WEEK 1 Origins of industrial revolution & great divergence
NOTES CHAPTER 1&2
Changes of rich/poor in quantity over time and explaining these changes. By comparing these
changes you can start predicting the future.
Causes of wealth as a dynamic process of historical change – why poor/rich global question, but also
a national question – why is the income unequally divided?
1500 – trade India and America, up until 1800 set up global economy -> industrial revolution
19th century -> economic development as objective 1. unified national market 2. External tariffs 3.
Banks to protect currencies and finance investments 4. Mass education
Colonies left behind, western countries get ahead, making a clear distinction between countries in
GDP per capita from 1800 onwards. (started in 1500 – little divergence) Economies became more
stable and started growing substantially.
Rich countries develop complicated technologies only effective in high wage countries
Between 1500-1800 Europe trade and colonies -> rich, spread this only to close countries
These rich countries have faster growing economies, divergence equation
Rich countries can produce more and mechanically, making non mechanical countries fall behind. If
the standard of living in a country is high, their economic growth will probably be high and they’ll
have been rich throughout history.
Real wages, standard of living earned by salary – do they earn bare-bones subsistence, which defines
the least costly way of living, for their families?
From 1500 on rich countries could afford more, now up to 50 times bbs, while in poor countries they
barely make bbs.
Bbs – shorter (life expectancy), less healthy, less educated, less motivated. Labour is too cheap to
invest in machinery. No incentive to industrialize. This was usually the case in Malthusian economies,
where many people worked on land and earned bbs. The economy was stagnant and on the brink of
poverty. Law of diminishing return says in these economies even if more people work etc. the
productivity will remain the same, bbs. Malthusian trap dictates when wages and population
increase, you’ll make just enough more to feed new people, never more than the bare minimum.
You can measure the wealth of a country by how many people work in cities/non agaric rural area’s –
their food production is effective enough to have people working in other sectors.
Geography depends on technology and economic opportunities (coal and the technologies to use it)
Culture can determine work ethics, but also methods used and development, accessibility of those,
also cultural, countries with an emperor who specialized still boomed. Institutions also background.
Direct causes 1 technological change, 2 globalization 3 economic policy. Globalization lead to the
industrial revolution. Cheaper ways to obtain goods when they started to explore the seas. First just
trade, then colonies. English started with excluding the Dutch from trading with them. Production for
exporting to the new cities. Less people working in agriculture, urbanisation. Rural industries, local
products. High wages, high demands made agricultural revolution, energy revolutions,. These people
with high wages could educate themselves. You could increase the demand on yourself.
, Notes Article Great Divergence
Explaining the great divergence
1 introduction of steam-power and new technologies
2 how did the growth become (self)sustained
3 how to catch up?
4 why do countries fail to catch up and widen the gap
Weber: rationalism caused capitalist markets, bureaucracy and a culture that suited development.
Marx: capitalism -> good economic position, fit for Europe
Dependency theory and world systems-analysis – Neomarxism, exploitation and unequality.
Capitalists dominate alongside politicians.
China to fixed by dynasties to be developing.
Californians.
Until 1500 Asia world leader. West used this and got ahead by 1800. They exploited and stole from
China. Same with America, milking money from it. But this only started happening form 1800
onwards.
China used to be just as rich as us, rich Netherlands industrialized late and industrializing was not
that expensive. However, China did not participate in trade and was not dominating the world
market. Even though they owned much silver. The West owned other valuables though. China did
not benefit from their silver.
Development and wealth were equal, they could do as much as the land allowed them to. So did the
West get ahead because of their continuous luck? However, access to resources does not make them
valuable. Productivity is a more important factor. Did China fall and did this influence productivity in
the West? Brittan found cheaper ways to produce ‘Chinese’ goods. Mechanisation put them ahead.
England less people, more demand for machines. In the East too many people. The smart trading,
protecting the market and such, made the East fall. What Californians fail to see: the West was
getting ahead before any industrialization and the East was not using it’s available resources.
Furthermore, the West collected and spread their knowledge on innovation. Britain, for example,
could book greater military successes using less manpower. China was more corrupt.
Classical topics like the study of modes of production and especially of cultural factors, institutions
and politics get quite short shrift in their work. If culture and institutions and the state indeed matter
so little, one wonders why in all countries where industrialisation was on the agenda, one sees these
fierce debates between ‘modernisers’ and ‘conservatives’ about cultural and institutional change.
Asia used to be on the same level as the west, but through the lack of them exploiting the coal supply
and not involving themselves in trade they did not participate in globalisation and fell behind. They
did not trade and did not exploit colonies.
Vries argues the argument of the Californian school is stretched far and overexaggerated, they left
out cultural and political factors and saw institutions as unimportant.
