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    Divergent Patterns of Economic Development: Lecture Outline 1. Explaining "Divergence" After 1870

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    fendy
    The document discusses divergent patterns of economic development after 1870. It analyzes both international and domestic factors that contributed to this divergence, including: 1) Great power rivalry and colonial exploitation internationally, and 2) Differences in domestic endowments of resources, labor, and climate as well as the development of institutions that reinforced elite interests within countries. Specifically, it examines how initial conditions in colonial societies led to different types of economies and institutions with long-term path-dependent effects on economic and social outcomes over time.

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    Divergent Patterns of Economic Development: Lecture Outline 1. Explaining "Divergence" After 1870

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    fendy
    33 views11 pages
    The document discusses divergent patterns of economic development after 1870. It analyzes both international and domestic factors that contributed to this divergence, including: 1) Great power rivalry and colonial exploitation internationally, and 2) Differences in domestic endowments of resources, labor, and climate as well as the development of institutions that reinforced elite interests within countries. Specifically, it examines how initial conditions in colonial societies led to different types of economies and institutions with long-term path-dependent effects on economic and social outcomes over time.

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    Divergence

    Original Title

    Lecture 7

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    The document discusses divergent patterns of economic development after 1870. It analyzes both international and domestic factors that contributed to this divergence, including: 1) Great power rivalry and colonial exploitation internationally, and 2) Differences in domestic endowments of resources, labor, and climate as well as the development of institutions that reinforced elite interests within countries. Specifically, it examines how initial conditions in colonial societies led to different types of economies and institutions with long-term path-dependent effects on economic and social outcomes over time.

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    © All Rights Reserved
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    33 views11 pages

    Divergent Patterns of Economic Development: Lecture Outline 1. Explaining "Divergence" After 1870

    Uploaded by

    fendy
    The document discusses divergent patterns of economic development after 1870. It analyzes both international and domestic factors that contributed to this divergence, including: 1) Great power rivalry and colonial exploitation internationally, and 2) Differences in domestic endowments of resources, labor, and climate as well as the development of institutions that reinforced elite interests within countries. Specifically, it examines how initial conditions in colonial societies led to different types of economies and institutions with long-term path-dependent effects on economic and social outcomes over time.

    Copyright:

    © All Rights Reserved
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    of 11

    Divergent patterns of economic development

    Lecture Outline
    1. Explaining “Divergence” after 1870
    • International factors:
    • Great power rivalry and the rush for colonies
    • Colonial exploitation
    • Domestic factors:
    1. Endowments of resources, labor, climate
    2. Interests and govt policy
    3. Institutions lock-in elite interests

    1
    Explaining Divergence after 1870
    International factors:
    • Great power rivalry and the rush for colonies
    (Figures 1 & 2)
    • Economic causes of the “New Imperialism”?
    Figure 3)
    • Colonial exploitation did slow growth in some
    areas (e.g. Congo)
    • But some areas did experience growth and
    development as export economies under
    colonialism
    • And some non-colonies didn't develop (see Figure
    4)

    2
    Figure 1: Colonial Expansion 1876-1914
    Colonies Mother Countries

    1876 1914 1914


    area Pop. area Pop. area pop.

    G.B. 22.5 251.9 33.5 393.5 0.3 46.5

    France 0.9 6.0 10.6 55.5 0.5 39.6


    Germany -- -- 2.9 12.3 0.5 64.9
    United -- -- 0.3 9.7 9.4 97.0
    states
    Japan -- -- 0.3 19.2 0.4 53.0
    Russia 17.0 15.9 17.4 33.2 5.4 136.2

    Note: Population in millions; area in sq. kms.


    Source: N. Bukharin, The Imperial World Economic System.
    3
    Figure 2: The Scramble for Africa…and Asia

    4
    Figure 3: Not much support for economic
    interpretations of imperialism

    • Most empires were not very dependent on their colonies for trade. Same holds
    for investment; most investment went to non-colonies.
    Source: Benjamin J. Cohen, The Question of Imperialism (New York: Basic Books,
    1973). 5
    Figure 4: Distribution of incomes for colonized and
    non-colonized countries
    Some former
    colonies did
    develop

    And some non-


    colonies did not
    develop

    Source: Dani Rodrik, et al, "Institutions Rule: The Primacy of Institutions Over Geography and
    Integration in Economic Development." NBER Working Paper No. 9305, October 2002.
    6
    Divergence Puzzles
    US/Canada vs. Barbados (same empire)
    U.S. vs. Mexico (same initial income)

    In 1700, Barbados and Mexico were rich relative to the US, and people
    thought they would grow very fast. But by 1989, the US had grown
    spectacularly wealthy while Barbados and Mexico had stagnated. Why? 7
    Engermann &Sokoloff explanation – While all New
    World colonies had an abundant endowment of natural
    resources that could produce a high rate of economic
    growth, endowments of other complementary factors
    differed. Two important ones were:
    • labor endowments (size of indigenous population)
    • climatic conditions (which crops could be grown).
    These two features affected initial economic institutions of
    colonial societies in distinctive ways:
    • “plantation economies” (Caribbean)
    • “conquest economies” (S. and Cen. America)
    • “settlement economies” (N. America)
    8
    Engermann and Sokoloff: Relationship between endowments,
    interests and institutions

    Endowments Interests Institutions

    Initial income
    Initial factor Institutions developed
    distribution
    endowments (political, legal, &
    (climate, labor) economic)

    Initial economic org.


    Initial socio-political
    (plantation, conquest, Long-term economic
    outcome
    settlement) and social outcome

    A “path-dependent” argument: differences in initial conditions create


    differences in long-run outcomes because they send economies along different
    paths. Socio-economic processes set up at the beginning become self-
    reinforcing.
    9
    Interests and Political Institutions: Extent of
    Voting in the New World

    10
    Country Year Age Percent

    Literacy Rates in the


    Argentina 1869 +6 23.8
    1895 +6 45.6
    1900
    1925
    +10
    +10
    52.0
    73.0
    Americas, 1850–1950
    Barbados 1946 +10 92.7
    Bolivia 1900 +10 17.0 • The distribution of political power
    Brazil 1872 +7 15.8
    1890 +7 14.8
    affected the distribution of wealth
    1900 +7 5.6 and human capital and thus had
    1939 +10 57.0 implications for growth. The
    Chile 1865 +7 18.0
    1875 +7 25.7
    development of public primary
    1885 +7 30.3 schools, the principal vehicle for
    1900 +10 43.0 high literacy and an important
    Peru 1925 +10 38.0
    Uruguay 1900 +10 54.0
    contributor to human capital, tracked
    1925 +10 70.0 the distribution of political power.
    Venezuela 1925 +10 34.0
    Canada 1861 All 82.5 • In the 19th cen., only the US and
    English-majority counties 1861 All 93.0 Canada enacted laws to establish
    French- majority counties 1861 All 81.2
    United States
    “free schools” open to all children
    Northern whites 1850 +10 96.9 and supported by general taxes.
    Southern whites 1850 +10 91.5

    All 1870 +10 80.0 (88.5, 21.1)*


    1890 +10 86.7 (92.3, 43.2)*
    1910 +10 92.3 (95.0, 69.5)*
    11

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