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Topic 2: Early Modern Period: 1500-1750 Great Divergence ● Differential economic performance between Western Europe and China, specifically, England and China. ● Economic performance is usually measured by GDP or national income per capita. However, in absence of the GDP series during the Great Divergence, economists have resorted to other proxies to estimate economic performance such as grain wages, silver wages, urbanisation rates, etc. Debate on the timing of Great Divergence Late Divergence: A view that argues divergence as a product of 19th century Industrial Revolution (IR); after 1800. ● This view emphasises the resource advantages (similarly, constraints) of an economy relative to others. E.g., divergence likely occurred as a result of European coal advantage, colonial policies, or economic shocks (Opium Wars 1840s, Taiping and Nian rebellions 1851-1868) which favoured Europe. ● Some key authors supporting this view are ○ Pomeranz, 2000

○ Clark (2008:2)

● Broadberry and Gupta (2006:17 and 19)

○ Grain wages (kilograms per day) - How much grain (that is produced in their region) can an individual afford with their wages? ○ By looking at the column ‘Indian wage as % of English wage’, the drastic drop on % (and therefore the disparity in wages) is prominent after 1700 ○ Similarly, for China, the disparity in wages is clearer after 1750 onwards ○ By using grain wages as a proxy of economic performance, great divergence is said to happen in the late eighteenth/early nineteenth century

Early Divergence: A view that argues North Western Europe was ahead of Asia (Cina) due to institutional differences; before 1800 ● This view emphasises that the difference in commerce, consumption patterns, urbanisation rates, agricultural productivity between Europe and Asia as the cause of divergence ● Some key authors supporting this view are ○ (Allen, 2011)

● Broadberry and Gupta (2006:17 and 19) ○ Silver wages (grams per day) ○ When observed through silver wages, the polarity between India wage and Chinese wage when compared to English wage has always been clear.

○ The difference became even more stark after 1750, which is around the time IR started.

Grain wages data support late divergence while silver wages data support early divergence; Which is more accurate? Broadberry and Gupta (2006) ● Grain wages are easy to measure as it is the staple food of most countries. ● However, it is worth noting that less developed countries (LDC) may have lower grain prices relative to developing/ developed countries. ○ LDCs mainly focus on agricultural production; most labourers are in the agricultural sector (more labour, greater supply, lower price) ● Contrarily, manufactures and luxury goods are expensive in LDCs ● Point here is, using grain wages as a measure of purchasing powers favours LDCs hence comparisons may be biased (i.e., overestimation of purchasing powers) ● Grain prices are subject to comparative advantages/ terms of trade ● On the other hand, silver wages take into account that an individual can buy more than just food with the wage. Purchasing power of silver is closer in comparison to currency than grains ● Silver wages (in a way) allows for unbiased cross country comparisons ● Still, silver wages are nominal so a problem arises if the price of goods rises faster than wages. Standard of living worsens over time. Solution to this problem is presented in Allen (2009 and 2011) ● Calculated welfare ratios (real wages) i.e., how many baskets of goods a family can buy ● Types of baskets ○ Bare Bones Basket - contains only essential goods ○ European Respectability Basket - essentials + comfort goods ● To analyse: based on Allen (2009), which country was living comfortably and which was not?

Potential reasons behind the divergence How fertility patterns can contribute to the divergence How institutional change can contribute to the divergence Historical evidence on reasons behind the divergence...