from around 63 per cent in 2007 to
less than 59 per cent in August 2009 and has remained below that level throughout
2014. In one of the few true stated attempts at Keynesian stimulus in American history,
the Obama administration and a Democratic Congress pushed through a stimulus
package that doubled the deficit from 5 to 10 per cent of GDP, but this did not resolve
the unemployment problem.
● Even though the Federal Reserve has flooded the economy with liquidity with large-
scale purchases of government and mortgage-backed securities, interest rates are at
record lows and inflation has stayed at a low level. Meanwhile, the S&P 500 stock
market index has recovered to reach record highs by 2014. Yet, the problems with
housing have not been resolved and many banks still hold a significant number of CDOs
that contain troubled mortgages and thus credit has remained tight. Meanwhile,
problems with sovereign debt in the euro zone and various disasters in the rest of the
world have contributed to a slow recovery in the US.
Growth of Government
Introduction
● Expansion in role of government has been one of the biggest change in 20th century.
● Circa 1900, large numbers of economic decisions were not much influenced by
government regulation. Decisions that were affected were mostly influenced by local or
sometimes state regulations.
● Over the next fifty years these attitudes changed markedly as the federal government
expanded its role to large degrees in response to the crises of the two world wars and
the Great Depression.
● The changes have come more through changes in regulation and transfer payments
than direct government consumption and expenditures on final goods and services.
● Despite phases of deregulation of banking and transport in the late 1970s and early
1980s, overall federal regulations have continued to expand in all areas of American life.
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● Pure transfers to the poor have grown from about 1 per cent to 3 per cent of GDP, in part
due to rises in health care expenditures associated with Medicaid for the poor. Much of
the rise in the ‘welfare state’ has come in the form of government social insurance, in
which a worker or their employer makes payments into a fund that entitles them to
benefits when they reach retirement age or become disabled, ill, unemployed or injured
on the job.
Households’ benefit
● Americans have smaller expenditures on public social welfare systems than Canadians
and many of the western European countries due to privatized healthcare, most often
through private insurance with employers. Once this spending is incorporated,
Americans spend as much or more on social welfare as any country in the world.
● The greatest expansions in the US in public social insurance have come through the
social security old-age pension programme enacted in 1935 and the Medicare
programme for elderly health care enacted in 1964. Both are operated as pay-as-you-go
programmes. Working people and employers pay taxes into a ‘trust fund’ that is then
invested in government bonds.
● The demographic changes in the US have led and will continue to lead to increases in
the costs of running the programme with the baby boom in 1957,higher incomes, better
healthcare lifting life expectancy. Up to 2011 more social security and Medicare taxes
have been collected each year than benefits paid out because the tax rates have been
raised.
● The US and Canada are actually in better shape with respect to social insurance than
most western European countries and Japan, because the US working age population is
growing faster than in those countries, in part due to higher birth rates and also due to
more immigration.
Figures and Maps

Figure 3.1
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Figure 3.3
Figure 3.4
Figure 3.5
Map 3.1
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4) Latin America
Baten - Latin America Reading
Latin America in the world economy: convergence and divergence in per capita GDP
three major phases: a decline between Independence and about 1870, although only relative to
the world leaders of the industrialization process (the West); an upward trend in 1870–1980,
and another decline since the 1980s. pg(123)
population growth accounts for some 60 per cent of its total economic growth, whereas annual
growth rates for per capita GDP have been only three-quarters of the rates achieved by the
West. pg(123)
Between 1820 and 2008, the gap between Latin America and the West widened from 0.8 to 2.7
times Latin America’s per capita GDP. pg(123)
A typology for an analysis of the Latin American countries
Cardoso and Pérez Brignoli (1979) - identified three major types of transitions to wage-based
labour markets.
‘Indo-European’ regions, where indigenous and mestizo groups constitute a large portion of the
population.
‘Euro-African’ regions where the development of a slave labour-based economy and the
complex process involved in the abolition of slavery have been pivotal factors.
‘Euro-American’ societies were located in the temperate zones of the Southern Cone, where
European immigration has been the main factor in the growth of the population, or in enclaves
within one of the other two types of societies. Pg(125)
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main type of commodity differed between mining, agriculture or forestry. Pg(126)
The long delay: the decades after Independence, 1820–1870
major conflicts and internal political instability pg(128)
per capita GDP grew only at an annual rate of 0.2 per cent
exports per capita grew stronger at around 2 per cent
decades following Independence were featured by slow growth and even stagnation pg(131)
The decline of the silver-based economy dampened production activity in the haciendas that
provided inputs for that sector, and these haciendas became increasingly self-reliant, a
tendency that was heightened by a highly radical form of protectionism. In their turn, the main
export activities of the coastal areas were hit by the dissolution of the slave-labour system on
which they were based (Gootenberg 1989). Pg(132)
boom in the guano trade affected Peruvian economy - exports jumped by a factor of seven
between 1845 and 1860, and guano accounted for over 50 per cent of total exports in the latter
year (Contreras and Cueto 2004: 116). Pg(133)
Mexico - civil wars and institutional instability of the 1850s: clashes between castes, different
ethnic groups and haciendas, and entailed a deepening of the political and ideological divisions
between radical liberals and conservatives
Brazil’s independence in 1822: population did expand at a rapid pace (nearly 2 per cent per
annum), the country’s efforts to improve its performance in per capita terms were largely
frustrating until the start of the twentieth century. Exports of sugar and cotton declined (only
30%) while share of coffee exports jumped from 26 to 47 per cent (author’s estimates; Mitchell
2003). Pg(134)
since up to 1852 (end of the slave trade), wages were depressed by the presence of slave
labour and later by subsidized immigration flows, particularly from Italy (Leff 1997: 35).
Colombia underwent an economic contraction during the War of Independence that was
followed by a period of stagnation, which lasted until around 1850 – collapse of gold production
along the Pacificcoast (based on gold production)
challenge to build and consolidate the new nation states caused by the weakness of the local
elites. pg(136)
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obstacles against the introduction of liberal reforms
between 1820 and 1870, the per capita GDP gap between Latin America and the West swelled
from 0.8 to 1.8 times the level of the former.
Export-led growth during the first globalization boom (1870–1929)
sharpest pop. growth in recently settled areas unlike traditional centres of the colonial economy
and the regions where the economic activity of the haciendas, campesinos and mining
operations had held sway
Argentina and Brazil were the main destinations for European labour.
Exports soared between 1870–74 and 1925–29 at an annual rate of 4.2 per cent at constant
prices.
convergence of the Latin American economies was due to the strong performance of medium-
sized and large countries other than those of the Southern Cone.
deglobalization period of the 1930s and 1940s motivated Latin America to move away from the
global market and try out a state-led industrialization policy in the following period. Pg(138)
How did Latin America develop during the 20th Century relative to rest of the world?
1870-1980, Latin America improved global ranking- whilst rest of world declined up until mid
20th Century.
Latin America’s share of world output rose from 2.6 per cent in 1870 to 5.2 per cent in 1929 and
to 9.5 per cent in 1980 (pg138)
But gap to West widened between 1950-73 (“Golden age” of Capitalism)
Latin America lagged behind other developed nations since 1980- world output slipped from 9.5
per cent in 1980 to 7.8 per cent in 2008 (pg138).
Analysis
Volatility of Latin American economies exceeds the norm- consequences to investment/ political
stability.
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Volatile due to reliance on natural resources/ small number of
commodities- more vulnerable to fluctuations in demand/price.
“procyclical nature of international capital flows to developing countries also contributes to this
excessive volatility”- i.e. when downturn, effects of slump in demand heightened by sudden stop
of capital flows (pg139)
Level of volatility fluctuated. Particularly high in interwar period.
Another aspect of volatility: financial crises. Only 2 of major international financial booms not
been followed by financial crises in Latin America (but still were followed by regional recessions)
(pg140)
Debt crises most common problem in Latin America since independence.
Steep devaluations associated with Balance of payments crisis main factor behind crisis
between mid 50’s and 60’s.
Integration into world economy: Volatility of commodity prices
fairly close correlation between volatility and export product concentration (correlation coefficient
is 0.44)- pg (142)
Latin American specialisation: been seen as the main reason for the region’s failure to grow
more rapidly- Structuralist school of thought. Furthermore, “fastest-growing economies in the
developing world have been those that have diversified their production”- in particular high tech
manufacturing exports.
First wave of globalisiation: world trade was based on an exchange of raw materials and food
products for manufactures (good for Latin America). But, protectionism against agricultural
products and textiles from developing world during interwar period. Latin America’s “share of
world trade sank to a level three percentage points lower than it had been during the boom of
the 1920s”- pg144.
Second wave- export opportunities in 1960’s. Economic polices shifted to export-led growth.
Able to regain some of lost ground.
Terms of trade
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Between the decade leading up to the First World War and 1998–2003, the terms of trade for
commodities (other than oil) fell by 60 per cent
(pg144)
“world-wide demand shifts toward higher-quality products caused substantial problems for Latin
America”.- pg 145
In periods of income growth consumers did not demand proportionally more Latin American
commodities anymore.
Trade balance
Balance of payments problem would arise “if Latin American consumers and firms at higher
income levels demanded more and more foreign products but foreign markets did not
proportionally demand more Latin American products (at also higher income levels)”.
Structural changes: only if Latin America started to produce other products (with higher income
elasticity in foreign markets) the balance of payment problems could be avoided and higher
growth rates could be achieved
“fundamental problem of commodity exporters is that the income elasticity of the demand for
imports to Latin America will inevitably be higher than the income elasticity of the demand of
their exports abroad”.
Relative income elasticity factor (assuming no structural change) may account for the overall
drop in Latin America’s per capita GDP relative to the West from 36 per cent to 31 per cent (pg
146).
Education+ human capital
Improvements to education may be too little+ late- factor explaining why convergence to Europe
and North America not complete
2000: Latin America average 7.1 years schooling. France, German, UK and US average of 12.5.
Just 1.5 year schooling completed in Latin America on average: start of 20th Century (pg 147)
For any per capita income, Latin America’s education level is lower than other regions. Because
commodity exports (big growth source for Latin America) contain relatively low levels of value
added (don’t need high education)
Also landowners prefer unskilled labourers (fear education will build workers political powers).
Inequality
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Latin America has highest levels of income inequality in the world.
Inequality in 50’s, 60’s and 70’s. Importance of the oligarchic aspects of Latin American
development, which were manifested in the concentration of political power, wealth and income
in elite groups of landowners and financiers who controlled labour relations and trade.
“institutions set up by the colonial powers immediately following colonization created a long-term
equilibrium situation marked by sharp political and economic inequalities, sluggish human
capital formation and slow economic growth”.- Neo-institutional theorists.
But, Coatsworth (2008) contends that the “root causes of Latin America’s backwardness should
be sought in the period between 1770 and 1870, when the Latin American economies missed
the opportunity to engage with the industrial revolution and bring about one of their own”.
State-led industrialisation: If had some form of welfare state, caused decreasing inequality (e.g
Argentina, Chile). Where very large domestic markets and highly segmented labour markets,
industrialisation heightened concentration of wealth (e.g. Brazil). This happened in others until
distribution improved due to surplus of rural labour shrinking and effects of education
development felt (e.g. Mexico) (pg 150).
The economic crises had negative distributional impact.
Start of 21st Century: Inequality declined (“improvement of the distribution of educational

opportunities had a cumulative effect, and the newly designed system of social assistance
succeeded in reaching the poorest sectors of the population”.)
Present challenges from a historical perspective
4 lessons
“accomplishments in terms of inflation and fiscal sustainability need to be consolidated, but

policymakers are also faced with the immense challenge of managing the Latin American
economies’ long-standing vulnerability to external shocks”. (pg151)
Proactive production policies (especially technology development) also
needed for economic growth (not just specialisation based on comparative advantage). Also
education development needed.
Institution building and improvement of relationship between state and market (mix of state and
market vital- evident from international experiences). Strong policy initiatives important (the
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development of the production sector during the period of state-led industrialization). “Education
and technological development should therefore be at the centre of state reform efforts in the
future” pg152- best way to overcome Latin American institutional trait.
Enormous social debt (huge inequality). Advances made in human development indicate that
social policy is not enough, in itself, to make headway in terms of social equity – not as long as
the economic system continues to produce and reproduce high level of inequality in income
distribution.
Consequently, further improvements in technological and industrial policies need to be achieved

to successfully integrate Latin America’s economies and societies into the global markets and to
converge to the richest world regions.
5) Japan
Chapter overview
Page 167-68 in this book offers good insight from McNeill into the geographical position of
Japan on their vulnerability to disease and culture. This is a small part of the book, but it is worth
reading fully in the book to understand what is going on.
Page 168-69 explains the samurai regimes, instability and warfare in the Japan around the
fifteenth century after the collapse of Kyoto, and into the establishment of the Tokugawa regime.
The bottom of page 169-170 shows the effect and demographic of Japanese agricultural
production, with an emphasis on silver mining up to the seventeenth century, with Map 5.1 on
page 170 showing East Asia production.
Figure 5.1 on page 171 illustrates population and rate of urbanisation 1500-1900. Page 171
also has a fair amount of growth statistics and reasons for them, and is carried over into the
next page.
GDP per capita estimates: the majority of page 172 and part of 174 demonstrates the methods
and estimates for GDP per capita from 1600 onwards, Table 5.1 and Figure 5.2 on page 173
show the estimate values for GDP per capita and their respective authors, and a further
comparison between Madisson and Saito and Takashima.
The argument of if Japan was in a Malthusian pressure is explained best on page 174 and is
hard to summarise, and includes reasons for the decline in GDP, the restabilization and the
effects on agriculture experienced in Japan.
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Figure 5.3 shows a more recent graph of the growth of Japan’s GDP per capita and is from
Maddison (2001: 241, 264).
Table 5.2 on page 176 shows the average annual growth rates of GDP per capita of selected
countries from 1500-1700.
Page 176-77 discusses the change in sector and production which was brought to Japan
towards the end Tokugawa Japan, with there being an emphasis on Japan’s industry following
Smithian Growth - Japan’s Smithian growth was ‘rural-centred’ as contrasted with urban-
centred’ (Smith 1973: 127-160)
Smith, T. C. (1973), ‘Pre-modern Economic Growth: Japan and the West’, Past and Present (1),
127-60
Page 177-78 then concludes this part of the chapter by discussing change in literacy, education
and interclass inequality.
The majority of this section discusses Japan’s growth plan after the second world war and the
influence that the MITI (Ministry of International Trade and Industry) has on the accelerated
growth that Japan experienced.
The final paragraph includes some statistics about the growth of Japan and production onwards
from 1973.
Japan - Summary
Population and trade developments before 1600
● Japan’s Geography had an effect on demographics - isolated island country →

insulated from disease contacts, however insulation → dense population →
vulnerable to epidemics if diseases did arrive (McNeil 1979: 133)
○ McNeil argues - Japanese islands remained sparsely populated, even

after contact with China → many lethal diseases did not stay around for
long enough to become childhood diseases (see direct Quote 1) → no
immunity built up → infections “cut repeatedly into Japanese
populations → held back economic and cultural development” (see
direct Quote 2) - Mechanism known as McNeillian Trap - real development made
after demographic threshold crossed.
○ Saito argues - break in the pattern occurs at the start of 16th century: Tokugawa
clan won a 150 year civil war - formed a new shogunate government in 1603. At
this time population was as low as 12 million (Akira Hayami estimate) / 17 million
(unpublished Osamu Saito estimate).
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● Estimations of famine: 8th & 9th centuries saw nationwide / cross-regional famine once 1
in < 3 years. Remained high until mid 16th century - average of 1 in 7 years. (Saito
2015a)
● Japan’s medieval period: decline of central administration (in Kyoto) and rise
of territorial samurai powers (daimyo) - drastic decline of famine during this
warring period - research shows: frequency of poor harvest is the same, but
probability of the poor harvest resulting in mass starvation ↓ under the
warlords.
○ Warlords brought ‘territorial consolidation and administrative

integration’ → preventing a poor harvest from turning into a regional
famine → allowed population to grow → could pass demographic threshold
for diseases.
○ Daimyo policies: disaster relief and land development (in river deltas) - e.g.
building dykes and reservoirs - also introducing of new rice varieties which could
withstand marshes
○ Land projects contributed, but not solely responsible for decline in famine
frequency - other factors at work.
● “16th century population growth coincided with the age of Asia’s flourishing maritime
trade” (DQ3) - Muromachi shogunate licensed trade with China in 14th century
(Japanese trading brigades (wakō) had been there before).
○ Introduction of new cupellation technology (the process of refining

ores) to silver mines → mining boom → export boom. Japan’s supply of
silver on world market - average annual silver exports from 1596 to
1623 was 10% of nations total farm output (Hayami 2004: 13, Shimbo and
Hasegawa 2004: 167)
○ During mining boom, wakō’s trade expanded with the Chinese, Korean and
Portuguese, 10,000 Japanese settled in Asian port cities (e.g Cochin-China and
Manila) (Lucassen et al. 2014: 366)
○ Overall, evidence points to population growth, state formation and

economic development occurring simultaneously → large populations
of settled farmers + powerful merchants.
○ “By 1600, therefore, having already broken away from the McNeillian trap, Japan
set herself on the path to early modern growth.” (DQ4)
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Growth performance in the early modern period

(very analysis heavy, advisable to look at book for figures and detailed explanation)
● Figure 5.1 (Saito in Baten: pg 170): growth rate (estimated at 0.5% from 1600 - 1720)
and urbanization rate
○ Population growth accompanied by land development (arable land area

↑ 40%) and output growth (farm output ↑ 60%) (Miyamoto 2004: 38)
○ However, no growth in per capita terms - as population ↑ 80%, farm

output per capita ↓ slightly
○ After the battle of 1600, Tokugawa shogun began constructing castles

and town facilities - followed by daimyo’s castle building - building
boom → demand for construction workers + merchants & crafts men
after completion moved to live in towns (Lucassen et al. 2014: 398–403).
○ Proportion of people living in places with populations of 10,000+ ↑6%

in 1600 to 12% in 1720 → rural population ↑ 70% but urban population
more than tripled. (Saito in Baten, pg 172)
● “Whether people’s overall standard of living declined or not hinges on the estimation of
GDP, more specifically on that of output in the secondary and tertiary sectors at both the
beginning and the end of the 120-year period.” (Saito in Baten) (DQ4)
● Two estimates of GDP per capita in period before Meiji restoration: (Maddison 2001:
264) and (Bassino et al. 2011)
○ First difference: Bassino et al estimated GDP per capita to be higher than

Maddison’s for the first half of the Tokugawa period but not the second
■ at odds with Tokugawa historiography - well known that: drastic
↓ in silver mining → end of export boom in early 17th century
■ Building growth lost momentum - government seclusion policy.
■ Eighth shogun’s government used import substitution - targeted raw silk,
sugar and ginseng (Totman 1993: 311–14)
○ Second difference: Maddison’s attempt to include non-primary sector output is

based on non-quantitative works, while Bassino et al rely on rates of urbanization
● Saito doesn’t like either of these estimates so he makes a new estimate using
urbanization and population density
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○ Uses two parameters, one for secondary sector output and one for tertiary sector
output
○ New GDP per capita estimates presented in Table 5.1 (Saito in Baten, pg 172)
along with Maddison’s data
■ Both estimates close in mid-Tokugawa period
■ However, diverge either side - from 1721 - 1870s gap widens, Saito
estimate ends up 14% higher than Maddison’s (effect of proto-industrial
progress)
■ From 1600-1721 initial gap but this narrowed towards the end of the
period - Maddison presented growth as a steady path, Saito suggests a
turning point from stagnation to sustained growth phase
● Does this support the claim that Japan under Tokugawa rule was under Malthusian
pressure?
○ Issues with Saito’s methodology - likely that mining and export boom not
reflected in 1600 estimate (Saito in Baten)
■ Proportion of silver export to primary output could have been higher than
Saito predicted - in this case rate of Change of GDP per capita becomes
negative (-0.01%) - period of close to zero growth
○ Decline was exacerbated by the exportable silver running out & end of the
construction boom.
● After 1700, market economy became more orderly and functioned well →
does not imply that living standards worsened for the peasantry.
○ Thomas Smith argued: individual farm families became the centre of production
organization - within this framework, any surplus left went to peasants (Smith
1958: 50–70).
● Estimates in Table 5.1 (Saito in Baten, pg 172) - GDP per capita reached $840 by 1874,
close to world average but below West ($2064)
○ Within Asia, likey that Japan surpassed the levels of China and India
Early modern growth in Eurasian perspective
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● (Bolt and van Zanden 2014: 637): Japan’s GDP per capita still low in 1800, compared to
other Eurasian countries, e.g. India and Ottoman Turkey - However, if growth rate used
then different picture:
○ (Table 5.2 Saito in Baten, 176): Before 1700 - England and Holland had stronger
growth, south European and Asian countries were stagnant or declining.
○ After 1700 - England, Holland grew even faster, Italy India China decline, Spain
and Ottomans steady.
■ Japan turned positive, 0.24% growth - on par with Holland
● 1720 - 1874: Japan closed to trade → growth was pre-modern (no factories or
machinery) → growth was in the tertiary sector
○ Many who engaged with financing and trading commodities during this period
○ Little structural change - secondary and tertiary shares did not increase - growth
was balanced in all sectors - rural industry, agriculture, commerce and services
all grew simultaneously.
■ “What took place was a separation of the cultivation of industrial crops

from food crops, the manufacturing of intermediate goods from finished
goods and the trading for producers from that for consumers” (DQ6)
■ Example: ↑ silk weaving in any region → ↑ demand for raw silk -

Japan under seclusion → no option to import raw materials →
demand goes to local cultivators → ↑ primary sector output
■ Simultaneously: marketing, transport, distribution, etc → more
jobs
■ These processes took place all over the country (regional specialization) -
Smithian growth (Adam Smith’s idea).
■ Japan’s growth accompanied by urbanization - was ‘rural-centered’
instead of ‘urban-centered’ (Smith 1973: 127–160).
■ It is suggested that rural-centred development did not benefit the samurai

or urban wealthy (Smith 1973: 37–41) → growth had a levelling effect
on income distribution
● Income distribution:
○ (North-western Europe - ↓ real wages despite ↑ output) compared to

(Tokugawa Japan - wage trends did not diverge from GDP per capita)
(Saito 2005a).
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○ Interclass inequality was low in Chōshū in the 1840s (Saito 2015b).

■ Although within-class income inequality needs to be taken into account -
e.g. skewed in the case of samurai, but most likely consistent among
peasants
● Tokugawa Japan had high levels of literacy and numeracy by early modern standards:
○ Basic numeracy index (measures the ability to exactly report one’s own age) in
East Asia - at a level comparable to north-west European countries (Ma in Baten,
Chapter 6)
■ Japan’s index was close to 100% mark throughout 19th century
○ Dore (1965: 317–22, 31, 291) - estimated 43% of boys and 10% of girls had
some kind of schooling
■ → “This advance in human capital investment in the Tokugawa
period must have been an important legacy for the subsequent
era of fully fledged industrialization.”(DQ7)
Growth acceleration and deceleration, 1868-2010
● Meiji Japan opened up during the 19th century wave of globalization -

industrialization became a national goal → was successful during 20th
century
○ 1890-1935 - GDP per capita growth was steady (1.7% a year (Table 5.1, pg 174
Saito in Baten)), WW1 stimulated the economy, Great Depression had less
impact (compared to western countries)
○ 1935-1940 (WW2) - brief period of growth (due to military build up),

but soon difficulties + ↓ standards of living
■ If you need more info related to the Japanese economy during
WW2 → see Highlight Chapter 5.1 of Baten Book - lots of detail
○ 1950 - GDP per capita dropped to 1935 level, however Japan’s growth consistent
with world growth (Figure 5.3, Saito in Baten pg 175)
■ Japan was an average economy until mid 20th century - 1.4% GDP per
capita growth (1914-18 and 1931-1936 estimate) (Table 6.1 in Chapter 6,
Ma in Baten pg 193) - compared to 1.1-1.5 of Lower Yangzi, Korea and
Taiwan
■ However if growth rate stayed the same after the war, ‘it would have
taken Japan 327 years to catch up to the US. That was not fast enough’
(Allen 2011: 126).
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○ 1950-1973: Catch up - emerging Japanese firms (e.g Toyota, Sony, Panasonic)

in auto industry and electronics - targeted mass market, developed new models
of manufacturing (used skilled labour but still comparable to American mass
manufacturing)
● 1973-2010: End of high economic growth - average rate ↓ to 3% per year

(1973-1990) → then dropped to 0.9% (1990-2000)
○ Accompanied by deindustrialization (Fukao and Saito 2013: 152)

■ Before 1973 proportion of value added (in manufacturing sector) to GDP
was 35%
■ After 1973 oil crisis - ↓ 5%
■ 2008 - Share of manufacturing ↓ to below 20%
■ 2010 - Tertiary sector had 70% share → transition to a service
economy
○ Transition to services but no ↑ in productivity in tertiary sector -

manufacturing total factor productivity (TFP) steady, but tertiary sector TFP slow -
levels of productivity lower than international standards (Fukao and Saito 2013:
155–57).
Direct Quotes from the chapter (DQ)
1) “A number of important and lethal diseases that became chronic in China could not
establish themselves lastingly among the Japanese until about the thirteenth century”
(timing debatable) (McNeil 1979: 133-134).
2) “As long as the island populations were not sufficient to enable such formidable killers as
smallpox and measles to become endemic childhood diseases, epidemics of these (and
other similar) infections coming approximately a generation apart must have cut
repeatedly and heavily into Japanese population, and held back the economic and
cultural development of the islands in drastic fashion” (McNeill 1979: 135).
3) “16th century population growth coincided with the age of Asia’s flourishing maritime
trade” (Saito in Baten)
4) “By 1600, therefore, having already broken away from the McNeillian trap, Japan set
herself on the path to early modern growth.” (Saito in Baten)
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5) “Whether people’s overall standard of living declined or not hinges on the estimation of
GDP, more specifically on that of output in the secondary and tertiary sectors at both the
beginning and the end of the 120-year period.” (Saito in Baten)
6) “What took place was a separation of the cultivation of industrial crops from food crops,
the manufacturing of intermediate goods from finished goods and the trading for
producers from that for consumers” (Saito in Baten)
7) “This advance in human capital investment in the Tokugawa period must have been an
important legacy for the subsequent era of fully fledged industrialization.” (Saito in
Baten)
Saito, O. (2016) Japan. In: A History of the Global Economy: 1500 to the Present. Cambridge:
Cambridge University Press: 167-180.
● (This is to cite only the Japan Chapter)
Baten, J. (ed.) (2016) A History of the Global Economy: 1500 to the Present. Cambridge:
Cambridge University Press.
● (This is to cite anything in the Baten Book)
References Saito uses in his chapter
Allen, R. C. (2011) Global Economic History: a Very Short Introduction. Oxford University Press.
Bassino, J. P., Broadberry, S., Fukao, K., Gupta, B. & Takashima, M. (2011) Japan and the
Great Divergence, 730–1870. London School of Economics Working Paper.
Baten, J. (ed.) (2016) A History of the Global Economy: 1500 to the Present. Cambridge:
Cambridge University Press.
Bolt, J. and van Zanden, J. L. (2014) The Maddison Project: Collaborative Research on
Historical National Accounts. Economic History Review, 67: 627–51.
Fukao, K. and Saito, O. (2013), Japan’s Alternating Phases of Growth and Future Outlook. In D.
S. Prasada Rao and B. van Ark (eds.). World Economic Performance: Past, Present and
Future. Cheltenham: Edward Elgar: 136–61.
Hayami, A. (2004) Introduction: the Emergence of Economic Society. In A. Hayami, O. Saito &
R. P. Toby (eds.) Emergence of Economic Society in Japan 1600–1859. Oxford University
Press: pp. 1–36.
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Lucassen, L., Saito, O. & Shimada, R. (2014) Cross-cultural Migration in Japan in a

Comparative Perspective. In Jan Lucassen and Leo Lucassen (eds.) Globalising Migration
History: the Eurasian Experience (16th–21st Centuries). Leiden: Brill: 362–409.
Maddison, A. (2001) The World Economy: a Millennial Perspective. Paris: OECD.
McNeill, William H. (1979). Plagues and Peoples. Harmondsworth: Penguin Books.
Miyamoto, M. (2004) Quantitative Aspects of Tokugawa Economy. In A. Hayami, O. Saito & R. P.

Toby (eds.) Emergence of Economic Society in Japan 1600–1859. Oxford University Press: 68–
82.
Saito, O. (2005a) Pre-modern Economic Growth Revisited: Japan and the West. Working Paper
of the Global Economic History Network: 16/05.
Saito, O. (2015b) Growth and Inequality in the Great and Little Divergence Debate: a Japanese
Perspective. Economic History Review, 68 (2), 399–419.
Saito, O. and Takashima, M. (2015b) Estimating the Shares of Secondary- and Tertiary-sector
Output in the Age of Early Modern Growth: the Case of Japan, 1600–1874. Hitotsubashi
University RCESR Discussion Paper Series No. DP15-4 http://hdl.handle.net/10086/27294.
Shimbo, H. and Hasegawa, A. (2004) The Dynamics of Market Economy and Production. In A.
Hayami, O. Saito & R. P. Toby (eds.) Emergence of Economic Society in Japan 1600–1859.
Oxford University Press: 159–91.
Smith, T. C. (1958) The Land Tax in the Tokugawa Period. Journal of Asian Studies, 18 (1), 3–
19.
Smith, T. C. (1973) Pre-modern Economic Growth: Japan and the West. Past and Present, 60
(1), 127–60.
Totman, C. (1993) Early Modern Japan. University of California Press.
6) China by Debin Ma
Regimes of China:
● Ming (1368–1644)
● Qing (1644–1911)
● Republican (1911–49)
● Communism since 1949.
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China’s predominant position in east/south-east Asia was the basis for the “tributary states trade
system”: neighbouring states gave tribute to China in exchange for status, peace, and some
trade.
Into the Qing dynasty, China’s territory doubled, and its population tripled (between 15th & 18th
Century). No other political entity reached such size with such stability under a single regime.
⮚ Maddison (2007) claimed that China was the global leading economy during this time.
Estimated China’s annual income to be around 500 or 600 international dollars (in 1990
prices), at about 80 per cent (in 1500) and 35 per cent (in 1700) of Britain and the
Netherlands (the world’s leading but much smaller economies of the time).
⮚ More recent work to measure historical GDP seem to largely confirm these estimates,
according to (Bolt and van Zanden 2014).
Living standards in 19th/20th Century: Estimates of real wages and heights indicate a general
decline in Chinese living standards/human capital after the middle of the 19th Century. Recovery
in the 20th Century.
⮚ Height data study:

Baten, J. and Blum, M. (2014)
⮚ Wage data study: Allen et al. (2011)
⮚ N.B.: Baten et al. (2010) argue that
Japanese and Chinese heights are
not a fair direct comparison to
indicate welfare due to notable
absence of animal protein in the
Japanese 19th/early-20th Century
diet.
Real wage data also reveal that Chinese living standards were probably closer to the less
developed parts of Europe but lower than north-western Europe in the 18th/19th Centuries.
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HOWEVER: the basic numeracy index (which

measures ability to report an exact rather than a
rounded age) indicates a relatively high level of
Chinese human capital, closer to north-western
Europe in the 18th/19th Centuries, than to
countries with similar living standards (e.g. India,
Turkey).
⮚ 86% in 1820, 100% in 1890 (Baten et al

2010)
19th Century: “the beginning of the nineteenth century may have seen the turn of the tide that
had once so favoured the fortune of Qing.”
The population growth sustained by rising agricultural land productivity and the introduction of
new crops (e.g. maize/potatoes from the New World) may have finally stretched the limits of the
resource constraint.
⮚ Maize was responsible for a rise in the Chinese population of almost 19% in the period
1776-1910 (Chen and Kung, 2016) (not from textbook)
Within China, the White Lotus movement (1796–1804) – a series of domestic rebellions – and
the Taiping Rebellion (1851–64) both reflected and contributed to the erosion of the Qing
regime.
Outside China, after the collapse of the East India monopoly in 1833, British imperialism driven
by private commercial interest intensified on the Chinese trade.
Britain’s exporting of Indian opium to China reversed China’s long-standing trade surplus,
draining silver out of China.
Increasing scarcity of silver, as reflected in the rising ‘copper cash–silver’ ratio, was wreaking
havoc on people’s livelihoods and governmental tax collection, as well as the morale of the
military (Lin 2006).
Under-informed on the potency of rising Western imperialism, Qing fought and lost the 1842
Opium War against England.
The 1842 Treaty of Nanking which Britain forced Qing to accept had several concessions: Hong
Kong given to the British, virtual free trade and the ‘treaty port’ system which opened five
Chinese ports to British merchants with extraterritorial protections. This system was expanded
to dozens of treaty ports.
Qing nearly brought to collapse by the Taiping Rebellion (1851-64).
Tongzhi Restoration (1861–75) was an economic recovery via revitalization of traditional

institutions:
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⮚ the reinstatement of Confucian orthodox

⮚ the restoration of the meritocratic National Civil-Service Examination (largely interrupted
during the Taiping Rebellion)
⮚ and the initial exemption of land taxes to lure cultivators back to war-torn agricultural
regions
Self-Strengthening Movement (1860–94): programme aiming to expand Chinese military

strength by developing a small number of Western-style, capital-intensive, state-financed
enterprises, directed by officials with the highest Confucian academic credentials.
⮚ Inefficient and corrupt, but some modest achievements
In contrast to the concurrent Meiji reform in Japan: no reforms fundamentally changing the
regime’s institutions. No modern constitution/commercial law; no reform in the currency system;
modern banks/infrastructures such as railroads expressly prohibited; steamships limited to
major river ways such as the Yangzi river.
Treaty ports limited tariffs to 3 or 5%, expanding Chinese international trade.
⮚ China’s Maritime Customs data show real imports more than doubling in the two and a
half decades prior to 1895, and exports increasing by half of this.
⮚ Slower growth of real trade (around 2–3%/annum) after 1895.
⮚ Trade gradually pulled major domestic commodity markets into close alignment with
exchange throughout the Pacific Basin. (CONVERGENCE)
Treaty system allowed for arrival of new technologies, but industrialisation was not as high as it
could have been, due to barriers in the late Qing economy:
⮚ low government investment limiting infrastructure growth

⮚ traditional mercantile and handicraft guilds, who obstructed introduction of new
technologies and new business arrangements in the agricultural commodities like
soybeans and silk larvae to protect their monopoly. (For details on these obstacles, see
section 4.2 in Brandt et al. 2014.)
The onset of China’s Industrial Revolution 1895-1949: China’s defeat in the Sino-Japanese War
of 1894–95 led to the 1896 signing of the Treaty of Shimonoseki, which granted foreigners the
right to establish factories in the treaty ports.
⮚ Rapid expansion of FDI
Qing constitutional movement of 1903–11 aimed at steering China towards a constitutional

monarchy by drafting a formal modern Constitution with national, provincial and local level
parliaments.
Military modernization was high on the reform agenda. Sought to modernize public finance and
adopt a national budget. New Ministries of Education, Trade and Agriculture and encouraged
the founding of local chambers of commerce.
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Currency reform, efforts to establish modern banks and to expand railroads and other public
infrastructure.
Overall industrial output showed double-digit real annual growth during 1912–36; very good
considering China’s political turbulence and the impact of the Great Depression.
Factory production, initially focused on textiles, food processing and other consumer products,
concentrated in two regions:
⮚ lower Yangzi area where both foreign and Chinese entrepreneurs pursued factory
expansion in and around Shanghai
⮚ China’s north-east or Manchurian region, where Japanese initiatives predominated
By 1935, Chinese factories, including some owned by British or Japanese firms, produced 8%
of the world’s cotton yarn (more than Germany, France or Italy) and 2.8% of global cotton piece
goods production.
Chinese-owned companies produced 73 per cent of China’s 1933 factory output. Combined with
the accumulation of experience in operating and repairing modern machinery, that spurred new
private initiatives in machinery, chemicals, cement, mining, electricity and metallurgy.
Official efforts (including semi-official Japanese activity in Manchuria) also promoted the growth
of mining, metallurgy and arms manufacture (Rawski 1989: ch. 2).
China’s foreign trade rose to a peak of more than 2 per cent of global trade flows in the late
1920s, a level that was not regained until the 1990s.
FDI inflows 1902-31: grew at annual rates of 8.3%, 5% and 4.3% for Shanghai, Manchuria and
the rest of China respectively. By 1938, China’s stock of inward foreign investment amounted to
US$2.6 billion.
⮚ 8.4% of worldwide stocks of outward foreign investment that year.

⮚ By contrast, China’s 2001 share of worldwide inward foreign direct investment was 2.1%
Domestic investment: ‘Modern-oriented’ fixed investment (calculated from consumption of

cement, steel and machinery) grew at an average annual rate of 8.1% 1903-36
⮚ outpaced Japanese gross domestic fixed capital formation in mining, manufacturing,

construction and facilitating industries (5%/year)
⮚ Despite the effects of the Great Depression and political tumult, economy-wide gross
fixed investment exceeded 10% of aggregate output 1931–36 (Brandt et al. 2014).
China’s railway track length grew from 364km in 1894 to over 21,000km by 1937.
Banking reform: Introduction of paper notes convertible to silver reduced transaction costs.
Expansion of branch networks allowed major domestic banks to attract deposits from all regions
and recycle them to the areas of greatest demand. Funnels deposits into investment.
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People’s Republic of China established in 1949. Violent campaigns expropriated the assets of
urban and rural elites, after which the PRC moved to implement socialist planning.
New regime got rid of what was left of several Qing-era institutional constraints on growth.
Vastly expanded state control over resources, solving the lack of fiscal revenue that had
prevented previous governments from financing aggressive development initiatives.
Early 1950s saw the introduction of the Plan system, which “brought notable expansion of
industrial and technological capabilities, as well as major improvements in literacy, school
attendance, maternal and infant survival rates, public health and life expectancy.”
⮚ Real annual GDP growth ~6% (and 4% in per capita terms), surpassed growth in other
large low-income countries like India, Pakistan, Egypt and Brazil.
From 1958, Mao Zedong organised rural citizens into People’s Communes, and promoted rural
industrialisation.
⮚ Poor incentives, false reports of rising crop output, excessive grain procurement,
massive reallocation of labour from agriculture to industry, and the killing of sparrows
(predators of crop-eating locusts) caused the Great Leap Famine of 1959–61 in which
tens of millions died.
In the mid-1960s the Cultural Revolution caused a new reversal in economic policies and
incentive mechanisms. PRC’s anti-economic policies: “an assault on individual and firm-level
incentives, persecution of intellectuals and educators, forced collectivization of farming and a
destructive regimen of local self-reliance”.
Growing gap between urban and rural living standards.
Food supply barely grew proportional to the total population between 1958 and 1978 (Brandt et
al. 2014).
death of Mao Zedong (1893–1976): Late 1970s reforms saw rural liberalization, expansion of
foreign trade and investment, policies aimed at ‘enlivening’ state-owned enterprises and fiscal
decentralization.
⮚ “for the first time, China’s economy avoided most of the Qing-era institutional constraints
as well as the most restrictive of the fresh obstacles imposed by the PRC.”
⮚ Reform saw a great expansion of entrepreneurship in rural areas, and later in cities, and
investment policy changed to channel resources into labour-intensive export production,
suiting China’s resource endowment.
“Although the reform process spawned episodes of social unrest – the 1989 Tian’anmen
protests in part reflected public anger over inflation and corruption – overall, the first fifteen
years of reform produced no substantial group of losers – a rare outcome in episodes of
substantial socio-economic change” (Naughton 2007, Xu 2011) (Quote from Baten textbook).
Mid-1990s: broad embrace of globalization that reduced tariffs and other trade barriers
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2001: Entry into WTO
China: References
Allen, R., Bassino, J.-P., Ma, D., Moll-Murata, C. and van Zanden, J. L. (2011), ‘Wages, Prices,
and Living Standards in China, Japan, and Europe, 1738–1925’, Economic History
Review 64 (S1), 8–38.
Baten, J. and Blum, M. (2014), ‘Why are you Tall while Others are Short? Agricultural Production
and other Proximate Determinants of Global Heights’, European Review of Economic
History 18, 144–65.
Baten, J., Ma, D., Morgan, S. and Wang, Q. (2010), ‘Evolution of Living Standards and Human
Capital in China in 18–20th Century’, Explorations in Economic History 47 (3), 347–59.
Bolt, J., and van Zanden, J. L. (2014), ‘The Maddison Project: Collaborative Research on
Historical National Accounts’, Economic History Review 67 (3), 627–51.
Brandt, L., Ma, D. and Rawski, T. G. (2014), ‘From Divergence to Convergence: Re-evaluating
the History Behind China’s Economic Boom’, Journal of Economic Literature 52 (1), 45–123.
Chen, S., Kung, J.Ks. Of maize and men: the effect of a New World crop on population and
economic growth in China. J Econ Growth 21, 71–99 (2016).
Lin, M. (2006), China Upside Down: Currency, Society, and Ideologies, 1808–1856. HUAC-
Harvard University Press.
Maddison, A. (2007), Chinese Economic Performance in the Long Run. 2nd edn., rev. and
updated, Paris: Development Centre of the Organisation for Economic Co-operation and
Development.
Naughton, B. (2007), The Chinese Economy: Transitions and Growth, Cambridge, MA: MIT
Press.
Rawski, T. G. (1989), Economic Growth in Prewar China, Berkeley: University of California

Press.
Xu, C. (2011), ‘The Fundamental Institutions of China’s Reforms and Development’, The
Journal of Economic Literature, 49 (4).
7) Middle East, North Africa and Central Asia
Chapter 7: Middle East, North Africa, and Central Asia
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Intro
First impression of Middle East history is the heterogeneity of its development –cover the
geographic region between Morocco and Afghanistan
Some common features between many Middle Eastern countries (Charles Issawi 1982)
Contact with Europe in 19th century (acc. to Issawi – a challenge)
Before WW1, European merchants and govts had taken over important positions in Middle
Eastern economies outside agriculture
Issawi sees development as a reaction where ME leaders aimed at reducing European

influence
Sevket Pamuk – presented estimates of urban real wages and national income
Cosgel and Ergene studied development of early modern inequality based on tax registers for
Northern Anatolia
A further theme studies = biological standard of living i.e nutritional quality and health serve as
an indicator of welfare
ME had an advantage over Europe during mid 19th cent but since 1880s – divergence
Middle Eastern govts and families underinvested in education – a key component of econ
growth
Medieval and early modern period
During medieval period – tech of ME superior and knowledge from ME to Europe
Especially medical knowledge
Progress clearly seen in urbanisation rates – Bosker et al estimated urban share for geographic
area of ME compared to Europe, found to be much lower in Europe
European growth increased at same pace as ME until 1100
During Mongolian invasion/plague growth in ME declined while Europe converged during 1500-
1800 and overtook ME in 1800
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ME saw formation of large empires; Arabic ones, Ottoman empire massively expanded in 15th
-17th century
Quantitative evidence disputed – not clear is development was an absolute decline or a relative
one
Trade routes between medieval Europe and Asia shifted
ME earned monopoly profits from trade of Asian spices and luxury goods with Europe
In Early modern period, flowed from Portuguese, to the Dutch and then to the British and French
ME merchants also found additional income in trade of Yemenite coffee – so change in trade
routes could not have had a very large influence on ME economies as trading income affects
only a small part of the population.
Also, medieval and early modern demographic shocks
Borsch (2005) – plague and Mongol invasion hit ME irrigation economies in Iraq and Egypt
particularly hard as they needed a critical mass of population to keep up irrigation systems
Mamluks who were ruling Egypt even less inclined to invest in public works needed for irrigation
as number of peasants and therefore rents dropped after the great plague
Plague increased real wages in western Europe, but did cause detrimental effects in irrigation
agricultural parts in ME
Information regarding early development based on fragmentary data – Pamuk and Ozmucur
developed more evidence based on real wage developments in Istanbul and other large cities
Development of urban craftsmen wages similar to southern and central Europe during 16th-18th
centuries
So rich NW had outpaced ME
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However, compared with other European cities – ME urban centres maintained a similar welfare
level
But again this evidence found by Pamuk and Oz stressed these estimates could refer to a
specific social group and doesn’t take into account how other groups of society were developing
but plausible living standards were equal to Europe until 18th cent.
Evidence suggests human capital formation did not participate in European human capital
revolution
Maghreb suggests basic numeracy = 10% in late 15th to 16th century
Reached 50% in late 16th cent-18TH cent
Numeracy in Europe grew from 50-90% in same period (a strong competitor)
Limitations to the rule of law at the beginning of the 19th century
At beginning of 19th cent
Complicated institutional structure
Missing rule of law
Taxation capability and rulers were often exploitative
Some regions actually benefitted from low levels of the rule of law such as the Maghreb pirates;
in Algeria and Tunisia – an additional elements was the pirate economy of the 17th/18th
centuries
Ships whose owners couldn’t pay a substantial fee were captured and surviving personnel sold
on slave markets if no ransom was paid
Although hostages were violently taken – many later joined the pirate business and benefitted
from it
Through trade of booty – acquired wealth and rose in social rank
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In the irrigation economies of Egypt and Mespotamia, clear property rights and rule of law would
have been the most important as irrigation agriculture is dependent on clear institutional settings
But property rights weren’t always clearly defined
Structure of property rights
Land rights were very complicated (Owen 1993:33)
State owned most of the land except gardens, orchards and real estate
Most secure property rights established in Mount Lebanon and in lower Egypt
In Southern Syria and upper Egypt – communal redistribution of land. Each peasant received a
new plot of land after the harvest season
Quasi-private ownership was impossible
Only towards 19th century there was a tendency towards imitating private ownership in these
regions
Peasants skills at hiding production was very important and those who could achieved a higher
standard of living
Tax evasion common and taxpayers considered this legitimate as they received no public goods
in return
Iran – relationship between rulers of nomadic origin and peasants and merchants was difficult
so their ability to raise taxes was low.
Arbitrary confiscations were often used
Relatively unsecure property rights and governmental preference for nomadic tribes resulted in
a reduction of irrigated land and an increase of pastures and wasteland before 1800
Urban craftsmen and transport infrastructure around 1800
Industrial production in the Middle East was concentrated in the cities
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Trade in the famous suqs as well as admin were the main functions
Apart from Istanbul – cities all situated near substantial area of cultivatable land with reasonable
soil quality.
Textile production was the most important industry, complemented by food processing, furniture,
and specialised industries in some places
Tech progress in production was slower than in Europe, some industries – such as Turkish
armament producers and ship builders could produce similar quality items
Most other industries with fixed price systems and guild systems not conducive to
innovation even if quality was preserved
Caravan trade
Complemented coastal and river-based trade
Connected Syria and Mespotamia
Trade goods comprised textiles and spices from India and SE Asia in exchange for European
manufactures, African ivory etc.
Black slved from Africa traded north and White Slaves from Russia and Balkans traded south
Within Ottonman Empire
Grain
Sugar
Cotton
For overland transport, in addition to regular costs for camels and personnel, safety costs were
large and Bedouin tribes required dues that could be three times as large.
Therefore, at beginning of 19th century
Complicated property rights
Little economic dynamism
Systems of production and taxation didn’t encourage development
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Land resources weren’t completely used
Reform period: Early 19th Century
There were three main development paths of the 19th century:
Mild reforms and problematic openness in the Ottoman imperial core:
Tanzimat reforms from 1839 changed the law, administration, military and economic system
Equality of the citizenry most important
Military services regulated to a maximum of 5 years
Tax farming was abolished
Before, a rich tribal leader could obtain the right to collect taxes after
paying a fixed amount to govt
Caused overtaxing, conflict and inequalities of real tax burdens
Opening of Ottomon economy to imports
Forced development in Egypt
Stimulated by political changes initiated by Mohammad Ali Pasha
Built a strong army to protect his new state
Reforms also applied in education system : educated army leaders and to train Egyptians with
skills demanded by modern industry, trade and admin positions
Factories built, new industries developed
Production of chemicals, weapons and plants for construction of plants
Textile industry flourished
Imports and exports severely controlled as govt budget stemmed from trade revenues
organised by marketing boards
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Agriculture was focus of the reforms
Changing land property system, building new dams and watering channels, developing the
irrigation systems, introducing new crops and controlling planted yields agricultural production
increased substantially
Mohammad Ali also created a law of mandatory military service to expand the army
Included 4% of population
Egypt became a military state and participated in many wars
Forced development of military power, agriculture and new industries had similarities to Soviet
strategies
Ali’s successors adopted different strategies i.e. his son Ismail Pasha encouraged science and
agriculture and banned slavery in Egypt
In 1860 when US cotton producers dropped out of world market due to civil war, Egyptian cotton
production flourished
But then suffered from epidemic, floods and wars so had to rely on foreign debt to sort this out
Egyptian economy weakend and English/French colonial powers increased interventionist

policies until England transformed into a protectorate in 1882
Direct Colonialization in central Asia and Algeria
Russia began a territorial expansion first to northern steppe of central asia region during 1750s
when several Kazakh tribes called Czarist troops for support
Russian forts built to control the conquered territories
Russian settlers provided with land, reducing area available for nomadic tribes in the Kazakh
steppe
During early 19th century – Kazakhs were more numerate than Russians but then Russia
experienced a human capital revolution during the 19th century and the colonised Kazakhs
couldn’t keep pace
What could be the reason for early numeracy level?
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Settler share can explain this
Good nutritional situation in Kazakhstan (no protein malnutrition)
Russian human capital development, settlers may have stimulated contact learning
Russians successful with higher investment in human capital, so Kazakhs adopted this strategy
too
Southern part of Central Asia more densely populated
High urbanisation rate of 15-20%
Region of old Silk Road connecting China with ME and Europe
Russian Empire invaded Khanates of Kokand during the 1860s i.e. much later than it invaded
northern steppe
To prevent British colonial empire which had captured Afghanistan from further expansion
northward
Intensive cotton agriculture was attractive even more during the 1860s when US civil war led to
cotton famine affecting textile factpries in Moscow too
Military response more limited in Silk Road Region , similar to northern
steppe but some regions lost considerably in numeracy relative to Russia
During colonisation and accompanying military destruction in the 1860s, numeracy fell
dramatically – after modest recovery centre region of silk road was 75% numerate in the 1880s
– 20% lower than Russia
In Algeria – numeracy high initially but stagnated until 1870s
In travel reports of mid 19th cent, indigenous farmer population is described as industrious and
hard working
Most country heavily settled by Europeans in the middle East – during late 19th century –
European share was almost a fifth of the population
French govt tried to make Algeria an assimilated part of France – substantial educational
investments after 1900. Cultural and religious resistance opposed this tendency – Algeria kept
its individual skills and human-capital-intensive agriculture
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To summarise: 3 types of fundamental change
Tanzimat Reforms that opened economies to European competition and deindustrialisation
Infant Industry of Mohammad Ali in Egypt
Direct colonialization which led to relative decline in human capital in Silk Road region and
stagnation on a high level in Algeria
Why did the Middle East deindustrialise during 19th century?
Pamuk and Williamson note that during the 18th century – Ottoman Empire self-sufficient in
textile production – which represented a large share of traded industrial goods
Pamuk and Williamson offer a trade-based interpretation of the process during which ME
deindustrialised
Imported British textiles during 19th century were outperforming local producers
Improving terms of trade of cash crops (e.g. raw cotton prices increased substantially)
Real incomes were growing but much slower than Western Europe
When terms of trade declined again during 1930s, there was already a high degree of path-
dependence, which kept Middle Eastern economies in the cash crop specialisation
Deindustrialisation and concentration on agriculture discourages the development of skills
Institutional factors that could have weakened Middle Eastern economies
Kuran (2011) argues that institutions of Islamic law that were appropriate for early periods
tended to become handicaps for growth in the 19th century
Criticised stability of inheritance laws as they didn’t allow for capital accumulation
Lack of legal frameworks for capital firms
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Religious trusts called waqfs which locked capital resources into inflexible institutions
Excessive stability of these law concepts
Rubin (2011)
Criticised the view that Islam tended to generate less growth-conducive institutional design
E.g. Christian church and Islam aimed at restricting interest during middle ages
An example of an institution that limits capitalist development by constraining credit
In early phase, Islamic bankers and merchants were more successful than Christian ones in
circumventing religious constraint
Development of credit institutions that circumvented religious constraints were more rapid in
Christian Europe
Caused by need of rulers to be legitimised by religious leaders
Religious rules
Christian leaders developed doctrines that separated religious and governmental power.
Christianinty – more tension/competition between religious and political leaders
Islam – political power was weak and first Caliphs got their
legitimisation from being relatives of Mohammad. Leaders felt they had to strictly follow these
rules.
Economic segregation and human capital development
Talented individuals of the majority had fewer incentives to develop trade skills if considered to
be predetermined for occupations in finance and trade
Limited human capital development
Living Standards
Pamuk (2006) found GDP trends up but growth slow in Middle East
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Lag in production capacity
Ozmucur and Pamuk find real wages were equal/greater in the large ME cities
Real wages reflect urban unskilled and skilled craftsmen’s welfare – richer strata were lagging
compared to Europe
Human stature
Between 1850 and 1870, ME countries enjoyed favorable nutrition compared to Europe
In 1880, average heights of ME people decreased suddenly.
Due to cattle disease which started in Asia and then moved through M.E
Those who lived closed to animal husbandry e.g. goats/sheep/cattle could enjoy more protein
from milk and meat. Poor people also benefitted. Europe had a densely populated urban centre
so no good access to protein
20th century: everything, even perishable foods, could be transported thanks to refrigeration
transport tech so European inhabitants could provide kids with good nutrition and urban
populations became taller than rural ones
Europe also made progress om public health and medical development
GDP level was much higher than Middle East
In 20th century
Europeans and entrepreneurial minorities were forced to leave
WW1 and WW2 allowed M.E to abolish privileges such as immunities for European merchants
to nationalise railways, banks, petrol stations
Government owned mining and industries opened
However, bad quality products
In long run, new investments were missing
Low status of human capital development
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Turkey separated religion from government
Transition to a secular state
Increase in numeracy levels (Ghanem, 2014)
New schools built and primary school mandatory and free
Ataturk replaced religious education with national education
M.E saw need for reindustrialisation (Issawi, 1982), two world wars shows that European
imports not automatically available
Turkey set up two 5-year plans for industrial policies in 1930s in a reindustrialisation attempt, as
lack of entrepreneurs. In addition, socialist ideas implemented
Why were firms run by the government?
Entrepreneurial elites were foreigners before, and influence was to be reduced in 20th cent
Lack of human capital and skills
Peculiarities of oil production economies
Skills and human capital
Strong improvement in 20th cent
Made it hard to develop a class of entrepreneurs as numerical skills required
Oil Revenues
If M.E. economies reinvested the govt share of oil income, did this in the form of state owned
companies
Oil discovered in 1908 changing landscape of economies
Nationalisation of oil reserves became a key issue in social/political conflicts of Iran in

1940s/50s
Oil during and post WW2
Pre WW2, extraction mainly took place in Iran and in 1940s, Iraq became a major exporter
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1940 – oil production was below 5% but increased to 26% in 1960 and reached 42% in 1975
(pg 230)
Between 1950-60 oil production for economies was beneficial
Stimulus for economy
2% of population worked in oil
Many people who left oil companies started their own firms, training on the job allowed
development of entrepreneurial skills and spirit
1970s
Oil price increase and expansion brought wealth
Classical curse of resources occurred – difficult to decide how to distribute wealth
View that anything could be imported was poison for reindustrialisation efforts
High expectations of income generated by inexhaustible stream of revenues became unrealistic
Rising inequality
The government tried reinvesting oil revenue into firms that would generate income after oil
income had ended, which were often state run
State owned firms were inefficient
Demanded import protectionism and monopolies instead of production side policies
8) South Asia
● Colonial India experienced a deep economic integration within the world. Trade,
investment and migration rose to higher levels than before
● South Asia’s major livelihood continued to generate little income
● India transitioned from major exporter of artisanal textiles and trading partner of Britain to
an exporter of agricultural commodities and consumer of British textiles, aided by new
inventions
● BOP reconstruction produced good estimates of the outflow on the services
● Labour force reconstruction showed a fall in the employment of the artisans during the
census years, 1872-1931, could argue this meant Europe impoverished India
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● GDP increased at modest rates 1860-1914, and near zero rates 1914-1947. Agriculture
income imported the strongest effect on GDP and industry/services positive for GDP.
However, labour productivity slow and poor throughout
● Colonial era strengthened by openness of the economy. Industrialization also financed
by private investment
● Colonial India did see increasing inequality, due to the effect of globalization, which
favoured the resource-rich agricultural tracts and the port cities
● British Indian State made limited investment in infrastructure and welfare
● Data shows real wages and welfare fell during colonisation, although not clear
● Nutrition was poor, diet generated required energy for an adult but not sufficient to
ensure the physical development of children
● India suffered from exceptionally high infant mortality rates
● After colonisation, GDP was much higher and agriculture, manufacturing and services
registered acceleration
● Overall, the end of colonisation was seen as a positive for South Asia
9) Southeast Asia and Australia / New Zealand
THEMES DISCUSSED ( directly quoted from reading)
IMPORTANCE OF TRADE AND ITS LIVING STANDARDS (Southeast Asia have a

Long tradition of trading with others, the marked rise in GDP per capita, life expectancy
and heights after the second world war reflect the importance of trade for countries
living standards.)
NEED FOR INSTITUTIONAL AND POLITICAL STABILITY, AND AN ABSENCE OF

VIOLENCE, TO ADVANCE ECONOMIC OUTCOMES. (Countries with lower levels of
violence clearly demonstrates higher material outcomes, and those most recently
scarred by war lag behind those that have had more time to rebuilt )
HOW ECONOMIC IMPROVEMENTS CAN BE SELF REINFORCING (populations

whose living standards improve devote more resources to education and enjoy a longer
life expectancy. )
THE CHAPTER DISCUSSES THE FOLLOWING TOPICS TO ESTABLISH THE

ABOVE THEMES
GEOGRAPHY AND LATITUDE(partial paraphrase)
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To study better we divide the areas into 3 main clusters, namely; ‘Mainland southeast
asia’ which includes, Cambodia, laos, myanmar, malaysia and singapore; ‘Australasia’
comprising of Australia and New zealand and the remaining island nations such as
Timor leste, indonesia, papua new guinea and philippines as ‘island regions’.
Southeast Asia- This cluster is blessed with a north south basin surrounding
Irrawaddy,salween,chao,phraya, mekong and red(hong) rivers and mountain ranges
such as Truong son. In terms of population size and density, Singapore homes 5 million
people and is 700km in size. Sharing borders with each other, Influences in terms of
governance and religions is observed for example, India influenced Burma, thailand,
cambodia and laos, as mixtures of Hindu and Buddhist traditions shaped their
institutions and supported a semi-divine monarchy whereas Vietnam is influenced by
chinese and confucian values.
Australasia- Thai-Malay peninsula and the continent of Australia are geographically

stable, New Zealand is in the area of volcanic
activity. Australia is well populated by 23 million people with land mass of 7.7 million
square km in size.
Island region- Island of Indonesia and Papua New Guinea are in areas of volcanic
activity. In terms of population sizes the regions contrast with each other as Timor Leste
is populated with 1.2 million people whereas it is more than 250 million people in
Indonesia. This region is highly influenced with a variety of cultures and religions, to
state a few; Islam, dominant in indonesia, parts of Malaysia and many coastal areas is
evident of the interaction of traders with the middle east and Philippines, whose Islamic
influences were also influenced by traders, was dominated by Christianity only after
arrival of the Spanish in the 16th century.
PRE COLONIAL PERIOD 1500-1800
The period before 1500 saw the rise and fall of empires, upheavals of wars and
peaceful settlements, continuation of long distance trade, usual natural disasters and
local change. Howerever, things started to change after 1500.
Southeast Asia- Before the arrival of Europeans, Southeast Asia was very diverse and
unique in its religion, languages and societies.Difference between majority of
subsistence farmers and elite rulers was great, and no middle class existed. The state
was predominated by peasant farmers, small administrative and religious elites, and
groups of artisans and traders. It was very similar to european societies of that period.
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Australasia-In australia, lesser extend New Zealand and Papua New Guinea, Levels of
technology, governance, property rights and institutions were different which were
unrecognisable to europeans.
Spice trade- Maritime europeans were already familiar with Cambay(Gujarat, India),
Chittagong(Bengal), Pegu(lowerBurma),Meleka(Malaysian peninsula), Palembang
(Sumatra),Macao(China) ports for spice trade. Between 1500-1790, tons of pepper was
exported from southeast asia.The Portuguese began to build up a chain of fortifications
in the 16th century to the spice islands, which resulted as a failed attempt to monopolise
the spice trade,simultaneously, Spanish began colonisation and
conversion of much of the Philippines. Trade quantities increased slowly upto 18th
century though, it also decreased slightly in some cases such as pepper. Significant
expansion of European interests competing to capture control of trade with the ‘far east’
was fulfilled by ‘Doctrine of mercantilism’. The mercantilist saw national interest aligned
with trade, as state power enhanced with accumulation of precious metals and trade
surpluses. In the 17th century, Europeans discovered Papua, and portuguese interests
were elapsed by dutch. Dutch, as an indirect consequence of efforts to find trade routes
to the spice islands, discovered Australia and New Zealand and the Dutch East India
company focused particularly around Malacca and Batavia.In the 18th century, British
established interest in India via the British East India Company and turned attention
towards colonialism of penang and singapore.
300 years after 1500, traditional social routines and relationships for most people
continued as there was little interaction with Europeans, since most people lived away
from ports and main points of contact, moreover, Europeans had little interest in local
affairs.
NEW IMPERIALISM AND THE COLONIAL PERIOD
War and industrial transformation reshaped capabilities in Europe while southeast Asia
had to compromise with european interests. Between the 18th to 19th century, British
took control over Australia, New Zealand, Malay peninsula( taken away from the control
of Dutch), and also expanded settlements in Singapore, Malacca and Various other
provinces. Through the East India Company, they pressed burmese rulers and took
control over Burma. French , on the contrary, invaded Vietnam in 1850’s to protect
religious missionaries and imperial giants; they also took control of Cambodia and
Laos . Thailand remained a buffer between french and british interests. Dutch
government was prevalent in Indonesia whereas, portuguese maintained a small colony
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in Timor Leste. Spanish conquerors who had control over the Philippines in the 16th
century lost it to the United states in 1898.
Imperialism brought the following changes along with it such as, creation of dairy farms
in New Zealand, sheep farms and white fields in Australia and tin mining in Malaysia,
more intensive use of factor inputs, standardised record keeping and internationally
recognised laws, administrative process and property rights. Revolution of

transportation technology (soil to steam and animal carts to railways) between
napoleonic wars and world war1, and the creation of suez canal reduced cost and
expanded trade. Suez canal particularly benefited trade between Europe and Southeast
Asia. However, colonialism did offer hardships too, as in cases of Australia and New
Zealand where original inhabitants were ignored, marginalised or killed. In New Zealand
it was through the ‘treaty of Waitongi’.
An increase in migration rates was observed in the 19th century. Chinese started to
migrate towards Singapore; Vietnam, Cambodia and Laos appreciated their presence
due to their business skills. India started migrating to Burma, Malaysia and singapore.
The 20th century sparked a demand within the nationals to break free from colonist
rules and obligations. Increase in migration trends resulted in Australia becoming
independent in 1901 and New zealand in 1947 via peaceful political transformation.
World war 1, growing education and treatment of locals by colonialists were catalysts
towards initiating demand for independence in South east asian economies. The 1930s
saw depression resulting in retreation by many from trade, ought to it Burma and
Indonesia were badly affected and Thailand started a military coup to replace the
monarch. Thailand negotiated with the interests of Europeans in an attempt to break
free. Burma( now Myanmar) won independence in 1948 but had military dictatorship
from 1962-2011. Malaysia after violence of malayan emergency, got independence in
1957; Philippines in 1946 from the United states. Vietnam after violent clashes with
foreign invaders got its freedom in 1940 that lasted until 1975. Cambodia,
independence from french in 1953 and endured genocide regime 1975-91. Indonesia
fought against Dutch and Laos fought France between 1945-1949 to gain their
independence from oppressive rulers.
POST SECOND WORLD WAR
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This period returned to more open trade and international cooperation. Trade openness,
financial stability, international corporation, technology, increased physical and human
capital,
improved health and education, shift towards manufacturing and cheap energy are
some of many factors that lead to ‘Golden Age Of Growth’. The ‘Asian Tigers’ namely
Singapore, Hong Kong, South Korea and Taiwan had an average growth rate of 6
percent per annum between 1965-95. Another group of countries branded as ‘High
Performing Asian Countries’ included Indonesia, Malaysia and Thailand. These lead to
transformation in living standards.
Early 1960s were periods of political, social and military instability in Indonesia, and a
military coup in 1965. However, since the last 40 years indonesian government has
been backed by the military and using pro market policies, they have united several
islands. Malaysia has been on the path of greater economic developments such as
greater access to education, adoption of import substitution strategies, implementation
of National development policy and higher standards of living, all this possible because
of open economic policy and influx of foreign capital.
Urbanisation rates growing to more than 50 percent of population in 1990s were visible
in countries such as, malaysia, singapore, thailand, indonesia, australia and new
zealand. In contrast, Papua new guinea and timor leste had lower rates of urbanisation
and hence lacked the pull factor for the migrants. Shifting to urbanisation and growth not
always benefitted as they were a catalyst towards overly rapid and unconstrained
growth.
To promote intergovernmental cooperation and facilitate economic, political, security,

military, educational and other sociocultural integration amongst asian countries, an
economic union referred to as ‘Association of Southeast Asia Nations’ was formed in
1967, with initially including just Indonesia, Malaysia, Philippines, Singapore and
thailand; now, they are an union with 27 countries as its member nations.
The period 1997- 1998 were times of Asian financial crisis, given rise by excess
borrowing, lower returns and overheating economies. Indonesia faced so, due to the fall
of their government and failure of banks. In Malaysia it was a result of intervening in the
market, fixing exchange rates and expanding government expectations; restricted
capital outflow caused so in Thailand. This was a turning point in the Asian economy as
this led to decelerating growth of Japan and emergence of India and China as sources
of growth, this also integrated markets of southasian economies and Australia.
about:blank 66/77
Subsequent to the crisis, bilateral trade expanded, regional markets emerged and
macroeconomic reforms were undertaken.
Post crisis, poorer countries, such as Timor leste, that struggled to free itself from
Indonesia, destroyed 70 percent of homes and schools in their quest to finally achieve
independence in 2002. However, with this loss and backdrop, the country is well
endowed with Oil reserves for export prospects. Papua guinea and Myanmar remained
poor even after the crisis. Myanmar suffered long decades of violence, civil war and
martial law. Cambodia, which was drawn into the Vietnam war suffered mass murders
and Khmer Rouge reign that ended in 1979, even today the country is surviving on
agriculture, simple services and tourism to serve as a basis for their economy.
Towards the end of the chapter- other parameters to measure living standard are
discussed. The two methods discussed are-
1) Average height of the population [Fig 9.3, Pg 298]
2) Life Expectancy [Fig 9.4, Pg 299,301]
A critical factor between living standards and life expectancy is education. With
development and shit in forms of production the importance of education has increased
significantly in many economies over time.
More recently or after the second half of the 20th century the above mentioned
economies have adopted trade openness and modern economic policies to develop and
raise living standards. The countries now are integrated with each other for the means
of business and growth.
10) Sub-Saharan Africa
Baten - A History of the Global Economy: 1500 to the Present

Sub-saharan Africa
Intro
Most literature on Sub-Saharan Africa’s economic history has been to explain why it is relatively poor -
with the assumption that little had changed during the colonial period.
- achievement s of African farmers, traders and states, improvements in food security are ignored,
as well as periods of economic growth
- This chapter reviews the different interpretations of the history and development of African
economies and whether they are historically static is responsible for them remaining poor
about:blank 67/77
Interpretations:
Explanations can be grouped as: external vs internal and institutional vs. resources
External:
- Dependency theory (institutional and external)
- Bought to Africa in the 1970s (Rodney 1972, Amin 1976, Wallerstein 1976)
- The development of the West directly caused the underdevelopment of the Rest
- Rational choice counterpart of dependency theory (institutional and external)
- Offered by growth economists in 2000s
- Both externalist theories are Euro-centric (Credits Africa’s economic outcome to European
decisions e.g. slave trade and the colonial rule)
- Both believe that Africa does not have institutions to facilitate ‘market-based economic
development’ - Europe brought Africa into the world market but did not help them establish
institutions to continue to develop themselves
Internal:
- African culture such as extended kinship systems and ‘communal’ land tenure hinder growth
- Echoed in ‘Modernisation theory’ in 1950s and 60s
- Work by Bates derived from rational-choice political science: do the private interests of rulers
align with those of the population as a whole (Bates 1981, 198, 2005, 2008)
- Factors of production
- Until 20th century S-SA was land-abundant and labour-scarce so output was limited by
the supply of labour
- Land wasn’t suitable: soil was thin and easily eroded (by heavy ploughing), animal
diseases (such as trypanosomiasis), only two seasons (too much rain some months, not
enough in other months)
- The characteristics of the resources meant the technology chosen preferred ‘extensive’
rather than ‘intensive’ use of the land (Hopkins 1973, Austin 2008)
- Africa has diverging inheritance systems rather than converging
- Rely on coercion to recruit labour outside the family (Goody 1976, Hopkins 1973,
Austin 2005, Fenske 2012, 2013)
- Low population density means it is hard for leaders to take any significant revenue from
farmers and pastoralists
- ‘Exception that proves the rule’: Ethiopia - fertile, ploughable soil, was able to
extract agricultural surplus from peasants,, enough to sustain the longest political
bodies in the world
- Marxist scholars: believe externalist views but refuse the negative view of the
dependency
- Have ‘tragic optimism’: violence and exploitation brought advances in tech and
organisation of production
- Claim evidence of growth in the growth of wage labour over the past 100 years
and of education and manufacturing (Sender and Smith 1986, Sender 1999)
African economies, 1500-1650

- Africa was a number of regional economies not strongly linked
- ‘Central Sudan’ - many local savannah economies bonded by trade networks, now is: northern
Nigeria, southern Niger and Burkina Faso
- Not only regional - also with the Eastern seas, unified in Islam and therefore trusting each other
- Swahili-Arab towns on east coast and West African savannahs
about:blank 68/77
- 15th century: direct trade with Europe

- Portugal: explored coast on the way to India to cut out middlemen in trade of gold to
Europe
- Bought coastal bases and started slave trade when they purchased captives from Benin
- Archaeologists found islands of intensive agriculture throughout Africa (Sutton 1984, Widgren and
Sutton 2004)
- Most of the land was used extensively, cultivated on rotation system or used for pastoralism
- Large states existed in certain areas, no clear trend showing increase in proportion of the African
population living in states
- There is evidence of expansion of extra-subsistence production and trade in Zambezi valley, on
east coast and West Africa
- Concentrated settlement in areas like Zimbabwe but didn’t necessarily expand
- Local histories, constraints of low population density and intensive agriculture being hard to
sustain meant little expansion
- There is evidence for cumulative expansion of markets with expanded production for sale and
denser commercial connections at this time - especially West Africa (Inikori 2007)
- Took advantage of Atlantic trade
- Large-scale importation of currency materials e.g. cowries
- Can be deduced that there were currencies only used within Africa as Europeans did not
accept material in return for other exports
- Shows vitality of internal commerce (Inikori 2007)
- Used Atlantic trade to enlarge crop repertoire
- Farmers adopted crop varieties from Asia e.g. maize and cassava with better returns to
land and labour (Miller 1988, McCann 2005)
- Impossible to know size of African population at this point
- Whether more efficient food farming increase the population at the same rate as
the slave trade was taking them
Africa during the peak of the Atlantic slave trade 1680-1800

- Period was dominated by very large increase of the slave trade due to increase in Atlantic
plantation system
- Atlantic market had very bad effects on peaceful production and trade
- Encouraged private and state enterprise into slave raiding and warfare, making
production dangerous
- ‘Gold coast’ became net importers of gold (Rodney 1969)
- Enslaved were foreigners and those excluded from society as criminals - African were not
selling their fellow citizens (any exceptions were mainly in central Africa and were last
resorts, Miller 1988)
- Advantages:
- New crops
- Currencies developed by merchants were more efficient - shown in expansion of cowrie-
and-gold-dust zone in West Africa (Lovejoy 1974)
- Reduced cost of doing business, limited if the business included slavery, however
- Impossible to estimate demographic impact of Atlantic slave trade, and external slave trades
- Close to 13 Million embarked (12,736,000 from 1501-1900, see page 321), no idea what
the population of Africa was at the time to work out the proportion enslaved
- Population density was low compared to Eurasia (Austin 2008a: 590-1)
- Labour was the supply constraint on production not land
- Can assume slave trade enhanced inequality
about:blank 69/77
- Slave-holding increased as byproduct of the supply of exports

- Slave-raiding and trading was a business
- Aggressive states were profitable and this brought shortages of labour and demand
(Hopkins 1973)
- Probably an increase in political centralization in this time
- Debate on whether resources were allocated by the price mechanism or command and custom
- Karl Polanyi (1966) claimed prices in many markets were fixed - falsified by later
research (Hopkins esp. 6, 69-70,112, Law 1992)
- Importation of slaves increased living standards for white population in southern Africa, European
rule rare throughout S-SA
- In late 18th century, on East Coast Omani dynasty fought against portugese control of towns,
forts and harbours (Sherrif 1987, Alpers 2009)
Market, slave and states, 1800-80

- Two contrary impulses which both lasted into colonial era:
- Pressure for abolition
- British tried to abolish slave trade in 1807 but 4 million slaves still went to Atlantic
destinations after that date (shown in Table 10.1, page 321) and Red Sea and Indian
Ocean trades were at record levels
- Continuation and expansion of other slave trades from Africa and within Africa
- Major expansion of commodity production for regional and extra-African markets
- Partly due to the change to exporting slaves to ‘legitimate commerce’ e.g. palm oil and
peanuts
- Unintended consequence of creation of the Sokoto Caliphate in 1804
- Most populous state, occupying most of northern Nigeria and parts of
neighbouring countries
- Prosperity based on internal peace and market integration and importation of
‘pagan’ captives as slaves (Lovejoy 2006)
- Kano, its commercial capital was the biggest manufacturing centre in the region,
exporting cloth (Barth 2011 [1857] 125-9)
- This increased demand for slaves, in West and East Africa
- Labour coercion in appropriation of labour of young adult men by Zulu monarchy
- There was a jihadist wave in western, cental and eastern Sudan making Islam a mass rural
religion
- The Caliphate introduced Islamic repertoire of taxes including light taxation of artisanal
production and commerce.
- Zulu kingdom new kind of state in southern Africa - patrimonial military autocracy rather than a
tribe
- Model for ‘offensive’ and ‘defensive’ states in the region e.g. Ndebele and Lesotho
kingdoms
- Favourable to growth of agricultural and artisanal production
- 19th century efforts to ‘modernize’ to meet the threat of European imperialism
The colonial era, 1880-1960
- Partition of Africa was fast and relatively late
- Most of the territory and population went under colonial annexation during European ‘Scramble’
for Africa, 1879-c. 1905
- Most recovered independence around 1960
- Lateness and speed explained by technological changes which made it more attractive and less
costly to invade Africa
about:blank 70/77
- Progressive industrialisation of Europe and North America created larger markets for agricultural
and mineral products from Africa
- Cost of coercion was reduced by adoption of quinine against malaria and advances in military
and transport technology
- Individual European countries feared rivals would annex Africa further and monopolize resources
- explaining how the Scramble started and continued
- There were:
- Settler economies (or ‘settler-elite’): most of the land was for European use
- African farmers reacted quickly to produce crops for the market provided by
towns and mines (Arrighi 1973, Palmer and Parsons 1977)
- Real wages were high, due to labour scarcity and that Africans still had access to
land (Harries 1982: 143,161 n.)
- Settler economy governments tried to drive Africans out of produce market and to
the labour market
- Reserved land for European use
- Restricted and prohibited African tenancy on European-owned land
(Arrighi 1973, Palmer and Parsons 1977, Mosley 1983)
- Despite policies African production was resilient in 1920s and early 1930s in
Kenya and Southern Rhodesia
- Policy changed to taxing production, directly or indirectly (Mosley 1983)
- South Africa was successful
- Black real wages for gold mining were low due to private monopsy and
aforementioned policies
- Charles Feinstein: showed quantitatively that without wage repression
the gold mining industry in SA would have been a fraction of its size in
early 1930s (Feinstein 2005: 109-12)
- Peasant colonies: Africans kept most of the land
- ‘Cash crop revolution’: widespread expansion of export agriculture by African
producers
- Growth was large in a few colonies - African traders and farmers where risk-
taking entrepreneurs
- Cocoa beans in Ghana and Nigeria, peanuts from northern Nigeria
- Other countries resisted until they were sure of transport or storage e.g. Uganda
(Tosh 1978)
- Demand for labour brought seasonal migrants to cash-crop zones
- Male labour from Rwanda into Ugandan cotton production
- Male labour from Mali to Senegalese peanut cultivation
- Male labour from from northern Ghana and Burkina Faso to southern
Ghanaian cocoa production
- Pioneers of lorry ownership (Hopkins 1978, Drummond-Thompson 1993)
- Plantation/concession colonies: where large areas, but not necessarily the majority, of the
land was solely for European companies
- Colonial rule was meant to be inexpensive
- They faced same challenges to political centralization as Africans had faced e.g. extracting
revenue from domestic agriculture (Frankema and van Waijenburg 2014)
- Problems with imperial requirement to balance their budget and maintaining cooperation from
Africans
- ‘Indirect rule’ by the British and French - through chiefs or emirs
- Used indigenous authorities for colonial purposes
about:blank 71/77
- Lessened the need to have Europeans in Africa, which was more expensive
- In 1939, estimated 43 million inhabitants of British tropical Africa were at least nominally ruled by
a total of 2,339 white administrators, judges, police and soldiers. Over 18,000:1 (Page 327)
- Minimal foreight investment into African colonies, mines attracted large flows of capital
- 42.8% of all overseas investment went to South Africa
- £55.8 per head in South Africa, £4.8 per head in ‘peasant’ colonies, £3.3 per head in
French colonies (Page 327)
- Settler administrations used indirect rule but were less fiscally limited than the administrations of
other colonies
- South Africa became independent in 1910, as a white-minority regime
- Southern Rhodesia became self-governing internally, in 1923
- Both settler governments had advantage of royalties from mines - relatively very lucrative
- Different types of colonies had different medium and long-term economic outcomes, welfare and
structural change
- Took years/decades to abolish slavery within colonies
- Peasant colonies: most slaves located, had to provide opportunities for former slaves as
hired labourers or small independent peasants.
- Growth of export agriculture made African real wages rise earlier, higher and more resiliently in
successful peasant colonies than in settler colonies
- Until WWII at least, real wages in British West African cities were equal to or higher than
those of South and East Asia (Frankema and van Waijenburg 2012; see Figure 10.1,
page 328)
- Peasant colonies had greater bargaining power as they had greater retention of rights to
land than Africans in settler colonies (they only got minimum subsistence plots (Austin
2005)
- Also had higher incomes and physical welfare
- Had effect on human capital formation: parental investment depended on wage
expectations so Africa in general, particularly West Africa, had higher numeracy than
South Africa (see figures 10.1 and 10.2, page 328)
- Greater opportunities for entrepreneurship in peasant economies
- Where large proportion of labour was taken over by the state, e.g. French system of corvée,
abolished in 1946, there were less opportunities
- Even under more liberal regimes, there was a ‘fundamental asymmetry in the structure of
competition’
- Markets operated by Africans were highly competitive
- Lacked a background in commercial agriculture, so there was little economic space for
them
- Markets operated by Europeans’ competition was limited by collusion, including formal cartels
(Hopkins 1966, Nwabughuogu 1982)
- Manufacturing:
- 1960: South Africa (20%) and Southern Rhodesia had biggest shares of manufacturing,
followed by Belgain Congo, copper-mining in province of Katanga
- No other country in S-SA did manufacturing make up more than 10% of GDP (see Table
10.3, page 329)
- Development of manufacturing was due to mining sectors and political conditions
- Free trade treaty during Scramble for Africa
- Manufacturers in Congo benefited from neighbouring colonial markets
- Settler-dominated parliaments allowed governments to get import-substitution
industrialization, 1924-1933
about:blank 72/77
- Largest peasant economy, Nigeria and peasant colonies with highest income per head,
Ghana and Senegal had late expansions, as Europeans firms established factories
before they gained independence in order to preserve their markets
- Three overlapping sub-periods, which works best for peasant colonies:
- Conquests and establishment of colonial administrations
- High primary commodity prices
- General expansion of world trade
- ‘Heyday’ of colonial rule
- Stable
- Disrupted by Depression and the Second World War
- ‘Late colonialism’ and decolonization
- Greater government taxation
- Regulation of produce markets
- Greater willingness to invest in colonies
- Clear struggles for independence instead of reform
- The most positive developments of the colonial period:
- Introduction of mechanized transport (lorries in West Africa)
- Start of a continuous increase in population - most places, 10-15 years after global
influenza pandemic of 1918 (Manning 2010, Frankema and Jerven 2014)
Independence and African economies, 1960-present

- 60s and 70s, movement towards greater state intervention in African economies
- 80s, ‘Structural Adjustment’, from administrative to market mechanisms of resource allocation
- A few countries took on far-reaching socialist policies
- ‘African’ - Tanzania
- ‘Scientific’ - Guinea, Benin and from 1975, Angola and Mozambique
- Franc zone countries:
- Decided against monetary independency, kept freely convertible currency
- State intervention stopped short of quotas on imports and internal price controls
- Before structural adjustments, lower inflation and higher economic growth than
Anglophone countries who had own currencies
- Most non franc zone currencies were highly overvalued and not freely convertible
- Created rapid growth of other controls over volume and price
- Some cases led to economic contraction e.g. Congo, Ghana, Guinea, Tanzania and
Zambia
- Due to controls causing economic rents, these policies tailored easily with kleptocracy in more
severe cases e.g. Ghana in much of 70s and Mobutu Sese Seko in DR Congo, for decades
before his overthrow in 1977
- Era of economic liberalism, franc zone countries stood out, European currency itself floating, the
French franc, then the euro
- 1994 African franc was devalued by 100% against French franc to assist African exports
- On the whole, franc zone countries (14 of them, with collective population of about 150
million) have not outperformed the rest since Structural Adjustment
- 1960-73/75, economic growth higher than population growth in most countries (on average only
by 1%)
- 1973/75-1995, mostly slow or negative growth, early-colonial boom ended for most due to OPEC
oil shock of 1973
- A few major oil exporters (Nigeria, Angola, Gabon) experienced rapid growth and ‘Dutch disease’
- oil-fuelled appreciation of the currency diverting resources away from alternative exports
about:blank 73/77
- Structural Adjustment led to dramatic economic improvements in Uganda and Ghana, on

average, the decade that followed had stagnant or negative growth (see Figure 10.3 and 10.4,
page 332)
- From 1995 to time of writing, average growth of 4-5% per year and minimum 2% per year per
capita
- Except for Botswana (in 2010), no country has grown well throughout the whole period
- Major period of fast growth for over a decade then stagnation or actual decline
- Ghana and Ivory Coast, similar demographically and environmentally
- Boomed and slumped at opposite times (see Figure 10.4; Eberhardt and Teal 2010, page
332)
- Could be argued that alternation conceals a low ‘natural’ rate of economic growth,
disproved by the fact that the ups and downs lasted too long
- Plausible explanation is policy ‘mistakes’ and political instability
- First decade of economic liberalization is categorized as ‘lost’ in terms of growth and declining
expenditure on health and education
- Introduction of Structural Adjustment policies roughly coincided with severe downturn in world
commodity prices
- 1995 boom wouldn’t have been so large were it not for Structural Adjustment in 80s
- South Africa rejoined continent in time for post-1995 boom
- Economic significance of the fall of the apartheid regime (formally introduced in 1948
election): segregation caused mighrant labour system to break down, soil erosion in over-
crowded African ‘reserves’, illegal Afriacan ‘townships’ around white cities and unrest
among black populations
- Until 60s/ early 70s the National Party’s white supremacism seemed to cause rapid
growth and attracted foreign investment (see figure 10.3, page 334)
- Uitenhage massacre 1985 caused township revolt, losing the government its control of
black urban areas, undermining foreign confidence in the regime and currency in
particular
- Economy fell into stagnation then decline
- GDP per capita fell 0.6% per year from 1973-94 (Feinstein 2005: 145-7) (page
334)
- From 1967, marginal efficiency of investment had been falling (amount of additional units
of investment required to generate one more unit of output rose (Lewis 1990: 132-3))
- Best explanation is that economy needed more skilled labour to continue
growing, but ‘apartheid premium’ limited this
- Discriminatory education provision
- De jure and de facto racial discrimation
- Skilled labour in South Africa very expensive by international standards
(Lipton 1986, Nattrass 1991, Feinstein 2005)
- Blacks began to move into semi-skilled positions as increasingly educated white
workforce left, explains why black majority rule was then encouraged, and Nelson
Mandela won first universal suffrage election in 1994
- Why have African economies not grown faster since independence:
- Externalist arguments: protectionism and excessive competition in world
markets,
- Most influential analysis: domestic political economy in interaction with foreign
elites (Bayart 2000)
- Early 80s, Bates: post-colonial governments represented distributional
coalitions
about:blank 74/77
- in most cases, coalition was primarily urban so governments

were ok to tax export agriculture
- Ivory Coast and Kenyas were expectations that proved the rule:
leaders were large cash-crop produced, refrained from taxing
export agriculture too heavily so economies were doing well
(Bates 1981)
- Proposition that African governments were over-taxing exporters but had
no reason to change their behaviour proved false by the fact they
adopted Structural Adjustment.
- ‘Switch from administrative to market forces of resource
allocation entailed in the World Bank-sponsored Structural
Adjustment programmes must have reduced drastically the scale
of economic rents (which may be defined, in effect, as surpluses
above what the recipients would receive in a competitive
market)’
- Odd that in 90s claimed again that rent-seeking was Africa’s main
economic constraint.
- Economic rents remain part of economies, generated recently by
redistributions as privatizations and, in South Africa, the ‘Black Economic
Empowerment’ programme
- View that Structural Adjustments were ‘captured’ by existing elites fits in
some cases but doesn't do justice to the increased competition in other
economies
- Not all rents are negative for economic growth (Austin 2008b: 1017-19)
- Could be argued the most fundamental change post independence was
demographic
- Growth of population accelerated after 1945
- Fall of mortality rate
- Slight downturn in birth rates, especially among educated women.
- HIV-AIDS, 1990s, especially in southern and eastern Africa affected able-
bodied people, reducing expansion of labour force
- Land surpluses in some areas, especially DR Congo and South Sudan
- Relative abundance to relative scarcity of land from late 20th century to
early 21st century (extreme case of Rwanda, Andre and Platteau 1998)
- In agriculture, new pressure towards intensification, i.e.raising ratio of labour
and/or capital applied per area of cultivated land
- Depends on what sort of intensification is leading
- Negative: more hours of labour increase output, but lower productivity
- Positive: increased pressure stimulates innovation
- Higher yielding varieties require more water and petroleum-based inputs
(insecticides and chemical fertilisers) which are expensive for African farmers
(Richards 2010)
Review (1): Africa, poor and static?

- Study in 1800 in what is now Tanzania, ‘men measured out their lives in famines’ (Iliffe 1979:13).
- Land abundance was no guarantee of subsistence where population was scattered, soils infertile
and animal assistance lacking in arable production
- Access to land helped in S-SA generally (Iliffe 1987)
about:blank 75/77
- West Africa: heights for first half of 19th century were on average as tall as those in southern
Europe (Figure 10.5, Austin et al, 2012, page 337)
- Africans grew taller over colonial period
- In certain countries it applied from early part of colonial period (Ghana, Kenya, figure 10.6, page
337) (Moradi 2009, Moradi et al 2013)
- In large samples of countries, average male heights declined during early years of colonial rule
(being 0.57cm less in 1930 than in 1900, page 337)
- Rose strongly in late colonial era (2.43cm more in 1960 than 1930)
- Tanzania heights in figure 10.5 shows a combination of animal and human epidemics due to local
German invasion and Italian invasion of Somalia (Koponen 1996).
- Italian invasion brought Indian cattle to Africa, bring rinderpest virus devastating herds in eastern
and southern Africas in 1890s, leading to famines
- Differences between political forms of European domination caused differences
- There was greater mineral wealth and investment in South Africa so it’s shocking that infant
mortality rose, from 254 in 1910-20 to 302 in 1920-30
- Ghana infant mortality decreased from 295 to 110 in same time
- In 1980s and early 1990s real incomes per capita not much higher than at time of independence
- Had been major advances in education and health
- Despite conflicts, overall economic trends have been positive in incomes, educations and public
health
- Productivity of labour:
- Scarce factor in precolonial times
- Major environmental constraints on productivity in agriculture, applied to supply of raw
materials too e.g. cotton textiles, as planting more meant less time for planting food crops
(Tosh 1980)
- Led to failure of European plantations in Ghana and colonial mechanization in
Tanzania as too costly
- Precolonial technologies were simpler and less productive than those used in Eurasia
(Austen and Headrick 1983)
- Iron smelting technique produced higher-quality metal than imported competition,
declined due to exhausting supplies of fuel
- In 19th century and early 20th, Africans took advantage of expansion of overseas
markets after the Industrial Revolution for various crops that could be grown profitably in
African conditions
- Since independence, on average there was slow growth until 1973-75, then a period of
stagnation and even decline, followed by faster and more widespread growth since 1995,
sustained by Chinese-led commodity boom
- Overall, view of S-SA characterized by low average real incomes , episodes of growth, especially
regionally and nationally.
- Economic development is more than economic growth
- Food security has improved as well as productivity of labour during the dry season, extending
agricultural year where possible
Review(2): economic development in Africa - dynamics and constraints

- Interactions between internal and external elements, resources and institutions have helped
determine the patterns of development
- External slave trades
- Internal constraints on labour productivity
about:blank 76/77
- Resources at time explains why external slave trades were profitable at the time for captors and
buyers but it damaged wider economies of the regions
- Brought violence and increased labour scarcity
- Political condition is also needed to explain the export of captives from Africa, there was a
willingness to participate
- Joseph Inikori (Inikori 2003) argued it was due to political fragmentation, no huge empires
so individual states just tried to avoid the sale of their own people
- Claims that Africans were unresponsive to market opportunities are disproved by many examples
- ‘Cash-crop revolution’
- African entrepreneurship (Forrest 1994)
- Indigenous institutions show African institutions were suited for exploiting opportunities
presented by the growth of overseas markets for crops that could be grown on African
soil (e.g. Ghanaian cocoa industry (Hill 1997[1963]) )
- Resource ratios change so institution that helps growth in one period may hinder it in another
- Situation in parts of Ghana changed from land surplus to land scarcity due to population
growth at beginning of 21st century
- System of segregation and apartheid in South Africa: cheap labour made mining
successful, then couldn’t become more productive as they needed higher-skilled labour,
which was made very expensive
- This shows that we have to consider changing historical contexts when thinking of long-
term determinants of development
- In dynamic context, useful to think of ‘paths’ of development rather than ‘‘Static geography’
approach which doesn’t take into account resources changing
- Characteristic precolonial choices where land was abundant but labour scarce:
- Land-extensive agriculture: maximizes returns to labour and conserving and restoring soil
fertility by extended land rotation, done in mid 20th century when mortality rates fell,
preference for large families
- Population of S-SA increased at least six times during twentieth century
- Workforces were not much more educated than at the time of Independence and African
labour cheaper than before
- Re-embarked on industrialization
- Contrast to Eurocentric interpretations of dependency theory and some rational-choice writing,
necessary to underline importance of African agency (African influence over African history)
- In 1980s, agreement to Structural Adjustment programmes with the IMF and World Bank in
exchange for loans was in part due to fiscal crisis resulting from producers and consumers
bypassing official markets, and thereby not paying taxes
Conclusion
- There have been periods of economic growth and trends towards economic development in the
broad scene
- Major approaches to African economic history variously emphasize external and internal
influences on growth as well as institutional and resource conditions
- Over centuries, the constraints on development are a result of the interaction of both
opportunities and constraints
- Influenced by decisions of Africans themselves, especially in responding to their own
environments
- There is still research to be done into the history, there is more being done now than ever before
about:blank 77/77

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20/02/2023, 10:56 Baten - A History of the World Economy Summary

Baten - A History of the World Economy Summary

1) North Western Europe

Summary of key points:

The Spread of the Industrial Revolution in the 19th Century:

The 20th Century Rollercoaster: 1914-45

Peace and Welfare: 1945-2010

More In depth Summary

Early Growth and Modernization:

The Spread of the Industrial Revolution in the 19th Century:

The 20th Century Rollercoaster: 1914-45

Peace and Welfare: 1945-2010

2) Southern, eastern and Central Europe

● Central Europe became rich during second industrial revolution.

Author: Joerg Baten

Why was Italy rich?

Why did Italy fall behind North west?

East-Central relatively high standards of living around 16th-17th century, as measured by

How were standards of living high in East-Central?

Why did this change later?

What affects numeracy?

Examples of sources of growth during second industrial revolution:

The first era of Globalization, 1850-1913

Did emigration to the Americas cause brain drain in Europe?

Economics effects of WW1 and interwar years:

WW2 and the costs of war:

● In German-occupied territories, WW2 caused destruction of physical capital and low

European economic boom during 50s and 60s:

Stagflation of 70s and 80s:

Economics in 90s and 00s:

● Considerable variability in important development and welfare indicators over a period of

3) United States and Canada

○ This allowed the populations’ development leading to productivity

○ Located in Eastern part of North America

● North-West Indian tribes

○ Sited near rivers and ran to the sea often

● The Plains Indians

○ Often travelled over large swaths of territory

● Was short-lived possible due to

Migrations from Europeans

○ This happened for nearly 3 centuries

○ Stable crops include wheat and rice for example

Creating and independent nation with a broad range of economic freedoms

■ Protection of private property

■ Patents and copyrights

The economy from 1790 to 1914

Population growth, 1800 – 1940

○ A large share became entrepreneurs

Long Run per capita growth

Impact of Agricultural expansion

Steel’s Effect on Firms and Workers

The destructiveness of Wars

Productivity advances after the war

Oil price surge 1970s

Figures and Maps

Baten - Latin America Reading

A typology for an analysis of the Latin American countries

main type of commodity differed between mining, agriculture or forestry. Pg(126)

The long delay: the decades after Independence, 1820–1870

major conflicts and internal political instability pg(128)

exports per capita grew stronger at around 2 per cent

obstacles against the introduction of liberal reforms

Export-led growth during the first globalization boom (1870–1929)