EC104: The World Economy: History & Theory (EC104)
Institution
The University Of Warwick (UoW)
Book
Power and Plenty
This document contains all the notes from the core reading which is compulsory for your first year EC104 module. It contains all the key information you need to achieve a top mark in this module, with all chapters summarised and noted clearly.
EC104: The World Economy: History & Theory (EC104)
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Power and Plenty Chapter 1
What is the Malthusian trap? What does it explain about the world before
1500?
Q: Were the Islamic World and China more advanced than Europe before the
black death?
Chapter 1: Introduction: Geographical and historical background: Analyzing world trade over
time is hard, as countries which exist at the beginning point don’t exist at the end point.
Mauro (1961) proposed an “intercontinental model” in the form of an interregional input-
output table that would record the flows of goods and precious metals between the
continents over time. This would eliminate the problems of politics by sticking to the
geographic entity of a continent which does not change.
Lewis and Wisen propose the concept of “world regions” namely “multi-country
agglomerations, defined not by their supposed physical separation from one another (as are
continents) but rather (in theory) on the basis of important historical and cultural bonds.”
Western Europe: boundaries chosen to reflect the extent of the cultural influence associated
with the Roman Catholic Church. Geographically this region has many natural advantages -
high ratio of coastline to land area, greater than for any other continent according to Rhoads
Murphey (1970, p.87); has the lowest average elevation; the greatest proportional extent of
plains; relatively mild temperature in relation to latitude due to the effect of the Gulf Stream
-> very fertile lands. Many rivers keep transport costs low and market areas connected.
Natural barriers such as the Alps which makes its political unification militarily difficult.
The eighth century saw western Europe prosper from the expansion of trade in the North
Sea and Baltic regions. The extent of the wealth generated by trade, tribute, and plunder
can be seen by the treasures excavated in 1939 at the famous ship burial of Sutton Hoo.
Eastern Europe: The major formative cultural influences on the region were the Byzantine
Empire and the Greek Orthodox Church. Very large continental area with wide extremes of
temperature. Major rivers such as the Don and the Volga.
North Africa and Southwest Asia (known today as the Middle East): The Islamic World: A high
proportion of the land area is arid or semiarid, with scarcity and irregularity of rainfall.
However, good location relative to the other world regions. Europe was just across the
Mediterranean, Iran and Afghanistan were in direct contact with Central Asia and hence the
overland trade routes to China; India reachable by sea. Spices from the Indonesian
archipelago could be brought to the Persian Gulf and the Red Sea; gold from West Africa
could also be brought and exchanged for salt. Islamic religion and the Arabic language.
Despite intense internal conflicts, the Islamic World thrived economically, with a wide variety
of crops from the east, while Damascus continued to expand. Damascus was at a crossroads
of the caravan trade. Conflict was high, however, which led to a downward turn in wealth for
the region.
Arabs lived in centralized garrisons maintaining their culture. Disadvantage was that they
became pure rentiers, except when they were called upon to fight against internal revolts or
external invaders. This military function was eventually turned over to specialized military
slaves of Turkic origin, with very adverse consequences for the caliphate.
There was a large fiscal imbalance between the claims of the army and the ability of the
economy to generate the necessary revenue, which left the system vulnerable to external
,shocks and threats. The initial unity of the empire slowly broke down over time: internal
dynastic quarrels, religious schism, distance from centre etc
Big blow to prosperity of Iraq came, when the main source of water to the Sawad was
deliberately cut by a feuding warlord in 937 in an attempt to impede the march of a rival.
Central (or Inner) Asia: Vast region in the interior of the Eurasian landmass, bounded to the
south by towering mountain ranges and to the north by the Arctic tundra. Interdependence
of nomadic people and sedentary civilizations - perfect for trade but also for the nomads to
raid the sedentary civilisations, steal and leave. The region served as a crossroads traversed
by the flow of goods, technical inventions and religions between the widely separated
settled regions themselves. Taxing the aravans that crossed the region was usually more
profitable than simply plundering them. Even more profitable, was obtaining key
commodities such as silk at the source in China and then trading it westwards, if this was
possible by force of arms. The Turks were able to extract lots of silk from China at very
favorable terms of trade in the light of the military pressure that they were able to apply.
South Asia: Separated from Central Asia by the Himalayas. Caste system. Ganges river was
the epicenter as it provided access to internal as well as overseas trade. Local deposits of
iron ore gave it an edge in weaponry, while forests provided timber as well as a supply of
war elephants. Roman coins have been found in southeast asia which demonstrates the
trade that happened in that region. Several Arab merchants settled on the western Malabar
coast that was later to play a significant role in both trade and the spread of Islam to
Southeast Asia. Rice cultivation was a big part of the economy, supported by what
eventually became a very elaborate system of irrigation.
Southeast Asia: all of the Eurasian landmass east of India and south of China, together with
the extensive chain of islands e.g. Thailand, Malaysia. The most prominent geographical
feature of the mainland is the series of long river valleys, generally running north to south
e.g. the Mekong. The plains along these river valleys, particularly the silt-rich deltas, are
fertile areas for rice cultivation. The river valleys are usually flanked by forested uplands
that are more difficult to cultivate except on a slash and burn basis. Region is subject to the
play of the seasonal monsoon winds. The indigenous people developed wet rice cultivation,
bronze and iron metallurgy and distinctive cultural, social and political traits well before
historical times and independently of India and China. Because of their intermediate location
they did become subject in historical times to powerful influences from the great civilizations
of their Indian and Chinese neighbours.
East Asia: China, Korea and Japan: Settled agriculture has always been an abiding aspect of
Chinese civilisation. The fertile valleys of the Yellow River and the Yangtze have provided
the agricultural foundation for all subsequent development. There was a protracted power
struggles between the Warring States which ended with the victory of the western border
state of Ch’in in 221 B.C. which Bodde (1981, p.41) calls “the most important single date in
Chinese history before the abolition of the monarchy in 1912.” A centralised despotic regime
was imposed, with standardized language, laws, weights, and measures administered by a
civilian bureaucracy supported by a powerful army. The Great Wall was built and
consolidated and a number of other massive public works undertaken.
Japan has been much less subject to invasion and immigration in historical times and is
unique in the degree of its long relative isolation from foreign influence, in comparison with
other major modern nations. The land is mountainous, less than a fifth of it being arable.
Compensating for this are timber from abundant forests and a rich variety of fish from the
surrounding seas.
,What is the Malthusian trap? What does it explain about the world before
1500?
Q: Were the Islamic World and China more advanced than Europe before the
black death?
Chapter 2: The World Economy at the turn of the First millennium: The Islamic World in the
first century was the only one of the seven regions that experienced regular and direct
contacts with all of the other regions e.g. they exchanged salt and textiles for West African
Gold; invaded Central Asia; invaded India.
South Asia was a fairly well connected region, by virtue of its relatively central geographical
position (5).
Africa - in contact with two other regions each
Central and East Asia in contact with four regions and southeast asia and eastern europe
with three and sub Saharan Africa and western Europe with only two.
Trade was dependent on security for merchants as they crossed vast expanses with goods
to trade.
Trade by sea was an issue due to the monsoon winds. Another problem was a political one.
There were two bottlenecks that had to be negotiated if goods were to pass between China
and Europe, the Malayan peninsula and the Arabian peninsula. Control over either of these
bottlenecks could give rise to substantial monopoly rents, and so a series of regimes arose
in both regions that used military power to levy substantial taxes on trade. When the
overland route was functioning well, their rents should have declined; when it broke down as
a result of political instability, their rents should have increased. Western Europe’s
encirclement by the Muslim World, meant that it was especially vulnerable to such
monopolistic practices.
The Golden age of Islam: Gold and Silver made up the coins in the islamic unified world.
They had an abundance of these deposits across the Muslim world. With these resources at
their disposal the Islamic World was able to enjoy monetary stability without any significant
resort to debasement for over three centuries, so that the description of this era as the
Golden Age of Islam holds true not just figuratively but literally as well.
The holy cities e.g. Medina, were the terminal points of the vast annual pilgrimages, the hajj,
and as such were of considerable economic importance as well. The Arabian peninsula
served as a market for trading African slaves. Another major economic activity was horse
breeding. Trade was really important in the muslim world. The Bactrian camel was very
useful for facilitating this trade.
Most cities were situated at oases, with irrigation systems supporting market gardens and
crop cultivation to feed inhabitants.
Trade of gold from Africa was taxed. These rents were supplemented by a range of
manufactured exports such as textiles, ceramics and glass, as well as the export of horses to
the rest of the Islamic World as well as to sub Saharan Africa. Slaves were also traded
between sub Saharan Africa and the Islamic World.
Gold from East Africa, as well as ivory and rock crystal were exported from a series of
trading ports along the east cost.
, The arab world, especially egypt, received a lot of monopoly rent as a hub for which trade
passed through.
The Fatamids permitted free enterprise in trade and industry. The administrative efficiency
and economic policy of the Fatamids was apparently so successful that S. D. Goitein speaks
of the “miracle of the Fatimids”, which he attributes to these factors as well as to trade with
an increasingly prosperous Western Europe. It had an almost laissex-faire character, with
very low customs duties and free movement of goods, people and capital. However, at the
same time, members of the court and the royal family, including top civil and military
leaders, were rewarded with a variety of privileges, such as the right of purchase and
exemptions from taxation, which tilted the markets very much in their favor at the expense
of less well connected merchants and the general public. However, this laissez-faire
approach may have meant that the Famitmids neglected maintenance of the agricultural
infrastructure, which traditionally required from a third to a fourth of annual revenue. It did
bring significant wealth though, as shown in the public buildings that were built and large
houses.
The arab conquests led to a “green revolution” in the lands they occupied with the diffusion
of new crops and complex irrigation techniques to render the growth of these crops in arid
environments feasible.
The social changes accompanying the Arab Conquest also seem to have been beneficial,
replacing the slave plantations of the Roman and Visigothic eras with rent-paying tenant
cultivators or sharecroppers, and with more flexible arrangements regarding land use and
property rights being introduced.
The small Jewish community played a role in commerce and administration out of all
proportion to its size, because its education, literacy, and eastern origins enabled it to be a
cultural mediator between the Muslims and Christians.
Industry and mining were also highly developed in al-Andalus.
Piracy and freebooting plagued the Mediterranean trade in earlier times but declined
noticeably from the tenth century onwards.
“Hispano-Moorish” economic system asserted itself, with a flourishing trade across the
western Mediterranean involving the exchange of southern agricultural products, for
northern timber and metals.
All of the cities and areas of the Islamic world were in constant touch with each other, with
no restrictions at all on the free flow of people, ideas, techniques and capital, in spite of the
frequent political conflicts and warfare between the individual Muslim states. The hajj was a
major unifying factor.
China: The sung economic miracle: At the turn of the first millenium, China was undergoing
an unprecendented economic expansion. North and South China linked together by an
extensive network of canals and other waterways.
Population grew massively as a new strain of rice (“early ripening rice”) was introduced
which enabled double and even triple cropping (from 50 million in 750 to well over 100
million by the 12th century)
This can be seen as the operation of a classical Malthusian type model, with population
growth eventually wiping out gains in productivity. But in the 11th and 12th century the lag
between the productivity gain and population growth was long enough to have led to a
remarkable burst of prosperity. This period saw a great extension of markets, trade and
specialisation, accompanied by an increase in urbanization and technological change in
industry and transportation.
Central to the buoyant economy based on centers each specialized in different goods was
one of the most extensive and convenient system of water transport anywhere in the world.
Taxes on trade came to play an increasingly important role in the fiscal basis of the state.
The economic performance of Sung China is all the more remarkable in light of the fact that
the entire history of the dynasty was marked by incessant conflict on its northern borders
with powerful nomadic states.
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