Why Are Come Countries Rich

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The Industrial Revolution and the Rise of the West.
Bob Allen Professor of Economic History Oxford University Graham Lecture, 2008

Why are some countries rich and others poor?

Since 1500, incomes have risen in most of the world, however: • Incomes have risen fastest in the countries that were richer in 1500 • Consequently, world inequality is much greater today than in 1500 • In 1500, average income in the UK was only 30% higher than in India • Today, the average UK income is ten times that in India.

The graph shows when the West got rich.
25000

GDP per head 1990 US$’s

20000 15000 10000 5000 0 1500

UK

1600 Italy

1700 1800 1900 2000 China India Japan

GDP per head, 1990US$’s
1500 UK Italy USA Canada China India Japan 714 1100 400 400 600 550 500 1820 1707 1117 1257 904 600 533 669 1913 4921 2564 5301 4447 552 673 1387 2000 19818 18740 28129 22198 3425 1910 21069

Distribution of global manufacturing

Source: Crafts and Venables (2003, p. 327)

The Big Question is: Why are some nations rich and others poor? • Technological change is the fundamental cause of economic growth • Other changes—urbanization, rising incomes, capital accumulation are results of more efficient production • The Rise of the West, therefore, comes down to the invention and utilization of labour saving technology.

Why was Arkwright’s water frame applied on a mass scale in Britain?

While this machine was little used and then abandoned in China

and Vaucanson’s automated loom was ignored in eighteenth century France?

Five classic answers explain the Rise of the West
• Geography: did the natural world favour the West? • Political institutions: Did limited government foster commerce and thereby the rise of the West? • Demography: Did different patterns of marriage and fertility give the West its lead? • Culture: Was the West more ‘rational’ than the Rest? • Science: Did the scientific revolution of the 17th century cause the industrial revolution of the 18th?

1. Geography favoured the winners:
• Coal was a corner stone of the Industrial Revolution • Abundant land and resources led the USA to invent labour saving technology • Do the tropics suffer from malaria and the tsetse fly?

2. Limited Government
• ‘Good’ institutions include
– Limited government – Low taxes – Secure property rights

• They create a broad market and a ‘favourable climate for investment.’ • These were secured in England by the Glorious Revolution of 1688 (parliamentary supremacy) • The rest of the world was cursed with despotism.

The trouble is that parliamentary ascendancy meant that
• Britain had higher taxes than France • Britain was more successful than France in seizing an empire. • British property was more vulnerable than French property (witness the sorry story of irrigation in France versus improvement in England). • “despotic power [which] was only available intermittently before 1688…was always available thereafter” (Hoppit 1996, p. 126)

3. demography
• Western Europeans had late marriages and not everyone married. • Rest of the world had early and universal marriage – The difference arose in the late middle ages when the chance to earn high wages created ‘Girl Power’ and women could say no to undesired husbands.

• The result was persistently higher incomes in West that led to more savings and investment in education. • In rest of the World population growth always defeated economic development and produced grinding poverty.

4. culture
• Weber thesis: protestant reformation led to rational pursuit of gain and high rate of saving • Economic growth required replacement of spiritual view by naturalistic view—the ‘disenchantment of the world’ • Weber thought the West exemplified these values but the Rest did not: true or false? • Did other cultures have other virtues? E.g. did the Japanese have a useful group solidarity?

Culture changed as ‘human capital’ was accumulated.
Proportion of the...
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