Great Divergence

"European miracle" redirects here. For the 1981 book, see The European Miracle.

Main articles: Western world, Modern history, and History of Western civilization

Maddison's estimates of GDP per capita at purchasing power parity in 1990 international dollars for selected European and Asian nations between 1500 and 1950, showing the explosive growth of some European nations after 1800. (Other authors hold that incomes in China were higher and not passed by Britain until the 1800's.)

The Great Divergence, a term coined by Samuel Huntington (also known as the European miracle, a term coined by Eric Jones in 1981), refers to the process by which the Western world (i.e. Western Europe and the parts of the New World where its people became the dominant populations) overcame pre-modern growth constraints and emerged as the most powerful and wealthy world civilization, eclipsing the Qing China, Mughal India, and Tokugawa Japan.

The process was accompanied and reinforced by the Age of Discovery and the subsequent rise of the colonial empires, the Age of Enlightenment, the Commercial Revolution, the Scientific Revolution and finally the Industrial Revolution. Scholars have proposed a wide variety of theories to explain why the Great Divergence happened, including government intervention, geography, and customary traditions.

Before the Great Divergence, the core developed regions included China, Western Europe, Japan, and India. In each of these regions, differing political and cultural institutions allowed varying degrees of development. China, Western Europe, and Japan had developed to a relatively high level and began to face constraints on energy and land use, while India still possessed large amounts of unused resources. Shifts in government policy from mercantilism to laissez faire liberalism aided Western development.

Technological advances, such as railroads, steamboats, mining, and agriculture were embraced to a higher degree in the West than the East during the Great Divergence. Technology led to increased industrialization and economic complexity in the areas of agriculture, trade, fuel and resources, further separating the East and the West. Europe's use of coal as an energy substitute for wood in the mid-1800s gave Europe a major head start in modern energy production. Although China had used coal earlier during the Song and Ming, its use declined due to the shift of Chinese industry to the south, far from major deposits, during the destruction of Mongol and Jurchen invasions between 1100 and 1400. The West also had the advantage of larger quantities of raw materials and a substantial trading market. China and Asia did participate in trading, but colonization brought a distinct advantage to the West.

Terminology and definition

The term Great Divergence was coined by Samuel Huntington in 1996 and used by Kenneth Pomeranz in his book The Great Divergence: China, Europe, and the Making of the Modern World Economy (2000). The same phenomenon was discussed by Eric Jones', whose 1981 book The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia popularized the alternate term European Miracle. Broadly, both terms signify a socioeconomic shift in which Western countries advanced ahead of Eastern countries during the Modern period.

The timing of the Great Divergence is in dispute among historians. The traditional dating is as early as the 16th century, with scholars arguing that Europe had been on a trajectory of higher growth since that date. Pomeranz and others argue that the period of most rapid divergence was during the 19th century. Citing nutrition data and chronic Western trade deficits as evidence, these scholars claim that before that date the East, especially China, was wealthier and more advanced. Others, while accepting parity of incomes between the most prosperous parts of China and Europe around 1800, trace the first significant changes in European economies back to the 17th century.

Constraints on pre-modern growth

Unlike modern industrial economies, pre-modern economies were constrained by conditions which greatly limited economic growth. Although core regions in Asia and Europe had achieved a relatively high standard of living by the 1700's, shortages of land, soil degradation, lack of a dependable energy sources (wood and charcoal were rapidly depleted), and other constraints limited growth in per capita incomes. Rapid rates of depreciation on capital meant that a great part of savings in pre-modern economies were spent on replacing depleted capital, hampering capital accumulation. Massive windfalls of fuel, land, food and other resources would be necessary for continued growth and capital accumulation. The industrial revolution overcame these restraints, allowing rapid, sustained growth in per capita incomes for the first time in human history.

Conditions in pre-Great Divergence cores

Distribution of colonial empires by the end of the 18th century.

A deeper look into the political and economic conditions of various developed regions before the Great Divergence reveals an assortment of insights into the event. Developed regions such as China, Japan, and Western Europe faced ecological constraints to economic growth, such as a shortage of land, deforestation, and lack of fuel supplies, while India still had many unexploited sources because of institutional limits to economic growth, like the caste system. Political systems varied in the various developed cores, and exercised varying influences on economic development.

Western Europe

Unlike the Asian cores, Western Europe was governed by a series of nation-states. The dominant governments' policies, prior to the 18th century were based upon mercantilism, which promoted government interference in the form of protectionism, state-granted monopolies, inflation, high taxes, and war. Western governments differed in implementation of these policies, however, with England and Holland implementing relatively limited interventions, while France and Spain adopted the full mercantilist program of heavy royal expenditures and regulation, state-backed monopolies and cartels, high taxes, the banning of innovations such as the loom and calicoes, and protectionism, crippling these countries' economies and leading to economic stagnation. Government policies shifted in the 18th and 19th centuries towards Classical liberalism, an ideology which called for a minimal government which would allow the economy to develop through the free market. The West's embrace of classical liberalism allowed its economy to develop to its full potential.

The West had a series of unique advantages compared to Asia, such as the proximity of coal mines, and the discovery of the New world which alleviated ecological restraints on economic growth such as land shortages, as well as the profits from colonization. Ironically, because previous institutions in the West had inhibited economic growth, more natural resources were available once the West had liberalized its economies and needed them.

China

Comparative populations (log scale) of China and Continental Europe between 1000 and 1975.

China had a larger population than Europe throughout the Common Era. Unlike Europe, it was politically united for long periods during that time.

During the Song Dynasty (960–1279), the country experienced a revolution in agriculture, water transport, finance, urbanization, science and technology, which made the Chinese economy the most advanced in the world from about 1100. Mastery of wet-field rice cultivation opened up the hitherto underdeveloped south of the country, while later northern China was devastated by Jur'chen and Mongol invasions, floods and epidemics. The result was a dramatic shift in the centre of population and industry from the home of Chinese civilization around the Yellow River to the south of the country, a trend only partially reversed by the re-population of the north from the 15th century. In the late imperial period (1368–1911), comprising the Ming and Qing dynasties, taxation was low, and the economy and population grew significantly, but without substantial increases in productivity.

By the end of the 17th century, the Chinese economy had recovered from the devastation caused by the Manchu conquest of China and the resulting breakdown of order. In the following century, markets continued to expand as in the late Ming period, but with more trade between regions, a greater dependence on overseas markets and a greatly increased population. After the re-opening of the south east coast, which had been closed in the late 17th century, foreign trade was quickly re-established, and was expanding at 4% per annum throughout the latter part of the 18th century. The resulting inflow of silver expanded the money supply, facilitating the growth of competitive and stable markets.

By the end of the 18th century, population density levels exceeded those in Europe. China had more large cities but far fewer small ones than in contemporary Europe. Chinese manufacturing output in 1750 is estimated at 16 times that of Britain, and was not surpassed by British levels until 1860.

India

Of the developed cores of the Old world, India was distinguished by its caste system of bound labor, which hampered economic and population growth and resulted in relative underdevelopment compared to other core regions. Compared with other developed regions, India still possessed large amounts of unused resources. India's caste system gave an incentive to elites to drive their unfree laborers harder when faced with increased demand, rather than invest in new capital projects and technology. The Indian economy was characterized by vassal-lord relationships, which weakened the motive of financial profit and the development of markets; a talented artisan or merchant could not hope to gain much personal reward. Overall, scholars state that India was not a very likely site for an industrial breakthrough, despite its sophisticated commerce and technologies.

Japan

Japanese society was governed by the Tokugawa Shogunate, which divided Japanese society into a strict hierarchy and intervened considerably in the economy through state monopolies and restrictions on foreign trade; however, in practice, the Shogunate's rule was often circumvented. Japan experienced a period of relatively rapid economic growth before 1720, after which Japanese population levels and incomes stagnated and declined.

Possible factors

Beginning in the early 1800s, economic prosperity rose greatly in the West due to improvements in technological efficiency, as evidenced by the advent of new conveniences including the railroad, steamboat, steam engine, and the use of coal as a fuel source. These innovations caused the Great Divergence, elevating Europe and the United States to high economic standing relative to the East. Scholars have proposed numerous theories to explain why the Great Divergence occurred.

Coal

The distribution of coal deposits shaped industrial development in Britain.

In the Industrial Revolution, coal and coke were extensively used in metallurgy and steam engines, being cheaper, more plentiful and more efficient than wood and charcoal. Coal-fired steam engines were also used in the railways and in shipping, revolutionizing transport in the early 19th century.

Kenneth Pomeranz drew attention to differences in the availability of coal between West and East. Due to regional climate, European coal mines were wetter, and deep mines did not become practical until the introduction of the Newcomen steam engine to pump out groundwater. In Chinese mines in the arid northwest, ventilation to prevent explosions was much more difficult.

Another difference was geographic distance; although China and Europe had comparable mining technologies, the distances between the economically developed regions and coal deposits were vastly different. The largest coal deposits in China are located in the northwest, within reach of the Chinese industrial core during the Northern Song. During the eleventh century, China developed sophisticated technologies to extract and use coal for energy, leading to soaring iron production. The southward population shift between the 12th and 14th centuries resulted in new centers of Chinese industry far from the major coal deposits. Some small coal deposits were available locally, though their use was sometimes hampered by government regulations. In contrast, Britain contained some of the largest coal deposits in Europe.

Efficiency of markets and state intervention

The claim that Europe had more efficient markets than other civilizations has been cited as a reason for the Great Divergence. In Europe, market efficiency was disrupted by the prevalence of feudalism and mercantilism. Practices such as entail which restricted land ownership, hampered the free flow of labor and buying and selling of land. These feudal restrictions on land ownership were especially strong in continental Europe. China had a relatively more liberal land market, hampered only by weak customary traditions. Bound labor, such as serfdom and slavery were more prevalent in Europe than in China, even during the Manchu conquest. Urban industry in the West was more restrained by guilds and state-enforced monopolies than in China, where in the 18th century the principal monopolies governed salt and foreign trade through Guangzhou. Pomeranz rejects the view that market institutions were the cause of the Great Divergence, and concludes that China was closer to the ideal of a market economy than Europe.

Another view, prevalent mostly in China, blames the Great Divergence on the Manchu conquest in the mid-17th century, and the resulting Qing Dynasty's interventions such as banning foreign trade in the late 17th century and later monopolizing it at Guangzhou, restrictions on opening private mines, suppression of free thought and new scientific theories (a man was executed for believing the brain was the center of thought) and attempts to discourage commercial agriculture, policies that contrasts with Ming's laissez-faire policies. However Pomeranz rejects the assertion that "...certain Asian societies were headed toward an industrial breakthrough until Manchu or British invaders crushed the 'sprouts of capitalism'", and holds that the Qing "...revitalization of the state" had a positive effect on the Chinese economy.

Differences in wages and living standards

Classical economists, beginning with Adam Smith and Thomas Malthus, argued that high wages in the West stimulated labor-saving technological advancements. However, more recent studies have depicted living standards in 18th century China and pre-Industrial Revolution Europe as comparable. Per capita income in China is estimated by late economic historian Paul Bairoch to have exceeded that of Europe until 1800 or later. Life expectancy in China and Japan for adult males were 39.6 and 41.1 respectively, compared with 34 for England, between 27.5 and 30 for France, and 24.7 for Prussia. Chinese laborers in the Yangtze delta consumed 4,600 calories per day on average (laborers in China overall consumed 2,637 calories on average) compared with 2,000-2,500 calories per day for England. According to Pomeranz and others, there was modest per capita growth in both regions, the Chinese economy was not stagnant, and in many areas, especially agriculture, was ahead of Western Europe. Chinese cities were also ahead in public health.

Economic historian Robert Allen estimates that family incomes in the Yangtze delta, the richest region of China, were substantially higher than England in 1620 and was the equivalent of 19 pence per day in 1820, compared with 20 pence per day in the contemporary English Midlands, However, Allen states that Yangtze delta agricultural labor productivity was static between 1600 and 1800, while English and Dutch productivity caught up, greatly increasing from a much lower starting point. Yangtse workers worked fewer days, and the trend was for the number of days worked to decrease as farms became smaller, reducing family incomes.

Luxury consumption

Elegant furnishings for the very wealthy

Luxury consumption is regarded by many scholars to have stimulated the development of capitalism and thus contributed to the Great Divergence. Proponents of this view argue that workshops, which manufactured luxury articles for the wealthy, gradually amassed capital to expand their production and then emerged as large firms producing for a mass market; they believe that Western Europe's unique tastes for luxury stimulated this development further than other cultures. However, others counter that luxury workshops were not unique to Europe; large cities in China and Japan also possessed many luxury workshops for the wealthy, and that luxury workshops do not necessarily stimulate the development of "capitalistic firms".

Property rights

Differences in property rights have been cited as a possible cause of the Great Divergence. This view states that Asian merchants could not develop and accumulate capital because of the risk of state expropriation and claims from fellow kinsmen, which made property rights very insecure compared to those of Europe. However, others counter that many European merchants were de facto expropriated through defaults on government debt, and that the threat of expropriation by Asian states was not much greater than in Europe, except in Japan.

Robert Brenner emphasizes differences in land tenancy rights. He claims that in the lower Yangtze, most farmers either owned land or held secure tenancy at fixed rates of rent, so that neither farmers nor landlords were exposed to competition. In 15th century England, lords had lost their serfs, but were able to assert control over almost all of the land, creating a rental market for tenant farmers. This created competitive pressures against subdividing plots, and the fact that plots could not be directly passed on sons forced them to delay marriage until they had accumulated their own possessions. Thus in England both agricultural productivity and population growth were subject to market pressures throughout the early modern period. However, Pomeranz argues against this thesis, stating that much of the land market in China was free, with many supposedly hereditary tenants and landlords being frequently removed or forced to sell their land. Although Chinese customary law specified that people within the village were to be offered the land first, Pomeranz states that most of the time the land was offered to more capable outsiders, and argues that China actually had a more free land market than Europe.

The New World

A variety of theories posit Europe's unique relationship with the New World as a major cause of the Great Divergence. The high profits earned from the colonies and the slave trade constituted 7 percent a year, a relatively high rate of return considering the high rate of depreciation on pre-industrial capital stocks, which limited the amount of savings and capital accumulation. European colonization was sustained by profits through selling New World goods to Asia, especially silver to China. According to Pomeranz, the most important advantage for Europe was the vast amount of fertile, uncultivated land in the Americas which could be used to grow large quantities of farm products required to sustain European economic growth and allowed labor and land to be freed up in Europe for industrialization. New World exports of wood, cotton, and wool is estimated to have saved England the need for 23 to 25 million acres of cultivated land (by comparison, the total amount of cultivated land in England was just 17 million acres), freeing up immense amounts of resources. The New World also served as a market for European manufactures. However, Ricardo Duchesne has argued against Pomeranz's assertion that the New world gave Europe a special advantage compared to other Asian cores by pointing out that China also engaged in expansion into the Southwest and Manchuria which gave it similar advantages.

Economic effects

A Watt steam engine, the steam engine fuelled primarily by coal that propelled the Industrial Revolution in Great Britain and the world.

The Old World methods of agriculture and production could only sustain certain lifestyles. Industrialization dramatically changed the European economy and allowed it to attain much higher levels of wealth and productivity than the other Old World cores. Although Western technology later spread to the East, differences in uses preserved the Western lead and accelerated the Great Divergence.

Productivity

When analyzing comparative use-efficiency, the economic concept of Total Factor Productivity (TFP) is applied to quantify differences between countries. TFP analysis assumes similar raw material inputs across countries and is then used to calculate productivity. The difference in productivity levels, therefore, reflects efficiency of raw materials use rather than the raw materials themselves. TFP analysis has shown that Western countries had higher TFP levels on average in the 1800s than Eastern countries such as India or China, showing that Western productivity had surpassed the East.

Per capita income

Some of the most striking evidence for the Great Divergence comes from data on per capita income. The West rising to power directly coincides with per capita income in the West surpassing the East. This change can be attributed largely to the mass transit technologies, such as railroads and steamboats, that the West developed in the 1800s. The construction of large ships, trains, and railroads greatly increased productivity. These modes of transport made moving large quantities of coal, corn, grain, livestock and other goods across countries, greatly reducing transportation costs. These differences allowed Western productivity to exceed that of other regions.

Economic historian Paul Bairoch has estimated the GDP per capita of several major countries in 1960 US dollars after the Industrial Revolution in the early 19th century, as shown below.

His estimates show that the GDP per capita of Western European countries rose rapidly after industrialization. For comparison, Bairoch estimated China's GDP per capita in 1800 at 282 1960 US dollars, Britain's at 240 and India's at 168 to 216.

Agriculture

Before and during the 19th century, much of European agriculture was underdeveloped compared to the rest of the world. This left Europe with abundant idle natural resources. In the 1800s, rather than adopting more advanced farming techniques for greater crop production, French and German farmers were able to sell more of their product by working longer and curbing consumption. There was also a large shift from subsistence agriculture to market agriculture. England, on the other hand, had reached the limit of its agricultural productivity well before the beginning of the 19th century. Rather than taking the costly route of improving soil fertility, the English increased labor productivity by industrializing agriculture. From 1750 to 1850, European nations experienced population booms; however, European agriculture was barely able to keep pace with the dietary needs. Imports from the Americas, the reduced caloric intake required by the newly forming proletariat, and the consumption of appetite suppressants such as tea allowed England to cope with the food shortages. By the turn of the 19th century, much European farmland had been eroded and depleted of nutrients. Fortunately, through improved farming techniques, the import of fertilizers, and reforestation, Europeans were able to recondition their soil and prevent food shortages from hampering industrialization. Meanwhile, many other formerly hegemonic areas of the world were struggling to feed themselves — notably China.

Fuel and resources

The global demand for wood, a major resource required for industrial growth and development, was increasing in the first half of the 19th century. A lack of interest of silviculture in Western Europe, and a lack of forested land, caused wood shortages. By the mid 1800s, forests accounted for less that 15% of land use in most Western European countries. Fuel costs rose sharply in these countries throughout the 18th century and many households and factories were forced to ration their usage, and eventually adopt forest conservation policies. It was not until the 1800s that coal began providing much needed relief to the European energy shortage. China had not begun to use coal on a large scale until around 1900, giving Europe a huge lead on modern energy production.

Through the 19th century, Europe had vast amounts of unused arable land with adequate water sources. However, this was not the case in China; most idle lands suffered from a lack of water supply, so forests had to be cultivated. Since the mid 1800s, northern China's water supplies have been declining at an alarming rate, reducing its agricultural output. By growing cotton for textiles, rather than importing, China exacerbated its water shortage. During the 19th century, supplies of wood and land decreased considerably, greatly slowing growth of Chinese per capita incomes.

Trade

19th century triangular trade between Europe, the New World, and Africa.

During the era of European imperialism, periphery countries were often set up as specialized producers of specific resources. Although these specializations brought the periphery countries temporary economic benefit, the overall effect inhibited the industrial development of periphery territories. Cheaper resources for core countries through trade deals with specialized periphery countries allowed the core countries to advance at much greater pace, both economically and industrially, than the rest of the world. Europe's access to a larger quantity of raw materials and a larger market to sell its manufactured goods gave it a distinct advantage through the 19th century. In order to further industrialize, it was imperative for the developing core areas to acquire resources from less densely populated areas, since they lacked the lands required to supply these resources themselves. Europe was able to trade manufactured goods to their colonies, including the Americas, for raw materials. The same sort of trading could be seen throughout regions in China and Asia, but colonization brought a distinct advantage to the West. As these sources of raw materials began to proto-industrialize, they would turn to import substitution, depriving the hegemonic nations of a market for their manufactured goods. Since European nations had control over their colonies, they were able to prevent this from happening. Britain was able to use import substitution to its benefit when dealing with textiles from India. Through industrialization, Britain was able increase cotton productivity enough to make it lucrative for domestic production, and overtake India as the world's leading cotton supplier. Western Europe was also able to establish profitable trade with Eastern Europe. Countries such as Prussia, Bohemia and Poland had very little freedoms in comparison to the West; forced labor left much of Eastern Europe with little time to work towards proto-industrialization and ample manpower to generate raw materials.

See also

• Colonial empire
• Western empires
• Modern history
• Second European colonization wave (19th century–20th century)
• Rise of the New Imperialism
• Economic history of China (pre-1911)

Books

• Guns, Germs, and Steel
• The Civilizing Process
• The European Miracle
• The Rise of the West: A History of the Human Community
• The Clash of Civilizations

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