Global Economic Development Overview

Global Economic Development: A Bird's Eye View

• Early economic growth was almost nonexistent before 1750.
• The Industrial Revolution (1750-1850) marked a turning point, breaking from stagnation.
• The modern growth regime (post-1870) saw increasing global economic disparities.
• The "Great Divergence" describes how the West industrialized, leaving other regions behind.
• Economic growth is measured by GDP per capita, representing total output per person.
• Economic development encompasses structural changes in the economy, leading to improved human well-being.

The Neolithic Revolution (~10,000 BCE)

• The shift from nomadic hunter-gatherer societies to settled agricultural communities.

• Occurred independently in regions like the Fertile Crescent, China, and Mesoamerica.

• Led to permanent settlements, specialization, and technological innovations.

• The shift to agriculture was potentially driven by climate change, population growth, geography and economic factors.

• Consequences of the Neolithic Revolution:

  • Economic: Stable food supply led to population growth, specialization in labor, and private property.
  • Social: Rise of complex societies, shifted gender roles, and increased conflict.
  • Negative Outcomes: Higher disease risks, malnutrition, and social inequalities like slavery.

The Malthusian Epoch (Pre-Industrial Society)

• Thomas Malthus' Theory (1798): Population grows faster than food supply; this creates a cycle of poverty.

• Malthusian Trap: Rising income leads to population growth, keeping living standards low.

• Checks on population: Famine, disease, and war curb population growth (these are positive checks).

• Preventive checks: Delayed marriage and limited birth control keep population growth in check.

• Defining Characteristics: Mass poverty with near-subsistence living standards, high birth and death rates, and limited escape from poverty except for the elites.

• European Marriage Pattern (EMP): High marriage age hindered fertility compared to other regions contributing to higher per capita income.

• Short-term Economic Booms:

  • Golden Age of Islam (850-1050 CE): Agricultural advancements and financial innovations
  • Song China (960-1279 CE): Paper money, iron production, and urbanization
  • Dutch Golden Age (1588-1720 CE): Early stock market, and colonial expansion.

The Industrial Revolution (1750-1850)

• A fundamental shift from agrarian economies to industrial production.
• Reasons for Britain's lead:
  • Institutions: Stable government, secure property rights.
  • Factor Prices: High wages and cheap coal incentivized labour-saving technologies.
  • Knowledge/Culture: Industrial enlightenment promoted knowledge sharing and scientific progress.
• Key Innovations: The steam engine, the spinning jenny, and railways.
• Consequences:
  • Economic: Urbanization, industrial capitalism, increased productivity, and rising living standards for some.
  • Social: Emergence of the working class, child labor, and poor working conditions.
  • Global: Europe industrialized while other regions lagged.

The Demographic Transition

• Stages of decreased mortality rates and birth rates: Initially, high birth and death rates, then declining death rates (with high fertility), and finally, declining birth rates resulting from investment in human capital (education, etc.).
• Role of Human Capital: Essential for industrial labor, parents prioritizing education over large families.
• Economic Implications: Shift from agricultural to factory work, rising life expectancy, and improved health.

Divergence and its Historical Origins

• Great Divergence (Europe vs. Asia):

  • Institutional Argument: Europe's fragmented states fostered competition, while China's centralized governance lacked it.
  • Economic Structure: Britain industrializing using coal and colonial resources, compared to China remaining agrarian.
  • Cultural Factors: Europe's Enlightenment promoted scientific progress while Confucianism emphasized stability.
  • Technological Lag: Europe's scientific revolution fueled ongoing progress while other regions experienced innovation that slowed.

• Little Divergence (Northwestern vs. Mediterranean Europe): Northwestern Europe's early urbanization, banking, and trade led industrialization ahead of others.

• Middle East's Decline:

  • Kuran's Argument: Islamic inheritance laws and lack of corporate institutions hindered capital accumulation and economic dynamism.