Global Economic History 9781472588449 1472588444 Compress

GLOBAL ECONOMIC HISTORY
ii
GLOBAL ECONOMIC HISTORY
Edited by Tirthankar Roy and Giorgio Riello

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vi
CONTENTS
List of Tables ix
List of Figures x
Contributorsxi
Prefacexiii
Introduction: Global Economic History, 1500–2000

Giorgio Riello and Tirthankar Roy1
Part I Divergence in Global History
1 The Great Divergence Debate Prasannan Parthasarathi

and Kenneth Pomeranz19
2 Data and Dating the Great Divergence Jack A. Goldstone38
3 Useful and Reliable Knowledge in Europe and China Patrick O’Brien54
4 Toolkits, Creativity, and Divergences: Technology in Global

History Karel Davids67
5 Families, Firms, and Polities: Pre-modern Economic Growth, and the

Great Divergence Regina Grafe and Maarten Prak83
6 Plantations and the Great Divergence Trevor Burnard102
7 Consumption and Global History in the Early Modern

Period Maxine Berg118
Part II The Emergence of A World Economy
8 Trade and the Emergence of a World Economy, 1500–2000

Tirthankar Roy and Giorgio Riello137
9 The Global Environment and the World Economy

since 1500 J. R. McNeill157
Contents
10 Labour Regimes and Labour Mobility from the Seventeenth to the

Nineteenth Century Alessandro Stanziani175
11 Varieties of Industrialization: An Asian Regional Perspective

Kaoru Sugihara195
12 Global Commodities and Commodity Chains Bernd-Stefan Grewe215
13 The Rise of Global Finance, 1850–2000 Youssef Cassis229
Part III Regional Perspectives to Global Economic Change
14 Africa: Economic Change South of the Sahara since c. 1500 Gareth Austin251
15 The New World and the Global Silver Economy, 1500–1800

Alejandra Irigoin271
16 Economic Change in East Asia from the Seventeenth to

the Twentieth Century Debin Ma287
17 Europe in the World, 1500–2000 Peer Vries299
18 South Asia in the World Economy, 1600–1950 Bishnupriya Gupta and

Tirthankar Roy319
19 Changing Destinies in the Economy of Southeast Asia J. Thomas Lindblad337
Glossary 355
Index360
viii
LIST OF TABLES
Table 2.1 Growth in Holland, 1510s–1800s: GDP, population, and

GDP per capita 45
Table 2.2 Growth rates for population and real GDP per capita in
England and Great Britain 46
Table 2.3 Peak GDP per capita in various societies in history 49
Table 8.1 Growth of world trade and GDP, 1500–2003 138
Table 8.2 Export of selected countries, 1820–1992 139
Table 8.3 World merchandise export as percentage of GDP 144
Table 8.4 Regional distribution of world trade in 1913 147
Table 16.1 Annual real growth rates of modern industry output in
China and Japan, 1880–1936 294
Table 16.2 GDP structure in East Asian countries 295
Table 16.3 East Asian per capita GDPs in 1934–6 and relative to
the United States 295
Table 17.1 The position of the region ‘Europe’ in the world 300
Table 17.2 Comparative levels of GDP per capita in Europe 302
Table 17.3 GDP per capita in several European countries, 1820–2000 302
Table 17.4 Size and population of the overseas empires of the main
colonial powers of Europe 303
Table 17.5 Levels of industrialization in Europe, 1750–1900 310
Table 17.6 Government spending as a percentage of GDP, 1870–2009 315
Table 18.1 Changing composition of Indian trade, 1811–1935 327
Table 18.2 Productivity and price advantage of British textile goods
over Indian goods 329
Table 18.3 Measuring the Great Divergence 331
Table 18.4 Economic growth in the long run 331
Table 18.5 Change in agricultural production and productivity, 1891–1946 334
LIST OF FIGURES
Figure 2.1 GDP and GDP per capita in Holland, 1510–1800 43

Figure 8.1 Europe’s intercontinental trade, 1501–1795 142
Figure 9.1 The Columbian Exchange 160
Figure 11.1 Change in the regional share in Asia’s GDP, 1820–1950 199
Figure 11.2 Import tariff rates in India, China, and Japan, 1868–1938 201
Figure 11.4 Share of Asian and intra-Asian trade in world trade, 1950–2014 206
Figure 15.1 Composition and geographical distribution of the
precious metal production in the New World 275
Figure 15.2 Silver output and trade in the eighteenth century 277
Figure 15.3 The market price of silver peso in sterling, in London, 1717–1818 281
Figure 16.1 Real wages in Asia and England, 1738–1914 290
Figure 17.1 European migration to other continents, 1500–1900 305
Figure 18.1a Merchandise exports from India, 1840–1920 325
Figure 18.1b Merchandise imports to India, 1840–1920 325
Figure 18.1c Indian net exports, 1840–1920 325
Figure 18.2 Trends in GDP, agricultural output, and industrial
output per head 333
Figure 19.1 Average annual volume of pepper exports from Southeast
Asia, 1530–1649 340
Figure 19.2 Average annual value of pepper exports in Southeast Asia and in
Europe, 1630–99 341
Figure 19.3 Average annual value of cargo entering Manila, 1601–70 342
Figure 19.4 Average annual turnover of VOC trade in Asia, 1711–90 343
Figure 19.5 Population of Southeast Asia, 1800–1950 345
Figure 19.6 Coolie labour in colonial Indonesia, 1910–35 347
Figure 19.7 Foreign direct investment in Southeast Asia in 1914 and 1938 348
Figure 19.8 Per capita GDP in Southeast Asia, 1913–50 350
CONTRIBUTORS
Gareth Austin is Professor of Economic History at Cambridge University.

Maxine Berg is Professor in the History Department of the University of Warwick.
Trevor Burnard is a professor of American History and Head of School in the School of
Historical and Philosophical Studies at the University of Melbourne.
Youssef Cassis is Professor of Economic History at the European University Institute
in Florence.
Karel Davids is Professor of Economic and Social History at the Vrije
Universiteit Amsterdam.
Jack A. Goldstone is Virginia E. and John T. Hazel, Jr. Professor of Public Policy at
George Mason University.
Regina Grafe is Professor of Early Modern History at the European University Institute
in Florence.
Bernd-Stefan Grewe is Professor of History Didactics and Public History at the
University of Tübingen.
Bishnupriya Gupta is Professor of Economics at the University of Warwick.
Karolina Hutkovà is Postdoctoral Fellow at the London School of Economics.
Alejandra Irigoin is Associate Professor in Economic History at the London School
of Economics.
J. Thomas Lindblad retired from his position as Professor at Leiden University.
Debin Ma is Associate Professor in Economic History at the London School of Economics.
John R. McNeill is Professor of History at Georgetown University.
Patrick O’Brien is Professor of Global Economic History at the London School
of Economics.
Prasannan Parthasarathi is Professor of History at Boston College.
Kenneth Pomeranz is Professor of History at the University of Chicago.
Maarten Prak is Professor of Social and Economic History at the University of Utrecht.
Giorgio Riello is Professor of Global History at the University of Warwick.
Contributors
Tirthankar Roy is Professor of Economic History at the London School of Economics.

Alessandro Stanziani is a professor of Global History at the École des Hautes Études en
Sciences Sociales in Paris.
Kaoru Sugihara is Senior Professor at the National Graduate Institute for Policy Studies
in Tokyo.
Peer Vries is Honorary Fellow at the International Institute of Social History in
Amsterdam and was previously Professor of Global Economic History at the University
of Vienna.
xii
PREFACE
Why does a global perspective matter in the study of economic history? Which are
the problems addressed by a new field called Global Economic History? Which are its
debates and methodologies? As this book shows, there is a variety of answers to these
questions. Because there are a range of answers, instead of imposing our own definition
of the field, we (the editors) collected a set of illustrations on why a global perspective
matters to economic history.
This book is timely as the field of economic history has seen major developments
in the past two decades. Since 2001, the ‘divergence debate’ led to path-breaking new
research on Asia, Africa, and Latin America, and pushed the boundaries of comparative
economic history much further back from the nineteenth century. It also fostered
the adoption of new methodologies such as the use of reciprocal comparison and the
engagement with new interpretive works on comparative politics and society. We see
the positive effects of more detailed research on key questions on regions and localities
where we once knew little, though the negative effects of a new fragmentation and retreat
to internalist disputes are now equally evident.
We invited nineteen contributions exploring specific aspects of the question: Why a
global perspective matters. The chapters included in this volume are thus an attempt to
contextualize the economic history of the world by providing entries and insights into
large and small debates. We do not aim for completeness of information, or treatment, or
chronologies. But we hope that by breaking up the big question into manageable parts,
the book will show why global interconnections and comparisons matter to economic
history, and why they matter so much that economic history and global history need
serious and continuous dialogue. Let us call that dialogue global economic history.
For students of global economic history, the chapters will show why certain economic
concepts, problems, and keywords make a difference; why historians and economists
debate them; and why they may disagree about them. Ultimately this book should help to
make sense of the shape of today’s economic world by studying its past transformations,
mutations, crises, and not infrequent disasters.
We are grateful for the financial support provided by the London School of Economics
and the University of Warwick. Our thanks also to the anonymous referees who provided
much-needed advice at different stages of this project and to Dr Helen Clifford who
has helped us with the editing of this volume. Professors Kent Deng (London School
of Economics), Pat Hudson (Cardiff University), and Masayuki Tanimoto (Tokyo
University) acted as commentators at the workshop held at the London School of
Economics in May 2016 when papers were originally discussed. Their comments have
been particularly valuable in shaping the editors’ introduction. We also thank several
colleagues and the anonymous referees for their comments and feedback.
Preface
This book draws on the pioneering discussions carried out by groups of scholars
gathered together at the London School of Economics and the University of Warwick
over the past twenty years. The Leverhulme-funded Global Economic History Network
active between 2003 and 2007 and coordinated by Patrick O’Brien was instrumental in
shaping the discipline of global economic history by focusing on issues of divergence
and the global integration of markets through commodity exchange.
Giorgio Riello and Tirthankar Roy

July 2018
xiv
INTRODUCTION: GLOBAL
ECONOMIC HISTORY, 1500–2000
Giorgio Riello and Tirthankar Roy
Economic history and its global turn
Economic history utilizes historical and quantitative methods to study economic change
over long chronologies. Trajectories of economic change vary across space because of
local conditions such as the quality of natural resources, local institutions, and a number
of other factors including labour markets, and the availability of labour, capital, and
technologies. Economic change is shaped also by patterns of interaction that occur
between localities, nations, and wider world regions. Global economic history operates
in these realms of variations and interactions between world regions sometimes adopting
the world as a unit of analysis.
From the nineteenth century, when the Western Europe industrialized, inequality
between nations started rising rapidly, and world trade also grew at an unprecedented
speed. Intellectuals, economists, social reformers, and philosophers became interested
in understanding the history of economic change at a global level. One might say that
Karl Marx and Max Weber were both global economic historians in this sense. Despite
their legacies, however, economic history emerged as a discipline in the first half of the
twentieth century and evolved over the following fifty years with a more national than
international orientation. In publications of economic historians, the most common
mode of analysis was that undertaken at the level of the nation state.
From the 1980s at least, if not earlier, environmental history and the world systems
school made a credible case for changing the unit of analysis from the nation to the
world. Varieties of Marxist historiography continued to produce books that were global
in scope. The movement that later became known as new institutional economic history
started as a reinterpretation of economic change in Europe, but its arguments had
obvious implications for the rest of the world. Imperial history was, by its nature, global
in scope. These were neither exceptional, nor outside the mainstream. However, their
impact on the shape of the subject of economic history was, until the 1990s, limited
to the ‘schools’ that they propagated. By and large, these works were more at home on
Europe and America than the rest of the world.
From about 2000, history has witnessed an emphatic global turn, in the wake of the
recent phase of globalization and rapid spread of connections between parts of the world.1
Economic history too began to be transformed by a somewhat distinct set of factors. The
availability of cross-country historical income data, the popularity of institutionalism in
top economics departments of North America, and new developments in the theory of
growth rekindled interest in an old and half-forgotten question: Why do some countries
Global Economic History
grow rich and others remain poor? In the 2000s, historians criticized institutionalism.
The exchange that followed became known as the divergence debate. In the last twenty
years, the divergence debate has formed the stem of the economic history field. The
economic emergence of countries like China or India – long regarded as textbook
examples of ‘why nations stay poor’ – questioned Eurocentric world history.
Interest in the inequality question was only one part of the global turn within
economic history. The global turn added to economic history other insights, questions,
and methods. There was a renewed sensitivity to time, especially long chronologies
stretching back over millennia. New modes of enquiry emerged. One example is
‘historical economics’, which tests causal models of economic growth with long-range
data sets. Connections across oceans, geographies, and frontiers began to be investigated
with an interest in economic change. There was a return of the ‘grand narrative’, which
post-modernism had briefly expelled from history. Social and cultural historians
reassessed the relevance of economic change to their own fields of study.
In the backdrop of what one might call the ‘rediscovery of the world’ by economic
historians, we may be closer than ever before to a definition of global economic history
as a field. This book is an attempt to contribute to that programme, and to think about
global economic history as a field.
Global economic history: Debates and questions
This book divides up the subject of global economic history into three types of
enquiries. The three-part structure of the book reflects the three types of stories that
global economic history often tells. The first part of the book entitled ‘Divergence in
Global History’ considers the economic trajectories of different world areas and reflects
on recent debates about ‘wealth and poverty’ in relation to economic divergence and
inequality. Part II, entitled ‘The Emergence of a World Economy’, explores the ways in
which global economic connectivity changed especially in the nineteenth and twentieth
centuries and reflects on the integration and emergence of a world economy. Part III,
‘Regional Perspectives to Global Economic Change’, considers a set of macro-regions
and reflects comparatively on simultaneous processes of change in various economies.
These chapters also show that the study of the integration between a regional economy
and the world economy can offer a useful perspective on the region itself; in other words,
global history can be a method to study regions. The three-part structure was adopted
because the discussions and debates in global economic history form overlapping but
distinct clusters; the three parts try to retain that distinction while the book as a whole
represents a shared agenda between these.
Let us follow these themes a little further. The ‘Great Divergence’ as conceptualized by
Kenneth Pomeranz in a book with the eponymous title is a natural starting point for an
enterprise of this kind.2 Divergence in experience of economic growth and development
has provoked new investigation of why the world became richer and specifically why
certain parts of the world industrialized first. This well-known debate also encompasses
2
Introduction
a discussion of the origins of world inequality. Explaining why the world became more
unequal in modern times requires comparisons of regions regarding their endowments
and attributes, an enterprise that has attracted a great deal of fresh work in the last twenty
years, drawn economists and historians together into conversations, and supplied a
strong motive for studying global history.3
The question of the origins of inequality and its connection with the origins of
‘modern economic growth’ has been around for a long time, but recent scholarship has
made it less Eurocentric and truly worldwide in reach. While there is no agreement as
to the causes and chronologies of divergence, debate has developed to consider a series
of old and new topics, ranging from institutions to the role of science and technology
and the impact of transnational consumption in a comparative global perspective. It
has made economic history less insular and more concerned to address the origin and
emergence of inequality. The latter topic has generated a great deal of debate not just
in relation to global inequality (between nations especially across the classic divides
between developed, developing, and the underdeveloped world) but also within nations
as exemplified by Piketty’s successful work.4
The second part of the book considers at least two other reasons why global
economic history matters. First, whether or not it explains inequality and growth,
interconnectedness is important in itself. The slave trade transformed human societies;
population growth and the adoption of fossil fuels changed the relationship between
societies and the natural environment, and trade produced world empires. The world has
been interconnected for centuries through trade, migration, investment, state formation,
environmental change, and knowledge exchange. These cross-border connections are
growing so rapidly in the present times that now more than ever we need to understand,
with tools of history, why they grow and what they mean. A further set of contributions
in Part II of the book focuses on integrative processes, led directly or indirectly by the
prospect of material gain.
The study of connections links up with two defining features of what Chris Bayly called
‘the birth of the modern world’: transcontinental empires and economic globalization.5
Connections also include possibilities of sharing knowledge and information between
sets of people who were not in the same network – ‘weak ties’ that are sometimes created
as externalities of economic exchange like trade and, of course, migration of capital
and labour.6 Yet, connectivity cannot fully explain the functioning of a global economy.
Economic historians have to address also ‘integration’, referring to the process by which
regions are drawn into pre-existing networks of economic exchanges – for example, the
way the Slave Coast of West Africa was integrated in the Atlantic trade of the seventeenth
and eighteenth centuries, or how the textile-producing areas of India were integrated in
a similar set of worldwide exchanges that shaped the future of these regions and the
future shape of the world economy at the same time.
Connections can be real, or inferred, for example, through the simultaneous
emergence of similar institutions in locations that are not necessarily connected in an
obvious way. As considered in the final part of this book, the causal link between these
processes, which we can call parallel developments, remains open to interpretation.7
3
From the seventeenth century to the nineteenth century, most manual labour took place
under bondage and other legal restrictions imposed on the labourers. These restraints
began to weaken, to be replaced by a different set of laws, and were also resisted more
easily from the end of the nineteenth century. Was this change – which one contributor
in the book calls ‘the great transformation of labour’ – an outcome of ideology, politics,
or markets, or a strange set of interrelated but worldwide processes that we do not
yet understand?8
At the end of the day, regions have their own distinctive features, nation states
play a powerful role on the economies that they manage, and sources needed for
historical research are typically produced by states. In short, a global perspective must
be consistent with region- and nation-bound histories. If the first two broad themes
considered in this book – the comparative history of growth and connectedness –
place the ‘world’ at the centre of the discourse with regions forming building blocks in
arguments about economic change in the whole world, there is a counterpart theme,
where the ‘local’ or the regional forms the centre, and the world economy acts as a
building block in, for example, arguments about why India, China, or West Africa
evolved in the way they did. Global history should not ignore differing perspectives,
especially those deriving from ‘area studies’ such as the Americas; Africa; East, South,
and Southeast Asia; and, perhaps more surprisingly, Europe. Nor should global
history submerge the distinctness of regions that derives from geography, culture, or
forms of governance. And the third set of chapters in this book pursues a region-
focused agenda.
The studies in this volume often use the term ‘world economy’ and refer to ‘global
approaches’.9 Yet, they do so for different reasons and in different ways. At the same
time, historians of all kinds use these terms with increasing frequency. Why? In the next
section, we consider how the global turn in economic history came into being, and what
was distinctive about it from earlier versions of global economic history.
World economy: The history of a concept
A search for the term ‘world economy’ in Google Books turns up a surprisingly large
number of books with ‘world economy’ in their titles, many published in the last twenty
years. Apparently, half of them deal with history. These books do not use the term in
similar contexts or for similar purposes. The significance of world economy in historical
scholarship has tended to shift. These shifts may give global economic history the image
of a literature without a centre. Although, as a taught subject, global history is becoming
popular, the impression of disjointedness does not help teachers of the subject. A quick
tour through the history of the term, however, shows that there is a deeper unity of
purpose and method in the literature than it may at first seem.
Historians who have studied societies that have access to the seaboard have long
been aware of the significance of cross-border economic exchanges in shaping the
course of history. The sea as a distinct economic geography, one that helps long-distance
4
Introduction
transactions and gives these a certain shape, is a concept akin to the world economy, and
perhaps the most profound and convincing way in which interconnections on a big scale
have been considered by historians. Fernand Braudel’s classic The Mediterranean and the
Mediterranean World in the Age of Philip II started a new historiography by placing the
sea at the centre of a chronological narrative, thus looking at history through the lens of
comparisons, connections, and diffusion.10 Braudel inspired a generation of European
historians who globalized the programme. Starting from the premise that the growth
of European overseas trade in the sixteenth century was a landmark in world history,
they explored intercontinental trade, long-distance merchant networks, and ‘the rise of
merchant empires’.11 In the 1970s and the 1980s, K. N. Chaudhuri, Kenneth McPherson,
Ashin Das Gupta, Om Prakash, Sinnapah Arasaratnam, and Anthony Reid, to name
only a few of the leading contributors, pursued the same agenda from the perspective
of regions bordering the Indian Ocean.12 Since the 1990s, the Atlantic has also been
placed within a similar ‘global’ perspective, particularly in relation to merchant networks
and communities.13
The idea that connected geographical spaces could be arranged in a hierarchy became
popular in the 1970s, through the influential work of Immanuel Wallerstein. World
economy, or the capitalist world economy, became a world system in Wallerstein’s work.
European overseas trade was a pivotal force because it allowed for European hegemony
to be established over world trade and politics. The world systems school that followed
Wallerstein’s early work joined the idea of connections with the economic concepts of
division of labour, surplus appropriation, and redistribution of gains from trade, to
suggest why Europe gained substantially from the sixteenth-century world system and
came to dominate the world.14
The world systems approach has been criticized for being Eurocentric. In 1998,
Andre Gunder Frank’s ReOrient made a passionate attack on the concept of European
hegemony, suggesting that the world economy was dominated by China for much
longer than we think, an idea that resonated well with China’s domination of world
trade in the early twenty-first century.15 In the 2000s, further revisions of the concept
of world systems were offered, significantly, differentiating world system history from
the theory of the ‘modern’ world system.16 The scholarship on world systems borrowed
from other contemporary strands in global history. The building blocks in both were
the international division of labour and the transfer of surpluses through the system
mostly from the periphery to the metropole. The significance of specialization and
the meaning of surplus are subject to dispute, but the combined emphasis on market
exchange on a world scale popularized the ideas that capitalism became global since the
1600s and that capitalism was formed from a series of interconnected market exchanges,
an altogether more flexible and easy definition of capitalism than the orthodox Marxist
one based on patterns of ownership of assets. Global history should be able to tell us
why goods acquired more value as they moved from market to market. And by doing
so, we should know not only how capitalism worked in practice, but also why it became
global, even if that story does not necessarily enlighten us about the origin of growth
and inequality.17
5
The notion that modern economic growth and inequality had developed from
forms of interconnectedness that emerged since the seventeenth century faced a strong
challenge from institutional economic history in the 1980s. Douglass North and others
argued that the modern West discovered secure property rights and contractual law in
the seventeenth and eighteenth centuries, thanks to attributes and processes that were
uniquely European.18 If such was the origin of modern economic growth, one would need
to explain the origin of world inequality by showing that the non-West had remained
trapped in an economic world that was unsafe and unpredictable. Early institutional
economic history implicitly assumed that this was the case, and in the process overlooked
huge diversity within the non-Western experience. Nor did early institutional economic
history offer interconnectedness a definite role in the explanatory framework.
In the 2000s, two more influential ideas were proposed, again linking growth,
inequality, and interconnectedness. One of these was Kenneth Pomeranz’s proposition
that European expansion changed the course of human history by giving Europeans
access to plentiful land and minerals.19 Pomeranz said little about technologies, trade,
or colonialism as such, but the proposition did suggest that settler colonies in the New
World were better off because they were more resource-rich than many Old World
societies.20 The fact that the settlers appropriated these resources by means of labour
servitude and land-grab institutions does however give a very different spin on the
intrinsic superiority of European institutions.
Pomeranz’s book gave the flood of publications on global history to occur since 2000
a collective name, the ‘divergence debate’. Some of these works were statistical, and
measured when and to what extent regions forged ahead or fell behind.21 Some were
comparative. Others were done in the narrative history mode, and focused on regions.22
Some deconstructed Europe and distinguished between ‘great’ and ‘little’ divergences.23
Others re-established the importance of trade in the economic emergence of Western
Europe.24 Explaining world inequality was the common purpose, though not all of their
authors felt equally driven by that purpose.
A further idea has re-established the importance of trade both for the early modern
and the post-1800 periods. The work by Flynn and Giráldez, and von Glahn, argued
for the creation of a world economy in the seventeenth century emanating from the
discovery and trade by Europeans of vast reserves of silver in the Americas.25 Although
this does not change the structure or chronologies for Wallersteinian interpretations, it
provides for a renewed emphasis on trade, in particular trade in those Asian commodities
exchanged for silver. Thus the so-called silverization of the Chinese economy (as a ‘silver
sink’) lubricated world trade in Southeast Asian spices and manufactured commodities
such as Chinese silks and porcelain, Indian cottons, and later on tea from China and
India and other produce such as sugar, coffee, and cocoa.26 Jan de Vries has concluded
that while both the Indian and Atlantic Oceans were key to the reshaping and growth of
European economies, it was the Atlantic trade (of slaves, cotton, and goods manufactured
in Europe) that was quantitatively more important for the creation of a world economy.27
Notwithstanding the now substantial literature on world trade in the early modern
period, suggesting the creation both of an integrated world economy and of a process
6
Introduction
of ‘globalization’ through trade, supporters of ‘hard globalization’ argue that a world

economy characterized by both commodity and factor-price convergence emerged only
in the nineteenth century.28 Kevin O’Rourke and Jeffery Williamson in Globalization
and History: The Evolution of a Nineteenth-Century Atlantic Economy (2001) showed that
increasing trade led to specialization and factor-price convergence on both sides of the
Atlantic in the late-1800s.29 Trade was not only an engine of economic growth but also
aided transmission of growth until a ‘backlash’ began to form in the interwar period.
In a follow-up work Trade and Poverty (2001), Williamson extended the framework,
controversially, to explain why the Third World did not experience convergence in the
same way, mainly because it suffered de-industrialization as a result of overconcentration
upon the export of primary products.30
Global interconnectedness, as said before, mattered in itself, as a feature of
modern capitalism, as a factor that shaped regional histories, and as a process
that progressively added value to capital, labour, and goods, or destroyed values
that they commanded in earlier centuries. One did not have to bat for a theory of
the Great Divergence to study the world economy. Several new publications were
written from this perspective, usually studying a commodity, a time, or a region,
and in each case contributing to the narrative of globalization and the emergence of
global capitalism.31 At the minimum, this was a Wallersteinian programme, minus
the baggage of surplus extraction and appropriation. Some of these works, however,
went further and made use of globalization to rethink the rise of the West. Several
chapters in the two-volume Cambridge History of Capitalism shared the same aim:
to explain global capitalism. But contributors were free to smuggle in afterthoughts
about the Great Divergence.32
A large part of the pre-2000 scholarship discussed in this section interacted with
economic history occasionally; the dialogue became more serious and systematic since
then. Their overlap deserves a closer look.
The tools of global economic history
A field should be defined by the questions that it seeks to answer. From before the
divergence debate took off, historians have reflected on the methodology of global
history. In an influential article published in 1997, Sanjay Subrahmanyam suggested
ways to think about connectedness in early modern history.33 In a now classic statement,
Patrick O’Brien wrote an overview of the field and asked why a craft such as history
that in antiquity frequently engaged with the world, lost interest in the global since the
nineteenth century, and why the global was now making a return. O’Brien contrasted
two ways of doing global history, comparisons and connections, and predicted that
the rationale of the field in the future would depend on the global historians’ ability to
construct ‘new cosmopolitan meta-narratives’ that challenged the ‘teleological chronicles
designed to reinforce people’s very own set of values enshrined in canonical Christian,
Muslim, Hindu, Confucian and other sacred texts’.34
7
Varied methodologies have been adopted by the different social sciences in their
approach to global (economic) history. Much work has been done on connections,
establishing in particular what we might mean by connections and connectivity. But
while economists and economic historians preferred to concentrate on integration
(possibly an outcome of connections), cultural historians explored concepts such as
entanglements, histoire croissée, and hybridity among the many.35 Many historians took
O’Brien’s call for challenging ‘teleological chronicles’ seriously, though many shied
away from adopting metanarratives (even if cosmopolitan in nature). Global history in
the past decade has definitively moved towards more ‘micro’ approaches. This is the
case of ‘micro-global histories’ that raise the issue of agency, of perspective, and of the
relationship between the global and the local.36 At the same time, however, global history
has experienced a continuing success of ‘macro’ approaches, though these have been less
interested than in the past in large-scale metanarrative and more concerned with long-
term analysis of change. This is the case of ’ ‘Big’ and ‘Deep’ histories stretching back to
the pre-historical period if not the Big Bang.37 They provide sweeping narratives that pull
together comparisons, connections, and ‘holistic’ views of history. They also connect
history to the sciences including biology, ecology, and psychology.38
Global economic history is, among the different types of global history today, the
one that has followed O’Brien’s view most closely. Whether macro or micro, global
economic history has created sustained debate and discussion around major themes and
problems, some of which are of long-standing importance for the discipline of economic
history. Many of these debates are referred to in contributions in this book. We wish
here to highlight three of them as paradigmatic of how the discipline of global economic
history has evolved over the past two decades: first, that of technological change and
its relationship with industrialization; second, large-scale projects on inputs, outputs,
prices, and wages that have addressed debates such as industrialization and divergence;
and finally an emerging concern about the ‘age of Anthropocene’ as an attempt to bridge
economic and environmental histories.
The Industrial Revolution, and more widely the process of industrialization in Europe
and elsewhere, remains a key topic in economic history. Several chapters in this book
comment on the ways in which the debate about the origin of modern economic growth,
of industry, and of a drastic transformation of economies worldwide has been reshaped
by the divergence debate. Although science, technology, and knowledge did not play
an important role in Pomeranz’s original formulation, the work of several economic
historians, most prominently Joel Mokyr, has provided new ideas about the role played
by technology in economic history.39 The literature is now vast but one might say that it
has attempted to bridge the gap between historians of science and technology on the one
hand and economic historians on the other. The focus on useful and reliable knowledge,
for instance, has allowed researchers to consider the ways in which both knowledge
and information – and their transfer in time and space – were key to both product and
process innovation.
Technological innovation is at the centre of one set of explanations concerning the
capital-intensive path undertaken by the European (and British in particular) economies
8
Introduction
in the eighteenth century. Based on a large-scale project comparing silver wages across
Eurasia from ancient times to the nineteenth century, Robert Allen explains the recourse
to mechanical devices in eighteenth-century British manufacturing as a response to
high wages.40 This explanation is based on a large collective quantitative undertaking
measuring not just wages in different cities in Europe and Asia but also prices and
estimates of GDP.41 This project extends analyses that until recently were confined
to individual nations. This labour-intensive exercise of data mining, collection, and
interpretation has produced an important knowledge base that is conscious of its biases,
gaps, and limitations. It provides economic history with a ‘global’ data set that, as always,
needs to be interpreted with care if we wish to make use of it in debates over economic
divergence and differentials in living standards or simply in comparative work across
cultures.
The projects on inputs, outputs, wages, and prices take GDP as a key measure and
economic growth as the metre through which to evaluate economies over time and
space. This approach has faced some criticism, on measurement as well as on conceptual
grounds.42 Similarly, recent scholarship on the ‘age of Anthropocene’ captures the
rising criticism towards the toolkit used by economic historians. What is the meaning
of GDP when it includes expenditure for armaments (leading to potential and often
real destruction) and does not include the damage made to the environment? How do
we deal with issues of inequality not just in wealth and income but also in access to
education, basic resources such as water, or life expectancy?43
These three examples show how global economic history has been in recent years in
a ‘revisionist’ mood. The enlargement of the chronological and especially the geographic
spectrum has led to questioning the very foundations of the discipline. While new debates
emerge and others evolve into larger and more ambitious enterprises, the toolkit and
methodologies of economic history cannot remain unaltered.44 Furthering that programme
requires taking stock of the cosmopolitan narratives the field has produced in the last twenty
years. This anthology takes a step in that direction. Others have done it before us. The
distinctive feature of this project is its accent on joining economic history with everything
that we know now matters to economic history, from politics, to resources, and to culture.45
The structure of this book
This volume gathers together historians and economists who have, in their careers, tried
to think big on one of the three dimensions of global economic history – comparisons,
connections, and the interaction between the local and the global. The editors gave the
contributors an open agenda. The contributors were free to define the questions and
the debates that mattered. This people-oriented approach left some obvious gaps in the
volume among which a lack of specific chapters dedicated to topics such as ‘empire’,
‘gender’, and ‘North America’. These are important themes that are to be found across the
book, gender being an important dimension in the discussion of labour and institutions;
North America in chapters on silver and slavery, and elsewhere in the book.
9
Seven chapters in the first part of this book are dedicated to the re-examination of
the divergence debate. Parthasarathi and Pomeranz present an overview of their positions
on divergence and extend the original Sino-European comparison to include also South
Asia and underline the ways in which the divergence debate has influenced both Chinese
and Indian scholarship. Jack Goldstone continues this critical analysis of divergence by
concentrating on the part played by the gathering and interpretation of data and the
implication that this has on the chronologies of economic development of Europe and Asia.
Patrick O’Brien and Karel Davids consider respectively useful and reliable knowledge
and technology as two of the key factors explaining differing trajectories of global
economic change. Responding to a premise of the divergence debate that the world
displayed more similarities than differences before the nineteenth century, O’Brien
suggests that global historians should engage with a proposition that Europeanists put
forward, that a distinct ‘regime for the accumulation of useful and reliable knowledge’
had emerged in early modern Europe as a result of an interdependent evolution of
natural philosophy and institutions of learning. Davids, on the other hand, cautions
against the tendency to emphasize sharp breaks or ‘divergences’ in technological change,
and shows how innovations could build on local practices by arguing that big differences
could emerge from small variations.
As the debate over divergence matured, new contexts and topics have been added to
the discussion. The role of institutions and institutional change in sustaining modern
or productivity-driven economic growth is well known to economic historians. Regina
Grafe and Maarten Prak offer an analysis on institutional change compatible with
‘the slow transition from early modern to modern intensive growth’. They consider
changes in family systems, collectives, and the state, and offer a measured conclusion
that cautions against drawing causal link between institutions and growth, and between
institutional change and European exceptionalism. Trevor Burnard asks what the role of
plantation economies was in the Great Divergence, a topic that has found less attention
than expected by historians. And finally Maxine Berg, moving away from traditional
concerns over production and the economy, connects divergence and global history to
the history of consumption and debates over the standards of living.
The second part of this book explores the emergence of a world economy by
concentrating on different aspects of what we might call economic globalization. In a
joint contribution, the editors of this book charter the importance of trade in structuring
global connections over the long period, showing its changing scale especially in the
nineteenth and twentieth centuries. If trade is often acknowledged as central to the
connectedness and integration of the world economy, John McNeill alerts us that
due attention should be given also to the environment. Adopting a multidisciplinary
perspective, McNeill argues that the creation of a world economy coincided with a
new relationship between man and natural environment, what today is called the ‘age
of Anthropocene’.
Alessandro Stanziani continues this analysis by concentrating on labour and the
mobility of labour as one of the key factors in the creation of global markets and the
10
Introduction
structuring of a world economy. He challenges established classifications that oppose

free versus coerced labour. This line of enquiry is further developed by Kaoru Sugihara
in a chapter dedicated to varieties of industrialization. Considering different Asian
regions, Sugihara challenges the European industrial paradigm as the template for
global economic growth. The final two chapters, by Bernd-Stefan Grewe and Youssef
Cassis, consider respectively the role of commodities and finance in structuring global
markets. Global commodity chains and global value chains, Grewe argues, provide
unique methodological perspectives to the study of the world economy and challenge
established notions of core and peripheries. A similar approach is adopted by Cassis who
shows the importance of global cities in the shaping of financial transactions worldwide
since the mid-nineteenth century.
The six chapters in the third and final part of this book shift our perspective from
global connectedness to the contribution of specific world areas. They collectively raise
the issue of how beneficial the ‘lateral thinking’ provided by a ‘placed’ perspective is to
global economic history. They also challenge the idea of a ‘natural’ unit of analysis by
showing how discretionary labels such as Africa, East Asia, South Asia, and even Europe
are, and how they subsume a variety of experiences and trajectories of economic change.
Gareth Austin considers sub-Saharan Africa and engages with colonial and post-colonial
theories of economic development. Alejandra Irigoin’s contribution observes how global
economic history has concentrated on Eurasia at the expense of the role played by the
Americas, especially in the production and trade of enormous quantities of silver that
‘oiled’ the world economy in the early modern period. Debin Ma shows how a shared
culture characterized the economic trajectory of a diverse region defined as East Asia but
observes also how modernization and industrialization were accompanied by conflict
and warfare.
The acknowledgement of differentiation is also central to a chapter by Peer Vries on
the European economy in the past five centuries. Far from constituting a monolithic
model of economic development for the rest of the world to follow, Vries presents a
continent characterized by deep-rooted economic inequality that has survived to the
present. Bishnupriya Gupta and Tirthankar Roy address instead the topic of decline of
the South Asian economy especially after 1800. They argue that its loss of status as an
exporter of industrial goods should be seen in connection with the development of textile
technologies in Europe, thus arguing for an entangled approach to economic history.
Finally a chapter by J. Thomas Lindblad on the economy of Southeast Asia argues that we
should appreciate both continuities and discontinuities when evaluating the economic
trajectory of a world area and its constituting nation states and areas.
Together these chapters aim to be both thought-provoking and informative. They
attempt to charter some of the debates that global economic history had developed in
the past two decades. This field of enquiry is still novel, ambiguous in its contours and
methodologies, and uncertain in its findings. While chartering the uncertain terrain
of global economic history, it is our hope that this collection of contributions might
provide inspiration for the field’s future direction.
11
Notes
1. See, for example, Sebastian Conrad (2016), What Is Global History? Princeton: Princeton
University Press.
2. Kenneth Pomeranz (2000), The Great Divergence: China, Europe and the Making of the
Modern World Economy. Princeton: Princeton University Press.
3. The literature on divergence is now vast. See the chapter by Pomeranz and Parthasarathi in
this volume as well as Parthasarathi’s critique of Pomeranz’s work. P. Parthasarathi (2002),
‘Review article: The Great Divergence’, Past and Present, 176, 275–93. For an introduction
to the debate, see the special issue of Historically Speaking, 12 (4), published in 2011 and
dedicated to the divergence debate as well as two shorter books: R. B. Marks (2002), The
Origins of the Modern World: A Global and Ecological Narrative. New York: Rowman &
Littlefield Publishers; J. Goldstone (2008), Why Europe? The Rise of the West in World History,
1500–1850. New York: McGraw-Hill Higher Education; and J. W. Daly (2014), Historians
Debate the Rise of the West. London: Routledge.
4. T. Piketty (2014), Capital in the Twenty-First Century. Cambridge, MA: Belknap Press. For a
recent analysis of how Piketty’s book has challenged the discipline of economic history, see P.
Hudson and K. Tribe (eds) (2016), The Contradictions of Capital in the Twenty-First Century:
The Piketty Opportunity. London: Agenda Publishing.
5. C. A. Bayly (2004), The Birth of the Modern World, 1780–1914. Oxford: Blackwell. See
also S. Subrahmanyam (1997), ‘Connected histories: Notes towards a reconfiguration of
early modern Eurasia’, Modern Asian Studies, 31 (3), 735–62; Idem (2004), Explorations in
Connected History: From the Tagus to the Ganges. Delhi: Oxford University Press; Idem (2004),
Explorations in Connected History: Mughals and Franks. Delhi: Oxford University Press.
6. On migration, a good book to begin with is Patrick Manning with Tiffany Trimmer (2013),
Migration in World History, 2nd edn. New York: Routledge. On ‘weak ties’, Mark Granovetter
(1983), ‘The strength of weak ties: A network theory revisited’, Sociological Theory, 1 (6),
201–33.
7. V. Lieberman (2003), Strange Parallels: Southeast Asia in Global Context, c. 800–1830. Vol. 1.
Integration on the Mainland. Cambridge: Cambridge University Press; Idem (2009), Strange
Parallels: Southeast Asia in Global Context, c. 800–1830. Vol. 2. Mainland Mirrors: Europe,
Japan, China, South Asia, and the Islands. Cambridge: Cambridge University Press.
8. J. Lucassen (ed.) (2008), Global Labour History: A State of the Art. Bern and Oxford: Peter
Lang. See also L. Lucassen (2016), ‘Working together: New directions in global labour
history’, Journal of Global History, 11 (1), 66–87.
9. While there is a distinction between ‘world history’ (concentrating on large world areas and
civilizations) and ‘global history’ (preferring instead the analysis of connections), we find this
distinction not particularly useful when applied to economic history. See B. Mazlish (1998),
‘Comparing global history to world history’, Journal of Interdisciplinary History, 28 (3),
385–95.
10. F. Braudel (1996, 2nd edn), The Mediterranean and the Mediterranean World in the Age of
Philip II. Berkeley: University of California Press.
11. N. Steensgaard (1973), Carracks, Caravans and Companies: The Structural Crisis in the
European-Asian Trade in the Early 17th Century. Copenhagen: Studentlitteratur; and J. D.
Tracy (ed.) (1990), The Rise of Merchant Empires: Long-Distance Trade in the Early Modern
World. New York: Cambridge University Press.
12
Introduction
12. For an overview of the literature, see P. Parthasarathi and G. Riello (2014), ‘The Indian
Ocean in the long eighteenth century’, Eighteenth-Century Studies, 48 (1), 1–19.
13. See for instance, F. Trivellato (2012), The Familiarity of Strangers: The Sephardic Diaspora,
Livorno, and Cross-cultural Trade in the Early Modern Period. New Haven: Yale University
Press.
14. I. Wallerstein (1974–2011), The Modern World-System, vols. 1–4. Berkeley: University of
California Press; New York: Academic Press.
15. A. Gunder Frank (1998), ReOrient: Global Economy in the Asian Age. Berkeley: University of
California Press.
16. Robert A. Denemark and Barry K. Gills (2012), ‘World-system history: Challenging
Eurocentric knowledge’, in Salvatore J. Barbones and Christopher Chase-Dunn (eds),
Routledge Handbook of World-Systems Analysis. London and New York: Routledge, 163–71.
17. On the recent interest in the history of capitalism, see L. Neal and J. G. Williamson (2014),
The Cambridge History of Capitalism, 2 vols. Cambridge: Cambridge University Pres; J.
Kocka (2016), Capitalism: A Short History. Princeton and Oxford: Princeton University
Press.
18. D. C. North (1981), Structure and Change in Economic History. New York: Norton; and D.
C. North and R. P. Thomas (1973), The Rise of the Western World: A New Economic History.
New York: Cambridge University Press.
19. Pomeranz (2000), The Great Divergence.
20. See Parthasarathi, ‘Review article: The Great Divergence’; P. H. H. Vries (2001), ‘Are coal
and colonies really crucial? Kenneth Pomeranz and the Great Divergence’, Journal of World
History, 12 (2), 408–46.
21. See for instance, S. Broadberry and B. Gupta (2009), ‘Lancashire, India and shifting
competitive advantage in cotton textiles, 1700–1850: The neglected role of factor prices,
Economic History Review, 62 (2), 279–305.
22. J.-L. Rosenthal and R. Bin Wong (2011), Before and beyond Divergence: The Politics of
Economic Change in China and Europe. Cambridge, MA: Harvard University Press; P.
Parthasarathi (2011), Why Europe Grew Rich and Asia Did Not: Global Economic Divergence,
1600–1850. Cambridge: Cambridge University Press; P. Vries, Escaping Poverty: The
Origins of Modern Economic Growth. Vienna: V&R Unipress; Idem (2015), State, Economy
and the Great Divergence. London: Bloomsbury; R. Studer (2015), The Great Divergence
Reconsidered: Europe, India, and the Rise to Global Economic Power. Cambridge: Cambridge
University Press.
23. J. L van Zanden (2009), The Long Road to the Industrial Revolution: The European Economy
in a Global Perspective, 1000–1800. Leiden: Brill; K. Davids (2012), Religion, Technology,
and the Great and Little Divergences: China and Europe Compared, c. 700–1800. Boston and
Leiden: Brill.
24. J. E. Inikori (2002), Africans and the Industrial Revolution in England: A Study in
International Trade and Economic Development. Cambridge: Cambridge University Press.
25. D. O. Flynn and A. Giráldez (eds) (1997), Metals and Monies in an Emerging Global
Economy. Aldershot: Ashgate; D. O. Flynn, A. Giráldez and R. von Glahn (eds) (2003),
Global Connections and Monetary History, 1470–1800. Aldershot: Ashgate.
26. M. Berg (2004), ‘In pursuit of luxury: Global history and British consumer goods in the
eighteenth century’, Past & Present, 182, 85–142.
13
27. J. de Vries (2010), ‘The limits of globalisation in the early modern world’, Economic History
Review, 63 (1), 710–33.
28. This position is criticized by P. de Zwart (2016), ‘Globalization in the early modern era: New
evidence from the Dutch-Asiatic trade, c. 1600–1800’, Journal of Economic History, 76 (2),
520–58 who shows price convergence for some key commodities traded by the Dutch East
India Company from Asia to Europe in the course of the eighteenth century.
29. K. H. O’Rourke and J. G. Williamson (2001), Globalization and History: The Evolution of a
Nineteenth-Century Atlantic Economy. Cambridge, MA: MIT Press.
30. J. G. Williamson (2011), Trade and Poverty: When the Third World Fell Behind. Cambridge,
MA and London: MIT Press.
31. G. Riello and T. Roy (eds) (2009), How India Clothed the World: The World of South Asian
Textiles, 1500–1850. Leiden: Brill; Roy, India in the World Economy; G. Riello (2013),
Cotton: The Fabric That Made the Modern World. Cambridge: Cambridge University Press;
J. Osterhammel (2014), The Transformation of the World: A Global History of the Nineteenth
Century. Princeton: Princeton University Press; S. Beckert (2014), Empire of Cotton: A
Global History. New York: Alfred A. Knopf; M. Berg, et al. (eds) (2015), Goods from the East,
1600–1800. Trading Eurasia. Basingstoke: Palgrave. On Atlantic commerce, see R. Findlay
and K. H. O'Rourke (2007), Power and Plenty: Trade, War, and the World Economy in the
Second Millennium. Princeton: Princeton University Press.
32. S. Broadberry and K. O’Rourke (eds) (2010), The Cambridge Economic History of Modern
Europe. Cambridge: Cambridge University Press.
33. Subrahmanyam, ‘Connected histories’.
34. P. K. O'Brien (2006), ‘Historical traditions and modern imperatives for the restoration of
global history’, Journal of Global History, 1 (1), 3–39.
35. C. Dean and D. Leibsohn (2003), ‘Hybridity and its discontents: Considering visual
culture in colonial Spanish America’, Colonial Latin American Review, 12 (1), 5–35. Gould,
‘Entangled histories, entangled worlds’; C. Douki and P. Minard (2007), special issue on
‘Histoire globale, histoires connectées’, Revue d'Histoire Moderne et Contemporaine, 54 (4
bis).
36. J. Brewer (2010), ‘Microhistory and the history of everyday life’, Cultural and Social History,
7 (1), 87–109, and F. Trivellato (2011), ‘Is there a future for Italian microhistory in the age of
global history?’ California Italian Studies, 2 (1), 1–24.
37. D. Christian (2005), Maps of Time: An Introduction to Big History. Berkeley: California of
California Press; C. Stokes Brown (2007), Big History: From the Big Bang to the Present. New
York: New Press; A. Shryock and D. L. Smail (2012), Deep History: The Architecture of Past
and Present. Berkeley: University of California Press.
38. On the methodological approaches to global history, see M. Berg (2013), Writing the History
of the Global: Challenges for the Twenty-First Century. Oxford: Oxford University Press and
British Academy; Conrad, What is Global History?.
39. J. Mokyr (1990), The Lever of Riches: Technological Creativity and Economic Progress.
Oxford: Oxford University Press; Idem (2002), The Gifts of Athena: Historical Origins of
the Knowledge Economy. Princeton: Princeton University Press; Idem (2017), A Culture of
Growth: The Origins of the Modern Economy. Princeton: Princeton University Press.
40. See among the many, R. C. Allen (2001), ‘The great divergence in European wages and prices
from the middle ages to the First World War’, Explorations in Economic History, 38, 411–47;
R. C. Allen, J.-P. Bassino, D. Ma, C. Moll-Murata and J. L. van Zanden (2011), ‘Wages, prices,
14
Introduction
and living standards in China, Japan, and Europe, 1738–1925: in comparison with Europe,
Japan, and India’, Economic History Review, 64 (supplement S1), 8–38; R. C. Allen (2015),
‘The high wage economy and the industrial revolution: A restatement’, Economic History
Review, 68 (1), 1–22.
41. Datafiles of Historical Prices and Wages: http://www.iisg.nl/hpw/data.php (accessed 15 April
2017). J. Bolt and J. L. van Zanden (2014). ‘The Maddison Project: Collaborative research on
historical national accounts’, Economic History Review, 67 (3), 627–51.
42. P. K. O'Brien and K. Deng (2015), ‘Locating a chronology for the great divergence: A critical
survey of published data deployed for the measurement of nominal wages for Ming and
Qing China’, Economic History Working Paper Series, 213 (The London School of Economics
and Political Science); Idem (2016), ‘China’s GDP per capita from the Han Dynasty to
communist times’, Economic History Working Paper Series, 229 (The London School of
Economics and Political Science).
43. P. Hudson (2017), ‘Economic History for the Anthropocene: Reflections on the Scope and
Normative Nature of Measurements Currently used by Economists and Historians’, Paper
prepared for the conference “Rethinking Economic History in the Anthropocene”, Boston
College, 24–25 March 2017.
44. Boldizzoni and Hudson, ‘Introduction’.
45. J. Baten (2016), A History of the Global Economy: 1500 to the Present. Cambridge: Cambridge
University Press.
15
16
PART I
DIVERGENCE IN GLOBAL HISTORY
18
CHAPTER 1
THE GREAT DIVERGENCE DEBATE
Prasannan Parthasarathi and Kenneth Pomeranz
The question why parts of Europe surged ahead economically from the eighteenth
century while much of Asia, Africa, and even the Americas (with the exception of the
United States), lagged behind has been debated for more than a century. Great thinkers
of the nineteenth and twentieth centuries, ranging from Karl Marx to Max Weber, have
addressed this large and important issue, as have a number of leading historians in
our own times, including Eric Jones, Douglass North, and David Landes. The ‘Great
Divergence’ as it has come to be known is, therefore, a very old question, but the contours
of the present debate were shaped by the publication of Kenneth Pomeranz’s book of that
title in 2000. While Pomeranz’s book focused on China – and more precisely on the
Yangzi Delta – it ranged into Japan, India, and Southeast Asia, but the entry of India
into the debate more fully would await the publication of Prasannan Parthasarathi’s Why
Europe Grew Rich and Asia Did Not in 2011.
The predilections of the two authors and the different perspectives that China and
India bring to the problem have meant that the explanations for divergence differ in the
two books. While Pomeranz has a far greater environmental history focus, Parthasarathi
devotes more time to questions of technology and the state. Nevertheless, both works
devote considerable attention to the economic conditions and institutions in the run-up
to divergence. All of the above have been subject to great debate.
In the last fifteen years one can distinguish several overlapping strands of contention
and not surprisingly the debate has focused far more on China than on India. In part,
this is due to the earlier publication of the Pomeranz work and the long dominance
of China–Europe comparisons. Such a debate is also not surprising given the greater
number of historians of China than India in the United States and Europe, which has
kept the discussion alive and thriving. There has also been more interest in the question
of divergence in China and Japan than in India. While economic history is currently a
flourishing field in East Asia, in South Asia it has gone into sharp decline since its heyday
in the 1960s and 1970s.
This chapter will focus on comparisons between the advanced regions of Europe,
China, and India, which have been the areas upon which much of the literature on
the question has concentrated. It takes up four sets of issues. The first has to do with
methodological questions connected to how we explain divergence. The chapter
contrasts the structural approach that characterized an older and conventional approach
to the problem with a conjunctural approach that has been introduced in the writings of
Pomeranz and Parthasarathi. The structural approach rests upon enduring differences
between Europe and Asia, which have been challenged in recent writings. Several
important contemporary writings explain divergence as a consequence of conjunctures

which led to different paths of economic development in different parts of the world.
The recent arguments for comparability between the advanced regions of Europe,
China, and India in the period before divergence at the end of the eighteenth century
bring us to the second set of issues considered in this chapter. The Pomeranz and
Parthasarathi claims for broad similarity have inspired debates and challenges to their
position. The chapter reviews these debates as well as the closely related question of
the timing of divergence and concludes that there is still striking disagreement on both
these issues as well as on issues related to institutions and scientific knowledge and the
role that these played in divergence. This brings the chapter to the third set of issues,
which has to do with the problem of how to settle upon the ‘truth’ in economic history.
The writing of history is an interpretive act, and it relies upon the reading of complex
and fragmentary evidence. Theoretical biases and questions of value shape how one
analyses the evidence. In such a situation is it possible to settle upon an explanation
of divergence which receives wide assent? Finally, this chapter considers the ways in
which a global and comparative debate, such as that on divergence, has been received
and has influenced scholarship in India and China.
Structure versus conjuncture
The classic writings of Karl Marx and Max Weber argued that the exceptional path of
European economic development emerged from exceptional European conditions.
Europe, in other words, was fundamentally different in some way from the advanced
regions of China and India, and it was this difference that gave Europeans an economic
edge and put the continent on a different trajectory. Such explanations are often called
‘structural’ in that they argue for deep social, political, economic, or cultural differences.
For Marx this difference was capitalism. Europe gave rise to a new economic order
which rested on private property and wage labour, which was dynamic, innovative,
and ever changing. Capitalism began in the countryside, where it transformed the
agrarian order, but it soon spread to the world of manufacturing and its restlessness
and dynamism produced the Industrial Revolution in the eighteenth century. However,
capitalism as a new mode of production had longer origins, which means that the
process of divergence began long before the eighteenth century, a point that the chapter
will return to. By contrast, China and India remained static and unchanging, trapped
in an Asiatic mode of production. As Marx wrote of India: ‘Indian society has no
history at all, at least no known history. What we call its history, is but the history of
successive intruders who founded their empires on the passive basis of that unresisting
and unchanging society.’1
While Max Weber took a more cultural tack to understanding capitalism, he
shared with Marx an approach which emphasized deep-seated differences between
Europe, in particular its Protestant areas, and China and India. For Weber, the critical
development in Europe was the affinity between the tenets of Protestantism and a spirit
20
The Great Divergence Debate
of capitalism, which transformed the approach to economic activity, making it more

systematic, calculating, and rational. These changes laid the foundation for the economic
transformation of Western Europe from the eighteenth century, but in Weber’s view
predated that era. Weber argued that the affinity between religious thinking, economic
rationality, and a transformative impulse found in Europe, had no counterpart in China
or India. Therefore, it was Europe which led the way to a new economic order.2
Twentieth-century historians approached the problem of divergence in much the
same way as Marx and Weber as they sought to identify what made Europe different
from even the economically advanced and thriving regions of Asia. Douglass North and
Robert Paul Thomas assert the superiority of the political and economic institutions
that emerged in Western Europe during the seventeenth century. For Eric Jones, Europe
possessed exceptional environmental conditions and a competitive state system which
was not found in Asia. David Landes attributed Europe’s success to an advantageous
culture. And Joel Mokyr has pinpointed the scientific culture of Europe as exceptional
and critical to its economic path.3
Parthasarathi and Pomeranz, on the other hand, built on arguments for rough
comparability and similarities between the advanced regions of Europe, China, and
India and they argued that there is little evidence for European exceptionalism.
In their view, divergence was the product of conjunctures between needs and
opportunities.4
Pomeranz’s book emphasized ecological relief which was provided by coal and
overseas trade. Pomeranz argued that Britain and the Yangzi Delta – the most advanced
regions in Europe and China, respectively – both faced pressures on the land, which
provided the food, fuel, and fibre that were needed for survival. Britain was able to
overcome its land constraint by substituting wood with coal and by importing foodstuffs
and raw cotton from the Americas. In effect, Britain vastly expanded its land area. The
Yangzi Delta, by contrast, did not have such ecological windfalls. While China as a whole
had plentiful deposits of coal, these were difficult to access because they were located
in Northwest China, at some distance from the Yangzi region, which was in the south.
The external trade of the Yangzi Delta did not provide the same ecological benefits.
(Pomeranz recognizes that a stream of new machines cannot be explained simply by the
availability of energy to fuel them, and he has no quarrel with scholars who emphasize
the contributions of European science as long as they do not claim that this is a complete
explanation.)
For Parthasarathi, ecological relief in the form of coal is certainly part of the explanation
and is especially critical for understanding the process of industrial development from
the 1820s – ‘the railway age’, to use the language of an earlier generation – although he
notes that the advanced regions of India did not face the ecological pressure of shortages
of wood which were found in Britain and the Lower Yangzi. Parthasarathi argues that
ecological relief must itself be placed in a larger political and economic context in which
state policies were important in shaping the coal revolution as well as technological change
more broadly. His approach to science questions its centrality for European economic
change in the late eighteenth and early nineteenth centuries. He also challenges the
21
differentiation of science along geographical boundaries and views it as a global enterprise,

arguing that in early modern scientific endeavours, India was an important contributor
and participant. (Pomeranz also points to non-European contributions to some emerging
sciences, such as forestry, but emphasizes this point less than Parthasarathi.)
For Parthasarathi, ecological relief marks a later stage in the onset of divergence
and becomes of central importance in the nineteenth century. In the late eighteenth
century, however, a dramatic reshaping of global trade in manufactures began to take
shape as Britain displaced India as the chief supplier of cotton textiles to the consumers
of the world. The key to this shift was technical and organizational innovations, which,
Parthasarathi argues, emerged as a response to the competitive pressures placed on
Britain, as well as other regions, from Indian cotton manufacturers, combined with
state policies of protection. The textile producers of India and China were not subject to
these pressures and thus did not face any need to innovate, which pressed upon Western
Europe (as well as other parts of the world such as the Ottoman Empire).
As can be seen from these very brief summaries, both The Great Divergence and Why
Europe Grew Rich and Asia Did Not built upon long-standing lines of thinking in British
economic history. Pomeranz, for instance, stands on the shoulders of E. A. Wrigley,
while Parthasarathi’s point of departure includes classic works such as The Cotton Trade
and Industrial Lancashire by A. P. Wadsworth and Julia de Lacy Mann. However, both
scholars take these lines and develop them in new ways as a consequence of the global
and comparative frameworks which they develop.5
How much divergence, and when?
The conjunctural approaches of Pomeranz and Parthasarathi rest on arguments on

the comparability of living standards, as indicated by various measures (each of them
imperfect on its own), well into the eighteenth century. The divergence between Europe
and Asia, or more accurately, the advanced regions in those two continents, was in
their view a recent phenomenon, dating back to the late eighteenth or early nineteenth
century. This position has been hotly contested, and there have been lively debates on
the timing and location of divergence as measured by living standards, wages, and so on.
These discussions are critically important, but can quickly lead one into a thicket of fine
details. Although this is not the place to wade into those details, some sense of the broad
contours of the disagreements is essential.
China
One of Pomeranz’s key claims, and confirmed by others, is the strength of the agricultural
order in the Lower Yangzi. Robert Allen’s reconstructions suggest that, as late as 1820,
productivity per labour day in Yangzi Delta farming was 90 per cent of England’s and
that annual net income for a Delta tenant family (including a wife who made cloth part
22
time, as was quite common) was slightly higher than for a similar English household.
Another study puts labour productivity in Yangzi Delta farming c. 1800 as equivalent to
that of Holland, which was 94 per cent of English levels.6 Meanwhile, land productivity
was far higher in the Delta than anywhere in the world except parts of Japan and was
roughly nine times that of England. Thus, the Delta’s total factor productivity was
also extremely high and much higher than in various European countries which did
industrialize in the nineteenth century. Agricultural labour productivity in Germany,
for instance, was about 50 per cent of English levels, and its land productivity was also
lower.7 These and other points challenge ‘agrarian fundamentalism’, which argues that
readiness for industrialization must be a direct function of agricultural efficiency as this
makes it possible to free labour and capital for other uses and keeps food prices, and
thus wages, low.8 Agrarian fundamentalism has also been challenged from the Indian
perspective, which we will turn to shortly.
A different version of agrarian fundamentalism had also long held sway in Chinese
historiography. The Great Divergence has generally been well received in China, but
there have also been criticisms, many of which have come from scholars convinced that
peasant production (as opposed to large farms largely worked by wage labour) cannot
have yielded either the surpluses above subsistence or the flexibility necessary to begin
sustained per capita growth. This position had long been a given of mainland Chinese
historiography, but it cannot be reconciled with labour and total factor productivity
figures like those cited earlier, or the impressive twentieth-century economic
performances of Japan, Taiwan, and, more recently, Eastern China – all places featuring
small-scale farming by families with strong ownership or usufruct rights.
The Great Divergence’s larger claim that living standards and per capita incomes were
comparable between Europe and China, and between England and the Yangzi Delta has
required some revision. Originally, Pomeranz suggested that this was probably still true
in 1800, and almost certainly around 1750. The 1750 claim remains plausible, though
disputed; the former less so. A recent paper by Stephen Broadberry, Hanhui Guan, and
David Daokui Li suggests a divergence in per capita GDP at a date closer to 1700 than
1750. However, this may be a sign that the range of disagreement is narrowing, since
Guan and Li had previously claimed that a huge gap already existed in the fifteenth
century.9 Still more recently, Patrick O’Brien and Kent Deng have questioned the
feasibility of any GDP or wage comparisons and argued for a focus on consumption,
beginning with grain; even here, numbers vary, but they suggest comparability between
the Lower Yangzi and England at least until 1750, and maybe beyond.10
India
The debate on standards of living in India is more spatially scattered and at an earlier stage
than that on China, for which there are more contributions and which are centred regionally
on the Yangzi. The debate may be said to have been launched in 1998 with the publication
of Parthasarathi’s ‘Rethinking wages and competitiveness’, which has been challenged by
23
several economic historians but most forcefully in several writings by Broadberry and
Gupta.11
Broadberry and Gupta have recently summarized their position: Silver wages were
substantially lower in India than in England in the seventeenth and eighteenth centuries,
which is a point that Parthasarathi made in 1998 and which he argued was the reason
for the competitiveness of Indian cotton cloth exports. While Parthasarathi argued that
grain wages (a rough measure of the real wage) were comparable in the mid-eighteenth
century, Broadberry and Gupta conclude that while they were roughly comparable in
the seventeenth century – the Indian figure ranged between 80 and 95 per cent of the
English – in the eighteenth century there was a sharp decline and the Indian grain wage
was only 33–40 per cent of the English.12
Broadberry and Gupta’s findings for the eighteenth century have been disputed by
not only Parthasarathi but also Sashi Sivramkrishna. The latter has drawn upon the
voluminous material contained in Francis Buchanan’s account of a journey through
South India, mainly Mysore, in the early nineteenth century and has showed a
rough comparability of real wages based on a broader basket of consumption goods.
Parthasarathi has questioned Broadberry and Gupta’s conclusions as they exclude well-
known estimates for earnings of outcaste labourers in agriculture, which would have
represented a wage floor in South India, and derive earnings for skilled weavers that fall
in the same range as those of these degraded labourers.13
There are other problems with the Broadberry and Gupta figures: There is no
allowance for non-monetary perquisites, which Parthasarathi included in his original
calculations; we have no information on how many days per week labourers worked
in England and India and the extent of unemployment and underemployment
(impressionistic evidence suggests that these labour market conditions favoured
workers in India, where there were widespread labour shortages before the nineteenth
century). Finally, Broadberry and Gupta do not provide any explanation for their
findings, especially given what we know about structures of contracts and the
bargaining power of labourers in the two places, which again favoured labourers in
India.
Obviously the jury is still out on the question of the comparability of wages and
standards of living in India and Europe. However, it is unlikely that quantitative evidence
alone will be sufficient to resolve this issue, and broader conditions of work and the
position of labourers in the political and economic orders must also be considered. In
his original contribution, Parthasarathi brought a broad perspective to the problem, but
his critics have tended to be narrowly quantitative. To continue this discussion requires
a deep immersion in regional economies and deep familiarity with local conditions and
prices. Broadberry and Gupta range widely over the Indian subcontinent as a whole and
mix together prices from diverse areas, which can be seen in their most recent summing
up of the debate. Finally, the low-estimate earnings that Broadberry and Gupta provide
for the eighteenth century raise the question of how labourers survived in that period.
We know from other sources such as anthropometric data that South Indian workers,
for instance, shrank in size over the course of the nineteenth century. The second half of
24
the nineteenth century was also an extraordinary period of famine in several regions of
India. Why did these things not happen in the eighteenth century?14
Discussion
Even if we accept the most pessimistic estimates, which suggest that rough parity in
standards of living had vanished by 1750 (in the case of China) or as early as 1700 (for
India), this represents a major revision of previously dominant views. Angus Maddison’s
widely cited per capita GNP estimates, for instance, suggested that both China and
India fell behind Europe centuries earlier,15 and many other scholars claimed that a
fundamental divergence had occurred by 1500, year 1000, or even earlier.16 Fixing a
precise date is probably not crucial or even possible. Nevertheless, some rough dating is
needed because that will determine the universe of plausible explanations for divergence.
For, if there was rough parity between the advanced regions of Eurasia in 1700, then
some traditional favourite explanations would be eliminated. For instance, if the cause
of divergence was, as David Landes claims, a difference between freedom and despotism
that went back to ancient Greece, and gave Europeans a much greater propensity to
innovate, it would be very hard to explain why East and South Asia remained so close to
Europe more than 2,000 years after Pericles.17
Even if economic divergence came later than we once thought, a significant gap
appears to have emerged by 1800 between the advanced regions of Europe and China,
and perhaps between those of Europe and India as well. Certainly, the gap grew rapidly
thereafter. This was largely because non-agricultural workers were generally much
more productive than farmers in Europe and England than in China and Japan, and
the number of non-farmers was growing at both ends of Eurasia.18 Again, this suggests
that explanations are best sought outside agriculture, and without relying on black-and-
white contrasts between entire societies. This still leaves us far from consensus, but it
narrows the range of possibilities considerably.
Divergence seems to have come earlier to unskilled wages, both urban and rural, than
to living standards. Though the data are poor, especially on the Chinese side, they indicate
that by the mid-eighteenth century – when other indicators still suggest close comparability
between Jiangnan and advanced regions of Europe – Delta wages had already fallen far
behind, resembling those of Milan or even Warsaw more than those of London.19
At first these two points seem irreconcilable; but a gap in real wages can be quite
consistent with comparable living standards. Wage labourers were probably under 10 per
cent of rural adults even in the highly commercialized Lower Yangzi, where one might
expect widespread landlessness. By contrast, nearly half of the working population in
England and Holland in c. 1700 probably relied on wage earning.20 Because most tenants
in the Delta had strong usufruct rights, they earned much more than unskilled labourers
– roughly three times as much, according to the best estimates Pomeranz can put
together (smallholders would have netted almost five times what a labourer earned).21
Thus, a comparison of unskilled real wages is a comparison of the bottom of the income
25
scale in Jiangnan with something close to the middle in Northwest Europe, reconciling
significant wage differences with comparable average living standards.
The role of institutions
Since politics as well as markets structured global trade flows, institutions are also of
importance. And institutions, of course, also figure in other explanations of East–West
divergence. Indeed, the variety of institutional differences that have been invoked by
one scholar or another can seem endless: domestic political arrangements; property
rights; contract enforcement; fiscal and financial systems; institutions for encouraging,
suppressing, and/or protecting inventions; organizations for trading and building
empires overseas; and so on. These debates have been a good deal broader than those
about the extent and timing of divergence, and participants have often talked past each
other – not only because they have been working on many different subtopics, but
also because it has not always been clear how to move from describing differences to
assessing their significance. We here highlight a few points that have become relatively
well accepted.
Although East Asian property rights and contract enforcement differed from
those taking shape in Northwest Europe, Pomeranz argues that they were adequate
for the efficient product markets that Smithian growth requires (i.e. growth based on
the expansion of the market and the extension of the division of labour).22 When it
comes to factor markets, the previous discussion of agriculture makes it hard to deny
the effectiveness of Chinese (and Japanese) systems for allocating access to land. The
evidence on capital markets is more mixed. It appears that capital in Japan and China was
more expensive than in Europe, but the higher costs did not inhibit typical eighteenth-
century kinds of economic activity such as handicraft production, commerce (including
long-distance trade), agricultural improvement, or even early factories. East Asian
manufacturing techniques tended to be less capital intensive than those in Europe, but
not necessarily less efficient.23
The biggest differences related to capital markets were in the area of public finance.
European states clearly had much more effective systems for raising immediately available
funds by pledging future revenues. However, it is not clear that this mattered much to the
overall economic growth in early modern times, due to three crucial conditions:
a) The overwhelming majority of European government spending was for warfare,
and so was not very constructive in the short run, although long-run linkages
were important.
b) China, and especially Japan, faced much lower and more episodic military costs;
these could generally be met by temporary exactions which were not large or
frequent enough to discourage wealth accumulation.
c) The technologies available did not require either very large-scale fixed investment
that took many years to fully repay initial costs (as, for instance, railroads would
26
in the nineteenth century) or really major public investments in physical and

human capital (e.g. universal schooling), some of which also took a number of
years to begin yielding a return.
In the nineteenth century, all of these conditions changed. Moreover, Europe after 1800
reaped large delayed rewards from the overseas colonization it had carried out earlier: an
activity that had required large amounts of patient capital, and was tied in various ways to
military/fiscal issues. But the relevant institutions here were not simply matters of ‘secure
property’ or ‘competitive markets’: They represented a much messier, and often far from
liberal, set of arrangements. Perhaps the most important point here, which seems to
be fairly well established, is about discontinuity. Institutions that were functional (or
dysfunctional) for an economy with one set of constraints and possibilities could be
much less (or more) facilitative of growth under the very different conditions of a later
period.
The role of science
One of the most contentious areas in the divergence debate continues to be the
contribution of science. Three positions may be identified in the literature. The first argues
that science was not relevant, at least in the early stages of industrialization, and that it
was artisanal knowledge that was important. Allen and Pomeranz are representative of
this perspective.24 The second argues that by the eighteenth century – if not even earlier
– European science was critical and that what Europeans brought to the enterprise of
production was in global terms a unique approach to knowledge and its application.
Margaret Jacob, Joel Mokyr, and Patrick O’Brien may be seen as exemplars of this
position.25 A final position may be seen as a hybrid of the two aforementioned positions
and is articulated by Parthasarathi. On the one hand, it argues that the application of
knowledge to production was found outside Europe, in this case early modern India;
that in important respects early modern science must be seen as transcending national
or continental frames and emerged from contact; and finally, this approach agrees with
Allen that in the early stages of industrialization artisanal knowledge was more important
than scientific and that the creation of knowledge of the natural world often followed
technical breakthroughs.26
The role that European science and knowledge systems played in divergence will
continue to be debated for some time. However, it is striking that economic historians
address these issues in radically different ways compared with historians of science.
First, historians of science have moved away from an old emphasis on the laboratory
or bench top as the main site of scientific activity to include field sciences such as
botany, in which there was widespread cooperation across the world. With this shift in
approach, historians of science have uncovered the contributions that scientific-minded
individuals outside Europe made to the development of modern science. The label
‘global science’ would be a more accurate descriptions of many things that have been
27
labelled as ‘European science’. Second, historians of science have found it very difficult to
connect scientific knowledge and technological change at the micro level and therefore
have moved away from making blanket statements about the connection between the
two. There are many instances well into the nineteenth century of major technological
advances emerging in the workshop and the science that lay behind the new technology
was understood only afterwards. The steam engine is the quintessential example. The
scientific principles, what we know as thermodynamics, were fully worked out long after
the steam engine had been put to work for many decades. Finally, the growing evidence
of scientific interest in seventeenth- and eighteenth-century South Asia and political and
economic interest in knowledge production for its usefulness mean that arguments for
the exceptional nature of European science have to be rethought. In sum, the differing
approaches of economic historians and historians of science will need to be reconciled if
the debate is to advance.27
Telling what’s right
Both The Great Divergence and Why Europe Grew Rich and Asia Did Not drew upon
generations of scholarship on the British Industrial Revolution and the industrialization
of Europe more broadly. The Industrial Revolution is one of the most intensely debated
events in the discipline of history. Its only rival may be the French Revolution, the other
event which along with the Industrial Revolution gave rise to the modern world in Eric
Hobsbawm’s famous and enduring formulation of dual revolutions.28
The Great Divergence builds upon classic writings on coal and British
industrialization. The energy approach may be traced back to the nineteenth century
with works such as the Coal Question by William Stanley Jevons. In the 1930s, John
Nef published a major two-volume study of the rise of the British coal industry. The
most important recent exponent of the energy approach is Tony Wrigley, who, in
1988, brought coal back to the centre of the story of Britain’s exceptional path of
economic development. Pomeranz also draws upon the work of Eric Jones, who
introduced the concept of ‘ghost acres’ in his classic study of divergence, The European
Miracle, and in a more indirect way on Eric Williams’ study of Caribbean slavery and
English growth.
Why Europe Grew Rich and Asia Did Not picks up on other significant strands of
writing on the British Industrial Revolution. The book’s focus on cotton has a long lineage
and may be traced back to nineteenth-century works such as Edward Baines’ History of
the Cotton Manufacture in Great Britain. In the twentieth century, cotton was central
to numerous classic accounts – from that of Paul Mantoux’s The Industrial Revolution
in the Eighteenth Century to David Landes’ Unbound Prometheus and Eric Hobsbawm’s
Industry and Empire. It was Hobsbawm who declared that ‘whoever says industrial
revolution says cotton’.29 Why Europe Grew Rich and Asia Did Not’s periodization of
British industrialization into stages, cotton followed by coal, is faithful to that offered by
John Clapham.
28
As the overview of the debate on divergence has indicated, the lines of debate
and disagreement are many. These revolve around the relative ‘levels’ of economic
development in the advanced areas of Europe and Asia, the nature of the industrialization
process, the contribution of institutions, and the contribution of science and knowledge
to that process. How are we to judge between competing explanations and settle upon
which one is right or true?
In the case of several of these issues, adjudicating between different positions
rests on the interpretation of qualitative data.30 The contribution of institutions to the
process of economic development or the level of scientific knowledge is not amenable
to quantification; thus, to some extent, the judgement of these factors is subjective and
‘in the eye of the beholder’. The interpretation of these sorts of factors is made more
difficult by the lack of research on them in the Asian context, and thus places limits
on our historical knowledge. The historical scholarship is far thinner on science in the
seventeenth and eighteenth centuries for India than for Europe, for example.
A focus on factors that can be quantified is not a solution to this dilemma. If only
such factors, such as wages, incomes, and prices, are part of the analysis, important
dimensions of social, cultural, economic, and political life, which play a significant role
in economic development, could be excluded. Quantification does not eliminate the
interpretive and subjective elements that are present in the case of qualitative evidence.
Making sense of quantitative evidence is no less ‘in the eye of the beholder’.
The creation of quantitative data rests upon hundreds, if not thousands, of judgements,
each of which can introduce error into the final figures. This is the case today when
economists construct national income and other figures of economic performance.
However, these difficulties are compounded when dealing with historical data and are
made worse the further back we go. Eric Hobsbawm, who was not averse to quantification
but recognized the difficulties, put it well more than fifty years ago when he pointed to
the complexities of calculating money wages for even British workers in the nineteenth
century: ‘We know next to nothing of what people actually earned. How much overtime
or short time did they work? How often were they unemployed and for how long? Who
knows?’31 Converting these money wages into real wages introduces further pitfalls and
is no easy task even in contemporary times. Hobsbawm writes: ‘We know from modern
experience how full of pitfalls cost-of-living indices can be even in our own time, when
considerable efforts are made to collect statistics specially for their compilation.’32
Kent Deng and Patrick O’Brien have pointed to a number of these same issues in a
critical review of the wage and price data that are available for China. They urge scholars
to ‘remain sceptical towards all published comparisons of wage levels and trends for the
Chinese and by extension other Asian empires’.33 While their careful analysis focuses on
the sources for a quantitative economic history of China, they conclude that the same
limitations apply to those for India and the Middle East.
Even if we were able to assemble quantitative information that was able to accurately
represent economic reality, that data would still have to be interpreted, which is neither
simple nor straightforward. Stephen Marglin, in his classic comparison of economic
paradigms, writes that it is difficult to conclude on the basis of empirical tests whether
29
neoclassical or non-neoclassical frameworks better describe the workings of the economy

because even sophisticated statistical analysis yields results that are consistent with both
theoretical approaches.34 Marglin draws this conclusion from the analysis of savings in
the US economy, and the difficulty is that the results of even sophisticated statistical
analysis are consistent with a number of approaches to why individuals and firms save.
What is one to do? Marglin argues: ‘We must either back off from purely empirical
means of distinguishing between theories, or despair of sorting out the competing
claims. Consistent positivists should prefer agnosticism. The rest of us will prefer to look
more closely at the premises of the theories … to examine the extent to which these
theories correspond to a plausible conception of the world. In short, if we are to choose
between theories of saving at this stage of our knowledge, it must be on the basis of their
inherent plausibility.’35
Applying Marglin’s recommendation to the divergence debate, a plausible explanation
must take into account all the available evidence, both quantitative and qualitative. At a
minimum, such an explanation must acknowledge three important facts about China,
India, and the global economy in the period between 1600 and 1900. First, for 200 years,
the advanced regions of China and India maintained what might be thought of as export
surpluses.36 These regions shipped large quantities of manufactured goods throughout
the world, cotton textiles in the case of India and porcelains and silk cloth (as well as an
agricultural product, tea) in the case of China, in exchange for silver, and in the Indian case,
to a lesser extent gold. These exports suggest that these regions possessed sophisticated
economies and commercial systems which were able to maintain a competitive hegemony
for a period of centuries. Second, the military encounters between Europeans and Asians
were evenly matched till the early nineteenth century, which indicates that technological
capability was comparable and that technological development in places like India was
not stagnant.37 Finally, it is widely acknowledged that the economies of the advanced
regions of India and China regressed in the nineteenth century. This regression suggests
some degree of prosperity in the eighteenth century from which the economies of these
areas fell back.
The divergence debate in China and India
In the English-speaking-and-reading world, the divergence debate has been dominated

by scholars based in the United States and Western Europe. However, a surprising
degree of discussion of the question has been taking place in East Asia. South Asia, by
contrast, has witnessed very limited interest in the issue, perhaps because of the decline
in economic history in what had been major global centres of research in economic
history, such as the Delhi School of Economics.
Driven by scholars in China and some Western Sinologists, two pre-existing debates
in Chinese historiography have been connected to that on divergence. One debate was
about whether the late imperial Chinese economy had contained within it ‘sprouts of
capitalism’, and if so, what had prevented them from blossoming. The second debate
30
ensued as it became clear that the absence of a thorough capitalist transformation in

China could not be fully explained by external forces such as the Manchu conquest in
the seventeenth century or Western imperialism in the nineteenth as some scholars
had suggested, and therefore, had to have explanations rooted in Chinese society.38 This
discussion centred on to what extent rural China in particular could have experienced
any sustained per capita growth within the late imperial social system, and what the
relationship might be between the limited (or according to some, non-existent) extent
of per capita growth and the undoubted growth in population during the late imperial
period. Both these debates thus take us back to ‘agrarian fundamentalism’, but in two
rather different guises: one essentially Marxist, the other Malthusian.
The Marxist debate has analogues in Indian history, particularly Mughal, where in
the 1960s the ‘potentialities of capitalist development’ in Mughal India were explored,
most extensively by Irfan Habib. Since then, South Asian history has moved away from
the applicability of these types of totalizing frameworks that have been derived from
the European historical experience, which marked a larger retreat from Marxism. An
important moment in this shift was the debate in the Journal of Peasant Studies in the
early 1980s on the applicability of feudalism to medieval India, which was initiated
by Harbans Mukhia. Parthasarathi developed Mukhia’s insights to query the utility of
the category of capitalism for the study of early modern India in a volume of essays in
honour of Mukhia.39
In Chinese economic history, one of the central debates in the People’s Republic
of China – which, not coincidentally, often focused on the advanced Yangzi Delta –
concerned the so-called ‘sprouts of capitalism’: whether or not one could find in the
sixteenth to eighteenth centuries an emerging Chinese capitalism that was then aborted
by the Qing conquest of 1644 (or for some scholars, by the Opium War of 1839–42).
The emphasis in this debate was firmly on identifying China’s dominant ‘mode of
production’ in a Marxist sense, and development was charted above all based on
evidence that wage labour was becoming increasingly prevalent (with a subsidiary effort
to track growing markets for land and capital), rather than by looking for changes in
per capita income, productivity, or technology.40 While many scholars were, by the late
1980s, increasingly unsatisfied with this focus, it was not clear what might replace it in
Chinese historiography.
More than anyone else, Li Bozhong began to push Chinese economic history towards
an emphasis on output, rather than labour relations. He also argued for a long period
of slow but generally steady per capita growth based on market-driven organizational
and technical change, beginning perhaps as early as the eighth century, but becoming
particularly strong between the mid-sixteenth and mid-nineteenth centuries.41 Some
important senior scholars once associated with the ‘sprouts’ debate, such as Wu
Chengming, endorsed Li’s approach, though most have not been willing to go as far as
he did; the scholars who were impressed by Li’s work have been generally receptive to
The Great Divergence.
The Sinologists who have been most sceptical about The Great Divergence, both in
China and in the United States, have been those who have combined some influences
31
from the ‘sprouts of capitalism’ literature with a strong emphasis on the negative
consequences of late imperial population growth. Probably the most notable has been
the Chinese–American historian Philip Huang (Huang Zongzhi); while based for many
years at the University of California, Los Angeles (UCLA), Huang has also been active in
scholarly circles in China. Huang reaffirmed the argument of his UCLA colleague Robert
Brenner that only capitalist farms based on wage labour (and ruthlessly minimizing costs
by driving ‘excess’ workers off the land) could generate rising labour productivity, capital
accumulation, and sustained growth. Much of Brenner’s work has been devoted to
insisting that these essential dynamics emerged only in England, and to explaining why.42
In an influential 1990 book, Huang took China, including the Yangzi Delta, to
represent an even more extreme case of the qualitative stagnation that Brenner attributes
to continental Europe. As he sees it, most Chinese peasants held on to their land (much
like in France, but unlike in Britain). As population grew and plot sizes shrank, they
had to maximize per acre yields; this is what enabled them to pay such high rents that
landlords had no incentive to replace them with wage labourers. These high yields were
achieved by working extraordinary numbers of labour days per acre, and by putting even
more days into labour-intensive handicrafts; this labour intensification continued even
at the cost of reducing peasants’ earnings per labour day to extraordinarily low levels.
Households working this hard could sustain large families, but only at bare subsistence
levels, and at the cost of further increasing pressure on the land in the next generation.
This locked in a process of numerical growth that was the antithesis of true development,
and which Huang calls ‘involution’.43
This is not the place to rehearse all the details of the debate that followed.44 Suffice it to
say that Pomeranz’s views have largely prevailed, in part because the debate uncovered a
basic error in Huang’s work: In estimating the earnings per labour day for Yangzi Delta
weavers, he misplaced a decimal point, throwing his calculations of gross earnings off by
a factor of 10 (and of net earnings by even more).
Unsurprisingly, it is the sections of The Great Divergence that deal with China (as
opposed to Europe or other places) that have excited the most interest in China. Most
of that discussion has treated the book as part of a larger ‘California school’ which has
become the topic of a number of articles. The members of this ‘California school’ vary
with the person defining it – which is hardly surprising since it has never had a firm
institutional identity or a complete consensus on the issues – but R. Bin Wong, James Lee
and his collaborators, Li Bozhong, Robert Marks, Richard Von Glahn, Jack Goldstone,
and Pomeranz are usually included.
Chinese responses to this ‘school’ have naturally been varied, but it is fair to say that
it has stimulated increased interest in comparative history within China. Moreover, this
has been comparative history which, unlike the ‘sprouts’ and ‘involution’ literatures, goes
beyond comparing China to a ‘typical’ (i.e. stylized European capitalist) path. In fact, one
common feature of ‘California school’ comparisons has been an insistence that neither
society should be treated as defining a norm from which the other society is a deviation.45
It has helped stimulate new approaches to the Qing era, in which the state is (for better
or worse) a less overwhelming presence, and the motors of social change are to be found
32
elsewhere in society. Increased interest has been paid to long-run, slowly developing
trends in Chinese society – perhaps going all the way back to the Song dynasty – that
continue up into the twentieth century. Such a view, quite forcefully expressed in a
conference volume called The Song-Yuan-Ming Transition,46 seems to be replacing older
stories in which ‘revolutionary’ changes in Song and late Ming were followed by equally
sharp reversals, frustrating what both Marxism and Western modernization theory
thought ‘should’ have happened next, and defining Chinese history in terms of those
alleged blockages.
Conclusion
As this chapter has shown, the debate on divergence is remarkably broad, touching upon
not only prices and incomes, the traditional bread and butter of economic historians, but
also ranging far and wide to include science, rationality, the environment, politics, and
the state. While the debate has raised difficult empirical questions, it has also brought
to the fore equally challenging problems of method. Its sheer scope and complexity
make the question an enduring one not only for historians but also for a range of social
scientists from sociologists to economists and political scientists. It will continue to
remain a central problem for decades to come.
Notes
1. K. Marx (1978 [1853]), ‘The future results of British Rule in India’, in R. C. Tucker (ed.), The
Marx-Engels Reader. New York: Norton, 659.
2. M. Weber (1930), The Protestant Ethic and the Spirit of Capitalism, trans. Talcott Parsons.
New York: Scribner; Idem (1951), The Religion of China, trans. H. H. Gerth. New York: Free
Press; Idem (1958), The Religion of India, trans. H. H. Gerth and D. Martindale. New York:
Free Press.
3. D. C. North and R. P. Thomas (1973), The Rise of the Western World: A New Economic
History. Cambridge: Cambridge University Press; E. L. Jones (1981), The European Miracle:
Environments, Economies, and Geopolitics in the History of Europe and Asia. Cambridge:
Cambridge University Press; D. Landes (1998), The Wealth and Poverty of Nations.
New York: W.W. Norton; J. Mokyr (2002), The Gifts of Athena: Historical Origins of the
Knowledge Economy. Princeton: Princeton University Press.
4. K. Pomeranz (2002), The Great Divergence: China, Europe, and the Making of the Modern
World Economy. Princeton: Princeton University Press; P. Parthasarathi (2012), Why
Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600-1850. Cambridge:
Cambridge University Press.
5. E. A. Wrigley (1988), Continuity, Chance and Change: The Character of the Industrial
Revolution in England. Cambridge: Cambridge University Press; A. P. Wadsworth and J. de
Lacy Mann (1931), The Cotton Trade and Industrial Lancashire. Manchester: Manchester
University Press.
33
6. B. Li and J. L. van Zanden (2012), ‘Before the Great Divergence? Comparing the Yangzi Delta
and the Netherlands at the beginning of the nineteenth century’, Journal of Economic History,
72 (4), 956–89.
7. R. C. Allen (2000), ‘Economic structure and agricultural productivity in Europe, 1300–1800’,
European Review of Economic History, 4 (1), 20.
8. See for instance R. Brenner (1985), ‘Agrarian class structure and economic development’,
and ‘The agrarian roots of European capitalism’, in T. H. Aston and C. H. Philpin (eds), The
Brenner Debate. Cambridge: Cambridge University Press, 10–63, and 213–327; M. Overton
(1996), Agricultural Revolution in England: The Transformation of the Agrarian Economy
1500–1800. Cambridge: Cambridge University Press. For the term ‘agrarian fundamentalism’
see R. C. Allen (1992), Enclosure and the Yeoman: The Agricultural Development of the South
Midlands. New York: Oxford University Press, 2–3.
9. S. Broadberry, H. Guan and D. Li (2014), ‘China, Europe, and the Great Divergence: A study
in historical national accounting, 980–1850’, http://eh.net/eha/wp-content/uploads/2014/05/
Broadberry.pdf. Guan and Li had previously argued that China was far behind by the
fifteenth century, if not earlier, and had fallen even further behind over the succeeding
centuries. See H. Guan and D. Li (2010), ‘Mingdai GDP ji jiegou shitan’ [A study of GDP and
its structure in China’s Ming dynasty], Zhongguo jingji jikan, 9 (3), 787–829, http://en.cnki.
com.cn/Article_en/CJFDTotal-JJXU201003003.htm
10. P. K. O’Brien and K. Deng (2016), ‘Nutritional standards of living in England and
the Yangtze Delta (Jiangnan), circa. 1644 – circa 1820: Clarifying data for reciprocal
comparisons’, Journal of World History, 26 (2), 233–67; P. K. O’Brien and K. Deng (2017), ‘How
well did the facts travel to support protracted debate on the history of the Great Divergence
between Western Europe and Imperial China?’ February 2017, available at New Economics
Papers, http://econpapers.repec.org/paper/pramprapa/77276.htm; K. Pomeranz (2017), ‘The
data we have vs. the data we want: A comment on the date of the Divergence Debate’, Pt. I
and Pt II, New Economics Papers (8 June 2017) https://nephist.wordpress.com/2017/06/06/
the-data-we-have-vs-the-data-we-need-a-comment-on-the-state-of-the-divergence-debate-
part-ii/ (Part 1, immediately below).
11. P. Parthasarathi (1998), ‘Rethinking wages and competitiveness in the eighteenth century:
Britain and South India’, Past & Present, 98, 79–109.
12. S. Broadberry and B. Gupta (2006), ‘The early modern Great Divergence: Wages, prices and
economic development in Europe and Asia, 1500–1800’, Economic History Review, 59 (1),
2–31.
13. S. Sivaramakrishna (2009), ‘Ascertaining living standards in erstwhile Mysore, Southern
India, from Francis Buchanan’s Journey of 1800–01: An empirical contribution to the Great
Divergence debate’, Journal of the Economic and Social History of the Orient, 52 (3), 695–733;
Parthasarathi, Why Europe Grew Rich and Asia Did Not, 37–46.
14. L. Brennan, J. McDonald, and R. Shlomowitz (1994), ‘Trends in the economic well-being of
South Indians under British rule: the anthropometric evidence’, Explorations in Economic
History, 31 (2), 225–60; M. Davis (2002), Late Victorian Holocausts: El Niño Famines and the
Making of the Third World. London: Verso.
15. A. Maddison (2001), The World Economy: A Millennial Perspective. Paris: OECD, 42,
suggesting that Western Europe overtook China in c. 1300.
16. See D. Lal (1998), Unintended Consequences: The Impact of Factor Endowments, Culture,
and Politics on Long-Run Economic Performance. Cambridge, MA: MIT Press; London: Eyre
34
Methuen; E. Jones (1987), The European Miracle, 2nd edn. Cambridge: Cambridge University
Press; I. Wallerstein (1976), The Modern World-System, Volume I. New York: Academic Press.
17. Landes, The Wealth and Poverty, 33–5, 59, and passim.
18. See Li and van Zanden, ‘Before the Great Divergence’.
19. R. C. Allen, J. P. Bassino, D. Ma, C. Moll-Murata and J. L. Van Zanden (2011), ‘Wages, prices
and living standards in China 1738–1925: In comparison with Europe, Japan, and India’,
Economic History Review, 64 (1), 8–38. This article’s estimates of agricultural wages in China
are, as the authors note, actually very close to Pomeranz’s. R. C. Allen (2009), ‘Agricultural
productivity and rural incomes in England and the Yangzi Delta, ca. 1620–1820’, Economic
History Review, 62 (3), 544, suggests that Lower Yangzi wages were about the same as English
ones in the mid-seventeenth century, and Delta peasants were far more prosperous than
English farm labourers at that time. Ibid., 546. And see R. C. Allen (2004), ‘Mr. Lockyer
meets the index number problem: The standard of living in Canton and London in 1704’,
available at http://www.iisg.nl/hpw/papers/allen.pdf, for a different (smaller) dataset,
suggesting comparable wages in Canton and London in 1704.
20. C. Tilly (1984), ‘Demographic origins of the European proletariat’, in D. Levine (ed.),
Proletarianization and Family History. Orlando: Academic Press, 1–85 uses a looser
definition, and gets even higher figures: see esp. 36.
21. Calculations in K. Pomeranz (2006), ‘Standards of living in rural and urban China:
Preliminary estimates for the mid-eighteenth and early twentieth centuries’. Paper for Panel
77, World Economic History Congress, Helsinki.
22. On market integration in China and Europe, see W. Keller and C. Shiue (2007), ‘Markets in
China and Europe on the eve of the Industrial Revolution’, American Economic Review, 97
(4), 1189–216.
23. See esp. J. L. Rosenthal and R. B. Wong (2011), Before and Beyond Divergence: The Politics
of Economic Change in China and Europe. Cambridge, MA: Harvard University Press. See
also Pomeranz, The Great Divergence, 180–2, on why interest rates per se may not be the best
indicators of whether credit markets were obstructing development.
24. R. C. Allen (2009), The British Industrial Revolution in Global Perspective. Cambridge:
Cambridge University Press; Pomeranz, Great Divergence.
25. M. Jacob (2014), The First Knowledge Economy: Human Capital and the European Economy,
1750–1850. Cambridge: Cambridge University Press; Mokyr, Gifts of Athena; and Patrick
O’Brien’s chapter in this volume.
26. Parthasarathi, Why Europe Grew Rich and Asia Did Not, ch. 7.
27. H. J. Cook (2007), Matters of Exchange: Commerce, Medicine, and Science in the Dutch
Golden Age. New Haven: Yale University Press; K. Raj (2007), Relocating Modern Science:
Circulation and the Construction of Scientific Knowledge in South Asia and Europe. Delhi:
Permanent Black.
28. E. J. Hobsbawm (1962), The Age of Revolutions: Europe, 1789–1848. London: Weidenfield
and Nicolson.
29. E. J. Hobsbawm (1969), Industry and Empire. London: Penguin, p. 56.
30. See the chapter by Jack A. Goldstone in this volume.
31. E. J. Hobsbawm (1964), Labouring Men: Studies in the History of Labour. London:
Weidenfield and Nicolson, 107.
32. Hobsbawm, Labouring Men.
35
33. K. Deng and P. K. O’Brien (2016), ‘Establishing statistical foundations of a chronology for
the great divergence: A survey and critique of the primary sources for the construction of
relative wage levels for Ming–Qing China’, Economic History Review, 69 (4), 1075. Also see K.
Deng and P. K. O’Brien (2016), ‘China’s GDP per capita from the Han Dynasty to communist
times’, World Economics, 17 (2), 79–123; and Deng and O’Brien (2017), ‘How well did the
facts travel?’
34. S. A. Marglin (1984), Growth, Distribution, and Prices. Cambridge, MA: Harvard University
Press, ch. 18.
35. Marglin, Growth, Distribution, and Prices, 430.
36. But on the dangers of treating precious metals as equivalent to modern money, as an ‘export
surplus’ reading does, see D. O. Flynn (1995), ‘Arbitrage, China, and world trade in the early
modern period’, Journal of the Economic and Social History of the Orient, 38 (4), 429–48; and
D. O. Flynn and A. Giráldez (1997), ‘Introduction’, in D. O. Flynn and A. Giráldez (eds),
Metals and Monies in an Emerging World Economy. Aldershot: Variorum, xv–xl.
37. It might be objected here that since the battles were fought in Asia, leaving Europeans
with very long supply lines, this is a risky inference. But for an argument that the decisive
advantage of East India Company forces in India was not technological, see K. Roy (2011),
‘The hybrid military establishment of the East India Company in South Asia, 1750–1849’,
Journal of Global History, 6 (2), 195–218.
38. It is worth noting that the earlier preference for externally driven explanations of Chinese
‘failure’ was convenient both for mainland scholars committed to the universality of a rigid
Marxist set of stages of society and for nationalists wishing to emphasize the damage done to
China by imperialism.
39. T. J. Byres and H. Mukhia (eds) (1985), Feudalism and Non-European Societies. London:
Frank Cass; P. Parthasarathi (2008), ‘Was there capitalism in early-modern Indian history?’
in R. Datta (ed.), Rethinking a Millennium: Perspectives on Indian History from the Eighth to
the Eighteenth Century: Essays for Harbans Mukhia. New Delhi: Aakar Publications, 342–60.
40. W. Chengming (1985), Zhongguo zibenzhuyi yu guonei shichang [Chinese capitalism and
the national market]. Beijing: Zhongguo shehui kexue chubanshe; and X. Dixin and W.
Chengming (1985), Zhongguo zibenzhuyi de mengya [The Sprouts of Capitalism in China].
Beijing: Zhongguo shehui kexue chubanshe, are the most important compendia of this work.
41. B. Li (1998), Agricultural Development in Jiangnan, 1620–1850. New York: St. Martin’s Press;
B. Li (2000), Jiangnan de zaoqi gongyehua [Proto-industrialization in Jiangnan]. Beijing:
Shehui kexue wenxian chubanshe; B. Li (2003), Fazhan yu zhiyue: Ming Qing Jiangnan
shengchanli yanjiu [Development and Constraint: Research on Productive Capacity in Ming-
Qing Jiangnan]. Taibei: Lianjing; B. Li (2005), ‘Farm labour productivity in Jiangnan’, in
R. C. Allen, T. Bengtsson and M. Dribe (eds), Living Standards in the Past: New Perspectives
on Well-Being in Asia and Europe. Oxford: Oxford University Press, 55–76; B. Li (2010),
Zhongguo de zaoqi jindai jingji: Huating-Louxian diqu GDP yanjiu [China’s Early Modern
Economy: Research in the GDP of the Huating-Louxian Region]. Beijing: Zhongua shuju.
42. R. Brenner (1985), ‘Agrarian class structure and economic development’, and ‘The agrarian
roots of European capitalism’; R. Brenner and C. Isett (2002), ‘England’s divergence from the
Yangzi Delta: property relations, microeconomics, and patterns of development’, Journal of
Asian Studies, 61 (2), 609–62. Pomeranz’s complete answer to Brenner is not yet published (it
is supposed to appear in a long-delayed volume based on a debate held at UCLA) but some
comments are included in K. Pomeranz (2009), La Force de L’Empire: Révolution industrielle
et écologie, ou pourquoi l’angleterre a fait mieux que la Chine, ed. with an introduction by
Philippe Minard. Alfortville: Éditions ère, 77–110.
36
43. P. Huang (1990), The Peasant Family and Rural Development in the Lower Yangzi Region,
1350–1988. Stanford: Stanford University Press.
44. P. Huang (2002), ‘Development or involution in eighteenth century Britain and China? A
Review of Kenneth Pomeranz’s The Great Divergence: China, Europe and the Making of the
Modern World Economy’, Journal of Asian Studies, 61 (2), 501–38; P. Huang (2002), ‘Fazhan
haishi neijuan? Shiba shiji Yingguo yu Zhongguo – Ping Peng Mulan ‘Da fenliu: Ouzhou,
Zhongguo ji xinadai shijie jingji de fazhan’, Lishi yanjiu, 149–76; P. Huang (2003), ‘Further
thoughts on eighteenth-century Britain and China: Rejoinder to Pomeranz’s response to my
critique’, Journal of Asian Studies, 62 (1), 157–67; K. Pomeranz (2002), ‘Beyond the East-West
binary: Resituating development paths in the eighteenth century world’, Journal of Asian
Studies, 61 (2), 539–90; K. Pomeranz (2003), ‘Facts are stubborn things: A response to Philip
Huang’, Journal of Asian Studies, 62 (1), 167–81; K. Pomeranz (2003), ‘Shijie jingji shi zhong
de jinshi Jiangnan: bijiao yu zonghe guancha’ [Early modern Jiangnan in global economic
history: comparative and integrative perspectives], Lishi yanjiu, 284, 3–48. See also essays by
R. B. Wong (2003), ‘Integrating China into world history’, Journal of Asian Studies, posted at
www.aasianst.org/catalog/wong.pdf; J. A. Goldstone (2003), ‘Europe vs. Asia: Missing data
and misconceptions’, Science and Society, 67 (2), 184–94; J. Lee, C. Campbell, and F. Wang
(2002), ‘Positive check or Chinese checks?’ Journal of Asian Studies, 61 (2), 591–607; S. Cao
and Y. Chen (2002), ‘Maerasi lilun he Qingdai yilaide de Zhongguo renkou: ping Meiguo
xuezhe jinnianlai de xiangguan yanjiu’ [Malthusian theory and Chinese population from the
Qing dynasty onwards: A critique of recent American scholarship), Lishi yanjiu, 275, 41–54;
and A. Wolf (2001), ‘Is there evidence of birth control in late Imperial China?’, Population
and Development Review, 27 (1), 133–54, among others.
45. R. B. Wong (1997), China Transformed: Historical Change and the Limits of European
Experience. Ithaca, NY: Cornell University Press; Pomeranz (2000), The Great Divergence.
46. P. Smith and R. von Glahn (eds) (2003), The Song-Yuan-Ming Transition in Chinese History.
Cambridge, MA: Harvard University Press.
37
CHAPTER 2
DATA AND DATING THE GREAT DIVERGENCE
Jack A. Goldstone
The problem of the great divergence
Since the classic works of Karl Marx and Max Weber, a distinction has been drawn between
dynamic European economies, which in an early modern period experienced the onset of
modern economic growth, and Asian societies, particularly China, which were considered
to have remained economically stagnant until they were overwhelmed by Western influences
in the nineteenth century.1 In this view, since at least 1500 (some scholars place the date
earlier, in the Italian Renaissance or even medieval times), an accumulation of capital and
productive technologies began in Europe that had no equal outside of the continent.2 By
1800, Europe’s industrialization was enabled and propelled by prior economic advances
that had already long supported more consumption, more innovation, more consistent
income growth, and more production per head than in any other major world economy.
This process was not synchronous across Europe; various countries took the lead
at different times. Yet scholars see this as a single process. Italy made its contribution
in the Renaissance; then the Netherlands made their contribution in the sixteenth
and seventeenth centuries; England made its contribution in the eighteenth and early
nineteenth centuries, then Germany in the late nineteenth and early twentieth centuries.
Cumulatively they put Europe on a steady path of rising income between 1500 and 1900.
Twenty years ago, a small group of scholars, based mainly in California, argued
that this view, which had prevailed among researchers for over a hundred years, was
profoundly mistaken.3 What has been defined as the ‘California School’ has drawn on
new scholarship in China’s economic and social history4 as well as that on Japan, India,
and the Ottoman Empire, to argue that despite differences in culture and politics, the
economic and technological conditions in Europe were not greatly superior to those
in the leading Asian empires until the early nineteenth century. The Great Divergence
that was apparent by the middle of the nineteenth century, with Europe enjoying clearly
superior military and economic technology, and rapid and sustained growth in both
population and income per capita, was thus a far more recent phenomenon, starting not
much before 1800, or about 300 years later than was previously thought.
Members of the California School did not agree on what caused the Great Divergence.
Pomeranz fell back on the established idea of capital accumulation, arguing that Europe’s
access to convenient coal and to land reserves in overseas colonies provided a key
advantage. Andre Gunder Frank argued that Europe surged ahead of China only because
of the temporary failure of China’s political institutions in the late Qing. Bin Wong and
Jack Goldstone put more emphasis on Europe’s scientific and engineering advances that
Data and Dating the Great Divergence
began to accumulate over the course of the eighteenth century. Since then, others have
argued that labour/capital ratios, or physical geography, better political organization, or
still other factors were responsible, on various time scales.5
Unfortunately, despite the importance of this dispute to understanding the major
patterns of world history for the last millennium, the arguments on both sides were
made with data that was, admittedly, fragmentary. Ideally, it would have been desirable
to have annual or at least decadal data on GDP and GDP per capita to assess the rates
and levels of economic growth in various regions and societies since at least 1500. But,
of course, GDP as a concept and measure was only invented in the twentieth century.
Scholars have thus had to make do with proxies for living standards, including wills and
testaments, tax assessments, estimates of farm income, scattered wage contracts, and
estimates of consumption of agricultural and manufactured goods. Estimates of output
based on trade data, tax rolls, diaries, gazetteers and handbooks, and census data (where
available) have also been used.
To get at levels of economic development, one also has to determine economic
output per capita. This requires data on population that is limited before modern
censuses. Some pre-modern censuses were compiled, but these are only available at
long intervals, sometimes centuries, during which wars and plagues may have greatly
altered the population. Such censuses usually focused on households, not individuals,
and households varied in size and composition across regions and times. Parish records
in Catholic and Anglican countries provide excellent local data, as do lineage records in
Asia, with identification of specific individuals by birth, marriage, death, and households.
But such information is painstaking and difficult to collect and aggregate.6
Things get even more complex when we compare different world regions: What
geographical or social unit should be the basis for estimation? Is it fair to compare
income levels in Holland, which was the richest, most urban, and most internationally
supplied portion of the still-small country of the Netherlands – which was in turn the
richest and most urbanized country in Northern Europe for several centuries – with
the much larger and more diverse countries of England and Wales, or France, much
less China? Pomeranz tried to compare what he called the ‘most advanced’ regions of
Europe and China, but even here how to proceed? Should one take the Yangzi Delta
in the seventeenth and eighteenth centuries, as he did, which is still a diverse region
of twenty-five million in population, and compare it with regions such as England (six
million) or the Netherlands (two million) or even Holland (800,000)? Also when should
one make the comparison? Each region had its own economic cycles of prosperity and
decay, and comparing one region during a boom with another during a slump could give
a very misleading picture of longer-term conditions.
The challenge of new data
Given the enormous difficulties discussed above, the creation of a comprehensive set
of national accounts for Britain and Holland from 1500 to 1800 that are unprecedented
39
in their comprehensiveness and detail is a true achievement.7 Such datasets survey

agriculture, including grain and livestock and other crops; output in manufacturing,
including the production of textiles, ceramics, leather goods, mining and metals, soap,
beer, books, and so on; and services, analysing trade and transport, finance, housing, and
government spending. They attempt to track output in each of these sectors year by year
over several centuries, in some cases going all the way back to the early Middle Ages.
These estimates open up new possibilities for evaluating several of the arguments
over the Great Divergence. One can scrutinize the national accounts for Britain and
Holland to seek internal patterns: By what dates do they seem to have achieved a self-
sustaining pattern of growth in income per head? We can compare this data with more
fragmentary but still useful estimates of output per capita in other times and places to
ask: By what dates do they seem to have achieved a level of income per capita that goes
beyond levels previously achieved in pre-modern times? Finally, this income data can
be checked against other sources and estimates for consistency, such as data on physical
heights or competing estimates of consumption.
As far as the compilers of the new data are concerned, they feel they have now
firmly dated the origins of the Great Divergence, and that their data strongly supports
the classical view that it began centuries before 1800. They argue that the data shows
early and sustained growth in GDP per capita in Northwest Europe, starting from the
late Middle Ages. This is a return to the views of scholars such as Fernand Braudel,
Immanuel Wallerstein, and Carlo Cipolla, who saw a commercial revolution starting
in the thirteenth and fourteenth centuries in Europe with great fairs and growing cities,
and trade then expanding through the age of exploration and colonial empires from the
sixteenth through the nineteenth centuries.8 All this created a distinctive growth path
in Europe long before the Industrial Revolution. Broadberry thus argues that ‘the Great
Divergence between Europe and Asia had its origins in the late medieval period and
was already well under way in the early modern period, as in the traditional economic
history literature’.9 De Pleijt and van Zanden similarly state that the Industrial Revolution
was ‘a continuation of trends going back to the late Middle Ages’.10 Rather than seeing
the process as uniform across Europe, the compilers of the new GDP data argue that this
process began with a ‘Little Divergence’ in which first the Netherlands and then Britain
launched on the path to higher income per head while other parts of Europe fell behind;
at the same time, the great empires of Asia were falling into stagnation or decline from
now distant medieval peaks of productivity, leaving only Northwest Europe poised to
develop further into industrial nations.
This argument, if accepted, would overturn the claims of the ‘California School’ that
European growth was not exceptional or sustained before the late eighteenth century.
The great similarities that California School scholars claim to see between the leading
pre-industrial European economies and those of Asia would be outweighed by greater
differences. Yet this chapter argues that the authors of these new GDP studies have
overstated such differences. Indeed, I claim that on closer scrutiny, there was a sharp
break in the pattern of economic growth only after 1750, and that there is no evidence of
an exceptional pattern of sustained or rapid growth in GDP per capita in Europe before
40
that. First, I show that while Holland had a very impressive efflorescence of growth in real
income during its sixteenth century Golden Age; it thereafter returned to a centuries-
long stagnation. Next, I demonstrate that before 1750 England did not experience both
population growth and significant growth in income per capita. Finally, I compare the
levels of income per capita found in Holland and Britain with data on GDP per capita
from other times and places. They show that the economic achievements of Holland
and Britain before 1800 are notable but not unprecedented. When industrialization
arose in Europe, it therefore came without any steady advances in income per capita, or
attainment of exceptional pre-industrial incomes, during the early modern period.
Dutch economic growth, 1510–1800: Efflorescence or modern growth?
In 2002, I introduced the concept of ‘efflorescences’ in economic history to counter the

notion that all nations’ economic history was binary – that there was only Malthusian
stagnation or modern steady increases in income.11 I argued that while most pre-modern
economies were usually bound by Malthusian constraints, unable to sustain any growth
in income per capita if population was growing, there were exceptions to the rule
scattered throughout history.
At various times, even pre-modern societies made breakthroughs in productivity
through improvements in agricultural tools and practices (in the use of animals, crops,
and crop rotations); through improvements in energy and water transport (windmills,
watermills, exploiting peat or coal, new designs for boats and canals); the importation
or creation of new production techniques and products (e.g. for paper, silk, ceramics,
metals, glass, or textiles); or advances in organization and finance (e.g. more extensive
and systematic accounting, banking, credit, insurance, and monetary instruments).
The added value of these advances encouraged higher levels of urbanization and of
trade. More extensive trade, both within the society and without, led to further gains
from exploiting comparative advantage, which often involved taking market share from
other regions. Such a burst of creativity could augment population increase, leading to
a rapid rise in both population and income per capita, thus breaking the Malthusian
bounds through ‘Schumpeterian’ or innovation-led growth. In such periods – often
deemed ‘Golden Ages’ – even pre-modern societies start to look more ‘modern’,
as surging productivity, gains in the service sector and investments in libraries and
education, and high levels of cultural production and consumption created a richer
and more diversified economy and lifestyles. Whether in Song China (remarkable for
its production of iron), or the Caliphate of Baghdad (famed for its libraries as well as
its science), Renaissance Italy (renowned for its art), or Golden Age Holland (bustling
with trade and manufacturing), such episodes set standards for sophistication that
often stood for centuries.
Yet unlike in modern economic growth, where we have seen centuries of steady
increases in output per capita, such episodes usually lasted only a few decades. Once the
gains of the initial productivity breakthroughs had been absorbed and exhausted, there
41
were no further such ‘Schumpeterian’ gains. At that point, population growth would
again push against the new resource boundary. At best, slowing population growth and
much more moderate gains in total output could sustain the prior levels of GDP per
capita; but there would be no further marked gains in GDP per capita in succeeding
centuries. At worst, a new period of war or revolution, or competition from other
societies experiencing a surge of productivity and taking market share away, or simply
continued population increase, could lead to a decline in GDP per capita. One might
still see income per capita rise in subsequent periods if there is a subsequent decline in
population that is greater than the decline in output, or if output grew modestly while
population remained constant or depressed. However, total GDP per capita would still
remain within the bounds of pre-modern efflorescence peaks, and the vigorous sustained
growth in both GDP per capita, and population that is characteristic of modern economic
growth does not reappear. Rather, after the efflorescence has peaked, a new Malthusian
equilibrium pattern takes over.
Jan Luiten van Zanden and Bas van Leeuwen have painstakingly reconstructed a set
of national accounts for Holland going back to the late Middle Ages. I will here focus
on their data for the period of 1510–1807. This is the period that encompasses Holland’s
‘Golden Age’, and is a period in which many observers, including van Zanden and van
Leeuwen, as well as Jan de Vries and Ad Van den Woude, have claimed to find evidence
for the emergence of ‘modern’ economic growth.12
Holland in its Golden Age has many features of a modern economy, including a
low fraction of GDP in agriculture; a high level of artistic and educational output and
consumption; and a high level of government and economic organization. But some
of this is inherent in the selection of the province of Holland in isolation as the unit
of analysis. Holland, anchored by Amsterdam and its other coastal cities, was an
exceptionally urbanized area: Its 337,000 residents were far more dependent on services
and trade than any regions with ten to twenty times that population could be – indeed
far more so than even other parts of the United Provinces, of which it was the largest and
richest. As early as 1510, 49 per cent of Holland’s GDP came from services, with 29 per
cent from crafts and manufacturing and only 22 per cent from agriculture and fisheries.
Many of those services derived from Holland’s role in the international economy, where
it was a depot for trade between the Baltic and the North Sea and the Atlantic, and
provided financial and warehousing services to merchants from throughout Europe.
The economy of Holland would be more like the economy of today’s Greater London,
or for that matter the cities of Rome, Florence, or Constantinople in their heydays, for
apt comparison. It was thus unlike the economy of any other pre-modern European
economy, where typically half or more of the population was engaged in agriculture.
The chronological developments for Holland are shown in Figure 2.1. The left scale
shows real GDP in constant 1800 prices in Dutch guilders; the right scale shows real
GDP per capita in the same measure.13 GDP started to rise strongly from the 1540s to the
1560s, faltering slightly in the next decade when the Dutch war for independence with
Spain began. However, after the 1570s there was rapid and unbroken growth up to the
1640s, when total GDP was four times larger than in the early sixteenth century.
42
250,000 500
GDP
200,000 300
GDP per capita

(in guilders)
(in guilders)
GDP
150,000 400
GDP per capita
100,000 200
50,000 100
0 0
1510
1520
1530
1540
1550
1560
1570
1580
1590
1600
1610
1620
1630
1640
1650
1660
1670
1680
1690
1700
1710
1720
1730
1740
1750
1760
1770
1780
1790
1800
Figure 2.1 GDP and GDP per capita in Holland, 1510–1800 (Decade Averages in constant 1800
prices).
The trajectory of this growth shows a clear ‘efflorescence’ pattern. From the 1540s
to the 1570s there was a sudden, one-time shift in the composition of GDP, as more
efficient services and new energy, transport, and manufacturing processes took hold.
In the 1540s, the sectoral distribution of Holland’s GDP was still virtually identical to
that in 1510, with 48.4 per cent in services, 30.3 per cent in crafts and manufacturing,
and 21.3 per cent in agriculture. But by the 1560s, as new techniques spread, there
was a dramatic shift, with services leaping to 64.7 per cent of output, while crafts
and manufacturing dropped to 21.7 per cent and agriculture to a mere 13.6 per cent.
Over the next century, this pattern would be preserved, so that by 1640, services
still contributed 62.5 per cent of output, crafts and manufacturing 26.9 per cent, and
agriculture 10.6 per cent. Most of Holland’s growth in output during this Golden Age
was thus in services, and specifically in trade, whose real value increased fivefold to
sixfold. Still, these trade gains reflected widespread gains in the economy as every
sector grew in absolute terms.
After 1640, however, the picture changed. For over a century after the 1640s, until the
1750s, real GDP was never more than 2 per cent above the 1640s peak. And the sectoral
structure of the economy remained unchanged: In the 1750s, services still contributed
59.4 per cent of GDP, crafts and manufacturing 30.1 per cent, and agriculture 10.5 per
cent. Indeed, this pattern remains unchanged all the way up to the 1790s.
There was a slight spurt of new growth in the late eighteenth century, with GDP in
the 1760s, 1770s, and 1790s up by about 10 per cent from the 1640–1750 level; but this
too faltered and by 1800–1807 GDP was back to within 5 per cent of the then 160-year-
old peak. According to this new data, real GDP grew by 300 per cent from 1540 to 1640,
but by no more than 5 per cent for the next 150 years. That certainly represented, as
Simon Schama has written, an ‘embarrassment of riches’ in the seventeenth century.14
However, this efflorescence was followed by no further changes in the size or structure
of the economy for 150 years after the 1640s.
Further evidence for this conclusion comes from looking at changes in GDP per capita
over this period. From 1540 to 1590 GDP per capita grew strongly, gaining roughly 56
per cent in these five decades. This was accompanied by vigorous population growth,
43
increasing 37 per cent from 337,000 in the 1540s to 462,000 in the 1590s. After these five
wondrous decades, however, gains in per capita income disappeared. GDP grew strongly
for another half-century, but in those years population growth more than kept pace, so
that GDP per capita dipped after the 1590s, inched up to that level again in the 1640s, but
then fell for the next century, so that not until the 1760s did GDP per capita again reach
its level of the 1590s, more than 150 years earlier.
Even more striking is that the rise in GDP per capita in the last few decades of the
eighteenth century is hardly accompanied by evidence of vigour in the economy; rather
it looks more like a slight Malthusian positive wave. For the GDP per capita level in
1800–07, which was still only 4.5 per cent higher than that of the 1590s, rose mainly
because Holland’s population declined. Shortly after the 1640s peak in GDP, population
also hit a peak in the 1670s, at 876,000. By the 1750s, population had declined by almost
100,000 to 783,000, and then fell yet another 34,000 by the years 1800–07.
All of this can be observed in Table 2.1. The annual GDP growth rates from the 1540s
to the 1640s stand out; they are wholly atypical for the period as a whole. GDP growth
steadily declined thereafter, virtually disappearing after the 1640s. Even more striking,
GDP per capita shows tremendous growth in the five decades from the 1540s to the
1590s, but that is all. After the 1590s, growth in per capita income turned negative for
over a century, and even the return of growth in GDP per capita in the eighteenth century
was almost risible, reaching 0.08 per cent per year only because the decline in Holland’s
population over the eighteenth century (−0.11 per cent per annum) was greater than the
decline in real GDP (−0.03 per cent per annum).
In sum, the Netherlands illustrate a classic pre-modern economic ‘efflorescence’:
several decades of truly remarkable growth in GDP, GDP per capita, and population,
followed by a return in the succeeding two centuries to virtually zero growth. Indeed,
for all these quantities, their level in the first decade of the nineteenth century is
indistinguishable from their level in 1640s, as is the sectoral composition of the economy.
In my view, these facts not only make the late-sixteenth-century Dutch Golden Age
even more impressive, but also indisputably distinguish it from being the onset of true
modern economic growth. However, several economic historians have argued that
although growth faltered in the Netherlands, from the seventeenth century onwards it
took off in England. They argue that we should see the joint trajectories of England and
the Netherlands as comprising a ‘Little Divergence’ from the rest of Europe that carried
this world region into new frontiers of economic performance.
British growth, 1270–1800
There is no dispute that after 1800, Great Britain was launched upon a remarkable period
of economic growth. Fuelled by vast gains in productivity in agriculture, transport, and
especially in textiles, mining, and metallurgy, Britain had so transformed itself by 1850
as to be the wonder of the world. Its railways moved people and freight at previously
unimaginable speeds, its steam-powered and iron-clad warships subdued the mightiest
44
Table 2.1 Growth in Holland, 1510s–1800s: GDP, population, and GDP per capita
Population Growth GDP per capita

GDP Growth since Population since prior date GDP per capita Growth since prior date
GDP (1510s = 100) prior date (% p.a.) (1510s = 100) (% p.a.) (1510s = 100) (% p. a.)
1510s 100 100 100
1540s 111.1 0.35 121.4 0.64 91.4 −0.30
1590s 241 1.56 166.4 0.63 144.7 0.92
1640s 389 0.96 271.4 0.98 143.3 −0.02
1700s 418.5 0.12 301.6 0.18 138.8 −0.05
1800s 407.9 −0.03 269.9 −0.11 151.2 0.08

Source: Jan Luiten van Zanden and Bas van Leeuwen as the ‘Reconstruction National Accounts of Holland’, at: http://www.cgeh.nl/reconstruction-national-
accounts-holland-1500-1800-0.
45
empires in the world, and its factories allowed this small island to replace the centuries-
old leadership of the vast Indian and Chinese empires and become the world’s leading
exporter of cotton goods.
What is still a matter of great debate, however, is how far in this direction Britain’s
economy had moved prior to 1800. Was Britain, already by 1700 or earlier, embarked on
a path of economic growth that showed a clear break with past Malthusian patterns? Or
was such growth only evident after the onset of industrialization, in the late eighteenth
or even only the early nineteenth century?
Table 2.2 shows recent data for growth in real GDP per capita in half-century periods
from the 1270s through the 1860s, along with data on population growth. If we exclude
two periods – the late fourteenth century and the late seventeenth century – then the
average annual growth rate in real GDP per capita for all other periods from the 1270s to
the 1700s, a period of over 400 years, was essentially zero. By contrast, in the two growth
periods, we see very rapid gains in income per capita, of 0.57 per cent and 0.72 per cent
Table 2.2 Growth rates for population and real GDP per
capita in England and Great Britain (% per annum)
Population Real GDP per capita
England
1270s–1300s 0.23 −0.02
1300s–1340s −0.06 0.07
1340s–1400s −1.32 0.57
1400s–1450s −0.14 −0.07
1450s–1500s 0.29 0.11
1500s–1550s 0.66 −0.16
1550s–1600s 0.64 0.18
1600s–1650s 0.45 −0.05
1650s–1700 −0.06 0.72
Great Britain
1700s–1750s 0.31 0.18
1750s–1800s 0.82 0.39
1800s–1830s 1.43 0.41
1830s–1860s 1.17 1.15

Source: Stephen Broadberry; Bruce Campbell, Bruce; Alexander Klein, Mark
Overton, and Bas van Leeuwen (2015), British Economic Growth, 1270–1870.
Cambridge: Cambridge University Press, Appendix 5.3.
46
per year. These stand out as periods of remarkable pre-modern growth, greater in fact
than the growth rates in GDP per capita observed from 1800 to 1830. The new GDP data
thus shows that all the growth in English GDP per capita between the Middle Ages and
the eighteenth century was due to growth in these two periods.
The late fourteenth century of course was the era of the Black Death, and income
gains were largely derived from population decline. But it should not be thought that
these gains were automatic. Many other areas, including Egypt, China, and Eastern
Europe, suffered equally devastating losses in population. Yet they did not sustain their
gains in real GDP per capita as England did. In England, the demographic decline was
accompanied by major changes in the organization of the economy. In the fifteenth and
sixteenth centuries, serfdom was largely abolished, a flourishing export trade in wool was
developed, and the country’s legal and judicial system continued to evolve. By contrast,
in Eastern Europe peasant labour was enserfed after the Black Death, while in Egypt vast
areas fell out of cultivation and in China the plague helped usher in the collapse of the
Mongol Yuan Empire.
Nonetheless, in Britain for the first 250 years after the Black Death, slow growth in
total GDP just barely kept pace with slow growth in population.15 If we were to stop
the clock in 1650, it would be obvious that England had not yet embarked on anything
like modern economic growth. From 1400 to 1650, England floated on a Malthusian
equilibrium, with population and GDP both slowly recovering, and two-and-a-half
centuries with no gains at all in income per capita. There were also no major shifts in the
structure of the economy: Agriculture’s share in real GDP was 45.5 per cent in 1381, 39.7
per cent in 1522, and 41.1 per cent in 1600.16
After 1650, however, there are clearly signs of change. From 1650 to 1700 income per
capita grew more strongly than ever before, although this was accompanied by a slight
population decline. From 1700 onwards, Britain was able to combine growth in both
population and GDP per capita. Yet growth in both population and income per head
were still very weak from the 1700s to the 1750s. Only after 1750 do we see stronger
growth in both population and income per head, with the growth rate of GDP per capita
moving well above pre-modern levels.
Determining precisely when England’s modern economic growth began thus
depends greatly on how we view events from 1650 to 1800. When in this period do we
clearly see a break from past patterns of pre-modern, Malthusian growth? When does
income per capita break free from both population constraints and pre-modern rates of
economic growth?
Let us first focus on the half-century from 1650 to 1700 – what happened in these
decades? The answer is that a significant structural transformation in the economy
coincided with a period of slight population decline, to produce a huge surge in income
per capita. The structural transformation was threefold. First, in manufacturing there
was a leap in the export production of textiles, driven by the ‘new draperies’, a blend
of wool and other fibres that was lighter than the ‘old draperies’ of heavy wool. The
new draperies were wildly popular, and allowed England to seize market share from
47
Holland and other European wool producers. This success propelled a large number
of workers into spinning for merchants.17 Second, there was the importation of Dutch
agricultural techniques into England, leading to shifts in crop rotations, and use of
fodder crops (clover and turnips) that allowed light-soil regions to greatly increase
their productivity for wheat, allowing heavy-soil regions to specialize more in livestock
raising.18 And finally, religious shifts in this period were favourable to Britain. Despite
the turmoil of the Puritan Revolution, Restoration, and the Glorious Revolution,
Britain in the late seventeenth century remained a region open to Protestants. Britain
thus attracted Protestant refugees from the continent, especially from France, who
brought capital and skills with them, providing a positive shock for production and
trade.
Nonetheless, it is clear that these changes were not transformative. Changes in
agriculture, for instance, were minimal and real output in agriculture in these decades
rose only 0.2 per cent per year. Industrial output rose rapidly by 1.01 per cent per year
in this period, as did output in services, at 0.71 per cent per year. The slow growth in
agricultural output compared to industry in this period means that industry’s fraction
of the economy rose and agriculture’s fell – but this did not yet reflect a fundamental
change in the economy. According to Broadberry and his co-authors’ analysis of labour
shares, the male workforce in agriculture in 1688 was still 46 per cent, and remained 43
per cent as late as 1759. While this was a significant reduction from the 67 per cent level
that had prevailed in the fourteenth to sixteenth centuries, it did not yet presage the
modern increases in productivity that would follow.19
Even in the period 1700 to 1750, we do not see anything in the GDP figures that looks
like modern economic performance. In this half-century population growth was also
quite slow, only half the rate of the entire sixteenth century, and only equal to the rate
of population growth in the late fifteenth century. Surely with such modest population
growth, a modern economy should have been able to produce significant gains in
income per head. Yet in fact the momentum of the late seventeenth century petered out,
and growth in income per head was no different than that in earlier centuries. Indeed,
the growth in income per head in 1700–50, of 0.18 per cent per year, was identical to the
growth rate for the period from the 1270s to 1700.
Perhaps most striking is that Broadberry and his co-authors find no continuation
of the strong growth in industrial productivity and output that sparked the per capita
income growth from 1650–1700. Instead, where industrial output per capita in Britain
had risen by 73 per cent from 1650 to 1700, such gains came to an abrupt end by 1700,
as in the next half-century it rose only 9 per cent, or just one-eighth as much.20 This was
a much lower rate of growth in industrial output per person than England had seen even
in the late sixteenth century, to say nothing of the late seventeenth. In short, there was
nothing distinctive about the rate of growth in either British GDP per capita or industrial
output per head in the first half of the eighteenth century. Macroeconomic performance
in this period, with slow population growth and minimal (0.18 per cent) growth in GDP
per capita, is simply typical of what was observed since the Middle Ages.
48
Comparing divergence across cases
One could argue that even if the rate of growth in Holland and Britain was neither
sustained nor historically exceptional prior to 1750, it was the level of output per capita
achieved that was unusual, and so marked a ‘Divergence’ from prior global patterns. If
the Netherlands, or Britain, were precocious in achieving levels of GDP per capita that
went significantly beyond the attainments of other pre-modern societies, it could be
that achievement which set the stage for their later breakthroughs to modern growth.
Drawing on data assembled by Broadberry and others, I argue that this is not the case.
What is remarkable in fact is how rigid the ceiling appears to be on pre-modern peak
levels of GDP per capita. Table 2.3 shows estimates of the highest levels of GDP per
capita found for a variety of societies, along with the dates at which those levels were
achieved, at any time up to 1800.21 These were generally associated with ‘efflorescences’
that marked peaks of high culture and economic achievement, along with technical
advances that boosted output and trade. They include Song China in the eleventh
century, medieval Spain, Renaissance Northern Italy, the Netherlands at the dawn of
the nineteenth century (we only have data for Holland earlier, which for reasons noted
above is not an apt unit of comparison with much larger countries), and Britain in the
mid-eighteenth and beginning of the nineteenth centuries.
It is astonishing that with the exception of medieval Spain, which was low, and Great
Britain in 1800, which is exceptionally high, the figures are almost all within 10–15
per cent of each other. Even compared to Song China, almost 800 years earlier, the
Netherlands in 1800 had a GDP per capita only 15 per cent higher; and they were only
4 per cent richer than the level Northern Italy had achieved 350 years earlier. Great
Britain in 1750 was not yet evidently any better off than any prior successful pre-modern
Table 2.3 Peak GDP per capita in various societies in history in Geary-Khamis
International 1990 dollars
Peak GDP per Ratio: compared to Song China/

Country (Year) capita to Renaissance Italy
China (1020) 1,518 1.00/0.90
Spain (1348) 1,030 0.68/0.61
Northern Italy (1450) 1,688 1.11/1.00
The Netherlands (1800) 1,752 1.15/1.04
Great Britain (1750) 1,710 1.13/1.01
Great Britain (1800 – Broadberry et al.) 2,080 1.37/1.23

Source: Stephen Broadberry; Bruce Campbell, Bruce; Alexander Klein, Mark Overton, and Bas van Leeuwen
(2015), British Economic Growth, 1270–1870. Cambridge: Cambridge University Press, Table 10.02.
49
country – GDP per capita was only 13 per cent higher than Song China and only 1 per
cent higher than Renaissance Italy. If we exclude the bottom two lines – that is, look at
the world’s leading economies from 1020 to 1750 (or 1800 for the Netherlands) – the
message is one of remarkable uniformity: None of the European countries at any time
achieves any meaningful advantage in GDP per capita over any other’s peak achievement,
nor over the peak achievement of China. At least as regards peak GDP per capita, as late
as 1750 there is no divergence of any kind, anywhere.
In sum, if one confines one’s view to the years before 1800, there is nothing in either
the pattern of growth or the level attained in GDP per capita anywhere in Northwest
Europe that is at all indicative of a break with prevailing pre-modern patterns. This is not
to deny that crucial things were happening, such as the flurry of inventions in Europe, the
advance of parliamentary governments, the rise of learning, the conquest of the seas, the
advance of religious pluralism, or dozens of other factors that contributed to subsequent
economic achievements. It is only to say that one cannot find, in the available GDP
data, evidence of sustained, rapid growth in GDP per capita nor advances to unusual
pre-modern levels at any time before the nineteenth century. Both the Netherlands and
Britain did have episodes of impressive growth in GDP per capita; but these merely
raised them to levels seen earlier by other very successful countries. Once they reached
those heights, they were marooned there – the Netherlands had no further growth in
GDP per capita from the 1590s to 1790s, and Britain had no return to the growth rates
in GDP per capita seen in 1650–1700 until at least 1750 and perhaps not until after 1800.
It is true that other nations suffered a considerable decline in GDP per capita over the
centuries since their peak, leaving the Netherlands and Britain in a relatively stronger
position as the nineteenth century opened. History makes clear, however, that such an
advantage is no automatic guarantee of further progress. Song China and Renaissance
Italy in their day held commanding leads in GDP per capita over their neighbours, and
did so at a level of income per capita not significantly different (evidently within 10
per cent in real terms) from that of Britain and the Netherlands, without subsequently
progressing to take GDP per capita to further heights. For that matter, the Netherlands’
great riches relative to other nations achieved in the late sixteenth century appears to
have done nothing to boost its GDP per capita in the succeeding two centuries. Relative
advantage is nice to have, but it in no way guarantees a better future.
Conclusion
This chapter has said nothing about the ultimate causes of the ‘Great Divergence’. That
debate remains open and is considered in other chapters in this book. Still, in order to
explain something, it is important to know exactly what is to be explained. The new data
makes it indisputable that the onset of a distinctive and new pattern of economic growth
was a relatively late phenomenon, only evident in the GDP per capita data from 1750
onwards. Whatever caused the Great Divergence to arise c. 1750, it was not a centuries-long
prior record of exceptional growth rates or levels of GDP per capita in Northwest Europe.
50
This new analysis of the data of Broadberry and co-authors makes it clear why even
expert observers of the British economy in the eighteenth century, such as Adam Smith,
could not see signs of any economic divergence. There was simply no evidence of any
departure from pre-modern growth patterns before 1750.
Explanations for the ‘Great Divergence’ that claim to find its roots in late medieval
or early modern growth patterns are thus mistaken. Certainly there were episodes of
prior growth, but such episodes lasted only a few decades and then stalled, and only
led the Netherlands and Britain to catch up with levels of GDP per capita attained
many centuries earlier in Northern Italy and Song China. To understand the onset of
distinctively modern economic growth – with sustained increases in both population
and real income at high rates leading to levels of income not seen in prior eras – we
need to develop explanations for a relatively late and sudden transition to a new mode of
economic growth that appeared only after 1750.
Notes
1. Ho-fung Hung (2003), ‘Orientalist knowledge and social theories: China and the European
conceptions of East-West differences from 1600 to 1900’, Sociological Theory, 21 (3), 254–79.
Adam Smith offered the same view: ‘China has been long one of the richest, that is, one of
the most fertile, best cultivated, most industrious, and most populous countries in world. It
seems, however, to have been long stationary’. A. Smith (1776), An Inquiry into the Nature
and Causes of the Wealth of Nations, Feedbooks http://en.wikisource.org, 48.
2. See for instance, P. Hoffman (2015), Why Did Europe Conquer the World? Princeton:
Princeton University Press; G. Clark (2007), A Farewell to Alms: A Brief Economic History of
the World. Princeton: Princeton University Press; T. Huff (2003), The Rise of Early Modern
Science: Islam, China and the West. Cambridge: Cambridge University Press; I. Wallerstein
(2011), The Modern World System. Berkeley: University of California Press; D. N. McCloskey
(2016), Bourgeois Equality: How Idea, Not Capital or Institutions, Enriched the World.
Chicago: University of Chicago Press; J. Mokyr (2016), The Culture of Growth: The Origins of
the Modern Economy. Princeton: Princeton University Press; S. R. Epstein (2000), Freedom
and Growth: The Rise of States and Markets in Europe, 1300–1750. London: Routledge.
World Economy. Princeton: Princeton University Press; R. B. Wong (1997), China
Transformed: Historical Change and the Limits of European Experience. Ithaca: Cornell
University Press; A. Gunder Frank (1998), ReOrient: Global Economy in the Asian Age.
Berkeley: University of California Press; Bozhong, Agricultural Development in Jiangnan;
R. Marks (2006), Tigers, Rice, Silk and Silt. New York: Academic Press; J. A. Goldstone
(1991), Revolution and Rebellion in the Early Modern World. Berkeley: University of
California Press; Idem (1998), ‘The problem of the “Early Modern” world’, Journal of the
Economic and Social History of the Orient, 41 (3), 249–84; Idem (2000), ‘The rise of the
West – or not? A revision to socio-economic history’, Sociological Theory, 18 (2), 157–94;
D. O. Flynn and A. Giráldez (2010), China and the Birth of Globalization in the Sixteenth
Century. Farnham: Ashgate; P. Parthasarathi (2011), Why Europe Grew Rich and Asia Did
Not: Global Economic Divergence, 1600-1850. Cambridge: Cambridge University Press; P.
Vries (2003), Via Peking Back to Manchester: Britain, the Industrial Revolution and China.
Leiden: Leiden University.
51
4. Among the most important were W. Skinner (1977), The City in Late Imperial China.
Stanford: Stanford University Press; W. Rowe (1992), Hankow: Commerce and Society in a
Chinese City, 1796–1889. Stanford: Stanford University Press; J. Z. Lee and W. Feng (2001),
One Quarter of Humanity: Malthusian Mythology and Chinese Realities. Cambridge, MA:
Harvard University Press; P. Perdue (2005), China Marches West: The Qing Conquest of
Central Eurasia. Cambridge: Belknap Press; T. Brook (1998), The Confusions of Pleasure:
Commerce and Culture in Ming China. Berkeley: University of California Press; S. Naquin
and E. S. Rawski (1987), Chinese Society in the Eighteenth Century. New Haven: Yale
University Press.
5. On labour/capital ratios, see R. C. Allen (2009), The British Industrial Revolution in Global
Perspective. Cambridge: Cambridge University Press; J.-L. Rosenthal and R. Bin Wong
(2011), Before and Beyond Divergence: The Politics of Economic Change in China and Europe.
On physical geography, see I. Morris (2010), Why the West Rules – For Now. New York:
Strauss and Giroux-Farrar; J. Diamond (1999), Guns, Germs and Steel. New York: W.W.
Norton. On political organization, see P. Vries (2013), Escape from Poverty: The Origins of
Modern Economic Growth. Vienna: University of Vienna Press.
6. The classic demonstration of how population data can be extracted from parish records
is E. A. Wrigley and R. S. Schofield (1989), The Population History of England and Wales
1541–1871. Cambridge: Cambridge University Press. Additional research using data from
local registers in Europe and lineage and other records in China can be found in R. C. Allen,
T. Bengtsson and M. Dribe (eds) (2005), Living Standards in the Past: New Perspectives on
Well-Being in Asia and Europe. Oxford: Oxford University Press; T. Bengtsson, C. Campbell
and J. Z. Lee (eds) (2009), Life under Pressure: Mortality and Living Standards in Europe and
Asia, 1700–1900. Cambridge, MA: MIT Press; and N. O. Tsuya, W. Feng, G. Alter, J. Z. Lee, et
al. (eds) (2010), Prudence and Pressure: Reproduction and Human Agency in Europe and Asia,
1700–1900. Cambridge, MA: MIT Press.
7. The British data have been published in S. N. Broadberry; B. M. S. Campbell; A.Klein, M.
Overton and B. van Leeuwen (2015), British Economic Growth, 1270–1870. Cambridge:
Cambridge University Press. Kindle Edition. The Dutch data have been published online
by the Centre for Global Economic History by J. L. van Zanden and B. van Leeuwen as the
‘Reconstruction National Accounts of Holland’, at: http://www.cgeh.nl/reconstruction-
national-accounts-holland-1500-1800-0.
8. F. Braudel (1973), Capitalism and Material Life 1400–1800. New York: Harper Collins; I.
Wallerstein (1974), The Modern World System I: Capitalist Agriculture and the Origins of the
European World Economy in the Sixteenth Century. New York: Academic Press; C. M. Cipolla
(1976), Before the Industrial Revolution: European Society and Economy, 1000–1700. New
York: W.W. Norton.
9. S. Broadberry (2013), ‘Accounting for the Great Divergence’, LSE Economic History Working
Papers, 814, 3.
10. A. M. de Plijt and J. L. van Zanden (2013), ‘Accounting for the “Little Divergence”: What
drove economic growth in pre-industrial Europe 1300–1800’, Working Papers 0046, Utrecht
University, Centre for Global Economic History.
11. J. A. Goldstone (2002), ‘Efflorescences and economic growth in world history: Rethinking
the “Rise of the West” and the Industrial Revolution’, Journal of World History, 13 (2),
323–89.
12. De Plijt and van Zanden, ‘Accounting for the “Little Divergence”’; J. de Vries and A. Van der
Woude (1997), The First Modern Economy. Success, Failure and Perseverance of the Dutch
Economy, 1500–1815. Cambridge: Cambridge University Press.
52
13. The decadal averages shown in Figure 2.1, and the period growth rates in Table 2.1 below,
are calculated by the author from the annual data provided in ‘Reconstruction National
Accounts of Holland’.
14. S. Schama (1988), The Embarrassment of Riches. Berkeley: University of California Press.
15. Population and GDP data from Broadberry, et al., British Economic Growth, Table 5.06.
16. Broadberry, et al., British Economic Growth, Table 5.01.
17. C. Muldrew (2012), ‘“Th’ancient Distaff ” and “Whirling Spindle”: Measuring the
contribution of spinning to household earnings and the national economy in England,
1550–1770’, Economic History Review, 65 (2), 498–536. It also helped that England won a
series of naval wars with Holland in this half-century, greatly expanding British access to
international trade.
18. J. A. Goldstone (1988), ‘Regional ecology and agrarian development in early modern
England and France’, Politics and Society, 16 (2–3), 287–334; R. C. Allen (1999), ‘Tracking the
agricultural revolution in England’, Economic History Review, 52 (2), 209–35.
19. Productivity data from Broadberry, et al., British Economic Growth, Table 5.07; male labour
in agriculture from Broadberry, et al., Table 9.08.
20. Computed from Broadberry, et al., British Economic Growth, Table Appendix 5.3.
21. The collection of macro-data on national GDP and GDP per capita, and its reduction to
comparable real levels through Geary-Khamis constant dollars or other metrics, has been
roundly criticized on the basis of difficulties in making meaningful comparisons in terms
of highly varied local currencies and the diverse regional economies in any large state,
e.g. Deng and O’Brien, ‘China’s GDP per capita’. Yet this project is seen by many others as
valuable and worth perfecting, e.g. Bolt and van Zanden, ‘The Maddison Project’.
53
CHAPTER 3
USEFUL AND RELIABLE KNOWLEDGE
IN EUROPE AND CHINA
Patrick O’Brien
Metanarratives celebrating the economic rise of the West have been challenged in
recent times by two theses proposed by the California and World Systems Schools of
historical sociology.1 The first insists that economic divergence between Europe and
Asia became apparent much later than what previous generations of historians have
suggested. It reconfigures the economic history of the pre-modern era into a world of
‘surprising resemblances’ to use Kenneth Pomeranz’s now famous expression.2 It also
rejects assertions that Europe alone possessed the cultures and institutions for modern
economic growth.3 The second thesis explains more than three centuries of divergence
between East and West with reference to Europe’s favourable location and natural
endowments. These, combined with high and persistent levels of investment in warfare,
colonization, and mercantilist policies (by way of coercion and unequal exchange),
enabled Europeans to garner most of the gains from trade from the fifteenth to the
nineteenth century.4
As observed by Jack Goldstone in this book, critiques among European and American
historians have concentrated upon the statistical evidence deemed to demonstrate that
divergence could be located earlier in time.5 The Divergence debate cannot be conducted
only with reference to macroeconomic statistics. This chapter considers and compares
regimes (clusters of connected elites and institutions) engaged with the discovery,
development, diffusion, and application of innovations based upon ‘useful and reliable
knowledge’ in China and Europe. It is deemed that such innovations augmented the
productivity of labour employed by households, farms, and firms.6
Global histories of science and technology suggest that some European cultures became
permeated by a cosmography that was conducive to the accumulation of useful and
reliable knowledge. Gradually, the embrace of new knowledge by educated and wealthy
elites embodied a cultural and a more directly applicable potential for advances in total
factor productivities that allowed Western populations to escape from age-old Malthusian
threats into modern economic growth before the populations of Asia.7 This view was
supported by a programme of historical research led by Joseph Needham, expanded by
Mark Elvin, analysed in a series of conference papers by the Achievement Project in the
1990s, synthesized in three books by Joel Mokyr, and became an accepted theme among
scholars engaged in the divergence debate.8 Assuming that the established consensus
which suggests that the locus of scientific discovery and technological innovation shifted
Useful and Reliable Knowledge in Europe and China
from Asia to Europe by, if not sometime before, the end of the fifteenth century, this
chapter provides an outline comparing Europe’s own trajectory towards the formation and
consolidation of a regime for the sustained generation of useful and reliable knowledge
with China.
I wish to address the hypothesis posed by Weber, and developed by Butterfield,
Needham, and later followers, who suggested that the innovations introduced into early
modern European agriculture and industry were connected to changes in conceptions
of the natural world held by Europe’s educated, wealthy, and political elites. Cultural
change led these elites to support networks of proto-scientists, inventors, and artisans
and to establish institutions that might conceivably generate and adapt knowledge
with potential to generate private profit, support the geopolitical power of states, and
secure the health, security, and material welfare of European societies.9 The thesis that a
switch in mentality shaped by science came on stream in the seventeenth and eighteenth
centuries became the subject of a debate between two great Sinologist historians of
science that is ongoing.10
Stimulated by debates on the Great Divergence, challenges to this view have
been mounted on two fronts. The first repeats familiar arguments from traditional
controversies between science and religion, namely that beliefs espoused and enforced
by Christian churches were at best neutral and at worst repressive towards investigations
into the natural world.11 The second and more recent wave of literature from histories
of science maintains that knowledge discovered, developed, and utilized for purposes of
production was ‘socially constructed’.12 This literature points out that science originated
from several parts of the world and that its connections to the beliefs promoted by
European elites were at best of tenuous significance for technological change.13
Recent histories of science are more inclined to accept that monotheistic Christendom
evolved into a culture that ceteris paribus embodied elements recognized as significant
for the promotion of a functional cosmography for the comprehension of nature.14 Before
the Reformation, European Christianity had consolidated its role as a hegemonic quasi-
autonomous, hierarchically organized religion that over time had suppressed all but one
system of beliefs about nature and the operations of the natural world in favour of its own
revealed truths for which its clergy held a monopoly of interpretation. Nevertheless, as it
evolved over the centuries into a supranational organization, the hierarchy of the Roman
Church recognized that faith in truths as revealed in the New Testament, the Bible, and
other canonical references would not be sufficient for competition with monotheistic
Islam, to combat heresies, or to retain its ideological influence over royal power. Thus the
papacy and bishops found it expedient to establish, patronize, and control institutions
based upon Greek and Roman models for the higher education of clerical and secular
elites that included classical modes of conducting ‘rational’ arguments in law, medicine,
natural philosophy, and even theology.15
Under strictly regulated conditions, proto-universities spread across the cities of
medieval Europe and established faculties and curricula for compulsory introductory
courses in natural philosophy based upon texts by Aristotle, Plato, Ptolemy, Galen,
Hippocrates, and other pagan authors. These included a corpus of classical speculations
55
about the operations of the celestial, terrestrial, and biological spheres of what the
Church resolutely insisted was a divinely created and ordered natural world.16
In recent years, scholars working on the medieval origins of modern science have
rehabilitated this long tradition of classical and post-classical endeavours to comprehend
the natural world.17 They have researched how far and how deeply European levels of
cosmographical comprehension had developed, before they were displaced by Copernicus’
seminal work on astronomy in 1543. Thereafter, the introduction of innovative paradigms
for an accelerated accumulation of more useful and reliable knowledge marked the onset
of what many historians continue to recognize to as the ‘Scientific Revolution’.18
That plateau in knowledge formation depended upon the diffusion of printed books,
which formed the basis for conversations, correspondence, associations, and debate
among Europe’s growing numbers of natural philosophers and theologians dissatisfied
with, or sceptical of, revealed spiritual truths.19 Scholars belonging to what has been
called the ‘Republics of Letters’ became interested in the workings of God’s natural world
and in the possibilities for its control and manipulation.20 They widened agendas for
discussion and education to comprehend a range of natural phenomena including the
age, size, shape, geography, and limits of planet earth; movements of the sun, moon,
and stars; seas and their tides; climates; earthquakes; minerals; chemical substances;
soils; plants; animals; fish; and human bodies. They engaged in debates concerned with
mathematical and rational methods for the study of medicine, law, and even theology,
which coexisted in a hegemonic but uneasy relationship with natural philosophy.
That tension became more fraught during the Renaissance when another cycle of
humanist scholarship recovered a series of classical texts, which opened up a wider
range of discourse about the nature and operations of God’s universe.21 Thus a wave of
classical scholarship not only questioned Aristotelian natural philosophy as expurgated
and beatified by the Church, but came dangerously close to challenging the logical and
evidential basis of revealed truths about the world contained in the Scriptures and other
sacrosanct texts propounded by theologians in the service of the Roman Church.22
Thereafter irreversible and fundamental changes in a cosmography embodied in the
cultures of European elites, in line with developments cautiously anticipated and outlined
by a minority of precursors during the Middle Ages, became clear and powerful.23
The period also witnessed the European ‘discovery’ of a new continent, the division of
Christendom into Catholic and Protestant countries and communities, horrendous wars
of religion, and the consolidation of regular transcontinental commerce. This eventful
conjuncture has also been contentiously, but plausibly, configured by historians of
Europe to mark a new regime for the accumulation of useful and reliable knowledge that
actively promoted and supported sustained economic growth.24 Its development was
neither revolutionary in pace nor linear in trend. Its historically validated connections
to an ongoing but gradual process of innovation were for many decades confined to a
limited range of technologies that in time became useful and reliable for navigation by
sea, the surveying of space, the derivation of energy from water, atmospheric pressure
and steam power, drainage, the accuracy of artillery, the bleaching of textiles, and the
like.25
56
Debate over their nature and economic significance has been protracted and
remains unresolved. Nevertheless, the contention of this chapter is that the significance
of this famous conjuncture for narratives concerned with the economic divergence
between Asia and Europe resides essentially in an unmeasurable but unmistakable
impetus towards the formation of confident conceptions among Europe’s educated and
wealthy elites that the natural world was in process of becoming more intelligible and
manipulable for material gain and human health than their ancestors living in Roman
and feudal times had ever imagined.26 Unfortunately, that impetus in the conceptions
and perceptions of Western elites cannot be validated because historical evidence for
its emergence consists essentially of books written by famous names in the histories
of science, technology, and cosmography, which have been subsequently selected as
contributions to the development of a plethora of specialized disciplines which were part
of the natural sciences.27 Attempts to validate this hypothesis statistically have produced
some positive but inconclusive results in the form of a dramatic rise in the numbers and
discernible decline in the prices of printed books published between 1450 and 1750 in
Western Europe following the invention and diffusion of the printing press.28
The flow of published knowledge representing a reformed cosmography was
almost certainly rising rapidly during a period when the number of students attending
universities and taking a compulsory course or two in natural philosophy was also
increasing faster than populations at large.29 Nevertheless, the case for an increasing
flow of knowledge about the operations of a natural world remains almost impossible
to demonstrate. Thus, an argument for cultural shifts in the cosmographical beliefs
of an increasing proportion of educated Europeans can only be made on a priori and
probabilistic grounds and with reference to the beliefs that their counterparts held about
the natural world and prospects for its control before, say, 1450 or in other parts of the
world in early modern times.30
One tenet remained hegemonic: It was dangerous to challenge Christianity’s
foundational belief that the universe had been created by God; that operations of its
celestial, terrestrial, and biological spheres were divinely ordained, regulated, and
suspendible; and that mankind’s primary purpose was to live but a short interlude on
earth according to moral principles enunciated in sacred Christian texts as interpreted
by God’s one and only true Roman Catholic Church. Its hierarchy had, moreover,
ordained that if men wished to understand the operations of a divine natural world, they
should first seek guidance from the Scriptures. Alternatively, they could consult a rather
restricted range of licensed classical authorities: first and foremost Aristotle on anything
but particularly on logical ways of comprehending the universe, Ptolemy on the heavens
and solar system, Galen on the human body, Hippocrates on medicine, Pliny on plants
and animals, Euclid on mathematics, and so on.31
Centuries passed before Europe’s traditional belief system became ‘secularized’ by a
scientific cosmography. Before the age of Enlightenment, elite culture changed slowly.
Progress could certainly have been assisted by appealing to the authority of a wider
number of classical authors other than Aristotle – particularly to Plato, Archimedes,
Lucretius, and Epicurus.32 Paradoxically, the worldly and politicized hierarchy of the
57
Catholic Church advised by Jesuit intellectuals acted from time to time as a buffer
against fundamentalist attacks on the diffusion of knowledge that endangered ‘truths’
about nature as revealed in Christianity’s sacred texts.33
By 1750 – in contrast to their ancestors – most educated Europeans supported what
had matured into a tradition of state and private investment in voyages of ‘discovery’
and intra-continental exploration. Most believed that the skies and heavens could
be mapped and that their own planet earth, displaced from the centre of an infinite
universe, rotated daily on its axis and circled the sun along with all other planets. Within
an infinitely expanded universe, they recognized their own insignificance.34 Man and his
common sense were no longer the measure of all things. His sensory perceptions and
understandings of nature were recognized as limited, but had and would predictably
continue to be successfully extended by instruments in the service of speculations,
hypotheses, and controlled experiments designed and monitored by ‘networks of
experts’ with credentials and codes of conduct maturing into scientific disciplines.35
These men not only had produced maps of the world and its seas and oceans with
more mathematically precise coordinates for purposes of trade and navigation, but also
were mapping the skies for the same utilitarian purposes. After decades of inconclusive
investigations into the powers of flowing water and the pressures and weight of air, they
had also discovered new sources of energy with potential to be developed, harnessed,
and diffused for production.36 In the course of a protracted intellectual conflict between
‘ancients and moderns’ marked by ‘battles of the books’, the traditional classical authorities
such as Aristotle, including Ptolemy, Galen, and Hippocrates, had been effectively
degraded by the systematic exposure of their errors, by geographical discoveries, by solar
observations, and by the elevation of mathematical logic and experimental methods
into hallmarks for new and more productive ways of accumulating reliable and useful
knowledge about the natural world.37
For economic development, clear and direct links between Europe’s reconfigured
and extended investigations in natural philosophy and breakthroughs in technologies
for agronomy, mechanical engineering, and bodily health have proved difficult to
document.38 Moreover, in recent years, historians of science have argued that many
acclaimed natural philosophers including Galileo, Hooke, Boyle, Beekmans, Huygens,
and Newton continued to engage seriously with the claims to knowledge by alchemists
and astrologers involved with rather unsystematic and unexplained manipulations
of materials and natural sources of energy sold to gullible customers and powerful
patrons.39 In any case, the ‘experiments’ of alchemists and observations of astrologers
contributed to debates about scientific ways of knowing and understanding how the
natural world really worked.40
Natural philosophy and the transition to science in the West
Over the long run, direct connections between Europe’s tradition in natural
philosophy, which matured into science allied to technological innovations, remain
58
unmistakable.41 Global economic history’s concerns have, however, been latterly

with the economic divergence between Europe and Asia. In the absence of bodies
of secondary literatures comparable in volume, scope, and sophistication to recent
historical analyses of European science, religions, and cosmography, it may be
premature to agree with Joseph Needham’s insights and conclusions published two
generations ago. As a Christian Marxist of unsurpassed erudition in global histories
of science and technology, Needham also remained deeply aware of the significance
of the fortuitous but ultimately fortunate religious and classical antecedents and
foundations for Europe’s peculiar but promotional cosmology for the accumulation of
useful and reliable knowledge.42
Furthermore, global historians need to be reminded that Butterfield saw Europe’s
‘scientific, agrarian and industrial revolutions as forming such a system of complex and
inter-related changes that in the lack of a microscopic examination, we have to heap
them altogether as aspects of a general movement’.43 Herbert Butterfield’s view could
never develop into the kind of history that could appeal to economists. To be elevated
into a key chapter for narratives of divergence, it could only be tested for plausibility by
way of reciprocal comparisons with the cosmographies and regimes for the production,
development, and diffusion of useful and reliable knowledge operating within Islamic
empires, China, and India in pre-modern times.
Of course, to paraphrase Ben Elman, Asian intellectuals continued to be engaged
in endeavours that understood the natural world on their own terms and in their own
ways.44 Nevertheless, the question of how effective their engagement became for the
discovery, development, and diffusion of technological, institutional, and biological
innovations is the issue. The ‘cultural’ dispositions towards innovation displayed by
the political, economic, and intellectual elites managing early modern Asian societies
continue to be represented as embedded in traditions of belief and thought that appear
to be indifferent and sometimes even hostile to systematic investigations into nature and
technology.45
Unfortunately, only a limited literature is currently available for the construction
of a comprehensive academic survey of the beliefs of elites and institutions in South,
West, and Central Asia.46 At present, the only prospect for an intellectual engagement
in reciprocal comparisons with the evolution of Asian beliefs and institutions that is
comparable to and coterminous with the conjuncture in the culture of Western Europe
can be read in histories of imperial China.47
Thanks to the Needham programme for the history of science and civilization in
China, relevant secondary literature that could be plausibly taken to represent East Asian
thoughts and beliefs has become extensive, diverse, and sophisticated enough to enable
a brief but tentative survey of relevant literatures published in English.48 A number of
scholars still accept Needham’s view that developments in the formation of useful and
reliable knowledge faltered sometime after if not before 1500.49 Thereafter Chinese
contributions can be plausibly discussed not as stasis but rather as a history of relative
retardation. No consensus exists, however, as to when and why a climacteric emerged
and persisted during the Ming and Qing dynasties.
59
Constructivist and cultural narratives have pointed to several theoretically and

potentially salient contrasts with the economies of Western Europe.50 For example, and
in order of significance, the share of the empire’s population located in towns and cities
regarded as hospitable locations for the formation of the human capital and institutions
required to engage with scientific and technological innovation declined from a 20 per
cent level under the Song dynasty (960–1279 CE) to well below the ratios estimated
for the advanced economies of Europe by 1700.51 Furthermore, a high proportion of
the empire’s stock and flows of men (with the education, skills, talents, and motivation
required for the discovery, development, and diffusion of useful and reliable knowledge)
invested time and family money on acquiring the credentials and qualifications
prescribed by the Chinese state for entry into and advancement within a bureaucracy
recruited on merits as displayed in a competitive and empire-wide examination.
The curricula for this admirably meritocratic system, which persisted dynasty after
dynasty, exercised a dominant influence on the mission, form, and content of all types
of education undertaken by Chinese males beyond levels of basic literacy. Secondary
education was, moreover, regulated by and for the state to serve two other purposes
essential for the governance of an extensive and complex empire. The first was to endow
its mandarinate of officials with the prestige and authority derived from their status as
a meritocracy, implementing the decrees and orders of an emperor whose power to
rule over the heterogeneous populations and territories of a vast empire was widely
proclaimed as a mandate from heaven.52
The second purpose of imperial China’s tightly regulated system of secondary
education was to clarify, disseminate, and debate how a set of interrelated moral
principles enshrined in ancient texts for the governance of an extensive, complex, and
agrarian empire could be internalized into personal and social behaviour. China’s ancient
philosophical texts (as Jesuit missionaries to the empire appreciated) can be plausibly
represented as analogous to the canonical texts of Christendom. Over centuries that
predated the birth of Christ by way of commentaries, critiques, adaptations, and the
selective absorption of elements from rival systems of belief including Buddhism,
Daoism, and Monism, the theology cum ideology of Ming and Qing China became
consolidated into a code for righteous behaviour framed by the writings of Confucius,
which is conventionally referred by intellectual historians as Neo-Confucianism.53
Neo-Confucian texts dominated the syllabus for the imperial examination system and
curricula for the education of China’s elites. These texts were studied, memorized, and
analysed using philological methods by the best and brightest young minds in China,
and they instilled a quasi-spiritual reverence for ancient classical authorities including
Mencius and Laozi and particularly Confucius.54 This ancient and quasi sanctified
‘wisdom’ can be understood as providing an education in moral and political philosophy
that inculcated the virtues embodied in the cultivation of personal enlightenment
through humanistic and didactic forms of scholarship and, above all, through respect for
and compliance with hierarchy reposed in patriarchy, within families, and politically in
dynasties of emperors mandated from heaven and served by officials exercising paternal
and moral rule over the peoples of an agrarian empire.55
60
From an Euro-centred perspective, the content of Chinese education, the forms of

teaching adopted by institutions for secondary education, and the absence of a tradition of
disputation among masters and their pupils, as well as its enlightened but overwhelming
concerns with personal behaviour, social stability and political order seem to be less
hospitable and encouraging towards the study of investigations of the natural world than
was apparently the case for the cosmography evolving in medieval and early modern
Europe.56 Nevertheless, it would be entirely erroneous to conclude that knowledge
that was useful and reliable for the comprehension, control, and manipulation of the
celestial, terrestrial, and biological spheres of that world had not accumulated at a more
impressive rate in the Chinese empire than in Western Europe before 1500 or that it
lapsed into stasis thereafter.57
Apart possibly from theories of probability, all approaches to investigations into the
natural world operating in Europe between the sixteenth and the eighteenth centuries
were also at least present in China.58 Furthermore, only a minority of the empire’s educated
elite obtained posts in the bureaucracy and even those privileged scholar officials found
it necessary to acquire some practical knowledge of agronomy, meteorology, hydrology,
pharmacology, and medicine. Growing numbers of men (literati) educated in Neo-
Confucian philosophy and statecraft became experts and wrote treatises, manuals,
and entries for encyclopaedia, on the properties, uses, and purposes of ‘things’ such as
birds, coinage, copper, drugs, dyestuffs, lacquerware, porcelain, salt sugar, and textiles.
They consorted with craftsmen in order to publish specialized and presumably useful
knowledge of many ‘things’ (gewu) as well as speculations about the ‘concrete forces’
embodied in sound, light, and magnetism.59
In China, however, the pursuit of this type of knowledge was neither rewarded with
prizes from the state nor protected for purposes of individual material gain by patents for
monopoly. Above all, this knowledge was not regarded as anything like as prestigious as
classical forms of learning that contributed to harmonious family life, to stability for the
social order, and to the benign governance of a huge pre-modern empire.60 By late Ming
times, some scholars began to question the hegemony and utility of classical learning and
sought, with limited success, to redefine the social and cultural status of more practical
and material forms of knowledge including knowledge imported into China, as artefacts
and industrial technologies as well as the new mathematics, astronomical methods,
and observations communicated by Jesuit missionaries and European merchants.61 All
proposals for reform were predictably resisted by scholar officials concerned to protect
their own status and cultural capital. Under the Qing dynasty, reformers could be
persecuted but generally they failed to convince the political establishments of either
the more open Ming regime or the alien Manchu dynasty (who conquered the empire
between 1636 and 1683) to modify let alone overturn Neo-Confucian ways of thinking
about an interconnected and harmonious cosmic and moral order that included the
heavens and all things on earth including man and his organic relations with nature.
After all, the development and dissemination of that cosmology had for millennia served
efficiently as an ideology for the maintenance of centralized rule by a long succession of
dynasties.62
61
There may have been, as some revisionist historians have recently claimed, lost
moments and promising opportunities for reform to the ways that China’s talented and
educated elites conceived of ways to explore and interrogate the natural world under
late Ming emperors.63 Greater attention and respect might have been paid to Western
knowledge that only became accessible to China’s literati through the less than objective
conduits of Jesuit missionaries educated in Western natural philosophy and resident
at court, as well as self-interested European merchants trading through Canton.64
Perhaps the takeover of the empire by an alien dynasty anxious to secure legitimacy by
suppressing departures from classical Han Chinese traditions as misplaced, degenerate,
and potentially destabilizing can be plausibly represented post hoc as an obstacle to the
relocation and reconfiguration of ways of investigating the natural world in new and
potentially more productive ways?65
Conclusion: China and Europe
Technological advances had appeared in China within the framework of a cosmography

that remained virtually intact until the fall of the empire in 1911. The Chinese had
certainly discovered and accumulated a great deal of useful and reliable knowledge and
observations about the natural world long before Europeans embarked upon a more
sustained and innovatory quest to comprehend its operations largely for purposes of
material gain and geopolitical power, and which complemented a religious conviction
that investigations into nature revealed God’s creation to mankind.
For centuries Chinese intellectuals promoted the accumulation of knowledge within
parameters of a different cosmology that seems to have been far more flexible and less
intolerant towards notions of discovery than Christendom with its theology of revealed
truths, conveyed and interpreted by hierarchal religions.66 Yet, that epistemology provided
almost no support for a separable intellectual role with its own autonomous institutional
base that embodied social prestige for systematic and sustained interrogations of nature.
Investigations (gewu) into ‘things’ of immediate practical and political concern continued
to take place in a piecemeal manner. In a recent book, a distinguished Sinologist suggested
that these genres in the Ming and Qing era could be represented as ‘a scattered landscape
of individual reactions, rather than a unified or linear narrative of knowledge in the
making’.67 The study of many things not only occupied a small space and place below the
study of texts in Confucian philosophy but also struggled for credibility and attention
by presenting evidence, findings, and recommendations in a traditional Confucian style
and manner.
For the discovery, development, and diffusion of useful and reliable knowledge,
those elements included not merely the social and political status accorded to Chinese
intellectuals who allocated time and resources to ‘evidential research’ into the natural
phenomena but also the conceptual frameworks, vocabularies, and mind-sets they
brought to the task. ‘Things’ were studied less for their potential utility and more for
their qualities, authenticity, and provenance within a system of thought that remained
62
deferential towards the dominant tendency in Confucian and other classical authorities
to conceive of man as part of nature and of nature as one harmonious organic whole in
which all things were somehow conducted through the prisms of such philosophical
notions as qi and li and ying and yang and to be correlated and connected.68
Needham recognized that ‘the Chinese, wise before their time, had worked out an
organic theory of the universe which included nature and man, church and state and
all things past, present and to come’, and added that the Chinese ‘had no confidence
that the code of nature could be read’.69 Poignantly he added that unlike their European
counterparts, the Chinese lacked ‘confidence that the code of Nature laws could be
unveiled and read because there was no assurance that a divine being ever more rational
than ourselves had ever formulated a code capable of being read’. Needham’s scholarship,
insights and questions cannot be evaded.70 Along with most Western scientists and the
educated and wealthy elites of his times, England’s great eighteenth-century chemist
and theologian, Joseph Priestley, would have agreed with Needham. ‘If ’, Priestley wrote,
‘there were no laws of nature … there could be no exercise for the wisdom for the
understanding of intelligent beings and no man could lay a scheme with a prospect of
accomplishing it.’71 And as Iliffe has demonstrated, Newton also ‘believed that natural
philosophy was largely a religious entreprise’. 72
Notes
1. J. Daly (2015), Historians Debate the Rise of the West. Abingdon: Routledge.
2. K. Pomeranz (2000), The Great Divergence. China, Europe and the Making of the Modern
World Economy. Princeton: Princeton University Press.
Experience. Ithaca: Cornell University Press.
4. I. Wallerstein (1974, 1980, 1989, 2011), The Modern Word System. New York: Academic
Press; A. Gunder Frank (1998), ReOrient: Global Economy in the Asian Age. Berkeley:
University of California Press.
5. A. Maddison (2007), Chinese Economic Performance in the Long Run, 960–2030. Paris:
OECD Publications; S. B. Broadberry and S. Hindle (eds) (2011), ‘Asia in the Great
Divergence’, Economic History Review, 64 (Special Issue).
6. J. Mokyr (2002), The Gifts of Athena. Princeton: Princeton University Press.
7. J. Mokyr (2017), A Culture of Growth: The Origins of the Modern Economy. Princeton:
Princeton University Press.
8. J. Needham (1969), The Great Titration: Science and Society in East and West. Toronto:
Toronto University Press; M. Elvin (1973), The Pattern of the Chinese Past. Stanford: Stanford
University Press; P. Gouk (1995), The Achievement Project 1990–1995 (www.alanmacfarlane.
com); Pomeranz, The Great Divergence; M. Elvin (2010), ‘Overview and introduction’, in
H. U. Vogel and G. Dux (eds), Concepts of Nature: A Chinese-European Cross-Cultural
Perspective. Leiden: Brill, 1–55.
9. Vogel and Dux, Concepts of Nature.
63
10. Needham, The Great Titration; J. T. Fraser (ed.) (1986), Time, Science and Society in China
and the West. Amherst: Massachusetts University Press; N. Sivin (1995), Science in Ancient
China and Medicine, Philosophy and Religion in Ancient China. Researches and Reflections.
Aldershot: Variorum and Ashgate; D. Wootton (2015), The Invention of Science. London:
Penguin.
11. E. Grant (2004), Science and Religion from Aristotle to Copernicus, 400 BC–AD 1550.
Baltimore: John Hopkins University Press.
12. J. Golinski (1998), Making Natural Knowledge: Constructivism and the History of Science.
Cambridge: Cambridge University Press.
13. M. Biagioli (ed.) (1998), The Science Studies Reader. London: Routledge; and M. Osler (ed.)
(2000), Rethinking the Scientific Revolution. Cambridge: Cambridge University Press.
14. J. Hannam (2009), God’s Philosophers: How the Medieval World Laid the Foundations for
Modern Science. London: Icon Books.
15. D. C. Lindberg (ed.) (2007), The Beginnings of Western Science: The European Scientific
Tradition in Philosophical, Religious and Institutional Context 600 BC–AD 1450. Chicago:
Chicago University Press.
16. V. L. Bullough (ed.) (2004), Universities, Medicine and Science in the Medieval West.
Aldershot: Ashgate.
17. Lindberg, The Beginnings of Western Science.
18. E. Grant (2007), A History of Natural Philosophy: From the Ancient World to the Nineteenth
Century. Cambridge: Cambridge University Press.
19. P. Rossi (1970), Philosophy, Technology and the Arts in the Early Modern Era. New York:
Harper Row.
20. P. Rossi (2001), The Birth of Modern Science. Oxford: Blackwell; and J. V. Field and
F. A. S. L. James (1993), Renaissance and Revolution: Humanists, Scholars, Craftsmen and
Natural Philosophers in Early Modern Europe. Cambridge: Cambridge University Press.
21. P. Long (2001), Openness, Secrecy Authorship, Technical Arts and the Culture of Knowledge
from Antiquity to Renaissance. Baltimore: Johns Hopkins University Press.
22. T. Rabb (2006), The Last Days of the Renaissance and the March to Modernity. New York:
Basic Books.
23. S. Gaukroger (2006), The Emergence of Scientific Culture and the Shaping of Modernity.
1210–1685. Oxford: Oxford University Press.
24. P. Dear (2006), The Intelligibility of Nature: How Science Makes Sense of the World. Chicago:
25. Mokyr, The Gifts of Athena.
26. Dear, The Intelligibility of Nature.
27. J. F. Cohen (1994), The Scientific Revolution: A Historiographical Inquiry. Chicago: Chicago
University Press.
28. J. L. van Zanden and M. Prak (eds) (2013), Technology, Skills and the Premodern Economy.
Leiden: Brill.
29. De Ridder-Symoens (ed.) (1996), A History of the University in Early Modern Europe,
1500–1800. Cambridge: Cambridge University Press.
30. S. Gaukroger (2010), Science and the Shaping of Modernity, 1660–1760. Oxford: Oxford
University Press; and Wootton, The Invention of Science.
64
31. J. Bona (1995), The Word of God and the Language of Man: Interpreting Nature in Early
Modern Science. Madison: University of Wisconsin Press.
32. M. A. Gillespie (2008), The Theological Origins of Modernity. Chicago: University of Chicago
Press.
33. T. Worcester (2008), Cambridge Companion to the Jesuits. Cambridge: Cambridge University
Press; and M. Feingold (2002), Jesuit Science and the Republic of Letters. Cambridge, MA:
MIT Press.
34. Wootton, The Invention of Science; and Gaukroger, Science and the Shaping of Modernity.
35. G. E. R. Lloyd (2009), Disciplines in the Making. Oxford: Oxford University Press; and D.
Headrick (2000), When Information Comes of Age. Oxford: Oxford University Press.
36. I. Inkster, and K. Deng (eds) (2004), History of Technology, vol. 25 (Special Issue). London:
Institute of Historical Research.
37. J. M. Levine (1991), The Battle of the Books: History and Literature in the Augustan Age.
Ithaca: Cornell University Press; and P. Smith and B. Schmidt (eds) (2007), Making
Knowledge in Early Modern Europe: Practices, Objects and Texts, 1400–1800. Chicago:
38. This excludes a significant and well-documented history of experiments concerned with
the properties of atmospheric pressure, with magnetism, with acids, human anatomy, and
navigation.
39. P. Smith (1994), The Business of Alchemy: Science and Culture in the Holy Roman Empire.
Princeton: Princeton University Press.
40. W. R. Newman and A. Grafton (2001), Secrets of Nature: Astrology and Alchemy in Early
Modern Europe. Cambridge, MA: MIT Press.
41. D. Noble (1997), The Religion of Technology: The Divinity of Man and the Spirit of Invention.
London: Penguin.
42. P. K. O’Brien (2009), ‘The Needham question updated: A historiographical survey and
elaboration’, History of Technology, 29, 7–28.
43. H. Butterfield (1949), The Origins of Modern Science, 1300–1800. London: Bell, 36–8.
44. B. Elman (2005), On Their Own Terms: Science in China, 1550–1900. Cambridge MA:
Harvard University Press.
45. Sivin, Science in Ancient China.
46. J. E. McClellan and H. Dorn (1999), Science and Technology in World History. Baltimore:
Johns Hopkins University Press.
47. C. A. Ronan (1983), The Illustrated History of the World’s Science. Cambridge: Cambridge
University Press.
48. R. Temple (1998), The Genius of China. London: Prism Books.
49. D. Bodde (1991), Chinese Thought, Society and Science. Honolulu: Hawaii University Press.
50. J. Lin (1995), ‘The Needham puzzle: Why the Industrial Revolution did not originate in
China’, Economic Development and Cultural Change, 43 (2), 269–92.
51. R. von Glahn (2016), The Economic History of China: From Antiquity to the Nineteenth
Century. Cambridge: Cambridge University Press; and J.-L. Rosenthal and R. Bin Wong
(2011), Before and Beyond Divergence: The Politics of Economic Change in China and Europe,
65
52. B. Elman (2000), A Cultural History of Civil Examinations in Late Imperial China. Berkeley:
California University Press.
53. W. T. de Bary (1981), Neo Confucian Orthodoxy and the Learning of Mind and Heart. New
York: Columbia University Press.
54. B. Elman (1984), From Philosophy to Philology. Cambridge: Cambridge University Press.
55. L. M. Jensen (1997), Confucianism: Chinese Tradition and Universal Civilization. Durham:
Duke University Press; and Y. Xinzhong (2002), An Introduction to Confucianism.
56. G. E. R. Lloyd and N. Sivin (2002), The Way and the Word: Science and Medicine in Early
China and Greece. New Haven: Yale University Press.
57. Sivin, Science in Ancient China; and Elman, A Cultural History of Civil Examinations.
58. M. Elvin (2004), The Retreat of the Elephants: An Environmental History of China. New
Haven: Yale University Press.
59. P. S. Ropp (1990), Heritage of China: Contemporary Perspectives on Chinese Civilization.
Berkeley: University of California Press; and B. Elman, and A. Woodside (eds) (1994),
Education and Society in Late Imperial China, 1600–1900. Berkeley: University of California
Press.
60. J. B. Henderson (1991), Scripture, Canon and Commentary. Princeton: Princeton University
Press.
61. T. Brook (2010), The Troubled Empire: China in the Yuan and Ming Dynasties. Cambridge,
MA: Harvard University Press.
62. J. B. Henderson (1984), The Development and Decline of Chinese Cosmology. New York:
Columbia University Press.
63. H. Zurndorfer (2002), ‘Old and new visions of Ming society and culture’, Toung Pao, 87,
151–69.
64. C. Jami, P. Engelfreit and G. Blue (eds) (2001), Statecraft and Intellectual Renewal in Late
Ming China. Leiden: Brill.
65. R. J. Smith (1994), China’s Cultural Heritage: The Qing Dynasty, 1644–1912. Boulder:
Westview Press.
66. Vogel and Dux, Concepts of Nature.
67. D. Schäfer (2011), The Crafting of 10,000 Things: Knowledge and Technology in Seventeenth-
Century China. Chicago: Chicago University Press, 19.
68. J. Needham (ed.) (1956), Science and Civilization in China, vol. 1. Cambridge: Cambridge
University Press, 543–82; J. Needham (ed.) (1961), Science and Civilization in China, vol. 2.
Cambridge: Cambridge University Press, 1–43; and Y. S. Kim (2010), ‘Confucian scholars
and technical knowledge in traditional China’, East Asian Science: International Journal, 4,
207–28.
69. Needham, The Great Titration, 120; see also: Mokyr, A Culture of Growth.
70. Needham, The Great Titration, 120.
71. J. T Rutt (ed.) (1817), The Theological and Miscellaneous Works of Joseph Priestley. London:
George Smallfield.
72. R. Iliffe (2017), Priest of Nature: The Religious Worlds of Isaac Newton. Oxford: Oxford
University Press.
66
CHAPTER 4
TOOLKITS, CREATIVITY, AND DIVERGENCES:
TECHNOLOGY IN GLOBAL HISTORY
Karel Davids
Economic historians agree that technological change after 1800 has been much more
rapid and pervasive than in earlier centuries, and since the late nineteenth century,
the United States has been the frontrunner in this development. As Robert Gordon
claimed, if productivity growth in the United States is now slowing down and the
potential for further revolutionary innovations is limited, this could mean that the pace
of technological change globally will diminish once the fruits of catching up with the
United States have been reaped.1 But will it? The nature and timing of future innovations
remain notoriously hard to predict, even though examples of successful forecasting
exist.2 There is no compelling reason why technological leadership should rest with the
United States forever. Historians surely cannot offer a safe guide to the future. What
historians, and especially global historians, can do is analyse and explain underlying
patterns and contexts of long-term technological change. Looking at connections and
making comparisons between different parts of the world, global historians can propose
answers to big questions such as: To what extent do different societies share the same
bodies of knowledge? When, where, and why do innovations take place? When and
why do divergences in technological development occur, and why does technological
leadership shift from one place to another?
These are the questions that figure prominently in the debate on the Great Divergence.
Answers, however, vary wildly. At one extreme are David Landes and Joseph Needham.
Landes claimed that from the Middle Ages onwards, Europe saw a continuous flow of
inventions and accumulation of technical knowledge, which eventually (also aided by
other factors) culminated in the Industrial Revolution in Britain.3 Joseph Needham, by
contrast, insisted that China was far ahead of the West in many areas of technological
achievement up to at least 1500.4 At the other extreme are those who play down differences
in technological development between Eurasian societies before the nineteenth century
and reject the idea that Europe had any advantage over China, India, or the Middle East.
In their view, differences in technology between these societies were far outweighed by
broad similarities. Eurasian societies in this period by and large supposedly shared the
same ‘toolkits’ of technical knowledge – to borrow a term coined by prehistorians and
archaeologists.5
André Gunder Frank denied that there was such a thing as ‘European technology’
at all, let alone ‘European technological superiority’, before 1800. The ‘very
substantial’ diffusion of technology and worldwide division of labour implied that
technological development was a ‘world economic process’ rather than a regional or

national one. Frank insisted that even the technological advances of the Industrial
Revolution, whose importance he acknowledged, should not be seen as purely
European achievements.6 John Hobson and Jack Goody likewise lambasted the idea
of a European lead in technological development before the Industrial Revolution.7
Edmund Burke III argued that the Islamic world, borrowing innovations from
a variety of sources, between about 650 CE and 1700 CE played a central role in
the formation of standardized ‘toolkits’ of knowledge on subjects such as water
management, writing, information processing, and mathematics, which Europeans
later turned to good account. These ‘technological complexes’, as he prefers to call
them, include both specific technologies and ‘the culture knowledge’ that made this
technology possible.8 More generally, Jared Diamond postulated that for all societies
much or most new technology is not invented locally but is instead borrowed from
other societies. According to Diamond, diffusion is key to technological development.
For the rest, ‘technology tends to catalyse itself ’.9 This is a long way from Robert
Gordon’s techno-pessimism.
Other scholars hold a position somewhere between these extremes. Comparing
science and technology in India and Europe in the seventeenth and eighteenth
centuries, Prasannan Parthasarathi concluded that ‘Europe indeed showed a “scientific
and technological verve”’ but that the key Revolution did not reside in ‘any purported
cultural, economic or social exceptionalism’ but in ‘the specific challenges the Europeans
faced’. The technological breakthrough in Britain resulted from a combination of
external competitive pressures, ecological shortfalls, and a mercantile state.10 Kenneth
Pomeranz acknowledged that ‘a surge in European technological inventiveness
certainly [was] a necessary condition of the Industrial revolution’, but stressed the
crucial role of ‘coal and colonies’ in removing the constraints for sustained growth of
per capita income.11 Peer Vries, by contrast, argued that coal and colonies could only
become relevant factors in the divergence between Europe and China because Western
Europe, in contrast with China, had experienced ‘a long process of continuing and self-
sustaining invention and innovation’ and by the eighteenth century had established a
‘wide-ranging lead’. The West was leading especially in fields ‘that had most potential for
increasing productivity’, and this lead was not a matter of accident but the outcome of a
long-term development.12 Joel Mokyr, too, emphasized that the divide between the East
and the West essentially sprang from prior differences in technology. More specifically,
Mokyr related this development to the Scientific Revolution in the seventeenth century,
which contributed to the rise of a new and unique environment for the creation of
useful forms of knowledge, which he called the ‘Industrial Enlightenment’. Useful
knowledge was ‘knowledge of natural phenomena and regularities that had the
potential to affect technology’.13
Yet another perspective has been suggested by Jack Goldstone. On the one hand,
he underscored the similarities between all societies in world history that experienced
a period of economic, political, and cultural ‘efflorescence’ (such as Song China,
Northwestern Europe in the high Middle Ages, Golden Age Holland, or high Qing
68
Toolkits, Creativity, and Divergences
China). On the other hand, he pointed to the unique emergence of ‘engine science’ – a
reliance on engines for understanding the world – and its spread into popular culture
in eighteenth-century England, which eventually led to the Industrial Revolution. Thus,
there was perhaps something special about the development in this part of Europe after
all.14
This chapter will discuss the three big questions introduced earlier, and the different
answers to these, in relation to the debate on the Great Divergence. The first section
examines the matter of toolkits. To what extent did different societies in the past share the
same bodies of knowledge? Was much or most new technology indeed borrowed from
other societies, and if so, how? The second section concerns the issue of technological
creativity. How did new technical knowledge come into being and how can its creation
be explained? The third section, finally, addresses the question of divergences. When
and why did divergences in technological development occur, and why did technological
leadership shift from one place to another? If there was a shared body of knowledge
between Eurasian societies, why did Europe, and in particular Britain, eventually move
into the forefront of technological development?
Toolkits and travelling knowledge
Although scholars have used the notion of a common human ‘toolkit’ of technology,
implicitly or explicitly, for quite some time, it is actually not firmly established
whether such a toolkit has existed at all. André Gunder Frank’s confident assertion
that technological development was a world economic process and that there was no
‘European’ technology at all is not substantiated by evidence. Similarly, Jared Diamond
does not offer evidence for his far-reaching claim that ‘much or most new technology’
is borrowed from other societies instead of being invented locally. Edmund Burke III
does indeed provide support for his thesis that major technological complexes in the
lands of Islam partly rested on innovations that had been developed in various regions in
‘Afroeurasia’ and subsequently underwent a process of standardization, but he is much
more sparing with offering proof that the Islamic world then served as a vital source of
knowledge for other parts of the world concerning, for example, water management and
the development of universities. Whether there really has been a toolkit on which all
societies could draw still remains a moot point.
The notion of ‘toolkit’ actually conflates several modes and layers of technological
development that analytically can be kept apart. It presents an oversimplified answer to
questions that in reality are quite complex: the issue of the relation between mobility and
rootedness of knowledge and the issue of the relation between diffusion of knowledge
and multiple independent inventions or improvements. ‘Toolkit’ suggests that technical
knowledge was transmitted across societies and cultures rather than being developed
or discovered locally. Yet, demonstrating that a certain item or process existed at the
same time in different places, or that it existed earlier in one region than another, does
not imply that there was some underlying common reservoir of knowledge or that
69
knowledge actually travelled. The fact that dikes can be found both in China and in
the Low Countries does not necessarily mean that the Chinese borrowed knowledge
on dike-building from the North Sea area or vice versa. Coexistence does not imply
common origin, nor does precedence entail causation. On the other hand, connections
can have existed and diffusion can have taken place.
Technology could in fact be borrowed or shared in a variety of ways. First of all,
it could remain more or less stable in space, yet move between different societies
and cultures. The debate on the ‘Watson thesis’ shows that both phenomena could
well go together in historical reality. Andrew Watson claimed that agriculture in the
Mediterranean and West Asia was transformed between about 700 CE and 1100 CE
under the impact of the rise and expansion of Islam. Once the entire region between
Spain and Afghanistan had been unified under Muslim rule, Watson propounded,
many ‘new’ crops and farming techniques were diffused in this area, which mostly
‘originated’ and had been ‘domesticated’ in the Indian subcontinent or lands farther
to the East. Among these ‘new’ crops were sorghum, rice, hard wheat, sugar cane,
cotton, lemons, limes, bananas, spinach, mango, watermelons, and coconut palms. The
diffusion of these plants and the techniques that facilitated their cultivation (especially
improvements in irrigation) led to a rise in agricultural productivity, which made
possible a growth of trade, an increase in specialization, and a rise in urbanization in
the Islamic world.15
Historians of technology and specialists on the history of the Mediterranean and
West Asia have criticized Watson’s thesis at many points, arguing notably that Watson
got his chronology of innovation seriously wrong. Evidence showed that several crops
on his list were already present in the Mediterranean and Western Asia before the rise
of Islam and that irrigation and other techniques had been more advanced than Watson
acknowledged. Peregrine Horden and Nicholas Purcell insisted that ‘innovation of the
utmost importance (was) going on continuously’ in antiquity. Michael Decker, too, took
issue with the idea of ‘rapid and deep changes in Muslim agricultural practices’. In his
view, ‘Islamic farming structures were built atop earlier Roman and Persian landscapes;
these were usurped rather than swept away.’16 Although, as Paolo Squatriti remarked,17
such critiques do not invalidate the thesis – because Watson stressed diffusion rather
than introduction or invention – they nevertheless make an important point about
technological development. Change was multi-layered; innovations were embedded in
pre-existing local practices and structures.
Once we view technological development in a given region in a long-term perspective,
labels turn out to be crude at best. The fact that an innovation emerged or thrived in a
place and time when a particular culture in this region reigned supreme (e.g. during the
Roman Empire or the Abbasid Caliphate) does not necessarily mean that this innovation
can be labelled as a product of that culture. ‘Roman’ technology was partly based on
technical knowledge developed in the Mediterranean and West Asia under Hellenistic
regimes and ‘Islamic’ technology partly rested on technical knowledge developed in the
same region during the Roman, Byzantine, and Sassanid empires.18 Michael Lewis’ case
study on the development of windmills between about 800 CE and 1200 CE suggests that
70
key innovations such as the introduction of the horizontal mill, the vertical mill, and
the tower mill first appeared on the Iranian plateau and in the Aegean due to successive
combinations of ideas of Greeks, Persians, Byzantines, and Seljuk Turks.19
A second way in which technology could be borrowed or shared was by the movement
of culture groups from one place to another. David Anthony showed that speakers of
proto-Indo-European dialects brought revolutionary innovations such as the horseback
riding and the use of wheeled vehicles and chariots from the Eurasian steppes to the
lower Danube Valley, Iran, and the Indian subcontinent from the fourth millennium
BCE. These very innovations in transportation also opened up the steppes as ‘a corridor
of communication’ between China, India, Iran, and the West.20
Finally, technology could also move from one place or culture to another via
the travelling of people and the circulation of storage devices such as manuscripts,
drawings, prints, books, and artefacts. According to Watson, travelling people were
essential agents for the diffusion of knowledge about new crops in the lands of Islam.
Apart from envoys acting on the authority of rulers, ‘thousands of mostly unknown
individuals from many levels of society’, including soldiers, pilgrims, and traders, must
have been instrumental in the movements of plants ‘over shorter or longer distances’.21
Sweet potatoes (and the knowledge of how to grow and to store them) reached China
from Central America by way of the Philippines, thanks to Spanish seafarers crossing
the Pacific and a Chinese merchant visiting Manila in the 1590s.22 The ‘Silk Road’,
which connected China and Transoxiana from the second century BCE, functioned
as a passageway for refugees, missionaries, craftsmen, traders, and other groups of
travellers, who – among other things – transmitted technologies from one side of
Eurasia to another. While the art of glass making moved to China from the West, the
techniques of weaving silk and making paper travelled from China in the opposite
direction. Paper making was probably introduced in Transoxiana by Buddhist monks
by the end of the seventh century.23 The wide availability of paper and the invention of
printing, which followed in the eighth century, further helped to enhance the mobility
of knowledge, even apart from the physical movement of people. The growth in the
production of books, whether copied by hand or printed with woodblocks or movable
type, meant that technical knowledge could be stored and circulated on a much larger
scale than ever before.24
Movements of knowledge between places and cultures were not a neutral process.
Circulation of knowledge involved both translation and transformation. Moreover,
as Harold Cook and Sven Dupré observed, ‘the parties involved, whether speakers or
listeners’ were changed in the process of translation as well.25 The massive Graeco-
Arabic translation movement under the early Abbasid Caliphate, for example, according
to Dimitri Gutas did not only generate ‘an Arabic scientific literature with a technical
vocabulary for its concepts’ but also preserved many non-literary Greek texts in Arabic
translation and ‘contributed, through the demand it created for secular Greek works, to
their preservation … in Greek’ by accelerating their transcription in manuscript copies.26
Knowledge in transit was thus not a ready set of tools packed in a box. Knowledge
changed in the very process of movement.
71
Technological creativity
How did new technical knowledge come about? Does technology tend to catalyse
itself, as Jared Diamond argues? Arguably technological advances often ‘depend
upon previous mastery of simpler problems’ and ‘new technologies and materials
make it possible to generate still other new technologies’.27 But this process is far from
automatic. Technological development can take unexpected turns. In many areas in
Europe during the early Middle Ages, for example, sophisticated water systems from
Roman times were neglected or abandoned. Aqueducts fell into disrepair. Fired brick
(and concrete) was not used in building north of the Alps for a long time.28 In North
Africa, the Middle East, and Iran, wheeled vehicles were abandoned in favour of the
camel as a means of transport for over a thousand years.29 The extensive use of paper
and the proliferation of books in the lands of Islam were not followed by an early
adoption of the printing press.30 Watermills were well known in the Mediterranean and
West Asia from Roman times onwards, but it was only in medieval and early modern
Europe that water power was harnessed for a wide variety of industrial purposes on a
massive scale.31
The rate and direction of technological change thus vary considerably in time and
space. How can it be explained? A common type of argument holds that factor prices
determine when and where inventions are adopted. The lack of more mechanization in
the Roman Empire, for example, has been ascribed to the abundance of cheap labour,
notably slave labour, relative to other factors of production. Scarcity of labour relative
to the abundance of land has been adduced as a crucial stimulus to mechanization in
the antebellum era in the United States. High wages relative to cheap energy have been
proposed as the single most important factor in explaining why the Industrial Revolution
happened in Britain in the eighteenth century.32
This approach is illuminating up to a point. Private entrepreneurs doubtless take
relative prices of production factors into account when making decisions about whether
or not to adopt a particular technique. But the explanatory power of this sort of argument
is limited. For one thing, it is not evident that other types of actors who had an impact on
technological change in the past, such as governments, princes, religious organizations,
and community associations, likewise based their decision making on information
about relative factor prices. The fact that until 1719 Muslims in the Ottoman Empire
were not allowed to operate a printing press had more to do with the high esteem for
the handwritten word in the Islamic world and with the economic and political power
of thousands of copyists in Istanbul than with the relative prices of production factors.33
Secondly, even if decisions about the adoption of inventions partly depended on
information on factor prices, this does not mean that the direction of inventive activities
themselves was determined by these particular conditions. Christine MacLeod has
shown that, contrary to expectations, most applicants for patents in eighteenth-century
England did not state the saving of labour as the goal of their invention but the saving of
capital or the improvement of the quality of products.34 Thirdly, and most fundamentally,
factor prices do not explain where knowledge embodied in technology actually came
72
from. How was knowledge supplied? How were inventions generated? What made the
creation of new techniques possible? Relative factor prices, in short, can be proximate
causes for the adoption of technologies, but they do not regulate the process of creation of
knowledge itself and they are certainly not the ultimate cause of technological creativity.
Like the diffusion of knowledge, the creation of knowledge could occur in a
multiplicity of ways. One of them was the creation of what are called ‘inventions’. The
term ‘invention’ suggests that the production of new knowledge is a discrete, distinct
event, a kind of happening which can be exactly pinpointed in place and time. This is,
historically speaking, quite a recent idea. It arose in Italian cities during the high Middle
Ages as part of an increasing tendency to consider knowledge as a type of ‘property’.
These growing proprietary attitudes manifested themselves on the one hand in formal
or informal arrangements to reserve specific knowledge to practitioners of a particular
craft or trade, and on the other hand in institutional provisions to protect property rights
on knowledge in the form of patents for invention. While from the thirteenth century
onwards patents for invention of new techniques of mechanical devices were granted on
an ad hoc basis, the practice became enshrined in law in many parts of Europe at the
end of the fifteenth century. The first law that guaranteed a right to the ownership and
commercial exploitation of a new invention was enacted by the Senate of the Republic
of Venice in 1474.35 The chief criterion for granting a patent in this Venetian statute
and subsequent regulations by other governments in early modern Europe was not the
originality of an invention as such, but its novelty to a particular locality. Apart from
providing a reward for the labours of private inventors, patents were equally used as an
instrument by cities and states to attract ‘new’ knowledge from elsewhere to give a boost
to their own economies.36 After the idea of an invention as something ‘new’, which could
be clearly identified, had taken hold in Renaissance Europe, literati began to produce
catalogues of inventions or discoveries that had not been known in the ancient world.
The most famous one is no doubt the set of three ‘inventions’ that ‘changed the face and
state of the world’ mentioned in Francis Bacon’s Novum Organum in 1620: gunpowder,
the compass, and the printing press.37 Following Bacon’s example, data on the frequency
and significance of inventions in the historiography of technology long remained a
yardstick for comparing the technological creativity of societies.38
The number of patents for invention granted in European countries increased by
leaps and bounds from the sixteenth century onwards. The level of patenting reached in
Venice was exceeded in the Dutch Republic after 1590, which was in its turn surpassed
by Britain in the eighteenth century. Britain during the nineteenth century ceded place
to the United States, which saw the ratio of patents relative to its total population truly
explode after the Civil War.39 Figures on patenting can to some extent be taken as an
indicator of technological creativity. However, even after the institution of patenting
came into existence, inventive activities continued to take place outside patent systems
as well. Prizes, premiums, contracts, tax exemptions, and other sorts of privileges or
rewards granted by public authorities or private organizations could in early modern
Europe fulfil similar functions for individual inventors as patents.40 Even in the United
States, the patent system was not always the only institution that promoted or protected
73
inventive activities. Robert Gordon observed that patenting in the United States actually
declined during part of the twentieth century, when inventive activities came to a large
extent to be concentrated in research laboratories of large corporations.41
Technological creativity, however, could manifest itself in other ways than through
the development or discovery of a distinct new thing or process, which could qualify
for a patent for invention or for some other kind of reward. ‘Macro-inventions’, that is
‘inventions in which a radical new idea, without clear precedent, emerges more or less
ab nihilo’ (as Joel Mokyr defines them), have been quite rare. One of the few inventions
that comes close to this ideal type is the steam engine. Throughout much of human
history, technological advance, on the contrary, largely proceeded through ‘micro-
inventions’, ‘small, incremental steps that improved, adapted, and streamlined existing
techniques already in use’ (again as defined by Mokyr), or what Eric Jones has called
‘technological drift’.42 Trial and error, random mutations, learning by doing, or learning
by using all could help to make this slow change possible.43 Although such mundane,
gradual improvements, adaptations, or refinements often have not been identified as
distinct ‘inventions’ – let alone patented – they nevertheless have made a contribution
to the growth of productivity and were sometimes instrumental in realizing major
breakthroughs. The successful ventures of European seafarers across the Atlantic and
into the Indian Ocean in the 1490s, for example, owed much to slow improvements
in shipbuilding and navigation during the Middle Ages as well as to the continuous,
painstaking accumulation of knowledge about wind patterns in the northern and
southern Atlantic.44
However, variations in the rate and direction of technological change must be related to
more factors than mere steady, ordinary technological drift or movements of knowledge
between places or cultures. These factors in themselves after all cannot explain why
creativity differed. Historians have sought additional underlying causes of technological
creativity in contextual variables such as competition between states, warfare population
growth, environmental challenges, cultural climates, and institutional arrangements.
On closer inspection, however, many of these factors turn out not to have as much
explanatory power as suggested. Sometimes they appear to stimulate innovation,
sometimes they appear to inhibit it, and sometimes they do not seem to have much
effect on technological creativity at all. Warfare, for example, can work out both ways.
Ecological pressures and/or population growth do not invariably lead to technological
breakthroughs.45 Some values and attitudes, such as respect for manual labour, may have
provided a more favourable climate for technological creativity than others, such as a
submissive attitude to authority, but it is doubtful whether the presence of such cultural
characteristics in itself has been a necessary or sufficient condition for innovation.
Still, cultural factors may have affected technology in an indirect way, namely by
influencing the development of institutions, which facilitated technological creativity.
Apart from arrangements specifically rewarding inventive activities, such as patents,
prizes, or privileges, these technology-friendly institutions also include institutions
supporting the dissemination, certification, and creation of knowledge more broadly such
as craft guilds, schools, academies, libraries, and research laboratories. David Mowery
74
and Nathan Rosenberg even termed the emergence of a R&D system in the United States
in the twentieth century as the ‘institutionalization of innovation’.46 At the present state
of inquiry, this institutional perspective, with a focus on infrastructures of knowledge,
offers the most promising strategy for understanding variations in technological
creativity. It may also help explain divergences in technological development between
different parts of the world which emerged over time.
Divergences
In the nineteenth century, global divergences in technological development became

patently obvious. While technological change generally was faster and more
comprehensive than before, Europe and the United States were clearly ahead of other
regions in the world. Technological advantage translated into an edge in productivity as
well as into political and military ascendancy. Western imperialism made great strides,
thanks to the use of advanced technologies. Innovations such as steamships, telegraphs,
rifles, and quinine after 1840 became effective ‘tools of empire’, as Daniel Headrick
called them, and connections between technology and imperialism persisted long
into the twentieth century.47 But when and why did these divergences in technological
development come about?
The debate on this issue has mostly concentrated on comparisons between Europe
and Asia – in particular China and India – and to a lesser extent on comparisons between
regions within Europe between about 700 CE and 1800 CE. Taking the ‘Great Divergence’
in technology first, we should consider the matter from two sides. On the one hand, there
is no convincing evidence that either Europe, China, or India had achieved technological
‘superiority’ over any other world area by the end of the eighteenth century. Extravagant
claims for the supremacy of Europe or China such as those put forward by David Landes
or Joseph Needham are not solidly grounded in facts. All the different types of machines
and mechanical devices described in Needham’s Science and Civilisation in China, for
example, can equally be found in late medieval and early modern Europe while energy
and the use of energy sources before the middle of the eighteenth century did not greatly
differ.48 Like Europe, Qing China still saw gradual technological change, especially in
the agricultural sector. A ‘relative technological standstill’, as Mark Elvin surmised, did
not occur.49 As for India, Prasannan Parthasarathi has made a plausible case for the
thesis that the knowledge and skills of eighteenth-century artisans on the subcontinent
were not inferior to those of European craftsmen in industries such as textile making,
shipbuilding, arms manufacture, and iron smelting.50 In 1800, the level of technology
that was actually used in Europe, China, or India did not yet substantially differ.
On the other hand, we should be careful to be fixated on similarities alone. If there were
no differences between these regions of Eurasia before 1800 at all, where did the disparity
in the nineteenth century come from? How can the technological lead of European
countries and the United States after 1800 be explained? Parthasarathi sought the answer
in ‘the specific challenges’ Europeans faced. In his view, the threat of being outcompeted
75
by Indian textiles on global markets and the increasing scarcity of traditional sources of
energy acted as triggers for ‘revolutionary technological breakthroughs’ in Britain, which
laid the foundation for the Industrial Revolution. Maxine Berg in the same vein argued
that imports of luxury goods from Asia ‘activated’ product innovation and invention
in Britain.51 But this kind of explanatory reasoning begs the question why Britain in
particular, or Europe more generally, was able to meet these challenges by developing a
radical new response. Failures to meet challenges are after all not uncommon in history.
Industrial revolutions on the contrary rarely happen. What made this unprecedented
leap forward in technological capability possible?
On closer look, differences in technological development between various regions of
Eurasia already existed before the end of the eighteenth century. Even though the general
level and rate of technological change in China and Europe did not vary greatly before
1800, there were differences in the nature of technological development, the formation
of human capital, the circulation of technical knowledge, and processes of technological
creativity. The potential of specific innovations was not always realized as fully in China
as in Europe. Clocks, cannon, the magnetic compass, and printing by movable type are
cases in point. In addition, technological change in early modern Europe had a wider
scope: it took place not only in the agricultural sector and in urban industries, but also
in various other branches of economic activity, such as the shipping industry. Formation
of human capital through specialist, technical education in China developed not as far
as in European countries. Schools with a vocational emphasis, for example, remained a
relatively rare phenomenon. Moreover, although the output of printed books, including
technical writings, in Late Ming and Qing China strongly grew, the extent of circulation
of these materials did not increase accordingly; libraries were often only accessible to the
selected few. As for processes of creation, Chinese technicians, unlike European artisans,
did not use drawings to ‘think on paper’.52
India and Europe were not similar in every respect either. Parthasarathi argues
that modes of transmission for ‘useful’ knowledge present in early modern Europe,
such as ‘schools, universities, lecture halls, associations’, were not entirely absent in
India, but he admits that evidence about their actual importance is hard to discover.
Infrastructures of knowledge in India cannot be demonstrated to have been the same
as in Europe. Furthermore, while patronage of states may have been ‘critical’ for the
diffusion of knowledge in India, especially through the establishment of libraries
and the sponsorship of translations, Europe saw, besides states, also other actors and
institutions such as cities, trading companies, and religious organizations playing an
important role in the circulation of technical knowledge. Europe probably surpassed
India with regard to the circulation of printed books and periodicals.53 This may have
been a relevant factor in the emerging divergence as well. Although much technical
knowledge in the past did not find its way into print, this does not mean that all forms
of knowledge could equally well circulate and advance through learning by doing or
learning by using. Not all knowledge can be subsumed in a broad, hybrid category
called ‘the mindful hand’.54 Distinctions between ‘tacit’ and ‘explicit’ knowledge or
between ‘manual abilities’ and ‘inquiry into nature’ do matter. ‘Prescriptive knowledge’
76
(knowledge ‘how’) and ‘propositional knowledge’ (knowledge ‘what’), as Mokyr terms

them, can be distinguished.55 And the latter type of knowledge in Europe increasingly
circulated in storage devices such as printed texts, which made a significant contribution
to technological advance. Prescriptive knowledge alone would not have made it possible
for European seamen to sail regularly from Europe to India or China, and back, nor have
enabled European inventors to design the steam engine, the railway, the telegraph, and
the internal combustion engine.
Divergences between Europe and Asia thus began to arise long before the end of the
eighteenth century. Some of the foundations for the spurt in technology capability in
Europe after 1800 were put in place as early as the late Middle Ages. But technological
change was not equally spread over Europe. Divergences within Europe emerged as well.
Some regions advanced earlier and developed more rapidly than others. Technological
leadership in Europe first rested with Northern Italy, south Germany, and the Southern
Netherlands, then shifted to the Dutch Republic and eventually moved to England.
‘Technological leadership’ meant that a given country, region, town, or cluster of towns
played an initiating role in the development of new technologies in a wide variety of
fields for a lengthy period of time.56
Life cycles of technological leaders before 1800 showed a more or less fixed pattern.
Before starting on a prolonged technological advance, a future leading region, town,
or cluster of towns first developed into the hub of a widespread trading network. The
scope of the technological advance was at first usually rather narrow, but once the
domination over an extended trade network had been firmly established, it broadened
in many ways. No centre of leadership started from scratch. Each new centre partly built
on the achievements of its precursors, while expanding and transforming the body of
knowledge in the process. South Germany borrowed from Northern Italy, Flanders
and Brabant borrowed from Italy and South Germany, the Dutch Republic borrowed
from all three, and Britain in its turn borrowed from the Dutch and its predecessors.
Movements of knowledge and skills via the travelling of people and the circulation of
storage devices such as books, manuscripts, drawings, and artefacts thus contributed to
the accumulation of know-how from one centre of leadership to another.57 Although a
technological leader often did not succeed in retaining a competitive edge in all those
areas where it achieved its initial supremacy, it still could for a while compensate for
the loss of the original strongholds by building new ones. Frontrunners explored new
routes of technological advance. While initial achievements of technological leaders
usually consisted more in improvements in physical productivity than in gains in quality,
the order was often reversed later on. Eventually, however, substitutions of old sectors
of growth by new ones became ever rarer. Leadership moved to a place that showed a
higher rate of innovation.58
At the end of the seventeenth century, foreign observers considered the Dutch
Republic as a model of technological creativity. A Swedish traveller called Holland in the
1690s an ‘officina machinarum’. In his travelogue The Grand Tour of 1749, Irish writer
Thomas Nugent stated that ‘there (was) no nation where the people apply themselves
with more diligence to all manners of mechanical arts, than the inhabitants of the United
77
Provinces’.59 In the course of the eighteenth century, however, England achieved a still
higher rate of technological innovation than the Netherlands by realizing a combination
of ‘prescriptive knowledge’ and ‘propositional knowledge’ which the Dutch did not
achieve. As Goldstone and Mokyr observed, English society and culture offered a
uniquely congenial environment for the emergence of ‘engine science’ or, more broadly,
the creation of ‘useful knowledge’ in the sense of knowledge of natural phenomena and
regularities that had the potential to affect technology. This ‘Industrial Enlightenment’
was a powerful factor in the making of the Industrial Revolution. The technological
leadership of the United States, which became manifest from the late nineteenth century
onwards, in its turn built on the foundation laid by these revolutionary breakthroughs
in industry in Britain.60
Conclusion
Technological change took place more or less continuously throughout history, though
at different rates and with different consequences. Sometimes advances occurred with
leaps and bounds, and often they were barely noticeable at all. Over time, divergences
emerged between technological developments in different parts of the world. This chapter
argues that these variations between times and places should neither be magnified nor
smoothed over. Neither point of view is very helpful for understanding technological
change and its role in global history.
This chapter proposes a more analytical, comparative perspective instead. It suggests
the adoption of a differentiated view of the circulation of knowledge and of its relation
with local inventions and improvements, rather than to utilize the notion of a common
human toolkit of technology. It suggests that we look beyond relative factor prices to
explain the rate and direction of technological change and that we examine more closely
the varied ways in which new technical knowledge actually could come about and the
congenial institutional settings in which creativity could flourish. Finally, the chapter
argues that similarities in the level and rate of technological change at a certain point
in time may well go together with slowly emerging differences in development, which
can eventually build up into major disparities. The Great Divergence in technology
between China and India on the one hand and Europe and the United States on the
other, which became patently clear in the nineteenth century, had its origins in initially
minor differences which began to appear many centuries before.
Notes
1. R. J. Gordon (2016), The Rise and Fall of American Economic Growth: The U.S. Standard of
Living since the Civil War. Princeton: Princeton University Press, 1–8.
2. Cf. J. Mokyr (2013), ‘Is technological progress a thing of the past?’ http://voxeu.org/article/
technological-progress-thing-past; and Gordon, Rise and Fall, 590–2.
78
3. D. Landes (1998), The Wealth and Poverty of Nations. New York: W.W. Norton, 44–54,
187–93.
4. J. Needham (1965), Science and Civilisation in China. Vol. IV, Physics and Physical Technology
part 2 Mechanical Engineering. Cambridge: Cambridge University Press; J. Needham, W.
Ling and D. K. de Solla Price (1960), Heavenly Clockwork: The Great Astronomical Clock of
Medieval China. Cambridge: Cambridge University Press.
5. E. Burke III (2009), ‘Islam at the center: Technological complexes and the roots of
modernity’, Journal of World History, 20 (2), 166.
6. A. Gunder Frank (1998), ReOrient. Global Economy in the Asian Age. Berkeley: University of
California Press, 186, 204, and 285.
7. J. Hobson (2004), The Eastern Origins of Western Civilization. Cambridge: Cambridge
University Press, 50–61, 190–214; J. Goody (2004), Capitalism and Modernity: The Great
Debate. Cambridge: Cambridge University Press, 19–20, 25–7.
8. Burke, ‘Islam at the center’, 167–8.
9. J. Diamond (1997), Guns, Germs and Steel: A Short History of Everybody for the Last 13,000
Years. London: W.W. Norton, 254, 258–9.
10. P. Parthasarathi (2002), ‘Review Article: the Great Divergence’, Past and Present, 176, 282;
Idem (2011), Why Europe Grew Rich and Asia Did Not. Global Economic Divergence, 1600-
1850. Cambridge: Cambridge University Press, 222 and 263.
11. K. Pomeranz (2000), The Great Divergence. Europe, China, and the Making of the Modern
World Economy. Princeton: Princeton University Press, 68.
12. P. Vries (2001), ‘Are coal and colonies really crucial? Kenneth Pomeranz and the Great
Divergence,’ Journal of World History, 12 (2), 437; Idem (2013), Escaping Poverty. The
Origins of Modern Economic Growth. Vienna and Göttingen: Vienna University Press and
Vandenhoeck und Ruprecht, 307–11.
13. J. Mokyr (1990), The Lever of Riches. Technological Creativity and Economic Progress. Oxford:
Oxford University Press, 81; Idem (2002), The Gifts of Athena. Historical Origins of the
Knowledge Economy. Princeton: Princeton University Press, 4–21, 34–42; Idem (2017), A
Culture of Growth. The Origins of the Modern Economy. Princeton: Princeton University
Press, 274.
14. J. Goldstone (2002), ‘Efflorescences and economic growth in world history: Rethinking the
“rise of the West’’ and the Industrial Revolution’, Journal of World History, 13 (2) 323–89;
Idem (2008), Why Europe? The Rise of the West in World History, 1500–1800. New York:
McGraw-Hill Education, ch. 8.
15. A. M. Watson (1974), ‘The Arab agricultural revolution and its diffusion’, Journal of Economic
History, 34 (1), 8–35, Idem (1983), Agricultural Innovation in the Early Islamic World: The
Diffusion of Crops and Farming Techniques, 700–1100. Cambridge: Cambridge University
Press, 2–3, 5, 77–8.
16. P. Horden and N. Purcell (2000), The Corrupting Sea: A Study of Mediterranean History.
Oxford: Wiley, 257–63, esp. 262; M. Decker (2009), ‘Plants and progress: Rethinking the
Islamic agricultural revolution’, Journal of World History, 20 (2), 187–206.
17. P. Squatriti (2014), ‘Of seeds, seasons, and seas: Andrew Watson’s medieval agrarian
revolution forty years later’, Journal of Economic History, 74 (4), 1210–15.
18. K. D. White (1984), Greek and Roman Technology. London: Thames and Hudson; A. Y.
al-Hassan and D. R. Hill (1986), Islamic Technology: An Illustrated History. Cambridge:
79
19. M. J. T. Lewis (1993), ‘The Greeks and the early windmill’, History of Technology, 15, 141–89;
Horden and Purcell, Corrupting Sea, 257.
20. D. W. Anthony (2007), The Horse, the Wheel and Language: How Bronze-Age Riders from the
Eurasian Steppes Shaped the Modern World. Princeton: Princeton University Press, 457–63.
21. Watson, Agricultural Innovation, 88–94, esp. 90.
22. C. C. Mann (2011), 1493: How Europe’s Discovery of the Americas Revolutionized Trade,
Ecology and Life on Earth. London: Granta, 168–9.
23. V. Hansen, (2012), The Silk Road: A New History. Oxford: Oxford University Press, 137–9,
238–9; J. M. Bloom (2001), Paper before Print: The History and Impact of Paper in the Islamic
World. New Haven: Yale University Press, 43.
24. Cf. Hansen, Silk Road, 138; Bloom, Paper, 110–23, E. Eisenstein (1979), The Printing Press as
an Agent of Change: Communications and Cultural Transformations in Early-Modern Europe.
25. K. Raj (2007), Relocating Modern Science: Circulation and the Construction of Knowledge in
South Asia and Europe, 1650–1900. Basingstoke: Palgrave Macmillan, 20–1; H. J. Cook and S.
Dupré (2012), ‘Introduction’, in H. J. Cook and S. Dupré (eds), Translating Knowledge in the
Early Modern Low Countries. Zürich and Berlin: LIT Verlag, 10.
26. D. Gutas (1998), Greek Thought, Arabic Culture: The Graeco-Arabic Translation Movement in
Baghdad and Early ‘Abbāsid Society (2nd–4th/8th–10th Centuries). London: Routledge, 192.
27. Diamond, Guns, Germs and Steel, 258–9.
28. A. Wilson (2002), ‘Machines, power and the ancient economy’, Journal of Roman Studies,
92, 32; R. Magnusson (2001), Water Technology in the Middle Ages: Cities, Monasteries, and
Water Works after the Roman Empire. Baltimore: Johns Hopkins University Press, 4; S. Aiyar,
C-J. Dalgaard and O. Moav (2008), ‘Technological progress and regress in pre-industrial
times’, Journal of Economic Growth, 13 (2), 127–8.
29. R. W. Bulliet (1975), The Camel and the Wheel. Cambridge, MA: Harvard University Press.
30. Bloom, Paper, 110–16, 220–4.
31. Ö. Wikander (2000), ‘The water-mill’ and ‘Industrial applications of water-power’, in
Ö. Wikander (ed.), Handbook of Ancient Water Technology. Leiden: Brill, 371–400 and
401–10; White, Greek and Roman Technology, 56; al-Hassan and Hill, Islamic Technology,
52–4; T. S. Reynolds (2003), Stronger than a Hundred Men: A History of the Vertical Water
Wheel. Baltimore: Johns Hopkins University Press.
32. White, Greek and Roman Technology, 56; Mokyr, Lever of Riches, 165, 103–95; J. J. Habakkuk
(1962), American and British Technology in the Nineteenth Century. Cambridge: Cambridge
University Press; Allen, The British Industrial Revolution, 2, 142.
33. Bloom, Paper, 222.
34. C. MacLeod (1988), Inventing the Industrial Revolution: The English Patent System, 1660–1800.
Cambridge: Cambridge University Press, 158–81, esp. 159–60; Mokyr, Lever of Riches, 165–6.
35. P. O. Long (2001), Openness, Secrecy, Authorship: Technical Arts and the Culture of Knowledge
from Antiquity to the Renaissance. Baltimore: Johns Hopkins University Press, 89, 93–6, L.
Molà (2000), The Silk Industry of Renaissance Venice. Baltimore: Johns Hopkins University
Press, 186–9.
36. M. Belfanti (2004), ‘Guilds, patents, and the circulation of technical knowledge: Northern
Italy during the Early Modern Age’, Technology and Culture, 45 (3), 569–89; MacLeod,
Inventing, 11.
80
37. Eisenstein, Printing Press, 20–1; M. Popplow (1998), Neu, Nützlich und Erfindungsreich. Die
Idealisierung von Technik in der frühen Neuzeit. Münster: Waxmann; J. Spedding, R. L. Ellis
and D. D. Heath (eds) (1857), The Works of Francis Bacon, vol. 1, Novum Organum. London:
n.a., Aphorism CXXIX.
38. For a recent example, see Vries, Escaping Poverty, 305–11.
39. K. Davids (1993), ‘Technological change and the economic expansion of the Dutch Republic’,
in K. Davids and L. Noordegraaf (eds), The Dutch Economy in the Golden Age: Nine Studies.
Amsterdam, 95–6; MacLeod, Inventing, 146, 150; Gordon, Rise and Fall, 570–1.
40. MacLeod, Inventing, 97–114; L. Hilaire-Pérez (1994), ‘Inventions et inventeurs en France
et en Angleterre au XVIIIe siècle’, 4 vols. Paris: doctoral thesis; K. Davids (2008), The Rise
and Decline of Dutch Technological Leadership: Technology, Economy and Culture in the
Netherlands, 1350–1800. Boston and Leiden: Brill, 410–16, 481–2.
41. B. Zorina Khan (2015), ‘Inventing prizes: A historical perspective on innovation awards
and technology policy’, Business History Review, 89 (4), 631–60; Gordon, Rise and Fall,
571–2; David C. Mowery (1998), Paths of Innovation: Technological Change in 20th-Century
America. Cambridge: Cambridge University Press, 11–46.
42. Mokyr, Lever of Riches, 12–13; E. Jones (2003), The European Miracle: Environments,
Economies and Geopolitics in the History of Europe and Asia. Cambridge: Cambridge
University Press, 45–69.
43. K. G. Persson (1988), Pre-industrial Growth: Social Organization and Technological Progress
in Europe. New York: Blackwell, 7–12; G. N. von Tunzelmann (1995), Technology and
Industrial Progress: The Foundations of Economic Growth. Cheltenham: Edward Elgar
Publishing, 7–9, 117–19 and 399, Mokyr, Lever of Riches, 13.
44. F. Fernández-Armesto (2000), Civilizations. London: Macmillan, 488–500.
45. Jones, European Miracle, 45, Mokyr, Lever of Riches, 159–92; Diamond, Guns, Germs
and Steel, 249–51; Landes, Wealth and Poverty, 45–59, D. R. Headrick, (2010), Power
over Peoples: Technology, Environments, and Western Imperialism, 1400 to the Present.
Princeton: Princeton University Press, 4; L. White Jr. (1978) ‘Cultural climates and
technological advance in the Middle ages’, in L. White Jr (ed.), Medieval Religion
and Technology: Collected Essays. Berkeley: University of California Press, 217–53;
D. Acemoğlu and J. A. Robinson, (2012), Why Nations Fail: The Origins of Power,
Prosperity and Poverty. London: Profile, 76–9.
46. Mowery and Rosenberg, Paths of Innovation, 11–46.
47. Headrick, Power over Peoples, 5–6; Idem (1981), The Tools of Empire: Technology and
European Imperialism in the Nineteenth Century. New York: Oxford University Press; Mokyr,
Lever of Riches, 81–148, A. Grübler (1998), Technology and Global Change. Cambridge:
Cambridge University Press, 117–26.
48. Needham, Science and Civilisation in China, vol. IV, part 2, table 56; P. Malanima (2006),
‘Energy crisis and growth 1650–1850: The European deviation in a comparative perspective’,
Journal of Global History, 1 (1), 101–12, K. Davids (2013), Religion, Technology and the Great
and Little Divergences. China and Europe Compared, c.700-1800. Boston and Leiden: Brill
5–8.
49. Cf. M. Elvin (1973), The Pattern of the Chinese Past. London: Eyre Methuen, 301, 312–15.
50. Parthasarathi, Why Europe Grew Rich, 210–13, 217–19.
51. Ibid., 221–2; M. Berg (2004), ‘In Pursuit of Luxury: Global Origins of British Consumer
Goods in the Eighteenth Century’, Past and Present, 87, 91, 97, 99 and 126 and 182.
81
52. Davids, Religion, 9, 13–14, 162, 188–9, 227 and 229; P. J. Golas (2001), ‘Technological
illustration in China: A post-Needham perspective’, in A. Arrault and C. Jami (eds), Science
and Technology in China: A Post-Needham Perspective. Belgium: Turnhout Brepols, 43–58.
53. On India, Parthasarathi, Why Europe Grew Rich, 214–16, 313 footnote 98; on Europe, see
Davids, Religion, chs. 2, 3 and 4.
54. L. Roberts and S. Schaffer (2007), ‘Preface’, in L. Roberts, S. Schaffer and P. Dear (eds), The
Mindful Hand: Inquiry and Invention from the Late Renaissance to Early Industrialization.
Amsterdam: Koninklijke Nederlandse Akademie van Wetenschappenpp, xv, xix, xxiv.
55. Mokyr, Gifts of Athena, 4–17; Parthasarathi, Why Europe Grew Rich, 219–21. See also Patrick
O’Brien’s essay in this volume.
56. E. Ames and N. Rosenberg (1963), ‘Changing technological leadership and industrial
growth’, Economic Journal, 73, 13–31; D. S. L. Cardwell (1972), Turning Points in Western
Technology. New York: Watson Publishing International, 190, 206; Mokyr, Lever of Riches,
207; Davids, Rise and Decline, 2–7.
57. K. Davids (1995), ‘Shifts of technological leadership in early modern Europe’, in K. Davids
and J. Lucassen (eds), A Miracle Mirrored: The Dutch Republic in European Perspective.
Cambridge: Cambridge University Press, 339–41; Idem, Rise and Decline, chs. 4 and 5.
58. Davids, ‘Shifts’, 342.
59. Thomas Nugent (1749), The Grand Tour, vol. I. London, 32. See also, Davids, Rise and
Decline, 48.
60. R. R. Nelson and G. Wright (1992), ‘The rise and fall of American technological leadership:
The postwar era in historical perspective’, Journal of Economic Literature, 30 (4), 1931–64;
G. Wright (2007) ‘Historical foundations of American technology’, https://web.stanford.
edu/~write/papers/Historical%20FoundationsR.pdf.
82
CHAPTER 5
FAMILIES, FIRMS, AND POLITIES:
PRE-MODERN ECONOMIC GROWTH,
AND THE GREAT DIVERGENCE
Regina Grafe and Maarten Prak
Institutions are usually defined as ‘the humanly devised constraints that shape human
interaction’. They include not only formal rules and organizations, but also informal
norms and customs.1 Since the 1980s, a whole field of studies, New Institutional
Economics, has turned them into a core element in the debate about development,
economic and otherwise. In its briefest form, the argument is that ‘poor’ institutions
drive up the so-called transaction costs associated with doing business. Economic
growth slows when information is hard to find, traders cheat, cartels corner the market,
the police want a cut, and the courts do not function.2 That begs the question we ask
in this chapter: Which role, if any, did public and private institutions play in economic
growth across the globe in the centuries leading up to the Industrial Revolution, and
do such institutions explain at least some of the divergences that eventually emerged
between different countries and world regions?
Initially, institutional economics focused mostly on the insecurity of individuals’
property rights. Whenever those were threatened, transaction costs rose, and economic
growth was stymied. In this story, rulers and elites mostly featured as revenue-
maximizing predators of private property.3 More recently, North, Wallis, and Weingast
have recognized that states as organizations were also needed to check uncontrolled
violence. Rulers not only created rents by interfering with open markets to line their
own pockets, but also used rents as a means of co-opting an elite that served as a check
on violence. For North and his co-authors, only the emergence of democratic constraints
on political elites in a small number of ‘Open Access’ societies during the nineteenth
century eventually unleashed the productive forces of industrialization.4
It is beyond doubt that institutions mattered, but tracing their impact is a challenge.
This chapter surveys a broad perspective of institutions, covering rules as well as
organizations, both formal and informal, including practices and beliefs.5 In this way,
we can create a historically more flexible set of scales to weigh the varying mixtures of
allocation mechanisms available to historical actors and discuss their impact on efficiency.
Following Polanyi, we distinguish between reciprocity (non-market exchange),
markets, and redistribution as coordination tools that can produce economic efficiency
or inefficiency, and social equality or inequality.6 Part of the complexity of understanding
institutions is that the three allocation mechanisms played varying roles at distinct levels,
which we identify as the family, the firm, and the polity. To complicate matters further,
choices on one level mattered for those at the others.7 For example, Greif has argued
that family structures tended to impose a logic of collective behaviour in Asia and the
Middle East, but favoured individualist behaviour in Western Europe. That turned out
to be good for family firms in the former, but placed them in the very long run at an
economic disadvantage vis-à-vis the latter.8 The interactions between institutional and
organizational arrangements regarding families, firms, or entire states also imply that
the effects of the same institution can be positive (efficient) in one context and negative
(inefficient) in another. Institutions come in interrelated sets, which are ‘co-evolutionary’.9
In this chapter, we will use the comparative method to identify institutional
environments that seem to coincide with positive economic outcomes in the short,
medium, and long term. We start from the smallest scale of organization, kinship, and
move on to the next, at institutions that governed production and trade, firms, trading
diasporas, guilds, and mercantile companies. Finally we turn to political governance
proper.
The family and economic development
One influential way in which families as an institution have been connected with
economic development is through their choices of how to allocate their labour inputs
and the products of their labour. The theory of the ‘family economy’ held that peasant
households tried to minimize their contacts with markets and sustained a situation of
economic self-sufficiency, by combining the labour inputs from all family members and
redistributing returns within the household. Historians of gender portrayed the family
economy as an environment of relative equality between the sexes. With the arrival of
capitalism and its labour markets, women were relegated to the poorly paid jobs, and as
a result also lost much of their clout within the household, where the male ‘breadwinner’
used his higher wages to obtain all sorts of privileges.
In the 1970s, the theory of the family economy was extended to the world of
‘proto-industry’. European peasant households in regions of poor soils incorporated
work for putting-out merchants in their annual schedule in an attempt to save their
smallholdings. More recent research on proto-industrial regions and on farming
families has undermined the idea of the household as a closed unit of production, and
the idea of a ‘family economy’ stage, preceding capitalism, has therefore been by and
large abandoned.10 Nonetheless, historians have remained sensitive to the household as
a place where economic decisions on consumption, production, and reproduction were
actively being taken.11
A second close connection between families and economic development is through
reproduction. Pre-modern societies balanced population and economic capacity
through Malthusian checks, that is, reproductive constraints that reduced, or epidemics
that wiped out excess population. The theory of the European Marriage Pattern (EMP)
argues that, with the help of late marriage and a high degree of celibacy, Europeans
were able to actively limit the number of children. While in other regions of the world
84
Pre-Modern Institutions
population growth outstripped economic resources, Europeans managed to free those

resources for investments in education and innovation. It was argued that this EMP
emerged in the late Middle Ages, especially in Northwest Europe, through a fortuitous
confluence of Catholic doctrine sponsoring juveniles’ agency in the choice of a partner,
inheritance practices that favoured the establishment of separate households (neo-
locality), and a strong demand for wage labour after the Black Death.12 The implication
suggested that European population patterns were more growth-friendly.
Yet, the picture of a pre-modern world mired in Malthusian constraints has been
equally questioned from the Asian perspective. China’s spectacular population growth
during the Ming and Qing eras was achieved without a substantial decline in living
standards. In Asia generally, where the age of marriage was lower than in Europe, the
regulation of fertility worked partially through infanticide. Because it was applied sex-
specifically, the percentage of male bachelors in the Chinese population around 1800
was on a par with England and Scandinavian countries. Chinese females, moreover,
had lower fertility within marriage than Europeans, suggesting a capacity to proactively
regulate family size.13 Overall, pre-modern societies in both Europe and Asia are now
understood to have been more capable of demographic self-regulation than neo-
Malthusian theories assumed.
A third approach to the connection between family and economy has been through
‘family systems’. It has been proposed that Middle Eastern and Asian social structures
favoured a collective mindset, compared to European incipient individualism, an idea
that harks back to Max Weber’s attempts to similarly frame the distinct trajectories
of Europe and Asia. The argument is that the structure of economic organization was
shaped by whether responsibility for wrongdoing was collective (i.e. an entire family
can be punished for wrongdoing) or individual. Societies organized around collective
responsibility would find the size of business organization capped. This was because
organizations could rely on internal monitoring mechanisms, which were the very
strength of such societies. But such internal mechanisms became less effective as the
size of the organization increased. By contrast, systems shaped by more individualist
social structures, where organizations could not rely on strong internal monitoring,
would have increased the demand for a ‘third-party enforcer’, an independent political
body that enforced rules and punished infractions. In Europe, where family-, lineage-,
or clan-based monitoring was deficient, organizations were keener to see the town, or
princely authorities control misbehaviour. But this, paradoxically, had the unintended
consequence of increasing the optimum size of the organization, and with it the market.14
Critics of this view argue that it misrepresents the notion of family or lineage
across Eurasia. In China, lineage was, to some extent, a fiction created by adoption. In
eighteenth-century Beijing, adoption rates varied between 6 and 10 per cent. And Japan
may have actually benefited from its traditional family structure, with three-generation
households and emphasis on lineage. Stable family relationships led to lifelong learning
and employment that created eventually the conditions for Japan’s steep growth
trajectory.15 Family systems were, in other words, flexible, and their economic outcomes
not predetermined.
85
At the same time, new data sets and daring attempts to classify societies according
to family systems have produced some intriguing results for the post-1800 period. The
first and most significant is that the connection between family and economy runs to
an important extent through the channel of female agency. In so far as family systems
support the education and labour participation of women, the economy will benefit;
when female agency is constrained, the economy tends to suffer. Yet, the size of the effect
clearly depends on the interactions with other institutional levels. Cultural restrictions
for Chinese women to work outside the household might have been less important since
a large share of the population had access to their own land and were thus less involved
in waged labour anyway, according to Pomeranz.16
In the modern world, positive correlations can be established not only between family
systems and economic growth directly, but also between late marriage, educational
attainment, and female voting rights, which in turn also have a positive effect on
economic development. For the pre-modern period, the evidence for Northwest Europe
suggests an economic stimulus emanating from the institution of the family, but for other
regions we still lack the evidence to fully understand its economic impact during the pre-
modern era.17 Still, the argument could be made that at this lowest level of institutional
structures, belief systems and religious and social norms were of particular importance
because they determined gender relations and reproductive behaviour, both of which
have been shown to be subject to particular persistence. In turn, they created limits (or
not) to productive organization within and outside the household.
Firms, guilds, and chartered companies
At the meso level, three distinct types of organizations have dominated the debates about
efficient institutions: firms, guilds and similar types of collective organizations, and
finally chartered and joint-stock companies. All of them faced the main challenges of any
economic enterprise of the early modern period: insecurity (the known unknowns) and
uncertainty (the unknown unknowns). The unpredictability of the business environment
started at the very basic level of bookkeeping: merchants and entrepreneurs used
methods to record their transactions that made it practically impossible to keep track
of the sources of profit and loss. Epidemics, fires, shipwrecks, piracy, and other natural
and human infringements of production and exchange likewise posed external risks.
To combat these problems, entrepreneurs would try to shield their activities through
collaboration and collusion.18 Practices that restricted the access of outsiders to markets
and protected insiders were ubiquitous. Sometimes such institutional arrangements
produced both private and social gains, but at other times the private gains were a
social loss.
The early modern firm was an organization of production and trade set up around the
family and kin as one way to deal with business risks. By pooling human and physical
capital, handling the redistribution of returns partially as a non-market transaction, and
guaranteeing succession in business, it introduced elements of stability. At the same time,
86
family firms were also subject to limitations in size. The selection of the most skilled
workers and succession in the firm were prone to mere chance. Traditionally, scholars
have thus argued that the transition to legally backed organizational forms of business
from Italian medieval family firms, via joint-stock trading companies, to the modern
corporation was an important element in economic growth. Companies could increase
in size, guarantee inter-temporal persistence, and raise larger amounts of capital. The
path towards the modern company in Europe was juxtaposed to a supposed continued
reliance of businesses centred on kin of religious institutions in Asia and the Middle East
as one part of the story of economic divergence.
There are several problems with this attractive but oversimplified story. At the
European end of the story, chartered and joint-stock companies were central to the
modernization argument. As handmaidens of a ‘world economy’, the Dutch East India
Company (Vereenigde Oostindische Compagnie – VOC) and the English East India
Company (EIC) were the first to be financed by shares traded on the stock market.
Yet, more recent research has shown that the VOC created its first shares more or less
by mistake and used the instrument hardly at all after the company’s start-up phase.
Moreover, very few other companies were financed through shares. Profits moved
from an early high on a downward trend, and by the mid-eighteenth century, the VOC
traded at a loss. The EIC was subject to the same trend.19 That is not to say that the
companies were not economically important. The VOC alone was responsible for 13
per cent of the Dutch Republic’s foreign trade, and its trading volume was larger than
all the imports from Baltic ports into Holland combined. Yet, commercial expansion
beyond Europe had arguably as much to do with aggressive state policies as with the
particular organizational form of the companies themselves. As Fernand Braudel had
already observed, chartered companies, with their state backing and strong-arm tactics,
were ill-fitted to act as role models of ‘free enterprise’.20
At the Asian and Middle Eastern ends, the story of the path towards the modern firm
is also more complicated than what was once thought. There is strong evidence that in
China the concept of lineage as the basis of business organization and credit networks
remained central. It is also likely that the co-evolution of norms and institutions
might well have reinforced those initial conditions that favoured clan-based business
structures.21 However, Chinese lineages worked very differently from European families:
lineage-based businesses were not organized in a strict genealogical sense; they could
rewrite the past if that was useful in the present and for the future. Not surprisingly,
evidence of Chinese business practices has been uncovered that looks remarkably akin
to those in the West.22
A separate argument holds that Middle Eastern development was at a disadvantage
vis-à-vis European business because Islamic family and business law made it harder to
guarantee the inter-temporal persistence of businesses. At the same time, alternative
institutions that were used to pool capital, especially religious foundations known as
waqf, were allegedly too inflexible to substitute for what some see as the quintessential
European credit institution, the bank.23 Yet, that argument, too, has been criticized. Too
little research exists right now for us to understand the application of Islamic law as
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related to business practices. Moreover, in parts of Europe and its overseas empires,
notably the Hispanic world, much of the credit markets were organized in the form
of religious institutions, which seems to have sustained commercial expansion and
economic development at relatively low costs (i.e. interest rates) well into the eighteenth
century.24
Just as important as individual firms were organizations that looked after shared
interests of trades in most pre-modern societies. Professional associations are still
common today and by no means a hallmark of the ‘traditional’ economy. What
distinguished pre-modern trade organizations, guilds, and trading nations was the
routinely imposed requirement for everyone in the same trade to become a member. This
requirement was usually backed up by legislation that established a ‘monopoly’ position
for the members of the guild as a group. It is important, though, to stress that they would
continue to compete with one another inside the association. This set them apart from
joint-stock companies such as the VOC or EIC, which held a proper monopoly in the
sense understood by modern economists.25
Craft guilds in turn should be distinguished from commercial organizations. In Europe,
merchant guilds emerged before craft guilds, to reduce the risks related to commitment
and enforcement in long-distance trade. They were still active in the sixteenth century.
But at least in the more advanced centres of trade, they were gradually losing ground by
1600 as market institutions became sufficiently solid to support transactions without the
guild framework as an enforcement mechanism. Locally, shopkeepers’ guilds remained
active, but with low entrance barriers and as a result broad membership.26
Chinese guilds usually recruited their members on the basis of shared geographical
backgrounds. As these often also determined the line of trade, economic and regional
identities tended to overlap. Most Chinese guilds emerged out of temple organizations
and shared their premises with religious buildings. They regulated weights and
measures, set prices (usually in conjunction with the local authorities), maintained
codes of professional conduct, and lobbied local government to promote the interests
of their members. There is, however, no hint of an exclusive access to particular trades
for members of a specific guild. Membership was available to anyone who fit the
membership profile, that is, originated from the region or was active in the occupation
covered by the guild.27
Craft and merchant guilds were also common phenomena in Ottoman towns and
cities. Ottoman guilds set quality controls and prices for both raw materials and final
products. Guilds regularly made their wishes known by petitioning the authorities, and
their proposals were usually accepted and absorbed into the body of regulations. Guilds
were numerous, as well as popular in the sense that they organized a very substantial
part of urban populations in the Ottoman Empire.28
European craft guilds took on a number of distinct roles. Economically, they
sometimes coordinated the purchase of raw materials and the branding of products.
More commonly, they provided training through apprenticeship schemes and tests of
acquired skills in the form of master examinations. Some guilds, especially in export
trades, branded goods by attaching a seal of approval after the product had been examined
88
by guild officials. Guilds might also provide recourse for dissatisfied customers. Socially,
some guilds assisted members in need through mutual support schemes. Guilds could
double as civic militias, and guilds everywhere lobbied local authorities, seeking support
for their trade.29
Strong claims have been made for and against the economic benefits of guilds,
especially in the European historiography. Against the guilds, Adam Smith famously
argued in The Wealth of Nations (1776) that they were a ‘conspiracy against the public’.
Modern critics of the guilds argue that they used their ‘monopoly’ rights to exclude
newcomers, minorities, and women and to create rents for established masters and their
offspring. The question is how widespread this was. In one area, the debate has been
settled in favour of the pessimists. With some notable exceptions women were excluded
from the corporate world.30
The optimists have nonetheless raised a number of counterarguments. One is that
guilds were the pre-modern equivalent of the firm. A second is that centres of economic
growth, like Antwerp, Amsterdam, and London, also had a strong guild presence.31 A
third, and perhaps the most relevant, claim is that guilds helped organize the training
of the workforce or, in other words, the creation and transmission of human capital
through skills education.
In its strongest form, this argument claims that apprenticeship contracts, enforced
by guilds, helped to iron out the mismatch between the masters’ investment in training
during the early stages of the process and the temptation for apprentices to move elsewhere
once they had gone through those early stages to claim a higher wage. New research has
demonstrated that the relationship between master and apprentice was much more fluid
than this model assumes. Guilds did not oversee the apprenticeship process, but merely
registered its progress. Their role in the training process may therefore have been more
limited to the registration of an apprenticeship, and as appeal boards for contracts that
broke down.32
Perhaps most importantly, research on the geographical background of guild
membership has clearly demonstrated that many masters, very often a majority,
originated from another town than the one in which they were working. This implies
a choice of business location. The same applied to merchants. In the late fifteenth
century, many migrated from Bruges to Antwerp. When the Dutch Revolt broke
out in the second half of the sixteenth century, a second wave of migration took
Antwerp merchants first to London, Hamburg, and Cologne, and ultimately to
Amsterdam. In the same vein, Jewish merchants from Iberia who wanted to settle
in Holland negotiated with various local governments about the conditions these
could offer them. All of this points to the fact that European towns were competing
to establish comparative advantages. Institutionally, such advantages consisted
of a bundle of arrangements. Like the guilds themselves, they served multiple
purposes at the same time. Inter-urban competition also supported the diffusion of
institutional innovations.33
All these arguments are much more difficult to verify outside the European contexts,
where guild documents have not been preserved as abundantly as in European archives.
89
In India and Japan, there were no formal guilds; it has been argued that Indian castes
were their functional equivalents, while Japan had brotherhoods that brought together
businessmen in the same trades. Guilds were introduced in the New World by European
colonizers, but in differentiated ways. In the Spanish colonies, they were numerous and
often admitted people of all ethnic backgrounds and sometimes even slaves. In their
North American colonies, British authorities were reluctant to create special interest
organizations for industrial producers, which might become a source of protectionism
against imports from the metropolis. As far as we know, the regulation of apprenticeship
had no equivalent in China or the Middle East.34 We have no way to test numbers against
economic performance.
Nevertheless, certain organizational structures seem to have been almost ubiquitous
across cultures and geographies. Such is the case of the clustering of certain crafts people
in urban settings. Whether these were imposed by urban institutions on the crafts, or
emerged out of the self-organization of the crafts, or responded to a location around a
religious shrine, clearly they were an early response to the benefits of external economies
of scale, and of agglomeration economies. Examples are the famous porcelain makers of
Jingdezhen and the production of cotton in parts of Bengal.35 The same might be true for
the role of the polity in creating enterprises. Several European countries – France and
Austria stand out – created state manufactures.36
What can we make of this? There certainly were distinctions in the way business was
organized across the globe in the pre-modern world. With the wisdom of hindsight,
certain institutional forms can be identified that would eventually emerge as being very
significant. The importance of shareholding companies in the long run is uncontested,
but their precursors were probably more important as the extended military arm
of European states than as capital-raising business enterprises or revolutionary
management solutions. Producers and trader associations raise similar concerns: Why
was urban economic development associated with their presence for centuries? And
why did their disappearance not create more growth in all places where this happened?
Finally, why did China not reap benefits from being less constrained by ‘monopolistic’
guild structures?
States and empires
This takes us to the third level of our analysis, the polity. Early modern political
formations were characterized by diversity, not only globally, but also within larger
continental spaces. City states, territorial states, and empires coexisted across Asia,
Africa, and Europe. Only in the Americas, transatlantic empires prevailed. Such overseas
empires existed, however, side by side with land-based empires, like Mughal India or
Safavid Persia. Polities also differed strongly in how they were constituted socially,
economically, and politically. The question to ask is whether we can observe clear
correlations between particular sets of political institutions and societies’ potential for
long-term economic growth.
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Political structures, generally quite loosely described as ‘states’, have long been central
to arguments about the economic benefits of parliamentary versus so-called absolutist
regimes in early modern Europe. The underlying problem is that societies face a
contradiction: Without enforcement of a set of rules that govern political and economic
life, the survival and property of individuals are permanently at risk, damaging their
willingness to engage with the market. An independent third-party enforcer is therefore
needed to protect subjects/citizens from random violence, and to enforce contracts
where necessary. But a political regime strong enough to protect is also strong enough to
blackmail and act as predator.37 So how could the institutions of governance be designed
in such a way that power holders would refrain from predating and extortion and thus
from raising transaction costs in society?
The answer given by much of the literature was that rulers needed to be constrained by
formal rules and parliamentary institutional arrangements that created sufficient checks,
such as those in place in England after the Glorious Revolution of 1688. Economic
historians have pointed out that the transition from pre-modern to modern intensive
growth was initially less about an acceleration of growth rates than about economies
no longer going into reverse gear. ‘Growth without a reverse gear’ was only thought to
be possible once political regimes relied on representation within a formal (though not
necessarily written) constitution. A related line of research has claimed that particular
legal systems were more suited to guaranteeing subjects/citizens property rights, also
singling out Anglophone legal origins as particularly growth-friendly.38
This returns us to the problem that any polity tasked first to guarantee external
defence and second to provide a third-party enforcer service also needs to be financed.
The legal capacity of the state depends on the coercive power to defend the state’s public
property rights to taxation, that is, its fiscal capacity.39 But all early modern polities were
states ‘under construction’. Their administrative capabilities were severely constrained by
rudimentary administrative systems, limited information, and high costs of administering
sometimes far-flung territories. Estimates of the share of GDP that polities could hope to
appropriate as tax income, a proxy for state capacity that is often called the state quota,
are notoriously hard to come by. Today it ranges in OECD countries from 30 to over 50
per cent. In the sixteenth century, the revenues in terms of share of GDP per capita of the
Ottoman Empire and most European polities are estimated at 2 to 5 per cent. By the later
eighteenth century, Ottoman revenues still hovered around 6 per cent of GDP and that
of China might have been somewhere between 4 and 8 per cent.40 But in Britain, it had in
the meantime reached 12–15 per cent, with other Western European states somewhere
between this and Asian or Ottoman levels.41 Was the divergence in fiscal capacity at the
heart of growth divergence?
Several hypotheses have been advanced that link institutional forms of state formation
to the likelihood of a more capable state emerging. Underpinning many of them is
the idea that there was an optimum size of the state, or more precisely a particular
combination of size, degree of centralization, and administrative efficiency. City states
did not suffer from the information costs that larger polities faced and might well have
benefited from an easier alignment between citizens’ interests and the fiscal exigencies of
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the polity. But in competitive state systems, especially in Eurasia, the internal success of
city states might over time be cut off by the external threat from larger neighbours. Local
elites that had guaranteed the financial survival of many of the most successful city states
for centuries sometimes turned into conservative and exclusionary ruling oligarchies.
Princes were not as aligned with commercial interests as urban burghers, but they did
quite often explicitly seek to foster economic development. Territorial states, princely
or republican, had an advantage when it came to raising the revenue to withstand inter-
polity competition. But in order to turn the advantage of more taxpayers into more
revenues, they needed to achieve a certain degree of centralization that afforded the state
a greater ability to appropriate and redistribute resources.42
If city states were considered too small, empires in general, but in particular land-
based empires, were considered too large and as lacking the resources necessary to
develop state capacity. While early institutionalists blamed excessive centralization for
their poor growth performance, now imperial decentralization is stressed as an obstacle
for growth. In the Ottoman Empire, an increasing share of fiscal resources remained in
the regions, where it attracted a large number of intermediaries that ate into the receipts
of the central state. Similarly, China’s very large size delayed the organization of effective
tax systems when compared to early modern Japan. In the Spanish Americas too, only a
very small share of the fiscal resources ever made it to the supposed centre of the empire;
most continued to circulate on the western side of the Atlantic.43
Caution, however, seems warranted in accepting too close an association between
the share of the product appropriated by the polity and state capacity. At very low
levels of fiscal capacity, polities clearly struggled to develop legal capacity. In Africa
underpopulation in large parts of the continent probably resulted in a high land–labour
ratio, which in turn limited the ability of polities to tax. Low population density in turn
was initially driven by a combination of sleeping sickness limiting the availability of
draught animals and few fertile lands. Where land was abundant, peasants could move
on if taxed. That left rulers with a choice of either very coercive means of extraction of
rents from labour or taxes that were imposed on major trade routes, which could not
be avoided by merchants for reasons of climate and geography as for example in the
trans-Saharan trade. This delivered at least four blows to prospects for growth. Labour
markets were pushed into forced labour, because slavery and forced labour were forms of
population tax. Trade, which already suffered from high costs caused by environmental
conditions, was burdened even more, and the consolidation of efficient and effective
political power was held back. Low levels of state capacity might have pushed economies
off their growth path repeatedly. Finally, fiscally weak polities were also very exposed to
external threats to their survival as independent polities that manifested themselves in
the nineteenth-century ‘scramble for Africa’ on the part of European states.44
Most Eurasian polities and the American territories attached to them, however, had
during the early modern period lean but reasonably stable administrative structures
that could tax land and population, as well as trade and consumption. The assumption
that empires were too large to achieve efficient degrees of fiscal capacity can also be
challenged. Most of the large land-based and overseas empires were by 1800 not the ‘dead
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men walking’ that early institutionalists had described them as. They had successfully
guaranteed their survival as political units, and a new historiography now sees significant
indications of economic dynamism in many of them as late as the eighteenth century.45
More important, a focus on the gross revenue as a means to assess state capacity is in
danger of confusing two fundamental state functions: that of third-party enforcer and
that of coordinating the articulation of the economy domestically and in the growing
international economy. The function of third-party enforcer could be achieved by one of
two means. A state that was centralized and therefore could exert coercion at relatively
low cost could also rely on such coercion to raise the necessary fiscal means. However,
high degrees of coercion provoked resistance because they undermined the legitimacy
of the state. In such a polity, fiscal capacity and legal capacity could only be aligned
through formal constraints that guaranteed some restraint in discretionary coercion and
a use of the state’s means that met the approval of the represented elites. Historically,
the mechanisms to achieve such balance probably emerged by chance. Royal power
in England was stronger and the realm more centralized than any other European
polity early on. Thus English medieval monarchs could force the nobility to attend
parliamentary sessions while their continental neighbours had trouble calling up the
nobility for duty. But centuries later, the English Parliament managed to turn its forced
meetings into a representative institution in large part because nobles had to attend.46
A second and more common model, however, was that of the poorly integrated
polities. This was the case of most empires, constituted as composite or polycentric
states. Coercion was expensive under such circumstances. Polycentric states were also
less characterized by the centre–periphery dynamics of nineteenth-century colonialism.
Instead they featured a governance regime that allowed for the retention of resources at
various locations and sub-centres; co-optation was likely more efficient than coercion in
these cases because it supported the state’s legitimacy. In these cases, decentralization,
rather than a sign of state weakness, was actually promoting the efficient use of resources
that bought off opposition and reduced the cost of coercive practices, while still offering
strong legal capacity.47 Local and regional agency converted large parts of local elites
into stakeholders of the polity. It generated quasi-voluntary compliance, which reduced
inefficiencies in fiscal systems compared to states that had to apply more force as some
have argued for the Spanish Americas.48 Likewise, in the notoriously de-centralized
Dutch Republic, the urban heritage may have helped to create trust and cooperation
between citizens and their rulers. The state could thus collect high taxes efficiently
and provide useful public goods. Quasi-voluntary compliance increased efficiency by
reducing coercion costs and left more revenue to be spent on other purposes.49
Still, polycentric forms of political institution building might have engendered
collateral damage in terms of economic growth. Powerful territorial and/or urban elites
in larger polities often created non-market obstacles to the movement of goods, capital,
and people in defence of local power. They did not hinder market development because
of their tendency to disrespect private property rights. Instead, their political and social
aspirations led to smaller and shallower markets, which in turn meant that allocative
efficiencies were removed only very slowly.50 Domestic markets remained poorly
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integrated. Perhaps the creation of states with strong polycentric features, from China to
the Austrian Habsburg Monarchy, was a response to a perceived need to substitute for
market forces in the deepening of the market.
Polycentric rule also made it impossible for rulers to develop cohesive external
commercial policies at a time when the share of international trade in economic
development was strongly increasing. Mercantilist policies of the kinds that Britain
or France developed in the eighteenth century presupposed a relatively high degree
of political integration. The transfer of sovereign power to the English East India
Company and the creation of a company state were possible because sovereignty could
be understood as hybrid on the Indian subcontinent. But it was also an expression of
a powerful domestic centralized ruler, with real military might and increasingly ill at
ease with such hybridity.51 Where mercantilist policies were used to control market
access, as in British competition in the textile sector with India, such policies were
able to significantly change the growth path of both economies, upwards in the former
case, downwards in the latter. Polycentric states, by contrast, lacked the ability to
create functioning mercantilist systems. Giving priority to one territorial interest over
another would have entailed very high coercive costs. The Dutch case was an interesting
intermediate example that combined strong polycentric structures in the Netherlands
with mercantilist policies in its colonies.52
This then brings us back to the co-evolution of institutions. Perhaps the debate about
states and empires has been wrong-footed from the very beginning. In a very nineteenth-
century manner, historians have assumed that states (and empires) are the proper level
of analysis to capture the effect of governance structures. However, given the constraints
states faced, more attention should probably be paid to the way they connected to other
levels of society. The role of towns and their citizens particularly merit our attention.53
After all, towns acted as hubs in commercial networks and were also the locus of
industrial activity. Increasing levels of urbanization always indicated rising economic
prosperity, even if specialists in European and Japanese proto-industry insist that non-
agricultural production in the country might well have been an alternative source
of growth.54 Urban elites’ personal interest in trade and industry and the efficiencies
emerging from an overlapping of economic and political elites remain good candidates
as growth-fostering institutions.55
Nevertheless we should be careful not to impose too simple a causality. Europe’s
economically most vital regions developed mechanisms to translate urban interests
into state policies: the city state in Renaissance Italy, federalism in the Dutch Republic,
and parliamentary rule in post-1688 England. At the same time, not all European
areas with very strong urban traditions were able to turn this heritage into faster
economic development. One notable example is Spain, where strong urban political
rights (together with territorial rights) acted as effective constraints of political power
– but failed to promote market development. Urban interests sometimes needed to be
overridden to let the market grow. In China, it has been argued, cities and towns were
not so much suppressed, as left in the cold: poorly regulated, poorly funded, and far
94
removed from state supervision, they were an easy prey for opportunistic officials and
corrupt practices.56
The co-evolution of political and economic institutions at various levels of social
organization produced an almost infinite number of variations. In a world of poor
transport and high information costs, that is, one in which using the market could be
costly, urban spaces were relatively privileged because here the market could function
more easily. Where higher level political institutions left those urban markets at the
mercy of greedy lords or officials, their development was hindered just as much as
where higher level political institutions left urban elites entirely in charge, allowing
them to restrict market size and depth. The role of states in coordinating the market
has probably been underestimated, but it was rarely independent of governance at the
urban level or at that of the many historical territories or provinces that had been joined
up in larger units.
Conclusion
The notion of a static early modern world, proclaimed by Emmanuel Le Roy Ladurie
in 1974, has since been comprehensively overturned.57 However, we still only partially
understand the forces that determined the tension between stasis and change. The slow
transition from early modern extensive growth to modern intensive growth was mostly
about economies stopping to go into reverse gear. The data, however imperfect, suggest
that this was achieved in pockets of Europe earlier than elsewhere. Any explanation for
that exceptional surging ahead cannot overlook the Industrial Revolution. However,
a growing consensus suggests that some European economies were going through
fundamental changes well before 1800, while the impact of modern industry took quite
a while to materialize after 1800. If we accept that industrialization was part of a larger
process of transformation that took several centuries, can we then argue that institutional
change was the driving force that took the reverse gear out of the engine?
At the most basic level, family systems clearly mattered. But for our period it has
so far proved difficult to produce convincing evidence that particular family systems
were associated with more or less growth, even if gender relations and inheritance
systems remained important. The analytical problem might in part be the co-evolution
of institutional forms: a particular form of lineage or family evolves in combination with
organizational forms of production, say the craft workshop or the agricultural unit of the
extended family, and is regulated and sanctioned by urban, religious, or state regulation.
For the historian it is difficult to identify which part of that set of institutions helped or
hindered growth. Looking at each of them in isolation might in fact be unpromising to
start with from a methodological standpoint.
Historians have traditionally paid much attention to the intermediate organizational
level. The current state of research highlights the role of guilds, that is, merchants’
and producers’ associations, as significant, but guilds’ ubiquity at the same time
reduces their value as an explanation for divergence between civilizations. Business
95
innovations from Italian family firms to joint-stock companies have been seen as
being at the heart of European divergence. We are not convinced. As new research
emerges on business practices and legal structures underpinning credit and goods
markets in Asia and the Middle East, perceived dramatic divergences seem smaller.
As for joint-stock companies, much of their impact before the late eighteenth century
was limited to overseas trade. On balance we would argue that the large diversity in
institutional solutions to commercial challenges and the development of crafts, and
the competition between them, might have been more important. Here we do see
a link with the more or less autonomous towns and a range of states in Europe that
offered such diversity.
Finally, we see the role of the state as that of a coordinator of economy and society.
Property rights were a part of that remit, but the Dutch Revolt or the Glorious Revolution
were concerned with legitimacy as much as anything else. Given the constraints of
distance and limited means of communication, coordination was expensive as well as
difficult to achieve effectively in large territorial units. The most successful states tended
to be small to medium-sized, even in the European context; the Industrial Revolution
itself was a regional, rather than a national, phenomenon. The more successful polities
also had institutional mechanisms that enabled the articulation of local concerns at state
level. The presence of multiple states, moreover, offered a mixed menu of institutional
combinations as well as various routes for ‘exit’, and therefore ‘voice’, to economic
interest groups, and an escape route for those who had fallen foul of a particular elite or
ruler.58 We do not believe that Europe had many superior institutions. But it might have
benefited from more institutional diversity that developed in, and benefited from, the
co-evolution at various levels of articulation.
There is thus not one single institutional factor that explains the ‘Great Divergence’.
In so far as institutions contributed to diverging trajectories of growth and stagnation,
we have tried to demonstrate that it was not ‘Europe’ versus the ‘rest’. Both categories
are too heterogeneous. The exceptional pockets in Europe were institutionally distinct
because of their small family units, strong urban institutions, and small state units. There
are indications that, precisely as a result of these features, those same regions managed
to create organizations that embraced more people and covered larger distances.
Theoretically, there could have been other sets of co-evolved norms, organizations, and
institutions that might have eventually led to the same path; historical examples of such
alternative trajectories are, however, not available.
Notes
* Thanks are due to the Social & Economic History Group at Utrecht University and to the
helpful suggestions of the audience at the authors’ workshop for this volume at the London
School of Economics in May 2016.
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101
CHAPTER 6
PLANTATIONS AND THE GREAT DIVERGENCE
Trevor Burnard
Few institutions define world history in the early modern period more than the plantation
complex. It has been argued that the plantations in America provided one of two crucial
ingredients (along with the presence of large coal deposits allowing for cheap energy)
propelling Britain and then Europe to the economic superiority of Europe over China by
1800. Kenneth Pomeranz suggests that ‘the extraordinary ecological bounty of the new
world’ lifted previous limits to the supply of land. Plantations added millions of ‘ghost
acres’ to Britain’s supply of agricultural land, providing food for a growing population
and freeing up resources for other activities.1 The plantation system is thus vital for
determining the extent to which wealth coming from the Americas in the seventeenth
century and, especially, in the eighteenth century can be seen as crucial in the foundations
of ‘the Great Divergence’. Significantly, the important role that is often attached to
plantations in accounts of ‘the Great Divergence’ suggests an importance for plantations
that is sometimes absent in the literature, where the plantation system seems only to
have added to the immiseration of humans generally and to the underdevelopment of
Africa specifically.2 In this chapter, I examine the role of plantations in fostering ‘the
Great Divergence’, paying particular attention to Britain which as a major imperial actor
in the plantation societies of the Americas and the first industrial nation is especially
crucial to arguments connecting the plantations of the Americas to eighteenth-century
industrial development.
That the Americas would be crucial to Europe in overtaking China as the driver of
the global economy by 1800 would have seemed surprising before the maturation of the
plantation system in the eighteenth century. By 1650, the settlement of the Americas
was mostly a failure. There were some successes. Spain and Portugal had placed
themselves firmly into Central and South America, with the Spanish developing silver
mines in Potosí in upper Peru that provided a torrent of bullion to the home country,
albeit with decidedly mixed results for economic development.3 The Portuguese had
established the first plantation complex in the Americas, producing sugar for export to
Europe from the 1550s, though this innovative use of American land had less positive
results for Portugal than might have been expected.4 Some new foodstuffs, like maize,
tobacco, and potatoes, had made their way from the Americas to the rest of the world,
as did exotic drugs like tobacco, leading to transformations of parts of the world
economy.5
The overall effect of the Columbian encounter, however, was mostly catastrophic,
especially for the native inhabitants of the Americas. Much of the Americas reverted to
wilderness, possibly taking some carbon out of the atmosphere and perhaps contributing
Plantations and the Great Divergence
to the Little Ice Age of the seventeenth century.6 Population decline was good news for
forests, which grew bigger and taller in the Americas than they had done for millennia.
For European settlers, these gigantic forests looked as if they were ancient but in fact
they were very new. These huge trees when chopped down provided the nutrients for
extensive agricultural cultivation, notably in northeastern Brazil from the 1550s and in
the smaller islands of the eastern Caribbean, settled by the British and the French, in the
second quarter of the seventeenth century. Once cleared, however, especially in places like
Barbados where there was no indigenous population to hamper European colonization
efforts, the rich soils of deforested land proved perfect places for the establishment of
farms for the production of tropical crops – in the Americas, these included tobacco,
cotton, rice, indigo, coffee, and above all sugar.7
In English America, these farms were called ‘plantations’. The rise of plantation
agriculture after 1650 and the nearly coincidental beginnings of the financial and
then industrial revolutions in seventeenth- and eighteenth-century England and
later Britain is the focus of fierce historiographical attention with less attention
paid to similar connections in other European empires. Nevertheless, despite the
concentration in this chapter on developments in Britain, if slavery and the slave
trade created capitalism and made a major contribution to the Industrial Revolution,
then the place where industrialization should also have occurred was France. The
French Caribbean, especially the powerhouse of Saint-Domingue, expanded far
more rapidly than the British Caribbean after 1714 and particularly after 1763. By
1776, the French Caribbean produced 43 per cent more crops by value than was
the case for the British Caribbean. That difference accelerated during the American
Revolution and the 1780s. Of course, the French economy was greater by aggregate
than the British in the eighteenth century, and international trade was relatively
small. Nevertheless, the contribution of the French Caribbean to French prosperity
before 1791 was considerable, even if slavery and the slave trade are assigned limited
importance in accounts of French industrialization. In addition, a stronger argument
for the importance of the slave trade for wider externalities is beginning to be made
for the Netherlands.8
It is possible that forthcoming work on the French economy in the late eighteenth
century might make a strong case for the contribution of the plantation economy to
French economic growth. Atlantic history has until recently been marginalized within
French historiography and the sudden collapse of Saint-Domingue after slave rebellion
in the 1790s and 1800s has tended to hide the dynamic influence of wealthy planters in
French commerce before the French Revolution. But wealth from the Antilles helped to
fuel important economic changes in the metropolitan economy after the end of the Seven
Years’ War, notably real estate speculation in the French capital. Some of the money
gained in Paris during the period in which the French capital was transformed from an
administrative and manufacturing centre into a financial powerhouse was reinvested
back into the Antilles. For example, Jean-Joseph Laborde, the wealthiest man in France
in the 1770s, invested heavily in Saint-Domingue after retiring as a financier. By 1789, he
owned 1,400 enslaved workers. Conversely, Saint-Domingue planters put their money
103
back into the metropolitan economy. Jean-Baptiste Hotten, for example, a plantation
owner with 219 slaves, became in the 1780s a Parisian real estate mogul.9 As we learn
more about such cross-fertilization between the French metropole and the colonies, we
will appreciate more how events in Saint-Domingue put a halt to the influence of the
Atlantic economy on French economic transformation during the Old Regime.10
But it was in Britain where the connections between the plantation system and the
‘Great Divergence’ have been most explored. The term ‘plantation’ was derived from
English settlement in Ireland in the late sixteenth century, initially denoting an overseas
colony.11 By the middle of the seventeenth century, the term had assumed its meaning of
a large agricultural enterprise in a tropical region, managed for profit, which produced
an export crop for sale in Europe and elsewhere and which had a labour force that was
hierarchically stratified. That labour force could be local or imported. Nevertheless, the
contingencies of history – which meant that the most important early manifestations of
the plantation complex were in the Americas and in places where indigenous labour was
unavailable for exploitation – led to the management and ownership of plantations being
in the hands of Europeans while the mixed-sex labour force was African or of African
descent.
The make-up of the labour force meant that for the majority of the period in which
plantations were most important for world economic growth, the plantation complex
was intimately linked to another global phenomenon: the forced migration through the
Atlantic slave trade of eleven million enslaved persons, mostly from West and Central-
West Africa. In the early modern period, that enslaved population tended (except in the
American South from the mid-eighteenth century) not to be self-sustaining, as heavy
mortality rates necessitated the continual replacement of workers through the slave
trade. The plantation was also an inherently colonial form of economic organization,
with control over the complex lying in the metropolitan centres of Britain, the
Netherlands, France, Portugal, Spain, and Denmark until the nineteenth century.
Most important of all, plantations, as they existed from the mid-seventeenth century
in British and French America, were large-scale agricultural enterprises requiring
anything from fifty to several hundred workers. All facets of production were done
within the physical boundaries of the plantation, making these farms capitalist in
economic orientation, even if (especially in sixteenth-century Brazil) they retained
some elements of feudalism.12
Plantations and economic growth
The development of plantation agriculture was crucial for the success of colonization
in the Americas.13 As Barbara Solow notes, ‘It was slavery that made the empty lands
of the western hemisphere valuable producers of commodities and valuable markets
for Europe and North America. What moved in the Atlantic in these centuries was
predominantly slaves, the output of slaves, the inputs of slave societies, and the goods
and services purchased with the earnings on slave products.’14 What planters in
104
Barbados did in the 1650s was to create a form of labour organization that produced
large enough quantities of sugar to bring wealth sufficient for substantial reinvestment.
The organization of labour involved ganged labour, with its lockstep discipline and its
liberal use of the whip that forced slaves to work as hard as possible. Having gained
effective forms of coercion over recalcitrant, demoralized, and traumatized African
enslaved people, slave forces increased dramatically in size, reaching well over a
hundred slaves per plantation in the West Indies and over fifty per plantation in the
American South. These large integrated plantations had significant economies of scale
over other agricultural enterprises. Most importantly, planters worked slaves very
hard. Slaves on sugar plantations in Jamaica worked on average 3,288 hours per year
in the later eighteenth century, which pushed them to the outer edge of work hours
in the pre-industrial world.15 Significantly, these hours included more backbreaking
work than was normal for European or African peasants. It was not just the hours that
were worked that accounted for the remarkable growth of productivity on plantations;
it was the manner of the work that was performed. Planters were relentless in their
demands on enslaved people. They worked women as hard as, if not harder than,
men (most women worked in the field while some men were trained as tradesmen),
and set children to work very young. Planters approached slave welfare with great
indifference. A project comparing 12,000 skeletons from various countries since 1000
BCE placed eighteenth-century South Carolina field hands in rice planting near the
bottom of all historical populations, in the same range as pre-Columbian populations
facing extinction or demographic disaster.16 Not surprisingly, the victims of such
punishing work regimes hated doing what they were forced to do. A slave rebel in
seventeenth-century Barbados declared that ‘the Devel is in the Englishman; that he
makes everything work, he makes the Negro work, the Horse work, the wood work,
the Water work and the winde work’.17
Over time, these methods of work became refined. Planters paid great attention to
enhancing the value of their human capital, using scientific methods of accounting and
modern management methods to make sure that enslaved people were placed in jobs that
enhanced their rising capital value. In places like Jamaica, such assiduous attention to the
developing science of modern management led to remarkable advances in productivity.18
Barry Higman estimates that per capita output increased from roughly £8 to £29 4s. by
1800. He concludes that in the second half of the eighteenth century, Jamaica ‘performed
strongly not only by comparison with other plantation economies but also relative to the
emerging industrial nations’.19 It achieved these strong productivity gains mostly through
the application of basic concepts of what today we call modern management in the division
of labour and specialization of tasks within a large labour force, all deployed in a disciplined
and coordinated way. By contrast, the gains in agricultural productivity obtained in late
eighteenth-century English agriculture lay in increasing the quantity of work done rather
than by improving productivity in any real sense, as can be seen in a dramatic increase in
the days worked by the average person from 258 in 1760 to 333 in 1800.20
A plantation was in important respects therefore a precursor of the modern factory,
based on its scale of capital investment in land, machines, and people, and in regard
105
to its output, technology, processing functions, and large labour force. The success of
the late-eighteenth-century plantation system as an example of modern management
encouraged planters and merchants to keep investing in plantations well after the
emancipation of slavery (which occurred between 1834 and 1888 in various slave
holding countries). Indeed, around 1900, the plantation sector followed a wave of
new colonization efforts to become important in a range of new locations, notably in
different areas of Asia. Its advantages over other forms of agricultural organization lay
in its rational and scientifically based form of cultivation and in the ability of plantation
owners, normally by this stage resident in Europe with operatives working on their
behalf in colonial areas, to extract maximum labour from a generally uneducated and
often imported workforce. By 1900, plantations had strong industrial components,
notably in the production of rubber in Malaya and Cochin China (Vietnam) where
plantations were especially like factories. The main move was towards free enterprise
capitalism and away from forced labour. But the state became ever more important,
especially in places like Java in Indonesia, where the Dutch government declared all land
to be the property of the state. Thus, government control over agrarian development was
exercised through control over space, territory, and property rather than through direct
control over people’s bodies.21
Pomeranz’s ‘Great Divergence’ argument makes sense in the nineteenth century
when cotton production in the United States meant that, due to the elasticity of raw
material supplied from America, the cotton industry could develop at a uniquely rapid
rate without substantial real price increases for raw cotton fibres. Even then, if cotton
had not existed, one can imagine industrialization happening, albeit probably more
slowly and in different forms, perhaps based on woollen textiles sourced from Australia
(which had the advantage of being a British possession) or linen from Russia.22 For the
seventeenth and eighteenth centuries, Pomeranz’s ‘ecological bounty’ is less convincing,
given that most of the commodities produced by plantations were subtropical groceries
and semi-luxuries. Their impact on economic growth was likely to be indirect, rather
than direct, creating a demand for commodities that needed to be purchased for cash,
thus encouraging specialization in household economies.23
We concentrate too much on production rather than consumption when looking
at what the plantations provided to Europe. Each of the crops produced could be sold
only through an exploitation of demand that had previously not existed: people had to
learn how to smoke tobacco, to use sugar in puddings, and to replace woollen clothing
with more fashionable cotton clothing. Demand was thus very important. Take sugar,
for example. It moved in a century from being an elite commodity to being a product
that ordinary people could afford.24 These new plantation products fed into the rise of
capitalist farming and into changes in consumer demand. These changes led people to
want to do new things in a society with steadily growing productivity in agriculture,
permitting a shift in the structure of demand for necessities, comforts, and even luxuries.
It was during the early modern period, for example, that Europeans first acquired a
sweet tooth and the nicotine habit, closely tied to new ways of marketing desires for
such products.25
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The plantations and the fiscal-military state
Plantation agriculture, of course, was important for several European countries besides
England/Britain. Before England had established a viable plantation system in Barbados
in the mid-seventeenth century, the Portuguese had developed a highly productive
plantation system – partly capitalist and partly feudal in nature – that revolved around
small farmers growing cane on rented land before taking canes to be harvested in
mills owned by senhores de engenhos.26 Yet Portugal was too small, too poor, and too
economically underdeveloped to be able to use the considerable plantation wealth
it acquired from Brazil and from the Atlantic slave trade with Angola to enhance its
own economy. Indeed, during the ministry of the most important eighteenth-century
Portuguese statesman, the Marquis of Pombal (1750–77), a strict adherent to classical
mercantilism, Portuguese efforts in Atlantic commerce were mainly directed towards
stimulating and diversifying Brazil’s plantation economy with little effort put into using
plantation money to enhance the metropolitan Portuguese economy.27
The Dutch were better placed in Europe than the Portuguese to benefit from their
involvement in the development of plantations because of the advanced nature of their
commercial economy in the early seventeenth century and their aggressive expansion
in the 1620s and 1630s into imperial conquest in Africa, Asia, and the Americas. But
when the Portuguese retook Brazil in 1654, combined with the end of the seventeenth-
century Dutch ‘Golden Age’, the ability of the Dutch to prosper from their involvement
in plantation agriculture was severely dented. The ‘Dutch moment’ in the Atlantic passed
quickly.28 The Dutch, however, remained important as a nation devoted to plantation
agriculture in Southeast Asia, especially in Java, which was the most important plantation
sector in nineteenth- and twentieth-century Asia.29
In regard to Britain, it is interesting to speculate on the coincidental timing of the
start of the large integrated plantation system in Barbados and upon significant changes
in the economic history of England.30 What happened in Barbados in the middle of
the War of the Three Kingdoms in the 1650s came at a propitious time in English
history. Meticulous research into English and British economic growth over the long
durée suggests that sustained positive economic growth only began from this period.
Recent estimates show that between 1650 and 1760, GDP in England/Britain grew at
0.61 per cent per annum, increasing to 0.83 per cent per annum from 1780 to 1800
before attaining modern growth rates in the nineteenth century of over 1.6 per cent per
annum. Due to rapid population growth in the eighteenth century, growth in GDP per
capita was less impressive after 1690, being just 0.23 per cent per annum between 1700
and 1780, before returning nearly to rates of per capita GDP growth attained between
1650 and 1690.31
Correlation is not causation but it is worth investigating what role the new-found
wealth of the plantation colonies played in stimulating a permanent rise in English
wealth.32 Gregory King estimated that by 1688 England’s overseas trade accounted for
about 20 per cent of national income.33 Nuala Zahedieh argues in a detailed exploration
of the growth of colonial trade that England’s increasing stake in the Atlantic shaped the
107
long build-up of economic change that culminated in the Industrial Revolution. The
trade in plantation-produced goods expanded wealth, relieved Malthusian pressures,
and encouraged investment in new skills, useful knowledge, and adaptive efficiency.
As she states, ‘Endogenous responses to the market opportunities created by imperial
expansion stimulated adaptive innovations on several main fronts: the accumulation
and improvement of manufacturing capacity in the capital and beyond; the extension
and enhancement of transport networks to create an increasingly integrated and
commercialized national economy; and a major investment in the mathematical and
mechanical skills which raised England to technological leadership in Europe.’34
Zahedieh’s study of the copper industry is a specific example of how colonial trade
facilitated improvements in England’s technological capabilities in the late seventeenth
century. She shows that colonial demand for fairly mundane copper vessels helped foster
inventive mentalities, uniting interest in natural knowledge with craft skills, providing the
means whereby a once-moribund industry was able to attract the human and financial
investment necessary for applying major technological breakthroughs in industries like
smelting and mining.35
The development of the large integrated plantation in Barbados also coincided with
the beginning of the fiscal-military state in England – an institutional evolution that
distinguished England from every other state in Europe. Patrick O’Brien connects the
rise of the fiscal state with conflict in the English Civil War in the mid-seventeenth
century. He insists that Britain came to be a high-taxing, fiscally powerful state because
wealthy elites were so devastated by the destruction of the Civil War that they were
willing to make a government fiscally powerful in order that this government would pass
legislation that secured individual property rights. Thus, England was able to develop
a fiscal state in which revenue from taxation was much higher than anywhere else in
Europe. As O’Brien notes, it was fortunate that this domestic reconstruction of the state
occurred ‘when England’s domestic economy began to generate the kind of accelerated
commercialization, colonization, urban concentration, and proto-industrialization that
facilitated the collection of duties on domestic production and imports’.36
Plantation profits played a crucial role in making the fiscal-military state a success.
Pat Hudson notes that the fiscal-military state gave a great stimulus to growth and
innovation, with plantation produce, which was liable to consumption taxes, very
important in redistributing wealth from taxpayers and government creditors to
merchants and manufacturers, especially in emerging industrial regions like Lancashire.
Although export dependence at the national level was never more than 35 per cent before
the American Revolution, some firms and industrial sectors in Lancashire depended
upon exports for 70 to 80 per cent of their markets, with much capital finding its way
across the Atlantic or to Africa as a result of the slave trade and the plantation economy.
She emphasizes how plantation trade had strong multiplier effects, stimulating process,
product, and financial innovations, and generating institutional provisions that affected
wide areas of the economy. In short, the effect of the plantation goods coming into Britain
from the late seventeenth century led to hothouse conditions conducive to technological
and organizational innovations, in response to accelerating demand for exotic crops.37
108
Imperial benefits
The argument about whether American plantations were valuable to Britain is handicapped
by a methodological problem that obscures the true relationship of the American
colonies to Britain. Colonies of settlement, which all the American colonies were before
the American Revolution, were not like colonies of exploitation, like India, attached to
Britain lightly and by ties of economic interest only. By contrast, the American colonies
were, as British Americans insisted, an intrinsic part of Britain, full of proud British
subjects who considered themselves just as British as any resident of England, Wales,
or Scotland and more British than Roman Catholic residents of Ireland. That Britons
and Americans were fundamentally the same, tied together by ties of mutual affection
and shared inheritances, was a central point in Benjamin Franklin’s ‘Observations on
the Increase of Mankind’ (1751), a pioneering essay in the developing field of political
economy. Franklin predicted that in a few generations white settlers in British North
America would eventually outnumber the number of people in the metropolis, to the
mutual benefit, he thought, of both areas, adding to the great glory of the empire. He
crowed that rapid population increase in North America meant that there ‘in another
Century, the greatest Number of Englishmen will be on this Side of the Water. What an
Accession of Power to the British Empire by Sea as well as Land! What Increase of Trade
and Navigation! What Numbers of Ships and Seamen!’ These new Britons would be firm
defenders of the empire, as ‘there is not a single native of our country who is not firmly
attached to our King by principle and affection’. Britain had to do nothing to maintain
that affection. There was no danger, he thought, of America ‘uniting against their own
nation, which protects and encourages them, with which they have so many connections
and ties of blood, interest and affection and which ’tis well known they all love more than
they love one another’. Indeed, Franklin continued, ‘I will venture to say, an union among
them for such a purpose is not merely improbable, it is impossible.’38
Some Britons also recognized that the colonies could not be divided from Britain
just because they happened to be overseas possessions. For Joshua Gee, writing in 1720,
British growth and prosperity was inseparable from its connection to the colonies. ‘If
we take a view of our own Kingdom,’ he wrote, ‘we shall find our Trade and Riches
came but very slowly till our Plantations began to be settled, and as they throve, our
Trade and Riches increased, our Lands rose in value, and our Manufactures increased
also.’39 Malachy Postlethwayt extended the theme: ‘Since we have established colonies
and plantations our condition … has altered for the better, almost to a degree above
credibility. Our manufactures are prodigiously increased, chiefly by the demand for
them in the plantations, where they at least take off one and a half and supply us with
many valuable commodities for re-exportation, which is as great an emolument to the
mother kingdom as to the plantations themselves.’40 C. Knick Harley insists that while the
Atlantic economy made a central contribution to the causes of the Industrial Revolution,
the route through which this contribution came was through trade to the non-plantation
colonies of British North America. These colonies wanted industrial goods from Britain
and financed them by developing the burgeoning provision trade to the West Indies.41
109
The greatest benefit that British North America and the West Indies brought to Britain,
however, was not the sugar, tobacco, rice, and cotton that they sent to metropolitan Britain
or was not even their importance as a market for British manufactures and a potential
reservoir of manpower for any war Britain wanted to embark upon against European
rivals. The most important benefit was their overall wealth and the opportunities that
such wealth afforded for British migrants. That wealth was extraordinary as early as 1700
and exceptional by 1774. Free white people in the Thirteen Colonies that later became
the United States of America had higher levels of income and more importantly much
higher standards of living in 1700 than their fellow countrymen in England. Their wealth
increased by 1774, although the differential between income levels in Britain and the
Thirteen Colonies diminished due to remarkable population growth in America that
increased dependency ratios and kept the increase in colonial incomes lower than
otherwise.42
British movement to the Americas was part of an expansion of the physical space
of Britain analogous to how England absorbed Wales in the fourteenth century and to
how England joined together with Scotland in the eighteenth century. Consequently,
Pomeranz’s contention that the colonies provided ‘ghost acres’ for Britain that allowed
it to overcome Malthusian constraints is misplaced. By ‘ghost acres’, Pomeranz means
lands that were not part of the landmass of Britain and thus were additional acres that
could be added to British agricultural potential. The problem was that such acres were
not ‘ghost acres’ unless one takes the reductionist belief that only acres in the British
Isles counted as part of British possessions and that acres in the British Americas were
somehow not owned by the British. Neither Britons nor Americans or West Indians
made such a fundamental distinction between ‘local’ and ‘foreign’ acres: all belonged to
an expansionary British state. These American acres devoted to plantation agriculture
were ‘real’ acres that formed part of the physical and economic expansion of a Greater
Britain.43 They were no more ‘ghost acres’ than were acres devoted to sheep in Sussex or
grain in East Anglia. Moreover, these ‘ghost acres’ were farmed by real Britons. All acres
were part of a growing territorial empire.
The colonies were in particular a reservoir for British migration, especially in the
seventeenth century. Jim Horn and Philip Morgan estimate that 303,000 Britons
(including Irish) went to the Americas between 1640 and 1700, 289,000 arrived
between 1700 and 1760 and a further 615,000 went there between 1760 and 1820. In
the seventeenth century, most migrants went to plantation colonies while the Middle
Colonies of British North America became the primary destination in the eighteenth
century.44 Extrapolations of what might have happened to English, Scottish, and Irish
economic growth if the safety valve of migration to the Americas had not existed
are difficult, given the multitudinous variables involved in this sort of counterfactual
explanation. Without the large migration to plantation colonies as the plantation system
started in the 1640s and 1650s, it is possible that the negative population growth of
England between 1650 and 1700 might have been reversed, hindering the steady growth
of income per capita. Possibly, England/Britain may have faced more severe Malthusian
constraints if its local population rose at the same rate as it did but with the 1.3 million
110
people (including the many who went to Ireland) who migrated to the Americas in the
two centuries before 1780 staying put.45 Between 1640 and 1699, emigration to the New
World from England and Wales accounted for as much as 69 per cent of the natural
increase of the population. As population increased and emigration slowed in the
eighteenth century, that percentage dropped to about 20 per cent – a still not negligible
factor in helping Britain avoid a Malthusian crisis.46
The wealth that the plantation sector produced for Britons who lived in these regions
was remarkable. British American prosperity helps explain its settled political state before
the American Revolution and makes clear why many Britons were willing to risk very
high mortality, especially in the areas of greatest wealth, like the Carolina Lowcountry
and the British West Indies, for the chance to make a decent competency or even a large
fortune. Estimations of the total physical wealth of British America compared to that of
Britain on the eve of the American Revolution make clear just how much money had been
accumulated in plantation America within a century of the large integrated plantation
system being established in Barbados. Britain had total physical wealth of £314 million
around 1774, of which 87 per cent was in England and Wales and 13 per cent in Scotland.
The wealth of British America was over half of this sum, at £162 million, with plantation
America accounting for £104 million, or 64.4 per cent of British American wealth or 21.9
per cent of the wealth of Britain and its American colonies combined (excluding Ireland,
for which GDP figures are unavailable, but which had probably a GDP of £50 million
and per capita GDP of about £12, assuming a population of four million).
To put this in perspective, plantation America was almost three times as economically
valuable to Britain as was Scotland and twice as valuable as Ireland. Of course, a large
proportion of the wealth of plantation America – perhaps £28 million if we value the
800,000 slaves in the colonies as worth £35 each – was in the form of human capital,
which did not exist in Britain. If we exclude this form of capital from our analysis, then
plantation America had total physical wealth of £76 million, or more than twice the
wealth of Scotland. Almost all the benefits of this wealth accrued to white settlers. British
Americans had in general over twice the wealth of people in England or Wales and 3.5
times the wealth of Scots. But real wealth was concentrated among free whites in the
plantation colonies, especially in the West Indies. Average per capita white wealth in
plantation America was £201 if wealth tied up in slaves is counted and £147 if enslaved
people are excluded. In the West Indies, average per capita white wealth was £1,144
if wealth in slaves is included and £826 if the value of enslaved people is excluded.
Whatever else can be said about the economic value of the plantations, it is clear that
they afforded in the eighteenth century a degree of wealth for white people that made
them appreciably richer than any group of white people in Greater Britain.47
One way of appreciating the wealth of white West Indians is to note that if the wealth
of the 45,401 whites in the British West Indies in 1774 was added to the 6,572,104
residents of England and Wales, average per capita white wealth, excluding wealth in
the form of slaves, would have increased by £5.81. If the wealth of the 519,301 white
inhabitants of the plantation regions of British America in 1774, excluding wealth in
slavery, is added to those of England and Wales, then average white per capita wealth
111
would have increased by £8.46. If slaves are included, then average white per capita
wealth would have increased by £11.62. By contrast, much lower wealth in Scotland and
especially Ireland substantially reduced average per capita white wealth in the British
archipelago. If Scottish and Irish wealth was added to that of England and Wales, then
average per capita white wealth drops to £30 – a fall of £12.3. Moreover, the wealth of
these plantation regions was advancing at a much greater rate than was wealth in Britain.
Whereas the GDP of England and Wales increased by a healthy 426 per cent between
1700 and 1774, total physical wealth grew by an astounding 1,100 per cent in Jamaica in
the same years.48
The plantations and industrialization
Our discussion still leaves the question moot about the extent what happened in the
colonies contributed to economic growth in other sectors of the British economy,
notably in industrial sectors. Most attention has been paid to crops sent from the British
plantations to Britain in the eighteenth century. There is little doubt that the amount of
such crops sent to Britain was considerable and was the most dynamic part of eighteenth-
century overseas trade from the colonies to Britain. Sugar was supplemented and then
surpassed by American-grown cotton. Cotton imports were spectacular in size and
crucial to the development of the quintessential industry in the Industrial Revolution.
Between 1750 and 1810, European cotton consumption increased between sixfold and
eightfold.49 The size of the imports was so large that South Carolina senator, James
Henry Hammond, famously declared on the floor of the Senate in 1858 that ‘no power
on earth dares to make war upon it. COTTON IS KING.’ Without southern cotton, he
thundered, ‘England would topple headlong and carry the whole civilized world with
her, save the South.’ It was one of the more famously mistaken statements in American
history, as Great Britain had no intention of ever supporting the Confederacy against the
Union, given how much it had staked its international reputation upon its commitment
to antislavery.50
There have been some recent attempts to prove that Hammond was right. Historians
heavily influenced by Wallerstein world-systems theory have argued that slave-produced
cotton was responsible for British and northeastern industrialization.51 Their polemical
intentions are different from Hammond (they argue that slavery was key to the invention
of capitalism because they want to associate capitalism with illiberalism) but their
arguments are similar. And, like Hammond, they overstate the case for cotton in the
development of the British and then the global economy. American cotton arrived on
the scene – becoming only important after the invention of the cotton gin in 1793 and
dominant only from the 1820s – too late to determine the beginnings of industrialization.52
By 1700, England’s transoceanic trade was not overwhelmingly large but in its
dynamic growth it was essential for new industries, like copper, and for sustaining
industries, like shipbuilding, vital for British defense. Moreover, it was central in
encouraging the financial innovations vital to the commercial ‘revolution’. Many of
112
the advances were hindered by vested interests diverting capital and enterprise into
rent-seeking activities but what the British state realized from around 1700 was that
the success of the American plantations showed that mercantilism worked. As Nuala
Zahedieh concludes, the highly performing plantation trade not only outperformed
other sectors, but also stimulated ‘adaptive innovations which took the country to a
new plateau of possibilities from which Industrial Revolution was not only possible but
increasingly likely’.53 Between the Glorious Revolution of 1688 and the end of the Seven
Years’ War in 1763, the British state supported planters wholeheartedly. It had reason
to do so, as John Gee and Malachy Postlethwayt recognized. The plantations brought
great profits, benefited significant economic agents like London and Bristol merchants,
and provided desirable consumer goods that added to the happiness of its inhabitants.
The plantations were rewarded for their contributions to the greater welfare of Britain
by favourable imperial legislation, by support for an increasingly efficient and effective
slave trade, and by tacit acceptance of colonial demands that slaves should be thought of
as property, not as humans.54
Opinion later turned against the planter class, and the system of economic exploitation
that sustained them. Here Eric Williams was also right. But, contrary to what Williams
believed, the decline of the influence of the planter class was not due to notions that
plantations were economically ineffective and could be discarded as soon as industrial
capitalism took over. Plantations were efficient means of organizing labour to gain profits
and were as capitalist an enterprise as any factory, even if work was organized differently.
Fogel and Engerman’s controversial Time on the Cross (1974) showed conclusively
how slavery and capitalism could work together and that nineteenth-century views of
plantation agriculture as being inherently backward and thus just a way station between
feudalism and industrial capitalism were incorrect.55
Plantations did more than just provide ‘ghost acres’ that provided Britain with an
ecological release from Malthusian constraints. They gave the owners and managers
of plantations, if never workers, high incomes and notable social prestige. But their
economic success was accompanied by pernicious social, and usually racial, consequences
in a colonial context that became increasingly disturbing to metropolitan observers.
Eventually, the plantation became a place in the European imagination that was so
ideologically suspect that its economic benefits needed to be denied. But if ideologically
suspect, it was never anything but economically successful.
Conclusion
Plantations were a principal means whereby Europeans could exploit the Americas,
through the agency of West Africa. There is no doubt that plantations brought great wealth
to their owners, enormous misery to enslaved people, and considerable economic and
geopolitical benefits to European imperial nations with American possessions, including
France, the Netherlands, and Britain. Some historians, following in the footsteps of
Eric Williams, have argued for an even greater impact of the plantation system – as
113
the impetus towards Britain’s precocious late-eighteenth-century industrialization. Such

arguments are overstated. We do not need to have the plantations be responsible for
British industrialization in order to accept their enormous role in advancing British
wealth and power (as also in France, where little emphasis has been customarily put
on the role of plantations in fostering French industrialization). Britain’s transoceanic
trade contributed significantly to various areas of trade and helped cement financial
innovations that secured Britain’s eighteenth-century commercial revolution. It is
in these areas that profits from the plantations were most important. It helps explain
Britain’s wholehearted support of planters and the plantation system before the Seven
Years’ War brought into public discourse less positive assessments of the effects of the
plantation economy upon the British sense of morality about their overseas empires.
Notes
1. K. Pomeranz (2000), The Great Divergence: China, Europe and the Making of the Modern
World Economy. Princeton: Princeton University Press, 275–7. This method of ‘ghost acres’
was pioneered in E. L. Jones (2003), The European Miracle: Environments, Economies and
Geopolitics in the History of Europe and Asia, 3rd edn. Cambridge: Cambridge University, ch.
1.
2. D. Eltis (2000), The Rise of African Slavery in the Americas. Cambridge: Cambridge
University Press; and W. Rodney (1972), How Europe Underdeveloped Africa. London: Bogle
L’Ouverture Books.
3. B. Yun-Casalilla (1996), ‘The American empire and the Spanish economy: An institutional
and regional perspective’, Revista de Historia Económica, 16 (1), 123–56.
4. S. B. Schwartz (1985), Sugar Plantations in the Formation of Brazilian Society, Bahia,
5. N. D. Cook (2015), ‘The Columbian exchange’, in J. H. Bentley, et al. (eds), The Cambridge
World History. Vol. VI. The Construction of a Global World, 1400–1800 CE. Part 2 Patterns
of Change. Cambridge: Cambridge University Press, 103–35. See also the chapters by J. R.
McNeill and Alejandra Irigoin in this volume.
6. G. Parker (2013), Global Crisis: War, Climate Change and Catastrophe in the Seventeenth
Century. New Haven: Yale University Press.
7. D. Watts (1987), The West Indies: Patterns of Development, Culture and Environmental
Change since 1492. Cambridge: Cambridge University Press.
8. D. Eltis and S. W. Engerman (2000), ‘The importance of slavery and the slave trade to
industrializing Britain’, Journal of Economic History, 60 (1), 130–31; T. Burnard and J.
Garrigus (2016), The Plantation Machine: Atlantic Capitalism in French Saint-Domingue
and British Jamaica. Philadelphia: University of Pennsylvania Press; J. Horn (2006), The
Path Not Taken; French Industrialization in the Age of Revolution, 1750–1830. Cambridge,
MA: Cambridge University Press; P. C. Emmer, O. Pétré-Grenouilleau and J. V. Roitman
(eds) (2006), A Deus Ex Machina Revisited: Atlantic Colonial Trade and European Economic
Development. Leiden: Brill; and K. Fatah-Black and M. van Rossum (2015), ‘Beyond
profitability: The Dutch transatlantic slave trade and its economic impact’, Slavery &
Abolition, 36 (1), 63–83.
114
9. Burnard and Garrigus, Plantation Machine, 22–3; A. Potofsky (2011), ‘Paris-on-the-Atlantic:

From the old regime to the revolution’, French History, 25 (1), 89–107.
10. K. O’Rourke (2006), ‘The worldwide economic impact of the French Revolutionary and
Napoleonic Wars, 1793–1815’, Journal of Global History, 1 (1), 123–49; C. Vidal (2006),
‘The reluctance of French historians to address Atlantic history’, Southern Quarterly, 43 (4),
153–89.
11. N. Canny (1998), ‘The origins of empire: An introduction’, in N. Canny (ed.), The Oxford
History of the British Empire. Vol. 1. The Origins of Empire. Oxford: Oxford University Press, 8.
12. P. D. Curtin (1990), The Rise and Fall of the Plantation Complex: Essays in Atlantic History.
Cambridge: Cambridge University Press, 11–13. See also K. Morgan (2016), A Brief History
of Transatlantic Slavery. London: I.B. Tauris.
13. T. Burnard (2015), ‘Plantation societies’, in J. H. Bentley, et al. (eds), Cambridge World
History, vol. 6, part. Cambridge: Cambridge University Press, 263–82.
14. B. Solow (1991), ‘Slavery and colonisation’, in B. Solow (ed.), Slavery and the Rise of the
Atlantic System. Cambridge: Cambridge University Press, 21–42.
15. J. Roberts (2013), Slavery and the Enlightenment in the British Atlantic, 1750–1807. New
York: Cambridge University Press, 86.
16. T. A. Rathbon and R. H. Steckel (2002), ‘The health of slaves and free blacks in the East’,
in R. H. Steckel and J. C. Rose (eds), The Backbone of History: Health and Nutrition in the
Western Hemisphere. Cambridge: Cambridge University Press, 208–25.
17. (1676), Great Newes from the Barbadoes. London: L. Curtis, 6–7.
18. C. Rosenthal (2016), ‘Slavery’s scientific management: Accounting for mastery’, in
S. Beckert and S. Rothman (eds), Slavery’s Capitalism: A New History of American
Economic Development. Philadelphia: University of Pennsylvania Press, 62–82.
19. B. W. Higman (2005), Plantation Jamaica 1750–1850: Capital and Control in a Colonial
Economy. Kingston: University of the West Indies Press, 2–3, 8–9.
20. G. Clark (1987), ‘Productivity growth without technical change in European agriculture
before 1850’, Journal of Economic History, 47 (2), 419–32; H.-J. Voth (2001), ‘The longest
years: New estimates of labor input in England, 1760–1830’, Journal of Economic History,
61 (4), 1065–82.
21. J. Breman (1989), Taming the Coolie Beast: Plantation Society and the Colonial Order in
Southeast Asia. Delhi and New York: Oxford University Press; Idem (2015), Mobilizing
Labour for the Coffee Market: Profits from an Unfree Work Regime in Colonial Java.
Amsterdam: Amsterdam University Press.
22. G. Riello (2013), Cotton: The Fabric that Made the Modern World. Cambridge: Cambridge
23. J. de Vries (2008), The Industrious Revolution: China, Europe and the Making of the Modern
World Economy. New York: Cambridge University Press. See also the chapter by Maxine Berg
in this volume.
24. S. Mintz (1985), Sweetness and Power: The Place of Sugar in Modern History. New York:
Penguin.
25. E. A. Wrigley (2008), Continuity, Chance and Change: The Character of the Industrial
Revolution in England. Cambridge: Cambridge University Press; C. Shammas (2000), ‘The
revolutionary impact of European demand for tropical goods’, in J. J. McCusker and K.
Morgan (eds), The Early Modern Atlantic Economy. Cambridge: Cambridge University Press,
163–85.
115
26. S. B. Schwartz (2004), Tropical Babylons: Sugar and the Making of the Atlantic World,
1450–1680. Chapel Hill: University of North Carolina Press.
27. K. Maxwell (1995), Pombal: Paradox of the Enlightenment. Cambridge: Cambridge University
Press, 119–28, 134–48.
28. W. W. Klooster (2016), The Dutch Moment: War, Trade, and Settlement in the Seventeenth-
Century Atlantic World. Ithaca: Cornell University Press.
29. A. Reid (1988–93), Southeast Asia in the Age of Commerce, 2 vols. New Haven: Yale
University Press. See Thomas Lindblad’s chapter in this volume.
30. R. R. Menard (2006), Sweet Negotiations: Sugar, Slavery, and Plantation Agriculture in Early
Barbados. Charlottesville: University of Virginia Press; and S. D. Newman (2013), Free and
Bound Labor in the British Atlantic World: Black and White Workers and the Development of
Plantation Slavery. Philadelphia: University of Pennsylvania Press, 54–9.
31. S. Broadberry et al. (2015), British Economic Growth, 1270-1870. Cambridge: Cambridge
University Press.
32. D. Acemoglu, S. Johnson and J. Robinson (2005), ‘The rise of Europe: Atlantic trade,
institutional change, and economic growth’, American Economic Review, 95 (2), 546–79.
33. P. Laslett (ed.) (1973), The Earliest Classics: Graunt and King. Farnborough: Gregg, 207.
34. N. Zahedieh (2010), The Capital and the Colonies: London and the Atlantic Economy,
1660–1700. Cambridge: Cambridge University Press, 4, 7, 285. But see P. K. O’Brien (1982),
‘European economic development: The contribution of the periphery’, Economic History
Review, 35 (1), 1–18.
35. N. Zahedieh (2013), ‘Colonies, copper, and the market for inventive activity in England and
Wales, 1680–1730’, Economic History Review, 66 (3), 805–25.
36. P. K. O’Brien (2011), ‘The nature and historical evolution of an exceptional fiscal state’,
37. P. Hudson (2014), ‘Slavery, the slave trade and economic growth: A contribution to the
debate’, in C. Hall, N. Draper and K. McClelland (eds), Emancipation and the Making of the
British Imperial World. Manchester: Manchester University Press, 36–59. See also J. E. Inikori
(2002), Africans and the Industrial Revolution in England: A Study in International Trade and
Economic Development. Cambridge: Cambridge University Press.
38. B. Franklin (1959), ‘Observations on the increase of mankind’, in L. W. Labaree, et al. (eds.),
The Papers of Benjamin Franklin. New Haven: Yale University Press, IV, 225–34.
39. J. Gee (1720), A Letter to a Member of Parliament, Concerning the Naval-Stores Bill. London:
n.a., 18.
40. M. Postlethwayt (ed.) (1764), Universal Dictionary of Trade and Commerce, 2 vols. 4th edn.
London, vol. I: entry under ‘Colonies’.
41. C. K. Harley (2015), ‘Slavery, the British Atlantic Economy, and the Industrial Revolution’,
in A. B. Leonard, et al. (eds), The Caribbean and the Atlantic World Economy. Basingstoke:
Palgrave Macmillan, 182.
42. P. Lindert and J. Williamson (2016), Unequal Gains: American Growth and Inequality since
1700. Princeton: Princeton University Press, chs. 2–3.
43. R. R. Davies (2000), The First English Empire: Power and Identities in the British Isles,
1093–1343. Oxford: Oxford University Press; D. Armitage (1999), ‘Greater Britain: A useful
category of historical analysis?’, American Historical Review, 104 (2), 427–45.
116
44. J. Horn and P. Morgan (2005), ‘Settlers and slaves: European and African migrations to early
modern British America’, in E. Mancke and C. Shammas (eds), The Creation of the British
Atlantic World. Baltimore: Johns Hopkins University Press, 20–4, 33–4.
45. Horn and Morgan, ‘Settlers and slaves’, 23.
46. M. Daunton (2015), ‘Afterword: Mercantilism and the Caribbean and the Atlantic World
Economy’, in A. Leonard and D. Pretel (eds), The Caribbean and the Atlantic World Economy.
Basingstoke: Palgrave Macmillan, 298.
47. T. Burnard (2015), Planters, Merchants and Slaves: Plantation Societies in British America,
1650–1820. Chicago: University of Chicago Press, 9–10. For Scotland’s GDP as 13.1 per
cent of Britain’s, see Maddison, The World Economy, 247. He also suggests that Ireland’s
GDP in 1774 was between 16 and 20 per cent of England Wales, suggesting GDP of around
£50 million or £12 per capita. Thus, the average white West Indian, including slave wealth,
was over 100 times as rich as the average Irish person. Dependency ratios in the various
regions, of course, were very different, with the West Indies having very few children or old
people.
48. Burnard, Planters, Merchants, and Slaves, 167; Broadberry, et al., British Economic Growth.
49. P. Bairoch (1993), Economic and World History: Myths and Paradoxes. Hemel Hempstead:
Harvester Wheatshelf, 158.
50. S. Drescher (2002), The Mighty Experiment: Free Labor versus Slavery in British
Emancipation. New York: Oxford University Press, 202–3, 231–7.
51. See in particular, S. Beckert (2014), Empire of Cotton: A New History of Global Capitalism.
New York: Alfred A. Knopf, 29–82.
52. Harley, ‘Slavery, the British Atlantic economy, and the Industrial Revolution’, 182.
53. Zahedieh, Capital and Colonies, 292.
54. L. S. Walsh (2010), Motives of Honor, Pleasure & Profit: Plantation Management in the
Colonial Chesapeake, 1607–1763. Chapel Hill: University of North Carolina Press.
55. R. W. Fogel and S. W. Engerman (1974), Time on the Cross: The Economics of American Negro
Slavery. Boston, MA: Little Brown; New York: Norton.
117
CHAPTER 7
CONSUMPTION AND GLOBAL HISTORY
IN THE EARLY MODERN PERIOD
Maxine Berg
Introduction
There is a large recent historiography on consumption and social and cultural history,
yet there is much less on consumption and economic history. Recent textbooks of British
economic history have no chapters on consumption. Instead, there is a traditional place
for chapters on wages and the standard of living.1 And yet consumption is a key factor
in economic policy formation, for it is currently the source of much British tax revenue.
During the eighteenth century, too, a key source of much government revenue was excise
taxes and customs duties – that is, taxes on consumer goods. Political debate over these
taxes fuelled radical reform movements and contributed to the American Revolution.2
Consumption, especially of luxury goods, was the key factor in debates on economic
improvement during the Enlightenment; indeed, discourse around consumption
stimulated the emergence of political economy as an intellectual subject area. Today,
consumer economic theory and other social science theory raise many fascinating
subjects, and have moved out in recent years to behavioural psychology.3 And yet
economic historians, apart from a few exceptions, have been reluctant to engage in an
analysis of consumption in economic change.
Economists from Jevons to Marshall introduced analysis of consumption in terms of
marginal utility.4 But mainstream economists showed little interest, even at the end of the
nineteenth century and the early twentieth century, in the wider aspects of consumption.
It was those of heterodox views who took it up: Veblen, Ruskin, and Hobson. Heterodox
voices converged between the end of the nineteenth century and the First World War to
analyse, deconstruct, and criticize a period of rapid growth of new wealth and luxury
expenditure in Europe and America. Luxury goods, excess consumption, and collecting
were manifestations of Europe’s and America’s new superrich bourgeois classes. Banking
and industrial families built palatial residences to be filled with all manner of globally
sourced luxury goods, and they collected antique objects, pictures, and other art objects.
There was a whole fin-de-siècle debate on the decline of capitalism, moral corruption,
and social division. Sombart, Simmel, and Veblen all published their critical texts on
hedonism during this period.5
There was some interest in consumption among economists in the 1960s and 1970s,
but the subject remained on the margins of mainstream economics. While product
development was advancing rapidly in this period, economists focused on productivity
Consumption and Global History in the Early Modern Period
change. There was much discussion of consumer choice, but this was conceived as a
choice between price and quantity; tastes, products, and qualities were assumed by most
economists to be fixed. Two critical voices from within mainstream microeconomic
theory, Kelvin Lancaster and Duncan Ironmonger, pointed out in the 1960s that
consumers selected not just a consumer good, but among the many characteristics and
qualities contained by such goods, but few took up the analysis of tastes that this implied.6
A few years later, Tibor Scitovsky argued the case for the importance of novelty to
consumer choice. Habituation in meeting demands needed to be punctuated by novelty
and uncertainty; thus he highlighted novelty, variety, complexity, and surprise, which
aroused the senses and stimulated pleasure.7 In recent years, Marina Bianchi has used
these ideas to develop her concept of the ‘active consumer’: one who is not a passive price
taker, but who actively engages to form tastes, responds to new goods, and combines
these in diverse ways to make an identity. This active consumer might well base her
choices on sensual satisfaction over everyday convenience and even necessity.8
The use by these economists of ‘hedonic indices’ and the psychological theories that
underpin them has also stimulated the economic historian Avner Offer to use such
theories to explain twentieth-century consumer trends. He argues that many economists
assume that individuals can rank their different wants consistently, that they want
as much as they can get, and that they act on their own preferences. But this is not
frequently the case. Wants become less compelling the more they are satisfied; and many
people shift their preferences sequentially to more psychologically pressing ones. We live
in states of anticipation and consummation, seeking the serial fulfilment of our transient
desires.9 True prosperity in Offer’s view is a good balance between short-term arousal
and long-term security; the challenge is not to maximize consumption, but to pace it
back to a level of optimal satisfaction.10
These issues of the factors lying behind consumption – the choices, the stimuli, and
the complexities of satisfaction – are central to explaining a history of consumption
in the early modern world. What difference has global history made to the history of
consumption? What part has consumption played in the factors considered in global
economic history?
The Great Divergence and consumption
In his work dedicated to the concept of the Great Divergence, Kenneth Pomeranz
compared consumption and luxury consumption across Europe, China, Japan, and India
to argue that these were not significant factors explaining differences between the great
regions of the pre-modern world. As he mostly adopted a comparative methodology, he
offered little analysis of the global connections in commodity trade as a factor behind
the Great Divergence.
Pomeranz’s findings suggested that sugar consumption in China in 1750 was higher
than in continental Europe, even as late as 1800; but at some point after this, China’s
per capita consumption of sugar declined, while Europe’s grew rapidly especially after
119
1840.11 China’s tea consumption was also much higher than Europe’s at 11 ounces
per person as compared to Europe’s 2 ounces per person in 1780s.12 Pomeranz also
compared the consumption of textiles and clothing in both regions to argue that Chinese
textile consumption compared quite well against that of Europe in the mid- to late
eighteenth century.
There was, furthermore, evidence of a moral debate on excess consumption among
the popular classes and peasants in the Lower Yangzi region of China and in eighteenth-
century Japan. And there was evidence of fashion in clothing and some consumer
durables in Ming China and Muromachi and Tokugawa Japan, though not in India or
Southeast Asia.13 Pomeranz found less change in the use of houses and their contents
and the generations they contained in Asia than in Europe. But there was nevertheless
a market for high-quality purchased goods even in villages in China’s remote macro-
regions. There were likewise many consumer products in late Tokagawa and early Meiji
era villages.14
Pomeranz reinforced his support for the case for high standards of living in
eighteenth-century China and East Asia more generally. He found higher consumption
there of tea and silk than in Europe, widespread consumption of tobacco, and per capita
cloth consumption on par with Germany. Expenditure on ritual was high, and though
meat and dairy consumption in China was lower than that in Europe, comparable levels
of protein intake could be found in these two world regions.15
What differed was the role of trade and imports. The Chinese consumed their own
domestically produced sugar, tobacco, and tea. These products – so crucial to Europe’s
changing consumer habits – in China produced only a low profit margin trade among
small merchants, no significant revenues for the state, and thus no powerful lobbies to
encourage their increased consumption. Europe, by contrast, grew all its sugar, tobacco,
and coffee in overseas colonies, and bought tea from China in exchange for silver from
the Americas. Europe drew its cotton from colonies or ex-colonies, while China grew
much of its own.16 The regional connections of commodities were thus missing from
the divergence debate. As Jan de Vries has pointed out recently, trade was toppled in
this new historiography from the central role ascribed to it by Andre Gunder Frank.17
Instead, Pomeranz focused on the trade that did not emerge in Ming/Qing China.
There was no extensive specialization and interregional trade, and the Chinese trading
diaspora in Southeast Asia did not give rise to a large trade in tropical goods to the
Chinese metropole.
Both Pomeranz and Parthasarathi argued that China and India did not cultivate
long-distance trade links because they had no need of them. The need for silver in both
places did, however, generate a supply of goods for export sufficient to elicit from Europe
an influx of silver capable of, as de Vries observed, ‘oiling the wheels of the Chinese
economy’ and acting as the ‘motor’ of the Indian subcontinent’.18 The point made by
Pomeranz for China and Parthasarathi for South Asia was that Asia and Europe had
at least similar levels of consumption of goods such as sugar, tobacco, tea, and textiles.
However, the part played by traded goods in consumption was much higher in Europe,
and it escalated in the eighteenth century.
120
What part, then, did traded consumer goods play in Europe? Jan de Vries compared
the levels of East India Company trade between Asia and Europe on the one hand and
Atlantic trade on the other. His data showed that Atlantic trade grew more than twice
as fast as the Asia–Europe trade, and contributed twice the value to European GDP, and
yet the indirect effect of the Asia–Europe trade was disruptive and highly significant in
shifting consumer cultures.19
Standard explanations for the appeal of Asian commodities in early modern
Europe are that they were exotic, unique or superior, and cheap. But more important
than their appeal was the information flows they brought in their wake. Merchants
brought new knowledge about goods, and participated in developing innovative ways of
incorporating these into European lifestyles with new uses and new products.20 The East
India companies were effective in gathering, processing, and analysing large amounts
of information about access to goods and ways of developing markets for them. In
Europe, most of these imported Eastern goods were sold in the company auctions, but
distributing these goods out to wider European markets and re-exporting them beyond
Europe were left to private trade. The variety of these goods and gradations of quality
brought a new signifier to taste and product development in Europe. Such goods drew
more households into the market. In de Vries’ words, ‘information and industriousness
were highly correlated’.21
Pomeranz recognized the impact of new goods on shifting social behaviours. He
acknowledged Adam Smith’s fine analysis of the role of exotic baubles that appealed
to the senses in motivating elites to acquire objects in lieu of retainers. Exotic goods,
Pomeranz wrote, also stimulated societies with strict sumptuary laws because such goods
were previously unknown and thus not yet assigned or forbidden to any specific group.
Goods with remote origins were more easily mystified, and acquired greater ‘value’ than
local or known goods with similar uses.22 Pomeranz accepted Jan de Vries’ case for an
‘industrious revolution’, that is, that the demand for newly available goods helped to
create new worker and consumer behaviours, but he did not provide any analysis for
what difference this might have made for diverging paths of economic development.
Part of the reason for this lies in the view held by China’s historians that external trade
was less important for Chinese industry than it was for that of Western economies. As
we have seen, sugar and cotton were internally produced in China. Europeans, facing
supply constraints and high transactions costs in acquiring these goods externally, were
stimulated to seek substitutes in other parts of the world that they controlled as colonies
or through their own process and product innovation. Europeans learned to produce to
Asian standards, varieties, and qualities.
They key external commodity which stimulated the economies of China and
India was silver, but even this was not, in Pomeranz’s view, transformative. Since the
publication of The Great Divergence, there has been much research on various aspects of
consumption in many parts of the world, China among these. Zheng Yangwen’s work, for
instance, investigates the taste for European goods in early modern China. Goods from
fragrances and clocks to foodstuffs and architecture were ‘indigenized’ and contributed
to commercial specialization. There may be parallels in the transformation of the
121
Chinese economy and society by foreign goods to the European experience, but they did
not entail the connections that de Vries drew between the ‘industrious revolution’ and
the Industrial Revolution.23
Much of the more recent research on the history of consumption in other parts
of Asia is focused on the nineteenth and twentieth centuries, and addresses social
and cultural history.24 Similarly, research on the Mughal and princely courts of India
reveals rapid changes in fashion, taste, and styles, but these remained confined to the
court environment and did not penetrate into urban communities.25 Bayly depicted
this consumer culture as a collecting culture, and a part of what he termed ‘archaic
globalization’. Rulers amassed goods from distant lands, and there was also a tributary
flow of consumption; the nawabs and other rulers controlled flows of goods and services
for the rest. The courts also sought unique or highly specialist goods. Whereas modern
complexity demands the uniformity of Levis and trainers, the archaic simplicity of
everyday life demanded that ‘great men prized difference in goods … In one sense
archaic lords … were collectors, rather than consumers.’26
While imported goods, fashion, and extensive product and quality differentiation
were significant to consumption in India, they did not reach out to wider urban
society, nor embed themselves in the everyday life of large groups of the population.
While they existed, they were not the stuff of the kind of ‘industrious revolution’ of
Northern Europe.27
Historiography: Is there an economic history of consumption?
To what extent do we have an economic history of consumption for the early modern
world, or even parts of the early modern world apart from Europe? When we look to
Europe, that historiography is focused on Jan de Vries’ ‘industrious revolution’.28 What
debate we have in the historiography generated in the wake of the ‘Great Divergence’ is
not one over consumption, but one over wages and standards of living. Again, this is a
debate over comparisons and not connections. It does not tell us about consumer goods,
or incentives to produce or to buy these; it does not tell us about the impact of some parts
of the world on others, for example, the impact of the Columbian Exchange of foods,
plants, and diseases, nor of colonial groceries or the impact of a global trade in resources
and materials, nor of that in manufactured goods.
What can we glean from that debate on wages and standards of living? Carole
Shammas asks ‘When and why did consumption of material goods become the measure
of the “standard of living”?’29 Up to the years immediately following the Second World
War, the standard of living was conceived in purely material terms – that is, the goods
and services at one’s disposal. Thus GDP per capita became the yardstick, but as we
know, these indices did not show inequality or investment in human capital. Now most
indices of well-being skip over household budgets and real wages, and turn instead to
life expectancy, health status, and heights, as well as other indices of well-being such
as education.30
122
Shammas summarized a widely accepted position on European living standards

to date: earlier estimates of early nineteenth-century income growth were revised
downwards, and pre-industrial standards were revised upwards. New products were
brought into Western Europe; diets became more varied, cotton fabric entered the
clothing market, and textile prices dropped. Brick and stone replaced wood and clay in
many cities, glass windows became widespread, and interior furnishings improved. This
was not due to lower grain prices, but to higher real incomes, lower costs of durables and
semi-durables, or better use of household labour.31
Among economic historians of the early modern period, there has been intense
debate over levels of wages and living standards; most of this centred on explaining
industrialization and divergence. Was there a great divergence in ‘wages and prices’?
What does this add to an older debate on wages and the standard of living led by
Hobsbawm in the 1960s? The purpose of the debate in the 1960s and after, and in more
recent configurations in studies of working-class budgets led by Horrell and Humphries,
was to discover the impact of industrialization on the poor.32 The purpose for the current
wage divergence debate is different. That purpose for one leading contender, Robert
Allen, is to discover high wages in Britain compared with the rest of the world, and
thence to argue that this wage premium could explain her prescient and rapid pace of
technological change and subsequent industrialization.33
These debates over wages do not, however, take us much further into the history of
consumption beyond that of basic foodstuffs. Allen’s work remains a good example. He
refers to an Indian diet of rice, millets, and pulses; in some areas, fish provided the only
source of animal protein. He writes of the poverty of ‘scanty clothing and barefoot’, of
mud huts with thatched roofs, of few furnishings beyond bamboo mats, and of cooking
done in earthen pots. His sources are Raychaudhuri and Habib from 1982.34 He finds
similar dearth in China, based on an account of Charles Lockyer, an early-eighteenth-
century merchant traveller. It seems obvious to him that Northwest Europe with its white
bread, meat, dairy products, and beer had the highest standard of living. But is this so
clear? The new histories of food and its preparation need to be linked to the wage baskets
used by economic historians, as do the data we now have on the consumption of luxuries
and novelties: tropical foodstuffs such as tea, sugar, coffee, and chocolate and imported
Asian manufactures – cotton, silk, porcelain, and British and European imitations.
Economic historians now need to look more deeply into the consumption of specific
types of goods – those associated with inequality and those that shifted behaviours.
Inequality
Recent research on inequality focuses on the macroeconomic picture of the distribution

of income and wealth. Thomas Piketty’s Capital in the Twenty-First Century (2015)
compares rising inequality in the period from the 1970s with the growth in inequality
in the later eighteenth and early nineteenth centuries. Piketty compares the wealthy
elites inheriting patrimonial wealth with the growth of elites from the eighteenth
123
century whose wealth was increasingly based on interest earned on private holdings
of government debt. Rentiers living off increasingly lucrative investment earnings
contrasted with the labouring poor whose relative wages did not rise in any degree until
after the mid-nineteenth century. Furthermore, property incomes rose from the mid-
eighteenth century in Europe, and increased inequality.
Technical change during the late eighteenth and in most of the nineteenth centuries
in Western Europe and in the United States reinforced this inequality, as capital was
substituted for labour in many manufacturing processes. Factories employed less skilled
labour; processes were simplified and products standardized for mass production in
factories.
What impact did these trends to rising inequality as well as changes in technology
mean for consumption? Once again the research we have is about wages with precise
assumptions over what goods comprised the wage basket. Comparisons of wages
and standards of living have focused on the working classes consuming ordinary
commodities, and budget studies are mainly based on foodstuffs. But as we know, the
rich and the poor consume different things. Philip Hoffman has argued that economic
historians have been over-reliant on the price series of staple products, especially food,
standardized older products, internationally traded goods, and physical goods, and they
underuse luxury goods, labour-intensive goods, new products, non-traded products,
retail products, and services.35
Luxury goods in the eighteenth century became cheaper relative to staple foods, but
their impact is as hard to quantify as that for introducing new goods and services into
today’s cost-of-living indices. Fashion and luxury goods changed constantly, frustrating
the search for consistent time series. Hoffman looked at price changes over a whole series
of standardized commodities, and found the biggest advances of prices in fuel, rent,
and cinnamon, and the greatest reductions of prices in textiles, sugar, silver, paper, beer,
and unskilled labour. He found rising food prices and falling wages of unskilled labour.
Many of those luxury products falling in price made use of factors that were getting
cheaper across the seventeenth and eighteenth centuries: clothing and textiles, paper,
chocolate, pewter, and sealing wax became cheaper along with the labour that went into
them.36 Adjusting the cost-of-living index with clothing, light, fuel, and beverages shows
standards of living declined a little less in the period than previously estimated. But we
also need to look further to class-specific cost of living indices.
Lower prices of luxury and staple goods brought real income gains for the wealthier
and for richer regions. Hoffman also charted the temporal cycles in this inequality.
Between 1500 and 1650, the top income groups experienced a 20 per cent reduction in
their cost of living. But between 1650 and 1750, there was a reversal with the common
people gaining. This swing reversed again in the second half of the eighteenth century,
with wealthier groups gaining from the impact on prices of luxury goods of greater
trade and new technologies. It was not until the last half of the nineteenth century that
inequality moved again in favour of the lower classes.37 In the period 1500–1650, the
wealthier benefited most from cheaper new luxury goods as well as old luxuries such as
domestic servants, and higher land rents added to their wealth. The poor faced scarcer
124
food and higher costs of housing and land. In England, a second inegalitarian trend took
place between 1740 and 1795–1815.
Hoffman poses that these trends favouring the wealthier classes in early modern
Northwest Europe might help to explain the Great Divergence. The gains to the
early phases of industrialization might well have contributed to changing behaviours
associated with the ‘industrious revolution’.
The problems with budgets, probates, orphans, and thieves
Accounting for inequality addresses some of the problems we have with diametrically
opposed, but equally widely accepted positions on standards of living even within Europe.
But much speculation, new sources, and different data sets remain at odds. Horrell and
Humphries investigated 1,350 household accounts and budgets of the labouring poor in
Britain over the period 1790–1850 to draw a pessimist case on trends in family incomes
over the later eighteenth and early nineteenth centuries.38 Their results, though resting
on data from the end of the eighteenth century, also led them to give little credence
to ideas of an ‘industrious revolution’ or a ‘consumer revolution’ reaching below the
levels of the middling classes.39 Horrell’s recent summing up reinforces earlier positions.
‘Studies of the standard of living in the classic Industrial Revolution have failed to find
evidence of increases in material welfare reflected in the consumption patterns of the
mass of the population between 1790 and 1850.’40 She argued that most studies based on
probate inventories might support a hypothesis of rising consumption, but only for the
middling classes; they anyway showed only a very gradual spread in the ownership of
innovative goods across England.41
Wider European probate inventories, however, indicated greater ownership of new
goods, both imported and British and European; these inventories were gathered
from many parts of Britain and Northern Europe. They were gathered from those
of the middling classes, but also included many from the labouring classes.42 These
demonstrate possession of new and imitative consumer goods, and evidence of new
eating practices, with the use of ceramics, glass, and cutlery replacing pewter and
wooden platters. Jan de Vries put the social history of new consumer practices in
Europe together with probate accounts gathered for England and some other parts
of Europe especially for the Netherlands to underpin his concept of the ‘industrious
revolution’.43 This has been the one serious analysis of an economics of consumption
for the early modern period that was not about prices and wages, but about changing
tastes and household behaviour. De Vries drew on Gary Becker’s analysis of household
allocation of time to argue for a shift in household labour priorities from home-
produced goods and services to market production. More within the household in early
modern Europe sold their labour, and bought some of those goods they had formerly
made themselves. They also worked longer and harder in order to satisfy a new taste
and demand for goods imported into the locality or region, imitations of these, or
entirely new goods. De Vries called this more intensive labour across the household
125
an ‘industrious revolution’. Decisions about consumption could be seen, therefore, as

intra-household decisions on time use and expenditure, with wider effects on labour
supply and intensity. Though wages were falling in the second half of the eighteenth
century, probate inventories and other evidence of material possessions indicated that
ownership of material objects was increasing. De Vries thus provided an explanation for
this paradox, and one that engaged directly with an economic history of consumption.
His case has been challenged by those who argue that labour intensification was driven
by necessity rather than by consumer aspiration.44
Research on other North European data sets have, however, endorsed his position.
Orphans’ accounts from the Netherlands indicated wide use of tea and tea and
coffee wares and ownership of a diversity of cheaper and more expensive textiles in
Amsterdam and other Dutch cities.45 Textile identifying markers from the London
Foundling Hospital, thousands of swatches of mothers’ clothing that were attached
to records of the infants they left in the orphanage, indicated widespread ownership
of printed cottons and mixed cotton and linen fabrics, fabrics that imitated more
expensive imports from India, but were made in small Lancashire mills.46 Toll records
in Hamburg also indicate the rapid uptake of colonial goods, and especially coffee in
Germany and Northern Europe.47
It was not only orphans who revealed the hidden material lives of the poor, but also
thieves. Beverly Lemire and John Styles drew on the records of stolen goods in the
Old Bailey to show the wide use in London of cotton textiles and of fashionable items
and accessories.48 More recent research developing these records into datasets shows a
much greater impact of fashion aspiration and the desire for variety and differentiation,
fashion, and taste among common people than once recognized.49 Cotton stockings
were popular items of theft from poor households as were napkins and table linen from
marginally better-off households.50
Where is the economic history of consumption?
We appear to have reached a stalemate on the economic history of consumption in the

early modern period. Most of the research has been on Northwest Europe. It is still focused
on wages and standards of living, with a great divide between those making the case for
higher wages and/or more food and material possessions, and those arguing for stasis or
immiseration. Wage baskets are estimated mainly on basic foodstuffs. Can an approach
through large data sets take us in new directions? What analysis and questions lie behind
the data sets? What was consumed, who consumed it, how and why did they consume it?
We could, instead, move down to a micro scale in order to connect an economics
of consumption with the significant research on the social and cultural history
of consumption. We can then engage with issues over choice and new products,
encountering and integrating not only strange goods, desire, and stimulus seeking in
the Scitovsky model, but also social interaction and awareness. We can investigate why
and when taste mattered, the choice of qualities over quantities, and the role of fashion.
126
Foodstuffs are one example. Grains, as we have seen, need to be converted to flour
for consumption. Food, furthermore, needs to be prepared and cooked. Even within
early industrial Britain, there were great differences in cooking practices related to the
availability of coal. The labouring poor in Yorkshire cooked their meals and heated their
homes. Those in the South of England, though there were fewer women working in
arable areas, faced much greater fuel constraints; they cooked much less and bought
their bread.51 Different food baskets also connected to different work regimes. Coffee
consumption spread quickly in the proto-industrial regions of Germany. Textile workers
consumed less grain and protein-rich foods than agricultural labourers. Coffee could
be prepared quickly, it increased concentration in long hours of repetitive tasks, and it
suppressed hunger. Merchants organizing the textile trade also dealt in coffee, and often
paid their outworkers in coffee.52
Tastes and fashions for differentiated and exotic goods are another case. Data sets
drawn from the Old Bailey records show that consumers substituted towards more
expensive cotton stockings and counterpanes and away from worsted and linen. This
was not about emulation, but about respectability, politeness, and differentiation. They
sought greater variety and higher quality.53 Exotic goods such as Asian imports in Jan de
Vries’ analysis changed tastes, and created new markets and products. Asian imports,
especially textiles and the porcelain, stimulated a commercialization of societies in
retailing, and drew households into the market.54
Lynn Hunt’s Writing History in the Global Era (2014) links a cultural history of society
and the self in late-seventeenth- and eighteenth-century Europe to how exotic goods
were experienced and chosen. Internal European factors interacted with wider global
connections. Europeans developed a culture in which exotic goods made sense. Larger
numbers, especially in specific places with higher discretionary incomes, wanted more
choice. A desiring, stimulus-seeking attitude developed in tandem with social awareness:
different varieties and individual choices among these demarcated new social groups.
Tastes changed as experiences of the self changed.55
We can thus understand the varieties of goods carried in East India Company cargoes
and constantly sought in East India Company orders. This was no random collection of
goods, but one constantly responding to large-scale buyers at the autumn and spring
company auctions, and these were closely affected in turn by the choices of all the small
retailers and peddlers they sold on to. French colourways dictated Swedish silk imports
from China; East India Company orders went out with letters criticizing the colours of
earlier cargoes, and demanding dynamic, responsive, and intuitive designs and patterns.
Dutch and English East India companies and private European and Indian merchants
competed vigorously for the finest figured jamdani muslins.56
The case of textiles
A global history of the consumption of cotton textiles provides an opportunity to address

some of these issues. As in the case of consumer durables in the early modern period,
127
most of the research has focused on Europe, but there is now more on the Americas,
Africa, South Asia, and East Asia. In all of these regions, fashion, sumptuary codes,
tribute, and gifts provided incentives to consume a commodity that was newly traded
between some large areas of the globe, and then newly manufactured in Europe and the
Americas. Cotton is also the subject of two recent large-scale global histories.57
What are the key markers of this textile consumption across the early modern world?
The entry of cotton into European ways of dress was slower than we once thought.
Merchants in the sixteenth and seventeenth centuries needed to ‘educate’ their potential
market, and cotton only became truly popular from the mid-eighteenth century. Colour
fastness, novelty, and new distribution channels were all important to their uptake. The
Dutch consumed the new fabrics right down the social ladder by the early eighteenth
century; at least a quarter of households in the Amsterdam inventories had them. By the
later eighteenth century, there were many substitutes, and cottons were widely used in
the dress of wage earners in Paris and in Castille.58
Well before Europe’s encounter with Indian cottons, Gujarati traders tapped into a
lively demand in East Africa. The Portuguese traded cotton from Gujarat, Sindh, and
Cambay for slaves that were then sold on at a very high profit in Brazil, Mexico, and
the Caribbean. By the late seventeenth century, the Gold Coast imported 20,000 metres
of European and Asian cloth a year, and between 1690 and 1800, cloth made up 68
per cent of all commodities exported from England to Africa; 40 per cent of this was
from India.59 Sumptuary codes on colour and high demand for geometric patterns and
stripes in vibrant colours shaped the trade. From an early period, Indian cottons were a
highly desirable luxury good in many parts of Africa.60
Gujarati cottons exported to East-Central and Southeast Africa responded to highly
specific and changeable tastes. They were used as a currency, and were important in
social, cultural, and political life in both coastal and interior areas. Cloth bestowed moral
and social qualities; it marked high and low status, was a significant diplomatic gift, and
marked political and cultural ceremony. Taste and fashion dictated these markets.61
The Latin American market was divided into higher-quality imported goods and
cheaper local products. Indian cottons came to Mexico via the Pacific Manila-Acapulco
route or via European imports, and were preferred in bright colours and floral patterns.
Cottons entered rapidly into the wardrobes of the colonists of French and British North
America and the Caribbean; consumers sought a ‘more refined and expensive product’.
By the last decade of the eighteenth century, one-quarter of London’s cotton imports
went on to Africa, and high proportions were also re-exported to the Americas. In
Riello’s words, ‘cotton became a global commodity.’62
Historians are now exploring the motivations of cotton’s consumption in these
different regions of the world. A commodity that connected India to Europe, East
Asia, Africa, and the Americas also conveyed very different meanings to its consumers.
Plebeian families distinguished between ‘best’ and working clothes; they owned changes
of clothing and duplicates, and dressed up for church and popular festivities. They
focused their consumer expectations on clothes; clothes were a sign of self-respect. They
chose and they benefited from new kinds of fashionable clothing made from cotton.63
128
There were also highly diverse markets for many medium-quality as well as fine-quality
materials. India’s cottons changed over time; they appealed to different social status and
aesthetic preference. Their markets also revealed fashionability, and finishing in dyeing,
printing, and embroidery appealed to consumers across India and outside.64
Conclusion
An economic history of consumption has eluded many economic historians. Many have
continued instead to create larger data sets and to compare like with unlike on levels of
wages and standards of living. In the space left by Pomeranz in the Great Divergence debate,
they have debated whether wages were different between regions of the world and whether
this factor drove other economic stimulants such as technological change. But all those
factors explored by social and cultural historians behind changing consumer behaviour
from status and social structure to gifts, diplomacy, and display, and on to fashion,
sensibility, and identity have remained beyond the purview of most economic historians.
The window opened to such investigation by Jan de Vries’ concept of ‘industriousness’ has
still provided little illumination into key consumer practices. Global economic history
in fact turned attention away from such investigation. The dearth of economic analysis
into these many motivations behind consumer behaviour underpins an economic history
which continues to avoid the history of consumption in favour of the history of wages.
A global economic history must include global connections as well as global comparisons.
The impact of exotic goods and of encounters between merchants from different parts
of the world helped to transform the contents of the probate inventories, toll registers,
thefts, foundling hospital identifiers, and indeed food baskets. Individual, micro, and local
studies are now revealing these in research such as that recounted here on cotton textiles.
Different products and distinctive qualities and different preparations and presentations
affected food baskets as much as domestic interiors and dress.65 There is much for global
economic historians to discover at the micro level that will move us beyond the now very
dated questions and materials still informing the big data sets of wages and prices.
Notes
1. M. J. Daunton (1995), Progress and Poverty: An Economic and Social History of Britain
1700–1850. Oxford: Oxford University Press; J. Mokyr (2009), The Enlightened Economy.
An Economic History of Britain 1700–1850. New Haven: Yale University Press; R. C. Allen
(2009), The British Industrial Revolution in Global Perspective. Cambridge: Cambridge
University Press. Though the most recent edition of the Cambridge Economic History of
Britain does have a chapter on consumption, a closer look reveals that this too is mainly
about wages and the standard of living.
2. See J. Brewer (1990), The Sinews of Power: War, Money and the English State 1688–1783.
Cambridge, MA: Harvard University Press; T. Breen (2004), The Marketplace of Revolution:
How Consumer Politics Shaped American Independence. Oxford: Oxford University Press.
129
3. L. Hunt (2014), Writing History in the Global Era. New York: W.W. Norton.
4. D. Winch (2009), Wealth and Life. Essays on the Intellectual History of Political Economy
in Britain, 1848–1914. Cambridge: Cambridge University Press, 149–76 and 332–66;
F. Trentmann (2016), Empire of Things: How We Became a World of Consumers, from the
Fifteenth Century to the Twenty-First. London: Allen Lane, 151–3.
5. W. Sombart (1967 [or. ed. 1913]), Luxury and Capitalism. Ann Arbor: University of
Michigan Press; T. Veblen (1899 [ed. 1912]), The Theory of the Leisure Class. New York:
Macmillan. Mandeville’s The Fable of the Bees, first published early in the eighteenth century,
reappeared at this time in a new American edition published by Kaye, and it was at the same
time translated into German.
6. K. Lancaster (1971), Consumer Demand: A New Approach. New York and London: Columbia
University Press; D. Ironmonger (1972), New Commodities and Consumer Behaviour.
7. T. Scitovsky (1977), The Joyless Economy: The Psychology of Human Satisfaction. Oxford:
Oxford University Press.
8. M. Bianchi (ed.) (1998), The Active Consumer: Novelty and Surprise in Consumer Choice.
London: Routledge.
9. A. Offer (2012), ‘Consumption and well-being’, in F. Trentmann, The Oxford Handbook of the
History of Consumption. Oxford: Oxford University Press, 653–72.
10. Offer, ‘Consumption and well-being’, 666.
11. K. Pomeranz (2000), The Great Divergence: China, Europe and the Making of the Modern
World Economy. Princeton: Princeton University Press, 122.
12. Pomeranz, The Great Divergence, 117.
13. Pomeranz, The Great Divergence, 131.
14. Pomeranz, The Great Divergence, 144–6.
15. K. Pomeranz (2005), ‘Standards of living in eighteenth-century China: Regional differences,
temporal trends and incomplete evidence’, in R. C. Allen, T. Bengtsson and M. Dribe (eds),
Living Standards in the Past. New Perspectives on Well-being in Asia and Europe. Oxford:
Oxford University Press, 7–10, and 21–4.
16. Pomeranz, The Great Divergence, 122–5.
17. J. de Vries (2015), ‘Understanding Eurasian trade in the era of the trading companies’, in
M. Berg, et al. (eds), Goods from the East, 1600–1800: Trading Eurasia. Basingstoke: Palgrave,
1–39, esp. 10–11; P. Parthasarathi (2011), Why Europe Grew Rich and Asia Did Not: Global
Economic Divergence, 1600-1850. Cambridge: Cambridge University Press.
18. de Vries, ‘Understanding Eurasian trade’, 11, 23–4.
19. J. de Vries (2010), ‘The limits of globalisation in the early modern world’, Economic History
Review, 63 (1), 710–33.
20. de Vries, ‘Understanding Eurasian trade’, 15–16, 34–6.
21. de Vries, ‘Understanding Eurasian trade’, 17.
22. K. Pomeranz (2012), ‘Commerce’, in U. Rublack (ed.), A Concise Companion to History.
Oxford: Oxford University Press, 111.
23. See Zheng Yangwen (2012), China on the Sea: How the Maritime World Shaped Modern
China. Leiden: Brill. See R. Bin Wong (2016), ‘The early modern foundations of the modern
world: Recent works on patterns of economic and political change’, Journal of Global History,
130
11 (2), 135–46; Also see J. de Vries (2008), The Industrious Revolution: Consumer Behavior
and the Household Economy, 1650 to the Present. Cambridge: Cambridge University Press.
24. See for example, D. Haynes, A. McGowan, T. Roy and H. Yanagisawa (eds) (2010), Towards a
History of Consumption in South Asia. New Delhi: Oxford University Press.
25. J. Gommans (2015), ‘For the home and the body: Dutch and Indian ways of early modern
consumption’, in Berg et al., (eds), Goods from the East, 331–49.
26. C. A. Bayly (2002), ‘“Archaic” and “Modern” globalization in the Asian and African arena
c. 1750–1850’, in A. G. Hopkins (ed.), Globalization in World History. London: Pimlico, 52.
27. de Vries, The Industrious Revolution.
29. C. Shammas (2012), ‘Standard of living, consumption, and political economy over the past
500 years’, in Trentmann (ed.), The Oxford Handbook of the History of Consumption, 212.
30. Shammas, ‘Standard of living’, 219. Also see A. Offer (2012), ‘Consumption and well-being’,
653–71.
31. Shammas, ‘Standard of living’, 212.
32. See J. Humphries (2004), ‘Household economy’, in R. Floud and P. Johnson (eds), The
Cambridge Economic History of Modern Britain, vol. 1. Cambridge: Cambridge University
Press, 238–67; S. Horrell and J. Humphries (1992), ‘Old questions, new data, and alternative
perspectives: Families’ living standards during the Industrial Revolution’, Journal of Economic
History, 52 (4), 849–80.
33. See Allen, The British Industrial Revolution, 106–31 and 135–55; Idem (2001), ‘The Great
Divergence in European wages and prices from the Middle Ages to the First World War’, 38
(4), 411–47; R. C. Allen, J.-P. Bassino, D. Ma, C. Moll-Murata and J. L. van Zanden (2011),
‘Wages, prices and living standards in China, 1738-1925: in comparison with Europe, Japan,
and India’, Economic History Review, 64 (Supplement 1), 8–38; See J. Humphries (2013),
‘The lure of aggregates and the pitfalls of the patriarchal perspective: A critique of the high
wage economy interpretation of the Industrial Revolution’, Economic History Review, 66 (3),
693–714. Allen also refined his data to include the wages of women and children. R. C. Allen
(2015), ‘The high-wage economy and the Industrial Revolution: A restatement’, Economic
History Review, 68 (1), 1–22.
34. Allen, The British Industrial Revolution, 32.
35. T. Piketty (2015), Capital in the Twenty-First Century. Cambridge, MA: Belknap Press;
P. Hoffman (2005), ‘Sketching the rise of real inequality in early modern Europe’, in Allen,
et al. (eds), Standards of Living in the Past, 24.
36. Hoffman, ‘Sketching the rise of real inequality’, 25–9.
37. Hoffman, ‘Sketching the rise of real inequality’, 51.
38. Horrell and Humphries (1992), ‘Old questions, new data’, 849–80.
39. S. Horrell (1996), ‘Home demand and British industrialization’, Journal of Economic History,
56 (3), 561–604.
40. S. Horrell (2014), ‘Consumption, 1700–1870’, in R. Floud, J. Humphries and P. Johnson (eds),
The Cambridge Economic History of Modern Britain, 3rd edn, vol. 1. Cambridge. Cambridge
University Press, 239.
41. Horrell (2014), ‘Consumption, 1700–1870’, 241. Horell’s findings rely on a data set compiled
by C. Muldrew in his (2011), Food, Energy, and the Creation of Industriousness: Work and
Material Culture in Agrarian England, 1550–1780. Cambridge: Cambridge University
131
Press. See the fundamental critique to this dataset in C. Shammas (2012), ‘Review of food,
energy, and the creation of industriousness: Work and material culture in agrarian England,
1550–1780’, Journal of Modern History, 84 (4), 951–3.
42. See the table of probate inventories for early modern England in Horrell, ‘Consumption’, 240.
44. See Trentmann’s critique of de Vries in Trentmann, Empire of Things, 75; P. Vries (2016),
‘What we do and do not know about the Great Divergence in 2016’, unpublished paper, 20.
45. Anne McCants argued there had to be a widespread consumer demand for these
commodities so that they were incorporated into budgets and daily routines in sufficient
amounts to alter overall standards of living. See A. McCants (2007), ‘Exotic goods, popular
consumption and the standard of living: Thinking about globalization in the early modern
world’, Journal of World History, 18 (4), 433–62; Idem (2008), ‘Poor consumers as global
consumers: The diffusion of tea and coffee drinking in the eighteenth century’, Economic
History Review, 61 (Supplement 1), 172–200; Idem (2013), ‘Porcelain for the poor: The
material culture of tea and coffee consumption in eighteenth-century Amsterdam’, in
P. Findlen (ed.), Early Modern Things: Objects and Their Histories 1500–1800. London:
Routledge, 316–41; Idem (2015), ‘Becoming consumers: Asiatic goods in migrant and
native-born middling households in eighteenth-century Amsterdam’, in Berg, et al. (eds),
Goods from the East, 197–215.
46. J. Styles (2006), The Dress of the People: Everyday Fashion in Eighteenth-Century England.
New Haven: Yale University Press; Idem (2010), Threads of Feeling: The London Foundling
Museum’s Textile Tokens 1740–1770. London: The Foundling Museum.
47. C. Fertig and U. Pfister (2016), ‘“Coffee, mind and body”: Global material culture and the
eighteenth-century Hamburg import trade’, in A. Gerritsen and G. Riello (eds), The Global
Lives of Things. Basingstoke: Routledge, 227.
48. See B. Lemire (1991), Fashion’s Favourite: The Cotton Trade and the Consumer in Britain,
1660–1800. Oxford: Oxford University Press; Styles, Dress of the People.
49. J. Humphries, S. Horrell and K. Sneath (2015), ‘Consumption conundrums unravelled’,
Economic History Review, 68 (3), 841 and 855.
50. Humphries, Horrell and Sneath, ‘Consumption conundrums’, 847 and 853.
51. D. Zyllerberg (2015), ‘Fuel prices, regional diets and cooking habits in the Industrial
Revolution, 1750–1830’, Past & Present, 229, 91–122.
52. Fertig and Pfister, ‘Coffee, mind and body’, 229.
53. Humphries, Horrell and Sneath, ‘Consumption conundrums’, 853–4.
54. de Vries, ‘Understanding Eurasian trade’, 14 and 22.
55. Hunt, Writing History in the Global Era, 114–41.
56. See essays by Prakash (2015) and Berg (2015) in Berg, et al. (eds), Goods from the East, 119–
38, and 183–96. Also see H. Hodacs (2015), Silk and Tea in the North. Palgrave: Basingstoke.
57. Giorgio Riello combined extensive research on museum collections of printed cotton textiles
with archival research to argue for the existence of a globalized economy based in the wider
world trade in printed cotton textiles from India throughout the early modern period. This
trade stimulated industrialization in Europe, and especially Britain, as Europeans sought
to build an industry to match the fine material attributes of these cottons at low consumer
prices. G. Riello (2013), Cotton: The Fabric that Made the Modern World. Cambridge:
Cambridge University Press. Sven Beckert’s book provided another history of raw cotton and
132
cotton manufacture, but mainly in Europe and America in the modern period. S. Beckert
(2014), Empire of Cotton: A Global History. New York: Alfred A. Knopf.
58. Riello, Cotton, 114–5.
60. Trentmann, Empire of Things, 124.
61. P. Machado (2009), ‘Gujarat, Africa and the Western Indian Ocean’, in G. Riello and P.
Parthasarathi (eds), The Spinning World: A Global History of Cotton Textiles, 1200–185.
Oxford: Oxford University Press, 161–79; Idem (2009), ‘Cloths of a new fashion: Indian
Ocean networks of exchange and cloth zones of contact in Africa and India in the eighteenth
and nineteenth centuries’, in G. Riello and T. Roy (eds) (2009), How India Clothed the World,
53–84. Also see Trentmann, Empire of Things, 124–5, and 129.
63. Styles, The Dress of the People, 241–3, 263, 307–14, 323–6; R. DuPlessis (2009), ‘Cotton
consumption in the North Atlantic’, in Riello and Parthasarathi (eds), The Spinning World,
231–4. See the developing uses of cotton by gender and race in Spanish America and the
Caribbean as discussed by M. Vicente (2009), ‘Cottons in Colonial Spanish America’, in
Riello and Parthasarathi (eds), The Spinning World, 260. See also Rebecca Earle (2003),
‘Luxury, clothing and race in Colonial Spanish America’, in M. Berg and E. Eger (eds),
Luxury in the Eighteenth Century: Debates, Desires and Delectable Goods. Basingstoke:
Palgrave, 219–27.
64. P. Parthasarathi and G. Riello (2012), ‘From India to the world: Cotton and fashionability’, in
Trentmann, The Oxford Handbook of the History of Consumption, 148–50.
65. On foodstuffs, see Jan de Vries’ research on bread in the Dutch Republic. J. de Vries (2009),
‘The political economy of bread in the Dutch Republic’, in O. Gelderston (ed.), The Political
Economy of the Dutch Republic. Aldershot: Ashgate, 85–114.
133
134
PART II
THE EMERGENCE OF A WORLD ECONOMY
136
CHAPTER 8
TRADE AND THE EMERGENCE OF A
WORLD ECONOMY, 1500–2000
Tirthankar Roy and Giorgio Riello
The relationship between trade and the emergence of a world economy has been the
subject of several differing ideas and conceptualizations over the past two generations.
Economic historians have chartered the intensification of long-distance – and especially
transcontinental – trade over the course of the early modern period and since the
nineteenth century, but there is little consensus on the chronology and reasons for major
shifts in this long period. The relative size of trade fluxes is a subject of debate especially
for the pre-modern period as is a general definition of what the making of a global
market might entail. Economic historians have provided rather different chronologies
of the making of a global economic system of exchange. The same can be said of the
relationship between trade and economic growth, a topic of disagreement especially for
the period of the Industrial Revolution.
This chapter starts by charting the scale and movements of world trade over the five
centuries from the start of European direct trade with Asia and the Americas to the
late twentieth century. It introduces the historiography explaining these movements. It
considers the complex relationship between trade, politics, and economic development.
It concludes with a short overview of the points in the debates and controversies.
The shape and scale of global trade
Historians have argued that trade can be taken as one of the indicators of the level of
globalization. The exchange of goods – and more recently of an increasing amount of
services – across national borders is taken to be a measure of not only economic but also
social and cultural interconnection. Since 1500, world trade has mostly grown at rates
far higher than those of world GDP, suggesting that national economies have become
increasingly connected to each other through the trade of raw materials, foodstuffs, and
manufactured commodities (Table 8.1).
With a growth rate of just under 1 per cent a year in the pre-1820 period, trade grew
at three times the rate of the world GDP. In 1820, the size of world trade might have been
five times larger than in 1500. Yet, this growth was modest compared to the following
two centuries. It is estimated that world trade increased from $700 million (in 1970
US$) in 1700 to $38 billion in 1913.1 On the eve of the First World War, world trade
was between twenty-five and thirty-three times larger than a century earlier.2 With a
Table 8.1 Growth of world trade and GDP, 1500–2003 (annual average compound
growth rates in percentage)
World trade World GDP Ratio trade to GDP
1500–1820 0.96 0.32 3.0
1820–1870 4.18 0.94 4.4
1870–1913 3.40 2.12 1.6
1913–1950 0.90 1.82 0.5
1950–1973 7.88 4.90 1.6
1973–2003 5.38 3.17 1.7
1820–2003 3.97 2.25 1.8

Source: Angus Maddison, Contours of the World Economy: Essays in Macro-Economic History (Oxford:
Oxford University Press, 2007), Table 2.6.
growth rate of over 4 per cent in the period 1820-80, there was a ninefold increase in
world trade with a period of very high growth between 1840 and 1873 and slightly more
contained growth over the following forty years. This was the period of liberalization of
the European economies and the heyday of imperial projects on the part of European
nation states.
The First World War was a moment of disruption in world trade and foreign
direct investment, and it was followed by a period of slow growth. Autarchic regimes,
monetary and financial instability, economic stagnation, and a weakening of empires
meant in some cases an absolute reduction in world trade. It was only in the post-1945
period that trade began to grow again, indeed at a pace unmatched even during the so-
called first age of globalization of the second half of the nineteenth century. Already by
the early 1950s, the size of world trade had returned to 1913 levels, though it took until
the mid-1970s for the level of trade as a share of world output to be back to 1913 levels.3
At the same time, the pursuit of protectionist industrial policies in the developing
world after 1950 reduced the importance of foreign trade for some of these economies
(such as those of India or China), which had been highly open before 1950. The past
forty years have been a period of further liberalization of commodity and financial
markets and the ‘multilateralization of trade’. Both world GDP and world trade grew at
very high rates.
This overall picture needs however to be disaggregated in order to consider the
contribution of specific countries. In 1913, the merchandise export of Britain was worth
an estimated $39.35 billion (in 1990 US$), the largest in the world and just ahead of
Germany, and roughly double the size of US export. Britain, the United States, and
Germany – the three largest industrial economies at the time – accounted for possibly
two-thirds of all trade in the world (Table 8.2). The preponderance of industrial
economies has remained a feature of world trade throughout the twentieth century. In
138
Table 8.2 Export of selected countries, 1820–1992 (1913 = 100)
Size of the export (1913 = 100)

Value in 1913 Value in 1929 Value in 2003
1820 1870 1913 1929 1950 1973 2003 (GB = 100) (US = 100) (Ge = 100)
Great Britain 3 31 100 81 100 240 816 100 105 41
Germany 4 18 100 92 35 508 2055 97 115 100
France 4 31 100 147 149 922 3578 29 55 51
Italy 7 39 100 161 126 12
Russia - 100 -
United States 1 13 100 158 225 909 4176 49 100 102
Japan - 3 100 258 210 5647 23922 4 14 51
China 33 100 149 151 278 10811 11 21 58
India 37 100 87 58 102 908 24 27 11
World 3 24 100 128 797 - - -

Source: Angus Maddison, Monitoring the World Economy, 1820-1992 (Paris, OECD Development Centre, 1995); Id, Contours of the World Economy: Essays in Macro-Economic
History (Oxford: Oxford University Press, 2007), 170; Maddison, 361.
139
Trade and the Emergence of a World Economy, 1500–2000
2003, the export of Great Britain was eight times larger than what it had been ninety
years earlier, a modest performance compared to Germany (twenty times larger), France
(thirty-five times), and the United States (forty-two times). Trade grew exponentially
for China (108 times large in 2013 compared to 1914) and Japan (239 times), but
enormous increases for Asian countries hide the fact of the relatively small size of their
trade in 1913. At the beginning of the twenty-first century, the major Western industrial
nations – the United States and Germany in particular – still controlled a large part of
world trade.
The beginning of a global economy: The early modern period
The shape of global trade in the twentieth century could not be more different from
its contours just four centuries earlier. In 1500, China and India accounted for more
than half of the world manufacturing output and were the engines of global trade. Silk,
porcelain, iron, and copperware from China were exchanged for silver, cotton, spices,
and foodstuff. Palm oil, nuts, and precious metals from Africa and the Middle East
found their way to India in exchange for cotton textiles. Yet historians have disputed
as to whether this was in any sense a global system of exchange. Janet Abu-Lughod put
forward the idea that, already in 1250–1350, a system of global exchange existed but was
neither coordinated by any specific world area nor unified into one system. She proposed
instead a model based on a series of overlapping spheres of trade that included long-
established routes such as the silk routes across Central Asia, the China Sea, the Indian
Ocean, and the Mediterranean.4 The work of David Christian on the silk routes showed
how trade was based on a system of ‘repeated transaction’ with numerous disruptions
caused by warfare and political instability.5 Technology was one of the limiting factors
for intercontinental trade as direct trade between the two extremes of Eurasia was all
but impossible. Traders operated instead on specific segments of this Eurasian system
and were organized in ‘nations’ or trading communities that negotiated the protection
of local governments.6
The sixteenth and seventeenth centuries saw a restructuring of this system, though
historians dispute the scale and consequences of such change. It has been suggested that
the direct trade between Europe and Asia via the Cape first by the Portuguese from
1500 onwards and later by the Dutch, English, and other European companies after 1600
inaugurated a new period in world trade. This was a trade that was direct and did not
have to rely on a series of intermediaries; it was in the hands of Europeans and was
structured through large-scale organizations, the East India companies, that have been
seen as the precursors of modern corporations.
However, the idea that Europe’s direct trade with Asia and the Americas inaugurated
a new era for the early modern world economy has been debated. Critics point to the
fact that such a trade might have been rather modest. Extra-European markets were
small and the profitability of both colonial trade and slavery remained low.7 Over the
three centuries between 1500 and 1800, just over 10,600 vessels were sent from Europe
140
to Asia, two-thirds of which were sent in the eighteenth century.8 At an estimated

700 tonnes per vessel, the total trade between Asia and Europe was in the region of
7.5 million tonnes, roughly fifteen present-day container ships. By contrast, coastal,
short-distance, and port-to-port trade remained far more important than long-distance
trade in this period. The majority of trade was carried out within the borders of specific
regions. While India is often hailed as key to Britain’s early modern intercontinental
trade, estimates of the subcontinent’s trade and GDP reveal that long-distance trade
was small.9
Intercontinental trade was not just small but also slow as it took the best of two years
for a European ship to go to China and return to Europe. It was also expensive: Although
profit margins were high, recent research has underlined the cost of an ‘armed trade’ that
relied on violence and coercion as well as a sophisticated system of diplomatic relations.
This was also a trade with profound social costs as shown by de Vries’ estimates of the
high number of people who left Europe at the service of the East India companies. In the
case of a small nation such as Portugal, this constituted in all probability a large drain of
its human capital.10
Yet, quantities might not be the entire story. Dennis Flynn and Arturo Giráldez argue
that Europeans brought together separate areas of trade into one unified system. From
the 1560s onwards, vast reserves of silver mined in Latin America ‘oiled’ this newly
integrated system of exchange and allowed it to expand in size. Because of the high
value of silver in China and more generally in Asia, bullion could be used as a means
of payment for a variety of Asian commodities that found their way to European and
Atlantic markets.11
Silver was monetized and the Portuguese and Spaniards first, and later other
European nations, expanded trade by integrating the American and Asian economies.
The connection between the American, African, and Asian economies was furthered by
the setting up of plantations in the Americas cultivating a variety of tropical commodities
such as sugar, coffee, cocoa, and later raw materials such as cotton.12 The incorporation
of the Atlantic coincided with – and was fostered by – the expansion of the slave trade
by the hands of European traders. It is estimated that in the period 1525–1790, up to
ten million people were enslaved in Africa and transported to the Americas. Two-thirds
of such slaves were transported in the eighteenth century, the period of maximum
expansion of the production of tropical colonial goods.13
The system of intercontinental trade changed substantially over the course of the
early modern period and especially in the eighteenth century. Three main changes
should be underlined. First, while in the sixteenth century spices and what we might call
‘traditional luxuries’ had been central to global trade, by the seventeenth and eighteenth
centuries their role was taken over by cheaper cotton textiles as well as tropical goods
such as tea, coffee, and sugar. Tropical commodities and luxury goods were items that
were, at least initially, not available or not produced within the borders of Europe and
North America.
Second, over time Europe started becoming a direct competitor in the production of
Asian commodities. Unlike Portugal and Spain – the key trading players of the sixteenth
141
century – England, France, and the Netherlands possessed export-oriented industries

such as the English woollens, French silks, and the Dutch lighter new draperies.14 Over
time, they started manufacturing imitations of Indian cotton textiles, Chinese porcelain,
and Japanese lacquerware for domestic and export markets.15 High tariffs and total bans
were part of the mercantilist policies embraced by several, though not all, European
states. The ban of import and wearing of Indian cotton and silk textiles in most European
nations between 1689 and the 1770s tends to be seen, if debatably, as an example of
mercantilist policies aimed at fostering local production and re-export, and extended to
include colonial policies against export of manufactured commodities towards the mother
country. In the case of Britain, long-distance trade had to be carried out on English ships
and colonial commodities had to be sent to England before being re-exported. Duties on
tobacco, tea, sugar, and spirits accounted for a quarter of government revenue in Britain
in the late eighteenth century.16 In the 1820s, British tariffs still averaged between 45 and
55 per cent.17
Figure 8.1 Europe’s intercontinental trade, 1501–1795.

Source: Jan de Vries, ‘The Limits of Globalisation in the Early Modern World’, Economic History
Review, 63 (1) (2010), 720.
142
Over time, the Atlantic economy came to have a larger weight for Europe than the
eastbound Asian trade, even though the scale of Asian and tropical trade with Europe
increased substantially (Figure 8.1).18
Industrialization and reconfiguration of world trade
Historians agree that the nineteenth century saw a dramatic change in both the nature
and scale of global trade. The rise of the industrial West created a demand there for raw
materials and produced a surplus of finished commodities that needed to find markets all
over the world. If at the beginning of the seventeenth century British imports were equally
divided into manufactured commodities, foodstuff, and raw materials, a century later
Britain had become a net exporter of manufactured commodities with less than 10 per cent
of its imports in the form of manufactured goods. By 1800, Britain relied on the import of
foodstuff (45 per cent of all imports) and of a range of raw materials necessary as industrial
inputs (46.5 per cent of all imports).19 Britons in the mid-Victorian period spent one out of
every four pounds sterling on foreign goods, mostly food and primary materials.20
As we saw earlier, the ratio of trade to GDP grew from a level as low as 1 per cent in the
1820s to ten times as much on the eve of the First World War, indicating a pronounced
opening up of economies, especially those in Europe and North America (Table 8.3).21
Besides industrialization, the transcontinental railways, transoceanic steamships with
compound steam engines, and undersea telegraph cables contributed to the process. The
opening of new maritime routes such as the Suez Canal in 1869 and the completion of
the Union Pacific Railroad the same year allowed for cheaper and more reliable means
of transport. Improvements in navigation technology and the introduction of steam
decreased the cost of ocean freight by 80 per cent over the course of the nineteenth
century.22 The general peace in Europe and the balance of power in the century between
1815 and 1914 allowed for the establishment of specific imperial spheres of influence
by European nations in Asia and Africa. The infrastructure of empire in turn facilitated
the migration of people and the mobility of capital through foreign direct investment.
Between 1870 and 1914, the stock of capital invested outside the place of origin increased
from $9 billion to $44 billion.23
How ‘free’ was trade? There is a consensus that the general liberalism inaugurated
with the repeal of the Corn Laws in Britain in 1846 started a new age of free trade. The
Cobden-Chevalier treaty of 1860 in which Britain removed all tariffs on the import of
French goods (with the exception of wine and brandy) included a ‘most-favoured-nation
clause’ that allowed further treaties to be signed with other industrialized countries
in Europe. Bairoch however insists that liberalism was more a ‘myth’ than a reality in
nineteenth-century Europe as most economies did not readily embrace free trade. Even
considering the relative relaxation of duties and other protectionist measures in the
period 1860–80, Bairoch and Kozul-Wright conclude that in 1913 the developed world
could be ‘best described as islands of liberalism, surrounded by a sea of protectionism’.24
The financial crisis of 1873 gave voice to those who had been arguing for protection.
143
Table 8.3 World merchandise export as percentage of GDP
1820 1.0 **
1850 5.1*
1870 4.6 **
1880 9.8*
1913 11.9 (7.9**)
1929 9.0**
1950 7.1 (5.5**)
1973 11.7 (10.5**)
1985 14.5*
1993 17.1**
1998 17.2*
Source: *Paul Krugman, ‘Growing World Trade: Causes and Consequences’,
Brookings Papers on Economic Activity, 1 (1995), 331; ** Maddison, The
World Economy: A Millennial Perspective (Paris: OECD, 2001).
Three features characterized the new world trade system of the nineteenth century.
The first one is the creation of markets for standardized commodities such as cotton,
wool, coal, wheat, maize, and iron. Unlike the commodity exchange of the pre-
modern period, this was a trade in bulk commodities. These were also no longer non-
competing goods as they had been in the early modern period but competed directly
with producers in different continents.25 Chris Bayly, for instance, conceptualizes this
as a shift from what he calls an ‘archaic system’ of exchange based on the trade of luxury
items to one that can be defined as ‘modern’ based instead on capitalist expansion
and global imperialism.26 The interlinking of world commodity trade came to be
strongly associated with international specialization of labour and, as we will see, to
economic development more widely. The second element of this new system was the
preponderance of Europe and Britain in particular. In 1910, 60 per cent of the tonnage
passing through the Suez Canal was British. Western shipping dominated world
trade.27 The same could be said of direct foreign investment. At an estimated £4 billion,
British overseas investment accounted for 43 per cent of the world total in 1913. France
accounted for a further 20 per cent and Germany 13 per cent.28 Finally, this system
was based on a differentiation between industrial and primary produce economies.
In 1913, primary products accounted for nearly two-thirds of all world trade, with
food accounting for 27 per cent of all trade, agricultural raw materials 23 per cent, and
minerals 14 per cent. While Western Europe and North America were importers of
raw materials, they exported manufactured products to Africa, Latin America, Asia,
and Oceania.29
144
Historians have argued that it was not just the logic of trade or its size that
distinguished the nineteenth from previous centuries. O’Rourke and Williamson make
a claim that a true globalization, in the sense of closer market integration driven by a
sharp fall in trade and transportation cost, began only from the 1820s, whereas trade
connections grew between 1500 and 1820 driven by demand and supply stimulations.30
They take what de Vries calls a definition of ‘hard globalization’ and posit that the
integration of markets to form an international commodity system could only happen
when prices of basic commodities across the world started to converge as they did in
the nineteenth century.31 For instance, the cotton price spread between Bombay and
Liverpool decreased from 57 to 20 per cent in the forty years between 1873 and 1913.32
Other historians prefer instead a definition of so-called soft globalization based on the
idea of a continuative and sustained exchange of goods across different world areas as a
key identifier of a global market.33 In defence of soft globalization, the process induced
some of the key societal changes without which hard globalization would have been
impossible, including financial innovation, the joint-stock company, codification of
commercial law, mass demand for Asian tea or textiles, and the incentive to substitute
imports and develop better ships (more on this point later). In short, the distinction
between the weak eighteenth-century and the strong nineteenth-century globalization
may be an artificial one.
Trade and economic growth
The analysis of the nineteenth century brings to the fore the relationship between
economic development (especially industrialization) and intercontinental trade. This
topic has been at the centre of attention for economic historians for decades and has
seen opposing opinions. A traditional approach going back to W. W. Rostow, and before
him historians of the Commercial Revolution, argued that trade was key to capital
accumulation. More recently, academic scholarship has considered a wider spectrum
of socio-economic returns with C. A. Bayly arguing that merchant capitalists reaped the
benefits of new global patterns of trade well before industrialization took place.34 In the
1960s, Phyllis Deane, John Habakkuk, and Ralph Davis gave great attention to trade, but
by the 1970s and 1980s, Joel Mokyr, Deirdre McCloskey, and Nick Crafts dismissed the
existence of a strong connection between trade and economic growth, arguing that it was
technological change rather than trade or capital accumulation that was the main driver
of industrialization.35 The Industrial Revolution became mostly an endogenous affair.
In fact, they observed that Britain’s terms of trade should have increased during the
Industrial Revolution although in practice they fell due to cost-reducing technological
innovation. They observed that trade reallocates resources to its existing optimum but
does not shift that optimum itself.36
A more extreme position relies instead on counterfactual methodologies. Clark,
O’Rourke, and Taylor show that as late as the 1850s the absence of trade with the New
World would have had little impact on Britain’s growth, as substitutes for the cotton,
145
sugar, corn, and timber imported from the New World could be found in Asia and
Eastern Europe. However, they also agree that after 1850 the British economy became
highly dependent on foreign trade especially considering that its key sector, cotton
textile manufacturing, sold 60 per cent of its production in foreign markets.37 There is
now the acknowledgement that trade in British industrial goods increased substantially
during the period of the Industrial Revolution but that was due to falling prices. The
overall outcome was that the value of exported goods increased at a much slower pace
than the volume of traded goods.38 O’Brien and Engerman, though sceptical of the
overall importance of overseas markets for British economic growth, underline the
increasing employment opportunities in export-oriented industries.39 Furthermore,
the expansion of commerce that preceded industrialization allowed the flourishing of
legal, financial, and commercial institutions that underpinned the subsequent phase of
industrialization and sustained growth.40 Trade in the Atlantic strengthened the power
of merchants and secured property rights.41 Kenneth Pomeranz’s ecological narrative
shows through counterfactual scenarios that the imports of food and raw materials from
the Americas were key to the lifting of environmental limits to growth in Europe and in
Britain more specifically.42
A second debate on the relationship between trade and economic growth relates to
the relationship between the richer industrial and the poorer economies worldwide.
The nineteenth century saw a ‘great specialization’ of the world between the Western
world (North) engaged mainly in the production and trade of industrial goods and a so-
called Third World (South) specialized instead in the production of raw materials and
foodstuff.43 This is not a perfect differentiation as both Eastern Europe and the United
States produced and traded extensively in raw materials and other industrial inputs.
However, historians agree that in the nineteenth century trade facilitated the economic
convergence between richer and poorer economies, thanks to the export growth in raw
materials by non-industrialized countries.44 Terms of trade swung in favour of non-
industrial economies as the price of primary products increased over the course of the
nineteenth century, while the price of manufactured commodities fell dramatically.45
A more cautious position is proposed by Patrick O’Brien who argues that if food and
raw materials were a major import into Europe, the same could not be said of energy
and minerals whose import from the other hemisphere remained negligible. Even for the
case of raw materials such as cotton, oil seed, jute, hemp, dyestuffs, and wood, Europe’s
reliance on Asia, Africa, and Latin America decreased over the course of the nineteenth
century as the supplies of these primary products from North America and Australia
expanded. In 1913, Asia, Africa, and Latin America contributed less than 20 per cent
of global trade, with Africa’s contribution being as little as 3.7 per cent. In 1913, Europe
received hardly any manufactured goods from beyond its borders, and only 20 per cent
of all goods and services consumed by Europeans came from the Third World (Table
8.4).46 Bairoch argues that we should, however, distinguish between the United Kingdom
and the rest of the Western world. Britain was responsible for a large share of the trade
between South and North while other ‘North’ economies traded more extensively
between each other in both manufactured and primary products.47
146
Table 8.4 Regional distribution of world trade in 1913 (in percentage)
World primary products World manufactured

World trade exports (in %) exports (in %)
United Kingdom 62 6.2 26.9
Rest of Europe 39.9 50.3
North America 13.2 17.2 11.1
Asia 11.1 14.7 6.2
Africa 3.7 22.0
Rest of the world 10 5.5

Source: Nicholas Crafts, ‘Globalisation and Economic Growth: A Historical Perspective’, World Economy,
27/1 (2004), 52; Kevin O’Rourke, ‘Long-distance Trade between 1750 and 1914’, in Mokyr, ed., The Oxford
Encyclopedia of Economic History (Oxford: Oxford University Press, 2003), 368; Rondo Cameron, A Concise
Economic History of the World (Oxford: Oxford University Press, 3rd ed. 1997), 304.
Over the twentieth century, one can observe a widening of the gap between rich and
poor countries in per capita income.48 O’Brien argues that trade did not benefit the Third
World as it did not bring diversification of investment and most of the production of
raw materials remained firmly in the hands of European entrepreneurs.49 The shift in
global trade in the twentieth century from primary products (64 per cent of all trade
in 1913) to the trade in manufactured commodities (79 per cent of all trade in 1992)
has exacerbated the isolation of Africa and parts of Asia in the post-colonial period.50
Over the twentieth century, the North-to-North trade remained as high as 60 per cent of
world trade, while South-to-South just 10 per cent. Only a third of all world trade took
place between North and South.
A part of this divergence had occurred before 1950, when colonialism shaped the
North–South economic exchanges, which brings us to the issue of politics.
Trade and politics, 1500–1950
Growth of world trade between 1500 and 1930 is intimately connected with the growth
of states, especially European colonial states. Why was trade and state power so closely
interconnected? Did colonialism influence distribution of the gains from trade? Did
politics create new patterns of international economic inequality? These three questions
have been central to a number of debates on the implications of the modern world
economy. Why was trade and power interdependent? The question can be approached
from two ends – that of politics and that of business organization.
In the pre-industrial era, mercantilism created a reason for states to intervene in
foreign trade. The European merchants needed licences and contracts to negotiate with
indigenous merchants and rulers. The slave trade by its nature involved coercion as a
147
business strategy. The slave trade in Africa was indigenous, extensive, and politically
controlled before it turned into a source of supply of workers in the New World. European
involvement in the African slave trade changed not only its volume but also its quality,
with the introduction of a new kind of racialized chattel slavery proverbially ruthless
in its instrumental brutality and unrelenting in its demand for work from these slaves,
who were literally worked to death on a routine basis on British, Dutch, Portuguese,
and French plantations. Such brutal and dehumanizing regimens did not exist in Africa
before the arrival of Europeans. The depopulation of West Africa also had a long-term
negative legacy. The trade also left a political legacy in the form of states that were readier
to do opportunistic deals with the world market than to invest in the local economy and
in the population living on it.51
European intrusion in the Indian Ocean around 1500 entailed the systematic use of
gunships by the Portuguese and the subsequent attempts by them to tax trade. In the
seventeenth and eighteenth centuries, naval power shifted from the Portuguese to the
Dutch, the English, and the French. While these groups ordinarily relied on diplomacy
and negotiation, they could in theory receive military and naval support from the
sponsor states, which made them a different type of merchant group from what the
region had seen before.52 The merchant companies enjoying state monopoly can be seen
as extensions of mercantilist states of Europe. Institutionally, the Dutch and the British
attempts to use a more efficient and sparing use of power would suggest a successful
strategy to internalize the heavy cost of protecting their monopoly from European
rivals, private traders, and indigenous groups. As Findlay and O’Rourke show, in the
eighteenth century, European expansion gave the English complete mastery over the
slave trade, and gave the English, the Dutch, and the French territorial control in Asia
and Africa.53
In India, the seeds of an empire were sown in the move by the British East India
Company (and on a more limited scale by its rivals) to acquire sites on the coast for the
creation of fortified ports. Thanks to these ports, as the Mughal Empire collapsed in
the mid-eighteenth century and contests for power intensified in India, the British and the
French companies found themselves well placed to join these contests and conduct proxy
war between themselves. In this way, trading rivalry, combined with turmoil in India and
Europe, shaped the emergence of modern imperialism. In Indonesia, the Dutch, who
moved to consolidate their control on the world spice trade, saw it as a way to extend
their territorial power. The consolidation of Dutch maritime power forged new links
between the ports of East and Southeast Asia, even as it ‘decisively decoupled historical
trajectories in the archipelago from those in mainland [Southeast Asia]’.54
The propensity of the East India companies to engage in local politics raises the
question, What kind of firms these were. Like all corporate firms, in the British East
India Company too, there were ‘principals’ (shareholders) and ‘agents’ (employees
stationed in trading ports). But unlike in modern firms, these two sets of actors were not
located in close proximity to one another, nor were they able to communicate frequently
or effectively. The limited ability of the principals to monitor the agents suggests two
lessons on the nature of these firms. First, agents were given more freedom than would
148
be allowed in a modern firm. They were more than salaried servants, and were given
incentives to trade on the side, and their behaviour was monitored by an incentive-
punishment mechanism. Studies on contract enforcement in the East India Company
and the Hudson’s Bay Company find that the incentive-punishment mechanism worked
more or less effectively from the angle of the principals.55
Secondly, the agents’ interest could differ systematically from that of the firm, partly
because they were traders on the side and partly because they were exposed to certain
types of political risks and opportunities that the principals did not face. Ordinarily, the
divergence of interest was not a serious matter to the firm, but in the late eighteenth
century, the divergence widened because the risks and opportunities involved in taking
part in local politics changed. Adam Smith’s famous criticism of the British East India
Company in The Wealth of Nations (1776), in one view, needs to be seen in the context of
this particular agency problem and its late-eighteenth-century manifestation.56
Subsequent to the formation of states, in India by the British East India Company
and in Indonesia by the Dutch East India Company (VOC), economic policies in
both retained a focus on trade. The influence of merchants and bankers behind
British imperial policy has been explored in a well-known scholarship. The famous, if
controversial, thesis of P. J. Cain and A. G. Hopkins that the support for the expansion
of the British Empire formed of a coalition between landlords and capitalists is the most
cited example.57 Imperial history has also long reminded us of the deep connections
that had developed between British manufacturing and services with European trading
firms overseas. For example, the managing agency companies operating in India in the
nineteenth century formed formal or informal partnerships with British counterparts
that organized marketing and re-export businesses, and sometimes supplied finance
and skilled manpower.
The British Empire functioned as if it wished to maintain open borders to trade in
goods and services. Was this policy beneficial for the colonies? A recent empirical exercise
shows that belonging to an empire roughly doubled trade relative to those countries
that were not part of an empire. The use of a common language, the establishment of
currency unions, ‘the monetization of recently acquired colonies, and the establishment
of preferential trade agreements and customs unions help to account for the observed
increase in trade associated with empire’.58 The finding needs to be qualified with the
statement that within the British Empire, a greater share of the increased trade occurred
in trade between Britain and the settler colonies of the New World.59 But even for the
non-settler colonies, the trade growth was unprecedented, not only in scale but also in
a whole range of new relationships that it forged. For example, the opium trade linked
China with India, while Dutch trading operations in East and Southeast Asia likewise
integrated Japan and Burma in the Eurasian trade.
Was growth of trade under colonial conditions beneficial for the colonizer and
the colonized peoples? For the colonizer, trade growth led to accumulation of wealth,
integrated markets, and induced specialization and productivity gains. On the other
hand, there is a view that the captive market of the imperial domain made the colonizer,
Britain being the eminent example, less innovative than it would be otherwise. The belief
149
feeds into an explanation of British decline in the twentieth-century world economy.60

Of course, the strength of the belief should depend on how ‘captive’ or ‘soft’ imperial
markets really were, and in turn, what we mean by these terms. One investigation
concludes that it is difficult to presume that businesses could take colonial markets for
granted simply because they were colonial markets.61
Was trade growth beneficial to the colonized people? In answer to the question, four
points need to be considered. First, there was sometimes an element of pure ‘extraction’
using state power and institutional manipulation by the settlers or the state. But such
distortions were more the exceptions than the norm.
Secondly, trade growth caused ‘de-industrialization’ in the colonies. The trade boom
after industrialization began was driven by a large fall in the prices of manufactured
goods produced in Western Europe, and a rise in the demand for primary commodities
available in the tropics. So large was the rise in demand and so large the technological
leap that they jointly led to a long-term increase in the terms of trade, that is, in the price
of tropical exports as a ratio of the price of its imports. The tropics experienced a better
utilization of idle land and mining capacity, and could buy manufactured goods in
increasing quantity and increasingly better quality over time for an unchanging bundle
of primary products. On the other hand, most colonies were deprived of the spillover
benefits of industrialization (innovation, increasing returns to scale), experienced a
decline of its own artisan manufactures, and experienced ‘Dutch disease’ or shift of
resources away from other sectors towards exportable goods and more exposure of
the export economies to commodity price fluctuations.62 De-industrialization did
occur in many primary-product-exporting economies, but not in all. In East Asia,
terms of trade fell in the long run. In South Asia, the rise happened earlier and to a
much smaller extent than in Southeast Asia, Latin America, the Middle East, and the
European periphery. India did not de-industrialize as much as the other regions did,
and experienced a significant growth of cotton textile mill industry.63 The emergence of
a factory textile industry shows that while trade growth might have hurt the artisans,
it led to accumulation of capital by merchants, who invested money in modern factory
industry.
Third, despite growth of trade, specialization in a small basket of commodities for
export exposed the colonies to cyclical fluctuations. In the mid-twentieth century,
these risks were a ground for trade pessimism. Individual country studies, however,
show that global terms of trade boom in favour of primary commodity exporters on
the whole benefited the exporting countries until the early twentieth century, even
when the process increased inequality between the exporting sector and the rest of
the economy.64
Fourth, trade growth and factor market integration were connected processes in the
colonial territories. For example, British India relied heavily on net import of skilled
services and capital to run public administration, to finance and then run the railways, to
maintain the army, and to create and manage private businesses. To fund its deficit on the
services account, the regime needed a trade surplus. Indian nationalists called the deficit
a ‘drain’ of potential saving and investment. This interpretation remains controversial, but
150
the interdependence of the growth of trade and services was a feature of many colonial
relationships. The East India companies left a legacy on trade in services worldwide.
The emergence of a secondary market in VOC shares, for example, helped establish
Amsterdam as the world’s leading financial centre.65 The close interdependence between
trade and investment that had developed during the first globalization is illustrated with
railroad construction in India and Argentina in the late nineteenth century. With the
development of a market in London for Argentine debt, foreign money then found other
avenues, such as infrastructure. Analysis of the Baring crisis in the 1890s finds that trade
also acted as a channel of transmission of the crisis.66
Migration, of course, was one of these factor market effects. Before 1800, long-
distance migration flows were not always driven by market forces. New works on the
early history of empires written by cultural historians shed light on movements driven
by free migration, slavery, the military labour market, forced migration, exile and penal
colonies, and of course settlement on new land frontiers.67 By contrast, the sugar and
cotton plantations in the Americas integrated world trade and migration closely. The
largest flows of the post-1800 migration were driven by economic concerns, though not
always connected with international trade.68 After the transatlantic telegraph started
working (c. 1858), it was possible for European workers in Africa and the Americas
to remit money home.69 To some extent at least, trade, by encouraging migration,
stimulated factor income flows. Studies on the New World export economies suggest
a link between export of goods, investment boom, migration of labour in new fields
where investment took place, government expansion by borrowing abroad, migration of
labour, and export of capital, though the interpretation of the causal chain between these
variables remains open.70
What can we conclude from this discussion on the effects of trade upon the colonized
world? The generalization that trade-induced poverty is hard to sustain. A cautious
generalization could be that port cities gained from trade in commodities and services
irrespective of where they were located. Philip Curtin’s work on trade diaspora made
global historians familiar with the idea that a string of cosmopolitan coastal settlements
played a pivotal role in trade before modern transportation and communication
technologies forged a closer link between the ports and their hinterland. Abu-Lughod’s
phrase ‘archipelago of ports’ has a similar connotation.71 Strikingly, maritime trade
and port cities retained this role in organizing world trade long after the advent of
industrialization. Bayly shows in The Birth of the Modern World that most of the
world’s cities in the nineteenth century were trading cities rather than industrial ones.72
Located in very different world regions, they collectively represented a convergence in
institutions, living standards, political and cultural discourses, and bourgeois interest.
The convergence, wrought by the connections that trade created, in many cases
included a late industrialization element. In this way, Bombay, Calcutta, Shanghai,
Singapore, and Sao Paulo formed part of a convergent club of cities that also included
New York and Liverpool. This is not to dispute that on an international scale inequality
increased, but the roots of that inequality need to be searched in production conditions
and resource endowments, rather than trading conditions.
151
Conclusion
This chapter considers some of the main ways trade shaped a new world economy.
Specialization, market integration, growth of companies, expansion in financial services,
industrialization, and migration of labour and capital were some of the ways trade
could have such an effect. The institutional effects, on commercial law or evolution of
the company, for example, did not just follow from market integration, but also from
the particular legacies of early modern trade, such as the presence of the East India
companies in those parts of Asia and Africa where family firms ruled the world of trade.
Economic historians will continue to explore whether international economic
inequality, the distance between rich and poor countries, also increased because of
trade. While that debate remains unfinished, it is necessary to point out that whether
in a richer country or in a poorer one, the cities engaged in international trade were
often distinct from the rest of the country as the ones with more firms, more services,
and more capitalists committed to keep the system going. Equally, there were cities and
regions that were ‘left out’ of the capital accumulation process that trade encouraged.
Liberal regimes of the nineteenth century were strongly connected to colonial power.
Liberalism as an ideal did not live easily with lack of liberty and political choices in a wide
area of the globe, but since the wealthy communities in these areas developed a stake
in openness and globalization, support for an independence movement was initially
limited. The situation changed in the interwar period. The First World War disrupted
trade completely, and empowered the wealthy indigenous businesses in the colonies. The
Great Depression induced indigenous capitalists to look inward and towards the home
market. Some of them were now more willing to fund the independence movement. By
the mid-twentieth century, the world economy that had started taking shape from the
trade between Europe and the tropical regions from the 1600s had more or less ended.
Notes
1. P. D. Curtin (1984), Cross Cultural Trade in World History. Cambridge: Cambridge

2. R. Cameron (1997), A Concise Economic History of the World, 3rd edn. Oxford: Oxford
University Press, 296; V. Zamagni (2015), Perché l’Europa ha cambiato il mondo: una storia
economica. Bologna: Il Mulino, 145.
3. M. D. Bordo (2002), ‘Globalization in historical perspective’, Business Economics, January, 22.
4. J. Abu-Lughod (1993), ‘The world system of the 13th century’, in M. Adas (ed.), Islamic &
European Expansion: The Forging of a Global Order. Philadelphia: Temple University Press,
75–103; Id. (1991), Before European Hegemony: The World System A.D. 1250–1350. New
York: Oxford University Press.
5. D. Christian (2000), ‘Silk roads or steppe roads? The silk roads in world history’, Journal of
World History, 11 (1), 1–26.
6. J. de Vries (2003), ‘Long-distance trade between 1500 and 1750’, in J. Mokyr (ed.), The Oxford
Encyclopedia of Economic History. Oxford: Oxford University Press, 361.
152
7. R. C. Allen (2009), The British Industrial Revolution in Global Perspective. Cambridge:

Cambridge University Press, 107.
8. J. de Vries (2003), ‘Connecting Europe and Asia: A Quantitative Analysis of the Cape Route
Trade, 1497-1795’, in D. O. Flynn, A. Giráldez, and R. von Glahn, (eds.), Global Connections
and Monetary History, 1470-1800. Aldershot: Ashgate, 35–106.
9. The debate concerns whether the axis of world trade was located in Europe or Asia,
especially China. For different positions and arguments in this debate, see A. Gunder Frank
(1998), ReOrient: Global Economy in the Asian Age. Berkeley: University of California Press,
esp. ch. 2; P. Vries (2015), State, Economy and the Great Divergence: Great Britain and China,
1680s-1850s. London: Bloomsbury, 348–9.
10. de Vries, ‘Connecting Europe and Asia’.
11. D. O. Flynn and A. Giráldez (1996), ‘China and the Manila Galleons’, in D. O. Flynn (ed.),
World Silver and Monetary History in the 16th and 17th Centuries. Aldershot: Variorum;
Idem (1997) (eds), Metals and Monies in an Emerging Global Economy; Idem (2002), ‘Cycles
of silver: Global economic unity through the mid-eighteenth century’, Journal of World
History 13 (1), 1–16.
12. See the chapters by Trevor Burnard and by Alejandra Irigoin in this volume.
13. For a general account of the Atlantic slave trade, see H. S. Klein (2010), The Atlantic Slave
Trade, 2nd edn. Cambridge: Cambridge University Press. On the transition from slave trade
to other types of trade in one large exporting region, see R. Law (2009), ‘Introduction’, in
R. Law (ed.), From Slave Trade to ‘Legitimate’ Commerce: The Commercial Transition in
Nineteenth-Century West Africa. Cambridge: Cambridge University Press, 1–31.
14. Allen, Industrial Revolution, 20.
15. M. Berg (2004), ‘In pursuit of luxury: global history and British consumer goods in the
eighteenth century’, Past & Present, 182, 85–142.
16. J. Brewer (1989), The Sinews of Power: War, Money and the English State, 1688–1783. London:
Unwin; C. Knick Harkey (2004), ‘Trade: Discovery, mercantilism and technology’, in R.
Floud and P. Johnson (eds), The Cambridge Economic History of Modern Britain. Cambridge:
Cambridge University Press, 188. On the role of duties, see W. Ashworth (2003), Customs
and Excise: Trade, Production and Consumption in England, 1640–1845. Oxford: Oxford
University Press; and Idem (2017), The Industrial Revolution: The State, Knowledge and
Global Trade. London: Bloomsbury.
17. Vries, State, Economy and the Great Divergence, 339–41.
18. de Vries, ‘Long-distance trade’, 364. See also Idem (2010), ‘The limits of globalisation in the
early modern world.’ See also M. Berg, ‘Consumption in eighteenth- and early nineteenth-
century Britain’, in Floud and Johnson (eds), Cambridge Economic History, 366–7;
Broadberry, et al., British Economic Growth, 287; C. Knick Harley (2004), ‘Trade: Discovery,
Mercantilism and Technology’, in R. Floud and P. Johnson (eds), The Cambridge Economic
History of Modern Britain. Cambridge: Cambridge University Press, 176; K. Pomeranz
(2000), The Great Divergence. China, Europe and the Making of the Modern World Economy.
Princeton: Princeton University Press, esp. ch. 2.
19. Berg, ‘Consumption’, 365.
20. Harley, ‘Trade’, 191.
21. P. K. O’Brien (1997), ‘Intercontinental trade and the development of the Third Word since
the Industrial Revolution’, Journal of Word History, 8 (1), 77.
153
22. Curtin, Cross Cultural Trade, 252. This is a factor recently underlined by Luigi Pascali who,
however, argues that the adoption of steam shipping in particular helped market integration
but that the process benefited a small number of Western countries. L. Pascali (2014), ‘The
wind of change: Maritime technology, trade and economic development’, Warwick Economics
Research Papers Series (TWERPS), no. 1049.
23. O’Brien, ‘Intercontinental trade’, 80 and 84.
24. Bairoch and R. Kozul-Wright (1996), ‘Globalization myths: Some historical reflections on
integration, industrialization and growth in the world economy’, UNCTAD Working Paper,
113, 5. See also Bairoch (1993), Economics and World History: Myths and Paradoxes. New
York: Harvester, 16–29.
25. The concept of ‘non-competing’ good is somewhat misleading as practically all goods are
substitutable. In this case, we mean the production and trade of identical goods.
26. C. A. Bayly (2004), The Birth of the Modern World. London: Blackwells, 44–5. See also
Idem (2002), ‘“Archaic” and “Modern” Globalization in the Eurasian and African Arena, c.
1750–1850’, in A. G. Hopkins (ed.), Globalization in World History. London: Pimlico, 47–73.
27. Curtin, Cross Cultural Trade, 252.
28. Cameron, A Concise Economic History, 308–9 and 311.
29. K. O’Rourke (2003), ‘Long-distance trade between 1750 and 1914’, in Mokyr (ed.), The
Oxford Encyclopedia of Economic History, 367.
30. K. O’Rourke and J. G. Williamson (2002), ‘After Columbus: Explaining Europe’s overseas
trade boom, 1500–1800’, Journal of Economic History, 62 (2), 417–56; and Idem (2002),
‘When did globalisation begin?’, Journal of Economic History, 62 (1), 23–50. See also, Idem
(2000), Globalization and History, esp. chs. 3–6.
31. This has been recently challenged by P. de Zwart (2016), Globalization and the Colonial
Origins of the Great Divergence. Leiden: Brill.
32. O’Rourke and Williamson, ‘After Columbus’.
33. On soft and hard globalization, see de Vries, ‘The limits of globalisation’.
34. Bayly, The Birth of the Modern World, 52.
35. J. Mokyr (1977), ‘Demand vs. supply in the Industrial Revolution’, Journal of Economic
History, 37 (4), 981–1008; D. N. McCloskey (1981), Enterprise and Trade in Victorian Britain:
Essays in Historical Economics. London: Allen & Unwin, 139–54; D. N. McCloskey and
R. Thomas (1981), ‘Overseas trade and empire, 1700–1820’, in R. Floud and D. N. McCloskey
(eds), The Economic History of Britain, 1700-Present, vol. 1. Cambridge: Cambridge
University Press, 87–102; N.F.R. Crafts (1985), British Economic Growth during the Industrial
Revolution. Oxford: Clarendon.
36. P. Vries (2013), Escaping Poverty: The Origins of Modern Economic Growth. Vienna and
Göttingen: Vienna University Press and Vandenhoeck und Ruprecht, 283.
37. G. Clark, K. O’Rourke and Alan N. Taylor (2008), ‘Made in America? The New World, the
Old, and the Industrial Revolution’, American Economic Review, 98 (2), 523 and 527. See also,
Idem (2014), ‘The growing dependence of Britain on trade during the Industrial Revolution’,
Scandinavian Economic History Review, 62 (2), 126.
38. Harley, ‘Trade’, 199. One of the critiques against the approach that minimize the contribution
of trade to economic growth is that it is based on static approaches that do not take into
consideration both capital accumulation and technological change. K. O’Rourke, L. Prados
de la Escosura and G. Daudin (2010), ‘Trade and empire’, in S. Broadberry and K. O’Rourke
154
(eds), The Cambridge Economic History of Modern Europe. Cambridge: Cambridge University
Press, 110.
39. P. K. O’Brien and S. L. Engerman (1991), ‘Exports and the growth of the British economy
from the Glorious Revolution to the peace of Amiens’, in B. R. Solow (ed.), Slavery and the
Rise of the Atlantic System. Cambridge: Cambridge University Press, 177–209. See P. K.
O’Brien (1982), ‘European economic development; and S. L. Engerman (1972), ‘The slave
trade and British capital formation in the eighteenth century: A comment on the Williams
thesis’, Business History Review, 46 (4), 430–43.
40. Harley, ‘Trade’, 190.
41. O’Rourke, Prados de la Escosura and Daudin, ‘Trade and empire’, 112.
42. Pomeranz, Great Divergence.
43. Vries, Escaping Poverty, 272.
44. Bairoch and Kozul-Wright, ‘Globalization myths’, 5.
45. Vries, Escaping Poverty, 272.
46. O’Brien, ‘Intercontinental trade’, 88–9.
47. Bairoch and Kozul-Wright, ‘Globalization myths’, 9.
48. N. Crafts (2004), ‘Globalisation and economic growth: A historical perspective’, World
Economy, 27 (1), 50.
49. O’Brien, ‘Intercontinental trade’, 95.
50. J. Foreman-Peck (2003), ‘Long-distance trade since 1914’, in Mokyr (ed.), The Oxford
Encyclopedia of Economic History, 374–5.
51. Discussed in M. Vaughan (2006), ‘Africa and the birth of the modern world’, Transactions of
the Royal Historical Society, Sixth Series, 16, 143–62.
52. On the Dutch case, see J. I. Israel (1989), Dutch Primacy in World Trade, 1585–1740. Oxford:
Clarendon Press.
53. R. Findlay and K. H. O’Rourke (2007), Power and Plenty: Trade, War, and the World
Economy in the Second Millennium. Princeton and Oxford: Princeton University Press.
54. V. Lieberman (2008), ‘Protected rimlands and exposed zones: Reconfiguring premodern
Eurasia’, Comparative Studies in Society and History, 50 (3), 692–723, cit. 720.
55. S. Hejeebu (2005), ‘Contract enforcement in the English East India Company’, Journal of
Economic History, 6 (2), 496–523; A. M. Carlos and S. Nicholas (1990), ‘Agency problems
in early chartered companies: The case of the Hudson’s Bay Company’, Journal of Economic
History, 50 (4), 853–75.
56. G. M. Anderson and R. D. Tollison (1982), ‘Adam Smith’s analysis of joint-stock companies’,
Journal of Political Economy, 90 (6), 1237–56. P. J. Cain and A. G. Hopkins (1987),
‘Gentlemanly capitalism and British expansion overseas II: New imperialism, 1850–1945’,
57. For a criticism of the view, see R. Hyam (2010), Understanding the British Empire. New York:
58. K. J. Mitchener and M. Weidenmier (2008), ‘Trade and empire’, Economic Journal, 118 (533),
1805–34.
59. G. B. Magee (2007), ‘The importance of being British? Imperial factors and the growth of
British imports, 1870–1960’, Journal of Interdisciplinary History, 37 (3), 341–69.
155
60. On British declinism in general, essays compiled in J.-Dormois and M. Dintenfass (eds)
(1999), British Industrial Decline. London: Routledge, are useful.
61. A. Thompson and G. Magee (2003), ‘A soft touch? British industry, empire markets, and the
self-governing dominions, c.1870–1914’, Economic History Review, 56 (3), 689–717. See also
Idem (2010), Empire and Globalisation: Networks of People, Goods and Capital in the British
World, c. 1850–1914. Cambridge: Cambridge University Press.
62. The Dutch disease syndrome, which occurs when a specific tradeable draws resources away,
can frustrate prospects of industrialization and diversification of economic activity. Angus
Deaton applies the concept to post-war African development, the principle of it could apply
to some tropical colonial regions as well. A. Deaton (1999), ‘Commodity prices and growth
in Africa’, Journal of Economic Perspectives, 13 (3), 23–40.
63. J. G. Williamson (2011), Trade and Poverty: When the Third World Fell Behind. Cambridge
Mass. and London: The MIT Press. See also, Tirthankar Roy (1999), Traditional Industry in
the Economy of Colonial India. Cambridge: Cambridge University Press.
64. N. H. Leff (1973), ‘Tropical trade and development in the nineteenth century: The Brazilian
experience’, Journal of Political Economy, 81 (3), 678–96.
65. O. Gelderblom and J. Jonker (2004), ‘Completing a financial revolution: The finance of the
Dutch East India trade and the rise of the Amsterdam capital market, 1595–1612’, Journal of
66. K. J. Mitchener and M. D. Weidenmier (2008), ‘The Baring crisis and the great Latin
American meltdown of the 1890s’, Journal of Economic History, 68 (2), 462–500.
67. For example, K. Ward (2009), Networks of Empire: Forced Migration in the Dutch East India
Company. New York: Cambridge University Press.
68. Sunil S. Amrith (2011), Migration and Diaspora in Modern Asia. New York: Cambridge
University Press.
69. G. B. Magee and A. S. Thompson (2006), ‘The global and local: Explaining migrant
remittance flows in the English-speaking world, 1880–1914’, Journal of Economic History, 66
(1), 177–202.
70. H. W. Richardson (1972), ‘British emigration and overseas investment, 1870–1914’, Economic
History Review, 25 (1), 99–113; Leff, ‘Tropical trade and development’.
71. Abu-Lughod, ‘The world system in the thirteenth century’.
72. Bayly, The Birth of the Modern World.
156
CHAPTER 9
THE GLOBAL ENVIRONMENT AND
THE WORLD ECONOMY SINCE 1500
J. R. McNeill
The world economy and the global environment form the warp and weft of the fabric of
history. Always and everywhere, the global environment has affected the world economy.
Always and everywhere, the world economy has affected the global environment.
Economy and environment have been tightly bound together, and have evolved together,
often slowly but sometimes in leaps and bounds. This chapter will focus more on the
leaps than on the pauses between them.
As a rule, the environment has shaped the economy by defining the limits of the
possible. Climate, soils, vegetation, animals, diseases, waters, and winds (and a few other
components of the environment) have always shaped what human communities could
produce, at what costs, and in what amounts. The environment never fully determined
what or how much people might produce. Culture, choice, contingency, and social
circumstance (and a few other components of social systems) always played a role too.
But environments did determine the limits of the possible. People might have chosen to
raise camels in Iceland or build ships in the Sahara, but productivity would have been
low due to environmental constraints.
As another rule, economic activity always altered the environment. Often those
alterations were direct, as in the case of hunting or farming. Sometimes they were less
direct, as in the case of trade. Trade, say of wine for wool, inspired one set of production
decisions over all others, and thus shaped the regional environments where wine and
wool were produced. In the contemporary world, some economic activities have only
negligible environmental impacts – devising training plans for amateur triathletes, for
example. Others have outsized impacts, magnified by powerful technologies unknown
in prior times – squeezing oil out of Alberta’s tar sands, for example. By and large, pre-
modern economies were tied more directly to the natural environment than modern
ones. Modern economies, by and large, have had larger, less local, and less consistent
environmental consequences than did pre-modern ones.
This chapter takes up a small subset of the range of possible subjects involving the
global environment and the world economy since 1500. They are, however, among the
most consequential. First comes the intercontinental exchanges of plants, animals, and
microbes following the discovery of oceanic sailing routes in the late fifteenth century.
Second is the environmental implications of the creation and expansion of plantation
economies, mainly in the American tropics after 1640. Third is the global environmental
implications of industrialization. And fourth is a rumination upon the concept of

the Anthropocene.
Biological exchanges, 1492–1800
Nearly fifty years ago, Alfred Crosby assembled the scattered stories of the transfers
of crops, weeds, animals, and microbes across the Atlantic between the Americas
and (mainly) Europe into the concept of the Columbian Exchange. The concept
deserves amplification, because in his day, Crosby could not do full justice to the
involvement of Africa and Asia in intercontinental biotic exchanges.1 Moreover,
lesser currents of exchanges developed across the Pacific in the wake of Magellan (c.
1480–1521), important especially for the Philippines and sometimes defined as the
Magellan Exchange.2 Some scholars consider the post-Columbian epoch of biological
exchange so fundamental as to merit its own term in the style of earth history’s epochs:
the Homogenocene.3
After 1450, mariners, most of them Atlantic Europeans, linked almost every nook
and cranny of the humanly habitable earth into a biologically interactive web. The
world’s seas and deserts no longer served to isolate different biogeographical regions.
The world became one without biological borders, as plants, animals, and microbes
migrated wherever ecological conditions permitted their spread, although how soon
and how thoroughly they did so normally depended on human factors such as transport
technologies and skills, and patterns of trade, production, and politics.4
Columbus inaugurated regular exchanges across the Atlantic in 1492. The most
conspicuous result was that Amerindians acquired a large suite of devastating
diseases hitherto unfamiliar to them. Those diseases included smallpox, measles,
mumps, whooping cough, and influenza, all acute viral infections which had become
widespread in the sprawling interactive zone of Eurasia and northern Africa. From
Japan to Senegambia, these infections were usually endemic, childhood diseases
(sometimes called ‘crowd diseases’ because they require large, interacting populations
to stay in circulation) that contributed to high rates of infant mortality. But most adults
were survivors, and either resistant or fully immune to most or all of these infections.
In addition to the crowd diseases, the Columbian Exchange brought some lethal
vector-borne African diseases to the Americas, such as yellow fever and malaria. In
the Americas, all these were new diseases, so no Amerindians carried any acquired
resistance. Thus these infections ravaged the American hemisphere between 1500
and 1650. Together with widespread violence, expropriation, and famines caused by
European conquests, these diseases lowered populations by 60 to 90 per cent in one of
the two largest demographic disasters in world history, the other being the Black Death
in the mid-fourteenth century.5
The sharp reduction in population in the Americas, over the period 1492–1650,
carried both environmental and economic consequences on multiple scales. Within
the Americas, it opened the way for the creation of new wilderness. With less farming,
158
The Global Environment and the World Economy since 1500
hunting, and fire, wild plants and animal species recolonized formerly humanized
landscapes. On the global scale, resurgent vegetation in the Americas took some carbon
out of the atmosphere, weakening the greenhouse effect slightly, and perhaps adding a
chill to the Little Ice Age.6 In economic terms, the population catastrophe checked global
GDP growth and reduced the contributions to it made by various world regions, notably
by shrinking the economy of the Americas. It also paved the way for the formation of a
plantation complex, as will be discussed later in this chapter.
The Amerindians had little in the way of lethal infectious disease to export to Africa
and Eurasia. When the first migrants arrived in North America some 15,000 years ago (or
more), they passed through northeastern Siberia and Alaska during an Ice Age. Brutal
cold is not conducive to the survival of most pathogens.7 Beyond that filtering effect, the
first Americans had left Siberia when no animals but dogs had been domesticated, so
that the human infections derived from cattle, camels, and pigs (e.g. smallpox, measles,
and influenza) had not yet emerged. Once arrived in the Americas, Amerindians did not
domesticate any herd animals other than alpacas and llamas, which seem, by chance, not
to have hosted pathogens that evolved into agents of human disease. For these reasons,
as regards pathogens, the Columbian Exchange was extremely unequal: the Americas
received a lot and gave only a little.8
The same was true of domesticated animals. The Americas had few domesticated
animals, and those few (e.g. turkeys, llamas, and alpacas) did not travel well. By
contrast, Eurasian species flourished when transported to the Americas. Cattle, goats,
sheep, pigs, and horses were the most important animal immigrants to the Americas.
The immigrant animals provided Amerindians with new sources of animal protein,
hides, and wool. Horses and oxen offered an important source of traction, making
ploughing feasible in the Americas for the first time, and improving transportation
possibilities through wheeled vehicles and greater variety of pack animals. That
extended the potential of commerce and specialization, inviting Smithian growth
wherever populations recovered.
Horses in North America upset the economic and political order. The Amerindians
of the North American prairies acquired horses from Spanish Mexico in the seventeenth
century, and some of them quickly mastered the equestrian arts. On horseback, they
became far more adept as bison hunters, solving any subsistence problems as long as
the bison lasted. Moreover, those with horses easily inflicted military defeat on those
without, so by the mid-nineteenth century, peoples such as the Sioux and Comanche
had built considerable ‘empires’ on the basis of mounted warfare.9
Equestrian Amerindians also used their military prowess to create sizeable slave
trades to Mexico. Spanish imperial legislation from 1542 had banned the enslavement of
Amerindians, but did not forbid the purchase of people already enslaved. This law had
the unintended effect of outsourcing the business of capture of people for the Mexican
market to the horse nomads of North America, who from 1680 until 1870 or so seized
women and children from communities that lacked the military power to protect them.
Thus the Columbian Exchange in animals affected the Americas in political as well as
economic respects.
159
The Columbian Exchange was more even-handed in its economic impacts when
it came to crops. The Eurasian staples of wheat, rye, barley, and rice met welcoming
niches in the Americas. Sometimes those niches had to be created through human
(and animal) labour, as for example with rice. Some of the new crops could survive in
cold and dry landscapes where indigenous crops fared poorly. Aside from grains, the
Americas also acquired citrus fruits, bananas, grapes, and figs from Eurasia, and millets,
sorghum, yams, okra, and watermelon from Africa. So the new food crops extended the
possibilities of American agriculture and allowed a more varied diet. But they did not
constitute a vast improvement, because the Americas already had maize and potatoes
and plenty of fruits and vegetables.
Drug crops changed the Americas at least as profoundly as the new food crops. Sugar,
both a mild drug and a food, became the mainstay of a plantation economy based on
African slave labour. Coffee, from Ethiopia and Arabia, also became a plantation crop
in the eighteenth century. Without these imported crops, the plantation complex of the
Americas would have been much smaller (see later in this chapter and Trevor Burnard’s
chapter in this volume).
Maize and potatoes, together with cassava, tomatoes, cacao, peanuts, sweet potato,
pumpkins, squashes, and pineapples, formed the core contribution of the Americas to
global agriculture. South America also gave tobacco to the world. Some of these crops
had revolutionary consequences in Africa and Eurasia. Potatoes, for example, nicely suited
soil and climate conditions across Northern Europe from Ireland to Russia. In Europe,
potatoes contributed to a surge of population growth in the eighteenth and nineteenth
centuries, which helped supply the manpower for both overseas empires and the Industrial
NORTH
AMERICA
Tomato
Cassava Potato
Beans Vanilla
Avocado Squash Peppers Peanut Maize EUROPE
Sweet Cacao Bean
Potato
AT L A N T IC ASIA
Pineapple
Tobacco OCEAN Turnip Grape
Turkey Sugar Onion Disease
• Smallpox • Malaria
Cane
Pumpkin • Influenza • Diphtheria
Banana
Livestock • Typhus • Whooping
Olive Grains
• Cattle • Measles Cough
• Wheat
Honeybee • Rice • Sheep
Coffee Bean
Peach, Pear Citrus Fruits • Pig
Carribean Sea • Barley
• Horse AFRICA
• Oats
SOUTH AMERICA
Figure 9.1 The Columbian Exchange.
160
Revolution.10 Potatoes stored well, especially in cold climates, and they provide excellent
nutrition. In their native Andes, where production and storage had been raised to a high
art, potatoes had helped fuel the expansion of the Inca Empire in the fifteenth century. A
few centuries later they played a broadly similar role in Northern Europe.11
Maize, another American crop, had a more diffuse impact than the potato. It did well
in conditions as varied as those of Southern Europe, China, and large swathes of Africa.
Maize allowed new lands to be brought under cultivation, because it prospered where
grains and tubers would not. It undergirded population growth and famine resistance
in China and Southern Europe, but nowhere was it more influential than in Africa. In
the two centuries after 1550, maize became a staple in Atlantic Africa, from Angola to
Senegambia. Different varieties suited the several different rainfall regimes in Africa,
and improved chances of surviving drought.
In addition, maize stores much better than millets, sorghums, or tubers. It thus allowed
chiefs and kings to maximize their power by centralizing the storage and distribution of
food. In the West African forest zone, maize encouraged the formation of larger states. The
Asante kingdom embarked on a programme of expansion after the 1670s, spearheaded
by armies which carried dried maize with them on distant campaigns. Maize also served
well as a portable food for merchant caravans, which contributed to commercialization in
Atlantic Africa, including the slave trade. The slave trade could more easily reach far inland
if merchants, and their human property, had an easily portable food supply. Storehouses
of maize also made it more practical to imprison large numbers of slaves in the infamous
barracoons of the West African coast. Just as sugar and coffee heightened the demand in
the Americas for slave imports, so too maize within Africa increased the practicality of slave
exports.12
Cassava, also known as manioc, was the Americas’ other great contribution to African
agriculture. A native of Brazil, cassava is admirably suited to drought and poor soils and
resistant to many crop pests. Like maize it provided a portable food that underlay state
formation and expansion in West Africa and Angola. Cassava, like potatoes, need not be
harvested at a particular season but may be left in the ground for weeks or more. So it is
an ideal crop for people who might need to run away for their own safety, for example,
people routinely subject to slave raiding. In this respect it served as a counterpoint to
maize: it helped peasantries to flee and survive slave raids, while maize helped slavers
to conduct and extend their business.13 Together, maize and cassava gave Africa a much
larger stock of portable and storable food, making the continent more like the rice lands
of Asia and grain lands of western Eurasia, more likely to sustain long-distance trade and
larger state structures. Africanists do not adopt this nomenclature, but they might well
speak of pre-Columbian and post-Columbian African history.
The Columbian Exchange was the largest, fastest, and most important intercontinental
biological transfer in world history, but it was not the only one. A modest trans-Pacific
exchange resulted from Magellan’s voyages (1519–22), at first affecting chiefly the
Philippines, and intensified in the wake of Captain Cook’s meanderings throughout
the world’s largest ocean in the late eighteenth century. The Pacific Islands, rather than
the ocean’s rim, felt the greatest effects. As in the Americas (or in Australia after 1788),
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the most striking result was sharp depopulation in the wake of repeated epidemics. Many
American food crops became important in East Asia, such as sweet potatoes, maize, and
peanuts in south China, but they probably arrived not across the Pacific in the wake
of Magellan, but across the Atlantic and the Indian Oceans via Portuguese and Dutch
traders.14
Taken together, the whirlwind of intercontinental biological exchange in the
centuries between 1500 and 1800 brought astounding changes around the world. It led
to demographic catastrophes in lands unfamiliar with the crowd diseases. It improved
the quantity and reliability of food supplies almost everywhere. In cases where horses
were new, it reshuffled political relations by providing a new basis for warfare.
All these early modern exchanges carried historical consequences. European
imperialism, in the Americas, Australia, and New Zealand, simultaneously promoted
and was promoted by the spread of European (or more usually Eurasian) animals, plants,
and diseases. Europeans brought a biota that unconsciously worked as a team to favour
the spread of European settlers, European power, and Eurasian species, and thereby to
create what Alfred Crosby called neo-Europes – including Australia, New Zealand, most
of North America, southern Brazil, Uruguay, and Argentina.15
Beyond the neo-Europes, something of a neo-Africa emerged in the Americas.
More than ten million Africans arrived in the Americas in slave ships between 1550
and 1860. Slave ships also brought West African rice, which became not only the
foundation of the coastal economy in South Carolina and Georgia in the eighteenth
century, but important in Surinam as well. Other African crops came too: okra, sesame,
and (although not in slave ships) coffee. All this combined to create a world where
indigenous culture, including foodstuffs, was partially absorbed into a neo-African
matrix. In this it resembled the neo-Europes. But at the same time neo-Africa was
profoundly different from the neo-Europes: until the Haitian Revolution (1791–1804),
nowhere in the Americas were Africans and people of African descent politically,
economically, or socially powerful, whereas Europeans and their descendants soon
dominated the neo-Europes.
As the Columbian Exchange indicates, sailing ships brought the continents together
as never before. But they did not prove hospitable conveyances to every form of life.
They filtered out a few species that could not survive a long journey. The age of steam,
and then of air travel, broke down the remaining barriers to biological exchange,
accelerating the dispersal of old and new migratory species alike. Although its greatest
impacts came in the sixteenth and seventeenth centuries, in a sense the Columbian
Exchange never ended. American raccoons, grey squirrels, and muskrats for example
colonized parts of Europe in the nineteenth and twentieth centuries. Nor did the
Magellan Exchange come to an end. If anything, it sped up in the nineteenth and
twentieth centuries, not least because of deliberate introductions of species such as the
kiwi fruit (from China to New Zealand to Chile and California, and Southern Europe)
and eucalyptus trees (from Australia to almost everywhere). But the economically
(and demographically) transformative impacts of biological globalization came mainly
between 1500 and 1800.
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The plantation regime in the Americas, 1550–1850
The plantation system of the Americas, transplanted from Mediterranean and Atlantic
islands in the early sixteenth century, occupied a huge zone of Atlantic America, from
northeastern Brazil to Chesapeake Bay, in which the slave plantation was the primary
mode of production. The ecological significance of the plantation system had several
aspects.
The first point is the simplest one, one which historians and geographers have been
making for twenty or thirty years now, which is that every plantation, whether of
tobacco, cotton, rice, sugar, or coffee, typically required the clearing of forests to make
room for planting crops. Beginning in the 1550s, a surge of deforestation swept over
the coastlands of northeastern Brazil and then from the 1620s the smaller islands of
the eastern Caribbean motivated by the desire to clear more space for plantation crops.
The surge reached the larger Caribbean islands by the 1690s and climaxed in Cuba in
the nineteenth century. The same process was under way on a very considerable scale
in the American South, c. 1690–1860, where tobacco and cotton plantations likewise
required the clearing of forests.16
One entirely inadvertent consequence of this land cover change in the Caribbean
was improved breeding and survival conditions for two kinds of mosquitoes, the
vectors of malaria and yellow fever. With respect to Anopheles mosquitoes, the
vectors of malaria, deforestation in those Caribbean islands with mountains and
hills changed the hydrological situation by increasing run-off, floods, siltation,
and deposition in the lowlands, which in turn created more marshland, swamps, and
wetlands around the coasts of the islands. Montserrat and Martinique, just to give
two examples, became the perfect breeding grounds for Anopheles mosquitoes, which
thrive in swampy terrain.
The Aedes aegypti mosquito, the vector for yellow fever, is particularly connected to
the sugar plantation, rather than to plantations in general. A. aegypti is a rather peculiar
mosquito; it has a strong preference for laying eggs in artificial water containers, for
example, buckets, pots, and wells. It is therefore effectively a domesticated mosquito
which thrives on its association with human beings – it almost never lays eggs in
puddles, ponds, or ditches, as most mosquitoes do. This is the reason for its link to sugar
plantations, because every sugar plantation had a great number of pots but they were
in use only during the initial sugar refining phase. A large plantation might have had
ten thousand or more pots, which for most of the year sat unused, some broken, many
collecting rainwater, thereby providing the ideal conditions for this particular kind of
mosquito to reproduce.
Plantations fed as well as bred mosquitoes. All mosquitoes like sweet liquids, which
provide them with much of their energy, and female mosquitoes also require blood
meals in order to make eggs. Individual mosquitoes can survive on cane juice. So a sugar
plantation was a veritable smorgasbord for A. aegypti – all of the sweet liquid they could
possibly want was easily accessible as were the blood meals needed for their reproduction,
due to the proximity of the human and livestock populations. The conditions for the
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survival and expansion of A. aegypti mosquito populations were rapidly improved by the
installation of plantations, specifically sugar cane plantations, in the Caribbean.17
The plantation system also had far-reaching consequences as far as soils were
concerned. In the wake of the Columbian Exchange, the indigenous populations of the
Americas – not just Atlantic America, but across continental North and South America
– declined by 60 per cent to 95 per cent in most areas. This human calamity permitted
forest growth and regrowth. In almost all cases, the indigenous populations of the
Americas had regularly used forests and forest soils, which entailed widespread forest
burning, either for agricultural clearance or else to favour the proliferation of the grazing
animals which they hunted. Following the population decline, forests in the Americas
grew bigger and taller than they had been for a very long time.
Big trees held mother lodes of soil nutrients. Visitors to the Atlantic American coastal
regions mistook what they saw for ancient, primeval forests, but in fact the forests were
usually only a century or two old, even when they included towering specimens such as
the American chestnut (Castanea dentata) or the Venezuelan giant Gyranthera caribensis
(one of which attained 17 metres in circumference and 63 metres in height). The tissues
of these trees contained cornucopian concentrations of potential soil nutrients. In effect,
the trees had been drawing up nutrients from the soil and subsoil for 100 or 200 years,
largely from depths which crop roots simply could not reach. They were the functional
equivalent of the water towers which are such a familiar sight in North America, pumping
up ground water from the depths and storing it for later distribution.
The success of plantation agriculture in some measure depended upon the nutrients
locked in these mammoth and majestic trees. Felling and burning tall forests, the
chief occupation of most slaves early in the life of every plantation, unlocked stores of
nitrogen, phosphorus, potassium, and a dozen other nutrients. Char and ash, mixed into
topsoil, ensured the prospering of tobacco, cotton, and sugar for several years. Soon,
however, the nutrient bonus was gone, carried off across the sea in tobacco leaf or raw
cotton – or carried to the sea via soil erosion. Planters had to move their operations
at certain intervals – after twenty, then ten or even five years – as the key nutrients
that limit plant growth became ever scarcer. Evidence of this enforced mobility can
be found on a small scale on individual plantations, in the way in which landowners
deforested new patches of land within their holdings and planted tobacco, cotton, or
sugar in them. It can also been seen on a large scale, in the migration of the centre of the
plantation economy from the small islands of the eastern Caribbean to the bigger islands
of the western Caribbean, including Jamaica, Hispaniola, and Cuba. The same pattern
prevailed in the American South, where the cotton plantation regime migrated from the
eastern seaboard of Georgia, the Carolinas, and the Chesapeake westward into Alabama,
Mississippi, Louisiana, and East Texas.18 Similarly, tobacco plantations moved from the
Chesapeake area to the piedmont region of North Carolina, and even further west into
Kentucky and Tennessee. Plantations were a form of shifting agriculture on a macro
scale. In many environments, soils quickly became too poor to ensure profitability once
the subsidy of nutrients in forest ash wore thin. Plantation agriculture as practiced in
the Atlantic Americas was decidedly unsustainable due its demands on soils. By the
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time of the abolition of slavery (1832–88), the prospects for continued profitability of
plantation agriculture in Atlantic America were very poor, as the one-off gift from the
post-Columbian nutrient towers had vanished.
The plantation economy of the Americas, one of the characteristic business
innovations of the early modern centuries, exemplifies the connections between ecology
and economy. Its existence rested on the ecological reshuffling of the Columbian
Exchange. The important plantation crops all came from the Old World. Plantation
labour came mainly from Africa, serving as a replacement for the indigenous population
drastically reduced by imported diseases. The plantation economy’s efflorescence over
two centuries (c. 1650–1850) led to sharp ecological changes in Atlantic America, notably
deforestation, the entrenchment of mosquito-borne diseases, and the drawdown of soil
nutrients. In short, the plantation economy of the Americas was born of unique and
fragile ecological circumstances and its prosperity undermined those circumstances. It
was a model unsustainable economy.
The Industrial Revolution as global ecological change
Conventional conceptions of the Industrial Revolution consider it an English event with

profound social and economic ramifications. That it was. But it was also a global event
with profound ecological ramifications. From Spain to South Africa, from Argentina to
Australia, lands and ecologies far from Lancashire or Tyneside took part in the Industrial
Revolution.
The vast and ever-growing use of fossil fuels during the first century or so of
industrialization began a permanent revolution in global environmental history. Cheap
and abundant energy has probably done more to shape the human–environment
relationship than anything else in the past two centuries.19 Coal mining, oil and gas
drilling, energy transport, and fossil fuel combustion help explain much of the ecological
tumult since about 1850, especially in the realms of air, water, and soil pollution. But
the environmental meaning of cheap and abundant energy extends well beyond the
obvious to include countless ‘ecological teleconnections’, some of them of considerable
magnitude on local and regional scales.
The phrase ‘ecological teleconnections’ refers to linkages that involve places far
apart and carry significant environmental consequences.20 An example, alluded to
above, is the replacement of (mainly) forest land in Alabama, Mississippi, Louisiana,
and East Texas by cotton plantations during 1825–60, driven (mainly) by the
mounting demand for cotton in Britain. The plantation system, slavery included,
colonized the warm and humid lowlands from Georgia to Texas. Tens of thousands of
farmers and slaves migrated into these lands from further east. Upon settling down,
their first object was to clear the existing vegetation. They slashed and burned their
way through millions of hectares, and then planted maize and cotton. They arranged
both crops in rows for convenience in planting and harvesting, inadvertently
maximizing the susceptibility of their soils to erosion in the downpours characteristic
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of the humid South. One northern traveller passing through cotton country in the
early 1830s noted the rapid erosion of topsoil: ‘Every plough furrow becomes the
bed of a rivulet after heavy rains – these uniting are increased into torrents before
which the impalpable soil dissolves like ice under a summer’s sun.’21 A survey of the
cotton South at the end of the nineteenth century found ‘a miserable panorama of …
rain-gullied fields … dirt, poverty, disease, drudgery, and monotony that stretches
for a thousand miles across the cotton belt’.22 The Industrial Revolution’s demand
for long-staple cotton had transformed the landscape of the American South: an
ecological teleconnection.
By 1840, growing demand for cotton had begun to inspire environmental
transformations elsewhere besides the American South. These transformations
accelerated suddenly when the American Civil War (1861–5) and the Union blockade
of the Confederacy cut North American cotton exports to a trickle. Efforts to ramp up
cotton production took place in Central Asia, Tahiti, India, Anatolia, and Egypt among
other lands. In Egypt, cotton’s growth season did not fit the natural rhythm of the Nile
flood (unlike wheat, the staple crop for forty-five centuries along the Nile). So Egyptian
rulers, beginning with Muhammad Ali (r. 1805–49), undertook to impound some of the
flood in order to release it when cotton in the delta needed water, and to shield the crop
from potential damage from unseasonable high water. Thus mechanized cotton mills in
Britain inspired the large-scale re-plumbing of Egypt that culminated in the Aswan High
Dam in the 1970s.23
Cotton was not the only cloth whose manufacture led to conspicuous landscape
change; silk did as well. In Lebanon, for example, peasant families boiled silk cocoons to
disentangle the threads. The process required fuel wood, which in the early nineteenth
century was still available on the slopes of Mount Lebanon. When the power looms
of Lyon, Milan, and other silk-manufacturing centres geared up in the 1840s, silk
cloth became cheap enough for middle-class consumers, no longer merely the raiment
of the elites. Lebanese mountain families began a bonanza of silk cultivation that
lasted several decades, putting mounting pressure on the fuel wood supply of Mount
Lebanon. The near eradication of the famous cedars of Lebanon is often laid at the
door of the Ottoman Turks and the Hejaz railway built at the end of the nineteenth
century. However, the odds are that the greater part of that spurt of deforestation
resulted from the efforts of rural Lebanese to take advantage of the strong market for
raw silk that mechanization and cheap energy in France and Italy created: another
ecological teleconnection.24
Cloth was only part of the story. Gutta-percha was another. The world’s telegraph
system took shape from the late 1840s. Outdoor wiring required insulation against the
elements, a job for which tarred cotton was used at first. But engineers – notably Werner
von Siemens – soon found that gutta-percha served admirably as wire insulation,
suitable even for duty on the seafloor where other materials, such as rubber, suffered
from salt corrosion. The first undersea cable insulated with gutta-percha made its debut
at Folkestone (UK) in 1849. Between 1859 and 1900, special purpose-built ships laid
about 200,000 miles of undersea telegraph cable, all of it insulated with gutta-percha.
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Gutta-percha is a resinous gum found only in about eight species of trees, especially
one called Isonandra, all of which grow exclusively in Southeast Asia. Extraction of the
latex involved Dayak, Chinese, or Malay men finding and felling suitable trees, and
collecting their latex in bowls. Once dried, that latex would be gathered in the ports of
Southeast Asia. Raw gutta-percha was shipped from Singapore, Saigon, or Batavia to
London’s East End or smaller centres of gutta-percha works, where it was heated, cleaned
(of mud, etc.), cooled, and applied to copper cables destined for decades of service as
telegraph wire at the bottom of the sea.
A big Isonandra tree might yield a little more than a kilogram of gutta-percha; a
typical one will yield about 300 grams. A transatlantic cable required about 250 tonnes
of gutta-percha. The 200,000 miles of undersea cable in place by 1900 needed about
27,000 tonnes, or about 80 to 100 million trees’ worth of gutta-percha. In 1898–9, when
two trans-Pacific cables were laid, fifteen to twenty million trees were cut to supply the
needed gutta-percha. Several observers noted the unsustainable character of gutta-
percha exploitation. But cutting proceeded apace, to the point where the wild tree
neared extinction in the accessible landscapes of Southeast Asia. Efforts at plantations
of Isonandra and other gutta-percha trees began, unfruitfully, in the 1880s. By 1900,
however, fairly successful plantations existed. Eventually, wireless telegraphy and radio
(1920s) would reduce the demand for undersea cables and gutta-percha, making moot
the ecological sustainability or unsustainability of gutta-percha exploitation. But in
the meantime, between 1860 and 1900, an ecological teleconnection inaugurated by
the desire to send information via electrons through copper wire had brought a rain
forest species to the brink of extinction and made a significant dent in the forest cover
of Southeast Asia.25
It is possible to tell other stories of ecological teleconnections created by the
Industrial Revolution and cheap energy. I will quickly sketch some, beginning with two
about leather. The slaughter of twenty to forty million bison on the great plains of North
America between 1865 and 1881 is the largest and fastest anthropogenic reduction in
wildlife biomass in history. It had several motives, but prominent among them was the
demand for bison hide as leather strapping in the textile mills of New England (and to a
small extent in England). Bison leather helped to make cotton. As a result, by 1882, the
US bison herd amounted to about 1,000 animals, a close brush with extinction.
Tanning leather made it more flexible, suitable for fine shoes, belts, purses, and so
forth. Until the invention of chemical substitutes, tanning required tannin. Suitable
tannins came from a number of plants, but after 1867 among the best came from trees in
South America colloquially called quebracho (Schinopsis lorentzii). Their heartwood, if
chipped and boiled, yielded an exquisite tannin. Found in northern Argentina, southern
Bolivia, and Paraguay, quebracho provided tannin to British tanneries at the end of the
nineteenth century, until the tree became too rare to reward the effort. As bison helped
to make cotton, quebracho trees helped to make consumer leather.26
Copper, tin, lead, and iron were core ingredients of the Industrial Revolution. Some of
these ores lay underground not far from industrial zones, for example, Cornish tin. But
most came from faraway places such as Chile, Montana, Malaya, Andalucia, or Australia.
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As metallurgical industries went from strength to strength in the nineteenth and early
twentieth centuries, miners hacked out more and more ore, most of which required fuel-
intensive smelting or processing. Everywhere this brought a cascade of environmental
consequences – more ecological teleconnections. The province of Almería, in southern
Spain, provides a fine example. It was the most active lead-mining zone in the world
during 1830–60, and its best customer was Britain. But lack of fuel for on-site smelting
hampered the business. Bare mountains eroded quickly, filling rivers with enough silt to
change the Spanish coastline.27
Machines of all sorts required lubricants to work properly and enduringly. Before
petroleum derivatives became practical, several sorts of vegetable oils served as lubricants,
not least was the palm oil. Palm oil came at first from the Niger Delta but in the early
twentieth century became a plantation crop throughout West Africa and Southeast Asia.
Peanut oil, mainly from Senegambia, also lubricated the Industrial Revolution. Whale
oil was another important lubricant in the nineteenth century, as well as an illuminant.
The quest for whale oil lay behind a determined assault on the world’s right and sperm
whales, led by Anglo-American whalers. Ecological teleconnections extended to the
seven seas as well as to every inhabited continent.28
The first century of the Industrial Revolution helped to inspire changes in vegetation
all around the world. Charcoal stratigraphical analysis shows that global biomass burning
declined for seventeen centuries before 1750. It then spiked until 1870 or so, before
again declining for several decades.29 This spike probably represents frontier agricultural
expansion in Russia, north China, North and South America, and elsewhere, places
where pioneers torched vegetation in order to plant food crops. But it also represents
the work of people firing woodlands in order to try to make a living providing fibres
such as wool and cotton for the mills of Lancashire and New England, and the work
of others cutting and burning forests for rubber or palm oil plantations. The ecological
teleconnections of the Industrial Revolution helped to shape the vegetation cover of
every continent.
Britain, of course, was only the first nation to experience industrialization and to scour
the world for industrial ingredients. Parallel processes appeared almost simultaneously
in Northwestern Europe, eastern North America, and later in Japan and Russia. All these
industrial revolutions needed fibres, ores, and lubricants. Some of these ingredients
came from close by. But many, perhaps most, as in the case of Britain, came from afar
(even if in the case of Russia, materials came from within the Russian Empire). These
later industrial revolutions also provoked ecological teleconnections, contributing to the
environmental tumult of modern times.
The pell-mell industrialization of China since 1980, the fastest and largest scale
such process in world history, has crafted its own environmentally consequential
teleconnections, from the iron mines of Western Australia to the soybean plantations
in Goias (Brazil), to the copper belt of Zambia. This latest incarnation of the general
phenomenon of ecological teleconnections, like its predecessors, is predicated on fossil
fuel energy, without which China would have remained the poor peasant country it was
in 1950.30
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The Anthropocene
Since 1750, global population has grown about tenfold, energy used has increased
roughly 100-fold, and the size of the world economy, if we can trust the figures assembled
by Brad Delong or Angus Maddison, increased by well more than 100-fold.31 The scale
of these changes is so great, and their consequences so profound, that it may be time to
reconceptualize the material relationships between economy and environment, between
humankind and planet earth, and between modern history and deep history.
The term ‘Anthropocene’ now increasingly serves as a shorthand way to recognize
the great power that humankind now exerts – clumsily – over some of the earth’s basic
biogeochemical systems, over life on earth, and upon the face of the earth itself. Several
chemical compounds and elements, including water, nitrogen, sulphur, and carbon,
are constantly moving around our planet, cycling among living things, the earth’s rock
and sediments, the oceans, and the atmosphere – these are some of the biogeochemical
cycles. They did this planetary cycling before humans existed and they will likely do so
after humans no longer exist. But for a few thousand years (just how many is a subject of
debate), humans have affected those cycles. And in the last few decades, human actions
have radically altered some of them (on this, there is no debate). The crux of the original
Anthropocene concept is that the earth had entered upon a new interval in its history
in which human actions have overshadowed the quiet persistence of microbes and the
endless orbital wobbles and eccentricities, and therefore defined a new age. That new
interval follows the Holocene epoch, which began 11,700 years ago.
Meanwhile, in addition to monkeying with biogeochemical cycles, humankind has
also inaugurated what appears to be the sixth great mass extinction in the four-billion-
year history of life on earth. This we achieve mainly by converting habitats, in which
millions of species have learned to live over millions of years, into fields and pastures that
help feed us.32 And humankind has been clawing, scratching, and scraping rock and soil
to such an extent that we are now, by some measures, the most active geological agent
on our planet, outstripping the earth-moving work of glaciers and rivers. We have even
created new ‘rocks’ that will survive for millions of years in the earth’s crust, including
half a trillion tonnes – and more each year – of concrete.33
To put the matter differently, in recent decades, human action has nudged the earth
into a place it has never been during the Holocene. Greenhouse gas concentrations, the
acidity of the oceans, and the proportion of biomass put to human use are all now outside
the previous ranges of variation in the Holocene. The nitrogen and sulphur cycles are
notably different from any prior incarnations at any time in the history of the earth.
Global average temperatures and the share of the earth’s surface covered by ice will, in
all probability, soon be outside the Holocene envelope as well. It is recognition of this
torrent of anthropogenic environmental change that has inspired some geoscientists to
claim that the Holocene is over, to recommend formally adding the Anthropocene to the
official roster of epochs and eras in earth’s history, and to revise the geological timescale.
Just when the Anthropocene began (presuming it exists) is up in the air. The most
common view is that the Anthropocene commenced only with the advent of sustained
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fossil fuel use and is only as old as coal-fired industrialization. Coal use on a global scale
remained negligible until a transient process of industrialization took place in north China.
Under the Song dynasty (960–1279), coal became an important fuel in a steel-and-iron
complex that flourished for a century or more after 1020. Greenland’s ice cap contains the
wind-blown sulphurous residue of Chinese smelting during the Song dynasty. After the
Chinese metallurgical boom withered, coal slipped into obscurity as regards economic and
environmental history. It returned to the edge of the stage when it became a routine heating
fuel in London in the sixteenth century. But the real departure came with increasingly
effective steam engines, developed over the course of the eighteenth and nineteenth
centuries. Steam engines could convert the chemical energy of coal first into heat energy
and then – this was the revolutionary part – into kinetic energy, useful for making things
and going places. As a result of the new uses for coal, British coal consumption more than
doubled in 1750–1800, and then quintupled in 1800–50 and peaked in 1913.34
In the Anthropocene debates, coal is important mainly because when it burns it
releases carbon dioxide to the atmosphere. By virtue of its abundance, carbon dioxide is
the most important, although not the most powerful, of the greenhouse gases. It helps
regulate the temperature of the earth’s surface and lower atmosphere – where we live
– and the oceans too. For the last 800,000 years – until very recently when fossil fuels
entered the picture – carbon dioxide accounted for between 175 and 285 parts per million
(ppm) of the atmosphere. At the very end of the eighteenth century, the carbon dioxide
concentration in the atmosphere, as recorded in air bubbles trapped in polar ice, began
to climb slowly. That appears as the beginning of the secular trend that continues to this
day, and has brought those concentrations from about 260–280 ppm, their range for the
last 11,000 years, to a little more than 400 ppm today. This is the quickest rise in the past
800,000 years. It is probably the fastest in the history of the atmosphere.
An alternative view that is gaining adherents holds that the better choice is a later
Anthropocene, beginning about 1950. The subsequent decades brought tremendous
surges in fossil fuel energy use, population growth, urbanization, tropical deforestation,
carbon dioxide emissions, sulphur dioxide emissions, stratospheric ozone depletion,
freshwater use, dam-building, irrigation, river regulation, wetlands drainage, aquifer
depletion, fertilizer use, toxic chemical releases, species extinctions, fish landings, ocean
acidification, and much else besides.35
There is, perhaps, a way to reconcile the arguments for an eighteenth-century
Anthropocene and a mid-twentieth-century one. It rests upon the concept of the Great
Acceleration. In effect, the Anthropocene has stages. It may have begun about 1800, but
the scale, scope, and pace of anthropogenic environmental change all grew enormously
from the mid-twentieth century. To offer just a few examples, primary energy use has
quintupled since 1950, the number of large dams (15 metres high or taller) has sextupled,
the methane concentration in the atmosphere has nearly doubled, the quantity of
nitrogen flowing into coastal waters has quintupled, and marine fish harvests sextupled
(and then fell off a bit). That hectic post-1945 period is the Great Acceleration, within
the Anthropocene.36 Ultimately, the distinction between an Anthropocene originating
in the late eighteenth century and including within it the Great Acceleration and an
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Anthropocene beginning in the mid-twentieth century is a small one, a matter of

definition of terms, although fiercely fought over at the moment.37
Confining ourselves to planet earth may prove too narrow a view of the Anthropocene.
Since 1957, earthlings have launched a few thousand rockets into nearby precincts in
space. The rockets have left landing pads on Mars, Venus, and the moon. Humans have
put thousands of satellites into orbit. Millions of pieces of ‘space junk’ now careen around
the earth’s general neighbourhood, ranging in size from paint flakes to rocket boosters.
Two cameras, a glove, a toothbrush, and countless bits of metal, mainly aluminium, are
zooming above earth in low orbit, and will do so for centuries to come. In all, about
6,000 tonnes of space junk are in earth’s orbit, equivalent to a fleet of 3,000 cars parked
overhead. In any case, the Space Age on our planet is also an age of anthropogenic
environmental change in our solar system, and the Anthropocene concept might
deservedly apply beyond the earth itself.38
Conclusion
The four tales I have narrated about biological exchange, American plantations,
industrialization, and the Anthropocene will suffice to sustain the case that the bond
(between the world economy and global ecology) is always present, yet never constant.
The two have co-evolved, inciting one another to change shape or direction, to mutate,
or to grow. They always did and always will. But in the period since 1500, the bond has
somehow changed. The situation is a bit like two children across from one another on a
merry-go-round: if they step closer to each other, they make the merry-go-round spin
faster. The scale and speed of environmental change has accelerated, and so has the pace
of economic change. Both now proceed at rates unimaginable before 1500.
Whether such a pace can continue is uncertain and one of the great questions of our
time. Perhaps, metaphorically speaking, the merry-go-round will spin out of control and
we shall fly off. Perhaps we can carefully step further from the axis of rotation and slow to
a safer speed, one we can sustain indefinitely without danger. Perhaps, somehow, we can
loosen the bond between global ecology and the world economy, redesign the merry-go-
round, so as to be able to enjoy the comforts of economic growth without the perils (or
with reduced perils) of ecological convulsion. As usual, only time will tell.
Notes
1. A. Crosby (1972), The Columbian Exchange. Westport, CT: Greenwood Press; J. Carney and
R. Rosomoff (2011), In the Shadow of Slavery: Africa’s Botanical Legacy in the Atlantic World.
Berkeley: University of California Press.
2. Roughly 15–20 per cent of plant species in the Philippines today are of American origin.
3. M. Samways (1999), ‘Translocating fauna to foreign lands: Here comes the Homogenocene’,
Journal of Insect Conservation, 3 (2), 65–6.
171
4. For details, see J. R. McNeill (2012), ‘Biological exchange in global environmental history’,
in J. R. McNeill and E. S. Mauldin (eds), A Companion to Global Environmental History.
Oxford: Wiley-Blackwell, 433–52.
5. A recent study is M. Livi-Bacci (2008), Conquest: The Destruction of the American Indios.
Cambridge and Malden: Polity. Other important overviews include S. A. Alchon (2003),
A Pest in the Land: New World Epidemics in a Global Perspective. Albuquerque: University
of New Mexico Press; N. D. Cook (1998), Born to Die: Disease and New World Conquest,
1492–1650. New York: Cambridge University Press; Idem (2010), La Catástrofe Demográfica
Andina: Perú 1520–1620. Lima: Pontificia Universidad Católica del Perú.
6. This idea remains controversial. See R. Dull, R. J. Nevle, W. I. Woods, D. K. Bird, S. Avnery
and W. M. Denevan (2010), ‘The Columbian encounter and the Little Ice Age: Abrupt land use
change, fire, and greenhouse forcing’, Annals of the Association of American Geographers, 100 (4),
755–71; S. Lewis and M. A. Maslin (2015), ‘Defining the Anthropocene’, Nature, 519, 171–80.
7. A. Drake and M. Oxenham (2013), ‘Disease, climate, and the peopling of the Americas’,
Historical Biology, 25 (5), 565–97, are sceptical of the role of cold in shaping the slender
disease burden of the pre-Columbian Americas.
8. The likeliest candidate for a significant disease of American origins is syphilis, but expert
opinion remains divided. The debate as regards North America is presented in M. L. Powell
and D. C. Cook (eds) (2005), The Myth of Syphilis. Gainesville: University of Florida Press.
See also K. Harper, et al. (2011), ‘The origin and antiquity of syphilis revisited: An appraisal
of Old-World pre-Columbian evidence of treponemal infection’, American Journal of Physical
Anthropology, 146 (Supplement 53), 99–133.
9. P. Hämäläinen (2008), The Comanche Empire. New Haven: Yale University Press. Whether or
not the word ‘empire’ applies to these political formations is up for debate.
10. N. Nunn and N. Qian (2011), ‘The potato’s contribution to population and urbanization:
Evidence from a historical experiment’, Quarterly Journal of Economics, 126 (2), 593–650.
11. The potato’s impact on Northern Europe’s food supply required another biological
migrant: clover. Clover, although not from the Americas, was essential to the impact of the
Columbian Exchange in Europe. Clover hosts microorganisms that fix nitrogen from the air
in the soil, putting it where plant roots can absorb it. Potatoes are especially nitrogen-hungry,
and cannot yield well consistently without nitrogen supplements to the soil. Although as
yet unsung by historians, clover can claim an impact on European history as great as that of
the potato. T. Kjaergaard (2003), ‘A plant that changed the world: The rise and fall of clover,
1000–2000’, Landscape Research, 28 (1), 41–9.
12. On maize in Africa, see J. McCann (2005), Maize and Grace: Africa’s Encounter with a New
World Crop, 1500–2000. Cambridge, MA: Harvard University Press.
13. J. Miller (1988), Way of Death: Merchant Capitalism and the Angolan Slave Trade, 1730–1830.
Madison: University of Wisconsin Press, 19, 103, 193.
14. On the ‘Magellan Exchange’, see J. R. McNeill (1998), ‘Islands in the Rim: Ecology and
history in and around the Pacific, 1521–1996’, in D. O. Flynn, L. Frost and A. J. H. Latham
(eds), Pacific Centuries: Pacific and Pacific Rim History since the Sixteenth Century. London:
Routledge, 70–84.
15. A. Crosby (1986), Ecological Imperialism: The Biological Expansion of Europe, 900–1900. New
York: Cambridge University Press.
16. W. Dean (1994), With Broadax and Firebrand: The Destruction of the Brazilian Atlantic
Forest. Berkeley: University of California Press; D. Watts (1987), The West Indies. Cambridge:
172
Cambridge University Press; R. Funes (2008), From Rainforest to Canefield in Cuba: An

Environmental History since 1492. Chapel Hill: University of North Carolina Press.
17. J. R. McNeill (2010), Mosquito Empires. New York: Cambridge University Press.
18. A. Rothman (2007), Slave Country: American Expansion and the Origins of the Deep South.
19. On energy and the Industrial Revolution in England, see E. A. Wrigley (2010), Energy and
the English Industrial Revolution. Cambridge: Cambridge University Press; R-P. Sieferle
(2001), The Subterranean Forest. Winwick: White Horse Press.
20. ‘Teleconnection’ is a recognized term in the atmospheric sciences and climatology, used to
describe linked events thousands of miles apart.
21. J. J. Ingraham (1835), The South-west, by a Yankee. New York: Harper, 86, quoted in
W. Johnson (2013), River of Dark Dreams: Slavery and Empire in the Cotton Kingdom.
Cambridge, MA: Harvard University Press, 155.
22. C. Johnson, E. Embree and W. W. Alexander (1935), The Collapse of Cotton Tenancy:
Summary of Field Studies and Statistical Surveys, 1933–1935. Chapel Hill: University of North
Carolina Press, 14.
23. J. Waterbury (1979), Hydropolitics of the Nile Valley. Syracuse: Syracuse University Press.
24. G. Pitts (2016), Fallow Fields: Famine and the Making of Lebanon (1914–1952), Ph.D.
Dissertation, Georgetown University, ch. 2; Giovanni Federico (1994), Il filo d’oro: l’industria
della seta dalla Restaurazione alla Grande Crisi. Venice: Marsilio. The energy for the silk
industry often came from water power.
25. J. Tully (2009), ‘A Victorian ecological disaster: Imperialism, the telegraph, and gutta-percha’,
Journal of World History, 20 (4), 559–79; L. Potter (2005), ‘Community and environment
in colonial Borneo: Economic value, forest conversions and concern for conservation,
1870–1940’, in R. Wadley (ed.), Histories of the Borneo Environment: Economic, Political and
Social Dimensions of Change and Community. Leiden: Verhandelingen van Het Koninklijk
Instituut voor Taal, Landen Volken- kunde, 116. The 1911 Encyclopedia Britannica entry on
gutta-percha explains some of the refining processes: https://en.wikisource.org/wiki/1911_
Encyclop%C3%A6dia_Britannica/Gutta_Percha.
26. A. G. Zarrilli (2008), ‘El oro rojo: la industria del tanino en Argentina (1890–1950)’, Silva
Lusitana, 16 (2), 239–59.
27. For the case of lead in southern Spain, see A. S. Picón (1983), La Minería del Levante
Almeriense, 1838–1930. Almería: Cajal. See also J. R. McNeill and G. Vrtis (eds) (2017),
Mining North America: An Environmental History. Berkeley: University of California Press.
28. S. M. Martin (1988), Palm Oil and Protest: An Economic History of the Ngwa Region, South-
Eastern Nigeria. Cambridge: Cambridge University Press, ch. 1; J. N. Tønnessen and A. O.
Johnsen (1982), The History of Modern Whaling. Berkeley: University of California Press.
29. J. R. Marlon, et al. (2008), ‘Climate and human influences on global biomass burning over
the past two millennia’, Nature Geoscience, 1 (10), 697–702.
30. For a journalistic discussion of the contemporary Chinese case, see E. C. Economy and M.
Levi (2014), By All Means Necessary: How China’s Resource Quest Is Changing the World. New
York: Oxford University Press.
31. J. B. Delong (2008), ‘Estimates of world GDP’, available at http://delong.typepad.com/
print/20061012_LRWGDP.pdf; Maddison’s figures: The Maddison-Project, http://www.
ggdc.net/maddison/maddison-project/home.htm, 2013 version. Delong estimates the world
173
economy increased in size 320-fold between 1750 and 2008. Maddison’s estimates do not
take 1750 as a data point, but by inference it appears his estimate would be higher still.
32. By ‘learned’ I mean became adapted over many generations via evolution by natural
selection. Only a very few species ‘learn’ anything in the human sense. For the ongoing
extinction spasm, see E. Kolbert (2014), The Sixth Extinction: An Unnatural History. New
York: Macmillan; G. Ceballos, et al. (2015), ‘Accelerated modern human–induced species
losses: Entering the sixth mass extinction’, Science Advances, 1 (5), e1400253. DOI: 10.1126/
sciadv.1400253.
33. See, for instance, the several papers in the Philosophical Transactions of the Royal Society:
A: Mathematical, Physical and Engineering Sciences, 369 (2011); B. H. Wilkinson (2015),
‘Humans as geologic agents: A deep-time perspective’, Geology, 33 (3), 161–4.
34. Data on the quantitative history of coal in Britain are scattered throughout volumes 2 and
3 of (1983–87), The History of the British Coal Industry. Oxford: Oxford University Press,
written by M. Flinn and R. Church, respectively.
35. A detailed argument to this effect appears in J. R. McNeill and P. Engelke (2016), The
Great Acceleration. Cambridge, MA: Harvard University Press. A treatment that avoids all
alarmism is R. DeFries (2014), The Big Ratchet: How Humanity Thrives in the Face of Natural
Crisis. New York: Basic Books.
36. This term, intended to echo the title of Karl Polanyi’s 1944 book The Great Transformation,
which took a holistic view about the origins of modernity, made its debut (so far as I know)
at a workshop in Dahlem, a Berlin suburb, in 2005. The proceedings of that workshop
can be found at R. Costanza, L. Graumlich and W. Steffen (eds) (2007), Sustainability or
Collapse: An Integrated History and Future of People on Earth. Cambridge, MA: MIT Press;
for an explicit presentation of stages of the Anthropocene, see W. Steffen, P. Crutzen and J.
R. McNeill (2007), ‘The Anthropocene: Are humans now overwhelming the great forces of
Nature?’, Ambio, 36 (8), 614–21.
37. The debates may be followed in the pages of the Anthropocene Review.
38. A. Gorman (2014), ‘The Anthropocene in the solar system’, Journal of Contemporary
Archaeology, 1 (1), 87–91.
174
CHAPTER 10
LABOUR REGIMES AND LABOUR
MOBILITY FROM THE SEVENTEENTH
TO THE NINETEENTH CENTURY
Alessandro Stanziani
Why coercion?
Many economists and economic historians follow Domar’s model according to which
labour coercion is likely to develop when labour is scarce compared to land. This model
was based largely on Russian and medieval European serfdom, but it has been since
used to describe several other contexts, not only in Russia, Africa, and Asia, but also in
Britain and the United States as well. Such models are interesting not so much for what
they explain but for what they fail to explain.1 Thus, Domar’s model suggests that slavery
and serfdom were established when labour was scarce; in contrast, Habakkuk, Postan,
North, and Thomas stressed that in Western Europe, scarcity of labour accounts not for
the strength but for the decline of serfdom and resulting capital intensification. In the
first case, labour scarcity led to coercion, in the second, it led to increased wages and
hence to capital intensification.2 However, empirical evidence for this thesis is scanty.
Similarly diverging views and scant empirical confirmation of Domar’s model
emerge with regard to the colonial worlds. The cases of Australia and Canada testify
to the fact that the colonization of new territories did not necessarily entail massive
imports of slaves as in the United States.3 In Russia itself, the scarcity of labour was never
mentioned in sources contemporary with the emergence of serfdom,4 while the abolition
of slavery in the British Atlantic colonies had little to do with demographic trends. As
Seymour Drescher puts it, there was no fundamental change in demographic patterns
in the tropical world beyond Europe in the watershed period of 1760–90.5 Wrigley and
Schofield show that Britain established its overseas slave system during the very decades
when the net emigration rate reached a three-century peak (1641–61); in contrast,
British abolitionism took off exactly when the net emigration rate sank to a tercentennial
low (1771–91).6
Yet, it was not just a matter of supply and demand of labour between masters and
labouring people. In the period here considered, contract enforcement was a substitute
for higher wages: masters used it as long as they could, in order to secure labour.7 This
was possible because of two further conditions: first, society considered labour as a
service and an obligation vis-à-vis the head of the family, the village, the master, the
town, and/or the state; second, labouring people had few political, civil, and legal rights
compared to those of their masters.8 In the European context, unequal political rights
and the exclusion of labouring people from the benefit of the Glorious Revolution in
Britain and its colonies, of the Revolution in France and its colonies as well, allowed
masters to limit wage increase, despite the lack of labour. Moreover, in both areas, free
labour, even where a contract existed, was considered the property of the employer and
a resource for the whole community to which the individual belonged.9 Labour was part
of the broader public order. In the following pages I will discuss the relationship between
labour, contract, and public order in Britain, then France, and then the colonial world.
Why these areas?
In this context, the French case is of interest not because it was the land of Colbertism
and opposed to liberal England, but because its labour norms in the nineteenth century
were actually quite well suited both to a capitalist economy and to the heritage of the
Old Regime. Highlighting the case of France and comparing it with England leads us to
question the differences between liberalism and regulationism – or between free labour
and guilds within the capitalist world – and from there to narrow the distance separating
free labour from varieties of bondage. Contrary to widespread preconceptions, common
law in England was in fact accompanied by a considerable degree of regulation and state
intervention, and labour remained subject to punitive constraints until the end of the
nineteenth century.
While British and French norms and perceptions translated into various forms
of bondage in the Atlantic and the Indian Ocean region (thereby helping perpetuate
slavery well after its official abolition), slavery nevertheless existed prior to any European
intervention. The adopted solution did not result solely from British and French
influences, but from the interaction between those influences and local traditions.
These comparisons on the national and imperial levels are valid only as a rough
approximation. No doubt, legal rules (civil, tax, and customs laws) refer to the national
and imperial dimension of these phenomena; yet those rules were only one component
of economic action, along with symbolic, cultural, and political aspects. Hence we
cannot ignore the importance of local components and the great differences between the
dynamics of different regions. Several institutions coexisted on the local level, and even
when a process of national unification took place, institutional pluralism continued.
Institutional pluralism was more widespread on the level of empires, where legal
pluralism was an important instrument of economic and political action.10
Labour, contracts, and public order in Britain
The idea that capitalism and in particular the British Industrial Revolution was made
possible thanks to institutions that facilitated free contracts and (according to some) a
proletarianized peasantry is supported by a long tradition. It dates back at least to the
nineteenth century and classical economists such as Smith and Marx, continuing with
Tawney and Polanyi and in most works of historical sociology and economic history in
the twentieth century. Even the world system approach, while stressing the existence
176
Labour Regimes and Labour Mobility
of mixed forms of labour and exploitation on the periphery and quasi-periphery, has
always assumed that free wage labour typified the ‘core’.11 However, in recent decades,
several pieces of research have contested the impact of enclosures and the existence of a
truly free labour market in industrializing Britain.12
Until at least the mid-nineteenth century, the term ‘free labour’ did not mean what
we are now accustomed to it meaning.13 It included indenture, debt bondage, and several
other forms of unfree labour.14 Conversely, the official abolition of slavery did not see
the disappearance of forced labour, but rather the emergence of new forms.15 Thus,
from the sixteenth to the nineteenth centuries, laws on runaway slaves and indentured
servants were adopted not only in the colonial Americas, but also in Great Britain,
where runaway workers, journeymen, and the like were subject to quite similar laws
under the Master and Servant Acts and the Statute of Artificers and Apprentices of
1562. Apprenticeship, advances in wages and raw materials, and simple master–servant
relations justified such provisions. Since the mid-seventeenth century, the Poor Laws
related relief directly to workhouses. Any person lacking employment or permanent
residence was no longer considered simply a ‘poor’ person, but became a ‘vagrant’,
and as such was subject to criminal prosecution. Anti-vagrancy laws did not decline
but became stricter in the nineteenth century, particularly after the adoption of the
New Poor Law in 1834. Between 1834 and the mid-1870s, there were about 10,000
prosecutions for vagrancy.16
In this context, the workhouse system was far from marginal: it has been estimated
that in periods of crisis during the eighteenth and nineteenth centuries, about 6.5 per
cent of the British population was in a workhouse at any given time.17 Many have seen a
strong influence of Bentham in the New Poor Law of 1834. The commission in charge of
the New Poor Law insisted that workhouse labour would be applied for discipline rather
than for profit.18 Thus the years following the adoption of the new rules saw increasing
number of paupers committed to workhouses for offences: The number of committals
rose from 940 in 1837 to 2,596 in 1842, while over 10,500 committals for breach of
workhouse discipline were recorded during the same period.19
Yet paupers and inmates increasingly resisted the Poor Laws and the workhouse
principle, resorting to petitions, sabotage, and, in particular among women, self-
mutilation. If one adds the massive protests against the Poor Laws in the 1830s, one
would have a complex picture in which different central government orientations faced
equally various local elites’ attitudes and popular protests.20
Indeed, the history of workhouses has been one-sidedly linked to that of prisons,
while the link with ‘normal’ labour has been ignored. This link was strong not only
for the forms of discipline and rights, but also for the way wages and assistance were
related. The Statute of Labourers (1350–1) was enacted two years after the Ordinance of
Labourers had been put in place and was followed by a set of laws gathered under the
umbrella of the Master and Servant Acts, which multiplied in the sixteenth century and
accompanied the Statute of Artificers and Apprentices (1562). During the term of service,
the labour of servants was legally reserved for their masters. Even at the expiration of the
term of service, servants were not allowed to leave their masters unless they had given
177
‘one quarter’s warning’ of their intention to leave.21 Workers could be imprisoned until
they were willing to return to their employers to complete their agreed-upon service.
Any untimely breach of contract on the part of the servant was subject to prosecution.
In fact, in early modern Britain, resident servants were like wives and children: all were
members of the household and all were the legal dependents of its head.22 All of them
were supposed to be under his authority, the family head benefiting from a higher legal
status and more legal entitlements and rights than his dependents and family. Both
marriage and labour contracts were actually status contracts: they gave rise to a different
legal status for wives and servants on the one hand, and for masters and husbands on the
other.
In general, labour was seen as akin to domestic service, with the employer purchasing
the worker’s time.23 It is important to stress the chronology of these rules: the measures
of the Master and Servant Acts grew stricter starting in the 1720s, when penalties against
servants who broke their contracts were reinforced. Between 1720 and 1792, ten acts
of Parliament imposed or increased the term of imprisonment for leaving work or
for misbehaviour. Almost all these acts were a new departure: the Master and Servant
Acts not only attempted to provide for social and political stability but required tighter
control of workers by their masters while guaranteeing ‘fair’ competition among masters
(i.e. they should not try to entice away other masters’ working people). Specific groups
promoted these changes: tailors, shoemakers, leatherworkers, mariners, and lace makers.
Monetary or raw material investments made by the employer were used to further justify
such sanctions against wage earners who left their jobs.24
This trend had its basis in the huge expansion of the putting-out system in the
eighteenth century, which added to the mounting need for agrarian labour.25 Competition
between sectors and the intense seasonality of labour strongly buttressed these new
labour laws.26 The idea that high wages were necessary to encourage technological
creativity, as expressed by Habakkuk and many others, is based on the assumption that
technological progress was primarily a choice between equivalent alternatives and that
these choices depended on relative prices.27 However, there is no persuasive evidence
that technological progress emerged as labour-saving in the eighteenth century and the
first half of the nineteenth century. Agricultural innovations in particular tended to be
labour-using rather than labour-saving: the new techniques of husbandry demanded
more labour, not less.28 Recent analyses come to the same conclusion: labour and labour
intensity were the main source of agricultural growth before 1850, with human and
physical capital playing a secondary role.29 Long after steam had become the dominant
form of power employed in manufacturing, the major sources of energy available to
farmers continued to be men, animals, wind, and water.30 Labour-intensive techniques
linked to the diffusion of knowledge and attractive markets (with increasing agriculture
prices) were dominant between the seventeenth and last quarter of the nineteenth
century, when this trend reversed (decreasing agricultural prices and increasing wages).31
This trend was not limited to agriculture. The rate of capital intensification in British
industry was relatively limited until the mid-nineteenth century. 32 Unlike conventional
views on the Industrial Revolution, stressing capital intensification,33 the most frequently
178
declared goal of innovation was either improving the quality of the product or saving on
capital, not labour.34 By 1850, there were relatively few workers employed in factories.
Only a small proportion of the workforce worked in technologically advanced industries
such as cotton, iron and steel, and other metalworking: the full impact of steam power
in transport and production was yet to be felt.35 The unmechanized, subcontracted work
of the sweating system surely played a greater role in the intensification of work than
did mechanization.36
De Vries’ notion of an ‘industrious revolution’ explains this trend perfectly: even if
the author mostly refers to the period between 1650 and 1750, the main features of this
model were still relevant up through the mid-nineteenth century in Britain, far after that
in other areas of Europe and Asia.37
This also contributes to explain why, contrary to E. P. Thompson’s argument, working
hours per day increased significantly during the eighteenth century and the first half of
the nineteenth century.38 Masters often had an incentive to increase the workday during
rush periods to get the goods out and then to lay off or reduce hours in the dead season.
As the pace of mechanization was slower than painted in the textbooks, the working
hours increased, in particular in the textile mills.39
Seasonal needs in agriculture were a crucial variable. Seasonal local shortages of
manpower were overcome by interregional migration and – only later in the nineteenth
century – by a transformation of hand-harvesting techniques and tools.40 In fact, the
labour requirements of harvesting were particularly important since labour output
peaked sharply at the harvest. 41 All this helps explain the main features of labour contracts.
The labour market did not operate as an ‘auction market’.42 By the eighteenth century,
an oral or written contract for workers other than day labourers was presumed to last
a year, particularly in husbandry, unless specific terms had been explicitly negotiated.
However, the frequency of departures, mostly in connection with the harvest, proved
the relatively limited impact of the law on workers’ behaviour. Masters therefore looked
for other solutions, such as the possibility of workers subleasing looms and tools and
finding a substitute. This solution was particularly widespread in textile mills, where
family members who received a family wage usually worked small spinning mules.43
In general, short-term contracts allowed employers to lay off workers when there
was a sudden downturn of trade or if workers became troublesome. A positive trend in
business, with little unemployment, made short-term contracts favourable to workers;
the reverse was true when unemployment rose. The county and police-district records
for the years 1857 to 1875 show that some 10,000 people were prosecuted each year
for Master and Servant offences. Overall, 5–8 per cent of servants were prosecuted,
but the percentage peaked at 17 in some areas and even 20 in London in specific years.
There were no significant differences between the prosecution rate under the Master
and Servant Acts in rural areas as opposed to urban counties, or between agricultural,
putting-out, and manufacturing areas.44 Instead, the response to changing economic
trends and the rate of prosecution was stronger in the countryside than in town,
most likely because of the major impact of seasonal labour shortages on agriculture.45
Given the strong family ties between the town and the countryside, only persistently
179
increasing earnings would have encouraged permanent residence in town. But most
masters preferred to use coercion rather than attractive wages to keep the labour force,
and they thus ultimately encouraged ‘fugitive’ workers. The situation could change
only with a new political equilibrium (increasing strength of unions land labour
movement) and accelerating technical progress in both agriculture and industry,
creating a capital-intensive path of growth. This occurred only after 1850, with the
second Industrial Revolution and the increasing expulsion of the working force from
agriculture.
French servants
In the past, historians have been fond of opposing the persistence of guilds and the
corporatist spirit in French labour law to the free market of Anglo-Saxon labour.46 This
contrast is no longer tenable as the regulation of labour in France is no longer viewed
as being in opposition to market growth.47 France, for instance, was the first country to
abolish lifelong domestic service as well as criminal penalties in labour disputes.48 The
chronology of these developments requires further explanation.
As late as the eighteenth century, French official texts, estates, guilds, and local
administrations considered labour to be a service provision.49 Moreover, French case
law made no clear distinction between hiring a person for services and ‘hiring’ a thing.50
Although the French Revolution eliminated lifelong domestic service, it retained two
forms of contracts from earlier times: hiring for labour (louage d’ouvrage) and hiring for
services (louage de service). While the former brought the status of the wage earner more
in line with the independent artisan, the latter represented an important legacy from
earlier forms of domestic service. Cottereau has emphasized the importance of hiring
for services in nineteenth-century France and its ability to protect wage earners. Such
contracts and the overall attitude of prud’homme (law courts for labour conflicts) law
courts strongly protected workers.51 This argument, while not incorrect, is restricted to
specific sectors such as the textile industry and certain urban milieus. But what about the
other sectors, especially agriculture?
A variety of contractual arrangements to limit mobility existed at the time along with
general provisions.52 Thus from the sixteenth to the eighteenth century, agricultural
labourers and servants were free to move about and change employers only at certain
times of year – that is, according to the critical periods in the agricultural calendar.
The seasonal nature of agricultural labour gave rise to a significant amount of regional
mobility, which was already considerable in the seventeenth century and remained high
until around the end of the nineteenth century.53
This mobility, together with the notion of labour as service, is precisely what helps to
explain the harsh penalties imposed on labourers and servants. They were not allowed
to leave their masters until the end of their contract; otherwise they lost their earnings.
The master, on the other hand, could discharge them at any time.54 The situation changed
during the second half of the century, when the rate of disputes went up and the demand
180
for agricultural wage earners and domestic servants increased due to emigration to
the cities.55
This had an influence on industrial labour as well; about 25 per cent of labour moved
from one sector to another during the summer in the mid-nineteenth century. Industrial
employers could either shut down in the summer or increase wages. The adopted choice
depended on the branch of the industry and the region.56 Indeed a national market was
still missing in nineteenth-century France (at least until after the 1880s) and peasant
workers considered comparatively local wages in agriculture and industry. This explains
why in départments where industrial wages were high, agricultural wages followed, and
vice versa: workers compared and finally compensated the two wages. For this reason,
summer shutdowns were more widespread among firms that paid their workers less
than the summer wage for farm labour. This system made of local arrangements and
seasonal markets left room to different kinds of farms. Smallholders and even communal
fields provided seasonal work for industry and large agricultural units as well. Only
between 1860 and 1890 did the earlier practice of combining agricultural and industrial
employment largely come to an end. During the summer of 1860, at least 500,000 – and
most probably 800,000 – workers quit their jobs. By 1890, this number had fallen to
100,000.57 Despite important regional and sectoral differences, as a whole, the agrarian
crisis and the second Industrial Revolution attracted more stable workers, who were
mostly unskilled, into the towns and the manufactures.
In short, in Western Europe, between the sixteenth and the end of the nineteenth
century, labour was submitted to serious legal constraints. This was so for several
interrelated reasons including the fact that labour was considered a service to the
community and that labour and labour intensification were the main sources of growth.
National markets still lagged far behind local and international markets. These rules
were hard to enforce and they were effective at keeping working people in place than to
limit their voice and wages.
The major exception to this labour-intensive path and labour rules in the eighteenth
and nineteenth centuries was not so much Britain but its northern American colonies,
and later the United States. Since Habakkuk’s work, the argument has been that
scarcity of labour led to free markets, high wages, and precocious mechanization.58
More recently, several authors have developed this argument: factor endowment and
in particular the lower land-to-labour ratio in Britain compared to the United States
had encouraged its agriculture sector to invest in grain; thus, a more seasonal culture
was created, which in turn sustained proto-industry and multiple activity. By contrast,
in the United States, scarcity of labour and agricultural diversification reduced pluri-
activity and led to a quick concentration of industry.59 Unlike Britain, increasing labour
demand did not lead to coercion but to its opposite. Social and political equilibria
more favourable to labour contributed to this outcome. Yet, this does not clarify
the relationships between these dynamics in the north of the American colonies on
the one hand, and, on the other hand, slavery in the south of the United States, and the
persistent importance of the indentured labour in the North itself before, during and
after the age of slavery.
181
Indentured immigrants versus slaves
As the definition and practice of bonded labour in the colonies were linked to the
definition and practice of wage labour in Europe, the development of labour in the two
areas was interconnected. The blurred boundaries between freedom and unfreedom,
property in persons and their labour, found new definitions and became closer to our
understanding only in the transmutation of the English state into Imperial Britain.
The same can be said of France. The British and the French exported specific notions
and practices of wage earner: the servant and the indentured labour. This peculiar
contract derived from two types of extant contracts: that of the sailor and that of the
agrarian labourer.60
In the French colonies, the contract of engagement or indentured service was
developed in the seventeenth century. It was initially intended for white settlers whose
transport expenses were advanced by employers or their middlemen in exchange for a
commitment to work for several years. The engagés were subject to criminal penalties
and could be transferred along with their contract to other masters. The contract of
engagement should not be understood in opposition to these other labour relationships,
but as an extension of them in the colonial situation. Indeed, the notaries of Normandy
in charge of drafting the first contracts of engagement in the seventeenth century
explicitly relied on two types of contracts that already existed: the agricultural daily
labourer’s contract and the sailor’s contract. It is no accident that contracts of engagement
explicitly mention hiring for service: the engagé rented his services, that is, the totality
of his time, to his master. Terminating a contract was therefore difficult, especially
for the engagé. Similarly, contracts of engagement explicitly invoked apprenticeship
contracts: the master had the same requirement to provide for the care of the engagé as
he did for the apprentice, the same expenses in case of illness, and the same word in the
margins: bondage.61
Two clauses differentiated the apprenticeship contract from the contract of
engagement: the act of apprenticeship emphasized training in a trade, whereas in the
contract of engagement, the engagé first owed his labour to his master who, in exchange,
was to teach him about colonial farming. It was also the master who gave a lump sum to
his engagé and not the other way around, as in the case of an apprentice.62
In general, the engagés were not allowed to marry without authorization from their
masters, but an engagé had the right to redeem his indenture and could force his master
to agree to do so. Differences nevertheless appear between the engagés ‘with no trade’
and those who left as doctors, carpenters, and so on. The latter committed themselves
for three years instead of five; they received wages but were not subject to the servitude
clauses imposed on the others.
In the seventeenth and eighteenth centuries, the contract of engagement concerned
mainly whites who went not only to the French West Indies and Canada, but also to the
Indian Ocean region. Between 1660 and 1715 alone, 5,200 engagés left for the French
West Indies from La Rochelle. This figure is much smaller than the 210,000 indentured
Britons who left for North America between 1630 and 1700.63 Excluding the Caribbean,
182
in the period 1630–1780, the colonies received between 472,000 and 510,000 migrants,
50,000 of whom were convicts and the rest were half indentured and half ‘voluntary’
migrants.64A similar relationship between mother country and colonial labour contracts
existed within the British Empire. Just as a master in Great Britain had the right to pursue
fugitives, so too in the colonies: indentured servants who fled were subject to criminal
penalties.
Two periods can be distinguished: the first, from the seventeenth century to the
1830s, concerned some 300,000 European indentured servants. It coincided with a
period when slavery was still legal and European traders engaged in the slave trade.
The indentured servants were intended to be engaged in tobacco plantations and, to
some degree, in manufacturing. The second phase, in the nineteenth and twentieth
centuries, concerned two million indentured servants, mostly Chinese and Indians, but
also Africans, Japanese, and immigrants from the Pacific lslands. They were employed
in sugar plantations and in manufacturing. Unlike the indentured servants of the first
phase, these new bonded labourers seldom returned to the world of free labour once
their period of commitment ended. Their indenture contracts were therefore renewed.65
What is the relationship between indenture and slave labour? Menard argues that, in
North America, indentured servants and slaves were close substitutes and that planters
shifted from servants to slaves not because they preferred slaves but due to changes in the
supply and cost of the two forms of labour. Around 1660, the supply of servants began
to decline as in England population fell and real wages rose, thus leading to improved
opportunities at home.66 Consequently, after the mid-century, migration to America fell.
However, other scholars argue that this shift reflected the planters’ preferences for black
slaves, whom they considered to be more docile and productive than white servants.67
The case of Barbados, where the development of sugar plantations transformed the
island in the mid-seventeenth century, shows the relationship between the two forms
of labour. With the rise of sugar, monoculture replaced diversified farming, and blacks
arrived by the thousands while whites left. The island began to import food and fuel
and the great planters rose in wealth and power. Because of its substantial economies of
scale and large profits, sugar was most efficiently grown on big plantations that greatly
increased demand for labour.68 At the end of the seventeenth century, therefore, the influx
of slaves was not a response to a general lack of labour on the island, but to a specific
lack of coerced labour and indentured immigrants in particular. Increasing demand for
labour was hard to meet with native Indians and white indentured and convicts. Native
Indians were difficult to control and less productive than either indentured whites or
African slaves.
Some significant changes appeared at the end of the seventeenth century when
colonial indentured servitude began to be distinguished from other forms of resident
service and, above all, from slavery. It was slavery that enabled Virginians to achieve
a stable relationship between work and rights: different contracts expressed different
statuses (slaves, indentured immigrants) and, starting from this, they enabled different
rights to the slave on the one hand, and to the immigrant on the other hand. In the
Chesapeake and the Delaware valley, the relationship between British rules and
183
indentured immigration was reaffirmed, though in the eighteenth century it acted as

a way to differentiate indentured from slave labour. Decreasing costs of transportation
encouraged shipowners to enter the migration market, where labour became a tradeable
commodity. William Blackstone concluded that service was temporary property
of labour, while villeinage and slavery were perpetual conditions.69 Progressively,
indentured labour was confined to minors alone, while adult working men and women
refused to accept strong hierarchical power in labour relationship that they qualified as
a vestige of the British yoke. White indenture declined during the 1820s and came to an
end in the following decade. By the late 1830s, penal sanctions for breach of contracts for
white adult workers disappeared. It was however in this period that indentured contracts
became commonplace for ‘coloured’ immigrants in the Americas as well as in the British
and French colonies following the abolition of slavery.
While the legal and contract status of white indentured immigrants improved
over time, those of servants (black until the mid-seventeenth century) progressively
deteriorated into chattel slavery. This shift was the result of political and economic forces:
the excess of labour demand was strong with the expansion of coffee, and then sugar and
cotton cultivation in the colonies. The Restoration and then the Glorious Revolution
at the end of the seventeenth century were decisive for the change of the legal status of
black people in the American colonies.70 London asserted the rights of the metropolis
over its colonies. In this context, Locke, a member of this board, published his Two
Treatises of Government (1690) in which he defended English liberty and freedom and
justified slavery, to his eyes perfectly compatible with liberty.71
The shift from indentured labour to slavery was the outcome of a lack of labour in
the colonies, aggravated by the labour-intensive path in Europe itself. The rise of the
plantation system – labour-intensive and carried out on large-scale estates – bucked this
trend. The sugar boom was constrained by a narrow range of technological possibilities.
Crude cane-crushing mills, powered by animals, wind, or water, remained the basic
forms of heavy equipment.72 On mainland America, tobacco and then cotton plantations
also relied on labour-intensive production.73
Indentured after abolition
In England, many had believed that the abolition of slave trade would lead to the eventual
abolition of slavery. This was not the case, as France, Spain, and Portugal continued to
import slaves. A new antislavery society was founded; it shifted its agenda from gradual
to immediate abolition of slavery. A period (usually six to seven years, in line with the
time frame of individual emancipation and apprenticeship contracts) was imposed
during which the quasi-former slaves were given apprenticeship status.74 Slaves did not
enjoy full legal status inasmuch as they were not yet ‘civilized’.75 Apprentices worked
forty-five hours a week for their former owners in exchange for food, clothing, lodging,
and medical care. Absenteeism or low performance (according to standards set by the
planters themselves) led to severe penalties and increased the period and the amount of
184
apprentices’ obligations. Physical punishment, which had been suppressed under slavery
during the 1820s, was now re-introduced for apprentices. Abuse was thus extremely
frequent.76
Thus, even though former slave owners had received compensation of £20 million,
many planters used the apprenticeship programme as additional compensation, and, to
this end, they sought to extract as much unpaid labour as possible. The final social and
economic outcome differed from one colony to another according to the availability of
land, previous forms of bondage and types of culture, and new forms of labour and their
rules (different Masters and Servants acts enacted in each colony), and to systems of
credit.77 In Barbados, the planters monopolized all the land and rented it in part to former
slaves, few of whom therefore left their original plantations. In Jamaica, Trinidad, and
English Guyana, many former slaves had formal access to land, but many of them ended
up indebted to their former masters and found themselves back on the plantations.78 This
did not prevent former slaves (when they did not run away) from providing extremely
irregular (in their masters’ eyes) labour. A fall in sugar output in Jamaica was one of the
major expressions of resistance.
The abolition of slavery gave new life to indentured immigration worldwide. In the
nineteenth and twentieth centuries, more than 2.5 million people became indentured
servants, mostly Chinese and Indian but also African, Japanese, and migrants from the
Pacific Islands. They were employed in sugar plantations and in manufacturing. Unlike
white settlers during the first phase of indentured immigration, during the 1850s and
1860s, many indentured migrants – especially Indians – returned home. A third of all
indentured servants in Mauritius, the Caribbean, Surinam, and Jamaica and up to 70 per
cent of those in Thailand, Malaya, and Melanesia returned home. Distance and the cost
of transport were the two main variables affecting repatriation, though politics, concrete
forms of integration, and death from disease were also important factors. Between the
official abolition of slavery in 1834 and 1910, 450,000 indentured servants, mostly from
India but also from Madagascar, arrived in Mauritius. Two-thirds of them remained,
and as a result, the Indian population grew steadily – from 35 per cent of the island’s
population in 1846 to 66 per cent in 1871.79 Numerous observers drew attention to the
inhuman living conditions of these immigrants.80 These figures must also be expanded
to include other indentured servants from Southeast Asia and Africa: 30,000 in 1851 and
twice that number ten years later.
The real conditions of workers depended on when they arrived, their ethnic
origin, and which specific estates they worked on. Small plantation owners were more
concerned about fugitive, insubordinate, and vagrant indentured servants,81 whereas
large plantation owners, who complained of the excessive cost of slave surveillance, often
advocated a liberal ideology for the colonial systems. Immigrants often complained of ill
treatment, withheld wages, and poor food.82 The number of cases in which indentured
servants brought proceedings against their masters – something that rarely happened
in the 1850s – rose sharply thereafter. In the 1860s and 1870s, about 10 per cent of all
indentured servants sued their masters, in virtually every case for non-payment or
insufficient payment of wages, and they won in more than 70 per cent of cases.83 Such a
185
result was partly due to pressure from England and can hardly indicate that a ‘march to
equality’ was under way. In subsequent decades, the percentage of contracts disputed by
coolies declined first to 5 per cent at end of the 1870s and later dropped to a mere 0.3 per
cent between 1895 and 1899, with their success rate falling to less than 40 per cent.84 This
can be explained by the fact that, after the results of the 1860s and thanks to a new law on
labour contracts adopted in 1867, an increasing number of contracts were oral, making
it more difficult for the coolies to produce any proof that would hold up in court. Above
all, the coolies’ contracts were no longer signed with plantation owners but were drawn
up instead with Indian middlemen, which no doubt helped to quash many conflicts.
Retention of coolies increased with the percentage of contract renewals, rising from 40
per cent in 1861 to more than 70 per cent twenty years later.85
In Mauritius, 14,000 indentured and domestic servants were prosecuted each year in
the 1860s; during the same period in Great Britain, proceedings were brought against
9,700 servants per year for breach of contract and almost always resulted in convictions.
By contrast, masters were seldom indicted and even more rarely convicted for breach
of contract, ill treatment, or non-payment of wages. At the same time, even though
the real conditions of indentured servants were not necessarily better than those of the
slaves who preceded them, the rights they enjoyed and the fact that their status was not
hereditary were essential differences that were to play an increasingly important role in
the twentieth century.
The great transformation of labour in the twentieth century
Labour contracts (contrats de travail in French, contracts of employment in English)

emerged between the 1890s and the 1920s. These new legal institutions marked a
departure from the forms of labour that had sustained the economic growth and societal
transformation in Europe between the seventeenth century and mid-nineteenth century.
In England, at the start of the 1870s, most industrial enterprises were still independent
family-run firms that employed fewer than a hundred workers. Mass production was
slow in evolving and was still limited.86 By the mid-nineteenth century, a decisive shift
occurred towards an industrialized economy in which sustained increases in output per
capita served to support a growing population, which, in turn, provided a source of rising
demand.87 From the mid-1880s onwards, large combinations of firms began to emerge,
notably in textile manufacturing, coal mining, and engineering. Vertical integration, the
welfare state, and changing labour institutions went hand in hand. Vertical integration
required a stable labour force and large units; the peasant worker, the traditional
poor, and Poor Laws hardly fit this process. The removal of criminal sanctions from
the individual employment relationship in the 1870s was soon followed by the first
legislative interventions of the welfare state.88 These changes meant that the Poor Law
remained in place but dealt only with residual cases that fell outside the range of the
statutory social-insurance scheme.89 Despite advances, seasonal and casual workers were
excluded from these provisions as they were designated as independent contractors.
186
Litigation thus occurred over the definition of ‘independent’, with employers trying to
avoid responsibility for the social risks of illness, injury, and unemployment.
Along an analogous path, in France, the law of 21 March 1884 legalized trade
unions. The notion of the labour contract (contrat de travail) first appeared. The term
contrat de travail was not in widespread use in France before the mid-1880s. However,
once the term became established, it was used in turn-of-the-century legislation with
respect to industrial accidents (law of 1898), which introduced the employer’s objective
responsibility in case of accident. This in turn opened the way to social insurances,
which were being developed precisely during this period. However, the new labour law
widened rather than reduced legal, social, and economic inequalities among working
people. It excluded large categories, such as small enterprises, craftsmen, and peasants.90
All these groups were marginalized as ‘independent’ workers.91
Migration
Since the 1870s, the declining prices of these items and the joint process of mechanization
led to decreasing immigration of indentured Indians, Chinese, and Africans in many
production areas in the islands in the Antilles and the Indian Ocean regions. Yet migratory
fluxes increased in the last quarter of the nineteenth century. In Europe, mechanization
and concentration compelled people to migrate, while massive population flows helped
create a single global economy for both labour and capital. Thus, between 1840 and 1940,
55–58 million Europeans and 2.5 million Africans and Asians reached the Americas;
during this same period, 29 million Indians, 19 million Chinese, and 4 million Africans
and Europeans moved to Southeast Asia, the Pacific lslands, and the Indian Ocean rim.
Finally, forty-six to fifty-one million people from Northeastern Asia and Russia moved
(or were compelled to move) to Siberia, Manchuria, and Central Asia.92
Economic factors were important, but they were not alone in causing this mass
migration. Thanks to the transport revolution of steamboats and railroads, global
migrations caused a significant shift in the distribution of the world’s population. All
three aforementioned destinations (Americas, Central Asia, and the Indian Ocean)
experienced enormous population growth, increasing by factors of 4 to 5.5 from 1850
to 1950. Growth rates in these areas were more than twice that of world population
as a whole. By comparison, growth rates in the regions of emigration were lower than
world population growth and less than half of those in the regions of immigration. Taken
together, the three main destination regions accounted for 10 per cent of the world’s
population in 1850 and 24 per cent in 1950.93
Even if relocation within the same empire was important (in particular, in the Russian and
British empires), trans-imperial, intra-continental, regional, and local forms of migration
were also important – and they clearly show the inadequacy of the Eurocentric paradigm,
which consists of explaining migration as an ‘expansion of the West’.94 Indeed, migration
was multi-scale and involved almost all areas of the world. Nearly four million Indians
travelled to Malaysia, over eight million to Ceylon, over fifteen million to Burma, and about
187
one million to Africa, other parts of Southeast Asia, and islands throughout the Indian and
Pacific Oceans. Up to eleven million Chinese (most from the southern provinces) travelled
from China to the Straits Settlements, although more than a third of these transhipped to
the Dutch Indies, Borneo, Burma, and places farther west. Nearly four million travelled
directly from China to Thailand, between two and three million to French Indochina, more
than one million to the Dutch Indies (for a total of more than four million if transhipments
from Singapore are included), and just under one million to the Philippines.95
At the same time, railroad construction and a relative relaxation of frontiers between
Russia and China also led twenty-eight to thirty-three million northern Chinese to
migrate to Siberia and Manchuria.96 Migration within each area increased and interacted
with long-distance emigration. Migrants from Ireland travelled to England for work;
others moved from Eastern and Southern Europe to industrial areas in Northern Europe,
especially France and Germany. In Russia, migrants moved into the growing cities and
southern agricultural areas. Within India, they moved to tea plantations in the south and
northeast, to the mines and textile-producing regions of Bengal, and to newly irrigated
lands and urban areas throughout the subcontinent.97
Thus it would be reductive to explain twentieth-century migrations as simply an
‘expansion of the West’ and the triumph of free labour and free emigration over bondage.
To be sure, whole sets of laws in defence of ‘freedom’ were adopted on all continents.
‘Free’ migration expanded with the increasing restriction of indenture contracts and
their final abolition in 1920. In the United States, the Anti-Peonage Act of 1867 extended
the prohibition of servitude (voluntary or involuntary) to all states in the Union. The
government of India first restricted and then forbade Indian indentured contracts in
1916, while in 1874 an agreement between the Chinese and Portuguese governments
stopped the transport of Chinese contract labour from Macao. Chinese authorities
investigated the conditions of Chinese migrants in Cuba, Peru, and the United States,
which led to the suspension of most of these contracts.
At the same time, formal rules for migration were not always supported by real
legal rights granted to immigrants once they reached their destination. For example,
the conditions of former indentured labourers were extremely different, precisely as
they had been for former slaves. The access to landowning that one had on Mauritius
and Reunion Island was hardly the rule. Elsewhere, between 1899 and 1938, most of
the indentured immigrants served as day labourers in agriculture or in commerce; this
was the case with Chinese, Indian, and Japanese immigrants in Cuba, British Guyana,
Trinidad, and Hawaii. Servant contracts or ‘independent’ commercial activity was much
more widespread in Cuba (40 per cent of the immigrants) and Hawaii (48 per cent) than
in British Guyana (8 per cent) or Trinidad (24 per cent).98
Most importantly, different forms of bondage and debt obligations survived far into
the twentieth century. Chinese, Africans, Indians, and, to a certain extent, even European
emigrants were still subject to disguised forms of indenture contracts and bondage.99 The
same can be said for Africans, who even if officially freed from slavery were still under
multiple forms of bondage in both intra-African and African-European relations. Local
bondage coexisted with the intercontinental flow of free and less-free people. This was
188
the case for various reasons: labour markets remained highly segmented, unequal skills
adding to important institutional constraints. Migration was never really free; laws and
reciprocal and multilateral agreements between powers obtruded and thus regulated the
flow. The rise of the welfare state and protection of the ‘national’ working force went hand
in hand with the increasing control, if not limitation of immigration and the exclusion of
the colonies from the new welfare state.
Conclusion
Unfree labour cannot exist unless political institutions intervene and limit the free
market; the institutions regulating labour did not only respond exclusively to efficiency,
scarcity (of labour), and profit calculations, but also to power and values. Violence,
constraints, and contract enforcement were not only substitutes for higher wages, but
also the expression of the belief that labour was a service to the master, the head of the
family, the village, the community, and, ultimately, the state, and was accompanied by
strongly unequal distribution of civil and human rights between labouring people and
their masters. This global trend was at the very ground of economic growth through
the seventeenth to the mid-nineteenth century, certainly in Eastern Europe and in the
Western European colonial world (long after that date) and partially in the West as
well. Since the mid-nineteenth century, increasing labour and civic and human rights
in the West went along with capital-intensive growth, unions and political shifts more
favourable to welfare capitalism. Yet, this turn consciously excluded the colonial world
through the decolonization process, but even then, only for a short period, under the
post-war reconstruction in Europe. Since the end of the 1970s, restrictions to the welfare
state in the West went along once again with increasing restrictions to immigration and
immigrants’ social rights. Paradoxically, these two trends are increasingly perceived as
being in opposition, the defence of national welfare being opposed to immigration.
Notes
1. E. D. Domar (1970), ‘The causes of slavery or serfdom: A hypothesis’, Journal of Economic

History, 30 (1), 18–32; E. D. Domar and M. J. Machina (1984), ‘On the profitability of
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inspired by Nieboer, a Dutch ethnographer in the late nineteenth to early twentieth century.
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2. H. J. Habakkuk (1958), ‘The economic history of modern Britain’, Journal of Economic
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189
3. S. Engerman (ed.) (1999), Terms of Labor: Slavery, Freedom and Free Labor. Stanford:
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4. A. Stanziani (2014), Bondage: Labor and Rights in Eurasia from the Sixteenth to the Early
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5. S. Drescher (1987), Capitalism and Antislavery: British Mobilization in Comparative
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7. M. Huberman (1986), ‘Invisible handshakes in Lancashire: Cotton spinning in the first half
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8. Stanziani, Bondage.
9. R. Steinfeld (1991), The Invention of Free Labor: The Employment Relation in English and
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13. Brass and van der Linden, Free and Unfree Labour.
14. D. W. Galenson (1981), White Servitude in Colonial America: An Economic Analysis.
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15. P. C. Emmer (ed.) (1986), Colonialism and Migration: Indentured Labour before and after
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18. British Parliamentary Papers (from now on BPP) (1834), Report from the Commissioners
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19. D. Green (2006), ‘Pauper protests: Protests and resistance in early nineteenth-century
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20. F. Driver (1993), Power and Pauperism: The Workhouse System, 1834–1884. Cambridge:
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190
22. A. Kussmaul (1981), Servants in Husbandry in Early Modern England. Cambridge:

23. Postan, ‘The chronology of labour services’.
24. D. C. Woods (1982), ‘The operation of the Masters and Servants Act in the Black Country,
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25. R. Rudolph (ed.) (1995), The European Peasant, Family, and Society: Historical Studies.
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26. Hay and Rogers, English Society.
27. H. J. Habakkuk (1962), American and British Technology in the Nineteenth Century.
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30. P. K. O’Brien (1977), ‘Agriculture and the Industrial Revolution’, Economic History Review, 30
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31. F. M. L. Thompson (1968), ‘The second Agricultural Revolution, 1815–1880’, Economic
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35. Deakin and Wilkinson, Law of the Labour Market, 20.
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37. J. de Vries (2008), The Industrious Revolution: Consumer Behavior and the Household
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39. E. Hopkins (1982), ‘Working hours and conditions during the Industrial Revolution: A re-
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40. E. J. T. Collins (1976), ‘Migrant labor in British agriculture in the nineteenth century’,
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191
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41. K. D. M. Snell (1981), ‘Agricultural seasonal unemployment, the standard of living, and
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42. Huberman, ‘Invisible handshakes in Lancashire’.
43. M. Huberman (1996), Escape from the Market: Negotiating Work in Lancashire. Cambridge:
44. D. Hay (2004), ‘England, 1562–1875: The law and its uses’, in Hay and Craven, Masters,
Servants, and Magistrates, 67.
45. Naidu and Yuchtman, ‘How green was my valley?’.
46. E. Coornaert (1941), Les corporations en France. Paris: Gallimard; E. P. Thompson (1963),
The Making of the English Working Class. London: Vintage Books; W. Sewell (1983), Gens de
métier et révolution. Le langage du travail de l’Ancien régime à 1848. Paris: Aubier.
47. M. Sonenscher (1989), Work and Wages: Natural Law, Politics and the Eighteenth-Century
French Trades. Cambridge: Cambridge University Press; P. Minard (1998), La fortune du
Colbertisme: Etat et industrie dans la France des lumières. Paris: Fayard.
48. A. Cottereau (2002), ‘Droit et bon droit. Un droit des ouvriers instauré, puis évincé par le
droit du travail, France, XIXe siècle’, Annales, 57 (6), 1521–57.
49. J. Domat (1697), Les Lois Civiles dans leur Ordre Naturel, reproduced in Œuvres. Paris: 1835,
vol. 1; and R. Pothier (1861), Traité du Contrat de Louage. Paris: Bugnet.
50. Sonenscher, Work and Wages, 75.
51. Cottereau, ‘Droit et bon droit’.
52. P. Hoffman (1996), Growth in a Traditional Society: The French Countryside, 1450–1815.
Princeton: Princeton University Press, 45–6.
53. Postel-Vinay, ‘The dis-integration’.
54. (1865), Recueil des Usages Locaux en Vigueur dans le Département de la Vienne. Poitiers:
Bertrand; A. Pages (1855), Usages et Règlements locaux, Servant de Complément à la Loi
Civile et Topographie Légale du Département de l’Isère. Grenoble: Baratier frères. See also the
1870 parliamentary enquiry in Archives Nationales de France (henceforth AN) C 1157–61.
55. Cottereau, ‘Droit et bon droit’.
56. T. Magnac and G. Postel-Vinay (1977), ‘Wage competition between agriculture and industry
in mid-nineteenth century France’, Explorations in Economic History, 34 (1), 1–26.
57. Postel-Vinay, ‘The dis-integration’.
58. Habakkuk, American and British Technology.
59. K. Sokoloff and D. Dollar (1997), ‘Agricultural seasonality and the organization of
manufacturing in early industrial economies: The contrast between England and the United
States’, Journal of Economic History, 57 (2), 288–321.
60. U. Chakravarti (1985), ‘Of Dasas and Karmakaras: Servile labour in ancient India’, in U.
Patnaik and M. Dingawaney (eds), Chains of Servitude: Bondage and Slavery in India. New
York: Oxford University Press, 40–54; Benton, Law and Colonial Culture; M. Galanter (1989),
Law and Society in Modern India. Delhi: Oxford University Press.
61. Bibliothèque Nationale de France, section des manuscrits, ‘Nouvelles acquisitions de France’,
9328.
62. For treatments of apprenticeship contracts, see Sonencher, Works and Wages.
192
63. Galenson, White Servitude in Colonial America.

64. Indentured were 60–5 per cent of all migrants in the seventeenth century and 40–2 per
cent in the following century; see C. Tomlins (2010), Freedom Bound: Law, Labor, and Civic
Identity in Colonizing English America, 1580–1865. Cambridge: Cambridge University Press,
34–5.
65. Northrup, Indentured Labour, 156–7, table A.1.
66. R. Menard (1977), ‘From servants to slaves: The transformation of the Chesapeake labor
system’, Southern Studies, 16 (4), 366–7.
67. T. W. Allen (1994), The Invention of the White Race, 3 vols. New York: Verso; A. S. Parent Jr.
(2003), Foul Means: The Formation of a Slave Society in Virginia. Chapel Hill: North Carolina
University Press.
68. S. Engerman (1993), ‘Europeans and the rise and fall of slavery in the Americas: An
interpretation’, American Historical Review, 98 (5), 1399–1423.
69. Sir W. Blackstone (1765–9), Commentaries on the Laws of England, Oxford, 4 vols., vol. 2, 16.
70. R. Blackburn (1988), The Overthrow of Colonial Slavery, 1776–1848. London: Verso; Tomlins,
Freedom Bound.
71. D. Armitage (2004), ‘John Locke, Carolina, and the two treatises of government’, Political
Theory, 32 (5), 602–27; B. Hinshelwood (2013), ‘The Carolinian context of John Locke’s
theory of slavery’, Political Theory, 41 (4), 562–90.
72. R. Sheridan (1974), Sugar and Slavery. An Economic History of the British West Indies,
1623–1775. Barbados: Canoe Press.
73. Fogel and Engerman (1974), Time on the Cross; R. Fogel (1989), Without Consent or
Contract. New York: Norton.
74. Drescher, Capitalism and Antislavery.
75. BPP (1830–1), Papers in Explanation of the Condition of the Slave Population, 5 Nov. 1831,
CCXXX, 59–88.
76. J. R. Ward (1988), British West India Slavery, 1750–1834: The Process of Amelioration. Oxford:
77. M. Turner (2004), ‘The British Caribbean, 1823–1838: The transition from slave to free legal
status’, in Hay and Craven, Masters, Servants and Magistrates, 322.
78. T. Holt (1992), The Problem of Freedom: Race, Labour and Politics in Jamaica and Britain,
1832–1938. Baltimore and London: John Hopkins University Press.
79. R. Allen (1999), Slaves, Freedmen and Indentured Labourers in Colonial Mauritius.
Cambridge: Cambridge University Press, 16–17. See also A. Toussaint (1974), Histoire de l’Ile
Maurice. Paris: PUF.
80. Colony of Mauritius, Annual Report, 1854; BPP, XLII, 2050. See also, Jan Breman, Taming
the Coolie Beast.
81. Mauritius National Archives (MNA), HA 66 (planters’ petitions); BPP (1842), XXX (26), 25.
82. BPP (1842), XXX (26).
83. BPP (1875), ‘Report of the Royal Commissioners Appointed to Enquire into the Treatment
of Immigrants in Mauritius’, XXXIV, paragraph 704 and appendix A and B. Colony of
Mauritius, printed documents, Annual Report of the Protector of Immigrants, 1860–1885.
84. Ibid.
85. Allen, Slaves, 72.
193
86. Mokyr, The Level of Riches, 114.

87. Wrigley, Continuity, Chance and Change.
88. Deakin and Wilkinson, The Law of the Labour Market, 86–7.
89. G. Bentley (1966), The Evolution of National Insurance in Great Britain: The Origins of the
Welfare State. London: Joseph; J. Harris (1972), Unemployment and Politics: A Study in
English Social Policy, 1886–1914. Oxford: Clarendon Press.
90. R. Salais, N. Bavarez and B. Reynaud (1986), L’invention du chômage. Paris: PUF.
91. A. Stanziani (2012), Rules of Exchange: French Capitalism in Comparative Perspective,
Eighteenth to Early Twentieth Century. Cambridge: Cambridge University Press.
92. A. McKeown (2004), ‘Global migration, 1846–1940’, Journal of World History, 15 (2), 155–89;
D. Treadgold (1957), The Great Siberian Migration: Government and Peasant in Resettlement
from Emancipation to the First World War. Princeton: Princeton University Press, 33–5;
T. Gottschang and D. Lary (2000), Swallows and Settlers: The Great Migration from North
China to Manchuria. Ann Arbor: University of Michigan, Center for Chinese Studies, 171.
93. McKeown, ‘Global migration’.
94. O’Rourke and Williamson, Globalization and History.
95. K. Singh Sandhu (1969), Indians in Malaya: Some Aspects of Their Immigration and
Settlement (1786–1957). Cambridge: Cambridge University Press.
96. R. H. G. Lee (1970), The Manchurian Frontier in Ch’ing History. Cambridge, MA: Harvard
University Press.
97. A. de Haan (1999), ‘Migration on the border of free and unfree labour: Workers in Calcutta’s
jute industry, 1900–1990’, in J. Lucassen and L. Lucassen (eds), Migration, Migration History,
History: Old Paradigms and New Perspectives. Bern: Peter Lang, 197–222.
98. Northrup, Indentured Labor, 150.
99. McKeown, ‘Global migration’.
194
CHAPTER 11
VARIETIES OF INDUSTRIALIZATION:
AN ASIAN REGIONAL PERSPECTIVE
Kaoru Sugihara
Discussion on the comparative history of industrialization usually focuses on the

changes of technology and institutions, and makes a sharp distinction between the
first industrializer, England, and its followers. The latter, including continental Europe,
Japan, and Asia’s emerging states, are often seen as having gone through a ‘catch up
industrialization’ or ‘big push industrialization’.1 Technological and institutional
innovations and mobilization of capital, among others, are highlighted as factors
accounting for the first industrialization, while explanations for the diffusion of
industrialization often focus on the transfer of technology, institutions, and values and
norms, and the role of the state in it.
Such an approach leaves out the importance of the mobilization of natural resources
and the innovative role played by local and regional forces. The recent literature on
Asia’s long-term path of economic development has discussed how diverse the region’s
resource endowments were before industrialization and how it responded to the need
for procuring a much wider range and larger quantities of resources in the period of
industrialization.2 The best-known ‘initial condition’ in monsoon Asia was the presence
of a large peasant family economy centred on rice cultivation, which could provide
almost ‘unlimited’ supplies of labour.3 The most-discussed constraint the region suddenly
faced when industrializing was the availability of energy, especially coal, needed to serve
modern industry and transport.4 Another, equally serious constraint, emphasized in the
literature, was the shortage of arable land because of population growth. Economic and
social historians have discussed the widespread poverty, social inequality, and instability
of the last two centuries, often by linking them to the resource shortages, especially that
of land. Low agricultural productivity and a low land–labour ratio have been taken to be
among the most important indicators of a resource-poor country.5
Asia’s answer to such constraints was engaging in trade and migration within the
region. The growth of intra-Asian trade and migration significantly mitigated local
resource constraints, by trading coal and land-derived commodities such as rice and
raw cotton and by moving labour. Monsoon Asia is richly endowed with water and
biomass, but local endowment conditions vary greatly. It also suffers from the variability
of water supply, acute infectious diseases, and regular natural disasters. It is this vast
range of diverse environmental circumstances that offered the region opportunities for
trade and migration. Yet, the impact of these local and regional resource transfers on
industrialization has not been sufficiently recognized.
Asia also had to earn foreign exchange vis-à-vis advanced Western countries if
it wanted to import modern machinery and associated sets of knowledge needed for
industrial, urban, and infrastructural development. Exports of primary products were
dependent on international demand as well as on climate variations. The longer the
region took to build a competitive export sector, the more important it became to make
efficient use of available local resources.
As labour was abundant and land was scarce and in order to minimize the amount
of imports from the West and to exploit local resources, technology and institutions
were geared towards labour-intensive and local-resource-dependent industrialization.
Japan and other East Asian countries secured comparative advantage in labour-intensive
industries when they were relatively free from local resource constraints, especially at
the initial stage of industrialization. Where the availability of water was variable and
its shortage or precariousness affected the quality of land and the environment, efforts
were directed towards the more efficient governance and use of water to secure food
and sustain livelihood. On the whole, the economies of India and Southeast Asia under
Western domination were integrated into the international economy as exporters of
primary products through the development of steamship lines and the construction of
railways. While there was a significant development of labour-intensive industries in
colonial India, there was also an impressive growth in the network of Asian merchants,
and the migration and remittances across colonial boundaries in Southeast Asia.
In none of these countries or regions was technological and institutional innovation
directed specifically towards higher labour productivity. Of course raising labour
productivity is of crucial importance for any type of industrialization. But labour
productivity was usually part of wider concerns about sustaining a large agrarian
population and ensuring their welfare, regardless of whether the state was colonial
or independent. It was important that not just a small modern sector but the local or
regional economy as a whole would find its own path of economic development. Any
rush for capital-intensive and resource-intensive technology would have to be financed
with borrowing, often involving political costs or international risks. The adaptation of
traditional or intermediate technology to serve modern needs was a great advantage,
better still if it was accompanied by a fuller use of local resources. For example, where
wood was plenty, timber, rather than coal, was used for heating. Charcoal could be made
from timber relatively cheaply. Timber was also used instead of iron in the construction
of the frame of power looms, thus lowering their cost.
This chapter considers the importance of these path dependencies for Asia’s
industrialization in regional perspective. The sub-regions discussed are East Asia (though
Japan and China are often treated separately), Southeast Asia, and India (or South Asia).
The task is twofold. First, this chapter identifies Asia’s factor endowment conditions and
their diversity, to describe how the sub-regions interacted to enhance the possibility of
industrialization. I argue that the concurrent growth of local, regional, and global trade
has been key to shaping the pattern of economic development of each sub-region in the
nineteenth and the first half of the twentieth centuries. Second, the chapter traces the
process of resource-intensive industrialization on a regional scale for the second half
196
Varieties of Industrialization
of the twentieth century, and reviews the process of diffusion and its consequences. In
the last section, it compares the Asian and European regional paths of industrialization,
and suggests that, while Europe initiated the diffusion of industrialization, Asia made
it environmentally, technologically, and institutionally much more inclusive than the
original version. This was achieved by creating the resource nexus and by exploiting,
often overexploiting, the extraordinary environmental and cultural diversities of
monsoon Asia and beyond.
Initial conditions in 1820 and after
In 1820, China had 381 million people, or 37 per cent of world population; India had
209 million (20 per cent), while Japan had 31 million (3 per cent), and nine Southeast
Asian states had about 38 million (4 per cent). This is obviously a crude estimate, but
the difference in the size of the four sub-regions is important for the argument of this
chapter. China and India had the capacity to hold a very large population, while their
neighbouring sub-regions of Japan and Southeast Asia scarcely matched them but
sustained distinct units as the periphery.6 This is arguably the most important ‘initial
condition’ for Asia’s industrialization, in that the region was potentially able to both
absorb the largest pool of labour on earth and connect it to the outside world.
In explaining post-war economic development up to c. 1980, Harry Oshima stressed
the common socio-environmental characteristics of monsoon Asia, stretching from
East and Southeast Asia to South Asia, in terms of seasonal rainfall patterns induced by
monsoon winds and the centrality of the large river delta for the growth of rice farming
and dense population. His formulation focuses on the sequence of intensive rice farming,
population growth, availability of cheap labour, and labour-intensive industrialization
leading to economic growth.7 This sequence implicitly assumed several topics, which
have been more explicitly taken up by other scholars, mainly with reference to East Asia.
The development of intensive farming under land scarcity implied successful labour
absorption.8 It also implied the intensive use of water and manure required for commercial
crop production.9 Population growth also required the maintenance of social order.10
Proto-industrialization and commercialization of agriculture meant the growth of intra-
regional trade through merchant networks.11 Finally, labour-intensive industrialization
implied the capacity to engage in intercontinental trade, to exchange primary products
at an initial stage and increasingly to export labour-intensive manufactured goods in
return for fossil fuels, other resources, and capital-intensive goods.12 In other words,
monsoon Asia’s feeding capacity came as much from the development of the ability to
acquire resources as from the basic water and air circulation regime. Each country or
sub-region responded to this challenge with varying difficulties and policy support, and
eventually incorporated resource-intensive industrialization into its development path.
Second, maritime Asia, represented by present Southeast Asia but stretching from the
coasts of the Indian Ocean to the western side of the Asia-Pacific region, was able to organize
two very large sets of regional trading networks, involving local, regional, and global trade.
197
In the early modern period, there were a China-centred trading network east of the Malacca
Straits and an Indian Ocean trade from the west of the straits to the western Indian Ocean.
Together with the Atlantic trade, which was oriented more towards intercontinental trade,
they comprised the three major regional networks in the world in the seventeenth and
eighteenth centuries. Arab traders were extremely important in connecting Asia with Europe.
Moreover, the English and Dutch East India companies conducted world trade on the basis
of the two Asian trading networks locally conducted by Asian traders. Nevertheless, many
would agree that the two Asian trading networks had a degree of cultural cohesiveness and
diversity within it at the same time. The East Asian networks were governed by the tendency
to regulate intercontinental trade, and when by the end of the seventeenth century pirate
activities were curtailed, the East Asian seas became peaceful. In addition to, and partly in
replacement of, tributary trade relations, China developed a more equal regime of managed
trade (the Hushi system), and both Japanese and Chinese governments recognized the
utility of bilateral trade relationships. In other words, Asian traders had the capacity and the
environment to conduct local and regional trade comparable to European traders, though
not to engage in intercontinental trade. This is the second ‘initial condition’ which other
non-European regions did not have on a comparable scale around 1820.
It should be noted that maritime states based on port cities and surrounding rural areas
grew along the coasts of the Indian Ocean, including maritime Southeast Asia. Here the
key organizing agents were port cities (or port city states) and networks of merchants.13
Even in mainland Southeast Asia, the agrarian population was not necessarily the
mainstay.14 Products derived from sea, land, and forest were all involved in the exchange
economy. If the state was relatively urban or commercially oriented, it could shift its
fiscal base from one commodity to another, or from one economic activity to another,
relatively easily. This flexibility was one important strength for securing resources and
livelihoods. The first serious economic contacts with Europe often began via these states.
Setting up industrialization in monsoon Asia
Let me recapture the relative importance of the four sub-regions in terms of regional GDP.
In 1820, China’s share in Asia’s GDP (sum of the four sub-regions) was 59 per cent and
South Asia 29 per cent, while Japan, South Korea, Taiwan, and Hong Kong (using later
territorial categories for the sake of comparison) comprised 7 per cent and Southeast Asia 5
per cent.15 By 1950, China’s share had declined to 28 per cent, while that of Japan and others
rose to 21 per cent, Southeast Asia to 17 per cent, and South Asia to 33 per cent (Figure 11.1).
Thus the four sub-regions became much more equal in terms of economic weight, though
not concerning the size of the population. Within China and India, economic progress
mainly came from the coastal regions. The weight of Asia’s contribution to the world GDP
shifted from the two agrarian empires in China and India to maritime monsoon Asia.
Key to this transformation was location. The economies of maritime monsoon Asia
absorbed Western technology and institutions on the one hand, and mobilized local and
regional resources on the other, through the development of transport networks, trade,
198
Change in the regional share

in Asia’s GDP, 1820→1950
Japan, South Korea

China Taiwan, Hong Kong
59→28 7→21
South Asia
29→33 Southeast Asia
5→17
Annual rainfall
less than 20 inches
Figure 11.1 Change in the regional share in Asia’s GDP, 1820–1950.

Notes and sources: Figures are from A. Maddison (2011), ‘Statistics on World Population, GDP
and Per Capita GDP, 1-2008 AD’ http://www.ggdc.net/Maddison/. Map is Adapted from K. Pome
ranz (2009), ‘The Great Himalayan watershed: Agrarian crisis, mega-dams and the environment’,
New Left Review, 58, 5–39. K. Pomeranz (2009), ‘The Great Himalayan watershed: Agrarian crisis,
mega-dams and the environment’, New Left Review, 58, 5–39.
and migration. Two paths emerged as a result. In Meiji Japan, and a little later in coastal
China, commercial ports in or near major cities such as Yokohama, Kobe, and Shanghai
connected imported and local resources to help modern cities and industries grow. It
was important that the emerging area had both the will to industrialize (thus committed
to import technology and build an infrastructure to absorb it) and the social capacity to
mobilize local resources, natural and human (including the ability to import or recruit
them from other places). At the same time, in India and Southeast Asia, commercial
ports, built by Western colonial powers, also connected imported and local resources to
develop economies centred on port cities, but driven by the exports of primary products.
They included Bombay, Madras, Calcutta, Singapore, and Jakarta. Hong Kong acted as a
colonial port serving both China and Southeast Asia.
The two paths were interrelated and were not necessarily geographically separate. For
example, the first modern industry emerged in Bombay in the middle of the nineteenth
century, and soon met competition from Japan. Both China and Japan exported tea
and raw silk in large quantities to earn foreign exchange. Commercial ports in Korea
and Taiwan were developed by Japanese colonial authorities, to connect their primary
exports to Japan. But there was also a divergence within maritime parts of modern Asia.
South and Southeast Asia tended towards the path of primary produce economies, while
East Asia tended towards industrialization.
199
Japan’s labour-intensive industrialization was both dependent on the growth of

maritime economies and one of its major drivers. In the early stages of industrialization,
Japan exported rice and coal, but soon became an importer of these commodities as well
as raw cotton and sugar. It competed with India in the cotton yarn market of central
China during the 1890s. By the early twentieth century, Japan imported raw cotton from
India, rice and sugar from Southeast Asia, Korea, and Taiwan, and soybeans and their
derivates from Manchuria; in exchange, it exported labour-intensive manufactured
goods such as cotton yarn, cotton cloth and sundries to other parts of Asia. The
environmental implication of this division of labour was a mitigation of local resource
constraints, which enabled Japan to expand its industrial base, and most especially its
cotton textile industry. In this respect the basic logic was similar to England’s discovery
of ‘ghost acreages’ in North America during the period of the Industrial Revolution.16
In the interwar period China went through import-substitution industrialization,
which pressed Japanese manufacturers to find more processed or higher-value-added
products for export. Under the regime of selective protectionism, Japanese manufacturers
also increased the exports of textile machinery to China, which started regional
industrialization. This was an original ‘flying geese’, which has become a basic mechanism
of progressively including higher value-added commodities and commodities made
with the more advanced technology in intra-regional trade. Figure 11.2 shows that Japan
adopted a policy of selective protectionism, setting up tariff barriers only against imports
directly competing with the domestic industry. It encouraged import substitution but
pursued the benefit of free trade, and as a result its overall tariff rate remained relatively
low, while China and India raised tariff rates, partly for revenue purposes but also to
more comprehensively protect domestic industries. Japan’s dependence upon import of
raw materials was much greater than that of the other two countries.
Countries involved in intra-Asian trade included a number of European colonies in
South and Southeast Asia, as well as countries of East and Southeast Asia under unequal
treaties and the treaty port system. Under this system of ‘forced free trade’, Japanese
merchants brought a wide range of cotton manufacture (cloth and apparel) and sundries
(matches, soap, toothpaste and tooth brushes, traditional medicine, umbrellas, bicycles,
and noodle-making machines) to Asian peoples, and they interacted with Indian,
Chinese, and other Asian merchant networks. It was these networks, together with the
Japanese trade associations (and government efforts to help them to compete with Asian
networks), that facilitated the export of labour-intensive manufactured goods. With a
time lag and political disturbances, labour-intensive industrialization spread to China
and eventually to other parts of Asia.
This was also a crucial moment for modern (initially mostly colonial) states in
Southeast Asia. In the late nineteenth to the first half of the twentieth centuries, most of
the region was put under Western colonial rule, but it continued to interact with other
Asian countries, as the region traditionally had done. In fact it developed new trade
links with Japan, China, and India, roughly at the same speed as it did with the West.
With the improvement of transport and information networks under Western impact,
the fusion between the two former agrarian empires (of China and India) and Southeast
200
35
30
India
25 China
Japan
20
15
10
0
4 9 4 9 4 9 4 9 4 9 4 9 4 9 4 9
186 186 187 187 188 188 189 189 190 190 191 191 192 192 193 193
Figure 11.2 Import tariff rates in India, China, and Japan, 1868–1938.
Notes and Sources: India: K. Sugihara, (2002), ‘Indo Kindaishi ni okeru Enkakuchi Boeki to Chiiki
Koueki, 1868-1938-nen (The Long-distance Trade and Regional Trade in Modern Indian History,
1868-1938)’, Toyo Bunka, 82, 30–1; China: Liang-lin Hsiao, (1974) China’s Foreign trade Statistics,
1864-1949, Cambridge MA: Harvard University Press, 22–4, 132–3; Japan: Okurasho Shuzeikyoku
[Japanese Ministry of Finance Government Bureau of Taxation] (1948), Dai-15-kai Kokkai Kanzei
Sankosho (Reference Material on Customs Tariff for the 15th Parliament), Tokyo: Okurasho. Rates
refer to total import revenue divided by total value of imports. The Japanese data exclude colonial
imports after 1919.
Asia resulted in a massive (mostly temporary) migration of Indians and Chinese to

Southeast Asia.
Furthermore, across Asia, there emerged a shared demand for modern consumption
goods among ordinary peoples (from rice, dried fish, spices, and a range of non-timber
forest products to Japanese manufactured goods mentioned above). The traditional
commodity complex shared in the region (rice, sugar, tea, silk, and cotton) remained
important, and a modern Asian consumer culture emerged. A complex set of commodity
chains were created: while the growth of the market for intermediate goods (e.g. cotton
yarn of low counts) meant a degree of ‘culture-neutralization’ of the Asian international
market, these goods in turn served for a diverse range of final demand (e.g. traditional –
kimono – clothing and apparel to its modernized versions). Meanwhile, unbleached
cotton cloth was brought to the hinterland (and also other parts of the developing
world including East Africa) by Asian merchants and enhanced the scope of regional
integration. This in turn made it easier to transfer labour-intensive technology and
managerial know-how to culturally diverse areas, and underpinned regionally driven
industrialization in the post-Second-World-War period.
Thus, although many parts of Asia, especially India, were affected by the influx
of English cotton cloth in the nineteenth century, and traditional textile industries
201
declined to a certain extent, Asia was not just de-industrialized. It reorganized

itself into a new form of industrialization. In this period two different routes of the
diffusion of industrialization emerged: the capital-intensive route originating in the
West and the labour-intensive one originating in East Asia. The latter was too small to
be recognized by global economic historians in terms of the size of value added at this
stage, but it was already an important source of employment. It also tended to be less
resource-intensive than the former. Therefore, what actually emerged in the period
from the nineteenth century to the 1930s was a three-tier international division
of labour: capital-intensive manufactured goods, labour-intensive manufactured
goods, and primary products, and an increasingly uneven global resource allocation
in favour of Europe and regions of recent European settlement. It also developed
an international division of labour within Asia, in which Japan, China, India, and
Southeast Asia were hierarchically placed in the order of industrialization. The
growth of intra-Asian trade was faster than that of world trade or Asia’s trade with
the West between 1880 and 1938. In one estimate, the share of intra-Asian trade in
Asia’s export trade was 41 per cent in 1928. By 1938 it was 49 per cent.17 By contrast,
it has been observed that ‘regional integration through local and regional merchant
networks appears to have been less marked in most parts of Africa, the Middle East
and Latin America where the local economies were integrated into the metropolis-
led international economy as satellites’.18 However, even in Asia, the productivity of
proto-industries with traditional technology, modern labour-intensive factories, and
commercial agriculture built on the low land – labour ratio remained low. The standard
of living rose very slowly.19
Finally, both intra-Asian trade and labour-intensive industrialization were severely
disrupted by Japanese imperialism and territorial expansion. From 1931 to 1936, Japan
grew faster than most Western countries and proceeded with heavy industrialization.
This partly came from the ‘import-substitution industrialization’, in the sense that
competitive pressure from the West was eased, largely as a result of the Great Depression.
Under the collapse of world trade, the rise of protectionism and the demise of the
international gold standard, an East Asian monetary order with a tendency to devalue
against key currencies worked in favour of regional industrialization.20 The intra-yen bloc
trade now included a significant proportion of machinery trade. But it was also a move
towards autarky, anticipating post-war India and China, in that most new industries
were linked to the research and development efforts of Japan’s military industries. If the
direction of industrial development was driven by political and military interests (and
in Japan’s case without a full understanding of global military and resource balances),
there was no guarantee, or even a prospect, that the country was adopting a sensible
import-substitution strategy based on factor endowment considerations. To some
extent, therefore, the ecologically uneven exchange between Europe and colonial Asia
was extended to a similar resource transfer between Japan and other parts of Asia, not
least Japan’s own colonies.
202
Looking at the period from 1820 to 1950 as a whole, the intra-regional trading sphere
of Asia showed a common tendency to expand by commercializing its agriculture and
reorganizing its traditional industries, and by linking modern manufacturing to this
expansion, which resulted in the evolution of the system comprising a division of labour
between agriculture and industry within the region. The difference between the structure
of consumption in Asia and the West was another important factor that made it possible
for Asia to industrialize. Sustained by demand within the region, the traditional textile
industries managed, to some extent, to develop their hand-weaving industry with the
use of machine-reeled yarns and to form modern mass consumption markets somewhat
different from those in the West, and thereby coped with the ‘Western impact’ while
maintaining employment at certain levels. Such a labour-intensive path of economic
development was well suited to Asia’s factor endowments, and comparative advantages
were established in India, China, and Japan. Although formed under many difficulties
that were caused by the imposition of the free trade regime and domestic political
disorders, this constituted the core part of Asia’s development path, and served as the
pillar for the expansion of its trade. Perhaps one of the most significant contributions
from the growth of world trade, as viewed from a broader perspective that takes intra-
regional transactions into due consideration, may be the fact that it triggered this
type of response to the ‘Western impact’ and thereby helped to revitalize the region’s
employment absorption mechanism, which had at one time been seriously damaged.
Post-war diffusion of industrialization
After the emergence, development, and abrupt collapse of the Yen bloc in the 1930s and
the first half of the 1940s, intra-Asian trade recovered fast among a smaller number of
countries. The post-war reforms under the US-led allied occupation changed the character
of Japanese political, economic, and social organizations into a more democratic one. By
1950, India, China, many Southeast Asian countries, and North Korea withdrew from
the regime of free trade, while the countries along the western Pacific Rim (Japan, South
Korea, Taiwan, Hong Kong, and Malaya-Singapore among others) were integrated into
the US-led world economy.
The post-war diffusion of industrialization, beginning in Japan and spreading to other
Asian countries, followed the same interactive path between intra-regional trade and
industrialization as in the pre-war years, first among a small number of countries under
the regime of free trade and the technological transfer from the West, and gradually
embracing others. This is the case of the ‘Asian textile complex’ in the 1970s, in which
Japan produced rayon yarn, Taiwan wove rayon cloth, and Hong Kong made the cloth
into an apparel and exported the apparel to the United States.21 New intermediate goods
included cheap plastics, man-made fibres, machine parts, and eventually IC chips. Again,
we do not see such a dynamic relationship between regions in Africa, Middle East, or
Latin America in this period. South Africa and Brazil proceeded with industrialization
203
without accompanying regional integration. It is only in East Asia that economic

nationalism has embraced regional integration.
Import-substitution industrialization, strictly interpreted, was based on the building
of a full industrial structure equivalent to that in developed countries, by imposing very
high tariffs against imports of industrial goods from the West. This strategy seemed
politically viable in many countries, including India and China, though it turned out to
be relatively short-lived. In India, by the Third Five-Year Plan period, it became clear that
the benefits of heavy industrialization, modelled largely on the Soviet experience, did not
‘trickle down’, resulting in the growth of ‘disguised unemployment’ in rural areas and the
urban ‘informal sector’. In communist China during the Mao period, human development
indicators improved faster than in India, but the country struggled to develop competitive
heavy industries (also influenced by the Soviet experience) in the absence of technological
transfer from more developed countries, especially from the West.
By contrast, some East and Southeast Asian countries – such as Japan; the newly
industrializing economies (NIEs) of South Korea, Taiwan, Hong Kong, and Singapore;
and the ASEAN-4 consisting of Thailand, Malaysia, Indonesia, and the Philippines –
pursued an export-oriented path to industrialization. They experienced relatively high
rates of growth, by taking advantage of the gains from trade more than India and China.22
Figure 11.3 shows a further shift in the economic weight from China to Japan and NIEs
between 1950 and 1980.
We record some evidence of the regional dimension of industrial upgrading. In
post-war Japan, rapid technological transfer from the West led to the development of
machinery industries (transport, electrical, heavy, and machine tool) along the lines of
the extension of labour-intensive industries. Between 1972 and 1985, ‘new’ industries,
driven by microelectronics technology such as computer and communication industries,
grew faster in Asia than in the United States and Western Europe, although the technology
originated mainly from the United States. These industries did not necessarily require
industrial concentration and the kind of infrastructure which heavy industries needed
such as ports and transport to carry heavy material. Nor did they need the supply of
a very large amount of capital. As long as competitive labour, access to information,
and commercial and financial networks were available, they would move to any location
where the best combination of factor endowments and policy packages was on offer.23
Thus semiconductor and consumer electronics factories that were established across the
emerging economies became part of the ‘global supply chains’, and contributed to the
emergence of a large, semi-skilled to skilled labour force.
ILO studies in labour-intensive industries and human resource development
extensively discussed the ‘matching’ between the nature of new demand for skills on
the one hand, and education and formal training on the other.24 They were conscious
of the transferability of the experiences of Japan and NIEs to Southeast Asia. Not many
attempts were successful, nor were they comprehensively pursued by the government;
however by the 1980s, the direction of thinking was clearly towards the development
of human capital, or in manufacturing, that of a workforce of good quality. This was
linked to a shift towards a more balanced allocation of educational expenditure between
204

Japan, South Korea

28→24 21→41
South Asia
17→17
Annual rainfall
less than 20 inches

Sources: As per Figure 11.1.
primary, secondary, and tertiary sectors.25 The overall result was a simultaneous rise of
per capita GDP and the Human Development Index.
ASEAN-4 countries started a developmental policy under authoritarian regimes
around 1965. They gradually turned to the export-oriented strategy, and proceeded to
industrialization in the 1980s. This can be seen in the radical change in their commodity
composition of trade. In spite of a criticism of ‘shallowness’ of industrialization, and
limited scale of institutional reforms, such as land reform, industrialization occurred
with varying degrees of success.26 Indeed, it became a mainstay of Asia’s economic policy.
From a regional perspective, Southeast Asia mainly acted as an importer of East Asia’s
manufactured goods and capital, but was also a committed industrializer.
Under ‘open regionalism’, which helped the formation of ASEAN and underpinned
the emergence of APEC (Asia-Pacific Economic Cooperation), the region would not
discriminate against countries outside its boundaries. The underlying ideology is
different from both the hegemonic regime of free trade (as in Britain and the United
States) and the continental European regime of free trade through treaty networks.27
Historically, the region was used to low tariff levels and exposure to the international
economy, especially in the late nineteenth and early twentieth centuries under the
regime of ‘forced free trade’. It was natural for these Asian countries to engage in trade
between neighbouring countries with similar economic structures, to compete for
similar markets, seek complementarity in trade, and exploit regional sources of growth.
China and India joined the network of trade and economic growth after policy changes
in 1979 and in 1991, respectively.
205
(%)
35.0
30.0
25.0
20.0
Asia’s share in world trade
15.0
70%
10.0
5.0 Share of intra-Asian trade in world trade

27%
0.0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014
Figure 11.4 Share of Asian and intra-Asian trade in world trade, 1950–2014.
Notes and Sources: Percentage in box shows the share of intra-Asian trade in Asian trade. Calcu-
lated from K. Takanaka (2000), Higashi-ajia Choki Keizai Tokei 9: Gaikoku Boeki to Keizai Hatten
(Long-term Economic Statistics of East Asia, Vol. 9, Foreign Trade and Economic Development),
Tokyo: Keiso Shobo, 500–517 for 1950–99; and IMF, Direction of Trade Statistics Yearbook for
2000–14. Intra-Asian trade total refers to the value of exports from ten Asian countries (Japan,
four NIEs, four ASEAN countries and China) and their imports from the smaller Asian countries
(adjusted by FOB-CIF conversion).
In the early post-war period, the share of the United States (and other Western
countries) in Asia’s trade was large, and its influence in industrial development was
dominant. However, the US share rapidly declined, and was replaced by the growth of
regionally driven trade. In 1965, Asia’s share in world exports was 14 per cent, but this
share increased to 23 per cent in 2000, and to 31 per cent in 2015. More important, the
share of intra-Asian trade Asia’s exports increased from 35 per cent in 1965 to 51 per cent
in 2000, and to 70 per cent in 2015, a figure comparable to intra-EU trade (Figure 11.4).
Development of resource-intensive industrialization
To some extent rapid industrial upgrading in Japan along the lines of labour-intensive
industrialization was complementary to the more capital- and resource-intensive
industries, especially in the United States. But it also resulted in the upgrading and
expansion of capital- and resource-intensive industries within Asia. Imports of fossil
fuels, including oil and liquefied natural gas, and other raw materials became essential
for this purpose.
In the 1950s there was a debate over how Japan’s resources should be secured,
especially as to whether its energy demand should depend on domestic coal or on
imported oil. High economic growth and rapidly rising demand favoured the latter
206
option. There was also a coordinated attempt by the Ministry of International Trade
and Industry to spread the energy-saving methods of production in steel and electrical
machinery industries. In the second half of the 1950s, serious attempts were made to
develop a ‘seafront industrial complex’ (rinkai kogyo chitai) consisting of an oil refinery,
and a petrochemical and electricity generation plant, among other industries. There was
an accumulation of know-how prior to this period, including the idea of establishing
the ‘industrial port’ as distinct from the ‘commercial port’. International circumstances
also strongly favoured this strategy. A sudden expansion of oil production in the Middle
East was not being met by a matching increase of demand in Europe, and majors were
looking for their customers. This gave Japanese companies the opportunity to negotiate
with Western firms on technology transfer on good terms.28
Pursuit of the seafront complex involved a number of industrial and infrastructural
developments. Against the background of low prices of resources and energy, Japanese
shipbuilding companies and shipping lines attempted to utilize the latest technology of
large oil tankers and other specialist bulk vessels (e.g. for iron ore) to the full. Equally
important was a rapid introduction of container cargoes for other commodities, which
standardized shipments across international ports and helped coordinate the transfer of
goods between different means of transport in industrial ports. The seafront complex
was constructed with dredging and reclamation, centred on deep harbours which could
take large vessels. Railway lines and roads were built to ensure access. The establishment
of the industrial site required pursuit of economies of scale on the one hand, and political
and public approval on the other. In the 1960s the Japanese political will was strong
enough to push the ‘Pacific industrial belt’ development at a speed inconceivable in the
established industrial districts in the West.
Resource-intensive industries were typically located not in the central parts of major
cities such as Tokyo and Osaka, but in neighbouring areas. For example, Tokyo retained
employment-absorbing labour-intensive (by then mostly skill-intensive) industries
within the central wards, while the bay areas of Yokohama became home to a resource-
intensive cluster. After the second half of the 1960s, environmental protection movements
began to spread, and the municipal government gave voice to the citizens before the
central government did. Such politico-social dynamics were partly responsible for the
diffusion of the industrial complex to the more distant and less politically sensitive or
powerful areas, without necessarily mitigating the potential environmental damage.29
Unlike the ‘global supply chain’ – which in this context essentially consists of a
network of factories (plus perhaps headquarters) scattered in various parts of Asia – the
key feature here is what might be called the ‘resource nexus’: the creation of a spatial
cluster designed for combining specific sets of resources. In particular, local and domestic
resources were to be efficiently combined with imported resources. As industrialization
proceeded, the resource nexus began to reorganize the entire spatial allocation of human
and natural resources in the country. It encouraged the growth of cities, which provided
resource-intensive industries with labour and the market (e.g. for electricity). A large
proportion of the population moved to the cities, while a large part of rural areas became
‘urban’ at the same time. A new relationship between the city and the countryside was
207
formed with the premise that industries would have access to global resources to lead
economic growth.
Other East Asian countries also adopted the seafront industrial complex strategy. In
South Korea initial conditions for heavy and chemical industries were low, because most
of the colonial legacy was located in the North. In 1973, the developmental state declared
the programme for ‘heavy and chemical industrialization’. A series of seafront complexes
were subsequently established in the far south. They were distinctly separate from the
traditional light-industry zones. The new nexuses included shipbuilding, automobile,
steel, and military-related machinery industries. In addition to the steel industry,
which grew out of domestic demand and joined this development, petrochemical and
shipbuilding industries were especially successful in exports. Meanwhile, in Seoul and
its neighbouring regions and some other clusters, labour-intensive industries were
transformed into ‘new’ industries driven by the microelectronics revolution.30
In Taiwan, where traditionally fragmented small and medium-sized businesses
were scattered across the island, the government-led strategy for heavy and chemical
industrialization lasted for a relatively short period, from the late 1960s to the early
1970s. Even so, steel, petrochemical, and shipbuilding industries were established,
and they played a supporting role in the growth of labour-intensive and high-
technology industries.31
In China, the initial phase after the policy reform of 1979 was characterized by a
slow and difficult process of transition. Many heavy industries were located inland for
political and strategic reasons and because of the idea that they should be developed
close to where coal and other resources were found. Experts had to be persuaded that
imports of resources were essential for further industrialization. The Pearl River Delta,
on the strength of the rich historical tradition of Hong Kong as a major trading hub and
the export-zone initiatives in Canton in the 1970s, led the development of electronics
industries, while the city of Shanghai (and the Yangtze River Delta) initially suffered
from the need to reorganize state-owned enterprises, heavy industries, and coal mines.
The establishment of the Shanghai Baoshan Ironworks with the introduction of foreign
(Japanese) technology and management was a turning point in China’s commitment to
the seafront development model. By the 1990s, the Yangtze River Delta had re-established
itself as the main industrial complex with large imports of resources from abroad.32
In China the linkage between ‘new’ electronics-related industries and resource-
intensive industries took a different form. Three ‘megapolises’, a chain of connected
metropolitan areas, located in Pearl River and Yangtze River deltas and the national
capital region (Beijing-Tianjin-Hebei), respectively, grew into a centre of progressively
larger urban networks. While heavy and chemical industries, especially steel and
petrochemical sectors, were concentrated on the seafront to maximize the benefits from
economies of scale and access to imports, electronics and machinery industries were
located across a variety of cities and the countryside, so that the region could create intra-
industry linkages and links to a large consumer market.33 This was a more embracing
model for combining the strength of natural and human resources than the earlier
experiments in Japan and elsewhere, with accompanying, often more serious, problems
208
such as air pollution. It also had equally powerful political and social consequences for
the inequality and uneven resource allocation with other parts of China.
Local resources under pressure
Figure 11.5 shows a marked shift in the economic gravity from Japan and NIEs back to
China, although much of this comes from the growth of coastal areas within China (and
to a lesser extent India) in the period 1980–2014. It is clear by now that Asian growth
began to include the ‘hinterland’, as well as smaller countries in the Eurasian continent.
By making a vast rural population closer to trade-led industrialization, the policy
changes in China and India had a major impact on the rise of emerging economies in
particular and global economic development in general.
In these countries the rising export capacity made it possible to import raw materials
and fossil fuels. But, while food and fossil fuels could be imported relatively easily, the
resulting growth could put less tradeable factors of production under unprecedented
pressure. Such resources include water for agricultural use and local biomass energy.
Seasonal and annual variability of water supply could be crucial for the stability of
agriculture. Nearby forests or the ‘waste land’ from which timber, twigs, or crop residues
had been obtained could disappear as a result of population increase and expansion
of arable land, and this could make it difficult for the peasant household to secure
biomass energy for cooking, lighting, and heating, and for the local economy to secure

Japan, South Korea

24→50 41→16
South Asia
17→13
Annual rainfall
less than 20 inches

Notes and Sources: As per Figure 11.1. Figures for 2014 have been estimated, using IMF, Interna-
tional Financial Statistics Yearbook.
209
biomass resources for fuels and building materials.34 In other words, there was a great
deal of environmental diversity, which worked for sustaining a large population. As
industrialization occurred and tradeable resources were brought in, however, some areas
such as the Pacific coast or port cities prospered, while hinterlands, semi-arid regions,
and mountainous areas took longer to meet the increased demand for local resources.
In many parts of contemporary China, water became scarce and emerged as a focal
point of local, national, and regional politics. The most immediate problem was the supply
of water for agriculture as well as for industrial and domestic purposes. The problem
was also aggravated by the need for dam construction for electricity generation. Figures
11.1 to 11.3 outline the significance of a huge regional water and air circulation and the
multi-scale character of issues involved in its governance. In contemporary India, a rapid
progress in the use of tube wells solved the issue of self-sufficiency in food and raised
agricultural productivity, but resulted in the lowering of water tables. Free electricity for
tube-well users also distorted resource allocation, for example, by making investments in
the improvement of electricity supply more difficult than otherwise.35 Where electricity
is not always available, securing local biomass energy for cooking and heating purposes
could still be a matter of life and death. Vast numbers of hours had been spent on water
and fuel wood collection, mainly by women.36
Thus the growth of the resource nexus in the core parts of Asia has been accompanied
by the intensification of local resource constraints in the less developed areas, increasingly
derived from multi-scale causes. In many ways they have been the two sides of the same coin.
Conclusion: Towards a reinterpretation of Asian

industrialization in global history
How would the path of global economic development look in the light of the Asian
experiences described above? First, the fundamental difference between Asia and
Europe in the early modern period was the population holding capacity of the former. In
monsoon Asia, intensive farming, centred on rice cultivation under the scarcity of land,
fed a very large population. Labour-intensive technology developed to increase land
productivity and greater absorption of labour, including double-cropping, irrigation,
the introduction of new seed varieties, and the use of human and animal waste. Micro-
institutions such as the household and the village community helped reinforce labour
absorption within the village by combining the main (farm) work with proto-industrial
activities at home and during the off-peak seasons.
By contrast, in the European system of mixed farming (under the rotation system of
grain and livestock production), land was less intensively used. Pasture implied a greater
input of capital for the maintenance of cattle and its control, hence greater possibility for
capital accumulation. Labour productivity, rather than land productivity, was pursued,
both in large-scale capitalist agriculture and in peasant-based mixed farming. The
result was that by 1820 the standard of living in the core regions of Western Europe
was higher, while the size of the population in monsoon Asia was much larger. They
210
could be interpreted as two different responses to the Malthusian problem of population

exceeding beyond the capacity of food production.
Second, Europe offered another response to local resource constraints by developing
overseas trade and capital markets and by exploiting fossil fuels, especially coal. This
implied a progressive extension of its resource base to the biosphere of the New World
and the tropics on the one hand and to the Asian geosphere on the other (especially
on energy). War, territorial acquisition overseas, and mercantilist projects created the
need for advancing scientific knowledge for navigation and military technologies. At the
same time, new commodities were brought in from different parts of the world, which
helped the development of consumer culture. The major urban centres acted as a ‘nexus’
for combining diverse resources and created the possibilities of innovation and capital
accumulation. Artisans were gathered, food and raw materials for industrial products
were brought from the countryside, luxuries were imported, and capital was pooled and
invested for the development of infrastructure and industry. Eventually the invention
of steam engines and the use of coal made a decisive impact on the increase of labour
productivity in production and transport. By the time of the Industrial Revolution, the
region’s resource base was transformed not only into an extra-territorial one (especially
through the incorporation of land and forest-derived resources of North America but
more generally by engaging in intercontinental trade), but also into an extra-organic
type.37 In these two respects, Europe laid the foundations of the modern interregional
system of resource exchange.
Third, the two ways of responding to local resource constraints mentioned above were
combined in post-war Asia. The foundations of Asia’s industrialization had been laid earlier,
but the scale of post-war industrialization was different. Resource-intensive industrialization
first occurred in the Pacific industrial belt of Japan in the 1960s and 1970s, and then
diffused across maritime monsoon Asia and beyond. For the first time in global history,
a massive population of monsoon Asia was systematically connected to the international
economy and global resources. The standard of living of its large population rose, and the
worsening of global income inequality was arrested.38 The region’s factor endowment regime
characterized by high land productivity, a high level of labour absorption, and the original
environmental characteristics of monsoon Asia such as the availability and variability of
water and biomass energy were now reorganized to create a resource nexus of global reach.
The region sustained the ability to imported resources, including minerals and fossil fuels,
and combined them with local human and natural resources.
The key organizers of the nexus included the ‘developmental state’, as a substantial
amount of capital and a strong leadership were needed for building large-scale
infrastructure. The states were not always conscious of the environmental implications
of these developments. Urban congestion and pollution and environmental degradation
in the countryside also became a regional phenomenon. As the regional growth core
shifted to the Chinese metropolis, the influence of the resource nexus increasingly
included the Eurasian continent as well as maritime monsoon Asia.
Global environmental sustainability, including issues relating to global warming,
biodiversity, deforestation and health and ecosystem protection, now largely depends on
211
Asia’s response. The West has certainly been responsible for creating a technological and
institutional path of resource exchange, but is not in a position to offer relevant historical
experiences on a scale we see today.
Notes
1. A. Gerschenkron (1962), Economic Backwardness in Historical Perspective: A Book of Essays.

Cambridge, MA: Belknap Press; A. Suehiro (2008), Catch-up industrialization: The Trajectory
and Prospects of East Asian Economies, trans. T. Gill. Singapore: NUS Press in association
with Kyoto University Press; R. C. Allen (2011), Global Economic History: A Very Short
Introduction. Oxford: Oxford University Press.
2. G. Austin (ed.) (2017), Economic Development and Environmental History in the
Anthropocene: Perspectives on Asia and Africa. London: Bloomsbury Academic.
3. W. A. Lewis (1954), ‘Economic development with unlimited supplies of labour’, Manchester
School, 22 (2), 139–91.
4. See K. Pomeranz (2000), The Great Divergence: China, Europe, and the Making of the Modern
World Economy. Princeton: Princeton University Press.
5. For a brief description of the thinking of classical economy and its limits, see Y. Hayami and
Y. Godo (2005), Development Economics: From the Poverty to the Wealth of Nations, 3rd edn.
Oxford: Oxford University Press, 80–9.
6. In 1820, twelve countries in Western Europe had 115 million or 11 per cent of the world
population. Data are from A. Maddison (2011), ‘Statistics on world population, GDP and per
capita GDP, 1–2008 AD’, http://www.ggdc.net/maddison/ (Last Accessed 6 January 2018).
7. H. Oshima (1987), Economic Development in Monsoon Asia: A Comparative Study. Tokyo:
University of Tokyo Press.
8. S. Ishikawa (1978), Labour Absorption in Asian Agriculture: An ‘Issues’ Paper. Geneva: Asian
Employment Programme, ILO-ARTEP.
9. M. Elvin and Ts’ui-jung Liu (eds) (1998), Sediments of Time: Environment and Society in
Chinese History. Cambridge: Cambridge University Press.
Experience. Ithaca: Cornell University Press.
11. K. Sugihara (2005), ‘An introduction’, in K. Sugihara (ed.), Japan, China and the Growth of
the Asian International Economy, 1850–1949. Oxford: Oxford University Press, 4–8.
12. K. Sugihara (2013), ‘Labour-intensive industrialization in global history: An interpretation
of East Asian experiences’, in G. Austin and K. Sugihara (eds), Labour-intensive
Industrialization in Global History. London: Routledge, 30–8, and 43–55.
13. A. Reid (1993), Expansion and Crisis: Southeast Asia in the Age of Commerce 1450–1680.
New Haven: Yale University Press, 62–131.
14. For the Ayutthaya, see C. Baker and P. Phongpaichit (2017), A History of Ayutthaya: Siam in
the Early Modern World. Cambridge: Cambridge University Press.
15. The territorial categories do not exactly match the ones I used for the population figures
cited earlier, but the point basically stands.
16. See Pomeranz, The Great Divergence, 274–8.
212
17. Sugihara, ‘An introduction’, 6–7.

18. The historical presence of intra-regional networks in these regions is well known, and it is
possible to reconstruct trade statistics for at least some of them for the nineteenth and early
twentieth centuries from British and other Western sources; however, they do not appear to
have been as large as intra-Asian trade. See K. Sugihara (2015), ‘Asia in the growth of world
trade: A re-interpretation of the “long nineteenth century”’, in U. Bosma and A. Webster
(eds), Commodities, Ports and Asian Maritime Trade c. 1750–1950. Basingstoke: Palgrave
Macmillan, 41–51. Trade statistics assembled by the League of Nations and the United
Nations for the more recent period do not show high figures either. For example, the share
of intra-regional export trade in sub-Saharan Africa was 12 per cent in 2004, after which it
steadily rose to 19 per cent in 2015, reflecting the progress of regional integration. Data are
from IMF, Direction of Trade Statistics Yearbook. Asia’s post-war figures, shown in Figure
11.4, essentially come from the same source.
19. An estimate suggests that a PPP (purchasing power parity)-adjusted per capita income of
Japan in the mid-1930s (at current prices) was 32 per cent of the US level, which means that
the gap between the two countries was greater than the Maddison estimate suggested. Since
Japan’s level was far higher than other Asian countries’, there was no sense of ‘catching up’
with the West in this respect. See K. Fukao, Debin Ma and Tangjun Yuan (2007), ‘Real gap in
pre-war East Asia: A 1934–36 benchmark purchasing power parity comparison with the US’,
Review of Income and Wealth, 53 (3), 503–37.
20. K. Sugihara (2010), ‘Formation of an industrialization-oriented monetary order in East Asia’,
in Shigeru Akita and Nicholas J. White (eds), The International Order of Asia in the 1930s
and 1950s. Farnham, Surrey: Ashgate, 61–102.
21. J. S. Arpan, M. Barry and T. Van Tho (1984), ‘The textile complex in the Asia-Pacific region:
The patterns and textures of competition and the shape of things to come’, Research in
International Business and Finance, 4 (B), 112–7, 136–49, and 159.
22. Post-war Japan is not normally classified as ‘export-oriented’, as the high-speed growth was
driven mainly by the domestic market. On the other hand, as we shall see below, the need
to earn foreign exchange through exports to import crucial resources was so great that
the strategy she developed for industrialization arguably provided a proto-type of ‘export-
oriented industrialization’.
23. Sugihara, ‘Labour-intensive industrialization in global history’, 50–1.
24. R. Amjad (1981) ‘The development of labour intensive industries in ASEAN countries:
An overview’, in R. Amjad (ed.), The Development of Labour Intensive Industries in ASEAN
Countries. Geneva: ILO, 1–28; Idem (1987), ‘Human resource development: The Asian
experience in employment and manpower planning: An overview’, in R. Amjad (ed.),
Human Resource Planning: The Asian Experience. Geneva: ILO, 1–37.
25. Many developing countries in Asia overspent on tertiary education, while spending too
little on primary education at the early stage of industrialization. See P. H. Lindert (2003),
‘Voice and growth: Was Churchill right?’, Journal of Economic History, 63 (2): 315–50; Idem
(2004), Growing Public: Social Spending and Economic Growth, Vol. 1, The Story. Cambridge:
26. A. Singh (1979), ‘The ‘Basic Needs’ approach to development vs the new international
economic order: The significance of third world industrialization’, World Development, 7 (6),
585–606; E. Lee (1979), ‘Egalitarian peasant farming and rural development: The case of
South Korea’, World Development, 7 (4–5), 493–517.
27. Sugihara (2015), ‘Asia in the growth of world trade’, 34–8.
213
28. S. Kobori (2010), Nihon no Enerugi Kakumei: Shigen Shokoku no Kingendai [The energy
revolution in Japan: The modern and contemporary history of a resource-poor country].
Nagoya: Nagoya Daigaku Shuppankai.
29. S. Kobori (2017), ‘Rinkai Kaihatsu, Kogai Taisaku, Shizen Hogo: Kodo Seicho-ki Yokohama
no Kankyoshi’ [Seafront development, anti-pollution policy and nature conservation:
An environmental history of Yokohama in the period of high-speed growth], in S. Shoji
(ed.), Sengo Nihon no Kaihatsu to Minshushugi: Chiiki ni Miru Sokoku (Development and
Democracy in Post-war Japan: Conflicts at Local Settings). Kyoto: Showado.
30. H. Hashiya (1995), ‘Kankoku, Taiwan no Nizu-ka to Toshika’ [Development of newly
industrializing economies and urbanization in South Korea and Taiwan], in R. Kojima and
N. Hataya (eds), Hatten Tojokoku no Toshika to Hinkonso (Urbanization and the poor in
developing countries). Tokyo: Ajia Keizai Kenkyusho, 43–6; N. Ishizaki (1996), ‘Kankoku
no Jukagaku Kogyo Seisaku: Kaishi no Naigai Joken to Jisshi Shutai’ [South Korea’s policy
for heavy and chemical industries: Internal and external conditions for its establishment
and actors for implementation], in T. Hattori and Y. Sato (eds), Kankoku, Taiwan no Hatten
Mekanizumu [Patterns of development of South Korea and Taiwan]. Tokyo: Ajia Keizai
Kenkyusho, 65–86.
31. R. Wade (1990), Governing the Market: Economic Theory and the Role of Government in East
Asian Industrialization. Princeton: Princeton University Press, 86–112; Hashiya, ‘Kankoku,
Taiwan no Nizu-ka to Toshika’, 46–9; H. Sato (1996), ‘Taiwan no Keizai Hatten ni okeru Seifu
to Minkan Kigyo: Sangyo no Sentaku to Seika’ [Government and private enterprises in the
economic development of Taiwan: Choice of industries and their performance], in Hattori
and Sato (eds), Kankoku, Taiwan no Hatten Mekanizumu, 96–101.
32. M. Zhou (2007), Chugoku Keizairon: Kodo Seicho no Mekanizumu to Kadai [Essays on the
Chinese economy: The mechanism of high-speed growth and its problems]. Tokyo: Nihon
Keizai Hyoronsha, 81–4, and 119–21.
33. Zhou, Chugoku Keizairon, 72–128.
34. K. Sugihara (2012), ‘“Kaseki Shigen Sekai Keizai” no Koryu to Baiomasu Shakai no Saihen’
(The rise of the fossil-fuel-driven world economy and reorganization of the biomass society),
in K. Sugihara, K. Wakimura, K. Fujita and A. Tanabe (eds), Rekishi no nakano Nettai
Seizonken: Ontai Paradaimu wo Koete (The Tropical Humanosphere in Global History: Beyond
the Temperate Zone Paradigm). Kyoto: Kyoto Daigaku Shuppankai, 164–79.
35. N. K. Dubash (2002), Tubewell Capitalism: Groundwater Development and Agrarian Change
in Gujarat. New Delhi: Oxford University Press; T. Shah (2009), Taming the Anarchy:
Groundwater Governance in South Asia. Washington, DC: Resource for the Future Press.
36. B. Agarwal (1986), Cold Hearths and Barren Slopes: The Woodfuel Crisis in the Third World.
London: Zed Books.
37. See E. A. Wrigley (2016), The Path to Sustained Growth: England’s Transition from an Organic
Economy to an Industrial Revolution. Cambridge: Cambridge University Press; and S. Pollard
(1981), Peaceful Conquest: The Industrialization of Europe, 1760–1970. Oxford: Oxford
University Press.
38. The GINI coefficient appears to have worsened since the diffusion of industrialization
began in the nineteenth century, but stopped worsening around the middle of the twentieth
century, largely as a result of the high economic growth of Asian countries. However, a
further ‘equalization’ does not appear to have occurred over the last twenty years or so.
Calculated from Maddison (2011), ‘Statistics on world population’.
214
CHAPTER 12
GLOBAL COMMODITIES AND
COMMODITY CHAINS
Bernd-Stefan Grewe
Since the 1940s, it has been customary for most married people in Europe and America
to wear a golden ring, a symbol of eternal love. In India, a Hindu bride is also offered
golden jewellery, not as a symbol of eternal love, but as a dowry. Usually such a dowry
plunges a family into debt. On the other side of the Indian Ocean, in the Transkei in
South Africa, a Mpondo groom has to pay a lobola to the bride’s family. This bride-price
is not paid with gold, but with cattle. Nonetheless this marriage is as much linked to
gold as the others, because the cattle for the lobola is mostly earned by young Mpondos
employed as mineworkers in the Witwatersrand gold industry near Johannesburg.
In the Americas as in Europe, South Asia, and Southern Africa, gold clearly plays a
major role in weddings, but a different one in each case. The practices and meanings
people attribute to this metal may also change over time, and such changes can have major
repercussions on the demand for gold on international markets. For example in the first
decade of the twenty-first century, each year about ten million weddings took place in India
alone at which jewellery – mostly gold and to a lesser extent diamonds of an estimated
value of more than US$8 billion – was purchased. Yet in most economic history textbooks
there is no indication of such large-scale demand and use, as gold is only mentioned in
chapters on monetary history and especially in relation to the history of the gold standard.
Gold is a fascinating commodity and is here used to illustrate the potential and limits
of approaches in global economic history based on the study of commodities. I focus
on three approaches in particular: first on so-called history of commodities; second
on commodity-chain approaches; and finally on value-chain approaches. I argue that
commodity-based narratives provide unique insights into global economic processes
but struggle to generalize or provide historians with suitable tools of analysis. In the
past thirty years, economic historians have borrowed the concept of the commodity
chain from sociology and political science. Here too one can see limitations both at a
methodological and at an historical level. I therefore consider the concept of the global
value chain and evaluate whether this might be a useful tool for economic historians.
Histories of global commodities
Histories of global commodities are not new. Several such histories were written many
decades before the term ‘globalization’ was coined. Gold, for instance, is mined in specific
areas of the world and over the centuries has been treasured and used by different world
societies. It has been used not only for jewellery and precious objects but also, and in
tandem, as a currency and as a form of treasure (either by rulers and merchants or as gold
reserves held by central banks). Gold like silver has been essential for the development
of global trade between America, Europe, and Asia, since the fifteenth century. The two
precious metals were the material base for payment in far distant trade. Gold from Brazil
and silver from Peru circulated around the globe and linked colonial Latin America
with Europe and Asia in the early modern period. The form of labour exploitation
changed over time – from slavery and forced labour to wage labour or free labour – but
far too often people who worked in the mines had little choice but to work under harsh,
unhealthy, and dangerous conditions for little or no salary.
The case of gold alerts us to the fact that there are different ways to write about
commodities: in particular we can distinguish three groups of commodity histories. First,
commodity histories often describe the origins of a certain good, how it was discovered
in ancient times, how different cultures and societies made use of it, how it was eventually
reframed and remodelled during and after the Industrial Revolution, and how it was
finally consumed. Early commodity histories and more recent coffee-table books contain
information that can be of great value for historians today. A second group of commodity
histories are of popular appeal and include titles such as Mark Kurlansky’s Cod (1997),
Salt (2002), or Big Oyster (2006), and Mark Pendergrast’s Uncommon Grounds (1999) on
coffee and For God, Country and Coca-Cola (1993). Finally, a third group of commodity
histories is based on academic research and contributes to scholarly discussions.
One of the pioneering publications within this last group of academic commodity
histories was Sweetness and Power (1985) by the anthropologist Sydney Mintz. His
history of sugar starts with the cultural and social history of food in eighteenth- and
nineteenth-century Britain interlinking it with its production in the Caribbean. Mintz
studied the anthropology of food in Europe and how sweetness slowly gained importance
from the Middle Ages, its use rapidly developing from the nineteenth century onwards.
Sugar changed its character from a former luxury good for the elite that was presented
in silver or golden sugar bowls to a staple product and important food that even the
working classes could afford to sweeten their tea or coffee. Sugar provided an increasing
share of the calorie intake of common people in the nineteenth century. This change in
relevance was closely linked to the plantation economy, of how sugarcane was cultivated,
harvested, and quickly processed into raw sugar. The increase in consumption provided
an impetus for a capitalistic and intensified production process based on slave labour.
The labour-intensive organization of the sugar plantations in the Caribbean attracted
capital from Europe and further encouraged the development of capitalist economies.
More recent research on commodity history has evolved around the London-
based network ‘Commodities of Empire’.1 Inspired by Mintz and already working on
the economic history of colonialism in Latin America, Africa, and South Asia, several
researchers have started to investigate the commodity history of typical colonial products
like sugar, tobacco, palm oil, cotton, rubber, cocoa, coffee, and tea. These studies have
offered new insights into the functioning of the global economy and its various and often
216
Global Commodities and Commodity Chains
surprising effects on distant corners of the earth, like the example of coffee production
in Kenya. Here, the overproduction of coffee in Brazil and Colombia endangered the
colonial tax revenues derived from coffee sales. To preserve the coffee sector and the
tax income from it, the colonial administration broke the former monopoly on coffee
production of the white settlers and allowed African farmers to grow Arabica coffee.
This case shows an active strategy of a colonial government to reorganize the commodity
chain in order to raise production while maintaining quality but at lower costs.2
Other studies on commodity chains reveal new global connections with other chains
that have often been ignored by traditional economic history. Since the publication of
Mintz’s Sweetness and Power, historians have acknowledged the role of sugar cultivated
in the Caribbean plantations to the nutrition of British workers in the classic period of
the Industrial Revolution. It is much more surprising to discover the extent to which
North Atlantic salted cod was important for the feeding of slaves in the Caribbean and in
Brazil. Taste and low price made it possible for salted cod to become a major staple in the
West Indies and Brazil although ample supplies of fresh fish existed locally.3 So cod fished
by British fishermen off Newfoundland and Nova Scotia was salted and brought to the
sugar plantations, which in turn produced sugar for British workers. Another overseen
commodity chain linked Argentina with Europe through the export of skins and leather.
Herds of cattle in the Argentine Pampa also delivered meat that was dried and salted in
meat-salting plants, differentiated into standardized classes of quality, and then exported
– like cod – to Cuba and Brazil to feed slaves on sugar plantations. The introduction of
new technologies to produce corned beef and refrigerated ships to export frozen beef
reshaped the commodity chain in the nineteenth century.4
Another recent variety of commodity history is Sven Beckert’s Empire of Cotton
(2014).5 His book uses cotton as a lens through which to read the development of
the modern economy. He reconstructs the rise of cotton from a locally cultivated
crop that was hand-spun and woven into textiles for the same region where it was
produced, to one of the most important commodities of the nineteenth century. The
book shows the connection between cotton and the invention of new machinery and
the development of industrialized production. Beckert distinguishes a phase of what he
calls ‘war capitalism’, during which slavery and colonialism prepared the ground for a
globalized cotton industry. This led to a phase of ‘industrial capitalism’ which involved
the processing of fibres and the manufacturing of textiles. The author shows how both
stages of industrialization rested on violence: on the militarization of the trade (with
the East India companies), massive land expropriation in the Americas, genocide (of
Native Americans), and the enslavement of millions of Africans. He also shows how
‘industrial capitalism’ depended on a strong, interventionist state ‘capable of forging and
protecting global markets, policing its borders, regulating industry, creating and then
enforcing private property rights in land, enforcing contracts over large geographical
distances, forging fiscal tools to tax populations, and building a social, economic, and
legal environment that made the mobilization of labor through wage payments possible’.6
These types of commodity histories are based on many years of research. Mintz,
for instance, started his archival research in Puerto Rico in the late 1940s, working on
217
the lives of workers on sugar plantations.7 Perhaps one criticism that can be made of
commodity-based studies is that they rarely reflect on the methodological approach
they adopt. Often, they rely on a synthesis of current historic knowledge, integrating
different viewpoints and showing parallel developments in different parts of the
world.
Commodity chains
A commodity chain can be defined as the production of a tradeable good from the
extraction of its raw materials through to its design and elaboration, followed by its
transport and sale into the hands of the consumer. What would the commodity chain
of gold look like? In the 1960s, this chain might have begun more than 2,000 metres
underground in a South African gold mine in the Orange Free State from where the
ore was hewn and brought to the surface. The ore was milled in large plants and then
treated with cyanides to extract the gold, which was smelted into raw bars. These bars
which still contained other metals were transported to the Rand Refinery at Germiston
close to Johannesburg where the gold was refined out and melted into so-called London
Good delivery bars of 995.0 per thousand purity. This bullion was shipped via plane to
London, the leading international market for gold. Here the gold was bought either by
one of the national reserve banks for its gold reserves or by a Swiss bullion dealer who
resold and transported it to Dubai. The bars were then smuggled with dhows across the
Indian Ocean to secret places on the Indian coast close to Mumbai. Only a few hours
after its arrival, the gold was melted again, resold, and distributed in small lots to local
goldsmiths who worked and sold it to local consumers.
Gold is an example of the long-standing interest in commodity chains that goes back
to times before the very label ‘commodity chain’ was invented. The work of Frank Taussig
in the early years of the twentieth century reflected on the relationship between labour
and production and investigated geographical divisions of labour.8 John Davis and Ray
Goldberg integrated different steps of production, distribution, transportation, and
marketing in a single analytical framework.9 The interest in investigating commodity
histories beyond national borders was further developed in the 1970s in the context
of world-systems theory. Terence Hopkins and Immanuel Wallerstein were probably
the first to use the expression ‘commodity chains’ and to think of them in a decidedly
historical perspective.10 Hopkins and Wallerstein proposed the analysis of commodity
chains in order to overcome the distinction between different market levels ranging
from national to international. Their concept was designed to dismiss the assumption
that ‘commodity chains developed first of all within the boundaries of the state and
later began to cross state frontiers’.11 Commodity chains cut across state boundaries and
were thus of fundamental importance in the analysis of world systems and their core–
periphery relations.12 Wallerstein’s concept of the world economy as being structured
into core, semi-periphery, and periphery could be substantiated through the study of
commodity chains. Wallerstein showed that core activities commanded a large share of
218
the surplus produced within a commodity chain while peripheral activities commanded
only little or no surplus.13
The interest in commodity chains resurfaced in full in the 1990s when Gary Gereffi
and Miquel Korzeniewicz published an edited volume entitled Commodity Chains and
Global Capitalism (1994). Similar to Wallerstein’s initial definition, their concept of a
‘global commodity chain’ (GCC) referred to the whole range of activities involved in the
design, production, and marketing of a product across national boundaries. Yet, their
definition of commodity chain differed from that of world-system scholarship in several
respects.14 First, GCC is much more contemporarily oriented than Wallerstein’s historical
study which started in the long sixteenth century. GCC concentrates on the study of
the contemporary apparel and automobile industries, as well as chains of production
of foodstuffs such as bananas and tea or natural resources such as timber. Second, the
GCC approaches are specifically interested in inter-firm networks and examine how
global industries are organized. In opposition to the macro-focus of the world-system
analyses that study the world capitalist order and how commodity chains structured and
reproduced a stratified and hierarchical world system, GCC considers the macro–micro
links between global, national, and local units of analysis. Third, the GCC framework
is a network-based and organizational approach. The GCC method helps to analyse
processes of globalization in specific locations where production and related services
occur and to understand how these locations and activities are connected to each other.
GCC pays more attention to the specificity of locality and place than world-system
approaches, and is therefore conducive to the study of local cultural or social aspects.15
Gereffi and his co-authors developed this approach primarily to analyse the power
relations that are embedded in commodity chains and their governance. Overall, they
defined four dimensions of the GCC framework: first, an input–output structure (a set of
products and services linked together in sequence of value-adding economic activities);
second, a territoriality (spatial dispersion or concentration of enterprises in production
and distribution networks); third, the governance structure (authority and power
relationships); and finally, the institutional context.16
GCC research starts from the assumption that a lead firm dominates the character
of the chain. For the 1980s and 1990s, they identify in particular two types of
governance structures for networked GCCs, which they call ‘producer-driven’ and
‘buyer-driven’ global commodity chains. The difference resides in the location of
key barriers to entry. Producer-driven commodity chains are those in which large,
transnational corporations play a key role in coordinating production networks. This
type of GCC can typically be found in capital- and technology-intensive industries
such the automobile, aircraft, computers, and heavy machinery sectors where profit is
generated by productive scale, volume, and technological innovation. In buyer-driven
GCCs, large retailers, marketers, and branded manufacturers take the role of key
agents and set up decentralized production networks in a variety of countries, typically
located in the Global South. This is a typical pattern in relatively labour-intensive
consumer goods such as garments, footwear, toys, and housewares. The companies
that develop and sell brand-named products exert control over how, when, and where
219
manufacturing takes place, and how much profit accrues at each stage of the chain. The
dominant enterprises transfer economic competitive pressures to peripheral areas of
the world economy.17
One of the most debatable aspects of the GCC research is that the control of commodity
chains, and therefore the profit generated by the process, is considered to be in the hands
of so-called key agents. Take for instance the case of gold in the late nineteenth and early
twentieth centuries. Following the flows of gold, much of the gold from the late nineteenth-
century rushes in California, Australia, and South Africa was channelled to London from
where it was sold and distributed to the rest of the world. Before the First World War, the
City of London and the Bank of England had a hegemonic position in world finance and
much gold was shipped to London in order to pay for credit and for hoarding. London
attracted more than a third of all the gold mined in this period, thus acting as the ‘key
agent’ in this commodity chain. But did the bankers and bullion dealers exert any control
of the global flows of gold? The key agents in the City of London comprised not only the
Bank of England and large merchant banks such as Rothschild’s but also a group of five
bullion brokers who later became members of the London Gold Market Fixing (Mocatta,
Rothschild, Sharps Pixley & Co, Johnson Matthey, and Samuel Montagu). Although the
Californian and the other gold rushes in America did not take place within the British
Empire, the American need for credit brought much of its gold to London. For the
Australian and South African gold, the most important factor was not that both territories
were part of the British Empire but the fact that the big mining companies that ran the
mines were financed by the City of London. Not only the gold but also most of the profits
from gold mining flew to London, which was distributed as a dividend to stockholders.
One disadvantage of the GCC approach as exemplified through gold is that much
research has a strong European or American orientation.18 Few studies examine in detail
the agency and interests of stakeholders in other world locations. Hence in the case of
gold, the role of Indian, South African, and Australian actors is rarely given as much
prominence as that of Western reserve banks.19 A closer inspection of the GCC of gold
in the 1920s, for instance, reveals that the control of the different segments of the chain
was far from the prerogative of a single ‘key agent’ (such as the Bank of England or
Rothschild’s), and chains could be organized without any major driver. This does not
mean that these chains are necessarily organized in a more equal way without major
players or imbalances of power, but it is not necessary to assume the presence of either a
visible hand to manage and control the whole of a chain or the invisible hand of markets.
Power and control are surely not absent from markets and in commodity chains, but
they are not necessarily concentrated in one key agent.
A second problem with a GCC approach is that it often implies that initiatives for
change in the chain originate mainly from the industrialized countries in the North
(or as Wallerstein calls it, the core). In this perspective, the role of actors from the
Global South (Wallerstein’s periphery) is seen as passive. This may be due to the fact
that most commodity-chain studies concentrate on commodities that are consumed
in the developed countries of the northern hemisphere, ignoring the fact that many
220
chains find final consumers in the so-called ‘developing countries’ (or colonized
areas). Populations in former colonies and in the Global South are often considered as
producers, leaving researchers with little knowledge of their consumption patterns. For
gold, two observations from the 1920s illustrate this issue. Once the gold mining houses
in Johannesburg had erected their own refinery – the Rand Refinery in Germiston – they
became technically independent from the London refiners and market. As they could
guarantee the purity of the gold themselves, they sold it directly to the United States
and to the Indian subcontinent, thus circumventing the London market. The London
network of bankers, bullion dealers, and insurance brokers continued to manipulate
prices, shipment tariffs, and insurance rates; yet in the second half of the 1920s, South
Africa started to export its gold directly from Durban to Bombay. But shortly afterwards,
in 1931, it was forced again to sell its gold in London when Indian demand collapsed due
to bad harvests and falling agricultural prices. The flow of gold was therefore determined
not by key agents in London, but by other economic factors in South Asia.20
A third critical aspect of the GCC approach is the assumed imbalance of power within
the chain. Indeed, many studies have shown the power of leading firms and how these
so-called drivers reaped the largest share of profits in the chain. However, a group of
Latin American historians – including Steven Topik, Carlos Marichal, and Zephyr Frank
– has rejected the claim that profits invariably accrued in the more developed countries.
Instead they have shown that the arrangement of production and the distribution of
profit were dependent on the endowment of the different actors in the commodity chain.
They have showed, for instance, how Brazilian coffee producers have been able to get a
high share of profit.21
Notwithstanding these caveats, GCC provides an alternative method for the
economic analysis of global economic processes that link industrialized and developing
countries both at a macro and at a micro level. GCC methods of analysis have continued
to develop theoretically and empirically over the past quarter of a century. By the early
2000s however researchers became interested in a subfield that has come to be known as
the ‘global value chain’.
Global value chains
A new interdisciplinary and international initiative to examine different approaches

of global production networks started in 2000. Its main objective was to create a new
theory of governance to help policymakers explain and predict governance patterns in
cross-border production networks. Global value chain research was designed to study
the different ways in which global production and distribution systems are integrated in
the global economy. The intention was to explore the possibilities for firms in developing
countries to enhance their position in global markets. Thus the authors hoped that the
theory of global value chain governance would be useful for the crafting of effective policy
tools related to industrial upgrading, economic development, employment creation, and
221
poverty alleviation.22 Therefore it was claimed that this new model of analysis should be
robust, relevant, and easily applicable to real-world situations.23
The shift from ‘commodity chains’ to ‘value chains’ is not simply a terminological
one as some critics first suggested.24 Many empirical studies observed that an increasing
number of producer-driven chains were changing as lead firms started to outsource large
parts of their global production to external manufacturing firms. Some chains became
more buyer-like. The distinction between the two types of producer- and buyer-driven
chains was no longer sufficient and other network types were needed. The GCC typology
was based on a rather static view of technology and barriers to entry, but technological
change and firm- and industry-level learning stimulate change and make chains rather
dynamic. Many industries showed a clear shift away from vertically integrated producer-
driven chains, while buyer-driven chains could not encompass all the different networks
observed in the field. The decision to replace the term ‘commodity’ with ‘value’ was
taken because commodities are too often identified with undifferentiated products,
mainly primary products (i.e. crude oil) or agricultural products (such as coffee, cocoa,
wheat, or jute).25 Another reason to choose ‘value’ is that the term captures the notion
of ‘value added’ and thus the application of human effort to generate profit on invested
capital.
The building of a new global value chain (GVC) theory rests on the centrality of ‘nodes’
considered to be ‘the pivot points in transformation sequences: extraction and supply of
raw materials, the stages of industrial processing, exports, and final marketing’.26 GVC
addresses in particular three questions related to nodes: first, what kind of activities are
bundled up in one node of the chain or split among various nodes? Second, how are
knowledge, information, and materials passed from one node to the next? And finally,
where are these nodes located? Based on a comparison between case studies, a GVC
working group was able to identify five ways in which firms governed or coordinated the
linkages between value chain activities:
1. Market linkages that are governed by price, and in which the costs of switching to
new partners are low for both parties.
2. Modular linkages in which suppliers make products to a customer’s specifications.
Complex information regarding the transaction is codified and digitized before it
is passed to highly competent suppliers.
3. Relational linkages in which complex interactions between buyers and sellers
take place, creating mutual dependence and high levels of asset specificity. Trust
and relationship are often built over time and might work in spatial proximity as
well as in spatially dispersed networks. Tacit information is exchanged between
buyers and highly competent suppliers.
4. Captive linkages in which less competent suppliers are provided with detailed
instructions and are dependent on much larger buyers. Suppliers have to face
significant switching costs and are therefore ‘captive’. These linkages are often
characterized by a high degree of monitoring and control by lead firms.
222
5. Hierarchical linkages which are a governance form characterized by vertical

integration and managerial control, flowing down from headquarters to
subsidiaries and affiliates.27
This typology is the first step towards an operational theory of global value chain
governance and helps us to study under which conditions market, modular, relational,
captive, or vertically integrated chain governance arise. GVC identifies three key
determinants of governance patterns: complexity of information and knowledge transfer
that are required to sustain a particular transaction, particularly with respect to product
and process specifications; the extent to which information and knowledge can be
codified and efficiently transmitted; and the capabilities of suppliers in relation to the
requirements of the buyers.28
What makes GVCs attractive for economic historians is that the evolution of
governance structures over time is integral to their study. By considering several sectors,
GVC observes a trajectory from one type of governance to another and identifies causal
factors in the hope of being able to anticipate future change in GVC. The evolution of
the bicycle industry serves as example of how hierarchies and vertical integration in the
early years of the industry (in the 1890s) evolved towards inter-firm governance and
reliance on market mechanisms. In this GVC, specialist firms such as Sachs, Shimano, or
later SRAM producing just one component of a bicycle became more competitive than
vertically integrated producers of complete bicycles. Another example is provided by the
apparel industry whose governance changed from captive to relational value chains. The
suppliers in many East Asian countries moved in a few decades from simply assembling
imported inputs to full-scale supply as they learned how to make internationally
competitive consumer goods. This however requires the capacity to interpret designs, to
produce samples, to source all needed inputs, to control product quality, not to exceed
the buyer’s price, and to guarantee on-time delivery.
Other value chains changed in a different direction, as in the case of fresh vegetables.
As a primary product, the GVC of fresh vegetables in Kenya had for a long time been
the typical example of a market-based form of governance. But this changed in the 1980s
when large UK supermarket chains (Tesco, Asda, and Sainsbury’s) wished to attract new
customers by offering year-round supply and guarantee them high quality. At the same
time, they had to meet stronger standards of food safety, especially concerning pesticide
residues. The supermarkets’ strategy was to increase their control over the chain and
to explicitly coordinate their supply. They therefore signed renewable annual contracts
with their suppliers and monitored the entire chain.
The differentiation of the GVC model between five different governance types
(market, modular, relational, captive, and hierarchical) is useful in the analysis of global
economic connections. The example of the commodity chain of gold in the 1960s
illustrate this: at the production end of the chain in South Africa, most of the mines
were directed by a handful of large ‘mining houses’ (who also controlled about three-
quarters of all the joint-stock companies listed in the Johannesburg stock exchange – an
enormous concentration of economic power). Most of the mines were organized as stock
223
companies and run by these so-called mining houses. These holdings took care of the
transactions of their shares at stock exchanges in Europe and the United States and to
a smaller extent in Johannesburg. They had the know-how to run a mine and therefore
appointed the directors and mining engineers. This was obviously a hierarchical linkage.
However, most of the profits from these mines left South Africa as dividends were paid to
the shareholders located overseas. The mining houses were able to govern their business
with as little as 30 per cent of the shares as most international investors did not attend
shareholders’ meetings in Johannesburg.
Often GVC studies focus on the vertical direction of a network paying little
attention to the horizontal dimension of such linkages. Although the control of the
individual mines by the holdings was hierarchical, at the same time the different
mines and mining houses did not compete on a market for gold. In an atmosphere
of mutual trust, they shared technical information and mining innovation. This was
greatly facilitated by the fact that the mines did not have to compete for a lower price
of gold when their product did not differ in quality and when the market absorbed any
amount of gold for a guaranteed price (under the gold standard, the central banks of
the gold pool countries guaranteed the price of the gold). Cooperation allowed firms
to save on costs and even to coordinate their sales. The gold derived from the ores
that lay many thousands of feet underground, that the miners brought to the surface,
was milled, treated with chemicals, and refined at the Rand Refinery. This refinery
was run by the Chamber of Mines of South Africa and was deemed to embody the
cooperation of the mining houses in Johannesburg. The bars were then shipped via
Durban to Southampton and London. The gold was then either sold for a fixed price
to the Bank of England or on the gold market. It is highly questionable whether the
London gold market was governed by market linkages as the volatility of the gold price
was limited within a small range of fixed prices. Under the Bretton Woods system, the
reserve banks of the gold pool countries stabilized the gold price and thus the value of
their currencies by selling gold to the market or buying it whenever it was necessary
to stabilize its price.
As stated above, the biggest demand for gold for private purposes came from India.
But after the military conflict with China in 1962, the Indian government completely
banned the import of gold in an attempt to shift the capital spent on jewellery towards
investment for the development of Indian industry. However, what came to be known as
the 1963 Gold Control Act did not affect the demand for gold in India at all. The uncurbed
demand stimulated a black market and the smuggling of gold via the Indian Ocean,
with Dubai as a major connecting port. As the price of gold was 75 per cent higher in
India than on international markets, smuggling was extremely lucrative.29 It is estimated
that between 107 and 217 tonnes of gold were smuggled into India annually between
1968 and 1972.30 The sophisticated smuggling business was not run by individuals, but
by professional cartels operated from Dubai. Thus, the little sheikdom of Dubai that in
the 1960s had less than 60,000 inhabitants became the single largest gold buyer at the
London gold market. As this cursory analysis of gold reveals, the GVC model proofed to
be a useful analytical tool to better understand global interconnections.
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Critiques
However, for historians wishing to adopt a commodity-chain or value-chain approach,

there are several methodological problems and challenges to overcome: First, most
studies present the commodity and value chains in a linear form. Several authors have
stressed the problem of the linearity of commodity chain studies.31 They question how
chains are presented and argue that the competitive position of various actors at specific
nodes of the chain is excluded.32
Second, a possible solution to the problem of linearity could be to scrutinize the
construction of chains and question the decision-making processes in the identification
of chains. Most chains are presented as linking different nodal points at which new
actors enter the chain and participate in different ways. Historians, who often tend to
make their decision depending on the availability of sources, should openly discuss the
ways in which the haphazardness of recordings has effects on the results they produce.
Third, historians have favoured certain commodity chains, especially luxury
goods, exotic commodities, or strategic resources like rubber and oil. When they have
considered agrarian products, most historians preferred the products of the plantation
complex (sugar, coffee, tea, cocoa, cotton, and rubber) but for a long time ignored the
contribution of the small farmers to the same commodity chain. This raises fundamental
questions not only in which direction to orientate the research at the nodal points, but
also which commodities we should study: The study of rice, maize and potatoes, silicon,
cobalt, copper, aluminium, and uranium might be of greater relevance for global history
than the study of luxury goods or even gold.33
Fourth, entire segments of commodity chains are organized in ways that defy formal
control on the part of states or of any other formal institutions. This informal part of the
economy does not just exist in countries of the economic periphery where the power of
the state is supposed to be weaker than in the industrialized countries. Informal relations
are the domain of cities not only in developing countries such as Bangladesh, Pakistan,
Vietnam, or Indonesia, but can be found also in Western metropolises as for example
within sweatshops that produce haute-couture textiles in Paris and New York.
Finally, GCC and GVC approaches and sometimes historic studies making use of
these methods ignore the cultural dimension of economic interaction.34 The action is
often conceived in a way as if the origin of the actors involved, their language, their
conceptions of work and leisure, their ideas of dignity and honour, their estimations
of goods and services, and many other cultural aspects are of no importance to the
functioning of commodity chains. GCC and GVC overlook the relevance of cultural
patterns because they seem to have little bearing on the distribution of power and wealth.
Conclusion
The study of global commodities and of value chains has slowly gained acceptance
among historians and is now shaping a new research field at the intersection between
225
economic and global history.35 Commodity-chain and value-chain approaches offer

many new insights on global economic processes that link industrialized and developing
countries. Furthermore, they help us to overcome the traditional opposition between
micro versus macro approaches to economic history as they consider processes and
decision-making practices at different levels. The somewhat naïve assumption of early
commodity-chain approach (GCC) that such chains were managed by key agents has
been refuted both theoretically and empirically. Yet, the legacy of GCC is still important
as it investigates systematically the different ways in which global commodity and value
chains were governed at different levels and under a variety of conditions. Historical
studies of commodities and their chains have shown their potential for gaining a better
understanding of the basic characteristics of global economic interconnections. The
metaphor of chain helps us to develop a comprehensive narrative that is never simplistic.
Notes
1. Commodities of Empire. A British Academy Research Project. https://commoditiesofempire.

org.uk/. See also the special issue of the Journal of Global History (4) published in 2009.
2. David Hyde (2008), ‘Global coffee and decolonisation in Kenya: Overproduction,
quotas and rural restructuring’, Commodities of Empire Working Paper No. 8, https://
commoditiesofempire.org.uk/publications/working-papers/working-paper-8/
3. M. W. Herold (2015), ‘Nineteenth-century Bahia’s passion for British salted cod: From the
seas of Newfoundland to the Portuguese shops of Salvador’s Cidade Baixa, 1822–1914’,
Commodities of Empire Working Paper No. 23, https://commoditiesofempire.org.uk/
publications/working-papers/working-paper-23/
4. A. Sluyter (2010), ‘The Hispanic Atlantic’s Tasajo trail’, Latin American Research Review, 45
(1), 98–120; A. Sluyter (2012), Black Ranching Frontiers: African Cattle Herders of the Atlantic
World, 1500–1900. New Haven and London: Yale University Press, 169–210.
5. Sven Beckert (2014), Empire of Cotton: A Global History. New York: Alfred A. Knopf.
6. Beckert (2014), Empire of Cotton, 76.
7. S. Mintz (1960), Worker in the Cane: A Puerto Rican Life History. New Haven: Yale University
Press.
8. F. W. Taussig (1911), Principles of Economics, Vol. 1. New York: Macmillan, 15 and 30–48.
See also, M. van der Linden (2007), ‘Labour history: The old, the new and the global’, African
Studies, 66 (2–3), 169–80.
9. John H. Davis and Ray A. Goldberg (1957), A Concept of Agribusiness. Boston: Harvard
University Press, vii, 1–2, thank explicitly the Russian economist Wassily Leontief who had
designed a related approach in the 1920s. There is an (shortened) English reprint of his
article (German original in Archiv für Sozialwissenschaft und Sozialpolitik, 60 (1928), 577–
623): W. Leontief (1991), ‘The economy as a circular flow’, Structural Change and Economic
Dynamics, 2 (1), 181–212, 182: ‘At this point the concept of a circular flow comes into play as
a tool which enables us to identify those causal relationships that are specific to the economic
sphere. Circular flow analysis only takes into account those relationships which allow us to
return to the initial starting point.’
10. T. K. Hopkins and I. Wallerstein (1977), ‘Patterns of development of the modern world-
system’, Review: Fernand Braudel Center, 1 (2), 128.
226
11. Hopkins and Wallerstein, ‘Patterns of development’, 128–9.

12. I. Wallerstein (1974–2011), The Modern World-System, 4 vols. New York: Academic Press,
(vols. 1–3) 1974–89. Berkeley: University of California Press (vol. 4), 2011.
13. G. Arrighi and J. Drangel (1986), ‘The stratification of the world-economy: An exploration of
the semiperipheral zone’, Review: Fernand Braudel Center, 10 (1), 11–12.
14. An excellent comparison between these concepts can be found in J. Bair (2005), ‘Global
capitalism and commodity chains: Looking back, going forwards’, Competition & Change, 9
(2), 153–80.
15. Bair, ‘Global capitalism’, 159.
16. The last dimension was added later and is still the less developed, as the governance structure
is by far dominant in GCC research. G. Gereffi, M. Korzeniewicz and R. P. Korzeniewicz
(1994), ‘Introduction: Global commodity chains’, in G. Gereffi and M. Korzeniewicz (eds),
Commodity Chains and Global Capitalism. Westport CT: Praeger, 7; G. Gereffi (1995),
‘Global production system and Third World development’, in B. Stallings (ed.), Global
Change, Regional Response. Cambridge: Cambridge University Press, 100–42.
17. Gereffi underlines the similarities with Michael Porter’s value-chain approach. See M. Porter
(1985), Competitive Advantage: Creating and Sustaining Superior Performance. New York:
Free Press. This value-chain approach is also recommended in Michael Porter’s ‘Competitive
Advantage and Business History’, Business and Economic History, 21 (2), 228–36. P. Scranton
and P. Fridenson (2013), Reimagining Business History. Baltimore: John Hopkins University
Press; R. Kaplinsky (2004), Competitions Policy and the Global Coffee and Cocoa Value
Chains. Brighton: Institute of Development Studies.
18. For gold, see the excellent study by B. Eichengreen (1992), Golden Fetters: The Gold Standard
and the Great Depression, 1919-1939. New York: Oxford University Press.
19. J. McGuire, P. Bertola and P. Reeves (eds) (2001), Evolution of the World Economy, Precious
Metals and India. New Delhi: Oxford University Press.
20. B.-S. Grewe (2013), ‘The London Gold Market, 1910–1935’, in C. Dejung and N. P. Peterson
(eds), Power, Institutions and Global Markets: Actors, Mechanisms and Foundations of World-
Wide Economic Integration, 1850–1930. Cambridge: Cambridge University Press, 112–32.
21. S. Topik, C. Marichal and Z. Frank (eds) (2006), From Silver to Cocaine: Latin American
Commodity Chains and the Building of the World Economy, 1500-–2000. Durham, NC and
London: Duke University Press.
22. G. Gereffi, J. Humphrey and T. Sturgeon (2005), ‘The governance of global value chains’,
Review of International Political Economy, 21 (1), 79.
23. A very concise presentation of the GVC theory and the scientific context from which it was
derived can be found in T. J. Sturgeon (2009), ‘From commodity chains to value chains:
Interdisciplinary theory building in an age of globalization’, in J. Bair (ed.) (2008), Frontiers of
Commodity Chain Research. Stanford: Stanford University Press, 110–34.
24. B. Daviron and S. Ponte (2005), The Coffee Paradox: Global Markets, Commodity Trade and
the Elusive Promise of Development. London: Zed Books, 27.
25. For this type of commodity chain, John Talbot proposed the term ‘tropical commodity
chain’. J. M. Talbot (2002), ‘Tropical commodity chains, forward integration strategies and
international inequality: Coffee, cocoa and tea’, Review of International Political Economy, 9
(4), 701–34.
26. Bair, ‘Global commodity chains’, 66.
27. Sturgeon, ‘From commodity chain to value chain’, 119.
227
28. Out of the eight possible combinations of the three variables, there are only five value chain
types that the group can actually find. It is unlikely to find a combination of low complexity
of transactions and low ability to codify which excludes two combinations. If the complexity
of the transaction is low and the ability to codify is high, then low capacity suppliers would
be excluded from the chain.
29. See T. Green (1981), The New World of Gold. Johannesburg: Jonathan Ball, 172–5.
30. A. Sarma, et al. (1982), ‘Gold mobilisation as an instrument of external adjustment:
A discussion paper’, Bombay: Reserve Bank of India, 29. According to estimates of
Consolidated Gold Fields Ltd, the total illegal gold imports amounted to an estimated 4,770
tonnes of gold between 1958 and 1990. For comparison: at the end of 1991 the largest gold
reserves in a central bank amounted to 8,146 tonnes (the United States), and the second
largest 2.960 tons (Germany). See G. O’Callaghan (1983), ‘The structure and operation of the
world gold market’, IMF Occasional Paper, no. 105, 11.
31. J. Henderson, P. Dicken, M. Hess, N. Coe and H. Wai-Chung Yeung (2002), ‘Global
production networks and the analysis of economic development’, Review of International
Political Economy, 9 (3), 442; Bair, ‘Global commodity chains’, 16; Sturgeon, ‘From
commodity chains to value chains’, 126.
32. Bair, ‘Global commodity chains’, 15.
33. B.-S. Grewe (2016), ‘Raum und Macht – Eine Stoffgeschichte des Goldes im frühen 20.
Jahrhundert’, Jahrbuch für Wirtschaftsgeschichte, 57 (1), 59–89.
34. M. Granovetter (2005), ‘The impact of social structure on economic outcomes’, Journal of
Economic Perspectives, 19 (1), 33–50.
35. See the calls for papers of the IISH Amsterdam ‘Commodity Frontiers’ (Amsterdam, July
2015), ITH conference ‘Commodity Chains and Labour Relations’ (Linz, September 2016),
and ‘Global Commodity Frontiers in Comparative Historical Context’ (London, December
2016).
228
CHAPTER 13
THE RISE OF GLOBAL FINANCE, 1850–2000
Youssef Cassis
What is global finance? At its roots lie international capital flows – the export of capital from
some countries and the import of capital from others. However, global finance is more than
that. It should be considered as the plant rather than simply the roots. It could be described
as the complex web of financial institutions, markets, and agents involved in moving capital
across nations and regions, each fulfilling a set of functions in the nations and regions
connected by these multiple transactions. Within these nations and regions, global financial
transactions have concentrated in specific places, usually cities, where the various financial
services required by these transactions have gathered, primarily in order to achieve external
economies of scale. International financial centres thus form the fabric of global finance.
This chapter takes the third quarter of the nineteenth century as its point of departure,
because of the extent – both quantitative and qualitative – of finance in the age of industrial
capitalism. International capital flows started their long upswing wave, which would
continue until 1914 (perhaps even 1931) when new financial institutions and markets
emerged in all advanced economies, in particular with the rise of the big banks and the
development of the securities markets. However, the rise of global finance has not continued
unabated from the mid-nineteenth century to the early twenty-first century. World wars,
financial crises, and economic nationalism have led to periods of domestic (or imperial)
withdrawals or the exclusion of nations or regions from international financial exchanges –
especially during the decades from the early 1930s to the late 1970s. And the resumption of
global finance from the 1980s has taken new forms as a result of technological and financial
innovations as well as the transformation of the world economy.
The chapter follows a chronological order and is divided in three parts: the first deals with
the first era of modern globalization, from the 1850s to 1914; the second with the era of wars,
depression and regulation, from 1914 to 1973; and the third with the wave of deregulations
and innovations that marked the second globalization, from 1973 to 2000 and includes
a brief epilogue discussing the effects of the financial debacle of 2008 and the rise of new
economic powers, above all China, in global finance. It is structured around the development
of financial centres in both the core industrial countries and the periphery, paying particular
attention to their differences and similarities as well as the interactions between them.
The first modern globalization, 1850–1914
Foreign investment began to grow substantially from the mid-1850s, the capital stock
invested outside its country of origin going from just under $1 billion in 1855 (it was at the
same level thirty years earlier) to $7.7 billion in 1870. It then rose to $23.8 billion in 1900
and to $38.7 billion in 1914.1 Throughout these years, Britain was the largest exporter
of capital, followed by France, and, later in the nineteenth century, Germany. Small
European countries (the Netherlands, Belgium, and Switzerland) exported substantial
amounts of capital, especially when measured as a proportion of their GDP. The United
States became a capital exporting country by the turn of the twentieth century, even
though it remained a net debtor until the end of the First World War.
While Britain maintained its lead during the long nineteenth century, it was seriously
challenged by France during the 1850s and 1860s. The two countries exported similar
amounts of capital ($75–$100 million per year in the 1850s and $150–$175 million in
the 1860s), with a slight advantage for France, though Britain still held a larger stock of
foreign investments.2 Following its defeat by Prussia in 1871, France was no longer able
to challenge Britain but retained its second place. The volume of capital exports increased
markedly from the beginning of the twentieth century, having fallen in the 1890s in the
wake of the Baring Crisis. Between 1880 and 1913, capital exports amounted to 40 per
cent of available savings for Britain and between 20 and 25 per cent for France.
Figures are less reliable for the destination of capital exports, especially before 1900.
The United States was definitely the largest recipient, with 16 per cent of the world’s total
in 1913 (40 per cent of which came from Britain), followed by Canada and Russia (each
with 8 per cent), Argentina (7 per cent), and Brazil, Mexico, India, Australia, China,
South Africa, Spain, and the Austro-Hungarian Empire (with 4–6 per cent).
International capital flows were part of a broader globalization of the world economy,
in particular free movements of people, transport facilities, speed of communication,
and expanding trade, which required huge transfers of capital and/or facilitated
international financial transactions. From 1850 international migration increased on
an unprecedented scale: Thirty-six million Europeans left the Old Continent between
1870 and 1915, most of them, some 70 per cent, heading for the United States and
almost all the others for Argentina, Australia, Canada, and Brazil – in other words
mainly to temperate regions where European immigration was still recent. Advances
in transport and communication made the world smaller and brought countries and
continents closer together. The building of railway lines, starting in the 1830s, continued
on a much larger scale, world mileage increasing from 205,000 kilometres in 1870 to
925,000 kilometres in 1906. Maritime transport also made considerable progress with
the development of oceanic steamships, which really got under way in the 1890s, when
steam tonnage finally overtook that of sailing ships. Telecommunications sped up to
the point of becoming instantaneous, first with the telegraph (a cable linked Britain
to the European continent as early as 1851, and the first transatlantic cable between
London and New York was laid in 1866), then with the telephone (Paris and London
were connected in 1891, transatlantic links having to wait until the 1920s), and finally
with wireless telegraphy (messages were transmitted across the Atlantic from 1901).3
Foreign trade grew dramatically in the nineteenth century. In the case of Europe, the
proportion of exports, measured as a percentage of GDP, went from 9 per cent in 1860
to 14 per cent in 1913.4
230
The Rise of Global Finance, 1850–2000
The global financial order was organized around a dominant economy: Great
Britain – even though it was challenged and then overtaken by the United States (in
industrial output in the 1880s and GDP by 1900) and Germany (in industrial output
in around 1905). Britain’s position rested on the leadership it retained in foreign trade
(still 14 per cent of world trade in 1913, down from 20 per cent in the mid-nineteenth
century) and services and finance (as the largest capital exporter and the largest
provider of trade finance), as well as its key position in the system of multilateral
trade, on account of its deficit with the major industrial countries and its surplus with
its colonial empire.5 Britain’s weight in the world economy was thus primarily due to
the role of the pound sterling – the main international trading and reserve currency
and the cornerstone of the international monetary system in force at that time, the
gold standard.
Britain’s financial pre-eminence was embodied in the global role played by the City
of London, the world’s leading financial centre.6 The City offered an unrivalled range
of financial services, which made it the principal engine of financial globalization.
First, the bulk of world trade was financed through the medium of bills of exchange
drawn on London. And second, with nearly 50 per cent of foreign capital stocks held by
British investors, London was the main centre for the issue of foreign loans. These two
essential functions were carried out by a group of private banks, known as merchant
banks.7 The issuing business, the most prestigious activity in international finance,
was the preserve of the most select houses (Rothschilds, Barings, Morgan Grenfell,
Hambros, Schroders, and a few others, including Kleinworts, the leading accepting
house). The accepting business (in other words guaranteeing the payment of a bill
exchange when it came to maturity) was the bread and butter of a growing number of
firms, possibly as many as 105 in 1914, several of them from abroad. In the heart of
the world’s financial capital, the wheels of global finance were thus activated by old-
established family-owned private banks rather than by the new joint-stock banks that
had emerged in the mid-nineteenth century. The latter (Lloyds Bank, Midland Bank,
London County and Westminster, and National Provincial Bank, to name but the four
largest in 1913), known as the clearing banks, confined themselves to deposit banking
activities within the domestic economy, but they provided the cash credit required by
the merchant banks’ operations.
Another group of newly formed joint-stock banks, known as overseas banks (London
and River Plate Bank; Hong Kong and Shanghai Banking Corporation; Chartered Bank
of India, Australia and China; Standard Bank of South Africa; and others) were directly
involved in international finance. They usually had their head office in London (one
exception was the Hong Kong and Shanghai Banking Corporation), but operated
a network of branches in the formal and informal empire. Their goal was to provide
facilities, especially foreign exchange, to merchants in the regions in which they were
established. They also offered financial services in regions often lacking in banking
infrastructure, thus winning a clientele from among well-off members of the local
community. While the number of overseas banks doubled between 1860 and 1913 (from
fifteen to about thirty), the number of branches increased more than tenfold (from 132
231
to 1,387).8 But there was also a movement in the opposite direction. As a result of its
financial predominance, the City attracted large foreign banks that came there to seek
profitable business opportunities. Thirty of them – more than in any other centre – had
opened an office by 1913, belonging to twelve different countries, and included the major
French and German banks.
The City of London’s other major activity as an international financial centre was the
London Stock Exchange – a secondary market where the securities issued on the primary
market could be negotiated. The nominal value of the securities listed there went from
£2.3 billion in 1873 to £11.3 billion in 1913, more than the New York Stock Exchange and
the Paris Bourse combined.9 As evidence of its highly cosmopolitan character, foreign
stocks, which represented between 35 and 40 per cent of the total in 1873, exceeded 50
per cent from 1893 onwards. By 1914 one-third of all securities in the world were quoted
on the London Stock Exchange. The City hosted major commodity markets, such as the
London Metal Exchange and the Baltic Exchange; and it provided specialized professional
services, especially legal and accounting, whose leading firms soon expanded abroad to
follow their clientele or to build up a new one. Price Waterhouse, for example, opened
a branch in New York in 1890 and another in Chicago in 1892, where its business took
off very quickly. Finally, in the centre of global finance, the Bank of England was, to use
Keynes’ words, the ‘conductor’ of the international monetary system, whose leadership
the other central banks were prepared to follow in order to maintain monetary stability.10
No other centre had the same global range of services as London. Paris has been
accurately described by Alain Plessis as a ‘brilliant second’.11 Its strength lay above all
with its long-term capital market, especially for foreign securities, which was second
only to London. Until the negotiation of the war indemnity loans in 1871–2, the
issuing business had remained in the hand of the Haute Banque (Rothschilds, Fould,
Mallet, Hottinguer, Seillière, and a few others), a group of private banks akin to the
London merchant banks. From then on, it was taken over by the new joint-stock
banks – the investment banks (Paribas) as well as the big commercial banks (Crédit
Lyonnais, Société Générale, and Comptoir National D’escompte de Paris) which,
unlike their English counterparts, were involved in international finance, especially
the placing of foreign loans. They also established a network of foreign branches:
in 1913, the Crédit Lyonnais owned twenty, compared with eight in 1878, and the
Comptoir d’Escompte owned twenty-eight. Overseas banks were far less prominent
than in the City of London, owing partly to competition from the commercial banks
but mainly to France’s weaker presence in the world. However, the most important
among them (Banque Impériale Ottomane and Banque de l’Indochine) were forces to
be reckoned with in international finance. Paris also attracted foreign banks, though
less than London (around fifteen in 1913). And the Banque de France, with its large
gold reserves, played a key role in the international monetary system alongside the
Bank of England, maintaining regulation and stability by allowing its gold to flow to
London when the need arose.
The rise of global finance coincided with the rise of new financial powers. Frankfurt,
Hamburg, and Cologne had been European financial centres of some significance
232
since the seventeenth century, but it was only after German unification in 1871 and
rapid industrialization in the following decades that Germany and its new political and
financial capital, Berlin, rose to financial prominence. More than anywhere else, business
was dominated by the big banks (Deutsche Bank, Dresdner Bank, Disconto-Gesellschaft,
and Darmstädter Bank). They were universal banks, engaged in both commercial
and investment banking, and controlled most international financial transactions. In
addition to a number of foreign branches, they also established subsidiaries to conduct
business in less developed countries. The Deutsche Bank, for example, created the
Deutsche Überseeische Bank (active in Latin America) and the Deutsch-Asiatische
Bank, the latter in conjunction with the Disconto-Gesellschaft and Bleichröder, a private
bank.12 However, Berlin was not in a position to rival seriously London or even Paris,
if only because Germany invested far less capital abroad than Britain and France did.
Moreover, the Berlin Börse was strictly regulated in order to curb speculation and
combat fraud – the law of 1896 considerably limited forward transactions, and actually
prohibited them on the securities of mining and manufacturing companies. As a result,
speculative transactions, which represented the bulk of stock market business, moved
out of Germany, towards Amsterdam and London in particular.
Specialized services were offered by lesser European financial centres – a broad and
diverse secondary market in Amsterdam; finance companies in Brussels and Switzerland
(Zurich, Geneva, and Basel) that contributed to the development of the power industry
worldwide by transferring funds provided by the big German banks and electrical
engineering companies.13 All in all, the bulk of international financial business was
conducted in the financial centres of the leading capital exporting countries.
New York’s position was somewhat peculiar. Its arrival among the leading financial
centres was more as an entry point for foreign funds than as a point of departure for
capital exports – though the situation had changed by 1900. New York’s importance
became increasingly decisive because of the massive amount of foreign investment in
the United States, the dynamism of the American economy (foreign investment only
made a small contribution to the huge domestic accumulation of capital), and the
city’s position as the country’s financial centre. Like the City merchant banks, the Wall
Street investment banks (J. P. Morgan, Kidder Peabody, Lee Higginson, Kuhn Loeb,
and Seligman and Speyer), also family-owned private banks, formed the cornerstone
of New York’s financial centre.14 Revealingly, they had close links to foreign financial
centres, above all the City of London. Unlike in London, the largest national banks were
themselves involved in investment banking, with the National City Bank in the lead.15
Nevertheless, New York’s international influence was still limited and it was dependent
on London for the financing of American foreign trade, but the institutional foundations
of its future predominance were laid during the pre-war years.
International financial centres developed in other borrowing countries, but with
different characteristics from the providers of global finance. Centres such as Hong
Kong, Shanghai and Peking, Bombay and Calcutta, Cairo and Alexandria, Sydney and
Melbourne, Yokohama, Buenos Aires, Rio de Janeiro, Constantinople, and St Petersburg
all hosted between six (St Petersburg) and twelve (Shanghai) ‘transnational’ banks.16
233
By comparison London had sixty-two, Paris thirty-one, and New York twenty. Other
centres in advanced economies were well behind: Brussels and Hamburg had ten,
Berlin nine, and Amsterdam eight. Other European centres, such as Vienna, Milan,
Madrid, Stockholm, and Zurich, hardly featured at all. Emerging centres, including New
York, tended to attract foreign banks rather than host the head office of multinational
banks. In China, India, the Middle East, Latin America, and Australasia, virtually all
‘transnational’ banks were branches of foreign banks that primarily financed foreign
trade. With the exception of London, which combined the two, capital exports were the
dominant feature of established financial centres, and trade finance that of emerging
ones, especially in Asia.
The position of financial centres in less developed countries points to an important
feature of global finance before 1914 – the fact that opening up the world went hand
in hand with the establishment of colonial empires and the imperialist powers’ direct
or indirect domination over most of the world on an unprecedented scale. In 1914, the
British Empire stretched over 30 million square kilometres and included 450 million
inhabitants, while the French colonial empire stretched over 10 million square kilometres
with 50 million inhabitants. On top of this, they informally held sway over regions as
vast as China, the Ottoman Empire, and Latin America.
The costs and benefits of global finance must be considered in this context. There
is no doubt that capital transfers played a positive role in the economic development
of capital importing countries – though with major differences between countries and
regions. Government loans were certainly not always put to productive use, whether in
connection with military expenditure or, more often, with servicing an already contracted
debt. Yet significant achievements were made, especially in infrastructure: railways,
roads, docks, ports, power stations, and urban development. These achievements enabled
natural resources to be developed and exported, thus stimulating economic growth; and
only foreign capital could ensure their success. Recent research has emphasized, from a
strictly financial perspective, the links between the cost of a loan and the risks associated
to it.17 Favourable conditions included the borrowing country’s adherence to the gold
standard, which was seen as a guarantee of good financial order, or membership of the
British Empire, which provided additional assurance.18 Borrowing on the international
capital market was more expensive for Turkey than for Argentina or Russia, and even
more expensive than for Australia or Japan. Indebtedness could, however, have another
cost, and, even allowing for the complexities of the relationships between political and
financial interests, it did contribute to the partial or total loss of political independence
– from the occupation of Egypt and the foreign interference in the Ottoman Empire’s
finances to the division of China into ‘spheres of influences’.
Wars, depression, and regulation, 1914–73
The First World War did not put an end to capital exports. Between 1914 and 1918,
debts totalling nearly $20 billion – in other words an amount equivalent to the stock of
234
British foreign assets on the eve of the war – were incurred among the Allies. The two
main creditor countries were the United States ($9.2 billion) and the United Kingdom
($8.5 billion), with France ($1.7 billion) trailing far behind – although Britain also had to
borrow from the United States ($4.2 billion) and the French from both the United States
($2.7 billion) and the United Kingdom ($2.5 billion), while the other Allies (Italy and
Russia) were only borrowers.19 However, despite these vast amounts of capital transfers,
one cannot talk of a global market. These loans were essentially contracted between
governments and did not activate the mechanisms usually associated with credit
transfers between international financial centres. France, for example, borrowed $2.9
billion from the American government compared with only $336 million from banks,
and $2.1 billion from the British government, compared with $625 million from banks,
including the Bank of England. Only a few intermediaries and privileged partners were
involved in these operations, most of which were managed from New York and London,
from where they continued to offer their expertise and their network of relationships.
In this respect, the First World War marked the end of the Rothschilds’ supremacy in
government loans and the advent of the House of Morgan, which was responsible for
issuing the first Anglo-French loan for $500 million in October 1915, followed by four
more loans amounting to a total of $950 million on behalf of Britain in 1916 and 1917,
and was to dominate global finance in the 1920s.
Global financial transactions, both capital exports and trade finance, resumed after
the war. Some $10 billion flowed from creditor to borrowing nations during the second
half of the 1920s. One major difference with the pre-war years was the proportion of
short-term capital – about half the total in the case of European borrowers, not least
Germany.20 Another difference was the respective position of the financial powers. The
great victor was the United States, which in a few years changed from a debtor country
to a creditor country (having net private liabilities in excess of $3 billion in 1913 to
net assets of $4.5 billion in 1919). Europe was no longer the world’s banker. Germany
lost nearly all its foreign assets; France most of it, probably three-quarters of its assets
in Europe, mainly in Russia; and Britain some 20 per cent, essentially the $3 billion
worth of American stock that it was obliged to sell. The situation was complicated by the
questions of war debts ($19.4 billion in total, mainly due to the United States and Great
Britain) and reparations (132 billion gold German marks – three times Germany’s GDP).
There was thus no return to pre-war stability. The gold standard was finally restored
between 1924 and 1926, but its functioning was beset with difficulties and unable to
achieve its objective, namely to permit balance-of-payments adjustments. This was
caused by the overvaluation of the pound and the undervaluation of the French franc,
the uneasy cooperation between central banks, and insufficient expansionary policy in
the surplus countries (France and the United States).
Nevertheless, London remained the world’s leading financial centre in the 1920s,
having soon regained its predominance in most activities, despite the success of
acceptances drawn on New York, thanks to the establishment of the Federal Reserve
in 1913, which allowed national banks to accept bills of exchange. However, it had to
cede first place to New York in foreign issues. Britain remained the largest holder of
235
foreign investment in terms of stocks, but no longer the largest capital exporter in terms
of annual flows, because of the constraints weighing down its balance of payments. This
role was now devolved to the United States. During the second half of the 1920s, foreign
issues placed in New York generally exceeded those offered in London by 50 per cent
(respectively, $969 and $592 million in 1924, $1,337 and $676 million in 1927, and $671
and $457 million in 1929). Overall, New York ranked number two, but it should not
be forgotten that in spite of its new world role, it remained as much an American as an
international financial centre. Foreign issues played a secondary role to domestic issues
and accounted for only 15 per cent of the total amount of new issues in the 1920s. In
addition, foreign capital continued to be invested in the United States, both long term
and short term, especially with the bullish trend that marked the decade. This interaction
between national and international business was one of the main characteristics of New
York when compared to London.21
Paris was weakened by the war and dropped from second to third place. France was
crippled by the weakness of the franc, capital flight, and reconstruction requirements.
However, the stabilization of the franc by Raymond Poincaré in December 1926
marked a turning point: Paris recovered part of its pre-war vitality, rekindling
ambitions to compete with London and New York. Berlin paid the price of defeat
and hyperinflation in 1923. Germany became the world’s largest capital importing
country in the 1920s, and it is mainly in this capacity that the German capital
remained a significant international financial centre. Amsterdam, on the other hand,
was commonly described as Germany’s effective financial centre during the years of
inflation and hyperinflation. All the major banks set up there after the end of the war
and were active on the foreign exchange market and later in the acceptance market,
and Amsterdam enjoyed spectacular growth during the 1920s and established itself as
the foremost centre in continental Europe. Zurich and the other Swiss centres (Geneva
and Basel) played a lesser though not insignificant role in attracting foreign capital and
redirecting it abroad – mainly to Germany.
Financial institutions played fundamentally the same role as before the war. Foreign
issues continued to be handled by the merchant banks in the City, with limited
competition from the clearing banks; and by the investment banks in Wall Street, with
increasing competition from the securities affiliates of the big banks, with National City
Bank in the lead. As before the war, both merchant and investment banks were in family
hands, some organized as partnerships, others as limited companies but still controlled
by their owners. With the exception of J. P. Morgan which towered above the rest, they
were small or medium-sized companies. Their global transactions were conducted
from New York or London, without a significant presence abroad – some had a branch
or a subsidiary in another centre (J. P. Morgan, for example, held a majority stake in
Morgan Grenfell in London and Morgan Harjes in Paris), but most worked through
correspondents.
The big banks somewhat retreated on the global financial front. The emergence
of the ‘Big Five’ in England in 1918, which became the world’s largest banks, did not
fundamentally alter their functions. The French banks were weakened by the depreciation
236
of the franc, the loss or closure of several foreign branches (in Russia, the Middle East,
and Latin America), and the slow resumption of foreign investment. The German banks
were stripped of their foreign assets (foreign branches and subsidiary companies). The
American banks made only a short-lived attempt at expanding abroad in the early 1920s:
Their total number of foreign branches soared to 181 in 1920 though it decreased to 107
by 1925. In the end, British overseas banks were the only ones to expand: their network
of branches increased by nearly a thousand to reach 2,353 in 1928, almost exclusively in
their areas of specialization.
The Great Depression was a watershed in the history of global finance. It consisted
of four interrelated shock waves: the Wall Street Crash of October 1929, by a series of
banking crises occurring over a period of five years, the collapse of the world monetary
order, and an economic slump of dramatic proportions. Long-term capital investments
almost completely stopped in the 1930s. New York saw its role as an international
financial centre shrivel: foreign loans, which had been its speciality, fell to less than $300
million in 1931 – less than the issues offered in London – and to less than $100 million
in 1932 and 1933. But the domestic capital market was also shaken, issues on behalf of
companies going from $8 billion in 1929 to $160 million in 1933. In London, foreign
loans outside the British Empire ceased almost completely after September 1931, adding
up to a mere £28.5 million between 1932 and 1938 – that is to say less than 3 per cent of
the total amount of issues in London, as against 17 per cent for imperial issues (£186.7
million), which continued throughout the decade.22 The number of foreign issues as
a whole, including in the empire, thus dropped considerably in the 1930s. However,
Britain’s imperial retreat, strengthened by the formation of the sterling area, made it
possible to conduct international financial transactions from London. Overseas banks,
for example, added another thousand branches to their worldwide, mainly imperial,
network.
From the perspective of global finance, the Second World War was different from
the First if only because global financial activities had started to decline several years
earlier. Moreover the state’s hold over the economy was stronger than it had been
during the Great War, leaving hardly any opportunity at all for bankers and financiers
to take charge of the large financial transactions required by the war effort. Capital
transfers mainly took place within each of the two camps and consisted of state-to-state
transactions, or exactions – the American lend–lease programme on the Allied side
and the extensive use of resources from the occupied territories made by the Reich on
the Axis side.23
Global finance did not rise from the ashes after the Second World War. The
regulations inherited from the 1930s and those established in the immediate post-war
years, including exchange controls, contributed to financial stability but hampered the
re-emergence of a globalized financial world. Until the 1960s, or in some cases the 1970s,
the international financial centres’ business remained mostly confined within national
borders: the golden age of economic growth, between 1950 and 1973 when annual GDP
growth averaged 5 per cent in Europe and 8 per cent in Japan, was not accompanied by
intense international movements of private capital. The largest capital transfers were not
237
left to the private sector, but were undertaken by governments, state bodies, and, to a
lesser extent, multilateral agencies like the International Monetary Fund or the World
Bank. Between 1955 and 1962, foreign issues floated in New York barely reached $4.2
billion – a feeble sum compared with the $126.5 billion for domestic issues, or the $98
billion in economic and military aid granted by the United States to foreign countries
between 1945 and 1952.24
New York emerged as the world’s financial capital and its position remained
unchallenged until the 1960s. However, New York’s pre-eminence corresponded to a
period in which international capital flows were far smaller than before 1931 or after
1980. London’s position was considerably weakened after the war, but it refocused on
the Commonwealth and, particularly, on the sterling area, which enabled it to resume,
in a more limited way, the role it had played on the world stage prior to 1914.25 Paris’
international position after 1945 was a mere shadow of what it had been only some thirty
years earlier. Even more than in Britain, the state’s grip ended up stifling the Parisian
capital market, with foreign issues practically nil during this period.26 In Germany,
Frankfurt took over from Berlin as the country’s financial centre but remained a centre
of national rather than international significance until the late 1970s.27 Zurich was one of
the rare financial markets, along with New York, to strengthen its international position,
probably ranking third (together with Geneva, Basel, and to a lesser extent Lugano)
behind New York and London in the 1960s as the Swiss markets quickly developed their
role for accommodating and investing foreign capital, through international issues and
wealth management.28
In a climate of state intervention and regulation, global business and finance
resurfaced in the late 1950s with the advent of the Euromarkets. The Euromarkets
are markets for transactions in dollars taking place outside the United States, free of
American regulations. For various reasons, dollars started to accumulate in Europe,
especially in London, in the 1950s – the Cold War and the Soviet Union’s fears of having
its dollar deposits frozen in the United States; the overseas investment and growing
payment deficit of the United States; banking regulations, especially Regulation Q,
which put a ceiling on the rate of interests which US banks paid on domestic bank
deposits. The Eurodollar market, a short-term money market, was the first to develop,
when London banks began to use dollars rather pounds to finance third-party trade,
after the British government had banned the use of sterling instruments for such
purposes following the sterling crisis of 1957.29 With the European currencies’ return
to external convertibility in December 1958 and, from the early 1960s, the gradual
relaxing of controls on capital flows, the Eurodollar market expanded rapidly. It was
supplied mainly by American multinationals and by European central banks and
provided credit on a worldwide scale and in hitherto unprecedented proportions,
mainly to finance international trade and other short-term loans. From approximately
$1.5 billion when it started in 1958, this market reached $25 billion ten years later and
$130 billion in 1973.30
The Eurodollar market quickly gave birth to the Eurobond market, a long-term capital
market using Eurodollars not only for bank loans but also for issuing dollar-denominated
238
bonds, in London rather than in New York. The first Eurobond was issued in London
in July 1963 to Siegmund Warburg, on behalf of Autostrada Italiana, a subsidiary of
the state holding company IRI.31 Eurobonds quickly proved very popular, especially as
they were issued to bearer, which means that they were anonymous and exempt from
withholding tax. The Eurobond market grew from about $250 million in 1963 to a yearly
average of over $4 billion ten years later.
A third form of Euro credit − medium term this time, lasting from three to ten
years − developed in the mid-1960s, between short-term, mainly interbank, Eurodollar
deposits, and long-term Eurobonds. These were international bank loans wholly
financed by resources in Eurodollars and generally granted on the basis of floating
interest rates. In view of the growing demand for these loans and the size of the amounts
required, they took the form of syndicated loans bringing several banks together.
Despite the risks associated with interest rate fluctuations, the borrower found this a
more flexible source of funding than a bond issue. From barely $2 billion in 1968, Euro
credits quickly swelled to exceed $20 billion in 1973 − or more than four times the
amount of Eurobonds.
The Euromarkets reshaped the world of international finance. They marked
the start of the huge multinational expansion of American banks. They went from
having 131 branches abroad in 1950 to having 899 in 1986, in addition to their 860
foreign subsidiaries. Europe was the preferred destination: By 1975 the eight largest
American banks had set up 113 branches and 29 representative offices there, London
alone having 58 of them.32 Competition from American banks was particularly
strong. While London bankers were the founders of the Euromarkets, American
banks soon dominated it. The rise of the Euromarkets also signalled the rebirth of
the City of London, which quickly became their natural home. London was certainly
well equipped for hosting these new financial activities – because of the age-old
experience of its bankers, their expertise in international finance, and the diversity
and complementarity of its institutions and markets. The positive attitude of the
British monetary authorities, in contrast to that of their European counterparts, also
made a difference. The first sign of the rebirth of the City was the attraction that it held
for banks throughout the world: The number of foreign banks represented in London
went from 59 in 1955 to 159 in 1970 and 243 in 1975 – that is to say, nearly twice the
corresponding number in New York.33
The City merchant banks and the Wall Street investment managed to retain a share of
the Eurobond market – the issuing business was one of their historical specialities – but
they faced strong competition from both American and European, and later Japanese,
big banks in an increasingly global market. While twelve of them (including Kuhn Loeb,
SG Warburg, Hambros, Morgan, and NM Rothschild) featured among the top twenty
co-lead managers of Eurobond issues in the market’s first five years, between 1963 and
1967, their number had fallen ten years later to six, between 1973 and 1977. In both
periods, the ranking was headed by Deutsche Bank.34 Investment banks and merchant
banks were still dominant in corporate finance, especially mergers and acquisitions, an
activity that took off in the 1960s but was not to become global for another twenty years.
239
However, they were starting to lose their private bank character as most of them not only
converted into public companies (some had done so earlier) but opened ownership and
control to outside interests.
Innovations and deregulations, 1973–2000
The end of the Bretton Woods system in 1971–73 opened a new era of international
capital flows. According to recent estimates, in 2000 foreign assets ($28,984 billion)
represented 92 per cent of world GDP, up from 25 per cent (with $2,800 billion) in
1980 and barely 6 per cent ($147.7 billion) in 1960.35 At the turn of the twenty-first
century, the United States was – as indeed it had been since the end of the Second
World War – the largest holder of capital outside its territory, ahead of Britain, Japan,
Germany, and France – the same countries, in a different order, as before 1914, with
the addition of a newcomer, Japan. The destination of foreign investment, on the other
hand, had changed. At the beginning of the twentieth century, it was the colonies and
new countries that received the bulk of these transfers. A century later, it was the rich
countries of Europe and North America that, with Japan, absorbed more than 80 per
cent of foreign investment.
The upsurge in capital exports started with the demise of the Bretton Woods system
in 1971–73. With the end of fixed exchange rates, free movements of capital became
compatible with an independent monetary policy – in line with the Mundell-Fleming’s
trilemma, according to which only two of these three policy options can be pursued
together. Their continued expansion took place within a new climate marked, in
particular, by financial deregulations and innovations.
The deregulation movement started in the United States, with the liberalization
of the New York Stock Exchange (abolition of fixed commissions) in May 1975,
making competition keener and leading to a consolidation in investment banking.
The City of London followed in October 1986 with ‘Big Bang’, also a reform of the
stock exchange (abolition of fixed commission and of the separation, unique to the
London Stock Exchange, between the functions of brokers, who acted on behalf
of clients, and jobbers, who were market-makers); it was also decided to open the
London Stock Exchange, and by extension the City, to the outside world by permitting
banks, both domestic and foreign, to buy member firms, hitherto banned. In Paris,
the stockbrokers’ monopoly was abolished in 1992. In Germany, the Bundesbank
authorized floating-rate issues in 1984–5, despite its distrust of financial innovation,
and allowed foreign banks to act as lead banks for foreign issues in Deutsche marks.36
The wave of deregulation culminated in 1999 when the Glass-Steagall Act of 1933 was
repealed by the Financial Modernization Act. Commercial banking and investment
banking could again be brought together on the grounds that new financial
instruments justified greater concentration among the various intermediaries in the
world of finance.
240
Financial innovation became, as never before, an integral part of global finance. Three
main factors account for this development. One was the incredible progress made in
computing, which enabled the new financial products to reach an otherwise impossible
degree of sophistication. Another was the application to the market of theoretical
advances made in the field of financial economics (Markowitz and Sharpe’s modern
portfolio theory, Fama’s efficient market hypothesis, Black and Scholes options pricing
model, and others), opening the way for the design of ever more complex financial
products. And a third was the liberalization of the financial markets, whose aim was to
improve their efficiency by encouraging financial innovations – which remained very
lightly, if at all, regulated.
The end of Bretton Woods offered an incentive. Modern derivatives, which have
been at the heart of the financial revolution of the late twentieth century, came into
being in Chicago in 1972 with the creation of the International Monetary Market, where
currency contracts were traded – the initiative was taken to provide facilities for hedging
against foreign exchange fluctuations. The Chicago Board Options Exchange, where
options were traded on shares, was founded a year later. Europe followed with LIFFE
(London International Financial Future Exchange) in 1982, MATIF (Marché à Terme
des Instruments Financiers) in Paris in 1986, and DTB (Deutsche Termin Börse) in
Frankfurt in the early 1990s.
Derivatives were also combined with a new investment medium: alternative
management funds, better known as hedge funds, which appeared in the 1980s.37 They
were usually domiciled in an offshore centre, were highly leveraged, and took short
positions, through derivatives or forward operations. Their managers, who often made
the headlines in the financial press, earned high bonuses – generally reaching 20 per
cent of profits above a certain threshold plus 1.5 to 2 per cent management fees – and,
as a rule, invested their own funds alongside those of their clients. Their growth was
phenomenal during the 1990s, from a few hundreds to nearly 3,000 by 2006, with
nearly $1,000 billion of funds managed. And if they enjoyed spectacular successes (with
George Soros allegedly making £1 billion in 1993), they also suffered severe setbacks,
most spectacularly with the failure of LTCM (Long-Term Capital Management) in 1998,
which had a debt-to-equity ratio of 25 to 1 and two economics Nobel Prize winners
(Robert Merton and Myron Scholes) on its board of directors.
Banking and financial practices have been deeply transformed by what has become
known as securitization – the conversion of various types of debt, especially loans, into
marketable securities. Its novelty resided in the type of assets converted into securities
and the type of ‘financial products’ emerging from this conversion. Typically, they were
derivatives. Mortgages were the first debts to be securitized, in the form of mortgage-
backed securities; other assets, in particular consumer debt (insurance policies, car
loans, credit card loans, student loans, and so on), were in turn securitized, bearing the
generic name of assets-backed securities; credit derivatives were also developed, in the
first place Credit Default Swaps, which offered protection against the risk of default on
a debt through a contract between two parties, the seller as it were insuring the buyer in
return of the payment of a regular fee.
241
The securitization process was mainly undertaken by investment banks in New

York and London, thus enhancing the position of these two centres in the age of global
finance. By the turn of the twenty-first century, New York was still in the first place,
by far the largest capital market, even if London had the edge in direct international
financial activities, ranking first for international banking, asset management, and
foreign exchange, and attracting the highest number of foreign banks (481 as against
287 in New York). These two centres were well ahead of the pack. New York clearly set
the tone in international banking and financial business, if only because of the might of
the American banks, mostly based in New York, and on which a great deal of London’s
international influence depended. London’s policy of opening up to the world had been
kept up relentlessly and had borne fruit, at the cost, however, of a certain eclipse of
British financial institutions and the City’s dependence on foreign banks – what has
sometimes been called the ‘Wimbledon effect’.38
The major newcomer of the post-war era was Tokyo. As a result of Japan’s rise to the
rank of economic superpower, Tokyo established itself as a major international centre
during the 1970s, going in twenty years from being a regional financial centre to a centre
of world dimensions. And the possibility that Tokyo might overtake New York and
become the world’s leading financial centre did not seem entirely fanciful at the end of
the 1980s, though such judgements proved too hasty. The American economy, far from
declining, enjoyed spectacular growth in the 1990s whereas the Japanese economy went
into a long slump after the burst of the stock exchange and property bubbles in 1990,
which had severe repercussions for Tokyo’s international position.
Frankfurt only overtook Zurich and Paris to become continental Europe’s leading
financial centre in the late 1980s. The decision in 1992 to establish the headquarters
of the new European central bank in Frankfurt gave it a further boost, raising hopes
that it might eventually overtake London, but this appeared highly unlikely a decade
later. Paris regained some ground from the 1980s, without, however, really finding its
role. Paris did not dominate any of the main fields of international financial activity,
but held some aces, especially in asset management as well as in the bond market
and derivatives. Zurich and Geneva continued to figure among the leading centres,
increasingly specializing in wealth management, with 35 per cent of the world’s private
offshore wealth in the early 2000s, as against 21 per cent for Britain and 12 per cent for
the United States.
The number of emerging, or rather aspiring, international financial centres
increased significantly in the last two decades of the twentieth century. Several
cities, especially in emerging economies, were actively promoted with the aim of
their gaining the status of regional or even global international financial centre.
Two centres were particularly successful in managing this transition: Singapore and
Hong Kong, both with solid banking institutions, inherited from the British overseas
banks, advantageous geographical location, and stable political regimes, despite the
uncertainties related to Hong Kong’s return to its big neighbour in 1997 – all essential
requirements for the rise of an international financial centres, which were rarely met
in most emerging economies.
242
Singapore’s development was nonetheless the result of a systematic effort made on the
part of the authorities, immediately upon the country’s independence in 1965, to turn
it into an international financial centre by hosting the nascent Asian dollar market (the
counterpart of the Eurodollar market in London) and encouraging the emergence of a
bond market. Singapore’s financial markets really took off in the 1980s, and the foreign
exchange market grew in its wake to reach fourth position in 1998, behind London,
New York, and Tokyo; derivatives started being traded in 1984 with the foundation of
SIMEX; and as a result, an increasing number of foreign banks set up there, reaching
260 in 1995.39 In Hong Kong, by contrast, the authorities adopted a non-interventionist
stance, at the same time creating conditions conducive to developing financial activities,
notably a favourable tax system and modern infrastructure, in addition to the absence of
exchange control, a robust legal system, the existence of the rule of law, and its position
as the door for a China that began to open up to the world at the end of the 1970s.40
Syndicated Euro credits found a home here, with operations on behalf of enterprises and
governments in the region’s main economies – Japan, Taiwan, South Korea, Australia
and New Zealand, later joined by Thailand, the Philippines and, above all, China. In
the space of about ten years, Hong Kong established itself as the world’s third centre for
Euro credits, behind London and New York. Its international status was mirrored in the
presence of foreign banks, numbering 357 in 1995, that is to say more than any financial
centre except for London.41
New York, London, Hong Kong, and Singapore stood at the apex of a hierarchy of
financial centres. The Global Financial Centres Index listed forty-six centres when it
was first published in 2007, with London ranked first (in terms of competitiveness)
and Athens forty-sixth. The number had nearly doubled nine years later. Multinational
banks considerably expanded in the second age of global finance, with a much stronger
presence in the financial centres of both advanced and emerging economies – from
about 20 per cent, in terms of number, in 1995, to 34 per cent in 2009, with some
countries, especially in Eastern Europe, having more than 50 per cent of assets controlled
by foreign banks.
These developments were at once the cause and the consequence of the emergence of a
new type of multinational banks, that some have called ‘transnational banks’, in a different
meaning from the one used earlier in this chapter, to underline both the quantitative and
qualitative differences with their predecessors – in terms of size, internal organization,
geographical spread, and range of activities.42 The specialized British overseas banks,
which had dominated multinational banking since the mid-nineteenth century, had
lost their competitive advantage by the 1960s. By the turn of the twenty-first century,
global finance was dominated by the world’s leading universal banks (Citigroup, J. P.
Morgan Chase, Bank of America, HSBC, RBS, Barclays, Deutsche Bank, BNP Paribas,
UBS, Credit Suisse, and a few others). The largest, Citigroup, had offices in over 100
countries and employed nearly 370,000 people in 2007, before the crisis. It was engaged
in all types of banking and financial activities, including retail banking, investment
banking, trading, wealth management, and alternative investments such as hedge funds
and private equity. Even more significantly, the bank had internalized its international
243
activities, and was able to draw resources from one place and exploit them in another. All
universal banks had more or less adopted this model.
Conclusion
This chapter, like the rest of the book, ends around 2000, in other words before the
financial crisis of 2008. However, it is impossible to end this overview of the rise of
global finance since the mid-nineteenth without briefly considering the effects of the
most severe financial crisis in modern history – the result of global imbalances and low
interest rates, highly complex and not always well-understood financial instruments,
and irresponsible risk-taking reflected in exceptionally high leverage ratios hidden in
off-balance-sheet operations. At the time of writing, in summer 2016, two points are
worth highlighting.
The first is that the financial crisis has slowed down the tremendous rise of
finance – as an economic, social, political, and cultural phenomenon, sometimes called
‘financialization’. However, despite the regulatory measures taken at both national and
international levels, the financial sector, in other words global finance, as the two
have been inextricably linked since the end of the twentieth century, has continued
to grow – in contrast with what happened during the half-century that followed the
Great Depression. There are several reasons for this: the costs of cutting the financial
sector down to size, if only because of its share of national income and employment;
the political climate in the advanced economies most affected by the crisis, which
has been able to accommodate protest against financial abuses; and the international
context, where old and new tensions have not threatened the globalization of the
world economy.
The second point is that the financial crisis has not fundamentally altered the balance
of power in global finance. New York and London have remained the two leading
international financial centres and have not been toppled by Hong Kong, Singapore,
Shanghai, or Dubai. Changes of this magnitude have occurred very rarely in history –
only three cities (Amsterdam, London, and New York) have in turn been the world’s
leading financial centre in the last 300 years – and were very slow processes – as
witnessed for example by the replacement of London by New York as the nerve centre of
world finance. Emerging markets will have to meet several conditions, not least in terms
of wealth, depth of skill, and openness, before claiming the mantle.
The financial debacle of 2008 may have undermined global finance, but it did not
kill it. It is to be hoped that the crisis was severe enough to serve as a warning and
ensure that the global financial system rests on more solid grounds. A retreat from global
finance has never been a natural swing of the pendulum. It has always been the result of a
devastating financial crisis. And the upheavals of the world’s financial order have tended
to take place in the midst of military cataclysms.
244
Notes
1. M. Obstfeld and A. Taylor (2004), Global Capital Markets: Integration, Crisis and Growth.
Cambridge: Cambridge University Press, 52.
2. Estimations based on A. Imlah (1952), ‘British balance of payments and the export of capital,
1816–1913’, Economic History Review, 2 (2), 235–6; and M. Lévy-Leboyer (1977), ‘La balance
des paiements et l’exportation des capitaux français’, in M. Lévy-Leboyer (ed.), La position
internationale de la France: Aspects économiques et sociaux XIXe-XXe siècles. Paris: Editions
de l'École des Hautes Études en Sciences Sociales, 119–20.
3. P. Bairoch (1997), Victoires et Déboires: Histoire Economique et Sociale du Monde du XVIe
Siècle à Nos Jours, 3 vols. Paris: Gallimard, vol. 2, 123, 127, 175–9.
4. P. Bairoch (1976), Commerce Extérieur et Développement Economique de l’Europe au XIXe
Siècle. Paris: La Haye Mouton.
5. See S. B. Saul (1960), Studies in British Overseas Trade, 1870–1914. Liverpool: Liverpool
University Press; and F. Crouzet (1964), ‘Commerce extérieur et empire: l’expérience
britannique du libre-échange à la Première Guerre mondiale’, Annales E.S.C., 19 (2),
281–310.
6. See D. Kynaston (1994), The City of London. Volume I: A World of Its Own 1815–1890. London:
Chatto & Windus; Idem (1995), The City of London. Volume II: Golden Years, 1890–1914.
London: Chatto & Windus; R. Michie (1992), The City of London: Continuity and Change,
1850–1990. Basingstoke and London: Macmillan; Y. Cassis (2006), Capitals of Capital: A
History of International Financial Centres 1780–2005. Cambridge: Cambridge University Press.
7. See S. D. Chapman (1984), The Rise of Merchant Banking. London: Allen & Unwin.
8. G. Jones (1993), British Multinational Banking 1830–1990. Oxford: Clarendon Press.
9. R. Michie (1999), The London Stock Exchange: A History. Oxford: Oxford University Press,
88.
10. B. Eichengreen (1996), Globalizing Capital: A History of the International Monetary System.
11. A. Plessis (2005), ‘When Paris dreamt of competing with the City’, in Y. Cassis and E.
Bussière (eds), London and Paris as International Financial Centres in the Twentieth Century.
Oxford: Oxford University Press, 42–54.
12. P. Hertner (1990), ‘German banks abroad before 1914’, in G. Jones (ed.), Banks as
Multinationals. London: Routledge, 99–119.
13. W. J. Hausman, et al. (2008), Global Electrification: Multinational Enterprise and International
Finance in the History of Light and Power, 1878–2007. New York: Cambridge University
Press.
14. V. Carosso (1970), Investment Banking in America: A History. Cambridge, MA: Harvard
University Press.
15. H. van B. Cleveland and T. H. Huertas (1985), Citibank 1812–1970. Cambridge, MA:
Harvard University Press.
16. For the purpose of this study, ‘transnational banks’ has been defined as comprising both
the multinational banks headquartered in a financial centre and the branches/subsidiaries
of foreign banks established in that centre. See Y. Cassis (2016), ‘International financial
centres’, in Y. Cassis, R. Grossman and C. Schenk (eds), The Oxford Handbook of Banking and
Financial History. Oxford: Oxford University Press, 302–3.
17. M. Flandreau and D. Zumer (2004), The Making of Global Finance 1880–1913. Paris: OECD.
245
18. M. Bordo and H. Rockoff (1996), ‘The Gold Standard as a “Good Housekeeping Seal of
Approval”’, Journal of Economic History, 56 (2), 389–428; N. Ferguson (2005), ‘The City of
London and British imperialism: New light on an old question’, in Cassis and Bussière (eds),
London and Paris, 57–77.
19. D. Artaud (1978), La Question des Dettes Interalliées et la Reconstruction de l'Europe (1917–
1929). Paris: Champion.
20. C. H. Feinstein and K. Watson (1995), ‘Private international capital flows in Europe in the
inter-war period’, in C. H. Feinstein (ed.), Banking, Currency and Finance in Europe between
the Wars. Oxford: Oxford University Press, 94–130.
21. M. Wilkins (1999), ‘Cosmopolitan finance in the 1920s: New York’s emergence as an
international financial centre’, in R. Sylla, R. Tilly and G. Tortella (eds), The State, the
Financial System and Economic Modernization. Cambridge: Cambridge University Press,
271–91.
22. T. Balogh (1947), Studies in Financial Organization. Cambridge: Cambridge University Press,
250.
23. A. S. Milward (1977), War, Economy and Society, 1939–1945. London: Allen & Unwin.
24. M. Nadler, S. Heller and S. Shipman (1955), The Money Market and Its Institutions.
New York: Ronald Press, 290–1; R. Orsingher (1964), Les Banques dans le Monde. Paris:
Payot, 140–1.
25. Michie, The City of London; D. Kynaston (2001), The City of London: Volume IV: A Club No
More 1945–2000. London: Chatto & Windus.
26. L. Quennouëlle-Corre (2015), La Place Financière de Paris au XXe Siècle: Des Ambitions
Contrariées. Paris: Comité pour l’Histoire Economique et Financière de la France.
27. C.-L. Holtfrerich (1999), Frankfurt as a Financial Centre: From Medieval Trade Fair to
European Banking Centre. Munich: C. H. Beck.
28. M. Iklé (1970), Die Schweiz als Internationaler Bank- und Finanzplatz. Zurich: Orell Füssli.
29. C. Schenk (1998), ‘The origins of the Eurodollar market in London, 1955–1963’, Explorations
in Economic History, 35 (2), 221–38; S. Battilossi (2002), ‘Introduction: International banking
and the American challenge in historical perspective’, in S. Battilossi and Y. Cassis (eds),
European Banks and the American Challenge Competition and Cooperation in International
Banking Under Bretton Woods. Oxford: Oxford University Press, 1–35.
30. (1996), International Capital Markets Statistics, 1950–1995. Paris: OECD.
31. I. M. Kerr (1984), A History of the Eurobond Market: The First 21 Years, London: Euromoney
Publications; N. Ferguson (2010), High Financier. The Lives and Time of Siegmund Warburg,
London: Allen Lane.
32. T. F. Huertas (1990), ‘U.S. multinational banking: history and prospects’, in Jones, Banks as
Multinationals, 253.
33. M. Baker and M. Collins (2005), ‘London as an international banking centre, 1950–1980’, in
Cassis and Bussière (eds), London and Paris, 248–53.
34. Kerr, A History of the Eurobond Market, 29 and 53.
35. Obstfeld and Taylor, Global Capital Markets, 53.
36. G. Franke (1999), ‘The Bundesbank and financial markets’, in Deutsche Bundesbank (ed.),
Fifty Years of the Deutsche Mark. Oxford: Oxford University Press, 246–53.
37. S. Mallaby (2010), More Money than God: Hedge Funds and the Making of the New Elite.
London: Bloomsbury.
246
38. R. Roberts and D. Kynaston (2001), City State. How the Markets Came to Rule Our World.
London: Profile Books.
39. R. C. Bryant (1989), ‘The evolution of Singapore as a financial centre’, in K. S. Sandhu and
P. Wheatley (eds), Management of Success: The Moulding of Modern Singapore. Singapore:
Institute of Southeast Asian Studies, 337–72; D. R. Lessard (1994), ‘Singapore as an
international financial centre’, in R. Roberts (ed.), Offshore Financial Centres. Aldershot:
Edward Elgar, 200–35.
40. Y. C. Jao (1983), ‘Hong Kong as an international financial centre: Evolution and prospects’,
in R. Roberts (ed.), International Financial Centres of Europe, North America and Asia.
Aldershot: Elgar, 491–534; C. Schenk (2001), Hong Kong as an International Financial
Centre: Emergence and Development, 1945–1965. London: Routledge.
41. R. Roberts (1998), Inside International Finance. London: Orion.
42. C. Kobrak (2016), ‘From multinational to transnational banking’, in Cassis, Grossman and
Schenk, The Oxford Handbook of Banking, 163–90.
247
248
PART III
REGIONAL PERSPECTIVES TO
GLOBAL ECONOMIC CHANGE
250
CHAPTER 14
AFRICA: ECONOMIC CHANGE SOUTH
OF THE SAHARA SINCE C. 1500
Gareth Austin
This chapter tries to identify the major sources of economic change in sub-Saharan
Africa from the external slave trades onwards, to highlight the implications for the global
debates about the evolution of inequality between different world regions, and assess
the respective importance of resources and institutions as engines of economic change.1
It will be argued that, while external influences have often facilitated and triggered
economic change in Africa, internal influences have been crucial to the extent and shape
of those changes. It will also be suggested that it is neither resource endowments nor
institutions as such that have usually been decisive, but rather the interaction between
them: with institutions generally not only responding to the resources available, but also
gradually changing them.2
The main discussion is organized in four sections. As a preface, the first problematizes
the traditional Eurocentric periodization of Africa’s economic past. The second section
focuses on the internal variables by summarizing the main features of Africa’s changing
resource (‘factor’) endowment from the sixteenth to the early twentieth century, and
tracing a cluster of institutions with which that resource complex was associated. The third
section considers the impact on African economies of the combination of external changes
in technology and patterns of demand. The fourth section discusses what otherwise
contrasting literatures consider to be the most important set of institutional changes:
those in property and labour regimes associated with capitalism (arrangements which
in Africa are traditionally seen as imported innovations and whose implementation and
evolution have, however, been strongly shaped by the land–labour ratio within the region)
and its transformation over the last century. The conclusion draws the threads together,
emphasizing their entanglement, and reflects on their implications for the global issues.
Period and agency in African history
Over the last sixty years, specialists in African history have challenged the traditional
perception that economic change in the sub-Saharan subcontinent was largely absent
or essentially exogenous. In this view, a long-term stagnation was initially modified by
North African, Asian, and especially European commercial contact, most notoriously
the external slave trades; with major economic and demographic change starting under
colonial rule and continuing since independence – still in the context of continued
dependence on external relationships, with disappointing welfare results often

accompanied by political instability and violence. In contrast, the historical research
conducted in recent decades generally emphasizes the importance of African agency
(Africans making, or actively participating in making, their own histories) and change
and variation within African economies. Yet to a certain extent, the old view, in various
forms, continues to frame the ways in which most scholars in various disciplines view
African history. This is partly because the revisionist research has tended to be relatively
local in focus, whereas the older views have been restated at a general level, in the
categories of successive theories (dependency and world systems3 and some forms of
rational-choice institutionalism4) that have themselves functioned to re-dress (rather
than redress) the narrative of European (or North Atlantic) exceptionalism against
which sub-Saharan Africa continues to be used as a convenient ‘other’.
The continued priority of external sources of change in contemporary understandings
of African economic history is expressed most strongly in the persistence of the
traditional tripartite political periodization: pre-colonial, colonial, and post-colonial.
For economic history, this has been questioned, but the most influential challenges tend
to be at sub-regional level. For South Africa, it is widely accepted that a critical watershed
was the mineral revolution of the 1860s–1880s, without which the subsequent growth
of manufacturing would have been greatly attenuated.5 Again, A. G. Hopkins made an
influential proposal that ‘the modern economic history of West Africa’ should be dated
not from colonization in the late nineteenth century but from the early-nineteenth-
century transition in the Atlantic trade, from the export of slaves to that of agricultural
produce. This was a defining watershed in that it involved the entry of small-scale
producers into intercontinental trade for the first time on a wide scale.6 But the only
commonly accepted challenge to the traditional periodization for the region as a whole
is the view that the independence of most of tropical Africa, around 1960, was a lesser
turning point than the growth of state intervention in African economies, dating from
the Second World War and its immediate aftermath, or indeed from the 1930s.7
Let us consider the respective roles of external and domestic influences on the
turning points of African economic history in more detail, taking as an example the
post-independence era. Within this, it makes sense to identify the 1980s as a policy
watershed: when state-led development policies gave way, via ‘Structural Adjustment’,
to the liberal economic regimes that have characterized the region ever since. Regarding
economic growth, three periods can be distinguished at the level of the region as a whole:
relatively slow growth of output (in real GDP per capita), averaging little more than 1
per cent per year c. 1960 to 1975; stagnation over the following two decades, with some
years of actual decline; and a general expansion over the twenty-plus years from c. 1995,
at about 2 per cent per capita. The external influence on this regional growth record is
palpable: the first OPEC oil price shock, in 1973, was a brake on economic growth in
most sub-Saharan countries, few of whom were yet oil exporters. Conversely, the recent
general economic expansion – spread more widely across the region than earlier booms
– was at least initially stimulated by the rise in world commodity prices led by China’s
industrialization. Yet, at least until that boom, shifts in interregional terms of trade
252
Africa: Economic Change South of the Sahara since c. 1500
correlate rather weakly with the records of individual national economies. Most African
economies did relatively well in part of their post-independence history, but almost all of
them also had at least one period of stagnation or even decline.8 Côte d’Ivoire and Ghana,
cocoa-growing neighbours with similar factor endowments, followed almost opposite
trajectories for half a century: a contrast which cannot be explained primarily by external
influences, but rather owes much to very different policy choices in the early decades
of independence.9
The general policy shift that was Structural Adjustment is often casually attributed
entirely to external pressure, from the International Monetary Fund (IMF) and the
World Bank. They provided loans in return for which national governments accepted
packages of economic liberalization, shifting the mechanism of allocation of resources
and goods from administration to markets. Certainly, the Washington-based institutions
were crucial to the process, but it is important not to overlook the domestic pressures,
which in many countries led governments to embark on Adjustment. In contrast to
Latin America, at the beginning of the 1980s, few African governments had big debts
to foreign banks, because the banks would not lend to them. Indeed in Africa huge
sovereign debt to export ratios were usually a consequence of Adjustment rather than
a cause. Between 1980 and 1995, for sub-Saharan Africa, the ratio of external debt to
exports jumped from 90 per cent to 241 per cent, whereas for Latin America and the
Caribbean the rise was from 206 per cent to 212 per cent.10 A bigger problem for many
African countries at the start of the 1980s was profound shortages of government revenue
and import-purchasing power as a result of having increasingly overvalued, more or less
non-convertible, currencies that acted effectively as instruments of penal taxation on
their exporters (this did not apply to nearly the same extent, nor in the same way, to the
franc zone countries, for whom Adjustment was less radical because their currency was
already fully convertible). Faced with official prices that made it unprofitable to produce
or sell, including for domestic markets, farmers and traders in countries from Guinea
to Tanzania to the then (Congo) Zaire bypassed official markets.11 This unorganized
economic resistance from below did much to end the era of state-led development
policy. It does much to explain why the governments concerned reluctantly decided to
accept the IMF and World Bank’s offer of credit to assist them to shift from state to
market-based development policies. Thus, for both policy and performance, the major
trends and turning points of post-independence economic history have been very much
the outcome of interactions between external and internal variables.
Resources, techniques, and institutions within Africa, 1500–c. 1918
Most of sub-Saharan Africa, most of the time, was characterized by a relative abundance
of cultivable land in relation to labour, often until far into the twentieth century, and
in some areas, even until today. That is to say, over any period longer than it took to
clear the bush, the expansion of agricultural output was unconstrained by the physical
availability of land. Because most of the capital goods used in arable agriculture,
253
handicraft production, and small-scale mining were created by simple tool-aided labour,
output was mainly a function of labour inputs. In much of tropical Africa, labour scarcity
was relieved by an extremely uneven seasonal distribution of rainfall: for much of the
dry season, there was (as of 1500 and, in most areas, even 1850) little that could be done
in agriculture, freeing labour variously for hunting, mining, and handicraft production.
Meanwhile, sleeping sickness made the use of large animals unsustainable, whether for
transport or ploughing, wherever the parasite’s host, the tsetse fly, was endemic: the
forest zones and shifting zones within the savannas.12 In this forbidding context, it is
almost superfluous to add that, of two geographical features particularly favourable to
early industrialization, Africa was short on one, navigable rivers, and completely lacking
in the other, large supplies of coal and iron ore in close proximity to each other. The
physical abundance of land at least reduced certain sources of risk to food security.
The downside was that the fertility of the soils, derived from one of the oldest bedrocks
on the planet, was often low; and where it was high, it tended to be easily exposed to
degradation from severe rain or sun.13
While agricultural techniques varied across Africa, it is difficult not to see their
prevailing features as specific responses to these physical conditions: a preference for
land-extensive methods in the prevalence of itinerant pastoralism in herding areas, and
various forms of hoe-based land rotation in arable ones, with the largest trees often being
left to stand in cultivated fields. Conversely, the low opportunity cost of dry season labour
facilitated labour-intensive production off the farm, notably a preference (especially in
West Africa) for cloth woven on the narrow loom.14
Despite the prevalence of land-extensive techniques in agriculture, intensification
(defined as raising the ratio of capital and/or labour inputs per unit of land) in such forms
as terracing and irrigation was ancient in parts of eastern, southern, and even western
Africa. It was used to be thought that, nevertheless, there was no cumulative trend towards
intensification, because irrigation or terracing came and went in particular sites, albeit
in some cases lasting centuries before their demise. Recent research suggests, however,
that there was a net expansion of intensive agriculture during the sixteenth to nineteenth
centuries,15 though the extensive methods mentioned above remained predominant
until land became scarce, which it did it in many countries in the twentieth century.
Alongside the general (though not universal) preference for land extensiveness in
agriculture was a cluster of very widespread institutional features, notably strong social
approval for mothers (and fathers) who had many children;16 broadly defined kinship
groups and diverging inheritance;17 relatively open access to land, in the sense of
readiness to grant use rights in land even to strangers providing they acknowledged the
ultimate ownership of the existing owners, who were often a lineage or chieftaincy;18
widespread property in people, including children, wives, subjects, and also slaves and
pawns;19 and the persistence of ‘stateless’ (segmentary lineage) societies and small states
alongside large kingdoms and empires, through to the European partition of Africa
from 1879.20 These institutional patterns, like the characteristic choices of technique, can
be understood as reflecting the combination of land abundance and constraints upon
intensification: settings in which the production of large grain surpluses was unnecessary
254
(given low population density and widespread self-sufficiency in basic staples) and/or
difficult (where soils did not readily support short fallowing cycles). In such contexts,
there was usually no market in land rights (any payments were token or customary)
but people – not only children and adults, kin, but also immigrants – especially people
who were in some sense dependents, were valued as current or future producers and
reproducers, and possessing them raised the owners’ prestige. Inheritance systems were
organized not to transmit capital to narrowly specified heirs, but rather to spread what
property there was widely, the better to reinforce alliances and thereby share and reduce
risks, whether to nutritional or physical security. State formation was inhibited (though
not prevented) by the difficulty in concentrating the means to support political and
military specialists. Meanwhile, long-distance trade, spanning polities (large or small)
and cultures, could be facilitated by the construction of ethnic and religious trading
diasporas, which created internal moral communities, offering gains from (otherwise
much more limited) trade to producers and consumers at the cost of some monopoly
profit for the intermediaries.21
The argument for seeing these institutional patterns as responses to the characteristic
complex of resource conditions described above is borne out by what happened where
resources were different, or when they changed. The most enduring exception to the
difficulty of political centralization was the kingdom of Abyssinia in what is now northern
Ethiopia. This was indeed an ‘exception that proves the rule’ as its fiscal and logistical
base was grain surpluses paid as tribute by a peasantry in an environment supportive of
at least semi-intensive agriculture, with a long history of plough use.22 Where land rights
became locally scarce, land markets could emerge, as in Akwapim district in southern
Ghana in the pre-colonial and early-colonial nineteenth century,23 and access to land
could be newly restricted to close kin, as on the ‘Kikuyu reserve’ in central Kenya in
the 1940s, when young, unmarried adults who had been ‘squatting’ on land reserved
for European settlers returned home to find that cash crops and population growth had
made previously cheap and abundant land economically valuable.24
Conflicts of interests, in some cases violent, were not limited to when the older
institutions broke down or were transformed. High social valuation of children was one
of the motives for polygamy, which tended to promote the concentration of wives among
older, wealthier men.25 In certain circumstances the value of labour was converted
into slavery and debt bondage, especially when the demand for labour for commodity
production rose, as in both West and East Africa during much of the nineteenth
century.26 The widespread survival of stateless societies and small states owed much to
the determination of some small-scale societies to resist incorporation,27 combined with
the failure of state-builders to establish or extend their boundaries as far as they wished:
reflecting the widespread difficulty of extracting regular grain surpluses sufficient to
support a substantial class of military specialists.
The propensity to use land-extensive methods of production, noted above, is best
seen not as a static residual but as a path of development. Specifically, for most of sub-
Saharan Africa, the pattern of endogenous change from the fifteenth century to the late
nineteenth or twentieth century can be described as following an overarching land-
255
extensive path of economic development within which, however, there were intensive
elements.28 The land-extensive path may be defined as ‘a general, long-term revealed
preference for methods which used additional land where that would raise returns
on labour or capital, or conserve the latter’.29 To enlarge on a point introduced above,
this preference could be seen most widely and importantly in arable farming, notably
with the predominance of the hoe over the plough, the avoidance of clear felling, and
the preference for polyculture (planting more than one crop in the same field) over
monoculture. In pastoralism it was found, albeit to a large extent of necessity, in the
widespread practice of transhumance, motivated especially by the need to keep the cattle
away from the tsetse flies when the latter advanced during the rainy season. Even slave
raiding can be viewed as a form of land extensiveness, albeit with extremely high costs
to the region as a whole.
A land-extensive path of development, as distinct from a land-extensive strategy
at a given moment, actually entails phases of intensification: when it was necessary to
increase the ratio of labour and/or capital per hectare in order to take a step forward in
total factor productivity. This is not to be confused with labour intensity by default, as in
the reliance on headloading in the tsetse-fly zones, where pack animals were unavailable.
It is also not to be confused with the labour intensity in dry-season occupations, such
as mining and handicrafts, made possible by the low opportunity cost of labour during
the agricultural off season. Rather, the most general example of a phase of intensification
within an overarching path of land extensiveness was the transition from hunting and
gathering, or even from itinerant pastoralism, to settled agriculture, though the former
transition had mostly occurred before our period. The most important example in the
early colonial period was the adoption of tree crops in certain colonies, notably cocoa
beans in Ghana and Nigeria. This entailed a new production function and much fixed
capital formation.30 Even so, West African farmers chose to farm cocoa in as land
extensive a fashion as possible, planting trees close together to minimize weeding at
the cost of lower output per hectare, and temporarily abandoning capsid-infested farms
so that the cocoa trees became overshadowed by the returning bush, leading to the
disappearance of the pests. The farm could then be literally cut out of the bush and
restored to production; this practice is distinct from the intense application of sprays and
labour time to direct but unsuccessful action against the infestation. The efficiency of this
approach, under tropical African conditions, was demonstrated by the comprehensive
victory of Ghanaian cocoa farmers, large and small scale, in competition with European
planters during the early colonial period.31
Given the relative scarcity of labour, there were three major ways of raising the rate
of return for principals, whether they were individual farmers, household heads, or
rulers.32 The first was raising labour productivity in agriculture. African farmers did this,
above all, through trial and error with crops and crop varieties, resulting in the selective
adoption and adaptation of a range of exotic cultigens, on which more in the next section.
Agricultural productivity was also raised in some contexts by the adoption of the plough:
where soils were thick enough and demand high enough, as in the Cape and Natal in
the mid-nineteenth century. The second approach to increasing the rate of return was to
256
raise the productivity of labour outside the traditional agricultural year. There are a range
of examples of how this was done before colonization, including double-cropping where
new crops made that possible. In the twentieth century, the most important contribution
was the mechanization of transport. The third strategy was to reduce the supply price of
labour by coercion. The Nieboer-Domar hypothesis, that coercion of labour paid under
conditions of land abundance in the absence of sizeable capital formation or economic
advantages of scale, applied strongly to tropical Africa before colonization and again into
the early twentieth century.33 From the fifteenth to the end of the nineteenth century, in
arable and mixed farming areas, increases in demand for commodities tended to be met
by the acquisition of slaves, usually by purchase from the original captors, often via more
than one set of intermediaries. The nineteenth century saw a major increase in the scale
of slavery in West Africa and parts of East Africa, such as the kingdom of Buganda.34
The same logic was operative under colonial rule, where, if slavery was forbidden, other
forms of coercion could be applied to the same end, as will be highlighted below.
The overall effect of the non-coercive human responses to relative scarcity of labour in
relation to land, limited soil fertility, and the other features of the physical environment
of fifteenth- to early-twentieth-century Africa was to loosen – and ultimately to
transform – the resource constraints: extending the effective agricultural year, raising
productivity in and outside agriculture, and, after 1918, beginning to move the overall
factor ratio from land abundance to land scarcity. High social approval of large families
contributed to the demographic expansion that improving public health made possible
over subsequent decades.35 In the twentieth century as a whole, the population of sub-
Saharan Africa rose by perhaps six times. In much of this, however, interaction with
external influences was critical.
External influences: Technology and demand from 1500 to the present
Let us turn to the interaction of African economies with external markets and, relatedly,
external technological changes. While sub-Saharan Africa had an endogenous trajectory
of land-extensive economic growth, however intermittent and long-term, the growth
that was achieved, and the costs involved, owed greatly to its involvement in trade
between different regions of what became the world economy. Three features stand out.
First, and most positively, as Paul Richards has phrased it, the present crop repertoire
of African agriculture reflects selective adoptions and adaptations, via local trial and
error – natural and cultural selection – over many centuries.36 Sub-Saharan Africa was
an integral part of the Old World, and the initial borrowings were from Asia: notably
the banana-plantain family, which was eventually adopted throughout the tropical
latitudes of the continent, and beyond. In the Bugandan environment, for example, it
made possible an exceptionally high productivity food culture, covering nutritional
requirements with labour inputs that were unusually small by African standards.37 After
the Portuguese connected Africa and the New World, effectively from the sixteenth
century, a series of crop imports from the Americas began, including maize and cassava
257
(manioc), groundnuts (peanuts), different varieties of cotton, and in the nineteenth

century, cocoa beans, while some rice varieties moved in the opposite direction. For the
productivity of both labour and (less important at the time) land in African agriculture,
maize in particular was ‘revolutionary’, according to major sub-regional histories.38
Cassava was adopted more selectively and gradually, and incorporated into local diets in
differing ways. Crucially, its drought resistance improved food security, and its tolerance
of relatively poor or depleted soils prompted a further round of adoption in the mid-
twentieth century, in export-crop-growing areas in which fertile land was becoming
scarce.39 This long-standing readiness to experiment with, and selectively adopt,
exotic cultigens is a reason for optimism about the prospects for raising agricultural
productivity in contemporary Africa.
The second feature of sub-Saharan Africa’s external trade is notorious: the longevity
and geographical breadth of slave exports. The Atlantic trade alone accounted for about
thirteen million captives forcibly embarked, from its beginning in 1441 to the last voyage
in 1866. The trades across the Sahara, through the Nile Valley, and from the Indian
Ocean and Red Sea coasts were both older and longer lasting, though less intense. A
combination of estimates for the Atlantic trade, and guesstimates for the other trades,
puts the grand total of slaves shipped or walked out of sub-Saharan Africa between 1500
and 1900 at nearly eighteen million.40 The available figures for pre-colonial populations
are almost entirely dependent on backward projection from colonial censuses.41 Thus
we have only a rough sense of the size of the populations from which these people were
taken – and of the collateral losses, in deaths in raids and slave-trade-inspired wars,
plus deaths en route to the coast or to the starting points for the Saharan crossing, and
while awaiting the final journey. The margin of error is such that it is impossible to be
sure of the scale of actual depopulation.42 The latter may have been specific to particular
areas, given that the biggest slave-exporting parts of West Africa were among the more
densely populated in the early twentieth century. Even so, the removal of many millions
of people from a labour-scarce region, which probably had only about 100 million
people by 1900,43 can only have been damaging for its long-term economic development;
much more so, given the violence and insecurity that resulted from the slave trades,
causing casualties, and requiring communities and traders to give priority to defence.
A particular politically decentralized society based near Rufisque in Senegal cultivated
a reputation for killing strangers on sight.44 While rational as a defence mechanism this
was hardly conducive to ‘Smithian’ growth, that is, the trade-based pattern of economic
growth and specialization often seen as crucial in the early modern world. It seems, as
Joseph Inikori argues, that the intensification of the Atlantic slave trade from the 1680s
put a stop to what was otherwise a general tendency for production and exchange to
expand in West Africa, a stop that was itself ended only by the abolition of the trade, a
gradual and uneven process which effectively began in 1807.45 The external slave trades
had major repercussions for social structure and institutions. The nature of the activity
meant that it was virtually monopolized by large traders and rulers, and thereby was a
force for inequality, over hundreds of years.46 It also rewarded militarism; conversely,
when the Atlantic slave market was closed to the kingdoms of Asante and Dahomey,
258
‘peace parties’ emerged in both, advocating a reorientation away from wars and slave
exports to peaceful trade.47
In a sense, it was paradoxical that the external slave trades were profitable even to the
sellers and buyers themselves, given labour scarcity within the region and the existence
of an intra-regional market for slaves, which competed with the overseas and cross-
desert demand. Part of the demand from the Ottoman Empire was for girls and eunuchs
for harems, but otherwise African slaves were wanted mainly for agriculture, on New
World plantations and North Africa, and for specialized roles such as (in the case of
Somali boys) pearl diving in the Gulf of Arabia. One motive for selling captives to ship or
camel-borne merchants was to obtain state-of-the-art military tools, especially firearms
from Europe and horses from North Africa. But the majority of imports comprised the
kinds of commodities that were also produced widely in sub-Saharan Africa, such as
textiles. This makes it hard to avoid the conclusion that, over several centuries and much
of the continent, the productivity of (even enslaved) African labour was lower within
sub-Saharan Africa than in the areas to which African slaves were taken.48 Part of this
may have been a function of effective proximity to markets, raising the unit price of
the commodities produced by Africans in the unfree diaspora compared to the prices
obtainable at home. But the productivity gap was also partly a function of relatively
low physical productivity of labour in Africa, because of environmental constraints in
agriculture and transport, as well as the low labour productivity of labour-intensive,
dry-season handicraft production.49 Thus the geographical breadth and chronological
length of the slave trades across ocean and desert was made possible – made privately
profitable – by supply-side elements. These trades were external but by no means
entirely exogenous.
The last comment applies also to the political conditions that permitted and sustained
the sale of captives outside the region. In sub-Saharan Africa, as usual in the world
history of slavery, the vast majority of enslaved people were outsiders, foreigners, to the
society that originally enslaved them, and in the society (which was very often a different
one, in the intra-regional as well as interregional trades) where they were eventually set
to work. A crucial difference was that by 1500 in Europe, the Middle East, and North
Africa, intra-regional slave procurement had been greatly reduced or eliminated where
the emergence of huge empires and ‘world’ religions obliged would-be slave owners to
obtain slaves from much greater distances: the foreigners and unbelievers were much
further away than before.50 This externalized the collateral casualties of slaving, in that
the initial violence took place far away. In contrast, the multitude of polities in sub-
Saharan Africa meant that enslavable people – ‘aliens’ – were often relatively near in
physical terms, bringing the mayhem and insecurity of slaving close to home.51 The
problem was compounded by military competition between African polities, small and
large alike. To refuse to sell people to the Europeans would reduce a ruler’s access to
firearms and gunpowder.
Besides the selective importation of exotic cultigens, and the external markets for
slaves, there has been a third major feature of Africa’s long-term incorporation in the
world economy: a succession of technological innovations overseas altered the content
259
and scale of external markets for African products, in ways that contributed to the
progress of African economies along the land-extensive path of economic development.
It was the first industrial revolution that created or greatly enlarged the markets for
groundnuts and palm oil in Europe, commodities that could be grown profitably by
land-extensive methods in West African soils. Likewise, the inventions of the second
Industrial Revolution, notably milk chocolate, the bicycle, and the internal combustion
engine, created a new and vast market for rubber, and greatly enlarged the demand for
cocoa beans. Tyres made wild rubber valuable: eliciting responses not only by Leopold’s
armed adventurers in the Congo but also by small-scale African migrant tappers in
West Africa.52 The emergence of a mass market for chocolate made it profitable for
African entrepreneurs to initiate a major innovation in Ghana and Nigeria, adopting an
exotic crop, and a tree crop at that, changing the factor ratios in forest zone agriculture,
while finding methods of production which adapted the product to the kinds of
soils available.53 This pattern has continued to the present, from the advances in the
technology of extracting and transporting petroleum that made Africa’s oil deposits
commercially valuable, to the invention of the mobile phone, which made coltan a
mineral to kill for in Congo-Kinshasa in the later 1990s and 2000s. Economically, the
most important category of imports paid for by these primary product exports was
surely the tools of mechanized transport: loosening, and ultimately releasing, the vice
in which the constraints on the use of animals had held the majority of Africa. A range
of other imports have helped make African economies more efficient, among which the
most recent major example is again the mobile phone, the widespread adoption of which
has greatly improved information flows in local markets.
The emergence of capitalist institutions during and since colonial rule
The otherwise often contrasting Marxist, dependency, and rational-choice institutionalist

schools of thought on economic development south of the Sahara implicitly agree on
one thing: that such development has depended and continues to depend on the extent
of the establishment within the region of a particular complex of institutions often
associated with capitalism: individual ownership of land, labour that is free of coercion
but ‘unencumbered’ by the possession of land rights, and a system of government and
law that upholds private property.54 These institutions have traditionally been seen as
essentially exotic to Africa. Historians have increasingly qualified this: labour markets and,
though only rarely, wage labour preceded colonial rule; land tenure was often individual
at the point of agricultural use and, as we have seen, land markets might emerge where
land became scarce; and pre-colonial states defended certain forms of private property,
including in people.55 But it remains true that widespread individual title in land and
the near-ubiquity of free labour, where they have emerged in sub-Saharan Africa, did so
during or after colonial rule. To be sure, capitalism was compatible with slavery and other
forms of labour coercion, as was indeed shown again in the early colonial period; but by
then free labour was at least considered as part of the ideology of capitalism, or of self-
260
consciously ‘modern’ societies, as colonial administrations were frequently reminded by

the international abolitionist movement and the International Labour Organization.
Before going further, it is necessary to highlight the lateness and brevity of colonial
rule in most of sub-Saharan Africa: sixty or seventy years in many countries, roughly
half a millennium after the beginning of European overseas colonialism. When it finally
arrived, European rule in Africa proved to be colonialism on the cheap. Governors were
expected to balance their budgets, rather than ask for money from the metropole. In
a chicken-and-egg fashion, under-resourced administrations then imposed relatively
limited tax demands on their populations. For the largest empire, Ewout Frankema
has calculated that the tax demand on an unskilled wage earner in the interwar period
amounted to only a few days a year in some of the British colonies in Africa. While that
burden could be painful at the margin, the fiscal ambitions of the colonial administrations
were strikingly low compared to the white dominions, such as Australia.56 In part, this
was a response to the weakness of colonial coercive power on the spot: troops could be
shipped in to suppress a rebellion, but the ratio of European officials, police, and soldiers
to the population over which they presided was tiny: in the 1930s, 1:19,900 in British
tropical Africa and 1:27,000 in French West Africa.57 In this context, it is not surprising
that, in the non-settler colonies, early imperial ambitions to transform African societies
quickly gave way to a pragmatic gradualism.
Individual land ownership was a key part of what A. G. Hopkins has called ‘Britain’s
first development plan for Africa’, a mid-Victorian enthusiasm for private property
rights as the key to economic advance anywhere in the world.58 The British imposition of
a protectorate on Lagos in 1851, and the annexation of that city state a decade later, was
indeed motivated in part by calls from British and some African traders for the British to
impose private ownership in land and real estate, in order to animate the credit market by
providing good security for loans. By the time Britain came to annex the rest of Nigeria,
during the general European partition of the continent, officials had abandoned such
ambitions. Only in settler colonies did the British introduce compulsory registration of
title before 1945, and then only on land reserved for Europeans.59 Elsewhere, the British
invoked ‘customary’ law, which they generally interpreted as forbidding land sales or
mortgages. The result in some cash-cropping areas was to freeze the existing land tenure
systems at a moment when some of them had been evolving to permit land alienation,
as in the Akwapim case noted above. Part of the British reticence was economic: in
southern Ghana and southwest Nigeria, the rapid expansion of African investment
in tree crop agriculture proved that the existing systems were capable of providing
reassurance to investors that their property rights were secure (in Akan land tenure in
southern Ghana, for instance, the farmer who planted a crop was secure in possession of
the crop, even if the land on which it grew was litigated over by rival chiefs). Thus it was
a case of ‘if it ain’t bust, don’t fix it’.60 But there was also a powerful social and political
reason to discourage land sales among Africans, a consideration which applied both
to the so-called peasant colonies, where Africans retained virtually all the land under
their ownership and control, and to the ‘reserves’ into which Africans were crowded in
settler colonies. This was the fear that a land market would result in the poorer farmers
261
selling up and moving to the towns, creating dangerous problems of social control. In
practice, though less so in law, the story was similar in the French colonies. There were
partial exceptions in the late-colonial period, notably in central Kenya, where the British
reacted to the Mau Mau revolt by adopting a rather Stolypin-like land reform, designed
to reward and strengthen the wealthier cash-cropping peasants, as opposed to the
landless former squatters who provided a disproportionately large number of recruits
for the guerrillas.61 The case for colonial promotion of individual land ownership was
made strongly and repeatedly within colonial administrations, but the reality of African
enterprise on the ground, and the fear that the population might get out of control,
ensured that it was not much acted upon.
Indeed, colonial officials, of all nationalities, were not keen to see the mass of the
population lose their land rights completely and move to the towns. But the imperial
governments had justified their annexations in Africa partly by the promise to
implement in their new colonies the abolition of slave trading and slave holding that
they had already applied in their existing colonies. They had to contend with the fact
that colonization had not abolished the Nieboer-Domar problem: at the beginning of
the twentieth century labour coercion remained profitable to employers. In much of
tropical Africa, colonial administrations responded with a policy that can be described
as gradualist: banning the slave trade, in some cases (e.g. Northern Nigeria), announcing
that no one could be born a slave, but taking a decade or two (sometimes more) before
making slaveholding illegal. In French West Africa, emancipation was proclaimed only
in 1905, perhaps precipitated by mass walkouts of slaves, leaving their masters, in parts
of what is now Mali.62 The problem for masters (and in French West Africa about 30 per
cent of the population were estimated to be slaves at the beginning of the colonial period)
was real: How could they afford to become employers instead? The answer depended on
whether they were able to enter export agriculture and, if so, on the profitability of the
crop concerned. In the cocoa belt of southern Ghana and southwestern Nigeria, the
transition to hired labour was relatively smooth, with the workers migrating seasonally
from areas where the soils and/or transport costs made export agriculture unaffordable.
In some other cases, including southeast Nigeria, former slave owners were reduced to
reliance on family labour.63 On the desert edge in what is now the Republic of Niger, lack
of fertile soil and lack of cheap transport combined to encourage states and, later, also a
foreign development agency to demand unpaid labour from the population.64 Overall,
the transition to free labour in West Africa, and parts of East Africa, was thus the
result of the interaction of government policy and the geographically uneven spread of
export agriculture, spearheaded by African enterprise. In British West Africa, especially,
freedom proved no euphemism: workers in these non-settler colonies were able to obtain
wages that were relatively high by comparison with labour-abundant parts of Asia.65 In
the cocoa-growing areas, they went on in subsequent decades to negotiate successively
more favourable contracts, crucially including – at their insistence – a switch from
annual wage contracts to a form of sharecrop labouring. Thus, at the initiative of the
workers, West Africa reversed the conventional model of labour market development,
from sharecropping to wage labour.66
262
Besides going slow on abolishing slavery, colonial governments all over sub-Saharan
Africa resorted to various forms of forced labour. This was least so – though it still
happened67 – in the more prosperous export-crop zones, where it was both least necessary
and hardest to enforce, because the opportunity cost was higher. The International
Labour Organization adopted a Forced Labour Convention in 1930, which turned up the
international and metropolitan pressure on the supposedly more liberal colonial regimes
to match their own rhetoric of liberty. But it was only in 1945 that the post-liberation
assembly in Paris passed a law, moved by the young Felix Houphoet-Boigny, future
president of Ivory Coast, abolishing forced labour throughout the French Empire.68
In the settler colonies (among which South Africa became politically independent in
1910, and Southern Rhodesia partly autonomous in 1923, both under white minority
rule), the solution had been found as far back as the seventeenth century, in the Cape:
a policy of denying Africans access to land in order to force them to sell their labour.
The classic embodiment of the policy, implemented also in Rhodesia and Kenya in
particular, was the 1913 Natives Lands Act, which extended to the whole of South Africa
the two prongs of the policy: 93 per cent of land was reserved for whites, and Africans
were not allowed to work on white-owned land except as wage labourers. Though by
no means fully implemented (the abolition of black sharecropping tenancy threatened
the economic survival of many poor white farmers, who depended on their tenants
for capital as well as labour),69 it was sufficiently enforced to be the cutting edge of
an ambition to drive Africans out of the market for agricultural produce and into the
labour market. They were not supposed, however, to form a proletariat. Hence, under the
policies of segregation and later of apartheid, in principle blacks were prohibited from
living permanently in towns. Even in the ‘peasant’ colonies, where there was no such
law, it was not until the 1940s that colonial officials began to abandon the conviction that
Africans were essentially rural folk.70
Thus, as far as land and labour relations were concerned, colonial governments in
Africa hardly fulfilled the orthodox Marxist expectation that the imperialism of capitalist
powers would comprehensively destroy pre-capitalist social relations and establish the
most modern of capitalist ones. Their legacy as state-builders was no more convincing
from a market perspective. On paper, they brought to an end the long history of stateless
societies and micro-states. But the purpose of the Berlin conference of 1884–5 which
formally partitioned Africa was to prevent European powers fighting each other in
Africa and – with exceptions during the world wars, especially Tanganyika – that aim
was largely fulfilled. As Jeffrey Herbst pointed out, the guarantee that they would respect
each other’s borders, even when the details were yet to be fixed on the ground, reduced
the incentive to colonial powers to establish firm state control right up to their frontiers.
At a lower level of centralization, the reliance of colonial powers on governing through
African intermediaries such as chiefs and emirs (‘indirect rule’ applied to a greater degree
in the British case but to some extent in all the empires), combined with the preservation
or ossification of customary land law, prevented the emergence of national land markets
and ensured that collective identities would be, in future, more rather than less strongly
‘ethnic’, and only weakly national.71
263
During the first twenty years after colonial rule, any spread of land titling was rather
sporadic, and actively rejected by left-leaning governments. With Structural Adjustment
in the 1980s, the World Bank managed to engineer a liberal land reform in the republic
of Guinea,72 but a general, Africa-wide shift towards intensified buying and selling of
land, with or without formal title, seems to have waited for the post-1995 boom. The
subsequent ‘land rush’ has been propelled partly by a renewed external demand for
African lands, for growing food and fuel crops for overseas markets, which ‘structurally
adjusted’ governments have tended to try to satisfy. But it has also been driven by the
growth of commercial agriculture supplying the rapidly urbanizing populations of
African countries.73 The poor in Africa used to be people mainly with insufficient labour
power at their free disposal to use the land which they were entitled to use. Now they
are, in effect, increasingly landless, and looking to the cities for their subsistence.74 The
resource ratio hindered the growth of wage labour in the early colonial period, when
land was still overwhelmingly abundant except where settler regimes made it artificially
scarce. But by the twenty-first century, the growth of population, as well as export
agriculture and especially the cities, favoured the free labour market: on the supply side
at least.
Conclusion
This chapter has emphasized the interaction of African and external agency in African
economic history, arguing that the endogenous propensities towards a land-extensive
path of development were energized at various points by exchange with other world
regions, with results more negative than positive (during the slave trades) or the other
way around (during the export-crop revolution of the early colonial period in non-
settler colonies, and in the recent general African boom). Africa was ‘developing’ before
the Great Divergence, increasing food security and agricultural productivity, and with
a resilient handicraft manufacturing sector, especially in West Africa. The Atlantic slave
trade, and the intensification of the other slave trades during the nineteenth century,
surely hindered the economic progress of the region as a whole. But the very fact that the
export of slaves was so widespread, and lasted so long, suggests that labour productivity
in the region tended to be lower than in the solely slave-importing parts of the world,
even if the gap was aggravated by the slave trades themselves. Thus, it is argued here
that Africa was on a development path, of a specific kind – land-extensive – but it is
not suggested that even West Africa, the strongest candidate to be an economic ‘core’ in
the Pomeranz sense, was on course for an indigenous industrial revolution before the
intensification of the Atlantic slave trade in the late seventeenth century.
Following the beginning of industrialization in Europe, interactions with technologies
of overseas origin, and relatedly with overseas markets, encouraged Africans to specialize
in agricultural exports, especially in West Africa, even before colonial governments
arrived to invest further in the transport infrastructure of the import–export economy.
There were some successes in the nineteenth century and since. Africa has experienced
264
intermittent episodes of economic growth per capita,75 though they were mostly specific
to particular sub-regions (such as West Africa in the decades between the beginning of
the end of the Atlantic slave trade and the outbreak of the First World War, and South
Africa following the mineral revolution) until the post-1995 boom. It should also be
noted that the mere fact of having increased per capita income at all during the twentieth
century, when child-friendly social values combined with public health advances to
produce perhaps a sextupling of population, is an impressive case of what Kuznets called
‘extensive growth’.
It is possible to view African economic history as to a large extent a story of resource
rents, and African political economy as the struggle over them.76 But raising productivity
has also been part of the story, though mostly in very particular contexts. As land has
become scarcer, and as urbanization has proceeded, over the last century, poverty has
increasingly ceased to be associated with lack of access to labour. Historical comparisons,
especially with Southeast Asia, suggest that the prospects for a general breakthrough to
much higher living standards in a region that is well advanced in transition from labour
scarcity to (an increasingly educated) labour surplus depends greatly on whether at least
some African economies can industrialize.77
Notes
1. In thematic emphasis, and also in being more discursive and less formally quantitative and
chronologically organized, this chapter complements G. Austin (2016), ‘Sub-Saharan Africa’,
in J. Baten (ed.), A History of the Global Economy from 1500 to the Present. Cambridge:
2. ‘Institutions’ is used here in the sense of the formal and informal rules surrounding
economic activity. D. North (1990), Institutions, Institutional Change and Economic
Performance. Cambridge: Cambridge University Press, 3–4.
3. W. Rodney (1972), How Europe Underdeveloped Africa; I. Wallerstein (1976), ‘The three
stages of African involvement in the world economy’, in P. Gutkind and I. Wallerstein (eds),
The Political Economy of Contemporary Africa. Beverly Hills: Sage, 30–57.
4. D. Acemoglu, S. Johnson and J. A. Robinson (2001), ‘The colonial origins of comparative
development: An empirical investigation’, American Economic Review, 91 (5), 1369–401. For
a critique of this and related work, see G. Austin (2008), ‘The “reversal of fortune” thesis and
the compression of history: Perspectives from African and comparative economic history’,
Journal of International Development, 20 (8), 996–1027. For a distinctly different rational-
choice institutionalist perspective on African political economy in the twentieth century and
before, see R. H. Bates (1983), Essays on the Political Economy of Rural Africa, Cambridge:
Cambridge University Press; and Idem (2008), When Things Fell Apart: State Failure in Late-
Century Africa. New York: Cambridge University Press. Bates focuses on internal sources of
political-economic change.
5. C. H. Feinstein (2005), An Economic History of South Africa: Conquest, Discrimination and
Development. Cambridge: Cambridge University Press.
6. A. G. Hopkins (1973), An Economic History of West Africa. London: Longman, 124–35.
See also R. Law (ed.) (1995), From Slave Trade to ‘Legitimate’ Commerce: The Commercial
Transition in Nineteenth-Century West Africa. Cambridge: Cambridge University Press.
265
7. This sense of period is represented in a history of contemporary Africa which sets economic
change in a broader context. F. Cooper (2002), Africa since 1940: The Past of the Present.
8. J. C. Bertélemy and L. Söderling (2001), ‘The role of capital accumulation, adjustment and
structural change for economic take-off: Empirical evidence from African growth episodes’,
World Development, 29 (2), 323–43. See, further, M. Jerven (2014), Economic Growth and
Measurement Reconsidered in Botswana, Kenya, Tanzania, and Zambia, 1965–1995. Oxford:
9. J. C. W. Ahiakpor (1985), ‘The success and failure of dependency theory: The experience of
Ghana’, International Organization, 39 (3), 535–52; M. Eberhardt and F. Teal (2010), ‘Ghana
and Côte d’Ivoire: Changing places’, International Development Policy, 1 (1), 33–49.
10. N. van de Walle (2001), African Economies and the Politics of Permanent Crisis, 1979–1999.
Cambridge: Cambridge University Press, 221.
11. V. Azarya and N. Chazan (1987), ‘Disengagement from the state in Africa: Reflections on the
experience of Ghana and Guinea’, Comparative Studies in Society and History, 29 (1), 106–31;
J. MacGaffey (1987), Entrepreneurs and Parasites: The Struggle for Indigenous Capitalism in
Zaire. Cambridge: Cambridge University Press.
12. G. Austin (2008), ‘Resources, techniques, and strategies south of the Sahara: Revising the
factor endowments perspective on African economic development, 1500–2000’, Economic
13. Austin, ‘Resources, techniques, and strategies’. The soil quality issue is discussed further in
Austin (2017), ‘Africa and the Anthropocene’, in G. Austin (ed.), Economic Development
and Environmental History in the Anthropocene: Perspectives on Asia and Africa. London:
Bloomsbury, 95–118. My friend Joseph Inikori claims that soil scientists take a much more
optimistic view: J. E. Inikori (2014), ‘Reversal of fortune and socioeconomic development in
the Atlantic world: A comparative examination of West Africa and the Americas, 1400–1850’,
in E. Akyeampong, R. H. Bates, N. Nunn and J. A. Robinson (eds), Africa’s Development in
Historical Perspective. New York: Cambridge University Press, 79–80. But this is contrary
to the soil science studies cited in my own earlier work, and indeed to the volume on
which he relies: B. Vanlauwe, J. Djiels, N. Sanginga and R. Merckx (eds) (2002), Integrated
Plant Nutrient Management in Sub-Saharan Africa: From Concept to Practice. Wallingford,
Oxfordshire, UK: CABI Publishing and the International Institute of Tropical Agriculture.
For example, the chapter by U. Mokwunye and A. Bationo (2002), ‘Meeting the phosphorus
needs of the soils and crops of West Africa: The role of indigenous phosphate rocks’, provides
a quantitative survey of the characteristics of West African soils, concluding ‘Across all
agroecological zones, the soils are poor in organic matter content, base exchange capacity
and available phosphorus’ (p. 209).
14. Austin, ‘Resources, techniques, and strategies’.
15. M. Widren (2017), ‘Agricultural intensification in Sub-Saharan Africa, 1500 to 1800’, in
G. Austin (ed.), Economic Development and Environmental History in the Anthropocene:
Perspectives on Asia and Africa. London: Bloomsbury, 51–67.
16. J. Iliffe (1989), ‘The origins of African population growth’, Journal of African History, 30 (1),
165–9.
17. J. Goody (1976), Production and Reproduction: A Comparative Study of the Domestic
Domain. Cambridge: Cambridge University Press.
18. C. H. Perrot (ed.) (2012), Lignages et territoires en Afrique aux XVIIIe et XIXe siècles:
Stratégies, compétition, intégration. Paris: Karthala; G. Austin (2004), ‘Sub-Saharan Africa:
266
Land rights and ethno-national consciousness in historically land-abundant economies’, in S.

L. Engerman and J. Metzer (eds), Land Rights, Ethno-Nationality, and Sovereignty in History.
London: Routledge, 276–93.
19. G. Austin (2017), ‘Slavery in Africa’, in D. Eltis, S. L. Engerman and D. Richardson (eds),
The Cambridge World History of Slavery, vol. 4, Slavery since 1804. Cambridge: Cambridge
20. J. Herbst (2014), States and Power in Africa. Princeton: Princeton University Press, 2nd edn.
21. P. D. Curtin (1984), Cross-Cultural Trade in World History. Cambridge: Cambridge
University Press, 38–57; G. Austin (2002), ‘African business in nineteenth-century West
Africa’, in A. Jalloh and T. Falola (eds), Black Business and Economic Power. Rochester NY,
114–44.
22. D. Crummey (1980), ‘Abysinnian feudalism’, Past & Present, 89, 115–38.
23. G. Austin (2007), ‘Labour and land in Ghana, 1879–1939: A shifting ratio and an
institutional revolution’, Australian Economic History Review, 47 (1), 95–120.
24. R. H. Bates (1990), ‘Capital, kinship, and conflict: The structuring influence of capital in
kinship societies’, Canadian Journal of African Studies, 24 (1), 145–64.
25. A neat abstract analysis is C. Meillassoux (1972), ‘From reproduction to production: A
Marxist approach to economic anthropology’, Economy and Society, 1 (1), 93–105.
26. Austin, ‘Slavery in Africa’.
27. See, for instance, J. F. Searing (2002), ‘“No kings, no lords, no slaves”: Ethnicity and religion
among the Sereer-Safèn of Western Bawol, 1700–1914’, Journal of African History, 43 (3),
407–30.
28. This argument is developed, successively, in Austin, ‘Resources, techniques and strategies’;
G. Austin (2013), ‘Labour-intensity and manufacturing in West Africa, c.1450-c.2000’, in G.
Austin and K. Sugihara (eds), Labour-Intensive Industrialization in Global History. London:
Routledge, 201–30; and Austin, ‘Africa and the Anthropocene’.
29. Austin, ‘Africa and the Anthropocene’, 102.
30. G. Austin (2014), ‘Vent for surplus or productivity breakthrough? The Ghanaian cocoa take-
off, c. 1890-1936’, Economic History Review, 67 (4), 1035–64.
31. G. Austin (1996), ‘Mode of production or mode of cultivation: Explaining the failure of
European cocoa planters in competition with African cocoa farmers in colonial Ghana’, in
W. G. Clarence-Smith (ed.), Cocoa Pioneer Fronts: The Role of Smallholders, Planters and
Merchants. Basingstoke: Macmillan, 154–75.
32. The first part of this paragraph is based on Austin, ‘Resources, techniques, and strategies’.
33. For an exposition of the concept and a case study, see G. Austin (2005), Labour, Land
and Capital in Ghana: From Slavery to Free Labour in Asante, 1807–1956. Rochester, NY:
University of Rochester Press, 155–70, 236–49, 495–8, 512–15.
34. Austin, ‘Slavery in Africa’; P. E. Lovejoy (2012), Transformations in Slavery: A History of
Slavery in Africa, 3rd edn. Cambridge: Cambridge University Press, 160–243, 327–44. For
Buganda, see R. Reid (2002), Political Power in Pre-Colonial Buganda: Economy, Society and
Warfare in the Nineteenth Century. Oxford: James Currey.
35. Iliffe ‘The origins of African population growth’.
36. That was an oral observation in a presentation at the West Africa Seminar in the
Anthropology Department of University College London in 2010. See further, Richards,
‘A Green Revolution from Below? Science and Technology for Global Food Security and
267
Poverty Alleviation’, retirement address, Wageningen University, 18 November 2010,

published online at http://edepot.wur.nl/165231.
37. D. L. Schoenbrun (1998), A Green Place, a Good Place: Agrarian Change, Gender, and Social
Identity in the Great Lakes Region in the 15th Century. Portsmouth, NH: Heinemann, 79–83.
38. For an overview, see J. C. McCann (2005), Maize and Grace: Africa’s Encounter with a New
World Crop, 1500-2000. Cambridge MA: Harvard University Press.
39. For example, in the Ghanaian cocoa belt: Austin, Labour, Land and Capital, 66, and 474.
40. See Lovejoy, Transformations in Slavery, 19, 46, 138. For the Atlantic slave trade, see further
Voyages: The Trans-Atlantic Slave Trade Database, http://www.slavevoyages.org, launched in
2008 by a team led by David Eltis.
41. For the state of the debate about how to interpret colonial censuses, see P. Manning (2014),
‘African population, 1650–2000: Comparisons and implications of new estimates’, in E.
Akyeampong, R. H. Bates, N. Nunn and J. A. Robinson (eds), Africa’s Development in
Historical Perspective. New York: Cambridge University Press, 131–50; E. Frankema and
M. Jerven (2014), ‘Writing history backwards and sideways: Towards a consensus on African
population, 1850–2010’, Economic History Review, 67 (4), 907–31.
42. D. Henige (1986), ‘Measuring the immeasurable: The Atlantic slave trade, West African
population and the Pyrrhonian critic’, Journal of African History, 27 (2), 295–313.
43. Austin, ‘Resources, techniques, and strategies’, 590–1; and references in n. 41 above.
44. Searing, ‘“No kings, no lords, no slaves”’.
45. J. E. Inikori (2007), ‘Africa and the globalization process: Western Africa, 1450–1850’, Journal of
Global History, 2 (1), 63–86; Inikori (2009), ‘The economic impact of the 1807 British abolition
of the transatlantic slave trade’, in T. Falola and M. D. Childs (eds), The Changing Worlds of
Atlantic Africa: Essays in Honor of Robin Law. Durham, NC: Carolina Academic Press, 163–82.
46. Hopkins, Economic History of West Africa, 125; E. Evans and D. Richardson (1995), ‘Hunting
for rents: The economics of slaving in pre-colonial Africa’, Economic History Review, 48 (4),
665–86.
47. I. Wilks (1975), Asante in the Nineteenth Century. Cambridge: Cambridge University Press;
R. Law (1997), ‘The politics of commercial transition: Factional conflict in Dahomey in the
context of the ending of the Atlantic slave trade’, Journal of African History, 28 (2), 213–33.
48. S. Fenoaltea (1999), ‘Europe in the African mirror: The slave trade and the rise of feudalism’,
Rivista di Storia Economica, 15 (2), 123–65.
49. Austin, ‘Resources, techniques, and strategies’.
50. J-F. Paul (2009), ‘Empire, monotheism and slavery in the Greater Mediterranean region
from antiquity to the early modern era’, Past and Present, 205, 3–40.
51. J. I. Inikori (2003), ‘The struggle against the transatlantic slave trade: The role of the state’,
in S. A. Diouf (ed.), Fighting the Slave Trade: West African Strategies. Athens, OH: Ohio
52. Leopold’s regime needs no introduction; on African enterprise in the wild rubber boom
in West Africa, see K. Arhin (1980), ‘The economic and social significance of rubber
production and exchange on the Gold and Ivory Coasts, 1880–1900’, Cahiers d’études
africaines, 20 (77–78), 49–62; E. Osborn (2004), ‘“Rubber fever”, commerce and French
colonial rule in Upper Guinèe, 1890–1913’, Journal of African History, 45 (3), 445–65.
53. A. G. Hopkins (1978), ‘Innovation in a colonial context: African origins of the Nigerian
cocoa-farming industry, 1880–1920’, in A. G. Hopkins and C. Dewey (eds), The Imperial
268
Impact. London: Athlone, 83–96, 341–2; P. Hill (1997), The Migrant Cocoa-Farmers of
Southern Ghana: A Study in Rural Capitalism. Hamburg: LIT; first published Cambridge 1963.
54. J. Sender and S. Smith (1986), The Development of Capitalism in Africa. London: Methuen;
S. Amin (1976), Unequal Development: An Essay on the Social Formations of Peripheral
Capitalism. Hassocks, UK: Harvester; Acemoglu, Johnson and Robinson, ‘Colonial origins’.
55. S. J. Rockel (2006), Carriers of Culture: Labor on the Road in Nineteenth-Century East Africa.
Portsmouth, NH: Heinemann; G. Austin (2009), ‘Factor markets in Nieboer conditions: Pre-
colonial West Africa, c.1500-c.1900’, Continuity and Change, 24 (1), 23–53.
56. E. Frankema (2010), ‘Raising revenue in the British empire: How “extractive” were colonial
taxes?’, Journal of Global History, 5 (3), 447–77. See also L. A. Gardner (2012), Taxing Colonial
Africa: The Political Economy of British Imperialism. Oxford: Oxford University Press.
57. A. H. M. Kirk-Greene (1980), ‘The thin white line: The size of the British colonial service in
Africa’, African Affairs, 79 (314), 25–41.
58. A. G. Hopkins (1995), ‘Britain’s first development plan for Africa’, in Robin Law (ed.), The
Commercial Transition in West Africa. Cambridge: Cambridge University Press. See also A.
G. Hopkins (1980), ‘Property rights and empire building: Britain’s annexation of Lagos, 1861’,
Journal of Economic History, 40 (4), 777–98.
59. Though African land purchases were permitted in certain contexts. See, for instance, A. K.
Shutt (2002), ‘Squatters, land sales and intensification in Marirangwe Purchase Area, colonial
Zimbabwe, 1931–65’, Journal of African History, 43 (3), 473–98.
60. Austin, Labour, Land and Capital, 339–48, 531–3.
61. D. Branch (2009), Defeating Mau Mau, Creating Kenya: Counterinsurgency, Civil War, and
Decolonization. Cambridge: Cambridge University Press, 120–5.
62. M. A. Klein (1998), Slavery and Colonial Rule in French West Africa. Cambridge: Cambridge
University Press.
63. D. C. Ohadike (1999), ‘“When the slaves left, the owners wept”: Entrepreneurs and
emancipation among the Igbo people’, in S. Miers and M. A. Klein (eds), Slavery and Colonial
Rule in Africa. London: Frank Cass, 189–207; generally, G. Austin (2009), ‘Cash crops and
freedom: Export agriculture and the decline of slavery in colonial West Africa’, International
Review of Social History, 54 (1), 1–37.
64. B. Rossi (2015), From Slavery to Aid: Politics, Labour, and Ecology in the Nigerien Sahel,
65. E. Frankema and M. van Waijenburg (2012), ‘Structural impediments to African growth?
New evidence from real wages in British Africa, 1880–1965’, Journal of Economic History, 72
(4), 895–926.
66. Austin, Labour, Land and Capital, 315–24, 401–30, 442–3, 452–4, 527–9, 540–6.
67. For example K. O. Akurang-Parry (2000), ‘Colonial forced labor policies for road-building in
southern Ghana and international anti-forced labor pressures, 1900–1940’, African Economic
History, 28 (1), 1–25.
68. F. Cooper (1996), Decolonization and African Society: The Labor Question in French and
British Africa. New York: Cambridge University Press.
69. A marvellously thought-provoking case study is C. van Onselen (1990), ‘Race and class in
the South African countryside: Cultural osmosis and social relations in the sharecropping
economy of Transvaal’, American Historical Review, 95 (1), 99–123.
70. M. Lipton (1985), Capitalism and Apartheid. Aldershot: Gower; Cooper, Decolonization.
269
71. M. Mamdani (1996), Citizen and Subject: Contemporary Africa and the Legacy of Late
Colonialism. Princeton: Princeton University Press. For a highly perceptive recent analysis
see C. Boone (2014), Property and Political Order in Africa: Land Rights and the Structure of
Politics. New York: Cambridge University Press.
72. J. Clapp (1997), Adjustment and Agriculture in Africa: Farmers, the State and the World Bank
in Guinea. London: Macmillan.
73. C. Oya (2013), ‘The land rush and classic agrarian questions of capital and labour: A
systematic scoping review of the socioeconomic impact of land grabs in Africa’, Third World
Quarterly, 34 (9), 1532–57.
74. Compare J. Iliffe (1987), The African Poor: A History. Cambridge: Cambridge University
Press.
75. Austin, ‘Resources, techniques, and strategies’, 610–14; further, M. Jerven (2010), ‘African
growth recurring: An economic history perspective on African growth episodes, 1690–2010’,
Economic History of Developing Regions, 25 (2), 127–54.
76. I owe this thought to William Gervase Clarence-Smith, in a conversation many years ago.
77. Austin, ‘Labour-intensity and manufacturing’; G. Austin (2016), ‘Is Africa too late for
“late development”? Gerschenkron south of the Sahara’, in M. Andersson and T. Axelsson
(eds), Diverse Development Paths and Structural Transformation in the Escape from Poverty.
Oxford University Press, 206–35; G. Austin, E. Frankema and M. Jerven (2017), ‘Patterns
of manufacturing growth in Sub-Saharan Africa: From colonization to the present’, in K.
O’Rourke and J. G. Williamson (eds), The Spread of Modern Industry to the Poor Periphery
since 1870. Oxford University Press, 345–73.
270
CHAPTER 15
THE NEW WORLD AND THE GLOBAL
SILVER ECONOMY, 1500–1800
Alejandra Irigoin
According to Adam Smith, the discovery of the Americas and the discovery of a passage
to the East Indies by the Cape of Good Hope were the ‘two greatest and most important
events recorded in the history of mankind’.1 Economic historians of the pre-modern
period have emphasized one or the other of these two events leading alternatively to
what we might call a Euro-Atlantic centrism (as for instance in the triangular trade
concept proposed by Eric Williams) or to a Sino-Asian centrism (for instance in the
Great Divergence debate). Yet, many of these narratives have provided little help in
understanding why Adam Smith’s East and, most especially, West Indies were so crucial
to the development of the European economy.
The incorporation of the New World into the pre-modern international economy has
been the subject of several recent studies in global economic history. Kenneth Pomeranz
and Hersh and Voth underline the contribution of the Americas in terms of ghost acreage
for the production of food and fibres for differential European consumption and living
standards.2 A vast literature discusses the Columbian Exchange as detailed in John McNeill’s
chapter in this volume. Factor endowment and a particular European political economy
have created a narrative that associates colonialism with the exploitation of New World
riches and peoples as described by Trevor Burnard. Finally, the trade of people (slaves) and
commodities is also central to economic narratives of the New World and the Atlantic,
although recent growth theories have focused on endogenous sources of development, and
few economic historians today think of trade as the engine of economic growth.
Yet trade matters and arguably the Americas are intimately associated with the
production and trade of silver, a commodity which became fundamental for the
subsequent development of the global economy after 1500. This chapter charts the role of
the Americas in global economic history by concentrating on the role of silver. Silver had
no substitute and was available in large quantities in Spanish America. This is a well-known
topic in European economic history; however recent developments in Asian economic
historiography have stimulated a revision of the extraction, processing, and exchange of
American silver in the early modern world economy. American silver was used in the form
of coins as the preeminent global currency. It remained a currency standard for more than
two centuries before a gold standard came to define the classic economic globalization of the
late nineteenth and twentieth centuries. This chapter considers the Americas’ contribution
to the world economy through the lens of silver in order to reassess some of the factors that
drove the expansion of trade and integration of markets to an unprecedented level in the
three centuries after 1500. It revises conventional interpretations of the development of the
early global economy away from views centred either in Asia or in Europe.
Silver, trade, and the early modern world economy
Monetary historians explain the stream of silver flowing towards Asia as the result of a
difference in gold-to-silver ratios within Eurasia.3 For reasons not yet explored, unlike
Europeans, Asians preferred silver as money over gold.4 The New World produced large
quantities of silver – and to a lesser extent gold in the early eighteenth century – that
added to the availability of world silver from the rich mines of Central Europe estimated
at 50 tonnes per year at its peak in the 1540s.5 By the early sixteenth century, the Japanese
had adopted the technology of cupellation (the process of separating precious metals
from ore) from Korea; production boomed and Japan supplied silver to China, the world’s
largest economy. The Japanese silver output peaked in the 1620s at 130–60 tonnes per
annum.6 Although production continued into the eighteenth century, the level of exports
declined so dramatically that Japanese silver was all but absent from China by the 1680s.
The ‘Japanese silver century’ (1580–1680) paled however in comparison with the large
quantities and higher quality of Spanish American silver that arrived in Asia.7 The New
World aggregate output was 280–300 tonnes a year by the early seventeenth century and
it doubled in the following century. All of Spanish American mining combined might
have produced 75–80 per cent of world output in the pre-modern period.8
Between 1500 and 1820 global trade grew at an aggregate 1 per cent per annum and
European intercontinental trade in the eighteenth century grew at 1.26 per cent.9 The
aggregate production of Spanish American silver grew at 1.09 per cent a year in the same
period. European tonnage to Asia grew at 1.16 per cent and Mexican silver production
at 1.35 per cent over the course of the eighteenth century.10 Whereas there are a number
of theories which might explain the relation between the growth trends of world trade
and the expansion of European commerce, there is little exploration of the co-evolution
of the development in the extraction and trade of silver and world trade.11
Global monetary historians point to the arbitrage – that is, buying cheap in one
market for sale in another where the goods are expensive – that the Europeans carried
out in their commerce with Asia and especially with China.12 The relative abundance or
scarcity of a specific metal can explain the different bimetallic rates in America, Europe,
and Asia. However the gold–silver ratio in China had equalized to that of Europe by 1750
though the silver trade not only continued but also expanded further with significant
increases in the latter part of the century.13 As argued elsewhere, by 1800 it was apparent
that what China, and perhaps Asia at large, demanded was not silver bullion per se, but
specie, a universally reliable means of payment made of silver.14 Without its own coinage
of silver, China became reliant on the currency standard that the Spanish American coin
provided.
It remains true, however, that the arbitrage between rich and poor silver markets
produced a windfall for Europe. Palma estimates that a 10 per cent increase in the
272
The New World and the Global Silver Economy
production of precious metals in the New World increased in any given year the real
GDP in Europe by 1.3 per cent within four years – because prices responded to monetary
injections with considerable lags.15 To Europe, American silver was the means to trade
in Asia. Silver accounted for 93 per cent of the European cargo values to China and 79
per cent of the India-bound cargo.16 With American silver, the European companies in
Asia bought cotton and silk textiles not just for European consumers but also to trade for
slaves and gold in Africa.17 In the Americas, African slaves cultivated commercial crops
such as sugar and coffee that were shipped to Europe, thus establishing a truly global
multilateral trade in people, goods, and money.18 Later, American foodstuff, dyes, and
cotton found a market in Europe, but silver and gold were the main returns of the New
World until well in the late eighteenth century.
Acting as intermediaries in this extensive global commerce, European traders linked
different parts of the early modern world economy. In a well-known article, Patrick
O’Brien argued however for a peripheral role for the New World in the economic
development of Europe when he observed that three-quarters of the commodity exports
in Europe had another European port as destination.19 However he did not consider
the actual composition of such intra-European trade: American and Asian commodities
such as textiles, tea, sugar, slaves, and silver were key to European trade as they were
re-exported within and indeed beyond Europe. Along the way, European states taxed
their import and consumption, thus creating much-needed revenue for the developing
European nation states.20 The old mercantilist idea that precious metals were to be
stocked did not account for the profits derived in the intermediation of all these goods. A
more modern understanding of mercantilism can explain how specialization and trade
contributed to the growth in Europe. Without silver, the scale of European commerce
would have been much smaller and any resulting Smithian growth improbable.21
The production of silver in Latin America
But how was silver obtained from the New World? Mining in Spanish America was a
wholly private enterprise which enjoyed state support for taxes paid to the King on the
volume produced. Spanish colonialism imposed a royal domain over land and the subsoil.
Thus the King allocated the right to mine the precious metals to individuals – and even to
indigenous communities for a direct taxshare – on the production. So mining, smelting,
refining and even minting, were all private affairs. Because of the demographic collapse,
coerced labour was the exception rather than the norm despite the emphasis by both neo-
institutionalist and Marxist economic historians on the exploitative nature of Spanish
colonialism.22 They made up only half or less of the Potosi workforce – that is, less than
unskilled 3,000 workers in the eighteenth century – and worked in Huancavelica quicksilver
mines.23 The pre-Hispanic tributary system persisted under the Spanish rule, known as the
Mita (quechua for ‘shift’, ‘turn’). It performed more as a subsidy to miners than a core input
to mining (Tandeter, 1993). The great silver mines of Mexico employed overwhelmingly
free wage labour – a total workforce of around 50,000 men in the eighteenth century.24
273
The largest mining site of all, Zacatecas in the northern periphery of the Spanish
settlement, developed from the mid-sixteenth century in an area without a sizeable native
population. Indigenous and increasingly mixed-race people made a very (spatially)
mobile labour force in mining. African labour, by contrast, was not the best suited for
mining at more than 2,500 metres altitude as in Zacatecas (or for that matter at the 4,000
metres altitude of Potosí) but slaves and wandering labourers worked the gold mines of
Colombia and Brazil. Indigenous people and increasingly mestizos provided the bulk
of the labour force in silver mining. Spaniards were relatively more numerous among
refiners, smelters, and renters of mines, and definitively controlled the exchange of ore
and bars for coin as they ran the financing of mining.
The persistence of communal property rights to land by the indigenous communities
increased the opportunity cost of wage labour even in the most populated regions of the
New World. Nominal wages were very high and stable over time. Indeed, earnings were
adjusted by sizeable non-monetary compensation that followed declining demographic
trends. Their reduction starting in the 1780s followed population recovery. This explains
the extraordinarily high (and steady) nominal wage of compulsory labourers in Potosí;
they received about 12.5 grams of fine silver a day, a rate comparable to skilled labourers
in late-eighteenth-century London.25 The combination of indigenous property rights,
guaranteed urban food supplies, and the peculiarity of a silver-abundant economy
shaped a very different labour market and higher standards of living in Spanish America
than most recent studies posit.26
Mining was widespread both geographically and socially. The location and size of
mines were more varied in Mexico than in Spanish Peru, where Potosí produced by far
the largest volume of silver in the seventeenth century. With a faster population recovery
and more numerous and dispersed silver deposits, Mexico became the dominant world
supplier of silver in the eighteenth century, producing according to Soetbeer 45–55
per cent of the world silver.27 Potosí continued producing silver, though with marginal
decreasing profits. Europeans had originally relied on indigenous technology for the
extraction, smelting, and casting of silver in wind-blown furnaces.28 The incorporation
of amalgamation – the blending of pulverized ore with mercury – and the availability of
mercury in Huancavelica in the Andes or from Almaden in Spain secured indispensable
inputs and fostered a steady growth in production from the late sixteenth century. To
some Andean historians, the new technology also was prejudicial to indigenous miners,
subjecting them to a wage labour relation in lieu of a former sharing system. This, together
with the commutation of tribute in kind for cash payments, established market relations
for production factors and goods very early in the Spanish New World (Figure 15.1).
Yet, the volumes produced are extraordinary. Throughout the period, the combined
output of Mexican and Peruvian mines added 300 tonnes a year to a stock that largely
exceeded the contemporary Asian demand. At its peak in the 1780s–1800s, silver output
in Spanish America totalled 600 tonnes a year. Precious metals accounted for around 60
per cent of the value of the New World exports throughout the 1740s. Even at the peak
of gold production in Brazil in the 1730s and 1740s, silver never represented less than
60 per cent of precious metals’ total output. This proportion diminished with the growth
274
Figure 15.1 Composition and geographical distribution of the precious metal Production in the
New World.
Source: N. Palma (2015), ‘Harbingers of Modernity: Monetary Injections and European Economic
Growth, 1492–1790’, Unpublished PhD. thesis, London School of Economics, fig. 2. p. 63. I thank
Nuno Palma for allowing the reproduction of this updated version of the map.
of exports from the British colonies in the mainland and record sugar production in the
West Indies by the 1760s. Yet silver made at least a third or more of the total New World
exports. The rise in the international price of silver between the 1790s and 1810s lowered
the price of imports, giving an additional boost to the production of non-precious
275
metals commodities in Spanish America. The production of silver collapsed only with
the implosion of Spanish governance in the 1820s.29
More importantly, silver was obtained by means of trade and not from extraction.
Historians like Hamilton for the seventeenth century, and Morineau and Garcia Baquero
for the eighteenth century, agreed that until the late 1770s at least 70 per cent of the
‘treasure imports’ to Spain was made of privately owned silver. Moreover, at around
twenty million pesos, private remittances reached up to 90 per cent of total silver sent
to Europe in the 1790s when exports boomed.30 So the extraordinary volume of silver
shipped out of the New World, which by and large was private property, reflects the
levels of private consumption attained in the Americas.31
The Spanish silver trade
Between the 1580s and 1730s, export values increased tenfold, from around a million
pesos a year in the 1580s to ten million (250 tonnes of pure silver) in the 1730s. These
volumes doubled after the 1750s and neared thirty million (750 tonnes) in the 1770s.
Thus the European re-export of silver to China – estimated at an average of 114 tonnes
of silver a year between 1719 and 1833 – becomes less important in this light. By and
large the main destination of silver was Spain, a trade carried out via the few authorized
ports – Seville first and Cadiz from 1700 from where silver was re-exported into Europe
and beyond. Figure 15.2 shows the relation between output and coinage of silver and
shipments to Europe throughout the eighteenth century.
For most of the eighteenth century, for when data is available, the relation between the
pace of mining and minting and the shipment of silver to Europe was weak.32 The export
of precious metals to Europe was not immediate or automatic as often assumed. Instead,
most of the silver remained in circulation in the domestic economy before it was traded
for goods and services overseas. Although agriculture accounted for the largest share of
the colonial economy, mining was its engine. Provisioning, labour, and services such as
transport circulated silver domestically throughout the empire. Internal and external
commerce was the main source of revenue for the Spanish administration as trade and
consumption taxes became the fiscal backbone of the empire in the eighteenth century.33
Concerned with the supply-side aspects of the silver trade, economic historians have
underestimated the importance of silver in the New World.
Surely the markup price of goods exported to Spanish America was huge considering
the various costs incurred: transportation costs within and outside Europe, trading costs,
and taxes as most of these goods were re-exports from Asia and other European coun-
tries, plus the intermediation costs charged by the Spanish privileged participants in the
American trade. Economic historians have assumed that this trade was driven by the need
for imported commodities. However, the Spanish settlements in the mainland and in the
Caribbean islands were self-sufficient in food and plenty of high-quality foodstuffs like
sugar and meat. There is also an idea that this was a commercial system organized for the
profit of the Spanish king and metropolitan merchants, which prejudiced economic devel-
276
45000000
40000000
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
1717
1720
1723
1726
1729
1732
1735
1738
1741
1744
1747
1750
1753
1756
1759
1762
1765
1768
1771
1774
1777
1780
1783
1786
1789
1792
1795
1798
1801
1804
Output Europe Morineau Coinage Private imports (Spain)
Figure 15.2 Silver output and trade in the eighteenth century.

Sources: For silver output, J. TePaske, and K. Brown (2010), A New World of Gold and Silver, Lei-
den, Brill. For silver trade at Cadiz: A. Garcia Baquero (1996), ‘Las remesas de metales preciosos
americanos en el siglo XVIII: Una aritmética controvertida’, Hispania, Appendix. For silver arriv-
als in Europe, M. Morineau (1986), Incroyables gazettes et fabuleux métaux: Les retours des trésors
américains d'après les gazettes hollandaises, 16e-18e siècles. Paris: Editions de la MSH. For coinage,
author’s elaboration from G. Cespedes (1996), Las Cecas Indianas en 1536–1825. Madrid: Fabrica
de Moneda y Timbre.
opment in the region. But the structure of this trade is poorly known. Indeed, as in Africa,
European merchants were price takers in the commerce for silver in Spanish America.34
For all the bad reputation of their monopolistic practices, the Spaniards had limited
control on the commerce with their possessions. A maritime empire without a fleet might
appear an oxymoron. Yet, Spain’s shipping capacity did not match the geographical and
maritime extension of its empire. Remarkably, trade to the Spanish East Indies – the
so-called Manila Galleon – was ‘rationed’ to only one or two ships of c. 1,200 tonnes
a year.35 The size of the two fleets convoyed over the Atlantic in the 1720s and 1730s
averaged barely 10,000–12,000 tonnes on a dozen vessels respectively on each journey.
At arrival, the fleet and galleons traded their goods for silver at fairs in Jalapa/Veracruz
and Portobello/Cartagena and in Acapulco, where similarly privileged cartels of local
merchants controlled the supply of silver and the sale of imports further inland. From the
1760s, fleets were discontinued; hence individual vessels doubled in number and more
ports were licensed in the metropolis and colonies to trade, legalizing de facto an existing
large irregular trade.36 This ‘liberalization’ eroded the rents of cartels that controlled each
step of the trade. This increased further the number and frequency of vessels bringing in
277
some competition. When ships from the United States were allowed as neutrals to carry
on the Spanish commerce after 1797, they were already regulars: more than 200 foreign
ships a year called at Havana in the 1800s.37 The Napoleonic Wars threw the Spanish
American trade open to the US vessels in the 1790s and to the British after Trafalgar. This
explains why US merchants became dominant in the silver trade to Asia after the 1780s.
They supplied 80 per cent of the 3,800 tonnes of silver that China imported after 1790
and were large exporters to India too into the nineteenth century.
Formally, until 1778, Andalusian ports enjoyed the privilege of organizing the trade
with America. Subsequent ‘liberalization’ did not change Cadiz’s primacy among Spanish
ports as the city continued sending 75–80 per cent of all American imports in the last two
decades of the eighteenth century. In reality, Spanish colonial commerce had always been
dominated by foreigners. The Catastro de Ensenada, a census of the 640 traders in Cadiz
compiled in 1762, reveals that around 80 per cent of the commerce was in foreign hands, 42
per cent controlled by French mercantile houses, 15 per cent by English/Irish and Dutch/
Flemish merchants, respectively, and 10 per cent by Italians.38 Spaniards were numerous
among the smallest freighters or acted as figureheads for foreign houses.39 Indeed the
Cadiz merchant guilds (Consulado) were constantly at odds with similar corporations
in the New World as they competed for the control of silver returns for foreign goods.40
Yet, direct trade resulted in more and relatively cheaper silver traded to Europe.
Neither the composition nor the origin of goods changed, but terms of trade improved for
New World producers, and gave a boost to non-precious metal commodities. Access to
direct shipping opened a cleavage between new commercial interests and the established
merchant networks which controlled inland commerce. Thus the clout of the powerful
Consulados of Mexico and Lima started to wane and in the 1790s Caracas, Guatemala,
Guadalajara in Mexico, and Buenos Aires, Cartagena, Veracruz, Havana, Santiago de
Chile, and Manila obtained the royal charter for their own mercantile jurisdiction. The
carry trade by the United States and Britain catalysed the competition into the civil
conflict that followed the collapse of the Spanish government in the 1810s.
Silver allowed Europeans to participate in the Baltic and Hanseatic trades, and trade
with the Ottoman Empire, Central Asia, and certainly with maritime Asia.41 But its
persistence beyond the equalization of the bimetallic ratios within Eurasia requires a
further inquiry. The geographical distribution – and size – of the silver flows cannot
conceal the significance of consumption in Spanish America. With a total population of
twelve million people by 1800 and fabulous silver endowments, the ‘silverization’ of the
world economy had an equivalent in the extraordinary levels of private consumption in
the New World, high inequality notwithstanding. The production of local manufactures
there was characterized by the ‘protection’ of high transport costs (both overseas and
overland) and the costs of intermediation of several rent-seekers, as well as a growing
‘Dutch Disease’ effects from the world demand of silver.
The quantity of silver was probably less important than – and of secondary importance
to – the profits Europeans made in its global re-export. These were not ‘super-profits’
derived from their exploitation of extra-European people and riches. They were the rents
that all mercantilist states in Europe competed for in order to obtain a less costly and
278
more direct access to silver. So silver as the driver of global trade was also the driver of
institutional and production changes in European economies introduced to secure cheaper
goods and more profitable trade. That meant the increasing substitution of imports and
lower domestic financial costs of war making. Ultimately it was the marginal acquisition
of silver which allowed the continuation of trade; and trade was the means to increase the
elasticity of supply and demand in the European economy. Mercantilism might have been
a zero-sum game within Europe, but the process of Smithian growth worldwide since
1500 owed a great deal to the intermediation of silver and the trade it fostered.
Silver in Europe and Asia
Silver was exported as a commodity out of Spanish America.42 It is unclear whether silver was
imported into Europe and Asia as a commodity or money, as the overwhelming proportion
of it was coined with very consistent pure silver content, size, and weight.43 Historians use
the term ‘silver’ to indicate bullion or specie. However private agents, bankers, and states
beyond the Spanish American world had a more informed view: the Genoese, for instance,
financed the Spanish king and traded a great deal of silver into Europe in the mid-seventeenth
century, and valued the piece of eight (the Spanish coin)44 over its intrinsic content of pure
silver. In the 1640s the price for the Spanish coin oscillated between 103.35 and 108.11 soldi,
which was their money of account. Their own silver coin, the scudo, had 36.7929 grams of
pure silver and was quoted to be worth between 117.75 and 122.33 soldi, while the exchange
rate with the peso hovered between 1.12 and 1.14 per scudo.45 Given that the piece of eight
had 25.560 grams of pure silver, the exchange rate at silver parity was 1.4394 soldi, indicating
that the piece of eight as specie enjoyed 20 per cent premium in Genoa.
Seafarers on English ships in the mid-seventeenth century demanded pieces of eight
for their wages; lawsuit records at the High Admiralty Court show the variation in the
exchange rate to sterling depending on the distance from Cadiz where it was exchanged
at 48 pence, to Smyrna at 57–67 pence, and Mozambique at 78 pence, for instance.46
However it is doubtful that these rates reflected the gold price of silver in each place.
The exchange rate in sterling at Malaga in the same years was 54 pence and in Genoa it
fluctuated mirroring the particular local market conditions.47 It should not be surprising
that sailors demanded pieces of eight for wages in international shipping; they also
hoarded pieces of eight – or pesos after 1732 – for savings as the Old Bailey records in
London attest.48 Chinese seamen engaged in the junk trade to Batavia in the eighteenth
century preferred this coin as a means to send remittances home and according to the
historian of the Xianfeng inflation Jerome Ch’en ‘fearing the eventual collapse of the
Qing regime’ at the time, people hedged against inflation and turmoil transfer(ing) ‘their
savings into silver, mostly in the form of the Spanish Dollar (peso)’.49
Individuals were not the only ones who invested in pieces of eight or Spanish pesos.
European rulers had different ways to taking part in the intermediation of specie. The
Spanish monarchy had no means to control the rates at which her American specie was
to be transacted in Cadiz or in the colonies. Exchange was a private open business and
279
subject to royal licenses granted to export silver out of Spanish America. Eventually
the market came to be controlled by different sets of foreigners who obtained one
privilege or another to import goods and slaves, or victualled the Spanish ‘contractor
state’. Amsterdam, by contrast, was a free market for specie slightly above the mint
price and France struggled during the ancien regime to stabilize the silver price of her
currency. Napoleon took pains to move the French monetary system to a silver-based
currency in the first decade of the nineteenth century, leading to the establishment of the
modern Banque of France. Even then, piastres imported from Spain continued to reach
Amsterdam and beyond.50 Some European countries smelted the imported silver and cut
their own specie, but debasements and recoinages were frequent.
In the seventeenth century, South Asia operated with multiple metallic currencies,
but used the piece of eight to fix different exchange rates as reported by the East India
Company’s factors. One of them, Charles Lockyer, in 1711 indicated that the ‘pillar dollars
are the most esteemed and therefore bear the highest price (at St George’s fort)’. In Madras
‘silver in any form passes currant [sic] by weight instead of money, reckoning from a take
decimally to the smaller matter imaginable, in payments made with tankards, dishes, bowls,
plates, spoons and silver porringers.’ According to Lockyer, the Chinese however were well
acquainted with the English marks guaranteeing the quality of the metal; therefore ‘old
plate is the most profitable silver you can carry with you, when dollars are dear.’51 Most
rulers in Southeast Asia considered the Spanish American peso legal tender of sorts, even
if they were seldom seen in their markets, as late as in 1820s’ Penang or Singapore.52
Some economies involved in silver exchange were exceptional in their own way. In
China, from the 1780s at least, silver specie circulated as money in the southern region,
adding another layer of complexity to the peculiar monetary system of an empire that did
not coin silver but relied on imported specie.53 In England, silver coinage was drastically
reduced in quantity after 1696. Thereafter, gold and small change in copper formed the
nation’s currency. Goldsmiths continued producing silver plate in sizeable quantities
through the eighteenth century and the East India Company exported silver to record
levels.54 Until the 1740s, in England the exchange business with bullion and specie was in
the hands of goldsmiths. Thereafter, the Bank of England took over the market aligning
the private rates by setting an official rate for the silver peso along with the exchange rate
for gold and silver bullion.55 Notably the banking services that goldsmith bankers had
offered declined in favour of discount banks.
Figure 15.3 shows the relation between the market rates of the silver peso in
sterling and the silver/gold ratio in England. It is apparent that the market price of
specie in London in the eighteenth century did not bear any relation to the silver/
gold ratio in England. Obviously Figure 15.3 encompasses the period when sterling
was inconvertible, yet at the time the depreciation of sterling to the silver peso was
higher than to gold.56 It is worth exploring the role of the bank in steering the market
for specie and the business with the company. A particular cooperation between three
major institutions at the time made the English the providers of an incomparable
arrangement for the market of specie.57 Remarkably the English East India Company
replicated the mechanism in India; it fixed a standard rate for the silver peso/Spanish
280
0.35
Silver/gold ratio
0.05
13.5 14.25 15.0 15.75 16.5
Ex rate, $/£
Figure 15.3 The market price of silver peso in sterling, in London, 1717–1818.
Sources: Silver/Gold Ratio from L. H. Officer (2016), Between the Dollar-Sterling Gold Points: Ex-
change Rates, Parity, and Market Behavior. Cambridge: Cambridge University Press; Exchange rate
from E. M. Kelly (1976), Spanish Dollar and Silver Tokens, An Account of the Issues of the Bank of
England, 1797–1816. London: Spink & Son.
dollar for its accounts in transactions which involved silver and a variety of currencies.
This was the rate which set discounted bills in London, and priced goods in India,
suggesting that the company dealt with treasure exports in a similar fashion to the
bank-run market for exchange in London.58
The Mint, the Bank of England, and the East India Company concurred to stabilize
and develop a market for bullion while the silver commerce with Asia expanded; at
the same time a particular monetary regime and banking practices were established,
foreshadowing a new international currency standard. The gold standard of the British
pound eventually replaced the currency standard that the silver peso had created in
the mid-seventeenth century. The Napoleonic Wars in Europe, which led both to the
Restriction Period and the implosion of the Spanish rule in America, resulted in a
definitive cleavage in monetary matters too.
As pointed by Michel Morineau twenty years ago, ‘the incorporation of precious
metals in the general circulating medium of European economies, their effective role in
the development of the economy and of the armed forces, the concurrence with other
means of payment, and the transition to the different modern monetary regimes of
the 19th century’ remains to be explained.59 His research on silver import to Europe
was crucial to debunk Hamilton’s ideas about the price revolution and the crisis of the
seventeenth century, which persisted in the economic historiography for a long while.
Conclusion
For Adam Smith, New World commodities were ‘new values, new equivalents’ in the
global economy to be exchanged for the surplus of each intervening country – even in
those which ‘never sent any commodities to America, (and) never received any from it’.60
281
Among those, silver, in his words, was ‘one of the principal commodities by which the
commerce between the two extremities of the Old (world) is carried on, and by means
of it, in a great measure, that those distant parts of the world are connected with one
another’.61 Moreover, he pointed at ‘what has been said of the East India trade might
possibly be true of the French; that though the greater part of the East India goods were
bought with gold and silver, the re-exportation of a part of them to other countries
brought back more gold and silver to that which carried on the trade than the prime cost
of the whole amounted to’, revealing the crucial importance of the carry trade among
European nations and of silver as underlying factor in the contemporary process of
Smithian growth in Europe.62
Therefore the ‘general advantage which Europe, considered as one great country’
derived from the discovery of America and of the passage to the East Indies ‘consisted
first, in the increase of its enjoyments, and secondly, in the augmentation of its industry’.
Despite the largesse of its production and exports to the world, Spanish American silver
did not have persistent inflationary effects on prices worldwide. On the contrary, it
was for Smith ‘the gradual enlargement of the market for the produce of silver mines
in America, probably the cause which has not only kept up the value of silver in the
European market, but has perhaps even raised somewhat higher than it was about the
middle of last century’. The market had become ever ‘more extensive’ in America – as in
Asia – and the ‘greater part of Europe has been much improved, England, Holland, France
and Germany, even Sweden and Denmark and Russia have all advanced considerably
both in agriculture and in manufactures..63
For Smith, these improvements ‘must necessarily have required a gradual increase in
the quantity of silver coin to circulate it; and the increasing number of wealthy individuals
must have required the like increase in the quantity of their plate and ornaments of
silver’.64 He flagged that ‘America is itself a new market for the produce of its silver mines;
and its advances in agriculture, industry and population are much more rapid that those
of the most thriving countries in Europe; its demand must increase much more rapidly’.65
However, scholars within and outside the region have overlooked this relation – or result
– between silver and the development of the global economy because of an inaccurate
understanding of the colonial economy in Spanish America.
Thus the role of the global silver trade is still little understood. The incorporation and
circulation of silver and specie in the European economy and the importance of the New
World demand – and of Spanish America in particular – are aspects yet to be mined by
global economic historians.
Notes
1. A. Smith (1776/1979), An Inquiry into the Nature and Causes of the Wealth of Nations.
London: The Electric Book Company, http://www.myilibrary.com?ID=124076 Book IV, part
III, ch 7: 829.
World Economy. Princeton: Princeton University Press; J. Hersh and H. Voth (2009). ‘Sweet
282
diversity: Colonial goods and the rise of European living standards after 1492’, Discussion
Paper CEPR 7386.
3. D. O. Flynn and A. Giráldez (1996), World Silver and Monetary History in the 16th and 17th
Centuries. Aldershot: Variorum; Ibid. (1997), Metals and Monies in an Emerging Global
Economy: Expanding World. Brookfield: Variorum.
4. I. Habib (1982), ‘Monetary system and prices’, in T. Raychaudhuri and I. Habib (eds), The
Cambridge Economic History of India. Cambridge: Cambridge University Press, 360–81;
R. von Glahn (1996), Fountain of Fortune: Money and Monetary Policy in China, 1000–1700.
Berkeley: University of California Press. Copper, tin or brass also circulated as small change
in different Asian states. R. von Glahn (2014), ‘Chinese coin and changes in monetary
preferences in maritime East Asia in the fifteenth-seventeenth centuries’, Journal of the
Economic and Social History of the Orient, 57 (5), 629–68.
5. Soetbeer (1886), cited by J. Nef (1941), ‘Silver production in Central Europe, 1450–1618’,
Journal of Political Economy, 49 (4), 589.
6. I. Seiichi (1976), ‘Japanese trade in the 16th and 17th centuries’, Acta Asiatica, 30, 1–18 who
estimated this volume equivalent to the 30–40 per cent of the world production at the time.
7. R. Innes (1980), ‘The door ajar: Japan’s foreign trade in the seventeenth century’,
Unpublished PhD Thesis, Ann Arbor: University of Michigan, 379, and 582.
8. J. TePaske and K. Brown (2010), A New World of Gold and Silver. Leiden: Brill, table 3.20.
9. A. Maddison (2007), Contours of the World Economy, 1-2030 AD: Essays in Macro-Economic
History. Oxford: Oxford University Press; K. O’Rourke and J. G. Williamson (2002), ‘After
Columbus: Explaining Europe’s overseas trade boom, 1500–1800’, Journal of Economic
History, 62 (2), table 1, 421.
10. J. De Vries (2003), ‘Connecting Europe and Asia: A Quantitative Analysis of the Cape Route
Trade, 1497-1975’, in D. Flynn, A. Giráldez, and R. von Glahn (eds), Global Connections and
Monetary History 1470-1800. Aldershot: Ashgate.
11. Williamson and O’Rourke did not consider precious metals because of their monetary role
or think their ‘impact of intercontinental silver flows on aggregate price levels’ was relevant.
O’Rourke and Williamson (2002), ‘After Columbus’, fn. 4. See D. O. Flynn and A. Giráldez
(2004), ‘Path dependence, time lags and the birth of globalization: A critique of O’Rourke
and Williamson’, European Review of Economic History, 8 (1), 81–108.
12. A. Gunder Frank (1998), ReOrient: Global Economy in the Asian Age. Berkeley: University of
California Press; and Flynn and Giráldez (various years).
13. In India, the ratio had equalized by 1670 at 15/16:1, but reverted to 13:1 and even 11.5:1
in the early eighteenth century; it remained below the European ratio for remainder of the
century. Habib, ‘Monetary system’, table 9.
14. A. Irigoin (2013), ‘A Trojan horse in Daoguang China? Explaining the flows of silver in and
out of China’, LSE Economic History Working Papers 173/13.
15. N. Palma (2015), ‘Harbingers of modernity: Monetary injections and European economic
growth, 1492–1790’, unpublished Ph.D. thesis, London School of Economics. Another
argument about the importance of liquidity in Europe and Asia can be found in R. Findlay
and K. O’Rourke (2009), Power and Plenty: Trade, War and the World Economic in the Second
Millennium. Princeton: Princeton University Press, 212.
16. L. Dermigny (1964), La Chine et l’Occident; le commerce à Canton au XVIIIe siècle, 1719–
1833. Paris: SEVPEN II, 686.
17. H. Klein (1990), ‘Economic aspects of the eighteenth-century Atlantic slave trade’, in J.
Tracy (ed.), The Rise of Merchant Empires: Long Distance Trade in the Early Modern World
283
1350–1750. Cambridge: Cambridge University Press, 287–310; K. Weber (2002), ‘German

rural industry and trade in the Atlantic, 1680–1840’, Itinerario, 26 (2), 99–119.
18. Cotton from the United States became a prime export commodity after 1815, but, strictly
speaking, it was cultivated with home-grown slave labour of African descent, which makes
this crop distinct from the traditional West Indies exports.
19. P. K. O’Brien (1982), ‘European Economic Development: The Contribution of the Periphery’,
Economic History Review 35 (1), 4.
20. P. K. O’Brien (1998), ‘Inseparable connections: Trade, economy, fiscal state and the
expansion of empire’, in P. J. Marshall and A. Low (eds), The Oxford History of the British
Empire. Vol. 2. The Eighteenth Century, 53–78; P. K. O’Brien (2014), ‘The formation of states
and transitions to modern economies’, 357–64.
21. Findlay and O’Rourke, Power and Plenty, 210.
22. M. Dell (2010), ‘The persistent effects of Peru’s mining mita’, Econometrica, 78 (6), 863–903;
M. Van der Linden (2011), Workers of the World: Essays toward a Global Labor History.
Leiden: Brill.
23. E. Tandeter (1981), ‘Free and forced labour in late Colonial Potosí’, Past & Present, 93, table
2; P. Bakewell (1984), Miners of the Red Mountain, Indian labour in Potosí. Albuquerque:
University of New Mexico Press; R. Barragan (2017), ‘Working Silver for the World: Mining
Labor and Popular Economy in Colonial Potosí’, Hispanic American Historical Review, 97 (2),
193–222.
24. C. Marichal (2006), ‘The Spanish American silver peso: Export commodity and global
money of the ancien regime (16–18th centuries)’, in S. Topik, C. Marichal and Z. Frank (eds),
Latin American Commodity Chains and the Building of Global Economy. Durham: Duke
25. E. Tandeter (1993), Coercion and Market: Silver Mining in Colonial Potosí, 1692–1826.
Albuquerque: University of New Mexico Press; Allen, ‘The Great Divergence in European
wages and prices from the middle ages to the First World War’.
26. Allen, et al. (2012), ‘The colonial origins of the divergence in the Americas: A labor market
approach’, Journal of Economic History, 72 (4), 863–94; A. Arroyo and J. L. Van Zanden
(2011), ‘Between conquest and independence: Real wages and demographic change in
Spanish America, 1530–1820’, Explorations in Economic History, 49 (2), 149–66; R. Dobado
and G. Montero (2014), ‘Neither so low nor so short: Wages and heights in Bourbon Spanish
America from an international comparative perspective’, Journal of Latin American Studies,
46 (2), 291–321; and A. Challú and A. Gómez-Galvarriato (2015), ‘Mexico’s real wages in the
age of the Great Divergence, 1730–1930’, Revista de Historia Economica/Journal of Iberian
Latin American Economic History, 33 (1), 83–122 for a different view.
27. TePaske and Brown, A New World, 140.
28. C. S. Assadourian (1982), El Sistema de la Economía Colonial. El Mercado interior. Regiones y
Espacio Económico. Mexico: Nueva Imagen, 22.
29. A. Irigoin (2009), ‘Gresham on horseback. The monetary roots of Spanish America political
fragmentation in the nineteenth century’, Economic History Review, 62 (3), 551–75.
30. J. Cuenca (2008), ‘Statistics of Spain’s colonial trade, 1747–1820: New estimates and
comparisons with Great Britain’, Revista de Historia Economica/Journal of Iberian and Latin
American Economic History, 26 (3), 323–54.
31. Significantly this data do not include Brazilian gold exports or the silver smuggled by
European interlopers or traded in Pacific commerce. Gold was also produced in Peru,
Colombia, Chile, and Mexico.
284
32. The r2 is 0.30, whereas the correlation between output and coinage is 0.94.
33. R. Grafe and A. Irigoin (2006), ‘The Spanish Empire and its legacy: Fiscal redistribution and
political conflict in colonial and post-colonial Spanish America’, Journal of Global History,
1 (2), 241–67. In the eighteenth century, the growth of population and of mining, together
with the expansion of the Europeanized economy over the territory, fostered some Smithian
growth empire-wide. By taxing commerce, a ‘developmentalist’ state enlarged its fiscal base
along the way. Grafe and Irigoin, ‘A stakeholder empire’.
34. J. Baskes (2005), ‘Risky ventures: Reconsidering Mexico’s colonial trade system’, Colonial
Latin American Review, 14 (1), 27–54; D. Brading (1971), Miners and merchants in Bourbon
Mexico, 1763–1810. Cambridge: Cambridge University Press, 97.
35. Findlay and O’Rourke attribute this restraint to a compromise between ‘a permit to trade,
but to restrict it to a prescribed level permitting the survival of the import competing silk
industry’ (in Mexico and Spain). Findlay and O’Rourke, Power and Plenty, 168.
36. Numbers compare with the English East India Company’s commerce in the East Indies and
China.
37. L. Salvucci (2005), ‘Atlantic intersections: Early American commerce and the rise of the
Spanish West Indies (Cuba)’, Business History Review, 74 (9), 781–809.
38. D. Ozanam (1968), La Colonie Francaise de Cadiz au XVIII siècle. Madrid: Melanges de la
Casa de Velazquez.
39. M. Bernal (1992), La Financiación de la Carrera de Indias (1492–1824): Dinero y Crédito en el
Comercio Colonial Español con América. Cadiz: Fundacion El Monte.
40. Litigations before the court between the different Consulados in Seville, Mexico, Lima,
and Manila were constant. Probably the dispute around the introduction of Asian silks and
textiles to the New World over a period of 150 years recapitulated by A. Alvarez de Abreu
(1736/1977), Extracto Historial del Comercio entre China, Filipinas y Nueva España, Mexico:
Instituto Mexicano de Comercio Exterior, is the best example.
41. M. Malowist (1958), ‘Poland, Russia and Western trade in the 15th and 16th century’, Past
& Present, 13, 26–41; S. Pamuk (1994), ‘Money in the Ottoman Empire, 1326–1914’, in
H. Inalcik and D. Quataert (eds), History of the Ottoman Empire, 1300–1914. Cambridge:
42. The section builds largely on my paper ‘Standard error: The problems for economic
historians from (mis)taking Spanish American silver as commodity money, 1700s-1830s’
presented at the Economic History Society Congress on Iberometrics, Pamplona 2017.
43. Mintage was done locally and overwhelmingly made of one-peso coin. R. Romano (1998),
Moneda, Seudomoneda y Circulación Monetaria en la Economía de México. Mexico: Fondo de
Cultura Económica.
44. The coin had a fractional equivalent to 8 reals. It was called the peso de a ocho until 1732
when it started to be milled. Henceforth it was known as the Spanish dollar in English and
the piastre in French.
45. Thanks to Claudio Marsilio for sharing the exchange rates information.
46. R. Blakemore (2017), ‘“Pieces of eight, pieces of eight”: Seamen’s earning and the venture
economy in early modern seafaring’, Economic History Review, 70 (4), 1153–84. See his
‘Descriptive Report’ in http://humanities.exeter.ac.uk/history/research/centres/maritime/
resources/sailingintomodernity/datasets/ accessed 16/08/2017.
47. C. Marsilio (2012), ‘The Genoese and Portuguese financial operators’ control of the Spanish
silver market (1627–1657)’, Journal of European Economic History, 41 (3), 67–89.
285
48. A. Dolan (2015), ‘The fabric of life: Linen and life cycle in England, 1678–1810’, Unpublished
Ph.D. Thesis, University of Hertfordshire.
49. L. Blussé (2011) ‘Junks to Java: Chinese shipping to the Nanyang in the second half of
the eighteenth century’, in E. Tagliacozzo and W. Chang, Chinese Circulation. Capital
Commodities and Networks in South East Asia. Durham: Duke University Press, 285; J. CH’en
(1958), ‘The Hsien-Feng inflation’, Bulletin of the School of Oriental and African Studies.
University of London, 21 (3), 580.
50. M. Zylberberg (1993), Une si douce domination. Lex milieux d’affaires françaises et l’Espagne
vers 1780–1808. Paris: Comité pour l'histoire économique et financière de la France.
51. C. Lockyer (1711), An Account of the Trade in India. London: Samuel Crouch, 136 and 140.
52. L. Wong (1960), ‘The trade of Singapore, 1819–69’, Journal of the Malayan Branch of the
Royal Asiatic Society, 33 (4), 4–135; A. Reid and F. Radin (1996), ‘Shipping on Melaka and
Singapore as an index of growth, 1760–1840’, Journal of South Asian Studies, 19 (1), 59–84.
53. Irigoin (2013), ‘A Trojan horse in Daoguang China?’; R. von Glahn (2013), ‘Cycles of silver in
Chinese monetary history’, in Billy K. L. So (ed.), The Economy of Lower Yangzi Delta in Late
Imperial China. London, Routledge, 17–71.
54. N. Mayhew (2012), ‘Silver in England, 1600–1800: Coinage outputs and bullion exports
from the records of the London Tower Mint and the London Company of Goldsmiths’, in
J. H. Munro (ed.), Money in Pre-Industrial World: Bullion, Debasements and Coin Substitutes.
London: Pickering & Chatto, 97–108.
55. J. H. Clapham (1941), ‘The private business of the Bank of England, 1744–1800’, Economic
History Review, 11 (1), 77–89; A. Hotson and T.C. Mills (2015), ‘London’s market for bullion
and specie in the 18th century: the roles of the London Mint and the Bank of England in the
stabilization of prices’, in M. Allen and D. Coffman (eds), Money, Prices and Wages; Essays in
Honour of Prof. Nicholas Mayhew. Basingtoke: Palgrave, 217–27.
56. J. N. Silberling (1919), ‘British prices and business cycles, 1779–1850’, Review of Economics
and Statistics, 1 (10), 282–97.
57. A. Irigoin (forthcoming), ‘The Rise and Decline of the Global Silver Standard’ in S. Battilossi,
Y. Cassis and K. Yago (eds) Handbook of the History of Money and Currency (Springer).
58. K. N. Chaudhuri (1968), ‘Treasure and trade balance: The East India Company’s export
trade, 1660–1720’, Economic History Review, 21 (3), 480–502.
59. Morineau cited in A. García-Baquero González (1996), ‘Las remesas de metales preciosos
americanos en el siglo XVIII: Una aritmética controvertida’, Hispania: Revista Española de
Historia, 56 (192), 266.
60. Smith, Wealth of Nations, Book IV, chapter 7, 782.
61. Smith, Wealth of Nations, Book I, chapter 11, 287.
62. Smith, Wealth of Nations, Book IV, chapter 3, 629, 621–25.
63. Smith, Wealth of Nations, Book IV, chapter 7, 780.
64. Smith, Wealth of Nations, Vol III, chapter 11, 282–3.
65. Smith, Wealth of Nations.
286
CHAPTER 16
ECONOMIC CHANGE IN EAST ASIA
FROM THE SEVENTEENTH TO
THE TWENTIETH CENTURY
Debin Ma
What is East Asia?
Although defying precise demarcation, East Asia can be defined in geographic, political,
and cultural terms. Situated largely at the eastern end of the Asian continent, East Asia
is more closely associated with today’s nation states or regions of China, Japan, North
and South Korea, and Northern Vietnam but could, for cultural reasons, include the
far-flung city state of Singapore. Three interrelated historical identities are shared in
varying degrees across East Asia. First is the use of classical Chinese characters among
the educated elites and the corresponding adoption of the teachings of Confucius as
the ruling ideology. This is coupled with a hierarchical civil bureaucracy inculcated in
the teachings of Confucian classics and superimposed upon a predominantly agrarian
economic structure. And finally, East Asia is an international order based on what is
called a ‘tributary system’.
As a reflection of a Neo-Confucian cosmology, the political order of the tributary
system consisted of radiating concentric rings, with political power emanating from
the imperial seat of the Chinese emperor out towards administrative provinces,
tributary or vassal states, and mutual trade zones. The tributary states system created
a political framework in which neighbouring small states maintained a status of near
protectorate and within which cross-national trade, although restricted, was conducted.
This China-centred hierarchical worldview was internalized by periphery states such
as Korea, Northern Vietnam, and to a certain extent, Japan, who, in turn, imposed a
‘satellite tributary system’ upon other smaller states.1 East Asian states prevailed within
the tributary system until aggressive Western imperialism reached China’s shore by the
mid-nineteenth century.
East Asia in the seventeenth to the nineteenth centuries
The seventeenth century saw the onset of new political regimes in Qing China (1644–
1911), Tokugawa Japan (1603–1868), and the consolidation of the Choson dynasty in
Korea (1392–1897). Despite being a minority tribe hailed from China’s northeastern
border, the Manchu rulers turned Qing China into a mature, highly centralized, unitary
political regime governed by an absolutist emperor at the top of the power pyramid,
aided by a formal bureaucracy recruited through a highly structured national civil service
examination based on Confucian classics. The formal imperial regime coexisted alongside
the emperor’s personal rule, his personal entourage of eunuchs, consort, and other inner
court staffs.2 While Korea more faithfully reproduced the Chinese system of governance
with variation and adaptations, the Japanese system of governance remained far more
fractured and decentralized under the Tokugawa regime when the emperor was sidelined
in Kyoto as a symbolic figure. The real power resided instead in the hands of a military
general-bureaucrat (the Shogun) in Tokyo. But even the Shogunate’s rule only directly
controlled part of the Japanese territory and coexisted with 300 autonomous daimyos.3
Both cohesion and diversity characterized East Asia as an integrated cultural zone
or sphere. Firstly, despite the dominance of Chinese classics across the entire area, the
diversity of ethnic and national identities remained important. Indeed, the Qing Empire
was ruled by a non-Han minority group from Manchuria (in northeastern China) who
had had a long-standing engagement with the Han Chinese over the centuries. The
interaction between Han Chinese or Confucian cultures and other cultures in the region
should be viewed as a bi-directional flow rather than that of Han Chinese dominance.4
Secondly, connected with political and ideological exchange was the trade in goods
and perhaps more importantly in technology – both formally and informally – under
the tributary system. Despite the relative isolation, exchange led to the diffusion of
technology that allowed regions and states of East Asia to catch up economically and
technologically through import substitution during the early modern period. Among
the outcomes was the creation of a well-articulated intra-Asian trading network
somewhat independent of the Western trade systems that made serious inroads into
East Asia only after the mid-nineteenth century.5 Trade between East Asia and the world
beyond remained limited though of critical importance. The export of Chinese silks and
tea fuelled a passion for Chinoiserie in the West that eventually led to imitation and
import substitution of Chinese products in Europe and India. In the opposite direction,
the inflow of Latin American silver ingots and coins lubricated the engine of Chinese
commerce and supported the monetization of public finance from the sixteenth century
onwards. The introduction of New World crops such as maize, peanuts, and potatoes
sustained the population, which tripled during the Qing Empire.
The beginning of the nineteenth century may have seen the turn of the tide that
had once favoured the fortune of Qing China. Population growth sustained by rising
agricultural land productivity and the introduction of new crops may have finally stretched
the limits of the constraints on resources. Beginning with the White Lotus (1796–1804),
a series of domestic rebellions culminating in the vast Taiping uprising (1851–64), one
can observe an erosion of the Qing regime. Externally, following the collapse of East
India Company’s monopoly in 1833, British imperialism driven by private commercial
interest intensified to the detriment of Chinese trade. The rise of the trade in Indian
opium to China reversed China’s long-standing trade surplus, draining silver specie out
of the empire. The increasing scarcity of silver specie caused havoc across the economy,
diminished the government’s capacity to collect taxes, and decreased the morale of the
288
Economic Change in East Asia
military.6 This occurred because during the sixteenth and seventeenth centuries, mid-
Ming reforms had led to the silverization of tax revenue and the use of silver as one of
the mediums of exchange in the economy. Prompted by an urge to act, but armed with
little understanding of the might of the rising Western imperialism, the Qing’s military
confrontation with England in the now famous Opium War of 1842 turned out to be a
humiliating defeat. It also marked the fall of the world’s largest and most remote empire
into the orbit of Western imperialism. British arms forced the Qing to accept the Treaty
of Nanking (1842), which ceded Hong Kong to the British, imposed a regime of virtual
free trade, and initiated the ‘treaty port’ system by opening five Chinese ports to British
and other Western merchants. This agreement, which set the tone of China’s international
economic relations during the century prior to the Pacific War (1941–5), subsequently
expanded to include dozens of treaty ports where foreign residents were protected by
extraterritoriality at the expense of Chinese sovereignty.
In the eighteenth and nineteenth centuries, Tokugawa Japan shared commonalities
as well as differences with Qing China. In contrast to the eighteenth-century population
growth of Qing China, Japan’s population remained stable. This led an early generation
of historians to interpret this as a form of early modern Japanese exceptionalism vis-à-
vis other Asian countries, creating a unique ‘social structure’ that allowed a precocious
demographic transition for Japan. However, population stagnation can similarly be
interpreted as the result of Japanese population being trapped by its land territory, which
– unlike Qing China which saw a doubling of its territory – was circumscribed by its
coastal borderlines.7 However, there is little dispute that Japan diverged from China at
the beginning of the nineteenth century as the country remained relatively peaceful, and
sheltered from the dual crisis of opium and silver outflows that had gripped China. But
this divergence should not be overstated as the onslaught of Western imperialism exerted
equal if not more pressure on isolationist Tokugawa Japan. Indeed, after the opening up of
East Asia to free trade under Western imperialism in the mid-nineteenth century, during
their early attempts to expand business overseas, the Japanese suddenly found themselves
under the pressure of a remarkable resurgence of China-based mercantile dominance
across regions of East and Southeast Asia. In particular, Shanghai, as a newly opened treaty
port, rapidly emerged as an important node in a vast trading network that enveloped,
among others, the Japanese treaty ports of Yokohama and Kobe. The dominance and
cohesion of Chinese merchant networks throughout Asia posed a challenge to the young
Meiji government as formidable as the agenda of catching up with the West.8
Recent attempts at constructing new long-term Chinese GDP series seem to confirm
earlier estimates by Maddison.9 The claim that China was the world’s leading economy
in the seventeenth and eighteenth centuries was somewhat misleading based on a
conflation of aggregate and per capita figures. Based largely on guesstimates, Maddison
put China’s annual per capita income at about $500–600 (international $ in 1990 prices),
a level that was about 80 per cent (in 1500) and 35 per cent (in 1700) of the world’s
leading but much smaller economies of Britain and the Netherlands, respectively. But
Maddison was right in trumpeting the aggregate size of the Chinese economy.10 With
a doubling of its territory and a tripling of its population between the fifteenth and the
289
eighteenth centuries, no other early modern political entity achieved such size in both
territory and population under a single political regime. But it will be a far cry to claim
that any of this gave the Chinese economy the leading position that it may have held
in the early centuries of the second millennium as under the Song dynasty (960–1279
CE). The commercial, financial, political, technological, and scientific revolutions that
characterized a fragmented and quarrelsome Europe largely sidestepped the centralized
but rigid Qing state, only to haunt it by the mid-nineteenth century. We can get a more
comprehensive profile of the evolution of Chinese living standards and human capital in
the nineteenth and twentieth centuries based on integrated estimates of real wage and
anthropometric evidence. They confirm a general decline in living standards and human
capital after the mid-nineteenth century followed by a recovery only at the turn of the
twentieth century (Figure 16.1). The real wage data also reveal that in the eighteenth
and nineteenth centuries Chinese living standards were probably closer to the relatively
underdeveloped parts of Europe but lower than Northwestern Europe. They confirm
that a divergence in living standards and per capita income between Europe and China
already existed before the Industrial Revolution and only widened from the nineteenth
century onwards.11 However, in contrast to the findings based on real wages and heights,
the basic numeracy index reveals a relatively high level of Chinese human capital, which
in the eighteenth and nineteenth centuries was closer to that of Northwestern Europe
than countries with a comparable low level of living standards such as India or Turkey.12
Figure 16.1 Real wages in Asia and England, 1738–1914.

Source: R. Allen, J.-P. Bassino, D. Ma, C. Moll-Murata and J. L. van Zanden (2011), ‘Wages, Prices,
and Living Standards in China, Japan, and Europe, 1738–1925’, Economic History Review, 64 (S1),
pp. 8–38.
290
Economic change in modern East Asia
Western imperialism represented an external threat drastically different from China’s

traditional nemesis on its Northern frontier and was therefore a watershed in Chinese
history. The challenge was economic, political, institutional, and ideological. The new era
saw China start off disastrously with the outbreak of the devastating Taiping Rebellion
(1850–62). It must be said that the Qing under the so-called Tongzhi Restoration (1861–
75) engineered a remarkable economic recovery through the revitalization of traditional
institutions: the reinstatement of Confucian orthodoxy, the restoration of the national
civil service examination (largely interrupted during the Taiping Rebellion), and the
initial exemption from land taxes to lure cultivators back to war-torn agricultural regions.
The Qing did not remain entirely passive to Western incursions. As a natural
extension to the Tongzhi Restoration, powerful regional bureaucrats such as Li
Hongzhang and Zhang Zhidong sponsored the Self-Strengthening Movement (1860–
94), a programme that aimed to expand Chinese military strength by developing a small
number of Western-style, capital-intensive enterprises financed by the state and directed
by eminent officials who possessed the highest credentials awarded under the Confucian
academic system. Although these enterprises – which included arsenals, factories, and
shipyards – were fraught with inefficiency and corruption, they did manage to record
modest achievements. Nonetheless, the overall ideological orientation during this period
remained conservative. In contrast to the concurrent Meiji reforms in Japan, no Chinese
reform touched the fundamentals of the traditional regime: there was no introduction
of modern constitution or commercial law; no reform in the currency system; modern
banks or modern infrastructures such as railroads were expressly prohibited; and
steamships were limited to major riverways such as the Yangzi River.
The direct impact of the treaty port system according to which Chinese trade tariffs
were restricted to a modest 3–5 per cent was the expansion of China’s international trade.
China’s maritime customs data show how real imports more than doubled in the quarter
of a century prior to 1895, with exports increasing by half of that. Trade statistics suggest
that after 1895 trade grew at a slower pace, around 2–3 per cent per annum. Despite its
modest scale, trade gradually integrated major domestic commodity markets into the
international exchange system of the Pacific Basin.
The treaty system accelerated the arrival of new technologies, initially to the treaty
ports themselves, which became staging points for the diffusion of technologies into the
domestic economy. However, industrialization continued to lag behind the opportunities
opened up by trade and the inflow of new technology partly due to powerful obstacles
to innovation that existed within China’s domestic economy. These barriers, which
negatively affected the expansion of infrastructure such as modern railroads and inland
steam shipping, are most clearly visible in the history of private efforts to introduce
new technologies and new business arrangements in the processing of agricultural
commodities like soybeans and silk larvae.13
In sharp contrast to Qing China, the Samurai clans that overthrew the old Tokugawa
regime and came to power with the 1868 Meiji Restoration made no pretence to
291
‘restore’ Japan to her old days, but instead proclaimed to seek knowledge throughout
the world. They embarked on a reform programme to forge a modern nation state
modelled after the West. Japan’s decisiveness in turning outwards in facing the Western
imperial challenge stood in stark contrast to the contemporaneous Qing’s determination
to reinstate an orthodox Neo-Confucian ruling ideology to an empire that had been
brought to the brink of collapse. In contrast to the Self-Strengthening Movement (1860–
94) that pursued the modernization of the Chinese military through a series of either
government-financed or government-controlled Western-style industrial enterprises,
Meiji Japan threw its full support behind the private sector, which – with the sell-off
of the limited number of government enterprises in the 1880s – was designated as the
mainstay for Japan’s industrialization. The self-strengtheners in China displayed either
indifference or hostility towards private enterprise in modern sectors, supplied few
critical modern public goods, and in most cases even opposed private efforts to build
public infrastructure such as railroads and inland steam shipping. By contrast, the Meiji
leaders engaged in the build-up of crucial social and physical infrastructures such as a
modern legal system, public education, research and technological diffusion, a modern
monetary and banking system, and modern transportation and communications. While
there was little overhauling of its traditional political, legal, monetary, and education
system in nineteenth-century Qing China, the 1890s saw the birth of a newly transformed
modern constitutional monarchy in Japan.14
Available macroeconomic statistics give an annual growth rate of Japanese per capita
GDP at 2.25 per cent between 1887 and 1897. By 1910 the Japanese economy was 50 per
cent larger than it had been in 1887. Japan’s share of manufacturing and mining in total
GDP rose from 8.7 per cent in 1887 to 11 per cent in 1897, and to 16 per cent in 1910.15
Although rigorous quantitative comparison with Qing China are impossible due to the
lack of reliable macroeconomic statistics for the late nineteenth century, it is clear that in
China there was little industrial expansion except for government-sponsored enterprises
which, however, created little spillover effect across the economy. As for agriculture,
technological progress and productivity gains were largely absent while the effects and
degrees of commercialization during this period were mixed.16
The absence of macroeconomic statistics hinders any attempts to pinpoint the critical
historical moment when Japan overtook China in economic terms. However, China’s
humiliating naval defeat by Japan in 1894–5 serves as the litmus test of the merits of
almost three decades of contrasting political and economic policies. This ignominious
military defeat by a nation long regarded as China’s minor tributary neighbour inflicted a
profound mental shock on Chinese elites and the public at large. An immediate economic
impact followed the 1895 signing of the Treaty of Shimonoseki, which granted foreigners
the right to establish factories in the treaty ports. Eliminating the prohibition against
foreign factories in treaty ports sparked a rapid expansion of foreign direct investment
in China. This new arrangement indirectly legitimized Chinese modern enterprises.
Despite some setbacks from the repression of the Hundred Days’ reform centred in the
southern province of Hunan in 1898, followed by the subsequent debacle surrounding
the Boxer Rebellion in 1900, the Qing constitutional movement of 1903–11 was a
292
far more comprehensive and ambitious initiative. It aimed at steering China towards
a constitutional monarchy by drafting a formal modern constitution with national,
provincial, and local level parliaments. Military modernization was high on the reform
agenda. Administrative reform sought to modernize public finance and adopt a national
budget, as well as the setting up of new ministries of education, trade, and agriculture,
and encouraged the founding of local chambers of commerce.
From the very end of the nineteenth century, Chinese activity in mining and
manufacturing accelerated sharply from its small initial base. Overall industrial output
showed double-digit real annual growth during the period 1912–36, a phenomenal
result for that period, especially in view of China’s turbulent political scene and the
impact of the Great Depression. Factory production, initially focused on textiles, food
processing, and other consumer products, concentrated in two regions: the Lower
Yangzi area, where both foreign and Chinese entrepreneurs pursued factory expansion
in and around Shanghai; and China’s northeast or Manchurian region, where Japanese
initiatives predominated. By 1935, Chinese factories, including some owned by British
and Japanese firms, produced 8 per cent of the world’s cotton yarn (more than Germany,
France, or Italy) and 2.8 per cent of global cotton piece goods production. Despite the
importance of foreign investment in Shanghai and especially in Manchuria, Chinese-
owned companies produced 73 per cent of China’s 1933 factory output. The growing
production of light consumer and industrial goods, combined with the accumulation of
experience in operating and repairing modern machinery, generated backward linkages
that spurred new private initiatives in machinery, chemicals, cement, mining, electricity,
and metallurgy. Official efforts (including semi-official Japanese activity in Manchuria)
also promoted the growth of mining, metallurgy, and arms manufacture. 17
China’s economic prospects acted as a magnet for trade and investment during the pre-
Second-World-War decades. China’s foreign trade rose to a peak of more than 2 per cent of
global trade flows in the late 1920s, a level that was not regained until the 1990s. Between
1902 and 1931, inflows of foreign direct investment grew at annual rates of 8.3 per cent
for Shanghai, 5 per cent for Manchuria, and 4.3 per cent for the rest of China. By 1938,
China’s stock of inward foreign investment amounted to US$2.6 billion – more than any
other underdeveloped region except for the Indian subcontinent and Argentina. Although
estimates of pre-war capital flows often blur the distinction between direct and portfolio
holdings, it is evident that China played a substantial role in global capital flows. The above-
mentioned 1938 figure of US$2.6 billion for China’s stock of foreign investments amounts
to 8.4 per cent of worldwide stocks of outward foreign investment and 17.5 per cent of
outward foreign direct investment in that year. By contrast, China’s 2001 share of worldwide
inward foreign direct investment was only 2.1 per cent. Domestic investment also showed
substantial growth. ‘Modern-oriented’ fixed investment (calculated from consumption
of cement, steel, and machinery) grew at an average annual rate of 8.1 per cent between
1903 and 1936, outpacing Japanese gross domestic fixed capital formation in mining,
manufacturing, construction, and facilitating industry, which advanced at an annual rate of
5 per cent. Despite the effects of the Great Depression and political tumult, economy-wide
gross fixed investment exceeded 10 per cent of aggregate output during 1931–6.18
293
Transport development contributed substantially to economic expansion. China’s

railway track length grew from 364 kilometres in 1894 to over 21,000 by 1937, and
newly constructed north–south lines slashed economic distances across a landscape
dominated by rivers flowing from west to east. The completion of railway and telegraph
connections linking Peking (now Beijing) and the central China river port of Wuhan in
1906 reduced the time needed to ship commodities between these cities. In a remarkable
triumph of a free-banking version of the silver standard, privately owned Chinese banks,
often cooperating with foreign financial institutions and traditional money lenders,
transformed the financial face of China by persuading households and businesses
to transact with paper banknotes that were convertible into silver on demand. This
monetary transformation reduced transaction costs. The expansion of branch networks
allowed major domestic banks to attract deposits from all regions and recycle them to
the areas of greatest demand, contributing to the emergence of an embryonic national
market for funds. All in all, these developments in industry, transport, and finance
precipitated an episode of modern economic growth at the national level during the
early decades of the twentieth century.
These forces resulted in increased per capita output and structural changes of the
sort associated with Simon Kuznets’ concept of ‘modern economic growth’. This
was the case in two major regions: the Lower Yangzi, where private domestic and
foreign investment in and around Shanghai served as a key driver, and the northeast
(Manchuria), where Japanese investment and eventual takeover provided momentum
for economic development. Table 16.1 details the comparative growth pattern in
modern industries in Japan and China. It shows that growth rates in China (including
Shanghai) were comparable for the 1895–1911 and 1912–36 periods, and were possibly
matched only by those of Korea in the period 1912–36.19 Tables 16.2 and 16.3 show the
changing economic structure and per capita GDP levels of China, Japan, Taiwan, and
Korea during the 1930s at the national level. Clearly, sectoral structural change came
much faster in the smaller economies of Taiwan and Korea than that of China.20 Overall,
Table 16.1 Annual real growth rates of modern

industry output in China and Japan, 1880–1936
China Shanghai Japan

(%) (%) (%)
1880–1895 10.0
1895–1912 9.4 5.7
1912–1925 10.0 12 8.6
1925–1936 5.4 6.5 9.5

Source: D. Ma (2008), ‘Economic growth in the Lower Yangzi
region of China in 1911–1937: A Quantitative and Historical
Perspective’, Journal of Economic History, 68 (2), pp. 385–92,
and sources cited therein.
294
Table 16.2 GDP structure in East Asian countries
China Japan Taiwan Korea

(percentage (percentage (percentage (percentage
of total) of total) of total) of total)
1914–18 Agriculture 71 29 48 66
Industry 8 20 29 7
Services 21 51 23 24
1931–36 Agriculture 65 19 44 53
Industry 10 28 27 13
Services 25 53 29 34
Annual per capita NDP 0.53 1.4 1.5 1.1

growth rate in 1914–18 and
1931–36
Source: D. Ma (2008), ‘Economic Growth in the Lower Yangzi Region of China in 1911–1937: A Quantitative
and Historical Perspective’, Journal of Economic History, 68 (2), pp. 385–92, and sources cited therein.
Table 16.3 East Asian per capita GDPs in 1934–6 (in 1934–6 US dollars) and
relative to the United States
United States Japan Taiwan Korea China
Per capita GDP (exchange rate 574.7 77.1 49.2 29.1 20.1
conversion)
As percentage of US GDP 100.0 13.4 8.6 5.1 3.5
Per capita GDP (purchasing 574.7 180.8 129.6 70.9 63.6

power parity conversion)
As percentage of US GDP 100.0 31.5 22.6 12.3 11.1
Source: K. Fukao, D. Ma and T. Yuan (2007), ‘Real GDP in Pre-war East Asia: A 1934–36 Benchmark
Purchasing Power Parity Comparison with the U.S.’, Review of Income and Wealth, 53 (3), Table 8.
Japanese economic development preceded that of China by nearly two decades and
emerged as three times of that of China in the 1930s in purchasing power parity terms
after controlling for domestic price differences.
East Asia in the shadow of the Japanese Empire
The rapid modernization of Japan is one of the most significant events in world history.
Accompanying this modernization was its immediate impact across East Asia, particularly
across areas of shared cultural heritage. Japan’s emergence on the international scene was
295
initially seen as a challenge to the China-dominated tributary order. Being subject to a

similar treaty port system, Meiji Japan manoeuvred itself from a semi-colonial status
onto a relatively independent sovereign state, which, like all other ‘civilizing European
states’, developed its own forms of imperialism in the region. Japanese imperialism in
East Asia developed within the context of the unequal treaty port system (under the cloak
of free trade) imposed by European imperialism. Slowly, however, Japanese imperialism
became increasingly formal with the acquisition of Taiwan and Korea following the Sino-
Japanese War of 1894–5 and the Russo-Japan War of 1904–05, respectively. It was in these
two territories on the Chinese peripheries that Japan began a massive transfer of the
Meiji modernization programme. Such a programme included the full-scale transplant
of Japanese monetary and banking institutions, public infrastructural investment, and
the transfer of industrial and agricultural technologies. It was later extended to include
the education system. Both Korea and Taiwan were developed into major agricultural
and raw material producers for the benefit of Japan.21
In the end, Japan’s relationship with China was qualitatively different from that
imposed on China by the Western powers through the treaty port system. The two
countries shared a common culture and linguistic similarities and both had been the
objects of Western gunboat diplomacy. Indeed, following Japan’s victory over China in
the 1890s, there emerged the notion that the Japanese, in repayment of their cultural
debt to China, should help pull China up in the path of ‘civilization’. Many Japanese felt
empowered or even obliged by their successful modernization to help the Chinese climb
the path to national wealth. But these yearnings for solidarity with China were often
confounded by a sense of Japanese superiority, which partly laid an ideological basis for
Japanese imperialism in China.
Equally important to the rise of Japanese imperialist sentiment is the country’s
changing economic structure. In 1902, Japanese investment in China was a mere 0.1 per
cent of total foreign investment, but by 1931 it formed more than 50 per cent of total
foreign investment in China. The total number of Japanese residents in China dwarfed
the Western residents in China. In 1910, the total volume of Japanese commodity
trade with China was about five times that of Korea and Taiwan combined. While that
disparity declined over time as Japanese colonies developed important food crops,
China remained an important exporter of key raw materials and a consumer market
for Japanese manufactured goods.22 The Japanese production and trade structure were
maturing: while Japanese exports to Western Europe and North America remained
confined to labour-intensive products, Japan became a major and highly competitive
exporter of (capital and skill-intensive) manufactured goods to other parts of Asia.23
Japan’s increasing penetration of the China market came at a time when Western
powers were beginning to retreat and compromise with Chinese nationalism after the
fall of Qing in 1911. More importantly, while British investment in China was only
about 7 per cent of its overall foreign direct investment in 1929, Japanese investment in
China reached about 90 per cent of the country’s foreign direct investment in the 1930.
According to Peter Duus, this may have prompted Japanese imperialism to turn from
informal (maintained jointly within China by all the powers) to direct control (and a later
296
full-scale invasion). This direct control started with the full annexation of Manchuria
and the establishment of the puppet state there in 1931. The Japanese aggression
however coincided with a global downturn. Beginning in 1929, China’s economy faced
a succession of shocks caused by the Great Depression and falling export demand, the
severance of Manchuria in 1932 by the Japanese, and rapidly rising silver prices triggered
by Britain’s decision to exit the gold standard and the US Silver Purchase Act of 1934.
Considerable debate remains over how well the Chinese economy weathered the
storm and the severity of the combined impact of these events on aggregate economic
activity. But there is no dispute about what happened afterwards: the disastrous full-scale
invasion of mainland China in 1937 degenerated into a protracted and brutal eight-year
war, which spelled the end of nearly three decades of economic growth in East Asia. It
is also ironic that the Sino-Japanese War marked the direct confrontation of Japanese
imperialism against the newly risen Chinese nationalism, itself inspired by Japan’s
modernization success.
Conclusion
An integrated global history is critical to our understanding of the past, present, and future
of East Asia. In the absence of a single unified religion, East Asia was forged by shared culture
and writing scripts which defined some important economic and social features. These in
turn directed the long-term economic trajectory of this region. A shared identity served to
enhance the diffusion of modernization and industrialization but also led to conflicts and
warfare. In the aftermath of the Second World War, East Asia witnessed economic miracles
in Japan and two of her former colonies, South Korea and Taiwan. The last three decades
have also seen China’s miraculous emergence as the world’s second largest economy. These
miracles would have been impossible without the positive cooperation and competition
among East Asian countries. But changing political and economic imbalances could also
lead to renewed tension or conflict. It is hoped that the shared heritage and identities will
become the source of future cooperation rather than conflict in East Asia.
Notes
1. E. Rawski (2015), Early Modern China and Northeast Asia, Cross Border Perspectives.
2. D. Ma (2012), ‘Political institution and long-run economic trajectory: Some lessons from
two millennia of Chinese civilization’, in M. Aoki, T. Kuran and G. Roland (eds), Institutions
and Comparative Economic Development. Basingstoke: Palgrave Macmillan, 78–98.
3. Rawski, Early Modern China.
4. Rawski, Early Modern China.
5. T. Hamashita and H. Kawakatsu (1991), Ajia Koekiken to Nihong Kogyoukyoka [Asian
Trading Networks and Japanese Industrialization 1500–1900]. Tokyo: Libro.
297
6. Man-houng Lin (2006), China Upside Down: Currency, Society, and Ideologies, 1808–1856.
Cambridge, MA: Harvard University Asia Center: Distributed by Harvard University Press.
7. For a reinterpretation of the comparison between China and Japan based on a regional
perspective, see D. Ma (2008), ‘Economic growth in the Lower Yangzi region of China in
1911–1937: A quantitative and historical perspective’, Journal of Economic History, 68 (2),
385–92.
8. T. Hamashita, and H. Kawakatsu (1991), Ajia Koekiken to Nihong Kogyoukyoka [Asian
Trading Networks and Japanese Industrialization 1500-1900]. Tokyo: Libro.
9. J. Bolt and J. L. van Zanden (2014), ‘The Maddison Project: Collaborative Research on
Historical National Accounts’, Economic History Review, 67 (3), 627–51.
10. A. Maddison (2007 [2nd ed.]), Chinese Economic Performance in the Long Run. Paris:
Development Centre of the Organisation for Economic Co-operation and Development.
11. R. Allen, Jean-Pascal Bassino, Debin Ma, Christine Moll-Murata and Jan Luiten van Zanden
(2011), ‘Wages, prices, and living standards in China, Japan, and Europe, 1738–1925’,
Economic History Review, 64 (Supplement 1), 8–38.
12. It should be said that in comparison to the high level of Japanese numeracy, Chinese
numeracy displayed great volatility during the nineteenth century. J. Baten, D. Ma, S. Morgan
and Q. Wang (2010), ‘Evolution of living standards and human capital in China in 18th–20th
century’, Explorations in Economic History, 47 (3), 347–59.
13. See L. Brandt, D. Ma and T. Rawski (2014), ‘From Divergence to Convergence: Re-evaluating
the History behind China’s Economic Boom’, Journal of Economic Literature, 52 (1), 45–123,
for details.
14. Ma, ‘Economic growth in the Lower Yanzi’.
17. Brandt, Ma and Rawski, ‘From divergence to convergence’.
18. Brandt, Ma and Rawski, ‘From divergence to convergence’.
19. For industrial growth in Taiwan and Korea during this period, see T. Mizouchi and M.
Umemura (ed.) (1988), Basic Economic Statistics of Former Japanese Colonies, 1895–1938.
Tokyo: Toyo Keizai Shinposha, 273 and 276, respectively. Note that as the growth spurt
of modern industry in Japan started well before 1895, Japanese industrial expansion in
twentieth century expanded from a larger base than Shanghai.
20. For the importance of Japanese imperial investment in social overhead capital and education
in Korea and Taiwan in the facilitation of this rapid sectoral transformation and growth
in GDP, see Anne Booth (2007), ‘Did it really help to be a Japanese colony? East Asian
economic performance in historical perspective’, Asia-Pacific Journal, 5 (5), 1–26.
21. Mizouchi and Umemura (ed.), Basic Economic Statistics. Clearly in the long-run investment
in education and infrastructure also provided a basis to support the rapid independent
economic development of both regions after 1960. See Booth, ‘Did it really help?’.
22. P. Duus (1989), ‘Japan’s informal empire in China, 1895–1937: An overview’, in P. Duus, R.
Myers and M. Peattie (eds), The Japanese Informal Empire in China, 1895–1937. New Jersey:
Princeton University Press, xiii.
23. Duus, ‘Japan’s informal empire’, 3.
298
CHAPTER 17
EUROPE IN THE WORLD, 1500–2000
Peer Vries
A diverse continent
Europe’s history of the last half millennium is one of almost uninterrupted warfare,
culminating in the twentieth century in two disastrous world wars.1 These violent
conflicts were the main cause of the marked reduction in number of the continent’s
polities. At the end of the Middle Ages, Europe counted several hundred of them;
immediately after the Second World War, only some thirty. At the very end of the period
under discussion we see two trends: an increase of the number of polities because of
the disintegration of the Soviet Union, Yugoslavia, and Czechoslovakia and a further
reduction of the number of fully sovereign states as Europe’s economic and political
integration became deeper and wider. This increasing integration, however, did not
create a homogenous economic entity, as will be pointed out at several occasions in this
text. Differences in wealth, development, and growth between countries have continued
to be substantial and in several cases even increased.
The units of analysis and comparison in this chapter will almost exclusively be states,
as we currently know them. There are disadvantages to such a focus. It can easily become
anachronistic and even in relatively tiny states in Europe regional differences were and
often are substantial. The decision to nevertheless focus on states has been made for
pragmatic reasons – the number of pages available, intelligibility and comparability, and
the available data.
Until the sixteenth century the centre of gravity of Europe’s civilization and economy
had primarily been the Mediterranean area. In that century, the slow and protracted
process started in which the region lost its primacy.2 It became less ‘integrated’
because of the rise of the Ottoman Empire just when with the increasing importance
of the Atlantic world the centre of the European economy shifted northwest. The
Mediterranean economies, moreover, had few direct exchanges with the emerging
Atlantic economy, and their overseas connections to East and Southeast Asia were
less tight than those of the Dutch, the British, or the French. Southeastern Europe
became part of the Ottoman Empire, which most scholars regard as retarding for its
economy. That empire never directly engaged in the upcoming Atlantic economy. Its
exchange with the Far East never became intense. The parts of Southeastern Europe
that came under its rule were also only weakly integrated in the European economy
as a whole, even in the nineteenth century, not least because of geographical reasons.
Much of the rather low amount of their international trade, moreover, was in foreign
Table 17.1 The position of the region ‘Europe’* in the world

(Europe as a percentage of the world)
Year Land surface Population GDP**
1500 <4 16 20
1820 <4 16 27
1913 <4 19 38
2003 <4 8 21
* Here as in the entire chapter, without Russia, the Russian Empire, or the Soviet
Union.
** The figures for GDP are, of course, for the period until 1913 estimates.
Source: A. Maddison (2007), Contours of the World-Economy, 1–2030 AD. Essays
in Macro-Economic History. Oxford: Oxford University Press, 378 and 381, for
population and GDP.
hands. The region became one of the poorest of Europe, which it still is.3 Other parts
of the Mediterranean world also saw their position change: the economy of Italy was
probably already stagnating at the beginning of the early modern era. A widening
gap emerged between a North that continued to be relatively speaking quite wealthy
and a relatively poor South. Spain and Portugal became the centres of huge, primarily
Atlantic, empires but nevertheless their economies faltered. Incomes per capita tended
to stagnate or even decrease. Compared to Northwestern Europe they began to look
poor and backward.4 At the end of the twentieth century, notwithstanding sometimes
quite impressive efforts at catching up, their income still was below the average of the
Euro area.
Overall from the end of the sixteenth century onwards we see a retreat of the
Mediterranean and a rise of the Atlantic. Northwestern Europe, which had been fairly
marginal until the later Middle Ages – in particular in the case of the later Dutch
Republic and the British Isles – became Europe’s wealthiest and most dynamic region.
Because of the British and Dutch role in European economic development they will
receive quite some attention in the rest of this text, so I confine myself to this brief
comment here.
Overall Central Europe – here for convenience defined as the lands of the Holy Roman
and Habsburg empires – became more peripheral during the early modern era, although
with important regional differences. Trade connections with Northern Italy, Castile
and Aragon, and the Southern Low Countries became less intense. Its importance as
producer of silver and iron declined. The German, non-Habsburg, regions of the Holy
Roman Empire politically and economically lost leverage. Their economies were severely
damaged during the Thirty Years’ War (1618–48). In the eighteenth century, Prussia
started to fill the political void, but it was only after 1870 that a unified Germany with a
dynamic and strong economy emerged. From then onwards, Germany almost without
interruption had the strongest single economy of Europe. The Habsburg Empire had
300
Europe in the World, 1500–2000
great power status but apart from some regions – all in its Western half – like Bohemia,
Silesia, and parts of present-day Austria, it continued to be relatively poor.5 Yet, at the
end of the twentieth century Austria had become one of the wealthiest countries in
Europe. This is also the case for Switzerland that deserves separate mention here as a
central European country that enjoyed autonomy for seven centuries and industrialized
quite early.6
The economies of most of East, Central, and Southeastern Europe overall developed
differently from those of North and Northwestern Europe. From the early sixteenth
century, if not earlier, the region became more ‘peripheral’ and ‘fell behind’. Previously
existing states lost their independent statehood and became part of more ‘coercion-
intensive’ polities like the Habsburg, Russian, or Ottoman empires, just when in Western
Europe polities emerged with more potential for development that started reaping benefits
of overseas expansion. There, however, also existed internal reasons. First and probably
foremost is the re-institution or strengthening of ‘feudal’ structures. In particular, east of
the Elbe, unfree labour became the rule in agriculture, where many scholars speak of a
‘second serfdom’ and in several other sectors of the economy. In towns, a more restrictive
guild system began to prevail. Levels of urbanization were low and there was no strong
modernizing bourgeoisie. The region participated in international trade, but it did so
as a periphery. Intercontinental trade was all but absent.7 After the Second World War,
there was a major – but ultimately unsuccessful – effort to ‘catch up’ behind an Iron
Curtain in a communist setting of planned development. When the curtain fell, most of
the region returned to a peripheral position. Several countries even saw a sharp decrease
in their GDP per capita.
The history of Northern Europe here defined as Scandinavia, including Finland and
Iceland, has its ups and downs. It has never been economically or politically a powerful
European ‘core’ region, although Sweden in the seventeenth century came close to it.
Things have fundamentally changed here, in particular during the twentieth century.
Over the last decades it has even become one of the richest and most developed parts of
Europe.8
Differences in wealth in Europe in the period discussed here have always been
substantial, as Tables 17.2 and 17.3 show. In the case of Table 17.2 they provide
no more than very rough estimates, which, moreover, in several instances are not
completely identical to those of the Table 17.3 for the years 1820 and 1870. For
many countries we still lack sufficient good statistical information. Differences in
patterns of development and levels of wealth are striking.9 Eastern and Southeastern
Europe, of which only the Polish case is presented in Tables 17.2 and 17.3, did not
catch up with Western Europe since the beginning of the nineteenth century, while
Southwestern Europe and certainly Northern Europe did manage to diminish or
even close the gap.
The concept of Europe is not only problematic because of the substantial and shifting
cleavages within the geographical entity that bears that name, but also because Europeans,
over almost the entire period discussed here, held sovereignty over large regions outside
their continent. By 1800 Western states – European states and their overseas settler
301
Table 17.2 Comparative levels of GDP per capita in Europe, in real

terms (United Kingdom in 1820 = 100)
c. 1500 c. 1700 c. 1750 1820 1870
United Kingdom 57 73 87 100 187
The Netherlands 67 109 109 107 162
France n.a. n.a. n.a. 72 110
Italy 83 71 76 65 88
Spain 63 61 58 62 71
Sweden 64 66 67 70 97
Poland 50–54 38–42 34–37 41 55

Source: S. Broadberry and K. O’Rourke (2010), ‘Introduction to Volume 1’ in S. Broadberry
and K. O’Rourke (eds), The Cambridge Economic History of Modern Europe. Volume I:
1700–1870. Cambridge: Cambridge University Press, p. 2.
Table 17.3 GDP per capita in several European countries, 1820–2000,

in real terms (Great Britain in 1960 = 100)
1820 1870 1910 1960 2000
Great Britain 23 37 53 100 243
The Netherlands 21 36 43 96 256
France 13 22 34 86 235
Italy 17 18 25 63 217
Spain 14 22 36 182
Sweden 10 16 29 100 241
Poland 11 37 84
Calculated on the basis of J. L. van Zanden et al. (eds) (2014), How Was Life? Global Well-
Being since 1820. Paris: OECD, p. 67.
colonies’ offshoots – controlled some 35 per cent of the world’s land surface. By 1914
they had increased that total to almost 85 per cent. In 1500 it had only been 7 per cent.
For many people all around the world globalization took the form of being colonized
by Europeans (Table 17.4).10 But when it comes to importance and size of their empires
we again see big differences between different parts of Europe.
The economic consequences of being absorbed into a European empire differed
too. The so-called Western offshoots (the settler colonies in the United States, Canada,
Australia, and New Zealand) in the end all became rich. The United States became
302
Table 17.4 Size and population of the overseas empires of the main colonial powers
of Europe
In 1760
United
Spain Portugal Kingdom The Netherlands France
Area 12.3 8.5 3.2 0.2 0.065
Population 18.8 1.6 2.8 3.3 0.6
In 1938
United
Kingdom France Italy Belgium The Netherlands
Area 33.6 12.2 3.4 2.4 2.1
Population 496.8 70.6 12.9 14.3 68.4
Data in million of square kilometres and million inhabitants.

Source: B. Etemad (2007), Possessing the World: Taking the Measurements of Colonisation from the Eighteenth
to the Twentieth Century. New York: Berghahn Books, 135–136, 167, 171, 174 and 178.
independent already in the 1770s. The other three countries were integrated into the
British Empire quite differently from ‘normal’ colonies. As a rule, colonies, British and
otherwise, did not develop into wealthy countries.11
Discussing Europe in a global context over the period of half a millennium requires
making clear choices. This text sets out to discuss developments that occurred in Europe’s
economic history over the last 500 years that are of worldwide relevance. I single out
three: first, Europe’s dominant role in creating a global economy; second, the fact that
Europe became the first region in the world characterized by modern economic growth;
and finally, Europe’s political economy, in terms of how it actually worked and in terms
of the prevailing ideas about it.
Europe and globalization
Let us begin with economic globalization, that is, the increase in intensity, extent, speed,
and impact of intercontinental economic contacts. Some caveats are in order. Firstly, the
fact that focusing on Europe’s intercontinental exchanges with the rest of the world can
easily be misleading. Those exchanges were important but must be put into perspective.
Trading bulk goods over a long distance, even over water, continued to be expensive and
laborious until at least the second half of the nineteenth century. Even in Europe with its
many waterways and its long coasts, regions in the interior often were hardly integrated
in intercontinental networks of exchange.12 Even at the very end of the twentieth century
the bulk of trade by Europeans still was with other Europeans. For most of the period
303
discussed, long-distance and certainly intercontinental trade was only a small fraction
of total trade. Secondly, the focus in this text will be on European particularities and
on European agency. That is because this is a text about Europe not because Europe
would be exceptional in all respects or because the rest of the world would be without
any agency.
Economic globalization was not a unilinear process. From Columbus and Vasco
Da Gama onwards, it intensified. During the seventeenth century there was a setback,
after which it got a new impulse in the next century. In the nineteenth century a major
intensification of intercontinental exchanges set in that was only interrupted during the
period between the two world wars. From the 1970s onwards, it became very intense.
The so-called Columbian Exchange of flora, fauna, and diseases between the Old
and the New Worlds was probably the most consequential form of pre-industrial
intercontinental exchange.13 There was also an intercontinental transfer of people, first
and foremost the transatlantic slave trade that brought enslaved people from Africa to
the Americas. Europeans were heavily involved in it as slave traders and as consumers
and sellers of the goods made through the use of slave labour. Between 1519 and 1867,
some eleven million enslaved Africans were shipped from Africa to the Americas, almost
half of them by Portuguese and Brazilians, some 28 per cent by British traders and some
13 per cent by French carriers, and the rest by people from the Dutch Republic, Spain, or
the United States.14 Europeans not only brought slaves to the Americas. They also traded
slaves in Asia.15 On top of that, over the entire early modern period, they imported in
total some 600,000 enslaved people to Italy and some 375,000 enslaved Africans to the
Iberian Peninsula. Less well known is the fact that Europeans could be enslaved by
others: more than one million white Christian Europeans were enslaved by traders from
North Africa, whereas some three million East Europeans were sold on slave markets in
the Middle East.16
The number of people who left Europe for other continents over the entire pre-
industrial period was rather small: for the Americas before 1820 only an estimated three
million, and for Asia before 1800 only some two million, and for Africa certainly not
more than 100,000 (Figure 17.1).
In discussing the main routes of pre-modern commodity trade, one must differentiate
between the triangular trade between Europe, Africa, and the Americas, and the trade
between Europe and Asia along the Cape.17 In quantitative terms, the Atlantic world was
more important as a trading zone for Europe than Asia. The goods exchanged between
these zones were different too. From South and Central America, Europe imported
bullion, sugar, and cotton. Together with tobacco, cotton also came from the southern
states of what is now the United States. From the 1820s onwards, coffee was imported
from Brazil. Europeans brought slaves and manufactured goods in return. From the
northern half of the American continent came fish, furs, and wood. In return that region
imported primarily manufactured goods from Europe. Africa provided mainly slaves and
at times gold and ivory. It received mainly textiles, weapons, and also alcoholic drinks.
Asia provided ‘Oriental’ luxuries. It all began with spices coming from what now are
Indonesia and India. Over time cotton textiles became India’s most important export
304
Figure 17.1 European migration to other continents, 1500–1900.

Source: J. Lucassen and L. Lucassen (2009), ‘The Mobility Transition Revisited, 1500–1900: What
the European Case can Offer to Global History’, Journal of Global History, 4 (3), p. 356.
product to Europe. In return Europeans mainly sent bullion. China’s main exports to
Europe consisted in porcelain, silk, raw as well as in the form of textiles, and from
the last decades of the eighteenth century onwards almost exclusively tea. In return it
received mainly American silver, directly from Mexico or indirectly via Europe. Japan
for some time was an important exporter of silver. Later copper became its main export.
Imports from Europe via the Dutch were confined to a variety of specific manufactured
‘luxury’ products. Closer to home the Ottoman Empire increasingly provided Europe
with raw materials, over the eighteenth century in particular cotton. It imported mainly
manufactured goods and colonial re-exports from Europe. The impact of Asian trade
on Europe’s economy as a whole continued to be quite confined till the end of the
eighteenth century. The lubricating oil of this intercontinental trade consisted of bullion
from Latin America. The drain of it to Asia certainly was substantial, but the bulk of
the gold and more than half of the silver that Europe got from the Americas stayed
in Europe.
Europe’s trade tended to be organized differently depending on its trade partners.
Spain’s (or rather Castile’s) and Portugal’s governments as colonial rulers tried to regulate
or in any case skim the trade between mother country and colonies. Full control was
impossible especially in the Americas. Barriers to entry were low and smuggling,
privateering, and piracy too attractive. Governments of other European countries faced
the same problems. Overall, trade with ‘the West’ was less regulated and restricted than
trade along the Cape. Chartered companies, for example, were less prominent in it. True
enough, England’s Hudson Bay Company continued to exist till the 1860s, but it was as
much a territorial ruler – over a huge territory in what now is Canada – as an enterprise.
In European trade with the East, the role of such companies – a kind of company-states
that combined private enterprise and sovereign rights like the right to conclude treaties,
have armies and navies, wage war, or coin money – was more substantial and lasted
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longer. The biggest among them, the English and Dutch East India companies, in the
end, just like the Hudson Bay Company, acted more like territorial rulers than traders.18
The Dutch and in particular the British became major territorial powers in parts of
Asia. The French were less successful: They did not manage to keep strong footholds in
India, nor for that matter in the Americas. Portugal was active in Asia too, in India in
principle via the Estado da India. In practice, however, private initiative, improvisation,
and corruption prevailed. Spain in Asia only ruled over the Philippines but for lack of
resources this never became a successful colonial project.
In the Americas, where European settlement had a major impact, the main conflicts of
interest actually arose between the motherland and the settler elites – with the hold of the
motherland often being rather weak and decreasing – not so much with any ‘indigenous’
groups. The economic effects of the independence of all major colonies between the
1770s and the 1820s differed widely, especially between the north and the rest of the
continent. In Africa, until well into the nineteenth century, European direct political
leverage was marginal. European settlements were tiny. The Dutch settlement in South
Africa with some 60,000 settlers of European descent was the only relative exception.
In the big empires in Asia, Europeans for a long time were only on sufferance. Imperial
China did trade with them but allowed them hardly any freedom of movement and
manoeuvre on its territory. That would only change with the Opium Wars of the 1840s
and 1850s. In Japan, between 1633 and 1639, the Tokugawa Shogunate enacted what has
become known as the sakoku or ‘locked country policy’. That stayed in effect until 1853.
Except to some extent for the Dutch, the country became forbidden territory, at least for
Europeans. Korea was even more closed to the outside world. The Mughal rulers initially
considered the Europeans at best useful suppliers of goods and services and at worst a
nuisance, but certainly not a serious threat. In particular in the case of the English, that
proved to be a mistake. In the Ottoman Empire economic power relations changed too.
In the beginning, with the Ottoman Empire at its heights, the so-called capitulations,
grants by successive sultans to Christian nations conferring rights and privileges in
favour of their subjects resident or trading in Ottoman dominions, were voluntary gifts.
Over time, however, they became signs of European penetration and encroachment.
If possible Europeans tried to manipulate exchange. In particular overseas trade
and politics were mixed up. Distinctions between the private and the public, including
those between private and public violence, were blurred. Only a thin line separated
trade, privateering, and piracy. Trade and empire building often went hand in hand. In
particular European overseas imperialism had a peculiar twist. It combined exploration,
control, and utilization19 and involved sustained efforts to create a division of labour in
which a European motherland functioned as ‘core’ and its overseas trade partners as
peripheries.20
Until the second half of the eighteenth century, these peripheries were located first
and foremost in the Americas, in small parts of Asia, in the slave-exporting regions of
Africa whose ‘slave-production’ became an integral part of the emerging Western world
system, and in those parts of Europe that had become peripheral to Northwestern
Europe. Examples here are the Baltic region that provided the Dutch Republic with rye
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and materials needed for its fleet; Russia that exported flax, hemp, rye, and wood to
Great Britain; Hungary that provided Northwestern Europe with cattle, or Ireland that
until well into the nineteenth century functioned as a semi-colony of Britain.
In the European core the import of ‘exotic’ commodities like cocoa, coffee, spices,
sugar, tea, tobacco, textiles, and porcelain led to changing patterns of consumption.
Several scholars even speak of a ‘consumer revolution’.21 In the wealthier parts of
Northwestern Europe the wish to consume Asian ‘novelties’ often acted as a driving
force behind another revolution, the so-called industrious revolution: a substantial
increase of the total supply of labour on the labour market as more people began to
work longer and harder in order to earn more monetary income. Such industriousness
often was accompanied by specialization, increasing market integration, and growth.22
A third effect of imports from overseas consisted in the efforts undertaken to produce
substitutes and sometimes export previously imported commodities as for example silk
and cotton textiles and porcelain. When it was not possible to transfer production to
the mother country, European merchants often transferred it to extra-European regions
they controlled. Examples here would be the Dutch who began to grow coffee on Java or
the British who started growing tea in India.
Between 1750 and 1850, that is, still before Western Europe could be called ‘industrial’,
the global economic position of Europe or more generally ‘the West’ underwent major
strengthening. In the Americas, the United States became politically independent but
intensified its economic ties with its former colonizer Great Britain. Most of the Spanish
colonies – but also Brazil – became part of the ‘informal empire’ of the United States
and the United Kingdom. In Asia, too, Europeans increased their leverage. The Battle of
Plassey in 1757 has become the symbol of Great Britain’s rise in India, that actually had
already begun earlier. With increasing political power, the British changed their trade
relations with the country and also got some grip on production there.23 The Ottoman
Empire was ‘opened’ in 1838 by the Treaty of Balta Limani – with the United Kingdom
– that stated that the empire would abolish all monopolies, allow British merchants and
their collaborators full access to all Ottoman markets, and tax them equally to local
merchants. Already from the first decades of the nineteenth century, silver had started
leaving China as payment for opium, but the turning point here was the First Opium
War (1839–42). After that war, the Qing Empire retained its formal independence, but
lost much of its sovereignty. Japan was ‘opened’ from the 1850s onwards. It, too, signed
unequal treaties but it never became a real periphery. In Southeast Asia, Great Britain,
France, and the Netherlands further expanded their empires into what is today Malaysia,
Cambodia, Laos, Vietnam, and Indonesia.
From the end of the eighteenth century and even more so after 1850 when
industrialization deepened, the gap in wealth and power between ‘the West’ and ‘the
Rest’ became so big that Western countries could start a new round of empire building.
The clearest victim was Africa. The fact that parts of Europe industrialized would already
have sufficed to create a worldwide ‘Great Divergence’.24 But its effect became even bigger
because the industrializing countries in Europe also dominated global trade, transport,
communication, and finance at a time when economic globalization switched into
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a higher gear. Global trade, to confine us to that aspect, not only increased but also
changed character. Before, a very substantial part of what Europeans exported to other
continents had not been produced by themselves. Now for about a century global trade
became characterized by the ‘Great Specialization’, a global division of labour in which
developed, ‘industrialized’ countries produced and exported manufactured goods while
non-developed countries produced and exported primary commodities.
In order to facilitate their imports from their peripheries, European core countries
invested enormous sums of money to create the relevant infrastructure there.
Moreover, in the century between 1815 and 1914, more than forty million migrants left
Europe for other continents, in particular the Americas and so provided extra labour
for producing export commodities. The effects varied according to the region, but
overall the outcome of this ‘division of labour’ was not positive for the non-developed
countries. With the exception of Japan, countries outside the West not only ‘failed’
to industrialize; their manufacturing sector was also severely damaged by Western
competition.25
The exact impact on the economies of European core countries of this global division
of labour – that for ‘old’ peripheries had already originated before industrialization and
the heydays of European imperialism – continues to be subject of acrimonious debate.
The focus has long been on the extent to which ‘unequal exchange’ – and sheer coercion
and extraction – enabled Western accumulation of capital.26 With the increasing
awareness that the motor of modern growth is innovation rather than accumulation,
research now has broadened and takes on board all potential positive and negative
effects of specializing in the production of certain goods.27
In global economic history, understandably, the focus is on the Great Divergence
and the Great Specialization on a global scale. But economic development over
roughly the last two centuries was not an even process in Europe itself either. There
have also been shifts within the core of the ‘Western’ world itself. Until the First World
War, Europe’s industrial nations held global economic global primacy. After 1918, the
United States took over and became not only the world’s largest, but also increasingly
its leading economy. The period of the Great Depression of the 1930s was an era of
de-globalization in which intercontinental trade, investment, and migration decreased
and the economies of European countries tended to become more closed.28 The boom
of the economies of Western Europe in the period 1945–73, after the backlash of the
Great Depression and the Second World War, in a context of increasing trade between
developed countries primarily was a matter of successfully catching up with the United
States.
Several of the previous comments already took us to the last decades of the twentieth
century. In the second half of that century, three major changes in Europe’s global
position occurred. Firstly, in a few decades, the decolonization of Europe’s overseas
empires unfolded. One of the effects was that between 1945 and the beginning of the
1990s, some five to seven million Europeans and non-Europeans alone left the (former)
European colonies for Europe. They were joined by labour migrants from North Africa
and Turkey. Secondly, the Great Specialization came to an end. Non-Western countries
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increasingly began to massively produce and export manufactured goods, whereas the
most advanced parts of Europe ‘de-industrialized’. And finally, the increasing integration
of European economies into a common market allowed the continent to become a big
global player. In 2000, the GDP of the countries of the European Union was about a
quarter of global GDP, their exports some 40 per cent of global exports. But as indicated
earlier on, integration did not mean convergence.
Modern economic growth
Europe became the cradle of modern economic growth, that is, a sustained and substantial
increase of GDP per capita in real terms. Before industrialization, the available natural
resources set fairly strict limits to its economic growth and development. It experienced
periods of ‘efflorescence’, but growth in such periods was fragile and as a rule short-lived.29
The direct and overwhelming dependency on nature made the economy vulnerable and
‘volatile’ in the short run, and fairly stagnant in the long run. Even its most advanced
economies, Great Britain and the Dutch Republic, increasing population easily led to
economic problems or stagnation.30
Modern economic growth has taken different shapes but the same fundamental
changes underlie all its varieties.31 One is a major change in sources and use of energy
away from the traditional energy sources such as muscle power, water, wind, and wood.
Industrializing Europe increasingly began to rely on fossil fuels like coal, later oil and
natural gas, and later still nuclear power as its main sources of energy, producing heat and
power.32 A second major change was in the materials used: Europe’s modern economies
began to thrive on iron, steel, concrete, and (mineral-based) synthetic materials instead
of organic materials. The third major change was the fact that innovation became the
most important motor of growth.
When industrialization began in Great Britain, waterpower still was important, but
from the first decades of the nineteenth century, steam power became omnipresent
in mechanized production and transport as for instance the railways. Steel, heavy
engineering, electricity, and chemical industry were central in what is often called the
‘Second Industrial Revolution’ from roughly 1870 to 1914. After the First World War, oil,
automobiles, and motorization held centre stage. After the Second World War, developed
economies entered the age of mass production for mass consumption. With the digital
revolution yet another new leading sector came to the fore.33
The emergence of modern growth is normally identified with industrialization.
Clearly industry as such was very important, but innovation and the use of new
sources of energy and new technologies can also lead to ever-increasing productivity in
agriculture and services. The shift from the primary to the secondary and then tertiary
sector, that is considered characteristic for modernizing economies, did indeed occur in
all of Europe but with major differences in timing and intensity. Only rarely did industry
employ over 50 per cent of the total labour force. The service sector eventually became by
far the biggest sector in all advanced European economies. The growth of employment
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in the government sector, at least when it comes to civilian employment, needs separate
mention. In several European countries, it employed up to 20 per cent of the labour force
at the end of the twentieth century.34
There has never been one model of European industrialization. Ivan Berend
distinguishes three varieties.35 The first one is a fairly close and relatively early imitation
of the British example characterized by the use of coal and the mechanized production of
textiles and iron, using British technology. This route was taken in Great Britain, France,
Switzerland, and to some extent in Austria and Bohemia after 1880. The second one, a
route usually described as the ‘the Second Industrial Revolution’ with an emphasis on
chemical industry, electricity, and automobiles, was best exemplified in Western parts
of Germany but in the later phases of their industrialization France, Switzerland, and
Northern Italy also followed it, just like Great Britain and Belgium, and Scandinavia
after 1870. The third one is characterized by industrialization based on agricultural
products and food processing. Classic examples would here be Denmark and the
Netherlands, and to a lesser extent Switzerland and Austria /Bohemia, in particular in
the period 1840–80.
Differences in wealth, growth, development, and economic ‘modernity’ did not
disappear with industrialization (Table 17.5). Over the long nineteenth century (1780s–
1914) attempts at economic modernization in Europe were successful in Western Europe
including Switzerland, Austria, Bohemia, and Silesia, and with some retardation in
Scandinavia. The industrial trajectory of Ireland, Eastern parts of Germany, and Southern
Italy long was much less successful. Medium income levels as compared to Western
Europe and a certain level of industrialization were reached in most of Central Europe,
the Baltic region, Finland, and Ireland. Then there was a third group of countries with
some islands of modernity but where, overall, modernization failed. That group would
include Russia, the Iberian Peninsula, and Southern Italy. A lack of industrialization,
only a semblance of economic modernization, and the lowest income levels of Europe
Table 17.5 Levels of industrialization in Europe, 1750–1900 (United Kingdom

in 1900 = 100)
1750 1800 1830 1860 1880 1900
Europe as a whole 8 8 11 16 24 35
United Kingdom 10 16 25 64 87 100
Habsburg Empire 7 7 8 11 15 23
France 9 9 12 20 28 39
German States/Germany 8 8 9 15 25 52
Italian States/Italy 8 8 8 10 12 17
Source: P. Bairoch (1982), ‘International industrialization levels from 1750 to 1980’, Journal of European
Economic History, 11 (1/2), 269–333.
310
could be found in the Balkans and the easternmost and southernmost borderlands of the
Habsburg Empire. With some exceptions, a listing of regions in ‘order of development’
at the end of the twentieth century would be fairly similar. Levels of industrialization
and development inside countries as a rule also were quite different, as the process of
development often knows virtuous and vicious circles.
Europe’s political economy
Scholars claiming that Europe’s economy was exceptional in its institutional set-up
almost without exception refer to the fact that it was the continent where ‘capitalism’
first came to full maturity. As long as capitalism is not simply equated with a market
economy based on private property and private enterprise with ‘free’ and, as mainstream
economics defines it, ‘fair’ competition, that indeed seems correct. Market economies,
especially for consumer goods, have been fairly normal throughout global history. In
the variety of capitalism that was unique to certain parts of Europe, markets, private
property, and private enterprise indeed were prominent. But those markets often did not
function according to the logic of ‘perfect’ competition. They existed in combination, in
particular in certain sectors, with state intervention going far beyond just enabling the
market to work. The driving forces of modern capitalist development – large-scale capital
accumulation and major technological innovations – do not easily flourish in a setting
characterized by completely open and fair competition. Most scholars would now agree
that competition was important in pushing innovation and creating growth in Europe.
The wealthiest parts of Europe were regions with high levels of market integration.36
Although the market mechanism was often tampered with, apart from some specific
instances, it was not eliminated in Western Europe. But one should not underestimate
the importance of forms of market manipulation and regulation like monopolies,
oligopolies, and cartels, and of protectionism and government regulation.
One must differentiate according to time and place and realize that there were
different kinds of markets. Scholars like Marx and Weber claiming that Europe was ‘the
cradle of capitalism’ have always emphasized the fundamental importance of a labour
market with free labour. Yet, even in Europe such free wage labour was far from normal.
Simplifying to the extreme, one can distinguish three labour regimes in agriculture, the
main sector of production, until well into the nineteenth century: a regime with chiefly
unfree, manorial subordination; one in which peasants and their families constituted the
main labour force; and one with chiefly wage labour.37 The first regime was predominant
in Central and Eastern Europe, but certainly not unknown elsewhere in Europe. In
Prussia serfdom was only formally abolished in 1806 and in Austria-Hungary only in
1848. The second regime became predominant in England and the western and northern
parts of what is now the Netherlands, but also on large latifundia in, for example,
Southern Spain, Portugal, or Italy. A peasant, household mode of production could be
found all over Europe but was predominant in most of France, present-day Germany,
and Scandinavia.38 City air did not always make you free in every respect. Until 1810
311
only members of a guild could practise a certain trade in Prussia. That rule was only
abolished in the rest of Germany in 1869, and even then not entirely. In Austria it existed
till 1859. Free wage labour, that ‘even’ in Europe for very long coexisted with all sorts of
un-free labour, certainly was not uniquely European but it probably was more common
there than elsewhere in the world and the number of wage labourers increased over the
eighteenth and nineteenth centuries. In Great Britain, the first industrial nation, it was
already common before industrialization.
In practice, occupations – and economic sectors – were not neatly distinguishable.
Manufacturing and later industry tend to be associated with towns and factories, but
for very long they continued to be found in the countryside, with towns specializing
in processes that required skilled labour and advanced implements. Many people, in
particular in the countryside, operated in an ‘economy of makeshifts’, switching between
activities like taking care of their own tiny farms (if they still had land) and selling
some of their produce or their labour. By far the majority of them worked in a system
called ‘putting out’, in which they got raw materials from merchants, processed them,
and returned the processed materials to those same merchants, who then paid them a
piece rate. Less common was the so-called Kaufsystem in which the actual producers
themselves acquired the raw materials, processed, and sold them. Although in particular
the first form of domestic manufacturing has been described as ‘proto-industry’, it often
was not a preparatory stage of industrialization at all.39 Next to markets for labour, there
also emerged markets for land and money. Overall, land markets continued to be subject
to restrictions for very long – in several countries till far into the nineteenth century – as
land owned by the Church or aristocrats often was all but inalienable. Money markets
apparently worked quite well. Interest rates in any case, overall, first and foremost in
Northwest Europe, were relatively low.
A second claim that is often made with regard to European capitalism is that it was
characterized by exceptionally well-described and protected property rights.40 That
claim exaggerates ‘European exceptionalism’ and assumes that securing property rights
suffices to create modern growth, which is incorrect. That some sort of protection of
property is indispensable for sustained growth is not disputed.
This emphasis on protection highlights the role of the modern state as a guarantor of
those property rights and creator of institutional arrangements without which economic
growth cannot be sustained. The fact that Europe over the past two centuries has had so
many functioning states is already fairly exceptional: the world is full of ‘failed’ states.
In such states chances of having modern economic growth are nil. But what is striking
is that in those parts of Europe that first knew modern economic growth the state
actually was very present and active in the economy. In most European countries rulers
have always tried to influence and change the economy. Innumerable examples exist of
government initiatives and policies that failed completely. But the wealthiest European
countries all had states that at one time or another wanted to be and effectively were
‘developmental’.
The modern state as we now define it was a European invention that slowly took
shape and only really ‘matured’ after the French Revolution.41 Its actual policies and
312
power differed substantially according to time and place. Most European polities before
the first decades of the nineteenth century are described as ‘fiscal-military states’ and
their policies as ‘mercantilist’. The expression ‘fiscal-military state’ speaks for itself.
Such states – or maybe better ‘proto-states’ – had levels of government revenue (and
expenditure and indebtedness) that were higher than in any of the major world empires,
and spent the bulk of their revenues on war.42 Obviously high taxes and high spending
on the military are not necessarily good for the economy, even though high deficit
spending may have had ‘Keynesian’ effects. But in several European states, first and
foremost those with some form of political representation for those who provided the
state with substantial amounts of taxes and especially loans, the permanent bargaining
over claims and counterclaims between rulers and the ruled embedded the state in
society, which often led to institutional innovations, strengthening of the economy, and
higher revenues.43
Most of the fiscal-military states pursued mercantilist policies. There has never been
an elaborate system of thought called ‘mercantilism’, but there is a set of core notions
that are referred to time and again. They have to be understood against the background
of fierce competition between states in which increased production and trade counted
primarily as means to strengthen the state. Domestically mercantilist rulers strove to
eliminate hindrances to production and trade and to create efficient markets. That
as such could already help strengthen the state. The most effective way to do that, so
it was claimed, was to stimulate, protect, and tax the production and export of high
value-added goods and confine imports to raw materials. As far as possible, domestic
products should substitute for expensive imports. In their view, competitiveness of the
national economy and the military strength of their states could further be enhanced
if subjects worked hard and at low wages. Labour therefore had to be disciplined.
Creating monopolies, such as the chartered companies, was also supposed to make the
country more competitive. Besides, it made revenue collection easier for government.44
Mercantilists were permanently ‘benchmarking’ and comparing their state and economy
with that of others, something which European rulers and ruled have continued to do
ever since.45 Often the effects of mercantilist policies on the economy were negative,
and many of the positive ‘developmental’ effects actually unintended and indirect.
Such policies, moreover, were not, as often suggested, typical only for seventeenth- and
eighteenth-century Europe. Even in Great Britain, the home country of Adam Smith,
mercantilist measures, for example, very high tariffs, remained in force well into the
nineteenth century. But often mercantilism ‘worked’.
After the Napoleonic Wars, the nature of the state and of state spending began to
change. The fiscal-military state seemed to have reached its limits. No longer were
the bulk of expenditures for the military. Civil spending on material (transport and
communication) and immaterial infrastructure (first and foremost education) became
much more important. In the period from c. 1820 to 1870 states tended to become
somewhat leaner and less interventionist, especially when it comes to international
trade. From the 1870s onwards, however, many countries in Europe – though not the
United Kingdom – again became more protectionist, in particular because of pressure
313
by agricultural interests that felt threatened by imports from the New World and Russia.
The growth in the volume of international trade slackened. Domestically governments
could no longer ignore the ‘social question’ and had to care more about the welfare of
their citizens. Ideologies and scholarly disciplines emerged that claimed to know how
‘the economy’ worked.
With the First World War, state intervention reached an unprecedented level of
intensity as war more than ever depended on total mobilization of resources. In particular
in Germany the war economy came close to what would later be called a ‘planned
economy’. During what turned out to be the interwar period, the Great Depression
in particular hit Western Europe, but the ensuing problems led to a Europe-wide new
wave of large-scale state intervention. In the few European countries that continued to
be parliamentary democracies, governments attempted to combat unemployment and
protect their economies. In some cases they cautiously experimented with ‘Keynesian’
policies. In countries that had authoritarian, fascist/national-socialist, and communist
rule, dictatorial intervention in or even control of the economy became normal to make
the country strong and catch up with potential enemy countries. The Second World War,
of course, again meant massive state planning and control.
The post-war period saw the gradual emergence of the welfare state in Western
Europe.46 Thinking in terms of laissez-faire had lost most of its attraction during the
Great Depression. Recovering from the massive destruction of the Second World War
required massive state intervention. Citizens in now democratic states increasingly
regarded the state as guarantor of basic welfare and promoter of growth. Advanced
economies also required a quickly expanding infrastructure in the form of transport,
communication, and education. Government expenditure and the presence of the
government in the economy increased accordingly. Whatever the political colour of
government and whatever its plans or claims, the state in terms of taxes, expenditures,
debts, or employment continued to grow almost without interruption (Table 17.6).
In the 1980s, there was increasing talk of liberalizing the economy. In the sphere
of banking and finance that certainly occurred, though for the rest of the economy it
proved very hard to tame the Leviathan.
Modern economic growth in Europe never was simply the result of a rise of the
market and laissez-faire. It required a state that did not confine itself to being night
watchman. State intervention played a role in all successful and unsuccessful processes
of industrialization and economic modernization. The connection between power and
profit moreover was never severed. Countries that wanted to catch up realized that it
would require a strong, modern and active state. This suggests that Europe’s impact on
the world economy was not confined to the realm of the economic and the material. The
global impact of its thinking about ‘the economy’, the way it should be organized, and
its economic policies were just as pervasive. Between the French Revolution till at least
the Second World War, Europe was by far the major producer and exporter of economic
doctrines and practices. Economists like to focus on materialist factors but actually the
global impact of European economic ideas like mercantilism, laissez-faire liberalism,
socialism and communism, and Keynesianism can hardly be overestimated.
314
Table 17.6 Government spending* as a percentage of GDP, 1870–2009
1870 1913 1920 1937 1960 1980 1990 2000 2005 2009
Austria 10.5 17.0 14.7 20.6 35.7 48.1 38.6 52.1 50.2 52.3
Belgium n.a. 13.8 22.1 21.8 30.3 58.6 54.8 49.1 52.0 54.0
Britain 9.4 12.7 26.2 30.0 32.2 43.0 39.9 36.6 40.6 47.2
France 12.6 17.0 27.6 29.0 34.6 46.1 49.8 51.6 53.4 56.0
Germany 10.0 14.8 25.0 34.1 32.4 47.9 45.1 45.1 46.8 47.6
Italy 13.7 17.1 30.1 31.1 30.1 42.1 53.4 46.2 48.2 51.9
The Netherlands 9.1 9.0 13.5 19.0 33.7 55.8 54.1 44.2 44.8 50.0
Spain n.a. 11.0 8.3 13.2 18.8 32.2 42.0 39.1 38.4 45.8
Sweden 5.7 10.4 10.9 16.5 31.0 60.1 59.1 52.7 51.8 52.7
Switzerland 16.5 14.0 17.0 24.1 17.2 32.8 33.5 33.7 37.3 36.7
*1870–1937 central government; 1960–2009 general government.
Source: ‘Taming Leviathan: A Special Report on the Future of the State’, The Economist, 19 March 2011, p. 4.
315
Conclusion
At the beginning of the twenty-first century the relative decline of ‘Europe’ on the global
scene is undeniable. Its military and political power has dwindled and it certainly no
longer rules the waves. It still is an economy of major global importance but even if it
actually were an economic unity, it no longer can be called ‘dominant’. Modern economic
growth no longer is a Western monopoly. Other parts of the world show more impressive
growth figures and more dynamism than Europe. Europe’s states and economies and
mainstream European ideas about the economy are no longer a source of inspiration.
Notes
1. My definition of Europe is strictly geographical. It encompasses the westernmost part of

Eurasia without Russia/the Russian Empire/the Soviet Union. For debates on the question
what and where Europe is, see K. Wilson and J. van der Dussen (eds) (1993), What Is Europe?
Milton Keynes: The Open University.
2. F. Tabak (2008), The Waning of the Mediterranean, 1550–1870: A Geohistorical Approach.
Baltimore: Johns Hopkins University Press.
3. For the economic history of the Ottoman Empire, see H. Inalcik and D. Quataert (eds)
(1994), An Economic and Social History of the Ottoman Empire. Cambridge: Cambridge
University Press. Two volumes. For the situation since 1800, see M. Morys (ed), Economic
History of Central, East and Southeast Europe, 1800 to the Present Day, forthcoming.
4. See C-A. Nogal and L. Prados de la Escosura (2012), ‘The rise and fall of Spain 1270–1850’,
Economic History Review, 66 (1), 1–37; N. Palma and J. Reis, Portuguese Demography and
Economic Growth, 1500–1850, http://studylib.net/doc/12315291/portuguese-demography-
and-economic-growth--1500-1850--1; P. Malanima (2011), ‘The long decline of a leading
economy: GDP in Central and Northern Italy, 1300–1913’, European Review of Economic
History, 15 (3), 169–219.
5. For the economic history of ‘Germany’, see M. North (2005), Deutsche Wirtschaftsgeschichte.
Ein Jahrtausend im Überblick, 2nd rev. edn. Munich: C.H. Beck. For the economic history of
the Habsburg Empire, I refer to general histories of this empire.
6. For Austria, see for example, R. Sandgruber (1995), Ökonomie und Politik. Österreichische
Wirtschaftsgeschichte vom Mittelalter bis zur Gegenwart. Vienna: Ueberreuter. For
Switzerland, see for example, J.-F. Bergier (1983), Wirtschaftsgeschichte der Schweiz: Von den
Anfängen bis zur Gegenwart. Cologne and Zurich: Benzinger.
7. I. Berend (2003), History Derailed: Central and Eastern Europe in the Long Nineteenth
Century. Berkeley, Los Angeles and London: University of California Press; M. Cerman
(2012), Villagers and Lords in Eastern Europe, 1300–1800. Basingstoke: Palgrave Macmillan;
D. Chirot (ed.) (1989), The Origins of Backwardness in Eastern Europe. Economics and Politics
from the Middle Ages until the Early Twentieth Century. Berkeley, Los Angeles and London:
University of California Press. For the situation during communist times, see I. Berend
(2006), An Economic History of Twentieth-Century Europe: Economic Regimes from Laissez-
Faire to Globalization. Cambridge: Cambridge University Press.
8. See the references to Scandinavia in Berend, Economic History of Twentieth-Century Europe.
316
9. See Berend, Economic History of Twentieth-Century Europe, chs. 4–6, and G. Therborn,
(1995), European Modernity and Beyond: The Trajectory of European Societies, 1945–2000.
London, Thousand Oaks and New Delhi: Sage Publications Ltd.
10. D. Abernethy (2000), The Dynamics of Global Dominance. European Overseas Empires
1415–1980. New Haven and London: Yale University Press.
11. See G. Bertocchi and F. Canova (2002), ‘Did colonization matter for growth? An empirical
exploration into the historical causes of Africa’s underdevelopment’, European Economic
Review, 46 (10), 1851–71, and G. Gozzini (2010), Un’idea di giustizia. Globalizzazione e
ineguaglianza dalla rivoluzione industriale a oggi. Turin: Bollati Boringhieri, ch. 4.
12. See Studer, The Great Divergence Reconsidered, ch. 4, and V. Bateman (2012), Markets and
Growth in Early Modern Europe. London: Pickering and Chatto.
13. N. Nunn and N. Qian (2010), ‘The Columbian Exchange: A history of disease, food and
ideas’, Journal of Economic Perspectives, 24 (2), 163–88. See also, J. R. McNeill’s chapter in this
volume.
14. R. Findlay and K. O’Rourke (2007), Power and Plenty. Trade, War, and the World Economy in
the Second Millennium. Princeton and Oxford: Princeton University Press, 228.
15. For European slave trade in the Indian Ocean region, see R. Allen (2015), European Slave
Trading in the Indian Ocean, 1500–1850. Athens: Ohio University Press.
16. L. Lucassen (2016), ‘Connecting the world: Migration and globalization in the second
millennium’, in C. Antunes and K. Fatah-Black (eds), Explorations in History and
Globalization. Abingdon and New York: Routledge, 19–46, 29–30.
17. I focus on Europe’s role in intercontinental trade. For intercontinental trade in a more global
perspective, see the chapter by Giorgio Riello and Tirthankar Roy in this volume.
18. See P. J. Stern (2011), The Company-State: Corporate Sovereignty and the Early Modern
Foundations of the British Empire in India. New York: Oxford University Press
19. Abernethy, Dynamics of Global Dominance.
20. I. Wallerstein (1974, 1980, 1989 and 2011), The Modern World-System. The volumes have
been published in different places and not all by the same publisher.
21. F. Trentmann (2016), Empire of Things: How We Became a World of Consumers, from the
Fifteenth Century to the Twenty-First. London: Allen Lane. See further the contribution by
Maxine Berg to this volume.
22. J. de Vries (2008), The Industrious Revolution: Consumer Behavior and the Household
Economy, 1650 to the Present. Cambridge and New York: Cambridge University Press.
23. See the chapter by Giorgio Riello and Tirthankar Roy in this volume.
24. See the chapter by Prasannan Parthasarathi and Kenneth Pomeranz in this volume.
25. Findlay and O’Rourke, Power and Plenty, ch. 7; J. G. Williamson (2011), Trade and Poverty:
When the Third World Fell Behind. Cambridge, MA and London: MIT Press.
26. P. Emmer, O. Pétré-Grenouilleau and J. Roitman (eds) (2006), A Deus ex Machina Revisited.
Atlantic Colonial Trade and European Economic Development. Leiden: Brill; P. O’Brien and L.
Prados de la Escosura (eds) (1998), The Costs and Benefits of European Imperialism from the
Conquest of Ceuta, 1415, To the Treaty of Lusaka, 1974. Proceedings of the Twelfth Economic
History Congress. Madrid: Published as Revista de Historia Económica,16, first issue of 1998.
27. E. Reinert (2007), How Rich Countries got Rich … and Why Poor Countries Stay Poor. New
York: Caroll and Graf, chs. 4, 5 and 8; and Williamson, Trade and Poverty.
28. Findlay and O’Rourke, Power and Plenty, ch. 8.
317
29. See the contribution by Jack Goldstone in this volume.

30. For the logic of pre-industrial (advanced) organic economies, see E. A. Wrigley (2016), The
Path to Sustained Growth: England’s Transition from an Organic Economy to an Industrial
Revolution. Cambridge: Cambridge University Press.
31. For the concept ‘modern economic growth’, see P. Vries (2013), Escaping Poverty. The
Origins of Modern Economic Growth. Vienna and Göttingen: Vienna University Press and
Vandenhoeck und Ruprecht.
32. A. Kander, P. Malanima and P. Warde (2013), Power to the People: Energy in Europe over the
Last Five Centuries. Princeton and Oxford: Princeton University Press.
33. C. Freeman and F. Louçã (2001), As Time Goes By. From the Industrial Revolutions to the
Information Revolution. Oxford and New York: Oxford University Press.
34. For changes in sectorial employment, see A. Carreras (2003), ‘El siglo XX, entre rupturas y
prosperidad (1914–2000)’ in A. di Vittorio (ed), Historia Económica de Europa. Barcelona:
Critica, 303–435, 324 and 327, and Therborn, European Modernity and Beyond, ch. 4.
35. I. Berend (2013), An Economic History of Nineteenth-Century Europe: Diversity and
Industrialization. Cambridge: Cambridge University Press, ch. 5.
36. V. Bateman (2012), Markets and Growth in Early Modern Europe. London: Pickering and
Chatto.
37. See the chapter by Alessandro Stanziani in this volume.
38. For the situation in Central and Eastern Europe, see note 7. For the emergence of capitalist
agriculture in Great Britain and the Netherlands, see M. Overton (1996), Agricultural
Revolution in England. The Transformation of the Agrarian Economy 1500-1860. Cambridge:
Cambridge University Press; and J. de Vries (1974), The Dutch Rural Economy in the Golden
Age, 1500–1700. New Haven: Yale University Press. Very informative and detailed is T. Scott
(ed.) (1998), The Peasantries of Europe: From the Fourteenth to the Eighteenth Centuries.
London and New York: Longman.
39. M. Cerman and S. Ogilvie (eds) (1996), European Proto-Industrialization: An Introductory
Handbook. Cambridge: Cambridge University Press.
40. See for example D. Acemoglu and J. Robinson (2012), Why Nations Fail. The Origins of
Power, Prosperity and Poverty. London: Profile.
41. P. Vries (2016), ‘States: A subject in global history’, in C. Antunes and K. Fatah-Black (eds),
Explorations in History and Globalization. London and New York: Routledge, 155–76.
42. P. Vries (2015), State, Economy and the Great Divergence. Great Britain and China, 1680-
1850s. London: Bloomsbury Academic, under ‘fiscal-military state’.
43. M. Dincecco (2011), Political Transformations and Public Finances. Europe, 1650-1913.
Cambridge: Cambridge University Press; D. Stasavage (2011), States of Credit. Size, Power
and the Development of European Polities. Princeton and Oxford: Princeton University Press.
44. P. Roessner (ed.) (2016), Economic Growth and the Origins of Modern Political Economy:
Economic Reasons of State, 1500–2000. Abingdon and New York: Routledge.
45. S. Reinert (2011), Translating Empire: Emulation and the Origins of Political Economy.
Cambridge, MA and London: Harvard University Press.
46. For a short introduction, see D. Garland (2016) The Welfare State: A Very Short Introduction.
Oxford: Oxford University Press. A quantitative analysis is provided by P. Lindert (2004),
Growing Public. Social Spending and Economic Growth since the Eighteenth Century.
318
CHAPTER 18
SOUTH ASIA IN THE WORLD
ECONOMY, 1600–1950
Bishnupriya Gupta and Tirthankar Roy
Defining South Asia
The South Asian Association for Regional Cooperation demarcates South Asia as a
world region consisting of six large countries, Afghanistan, India, Pakistan, Bangladesh,
Nepal, and Sri Lanka, and two smaller ones, Bhutan and Maldives. Together these
countries contain about a fifth of the world’s population today. Most historical debates
on economic change and globalization in this territory, however, relate to the area
now included in India, Pakistan, and Bangladesh. This is so because the rule of two
long-lasting powerful empires, the Mughal (1526–c. 1720) and the British empires (c.
1765–1947), extended over a large part of the combined territory of the three countries,
imparting a certain consistency in the political and economic history of these countries.
The imperial connection extended to Afghanistan in an uneven fashion. The history
of lower Burma (Myanmar), which was ruled by the British, also overlaps with the
history of mainland South Asia in important ways. Yet these two countries were also
distinct from the mainland on many points. Sri Lanka or Ceylon was ruled by a different
entity from that of British India. Nepal, Bhutan, and Maldives were not colonized. The
historical scholarship centred on these countries, therefore, does not speak directly to
the scholarship that has developed on mainland South Asia. This chapter, therefore, will
define South Asia as the combined territory of India, Pakistan, and Bangladesh. The term
‘India’ will be used interchangeably with South Asia to refer to the Indian subcontinent
under the two empires of the Mughal and British.
Even this region demonstrates diversity in geographical and political terms, and it will
be useful to examine this briefly before discussing the major debates and controversies
about the region’s economic history. Geographically, the region can be divided into four
zones – the Himalayas, the Indo-Gangetic Basin (the floodplains of the Ganges and
the Indus), the arid or semi-arid areas including the Deccan Plateau, and the littoral.
Much of South Asia has a tropical climate, with a hot season that lasts half the year,
broken by the southwest and northeast monsoon rains. The monsoon, the rivers that
flow through the Indo-Gangetic Basin, and good soil conditions in the floodplains make
agriculture possible, but extreme aridity also makes it seasonal and often dependent on
expensive irrigation systems. Yet although agricultural conditions are uneven, South
Asia’s position in the middle of the Indian Ocean sustained a great maritime trade with
West and East Asia along the coastal zone. The integration of markets away from the
coast depended on navigable rivers in the north and land routes used by pack bullocks
before the advent of the railways from the middle of the nineteenth century. The region
saw large variations in prices across regions as well as frequent famines, driven by the
weather and political conflicts.
Politically, the region can be divided into two types. The Indo-Gangetic Basin forms
one type. The flat terrain and good agriculture supported a lot of overland trade, as well as
wheeled and river traffic, urbanization, and thus strong states for centuries. The empires
sustained themselves by means of agricultural taxation. Not all of the 700,000 square
kilometres of the basin was integrated; the Bengal Delta in particular was intermittently
part of imperial states that formed in north India. But a great deal of this zone was
politically integrated. These conditions occurred in the Deccan Plateau to a more limited
extent. In the arid areas, the uplands, and near the coasts, states tended to be smaller in
extent and less powerful. Political and military power was more contested. Agriculture
was more precarious, and overland trade dependent on the expensive and inefficient
system of bullock caravans.
This brief overview of geography and politics should give us a sufficient backdrop for
introducing the key historiographical debates around South Asia’s encounter with the
world economy from the seventeenth century. Two sets of historiographical debates will
frame this chapter: one relating to the eighteenth-century passage of empires and the
other on the impact of colonialism on development. The context for both the debates is
set within the European expansion in the Asian commercial world.
Europeans in South Asian trade
South Asia had been a trading zone for millennia. The Mughal Empire traded a great
deal with West and Central Asia by road and by sea. The coastal areas, as we have seen,
traded with maritime Asia on both sides of the Indian Ocean.
The bazaars symbolized a well-developed commercial system. Local communities of
traders engaged in internal trade in grain and industrial goods. Some artisans worked
directly for the nobility or the government; others sold to the merchants involved in
long-distance trade. There was widespread use of ‘hundis’ or bills of exchange reflecting
the well-developed network of banking and commerce. Indian merchant ships carried
goods to Alexandria, Basra, and Baghdad to the west and to Sumatra in the east, but
were not sturdy enough to sail the China seas. Commodities traded included not only
raw silk, but also manufactured goods such as textiles. Both China and India imported
bullion from outside, spices from Southeast Asia, horses from West Asia, and ivory from
East Africa.
This booming trade in the Indian Ocean and South China Sea was comparable to
the European trade. One key difference in the institutional setting between India and
Europe was that customary community laws and the long-term relationship between
members of the same social network governed the system of trade and commerce
in India rather than a formal system of universal law as in Europe. The contract
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South Asia in the World Economy, 1600–1950
enforcement mechanism of the Indian trading communities was similar to the private
order institution highlighted by the work of Avner Greif.1 Caste- and community-based
networks of Hindus, Muslims, Jains, Parsis, and Baghdadi Jews specialized in different
trading operations at different locations.2 Their commercial exchange depended on
maintaining trust and reputation of members who belonged to the community, and
exercised the primary means of contract enforcement.
From the 1600s, a new element was added to this picture: European merchants, some of
whom operated as employees of highly organized companies. The arrival of the European
trading companies disrupted the existing trading pattern, though only gradually. Indian
cotton textiles were previously traded all over the Indian Ocean region. Increasingly in
the early eighteenth century, Indian textile exports were directed to European markets.3
This trade was in the hands of the European trading companies from the seventeenth
century through monopoly trading rights granted by European governments. Like many
other merchant communities in the area, the European companies negotiated with the
local rulers the right to conduct trade and sign treaties. The treaties allowed trading posts
to be established along the Indian littoral. The two main organizations were the Dutch
and the English East India companies. They imported silver from Europe to purchase
cloth, silk, and spices. The textile weavers entered into contracts with the companies to
supply specified types of cloth over a period of time. In return the companies provided
them with advances to buy raw material and cover their living costs. Indian calicoes and
muslins became items of fashion and were sold in European, African, and American
markets as well as in East Asia. Trade in textiles began to rapidly increase, and rising
exports from India created a picture of prosperity in the urban centres.
European expansion and Indian Ocean trade joined in the early seventeenth century
along the South Asian coast. Intense rivalry among Europeans and the British East India
Company’s need to protect a trade monopoly also drew the Europeans into politics from
time to time. The political engagement involved mainly the Mughals or their vassals
until the early eighteenth century. From about 1720, the Mughal Empire started breaking
apart into a number of ‘successor’ states, and the field of political engagement shifted to
these states. Anglo-French conflict in Europe spilled over into India, and complicated
these processes. In the 1760s, the British East India Company had established areas of
strong influence, even indirect rule, in Bengal and in the state near Madras known as
Carnatic. By 1800, the British Empire was more or less an accomplished fact.
Two major historical debates about South Asia address the causes and consequences
of these eighteenth-century shifts. One questions whether the eighteenth century was a
period of decline or a period of growth, the other why Indo-European trade led to a new
empire. In other words, why did British merchants take over state power?
The eighteenth-century transition
The context of the former question lies in the nineteenth-century account of how the
British came to acquire state power, emphasizing that anarchy and warfare among
321
successor states made a third-party intervention likely. A state of anarchy points at a

dark age in economic history, followed by a new era of flourishing enterprise after the
takeover of power by the British. However, was the eighteenth century really a time of
decline? This ‘imperialist’ narrative of how India came to be ruled by the British stayed
more or less intact until the 1970s. Some historians of imperialism used Karl Marx’s
notion of a ‘primitive accumulation’ to suggest that officers of the company were driven
by a desire, not to save India from anarchy, but to plunder its wealth. However, they did
not challenge the orthodox view of the eighteenth century as a dark age.
That idea was questioned in the 1980s, through new accounts of the eighteenth
century offered by historians at Cambridge, notably C. A. Bayly and David Washbrook.4
Their work revealed the significant extent of capital accumulation by Indian merchants
and bankers in the eighteenth century. Some of the successor states ruled over rich
territories with lots of trade. Warfare and revenue farming improved the political clout
of bankers. European enterprise needed the association with, and partnership of, Indian
merchants. Almost the entire credit of the East India Company (hereafter Company),
until the Indian Mutiny in 1857, came from Indian bankers. These historians, in other
words, described a world in which overseas merchants and capitalists in the interior
zones developed compatible interests, and both seemed to do better, not worse, in the
eighteenth century.5
A deeper view of the emergence of an empire from trade began to form out of this
reinterpretation, giving birth to the second of the two main debates on the eighteenth
century, questioning why trade led to an empire, or why European merchants took
over state power. Older views of the Company’s successes on the battlefield during the
imperialist wars focused on the imbalance of military strength or the disunity among
the Indian rivals. Newer perspectives helped change the existing discourse in at least
three ways.
First, to a significant extent, warfare in eighteenth-century India was a reflection
of warfare in contemporary Europe. The two huge processes of state formation were
more interdependent than it might seem from the Indian-bound explanations of the
Company’s rise. The eighteenth-century political process in South Asia was a chapter
in what Bayly calls The Birth of the Modern World, in which Europe’s own state-making
and commercial expansion into Asia was a part.6 Second, whereas historians previously
saw conflict, in the new interpretations, they now saw consensus in the form of alliances.
The Company’s acquisition of state power between the 1740s and the 1770s did not
happen through outright conquest. And therefore, the idea of alliance is an attractive
one. It works particularly well in the context of Bengal, where a palace intrigue involved
a section of the Company officers. This idea also has possibilities as a broader paradigm
for understanding Indo-European relationships at this time.
Some of these revisionist writings suggest a broad continuity between Indian history
before and after the collapse of the Mughal Empire. The Company could be seen as just
another Indian type of state. As will be discussed more below, other contributors to these
debates emphasize discontinuity and the European origin of the new state to explain
its success.
322
Third, whereas the older views of Company’s ascendance focused on military

capability alone, new works interpreted the Company’s comparative advantage in the
battlefields differently. We should add that the theme of military capability has also
received an emphasis in Phil Hoffman’s recent work, which connects European history
and global economic history in a new fashion.7 On the other hand, research using
South Asian data points at two ways the Company represented a distinctively European
state in the South Asian setting. The oversight the British Parliament exercised over its
operations in India made the Company a more credible ally among contending powers
in the late-eighteenth-century South Asia.8 Military conquest came with the right to
revenue collection, and changed the nature of trade between Britain and India. The East
India Company, as a trading agent, exchanged bullion for textiles. Now the textiles could
be bought by tax revenues paid to the Company as the ruler.
The Company marked itself out as a distinctively European power in the way it
undertook institutional reforms to the land ownership structure in Bengal. This process
had begun between 1772 and 1793, when the rulers of the Indian territories acquired
by the British East India Company set up a centralized land tax collection system
replacing the old feudal system that relied on warlords and intermediaries to do the job
for the ruler. The transition owed not only to the capacity of the Company to coerce
and threaten the intermediaries, known as the zamindars, but also to an understanding
reached with them. In Bengal, the understanding took the form of the Permanent
Settlement, where the zamindars received ownership rights over the land they once
collected taxes from, but ceased to enjoy sovereign and military power over them.
The move had complex origins, including, as Ranajit Guha had shown, the influence
of physiocrat doctrines that privileged private land ownership.9 However fiscal and
military motives also played roles, and evidently paid off when there was a sharp rise in
tax collection in the early nineteenth century. The Company used the fiscal capacity to
create a standing army, ending dependence on allies and mercenaries, who still ruled
in other states. According to this second approach, a superior ability to raise resources
was the reason why the British succeeded in establishing a stable rule, which lasted for
so long in South Asia, and why it prevailed over its rivals and imposed its command on
the princely states.10
British Empire and the economy of South Asia
The British Empire in South Asia, which rose to power between the mid-eighteenth
and mid-nineteenth centuries, achieved a degree of political, bureaucratic, and military
centralization that the region had not seen before. Britain by this time had abolished
Corn Laws and with that protective tariffs. As the first country to embrace the doctrine
of free trade, it imposed it on India. As South Asia integrated into the world economy,
trade, investment, and migration rose to far higher levels than before. The trade to GDP
ratio increased dramatically, from 2–3 per cent in the mid-1800s to 20 per cent on the
eve of the First World War. Though only a small proportion of British capital went to
323
land scarce colonies,11 South Asia received a large share of this investment. British capital
went mainly into the railways to develop a modern transport network.
Nationalist historians have argued that the railways connected the agricultural
hinterland to the ports and paved the way for the rising volume of trade in agricultural
goods that met the demand for food and raw material in industrial Britain.12 India also
provided the much-needed outlet for industrial goods, in particular textiles. Millions
of Indians emigrated to work in the plantation colonies of the British Empire in the
far away tropical lands of Fiji and the West Indies as well as closer to home in Malaya
and Ceylon. Consequently, the Indian economy de-industrialized and became more
agricultural. There is a counternarrative, however, one that points out that the scale of
the de-industrialization cannot be precisely measured and that there was a reversal in the
fortunes of traditional industry including textiles from around 1900, thanks to product
differentiation. Only some product groups competed with machine-made alternatives.13
Measures of globalization: Volume and composition of trade
The first phase of globalization began in 1870 with the introduction of new technology in
intercontinental telegraph, shipping, the opening up of the Suez Canal, and thousands of
miles of railway networks built in different parts of the world with British capital. Sailing
ships were replaced by steam, bringing down transport costs together with the shortening
of the trade route from Europe to Asia. Conditions to bring about a fast increase in
trade were all there. The British Empire also removed another barrier to trade: tariffs and
trading rules. The creation of an international market under the hegemony of Britain
brought with it an international division of labour defined by comparative advantage.
The decline of Indian textile exports, faced with cheaper textiles of the modern cotton
industry, and the integration of the Indian economy into the empire created new sectors
of export. South Asia’s comparative advantage was in the production of agricultural
commodities, while British advantage lay in manufacturing. As the British economy
became more industrial, it relied on imported food and raw materials from the rest of the
world. South Asia became an important supplier. This was reflected in the changes in the
composition of Indian trade. Figures 18.1a and 18.1b show the rise in the merchandise
trade from 1840 to 1914. Both imports and exports rose, but the share of trade with
Britain did not rise comparably. India’s exports were more diversified by country than
Indian imports. Total imports and imports from Britain rose in line until the end of the
nineteenth century. Thereafter, India began to import more from the rest of the world.
For exports, Britain was less important in the Indian merchandise trade after the end of
the American Civil War, during which most of the raw cotton used in the British cotton
textile industry was supplied by India.
India’s net exports were positive all through this period and rising as shown in Figure
18.1c. However, the net exports with the United Kingdom turned negative from 1870s.
India’s reliance on British imports was larger than Indian exports to Britain, suggesting
that imperial connections in trade may have been more advantageous to Britain. India
324
(a) Total Merchandise Exports Merchandise Exports from Britain

350.00
300.00
250.00
200.00
150.00
100.00
50.00
-
1841
1844
1847
1850
1853
1856
1859
1862
1865
1868
1871
1874
1877
1880
1883
1886
1889
1892
1895
1898
1901
1904
1907
1910
1913
1916
1919
(b) Total Merchandise Import Merchandise Import from Britain
250.00
200.00
150.00
100.00
50.00
-
1841
1844
1847
1850
1853
1856
1859
1862
1865
1868
1871
1874
1877
1880
1883
1886
1889
1892
1895
1898
1901
1904
1907
1910
1913
1916
1919
(c) Overall Net Export Net Export to UK

120000000.00
100000000.00
80000000.00
60000000.00
40000000.00
20000000.00
0.00
1841
1871
1901
1910
1913
1916
1919
1844
1847
1850
1853
1856
1859
1862
1865
1868
1874
1877
1880
1883
1886
1889
1892
1895
1898
1904
1907
–20000000.00
–40000000.00
–60000000.00
Figure 18.1 (a) Merchandise exports from India, 1840–1920 (in millions GB£); (b) Merchandise
Imports to India, 1840–1920 (in millions GB£); and (c) Indian net exports, 1840–1920 (in millions GB£).
Source: Constructed from Statistical Abstracts of British India.
325
imported mainly industrial goods. The import of machinery from Britain rose with the
rise of modern industry in India. The Indian railway infrastructure was set up through
British investment and also relied on the import of rolling stock and other equipment
from Britain.
Table 18.1 shows that the composition of exports underwent significant changes.
Cotton piece goods accounted for the largest share in exported merchandise in 1811, yet
by 1850 this was insignificant. Raw cotton, indigo, and opium constituted 80 per cent
of total exports. In half a century, the composition of India’s export trade had changed
dramatically. By 1935, tea had emerged as the second largest export after raw cotton.
New products emerged such as raw jute and manufactured jute goods. Indigo, opium,
and sugar declined as exportables. The rise in exports of cotton goods from the late
nineteenth century reflected the growing importance of the domestic modern industry
and its competitive advantage in markets in Asia. Agricultural exports increased at 4 per
cent per year between 1876 and 1913.
The impact of globalization on the economy of South Asia
What effect did this have on production and productivity?

The effect of trade on growth and the implications of trade in agricultural goods as
opposed to trade in manufactured goods are debated topics. The literature on trade and
growth suggests that specialization by comparative advantage increases welfare. What
matters is factor endowment-based specialization. Countries with abundant land relative
to labour gain by specializing in agricultural products, while labour abundance provides
comparative advantage in industrial products. Both countries can gain by specializing
and trading. The Prebisch-Singer thesis cautioned us against this by showing empirically
that terms of trade of agricultural products relative to industrial products have declined
from the middle of the nineteenth century to the middle of the twentieth century.14
Therefore specialization in agricultural production can adversely affect economic
development. Since then, Frankel and Romer have showed, using cross-country data
from the second half of the twentieth century, that trade has a causal positive effect on
economic growth. Output per capita depends on the volume of trade. Evidence from
nineteenth century is much more mixed.15 Mitchener and Weidenmier show that being
a colony increased the volume of trade.16 Pascali uses cross-country data to show that for
the colonies trade had a negative effect on indicators of economic development.17
From within Indian economic history, a few other dimensions of the globalization
process have generated a great deal of controversy. Three such debates are especially
important. First, if free trade destroyed a part of the indigenous textile industry, how
large and how bad was the impact? Second, if average levels of living standards in India
rapidly fell behind Western European levels from the 1800s, was this ‘divergence’ due
to globalization? Did colonization contribute to the divergence? Third, although a great
deal of the exports came from agriculture, why did peasants not seem to gain from the
process? Let us consider these three aspects separately.
326
Table 18.1 Changing composition of Indian trade, 1811–1935
Raw cotton Cotton goods Indigo Raw silk Food grains Raw jute Jute goods Opium Sugar Tea
1811 4.9 33.0 18.5 8.3 23.8 1.5
1828 15.0 11.0 27.0 10.0 17.0 4.0
1850 19.1 3.7 10.9 3.8 4.1 1.1 0.9 30.1 10.0 0.2
1870 33.2 2.5 5.8 8.1 4.7 0.6 2.1
1890 16.5 9.5 3.1 19.5 7.6 2.5 5.3
1910 17.2 6.0 0.2 18.4 7.4 8.1 5.9
1935 21.0 1.3 13.5* 8.5 14.5 12.3

Source: K.N. Chaudhuri (1983), ‘Foreign Trade and Balance of Payments’, in Dharma Kumar and Meghnad Desai (eds), The Cambridge Economic History of India,
Vol. 2. Cambridge: Cambridge University Press, Tables 10.10 and 10.11.
327
De-industrialization
In the first half of the nineteenth century, there was a fall in industrial employment,
at first driven by the decline of textile exports and then by the rising market share of
British industrial goods. The penetration of British textiles in the Indian market followed
a slightly different chronology. Several authors show that the decline in the share of
Indian textiles in the domestic market occurred mainly between 1850 and 1880.18 In
1850 imports were roughly 10 per cent of domestic consumption, but by 1880 imports
supplied 60 per cent of domestic consumption. Thereafter Indian cotton mills began to
take over a share in the Indian market. The textile market expanded not only in response
to population growth but also due to a rise in per capita cloth consumption as the relative
price of textiles declined.
The decline of traditional industries and the loss of industrial employment is known
as de-industrialization. There have been several notable attempts to measure the extent
of the decline; the majority of these deal with eastern India.19 Bagchi showed that the
proportion of the working population engaged in industry was higher in 1800 at around
15–18 per cent, compared to 9–10 per cent in 1900. The most recent of these estimates
by Ray shows that de-industrialization affected 4 per cent of the workforce over several
decades in the nineteenth century. This was a significant figure, but not a catastrophe.
Another recent paper by Clingingsmith and Williamson reaches the same conclusion,
calling the early nineteenth century a period of ‘weak de-industrialization’ that shows a
relative, rather than an absolute, decline of industry.20
The corresponding loss of income is harder to measure because the large hand-
spinning industry mainly employed part-time domestic workers. The opportunity cost
of shifting out of this activity was low. The income loss, therefore, should be smaller
than the employment loss. The effect of de-industrialization on social welfare is also
difficult to measure. There was a rise in unemployment. At the same time the massive
fall in yarn and cloth prices arising from the higher productivity of the British industries
enabled more consumption of cloth. Handloom weavers started to use imported yarn,
which increased the profitability of cloth production. Per capita consumption of
cloth rose from 11 yards in 1880 to 15 in 1913 and to 17 in 1930. The net effect is
therefore ambiguous.
New research by Broadberry and Gupta sheds light on the chronology of changing
comparative advantage of British textiles in India.21 The textile industry in Britain saw
total factor productivity growth with the introduction of new technology, while textile
technology in Indian industry changed little. British products became competitive in
the home market between 1770 and 1790. British products became competitive in third
markets between 1790 and 1820. Consequently, India’s exports began to decline. It was
only after 1830 that British goods saw a high enough productivity increase to displace
Indian goods in the Indian market. British total factor productivity was twice as high
as that of Indian products and increased to three and a half times between 1680 and
1790. The price of British goods was twice as high in 1680, but only 35 per cent as that of
Indian textiles goods in 1820 (Table 18.2).
328
Table 18.2 Productivity and price advantage of British textile goods over
Indian goods (India = 100)
Year Total factor inputs FOB price Total factor productivity
1680 206 200 206
1770 270 200 270
1790 357 147 357
1820 150 35 150

Source: S. Broadberry, and B. Gupta (2009), ‘Lancashire, India, and Shifting Competitive
Advantage in Cotton Textiles, 1700–1850: The Neglected Role of Factor Prices’, Economic History
Review, 62 (2), Table 9.
The free trade policy imposed by the colonial state on India encouraged the growth
of the cloth trade but did not protect domestic industry as in many other countries,
including Germany and the United States. Might the Indian textile industry have
survived with a protectionist policy? The magnitude of the price difference between
British and Indian textiles was so large that it is difficult to conceptualize a high enough
rate of tariff that could have protected the hand-spinning sector. What if tariff rates of
20–40 per cent, as adopted by many European countries and the United States, had
been imposed? This might have prolonged the demise of some sectors of the handloom
industry. Tariffs, however, might have had a positive impact on the nascent modern
textile mills, which developed from the 1860s despite the absence of any kind of
state support.
This discussion leaves two big questions unanswered. First, why did any Indian
artisan producer of textiles survive at all? Artisans supplied nearly a quarter or more of
the cotton cloth market as late as 1942, and employed well over two million full-time
workers. Studies on artisanal weaving point at the diversity of consumption norms in
India, and the fact that, in certain types of clothing, Indian consumers continued to
buy handmade goods even when machine-made alternatives were available.22 Second,
why did a mill industry develop in India that competed directly with Manchester? The
Indian merchants involved in the raw cotton trade had made large profits during the
American Civil War. When these profits collapsed at the end of the war, they invested
in modern cotton textile firms and began to produce yarn and cloth for local markets.
The textile machinery producers in Britain were only too willing to sell to Indian
entrepreneurs. Indian entry into modern industry was facilitated by profits made in
the cotton trade, domestic availability of raw cotton, low wages, and the easy terms
on which Indians could buy machines and hire foremen abroad.23 Indian machine-
made goods made inroads into the domestic market for textiles at the cost of both
imports and traditional products. Imports per capita had risen from 1 yard in 1840 to
7 yards in 1880, but the increase slowed down and by 1930 the number had declined
to 5 yards.
329
Divergence
The conventional narrative has been that something special happened with the
Industrial Revolution in Britain. The economy of Britain moved from a Malthusian
equilibrium to modern economic growth, while most other countries fell behind. India
was another example of retaining extensive growth until the middle of the twentieth
century.
The timing of the Great Divergence has generated a large literature. The California
School and the world historians, however, propose a different view. They claim that
colonization was a primary determinant of the Great Divergence. This literature sees
1800 as the starting point of the divergence between Europe and Asia. In the eighteenth
century, living standards in the rest of the world were on a par with the developed parts
of Europe, such as Britain (Pomeranz on China, and Parthasarathi on India; see the
contribution by Pomeranz and Parthasarathi in this volume).24 Others argue that the
divergence began before colonization and may be explained in terms of a large high
productivity urban sector in Northwest Europe.25 New research shows that Britain was
the first country to move out of the Malthusian trap, and much earlier than the advent
of the Industrial Revolution.26 High mortality due to war and disease in the expanding
urban sectors shifted the economy to a low population growth regime and allowed per
capita income to rise in England.27 Per capita GDP declined or stagnated in most other
parts of the world, making way for the Great Divergence.
Systematic quantitative evidence of wages and incomes puts this date in the middle
of the seventeenth century for India. Broadberry and Gupta (2006) use a large data
set on silver and grain wages from different parts of India. While the silver wage was
one-fifth of the British level in 1600, the grain wage was over 80 per cent due to the
low price of food grains in India, suggesting that the differences in living standards
was not large. However, this difference widened over time, driven partly by a decline in
wage in India and by a rise in Britain. Allen et al.’s (2011) estimates using welfare ratios
of consumption baskets confirm this picture. While most countries were at a basic
subsistence level, London wages bought much more than a barebones consumption
basket.
Estimates of per capita GDP put that of India at 62 per cent of the British level in 1600
and show a decline all the way up to the middle of the nineteenth century.28 The average
Indian was worse off in 1750 compared to 1600 (Table 18.3). This evidence suggests that
the Great Divergence began well before the Industrial Revolution. The widening of the
divergence after 1800 was mainly driven by a rapid increase in British GDP per capita,
while the Indian GDP per capita stagnated. The evidence suggests that Indian per capita
income declined slowly but steadily during the golden age of the textile trade. As the
textile trade declined and India turned into an exporter of agricultural commodities, the
per capita GDP grew a little in the first phase of globalization but stagnated mostly in the
nineteenth century and after 1914 (Table 18.4).
The timing of the decline is important in order to find explanations. There are two
different explanations with very different implications for the role of colonization and
330
Table 18.3 Measuring the Great Divergence
Indian grain wage as percentage Indian GDP per capita as percentage

Year of British wage of British GDP per capita
1600 21 62
1650 27 59
1700 25 40
1750 21 34
1800 14 28
1850 12 19
Note: Grain wage is nominal wage divided by the price of the local grain.
Source: S. Broadberry, and B. Gupta (2006), ‘The Early Modern Great Divergence: Wages,
Prices and Economic Development in Europe and Asia, 1500–1800’, Economic History Review,
59 (1), pp. 2–31; and S. Broadberry et al. (2015), ‘India and the Great Divergence: An Anglo-
Indian comparison of GDP per capita, 1600–1871’, Explorations in Economic History, 55 (1),
pp. 58–75.
Table 18.4 Economic growth in the long run
National income Per capita income

(percentage per year) (percentage per year)
1860–85 1.8 1.2
1885–1900 1.0 0.5
1900–14 1.4 1.0
1914–47 1.1 0.1
1900–2000 2.0 1.0
1900–50 1.4 0.0

Source: T. Roy (2006), The Economic History of India, 1857–1947. New
Delhi: Oxford University Press, Table 3.1.
globalization on economic development. First, if the decline in living standards occurred

after 1800, we can think of colonization and integration into a global economy in a
system of ‘unequal exchange’ as a possible explanation. Colonization of India began in
the mid-eighteenth century. The world economy became increasingly integrated in the
nineteenth century through colonization and technological changes in transportation.
The Industrial Revolution in Britain created demand for raw material for industry. The
textile industry was at the centre of the Industrial Revolution and British textile products
competed with Indian textiles in the world market. In this scenario, the decline in the
331
Indian textile trade and the consequent decline of industrial activity in India may be
an important factor in explaining the decline in per capita GDP and living standards.
However, if the decline began closer to 1700, then the decline must be explained in terms
of a failure to raise productivity in the largest sector, agriculture.
The first explanation in the literature uses very little quantitative evidence.
Parthasarathi’s work on the living standards of Indian weavers is an exception.
Instead, this literature points to the thriving trade in textiles and other commodities
from the Indian subcontinent in the seventeenth and the eighteenth centuries as
indicative of a prosperous economy. Although the Indian economy did not fit the
picture of a backward, self-sufficient village economy, the presence of a vibrant
trading sector does not tell us much about the size of this urban economy. The
Indian urbanization rate was at its highest at 15 per cent in 1600 and declined slowly
until the nineteenth century, when the decline accelerated. In 1871, India’s urban
population stood at 9 per cent. Indian living standards declined during the years of
a prosperous trade in textiles.29 There is no doubt that the decline of the textile trade
had some effect, but its magnitude was not large enough to explain the stagnation of
per capita GDP.
How large was the textile trade? Reliable estimates relate to European trade with Asia.
However, it is difficult to gain such estimates of the Indian Ocean trade carried out by
Indian merchants. Om Prakash calculates the employment arising from the export trade
from Bengal in the eighteenth century at less than 11 per cent. If trade by Asian traders
was included, this number would be higher, but unlikely to be more than 15 per cent for
India as the whole. Bengal was one of most globalized and industrialized regions with
15–18 per cent employment in industry in 1801. The share of industry for India overall
was lower. In Britain, on the eve of the Industrial Revolution, the share of industrial
employment in total male labour force was 24 per cent, rising to over 47 per cent in
1840 with a similar proportion of the population living in urban areas. The pre-colonial
Indian economy, though a major exporter of industrial goods in the world, was not an
industrial economy.
Figure 18.2 shows that the trend in per capita GDP tracks per capita agricultural
output, but bears no relationship to per capita industrial output. Agricultural exports
increased in the nineteenth century, when GDP per capita shows a slight positive trend
or stagnation. Therefore, it is difficult to argue that the decline in textile exports had
serious consequences for the economy overall. Certainly, there were regional effects, but
in the aggregate rise in agricultural exports stabilized incomes. The agricultural sector
employed two-thirds of the labour force and therefore it had a more significant effect on
the economy.
Agricultural Stagnation
Even as agricultural trade grew, peasant incomes on average did not. There was,
however, considerable regional variation to this picture. The regions growing wheat
332
GDP per head Agricultural Output per head

Industrial Output per head
140.0
129.7
120.0 122.1 121.2 118.2 117.3
114.9 112.6
109.6 108.2
103.5 105.9 105.5 105.8 106.9
100.0 98.1 98.8 98.9 97.0 100.0 100.9 100.3 100.0
93.5 91.8 94.2 93.6
90.5
Index 1871 = 100
88.5 90.0 85.0 88.1

80.0
73.6
60.0 61.7 62.1
40.0
20.0
0.0
1600 1650 1700 1750 1801 1811 1821 1831 1841 1851 1861 1871
Figure 18.2 Trends in GDP, agricultural output, and industrial output per head (1871 = 100).
Source: Constructed from data in S. Broadberry et al. (2015), ‘India and the Great Divergence: An
Anglo-Indian Comparison of GDP Per Capita, 1600–1871’, Explorations in Economic History, 55
(1), pp. 58–75.
did better than those cultivating rice. Western India did better than eastern India.
The colonial government embarked on a policy of infrastructure building, and the
construction of the railway network integrated markets, while the creation of the
irrigation network was on a much smaller scale and had strong regional bias.
Expenditure on irrigation was small compared to that for the railways. The share of
capital formation in GDP remained less than a quarter than was achieved after 1947.
Within this limited investment, agriculture had a small share which declined over
time.30
Although the share of spending on irrigation was low, the colonial government built
one of the largest irrigation networks in the world. Large areas were covered in some
regions, but only 20 per cent of the total cultivated land was irrigated. Agricultural
output increased at the extensive margin as expansion of land under cultivation came
through increasing provision of water and irrigation. Overall, there was a difference
in productivity growth between food and non-food agricultural products, which may
suggest that rising agricultural productivity in cash crops fitted well with the objectives
of colonial trade (Table 18.5).
However, there is little evidence that most irrigation was directed to non-food cash
crops, which were the main exportable, at the expense of food grains. Yield per acre in
wheat increased on irrigated land. Wheat exports rose too. Falling productivity in food
grains was driven by falling agricultural productivity in rice. The failure to raise agricultural
productivity led to stagnation under colonial rule. This is not due to increasing share of
333
Table 18.5 Change in agricultural production and productivity, 1891–1946
Growth in yield per acre
Output Acreage Yield/acre 1891–1916 1916–21 1921–46
All crops 0.37 0.40 0.01 0.47 −0.36 −0.02
Foodgrains 0.11 0.31 −0.18 0.29 −0.63 −0.44
Non-foodgrains 1.31 0.42 0.67 0.81 0.34 1.16

Source: T. Roy (2006), The Economic History of India, 1857-1947. New Delhi: Oxford University Press,
Table 4.2.
agricultural exports, but rather the failure to invest in an appropriate infrastructure and
technological change that led to stagnation as the extensive margin dried up.
Conclusion
This chapter has traced the transformation of the South Asian economy from 1600s to
the end of British colonial rule. It traces the rise and fall of the textile export trade and its
political implications. India lost its status as an exporter of industrial goods after 1800 and
became an exporter of food and raw materials to the industrial economy of Britain. This
transformation had little to do with India’s colonial status and subordination to British
trade policy. The main reason for the shift in Indian advantage in the cotton textile market
came from the superior and more productive technology of the Industrial Revolution.
In the long run, average levels of living were depressed in India. As India began to
export increasing quantities of primary products, per capita GDP did not decline further.
Instead it rose at a very slow rate in the nineteenth century and then stagnated in the
twentieth century. The neglect of agricultural investment by the colonial government and
the consequent failure to raise agricultural productivity account for the lack of intensive
growth in the Indian economy. India’s integration into the global economy from the
nineteenth century had little consequences for actual economic growth.
Notes
1. A. Greif (2006), Institutions and the Path to the Modern Economy: Lessons from Medieval
trade. Cambridge: Cambridge University Press.
2. U. Dasgupta (2001), The World of the Indian Ocean Merchant, 1500–1800. New Delhi: Oxford
University Press.
3. K. N. Chaudhuri (1978), The Trading World of Asia and the English East India Company,
1660–1760. Cambridge, Cambridge University Press; S. Chaudhury (1995), From Prosperity
to Decline: Eighteenth Century Bengal. New Delhi: Manohar.
4. C. A. Bayly (1983), Rulers, Townsmen and Bazaars: North Indian Society in the Age of
British Expansion, 1770–1870. Cambridge: Cambridge University Press; D. Washbrook
334
(2007), ‘India in the early modern world economy: Modes of production, reproduction and
exchange’, Journal of Global History, 2 (1), 87–111.
5. L. Subramanian (1987), ‘Banias and the British: The role of indigenous credit in the process
of imperial expansion in western India in the second half of the eighteenth century’,
Modern Asian Studies, 21 (3), 473–510; T. Roy (2013), ‘Rethinking the origins of British
India: State formation and military-fiscal undertakings in an eighteenth-century world
region’, Modern Asian Studies, 47 (4), 1125–56; C. Markovits (2017), ‘The Indian economy
and the British Empire in the Company period: Some additional reflections around an
essay by David Washbrook’, Modern Asian Studies, 51 (2), 375–98.
6. C. A. Bayly (2003), The Birth of the Modern World, 1780-1914. London: Wiley-Blackwell.
7. P. T. Hoffman (2015), Why Did Europe Conquer the World?. Princeton: Princeton University
Press.
8. M. Oak and A. V. Swamy (2012), ‘Myopia or strategic behavior? Indian regimes and the East
India Company in late eighteenth century India’, Explorations in Economic History, 49 (3),
352–66.
9. R. Guha (1982), A Rule of Property for Bengal: An Essay on the Idea of Permanent Settlement.
New Delhi: Orient Longman.
10. T. Roy (2013), An Economic History of Early Modern India. London: Routledge.
11. Most of British investment was in the land-abundant colonies of North America and Australia.
12. For a discussion, see Dan Bogart and Latika Chaudhary (2016), ‘Railways in colonial India:
An economic achievement?’, in Latika Chaudhary, Bishnupriya Gupta, Tirthankar Roy, and
Anand V. Swamy (eds), A New Economic History of Colonial India. Abingdon and London:
Routledge, 140–60.
13. See T. Roy (1999), Traditional Industry in the Economy of Colonial India. Cambridge:
14. H. W. Singer (1989), ‘Terms of trade and economic development’, in Economic Development.
London: Palgrave Macmillan, 323–8.
15. J. A. Frankel and D. Romer (1999), ‘Does trade cause growth?’, American Economic Review,
91 (5), 379–99.
16. K. J. Mitchener and M. Weidenmier (2008), ‘Trade and empire’, Economic Journal, 118 (533),
1805–34.
17. L. Pascali (2017), ‘The wind of change: Maritime technology, trade and economic
development’, American Economic Review, 107 (9), 2821-54.
18. M. J. Twomey (1983), ‘Employment in nineteenth century Indian textiles’, Explorations in
19. A. K. Bagchi (1976), ‘De-industrialization in India in the nineteenth century: Some
theoretical implications’, Journal of Development Studies, 12 (2), 135–64. I. Ray (2011), Bengal
Industries and the British Industrial Revolution. London and New York: Routledge.
20. D. Clingingsmith, and J. G. Williamson (2008), ‘Deindustrialization in 18th and 19th century
India: Mughal decline, climate shocks and British industrial ascent’, Explorations in Economic
History, 45 (3), 209–34.
21. S. Broadberry and B. Gupta (2009), ‘Lancashire, India, and shifting competitive advantage in
cotton textiles, 1700–1850: The neglected role of factor prices’, Economic History Review, 62
(2), 279–305.
335
22. Roy (1999), Traditional Industry; D. E. Haynes (2012), Small Town Capitalism in Western
India: Artisans, Merchants and the Making of the Informal Economy, 1870–1960. Cambridge:
23. For more detailed discussion, see B. Gupta (2015), ‘The rise of modern industry in colonial
India’, in L. Chaudhary, B. Gupta, T. Roy, and A. V. Swamy (eds), A New Economic History of
Colonial India. London: Routledge.
World Economy. Princeton: Princeton University Press; Parthasarathi, ‘Rethinking wages and
competitiveness in the eighteenth century’, 158, 79–109.
25. S. Broadberry and B. Gupta (2006), ‘The Early Modern Great Divergence: Wages, Prices and
Economic Development in Europe and Asia, 1500–1800’, Economic History Review, 59 (1),
2–31; R. C. Allen, J. P. Bassino, D. Ma, C. Moll‐Murata and J. L. Van Zanden (2011), ‘Wages,
Prices, and Living Standards in China, 1738–1925: In Comparison with Europe, Japan, and
India’, Economic History Review, 64 (supplement 1), 8–38.
26. S. Broadberry, B. M. Campbell, A. Klein, M. Overton, and B. Van Leeuwen (2015), British
Economic Growth, 1270–1870. Cambridge: Cambridge University Press.
27. N. Voigtländer, and H. J. Voth (2012), ‘The three horsemen of riches: Plague, war, and
urbanization in early modern Europe’, Review of Economic Studies, 80 (2), 774–811.
28. Broadberry, et al. (2015), ‘India and the great divergence: An Anglo-Indian comparison of
GDP per capita, 1600-1871’, Explorations in Economic History, 55 (1), 58–75.
29. Broadberry and Gupta (2006), ‘The early modern Great Divergence’; and Broadberry, et al.
(2015), ‘India and the Great Divergence’.
30. B. Roy (1996), An analysis of Long-Term Growth of National Income and Capital Formation in
India (1850–51 to 1950–51). Calcutta: Firma KLM Pvt. Ltd.
336
CHAPTER 19
CHANGING DESTINIES IN THE
ECONOMY OF SOUTHEAST ASIA
J. Thomas Lindblad
Southeast Asia is an important player in today’s world economy. The region, embracing
the ten member states of the ASEAN (Association of South East Asian Nations), counts
625 million inhabitants, 8.3 per cent of the world total. Total GDP nears US$2.5 trillion
or 3.3 per cent of world GDP. Per capita GDP varies enormously across the member
states, presently averaging about US$4,000 at nominal prices, which corresponds to more
than US$10,000 if measured at purchasing power parity.1 Yet, for centuries this region
remained spectacularly underpopulated, and when colonial rule came to an end, virtually
all the newly independent nation states faced grave problems of economic development.
A true metamorphosis has taken place within living memory. Was this anticipated or
delayed by earlier changes in the region’s economic destiny? Or, to put it differently, could
the economic success in much, but not all, of the region have been predicted by observers
in the colonial period, let alone in pre-colonial times? The time frame of my exploration
stretches from the sixteenth century up to the mid-twentieth century.
Three key variables need to be surveyed to adequately assess the region’s long-run
economic development. The first one is economic growth, whether or not associated with
per capita gain, whereas the second one refers to the underlying economic structure. Both
have been prominently at play during the dramatic changes in the post-war era. Sustained
high growth rates qualified four ASEAN member states (Singapore, Malaysia, Thailand,
and Indonesia) to be included among the prestigious HPAEs (highly performing Asian
economies) as designated by the World Bank in 1993. A decisive shift from agriculture to
manufacturing occurred in five of the large economies (Indonesia, Thailand, Malaysia,
the Philippines, and Vietnam) between the late 1960s and early 1990s.
The third key variable concerns the openness to world markets. The region is literally
located at major crossroads in the world economy. Four major economies exhibit an
exceptionally high ratio of foreign trade to GDP – Singapore, Malaysia, Thailand, and
Vietnam – while others, notably Indonesia and the Philippines, remain more strongly
oriented towards their own domestic markets. In earlier centuries, the main external
influences came from either India or China. Then the radius was widened to include the
Middle East and Europe, and eventually the Americas. The strong external impetus had far-
reaching repercussions for both economic growth and economic structure. Did openness
generate sustained growth and encourage an economic structure conducive to such growth?
In his authoritative account of the longue durée in Southeast Asian history, Anthony
Reid identifies a succession of distinct phases of development.2 The ‘Age of Commerce’,
applying the label Reid himself coined in an earlier seminal study to identify the period
in Southeast Asian history from 1480 to 1630, came to fruition in an aggregation of
societies that more often than not succeeded in evading state formation. This is all
the more remarkable as it goes contrary to expectation from experience elsewhere,
where the formation of strong states preceded economic expansion or even formed a
prerequisite for such a change of economic fortune. Was Southeast Asia with its ‘Age
of Commerce’ of one and a half century the exception that proves the rule?
The subsequent Western colonialism put an indelible mark on the entire region
except for Thailand (Siam until 1930). The outcome was a process of formation of
states, but not nations. To what extent did colonial rule during the nineteenth and early
twentieth centuries prepare the region for the challenges of economic development after
independence? Addressing this issue acknowledges the need to study post-colonial
economic development in relationship to the colonial legacy. In a path-breaking study,
Anne Booth adopts a comparative perspective, arguing that Japanese colonialism in
East Asia laid stronger foundations for rapid development after independence than did
Western colonial rule in Southeast Asia.3
As said, this contribution focuses on the first two phases of Reid’s classification, only
touching on the third phase, the current post-war situation, in passing. Most attention
is given to economic matters, on occasion in juxtaposition with political trends, and for
reasons of space leaving aside social change and related issues.
Society without state
Southeast Asia covers a land area of 4.5 million square kilometres. Still, by the beginning
of the seventeenth century, the entire region counted less than twenty-five million
inhabitants and even by 1800 total population was estimated to be no more than thirty-
four million. Reid ascribes this peculiar feature of historical demography to a climate
and geography that encouraged collection of forest produce and maritime trading rather
than labour-intensive agricultural production.4 With the possible exception of Central
and East Java and Luzon, population concentrations were simply too low to support
centres of power and authority.
The half millennium or so preceding the ‘Age of Commerce’ (1480–1630) saw an
extreme fragmentation of polities based on charters between rulers and the surrounding
population. By the mid-fourteenth century, there were twenty-three kingdoms in the
broad mainland belt from Burma to Vietnam, and numerous more or less autonomous
units in the ‘empty’ area of the Malay Peninsula and the western part of the Indonesian
archipelago. Of the region’s three famous ancient ‘empires’, Srivijaya with its center in
South Sumatra had practically collapsed already, whereas Mataram and Majapahit
in Java effectively covered territories of ever diminishing size.5 Although some
recentralization took place on the mainland between the mid-fourteenth and the mid-
sixteenth centuries, the ‘state-light’ domain, an expression borrowed again from Reid,
338
Changing Destinies in the Economy of Southeast Asia
remained characteristic of the region with its bewildering array of amorphous ‘states and
non-states, large and small’, often with unclear and porous borders.6
The long sixteenth century, the period from 1480 to 1630, was one of a dramatic
expansion of foreign trade and shipping. The products in highest demand were spices
from Maluku (Moluccas), supplemented by a wide range of forest products such as
woods and resins, even ivory, rhinoceros horns, and birds’ nests. Towards the end of
this period of expansion, the range of tradeable goods had come to include also cane
sugar and cotton. The traders included Chinese, Indians, Arabs, and a variegation of
indigenous peoples from all parts of the region. The Europeans were the last to be added
to the long list of participants in the region’s booming trade.
A web of shipping connections evolved with nodal points. Melaka, dating from
around 1400, profited from its strategic location at the main road of access by sea to the
region and effectively shouldered the legacy of the defunct Srivijaya ‘empire’. Similarly,
Demak and other ports along the Pasisir, Java’s north coast, rose to prominence in the
vacuum left by the fading Majapahit ‘empire’. Other thriving ports in the expanding
Muslim Malay sphere included Brunei in northwestern Borneo while Hoi An in the
Chinese sphere of influence on Borneo played a crucial part in maintaining shipping
links with East Asia. Cities of impressive size arose. At the peak of the commercial
expansion in 1630, Reid identified ten cities with an estimated population in excess of
100,000 people, five on the mainland (Pegu, Ayutthaya, Hanoi, Hue, and Melaka) and
five in the Indonesian archipelago (Aceh, Banten, Batavia, Mataram, and Makassar).7
Trading in Southeast Asia during the ‘Age of Commerce’ was initially largely
conducted within the region itself, even if the traders often originated from other
regions. The global or interregional dimension, as opposed to the intra-regional one,
was gradually strengthened. Spices from Maluku had entered Europe through Middle
Eastern intermediaries already since late medieval times, and this branch of trade
received a powerful boost when the Portuguese established direct shipping links with
Europe around 1500. Imports of Indian textiles played an increasing part in the trade
with South Asia, rising threefold in value between the early sixteenth and the first half of
the seventeenth centuries. During the concluding decades of the sixteenth century, the
important bullion trade was added to exchanges with other parts of the world. The influx
of American silver from Acapulco through the region’s eastward gateway at Manila rose
fourfold between the 1580s and the 1620s.8
Pepper became the most spectacular of success stories. The total volume of exports of
pepper from Southeast Asia doubled between the 1530s and 1560s, from 1,300 tonnes
to 2,700 tonnes on average per year, climbing to a peak at 3,800 tonnes in the 1620s that
was sustained into the 1640s. An increasing proportion of total exports was destined for
the European market, where the Southeast Asian product soon surpassed Indian pepper
in popularity. The share of Europe in total Southeast Asian pepper exports rose from
one-quarter in the 1530s to about one-half in the 1560s and oscillated around 40 per
cent in the 1590s and the 1620s (Figure 19.1). Meanwhile the total annual value – based
on prices in Southeast Asian ports – rose fourfold from less than 80,000 Spanish dollars
(real) in the 1530s to 340,000 in the 1590s, eventually reaching a peak level of 600,000
339
4000
To Europe
3500
Total
3000
2500
2000
1500
1000
500
0
1530–39 1560–69 1590–99 1620–29 1640–49
Figure 19.1 Average annual volume of pepper exports from Southeast Asia, 1530–1649 (metric
tons).
Source: A. Reid (2015), A History of Southeast Asia: Critical Crossroads. Chichester: Wiley Black-
well, 78.
Spanish dollars in the 1640s. The latter figure was twice as high as the total value of
exports of the region’s second-ranking spice product, cloves from Maluku in particular.
It is worth noting that the pepper exports were far more voluminous than the exports of
cloves, which reflects a lower price for pepper, 0.15 Spanish dollars per kilogram in the
1620s against 0.80 Spanish dollars for cloves.9
The pepper trade was exceptionally profitable. This is best illustrated by trends in pepper
exports during the aftermath of the ‘Age of Commerce’. There was a huge divergence in
the value of the shipments of pepper, depending on where they were priced. The total
value of imports of Southeast Asian pepper, measured at the international market in
Amsterdam in the 1630s, was 4.3 times as high as the value of exports measured at the
point of departure. This ‘multiplier’ (markup) in the transfer from one market to the
next even climbed to 6.4 in the 1660s and still averaged at 4.7 times in the final decade
of the seventeenth century (Figure 19.2). The discrepancy between Southeast Asian and
European value was even more pronounced in the case of cloves, where the European
value from the 1650s to the 1690s represented a multiple of ten or more compared to the
value in Southeast Asia.10 The key to high profits in European trade with Southeast Asia
lay in imperfect information about market conditions. Exporters in Southeast Asia did
not have the slightest idea of how much their spices were worth in Amsterdam.
Three events stand out as landmarks in the history of European participation in the
expansion of Southeast Asia in this period. The first is the conquest of Melaka by the
Portuguese in 1511, which opened up the direct spice trade between Southeast Asia and
Europe. The second is the foundation of Manila by the Spaniards in 1571 that exposed
Southeast Asia to the bullion trade. The third is the establishment of the Dutch East
340
2500
In Southeast Asia
In Europe
2000
1500
1000
500
0
1630–39 1640–49 1650–59 1660–69 1670–79 1680–89 1690–99
Figure 19.2 Average annual value of pepper exports in Southeast Asia and in Europe, 1630–99
(in thousand Spanish dollars).
Source: A. Reid (2015), A History of Southeast Asia: Critical Crossroads. Chichester: Wiley Black-
well, 147.
India Company, VOC (Vereenigde Oost-Indische Compagnie) in 1602, arguably the

world’s first multinational. European involvement in Southeast Asian trade began in the
‘Age of Commerce’ and part of it survived beyond the peak in the region’s expansion. The
Dutch took over from the Portuguese, whereas the Spaniards remained largely confined
to the Philippines.
There has been a lively discussion among historians about the role of European traders
during the ‘Age of Commerce’ and its aftermath. Were they merely aloof observers from
the sideline or did they outrank their Asian rivals? The debate has been moving back
and forth between these two positions for some time, but current scholarship seems to
favour the externalist view above the autonomous one. The European traders had an
impact disproportionate to their numbers because of their control of long-distance
trading, naval supremacy, and ready access to bullion.11 Commercial success was secured
through competition and cooperative ventures with both migrant Asian and indigenous
competitors.
State-light power
The eclipse of the ‘Age of Commerce’ was signalled by several seemingly unrelated
events: exports of silver from Japan were banned in 1635, the fall of the Ming dynasty
in China in 1644 severely disrupted Chinese shipping, and the conquest of Melaka by
the VOC in 1641 secured the Dutch monopoly in the spice trade. Just as Southeast
Asia had benefited more than others from the booming ‘long sixteenth century’, the
region was especially hard hit by the seventeenth-century depression in the world
341
700
600
500
400
300
200
100
Figure 19.3 Average annual value of cargo entering Manila, 1601–70 (in thousand Spanish dol-
lars).
Source: A. Reid (1993), Southeast Asia in the Age of Commerce, 1450–1680, Vol. II. Expansion and
Crisis. New Haven: Yale University Press, 289.
economy. Economic setbacks were aggravated by military conflict and adverse physical
circumstances, such as earthquakes, possibly also tsunamis, and disturbances in the
climate somehow occasioned by the ‘Little Ice Age’ in Europe and the northern part of
Asia.12
Although the spice trade remained potentially highly profitable, Southeast Asia was
losing its comparative advantage due the rigidly enforced Dutch monopoly as well as
declining demand among consumers in Europe. The overall downward trend in the
economic tide is well borne out by estimates of the value of cargo entered in the port
of Manila. The high annual average at nearly 600,000 Spanish dollars prevailing for
the period 1610–50 declined to one-third of its former level in the 1650s and 1660s
(Figure 19.3).
The VOC emerged as the winner from the competitive strife in regional trading
during the seventeenth century. By 1660 the Dutch-owned business enterprise with
its diverse international labour force stood above competition in leading branches of
trade. The success can be ascribed to the synergy between selective trading monopolies,
the exercise of territorial power, and access to a global network. Among its rivals, the
VOC was unique in combining commercial advantage with political and military
operations resembling those of an autonomous state. From about 1680 onwards, the
VOC’s suzerainty over the decaying Mataram ‘empire’ was undisputed. The VOC came
to function as one participant among many in the fragmented multi-state system of the
archipelago, albeit one with military superiority.13
In the eighteenth century, the trade of the VOC grew increasingly oriented towards
intra-Asian trade as opposed to trade with Europe. Total annual turnover in trading in
Asia exceeded thirty million guilders in the early 1710s and reached a peak at nearly
thirty-nine million in the mid-eighteenth century. The Indonesian archipelago usually
342
accounted for more than one-half of the total, but almost all of the other half accrued
from possessions outside Southeast Asia. By the early 1770s, a decline had set in with
a total turnover around twenty million guilders, two-thirds of which originated from
the archipelago (Figure 19.4). The final downfall in the late eighteenth century was
conditioned by heavy losses during the Fourth Anglo-Dutch War (1780–4), revolution
and political upheaval in Europe during the 1790s, widespread corruption and private
trading by employees, and possibly also systematic errors in accounting practices.14
The VOC interfered in an unprecedented way in the regional economy of Southeast
Asia, in particular in the island world. The company reinforced or opened up profitable
avenues of exploiting the region’s natural resources and comparative advantages,
primarily to its own gain, although local elites also shared in the spoils. In the process, the
VOC became an active participant in the slave trade of the Indian Ocean and the eastern
Indonesian islands. Through the juxtaposition of its commercial and political or military
operations, the company had a deforming impact on the development of indigenous
statecraft, especially in Java. Differently from merchant communities of other ethnic
origin, however, the Dutch bequeathed a state under construction to the region. The
powerful alien state in Java was based on territorialization through taxation, applying
devices inherited from the company’s Portuguese predecessors.15 The VOC reaped the
benefits from local fragmentation of authority. A trend in the opposite direction became
Outside Southeast Asia Other Southeast Asia

Indonesia
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1711–13 1730–32 1751–53 1771–73 1789–90
Figure 19.4 Average annual turnover of VOC trade in Asia, 1711–90 (in thousand Dutch
dollars).
Source: E. M. Jacobs (2006), Merchant in Asia: The Trade of the Dutch East India Company during
the Eighteenth Century. Leiden: CNWS Publications, 306.
343
visible in the mainland, where a consolidation occurred of three integrated territories

under new dynasties: Kon-baung in Burma from 1752, Chakri in Thailand from 1782,
and Nguyen in Vietnam from 1802. This reinforced an existing cleavage between the
mainland and the archipelago, the latter here also including the Malay Peninsula. The
island world was more susceptible to external influences, especially Western colonialism,
and this was to become all the more important during the next phase of development.
State without nation
Towards the end of the eighteenth century, colonialism in Southeast Asia was virtually
confined to the old and highly indigenized Spanish possession of the Philippines and the
tiny Portuguese enclave in East Timor, not counting the quasi-state functions performed
by the VOC in Java. Scarcely more than one century later, the entire region except
Thailand had been subjugated to effective colonial rule. From being one of the least
colonized regions of the world, Southeast Asia became a region where colonial power
had profound repercussions for the development of society. The discontinuity with the
pre-colonial past was especially strong in the archipelago and on the peninsula. Our
concern here is with the economic impact of colonialism, leaving it to political historians
to address such intriguing issues as the continuity between colonial constructions and
post-colonial nation states.
The region became host to several Western colonial powers. The Dutch claim to the
entire Indonesian archipelago found its legal basis in the inheritance from the dissolved
VOC, but actual colonial state formation remained confined to Java for the better part of
the nineteenth century. The British started out from the three strategically located ports
of the Straits Settlements (Penang, Melaka, and Singapore), only to extend their authority
over the nine Malay sultanates of the peninsula several decades later. The conquest of
Burma and what then became French Indochina took place at about the same time
and in a similar gradual fashion during the latter part of the nineteenth century. Spain
was replaced by the United States in the Philippines in 1898, whereas the Portuguese
continued to control East Timor. The metropolitan powers erected a range of colonial
states, each with characteristics of their own and only sharing the common feature (with
the exception of Thailand) that they were not founded on the conception of a nation.16
The Dutch historiography has repeatedly struggled with the issue whether the
extension of Dutch colonial power to all corners of the Indonesian archipelago in the
late nineteenth and early twentieth centuries fitted into or differed from prevailing
patterns of modern imperialism. A consensus has emerged that the only exception
from the standard pattern was the belated switch in Dutch imperialism from reluctant
to aggressive expansion following the conquest of Lombok in 1894.17 The international
historiography has been more concerned with differences in colonial administration and
the resulting endowment with regard to post-colonial development. The British were
known for indirect colonial rule, notably through the Malay sultans on the peninsula.
This contrasted with both the highly centralized control of French Indochina and the
344
Dutch tendency to far-reaching intervention, often in conjunction with local elites. The
American administrators of the Philippines were the only colonial rulers in the region
bent on preparing their subjects for independence. Differences in the style of colonial
rule were reflected in budgetary and welfare policies with important consequences for
standards of living, a matter to which we shall return later.18
From the early nineteenth century, the region’s population began to grow more
rapidly. Total population rose almost threefold during the nineteenth century and
more than doubled between 1900 and 1950 (Figure 19.5). The proportion of the total
population accounted by colonial Indonesia rose to a stable level of some 45 per cent,
whereas second-ranking French Indochina lagged behind neighbours with its share in
the total falling from 27 per cent in 1800 to 16 per cent in 1930. Meanwhile, Burma
was surpassed by the Philippines in the third position. The demographic transition
finally caught up with Southeast Asia, but it is hazardous to make inferences from the
acceleration in population growth to the development of standards of living over time;
some of the increase may even be ascribed to better statistics.19
Colonialism radically altered economic relations with other parts of the world.
Seeking to revitalize the commercial supremacy of the VOC, the Dutch colonial
authorities in Java embarked on a state-run exploitation of the island’s fertile soils,
dispatching export crops to the staple market in Amsterdam. In effect, this was a reversal
of the preceding trend of the VOC to emphasize intra-Asian trade at the expense of
200
Other Southeast Asia Indochina
180
Philippines Burma
160
Indonesia
140
120
100
80
60
40
20
0
1800 1900 1930 1950
Figure 19.5 Population of Southeast Asia, 1800–1950 (millions).

Sources: R. E. Elson (1997), The End of the Peasantry in Southeast Asia: A Social and Economic His-
tory of Peasant Livelihood, 1800–1990s. Basingstoke: Macmillan, 76–7; H. Gooszen (2000), A De-
mographic History of the Indonesian Archipelago. Singapore: Institute of Southeast Asian Studies,
43; J. Touwen (2001), Extremes in the Archipelago: Trade and Economic Development in the Outer
Islands of Indonesia, 1900–1942. Leiden: KITLV Press, 330; A. Reid (2015), A History of Southeast
Asia: Critical Crossroads. Chichester: Wiley Blackwell, 263.
345
trade with Europe. The cultivation system in Java in the period 1830–70, with coffee,
sugar, and indigo as its foremost products, proved extraordinarily profitable. At least
6 per cent of Java’s GDP was siphoned off on occasion, contributing as much as 4 per
cent of total Dutch GDP and one-third of the public budget.20 The cultivation system
was abandoned eventually, because the state-run estates in Java had been an anomaly
in the pervasive movement towards exploitation of natural resources by private capital
in Southeast Asia.
The local economy provided land and labour wherever population densities were high
enough to permit a release of cheap, unskilled workers from food production, which was
notably the situation in Java and Luzon, but scarcely elsewhere. Private firms supplied
investment capital, technology, and management and relied when necessary on coolies
shipped in from poor regions far away, such as South India, South China, and Central
Java. A twin system of labour mobilization emerged in the region, one operating in
symbiosis with the local economy, the other consisting of enclave economies with little
interaction with the surrounding society. Both systems found large-scale application
in colonial Indonesia, the former one in Java and the latter one in the Outer Islands.21
In British Malaya, however, preference was given to coolie labour relying on Indian
immigrants.
The plantation belt of Deli on Sumatra’s east coast (now North Sumatra) grew
famous for its highly profitable cultivation of tobacco and rubber, but also notorious
for scandals about abuse of labour. The system of coolie labour was devised and first
tried out under the auspices of the ill-reputed penal sanction that rendered excessive
powers to employers against employees. The total number of coolies doubled between
1910 and 1920, and increased by another 40 per cent during the 1920s. By the peak
in 1929, the total approached 550,000 individuals, mostly men in productive ages,
a number corresponding to 8 per cent of the entire population of British Malaya,
including women and dependents. Although North Sumatra continued to have the
majority of the coolies in colonial Indonesia, it is worth noting that other regions
among the Outer Islands accounted for 30–40 per cent of the total (Figure 19.6). The
system’s decline in the 1930s was prompted by the abolition of the penal sanction
due to international pressure and accelerated by reductions of output during the
worldwide depression.
Foreign direct investment (FDI) by private firms was relatively slow in entering
the region around the turn of the twentieth century, although some important fresh
investments did take place in the Javanese sugar industry in the shadow and aftermath
of the cultivation system.22 One plausible explanation could stem from real or perceived
uncertainties associated with investing large sums of capital on remote production
sites, where protection by the colonial administration had not yet been secured. The
extension of effective colonial rule over large territories in the Indonesian Outer Islands,
and also in Malaya and Indochina, combined with booming markets for Southeast Asian
exports to trigger massive new investment. By 1914, total FDI in the region amounted
to US$1,100 million, of which US$675 million (60 per cent) was invested in Indonesia
alone. The estimated total for the late 1930s was two and a half times that level and might
346
600
Other Outer Kalimantan

500 Other Sumatra North Sumatra
400
300
200
100
0
1910 1915 1920 1925 1929 1935
Figure 19.6 Coolie labour in colonial Indonesia, 1910–35 (thousands of workers).

Sources: J. T. Lindblad (1999), ‘Coolies in Deli: Labour Conditions in Western Enterprises in East
Sumatra, 1910–1938’, in V. J. H. Houben, J. T. Lindblad et al., Coolie Labour in Colonial Indonesia:
A Study of Labour Relations in the Outer Islands, c. 1900–1940. Wiesbaden: Harrassowitz, 72–3;
idem (1999), ‘New Destinations: Conditions of Coolie Labour Outside East Sumatra, 1910–1938’,
in ibid., 101–7.
even have been slightly higher in 1930 before the effects of economic depression were
felt. The distribution across the colonies was largely unchanged with Dutch Indonesia up
front accounting for more than one-half of the regional total, followed by British Malaya,
the Philippines, and French Indochina, in that order (Figure 19.7). The sole non-colony,
Thailand, ranked last on both counts, which lends support to the idea that colonial rule
and FDI were intimately connected.
Liberalism with respect to investment and trade was vigorously celebrated by the
Dutch, the British, and the Americans, less so by the French. Nevertheless, there was
a strong bias in FDI patterns in favour of investors from the colonial mother country.
Dutch firms accounted for 70 per cent of FDI in colonial Indonesia, British investors
held similar stakes in Malaya, and American firms were good for more than one-
half of the total in the Philippines, whereas Indochina appeared as the most extreme
case, with a virtual monopoly enjoyed by French companies.23 Familiarity with legal
regulations, language, and culture obviously hid behind preferences among investors for
colonial targets, but direct contacts with colonial administrations were most probably
important as well. Colonialism in Southeast Asia implied at least a partial reorientation
in economic relations towards the outside world away from Asia and in favour of the
Western metropolitan countries.
The colonial relationship also surfaced in foreign trade. The trend of the VOC in
the eighteenth century to trade more in Asia, and less with Europe, was reversed by the
Dutch cultivation system in Java. When foreign trade, just as foreign investment, was
347
1400
Indonesia Malaya
1200 Philippines Indochina
Burma Thailand
1000
800
600
400
200
0
1914 1938
Figure 19.7 Foreign direct investment in Southeast Asia in 1914 and 1938 (in million US$).
Source: J. T. Lindblad (1998), Foreign Investment in Southeast Asia in the Twentieth Century. Bas-
ingstoke: Macmillan, 14.
liberalized in the Dutch colony after the cultivation system ended, nearly one-half of
imports entering the colony came from the colony, whereas the share of the Dutch in the
opposite flow of trade was as high as 60 per cent. Thirty years later, the Dutch proportion
in the trade of colonial Indonesia was down at one-third. Another three decades later, by
the late 1930s, only one-fifth of Indonesia’s foreign trade was with the Netherlands. The
delinking of mutual trade between colony and metropolitan mother country proceeded
even further in the British colonies of Malaya and Burma, where the share of the United
Kingdom in total trade scarcely exceeded 15 per cent. In Indochina, by contrast, one-half
of the foreign trade was conducted with France. The strongest trading relationship with
the mother country in the late 1930s was found in the Philippines, with the United States
buying more than 80 per cent of exports and supplying 70 per cent of imports.24
Total exports from Southeast Asia started to increase dramatically from about 1905
onwards, and the expansion continued unabatedly up to the very eve of the economic
depression of the 1930s. By the late 1930s, total exports from the entire region were
estimated at US$1.6 billion, of which two-thirds originated in colonial Indonesia and
British Malaya alone.25 The expansion of exports was only in part accompanied by an
increase in imports, since per capita incomes were lagging behind and failed to make
a larger contribution to aggregate demand in the domestic economy. The result was a
very substantial surplus in the balance of trade in all the region’s colonies as well as in
independent Thailand.26 In colonial Indonesia, to cite but one example, 38 per cent of
export earnings on average in the period 1900–38 were not spent on imports, a figure
that also reflected the growing disparity between Java, where the surplus percentage was
25 per cent, and the Outer Islands, where it exceeded 50 per cent.27
348
Some time ago, C. P. Kindleberger aptly explained the region’s trade-induced

expansion as follows: ‘demand was right abroad and supply was right at home.’28 In the
early twentieth century, Southeast Asia could offer a wide range of exportable products,
which at that time were in high and rapidly rising demand in the world market. Java
became one of the largest suppliers of cane sugar in the world, together with Taiwan
and Cuba. The Outer Islands of Indonesia and the Malay Peninsula emerged as two
of the world’s leading exporters of tin and natural rubber, later supplemented by palm
oil. Together with Burma, colonial Indonesia became the region’s main oil producer.
Tobacco, coffee, tea, and copra all occupied prominent positions in the wide range of
exports from the archipelago; colonial Indonesia even enjoyed a virtual world monopoly
in the small-scale but literally vital trade in cinchona, at the time crucial in combatting
malaria. By 1929, exports per capita ranged from US$4–13 in Indochina and the
Philippines to as much as US$126 in British Malaya. This statistic amounted to only
US$10 in the Indonesian archipelago due to the colony’s very large population.29
The key to success in international trade was, as British Malaya and colonial Indonesia
demonstrate, not just a question of having a favourable resource endowment that
enabled goods in high demand to be offered on the world market. It was also a matter of
building up a capacity to raise output targets in response to market signals. In the event,
export volumes were rapidly enlarged in colonial Indonesia and British Malaya during
the long boom in prices of primary products from about 1905 to the mid-1920s, but
also by way of compensation for the general fall in prices in the second half of the 1920s
and during the 1930s. Only at the nadir of the worldwide depression, when prices for
primary products had reached rock-bottom levels, did export producers in Southeast
Asia revert to curtailing output, notably in rubber, tin, and sugar.30
Export production was organized in one of two ways. There was the Western colonial
model, based on FDI, imported or locally mobilized labour and the overt or tacit support
by colonial governments. In addition, an Asian model of export expansion took shape
involving Chinese intermediaries in finance and trade and indigenous smallholder
producers in cash crop agriculture. Indigenous entrepreneurship was particularly
important in the rubber industry of Sumatra and Kalimantan and the Malay Peninsula,
and in the copra trade of Sulawesi. By the late 1930s, smallholders supplied about one-
half of the total exports of rubber and almost all exports of copra from colonial Indonesia
and British Malaya.31 The parallel modes of export expansion in Southeast Asia in the
late-colonial era testify to the region’s dynamic potential, decidedly in anticipation of
what was to come to fruition after independence.
The pre-war export expansion was rooted in a highly traditional economic structure
that above all emphasized the primary sector, including mining, at the expense of
manufacturing and services. About two-thirds of the labour force in colonial Indonesia,
the Philippines, and Burma were still engaged in agriculture around 1930. Even in
British Malaya with its substantial trading sector, three out of five worked on the land,
and in Thailand the share of agriculture in employment exceeded 80 per cent. Only an
embryonic industrialization, attracting about 10 per cent of labour, was taking place in
these colonies but, significantly, not in Thailand.32 The traditional economic structure
349
in almost the entire region on the eve of independence was without doubt a factor that
forestalled the switch to modern, sustained economic growth.
Global connections intensified and foreign trade grew but actual income gains for the
region’s colonies remained unimpressive. The richest colonies, Singapore and the Malayan
Peninsula, registered a growth rate of GDP per capita of only about 2.4 per cent on average
per year between 1913 and 1938. British Malaya was more or less on par with the Philippines,
but the long-term growth rate in the latter colony was lower still. Despite having witnessed a
spectacular trade expansion, colonial Indonesia figured in the ranking between Malaya and
Thailand, with a growth rate of scarcely more than 1 per cent per year. Burma appears to have
been the least fortunate in terms of reaping benefit from Western colonialism (Figure 19.8).33
The Japanese occupation in the 1940s, revolution, and upheaval of Dutch
decolonization severely depressed per capita incomes in all colonies except Malaya
(including Singapore) to below the level of the late 1930s. Yet, even discounting the
devastating effects on society and economy in the 1940s, it remains a fact that the rewards
for the region from a protracted expansion of foreign trade were deeply disappointing.
Colonialism offered stability, especially for foreign investors, and also ample commercial
opportunities, but it did not encourage structural change necessary for future growth.
Interestingly, however, the situation was no better in the only Southeast Asian country
escaping colonial rule: Thailand.
2500
Singapore Philippines
Malaya Indonesia
2000 Thailand Burma
1500
1000
500
0
1913 1929 1938 1950
Figure 19.8 Per capita GDP in Southeast Asia, 1913–50 (in 1990 US$).
Sources: A. Booth (2007), Colonial Legacies: Economic and Social Development in East and South-
east Asia. Honolulu: University of Hawai’i Press, 22; idem (2015), ‘A Century of Growth, Crisis,
War and Recovery, 1870–1970’, in I. Coxhead (ed), Routledge Handbook of Southeast Asian Eco-
nomics. Abingdon and New York: Routledge, 43–59, Table 3.4; A. Reid (2015), A History of South-
east Asia: Critical Crossroads. Chichester: Wiley Blackwell, 321.
Note: Per capita GDP expressed in 1990 Geary-Khamis dollars.
350
Conclusion: Change and continuity
Income disparities in Southeast Asia today are probably larger than in any other major
region of the world. In terms of GDP per capita, adjusted for differences in purchasing
power, Singapore ranks on par with Luxemburg, Thailand with Brazil, and Indonesia
with Egypt, while Cambodia lags behind at the level of Uzbekistan.34 Nevertheless,
economic development since about 1950 has been truly astounding in the region at
large, considering also that lags in development have more often than not been caused
by prolonged warfare and political strife. The financial crisis that struck in part, yet not
all, of the region in the late 1990s turned out to be a relatively short-term dip, which
even equipped the region to better withstand the adverse effects of the more recent Great
Recession.35 With the benefit of hindsight, could any observer of the situation in earlier
centuries have foreseen the dramatic change in the region’s economic destiny since the
mid-twentieth century?
The most conspicuous historical discontinuity is found in the vein of state formation.
Full-fledged nation states, loosely bound together in the ASEAN context, where first
largely stateless societies and then colonial states lacking national identity prevailed.
Recent state formation by definition rested on political decolonization, accompanied
by a full or partial economic decolonization, and was reinforced by surging population
growth. The ASEAN now has a population 20 per cent above that of the European Union.
A further important discontinuity is in economic structure. The excessive focus
on trading, coupled with some cash crop cultivation prior to colonialism, gave way to
an almost exclusive concentration on food agriculture and deliveries of unprocessed
primary products to the world market. Neither was particularly conducive to modern
economic growth based on high value-added production, at first in manufacturing, and
later in services. At the moment, Singapore is the sole ASEAN member state to have
joined the world’s rank of post-industrial economies.
A third discontinuity worth noting concerns the process of economic growth itself.
The pace of increase in GDP and standards of living has quickened beyond recognition,
although one must not forget that much still needs to be done with respect to unequal
income distributions. The acceleration in growth began at different points in time: in the
1950s for Singapore, Malaysia, and Thailand; in the late 1960s for Indonesia; in the 1990s
for Vietnam and the Philippines, the last at independence ahead of all its neighbours in
the region except Singapore and Malaysia. Time will tell whether this process is repeated
also in Laos, Cambodia, and Myanmar.36
There are also continuities discernible over time that strike the eye. Openness to the
world economy to varying degrees has been a constant factor for centuries in the region’s
economic life, owing to its strategic geographical location of resource endowments as
well as a strong receptiveness to influences from the outside. The strength of the market
forces in trading, both intra-regional and interregional, more than compensated for the
lack of support by strong states in triggering the ‘Age of Commerce’. Colonialism altered
the trading relations, enhancing the exclusiveness of mutual trade with the metropole at
the expense of the wider global connections. Yet, this tendency was reversed during the
351
late-colonial period. Post-colonial developments have seen a revitalization of genuinely

global trade in most, but not all, countries in the region.
A second important continuity may be observed in the spirit of entrepreneurship,
both indigenous and in conjunction with foreign participants, traders, and investors
alike. The most obvious manifestation was again the ‘Age of Commerce’, when the
European trading companies jumped on the bandwagon towards the end of the boom.
It is likely that Western intrusion in the region’s economy had a stultifying impact on the
region’s economic development both in the eighteenth century and under the conditions
of colonial rule in the nineteenth and twentieth centuries.
The discontinuities and continuities in the economic past of Southeast Asia cannot fail
but to underscore the essentially dynamic potential of this region, even if circumstances
have not always been conducive for a full realization of the possibilities. This appears to be
the main lesson to be learned from surveying the changing destinies of an exciting region.
Notes
1. Statistics for 2014 or 2015 from the website of the World Trade Organization (www.wto.org).
For a critical discussion of the concept of purchasing power parity, see A. Deaton and A.
Heston (2010), ‘Understanding PPPs and PPP-based National Account’, American Economic
Journal: Macroeconomics, 2(4), 1–35. I was alerted to this reference by Patrick O’Brien.
2. A. Reid (2015), A History of Southeast Asia: Critical Crossroads. Chichester: Wiley Blackwell,
16, 214, 390.
3. A. Booth (2007), Colonial Legacies: Economic and Social Development in East and Southeast
Asia. Honolulu: University of Hawai’i Press, 196.
4. Reid, A History of Southeast Asia, 6–8. The population figure for 1800 is based on R. E. Elson
(1997), The End of the Peasantry in Southeast Asia: A Social and Economic History of Peasant
Livelihood, 1800-1990s. Basingstoke: Macmillan, 76–7; and A. Reid (1988), Southeast Asia
in the Age of Commerce 1450-1680, Vol. I. The Lands below the Winds. New Haven: Yale
5. V. Lieberman (2003), Strange Parallels: Southeast Asia in Global Context, c. 800-1830, Vol. I.
Integration on the Mainland. Cambridge: Cambridge University Press, 21–66; Idem (2009),
Strange Parallels: Southeast Asia in Global Context, c. 800-1830, Vol. II. Mainland Mirrors:
Europe, Japan, China, South Asia and the Islands. Cambridge: Cambridge University Press,
58–60, 768. The ancient kingdoms were not empires in the common sense of turning into
cohesive systems with a centralized authority.
6. Reid, A History of Southeast Asia, 27–9.
7. A. Reid (1993), Southeast Asia in the Age of Commerce, 1450-1680, Vol. II. Expansion and
Crisis. New Haven: Yale University Press, 13–24, 60, 76; Idem, A History of Southeast Asia,
62–3.
8. Reid, Southeast Asia in the Age of Commerce, Vol. II, 27, 30.
9. Reid, A History of Southeast Asia, 78.
10. Reid, A History of Southeast Asia, 147.
11. Lieberman, Strange Parallels, Vol. I, 6–15; Idem, Strange Parallels, Vol. II, 823–4. The modern
debate about the significance of European trading in Asia was sparked off in 1955 with the
352
English translation of J. C. van Leur’s Ph.D. dissertation in Dutch from 1934. J. C. van Leur
(1955), Indonesian Trade and Society: Essays in Asian Social and Economic History. The
Hague: Van Hoeve.
12. Reid, Southeast Asia in the Age of Commerce, Vol. II, 286–98; Idem, A History of Southeast
Asia, 143–51. It is tempting, yet hazardous, to link the decline in Southeast Asia in the
seventeenth century to the ‘Great Divergence’ debate.
13. Lieberman, Strange Parallels, Vol. II, 841–4.
14. E. M. Jacobs (2006), Merchant in Asia: The Trade of the Dutch East India Company during the
Eighteenth Century. Leiden: CNWS Publications, 290–4. See also J. P. de Korte (2000), The
Annual Accounting in the Dutch East India Company (VOC). Amsterdam: NEHA.
15. Lieberman, Strange Parallels, Vol. II, 862–3. See also M. van Rossum (2015), Kleurrijke
tragiek: De geschiedenis van slavernij in Azië onder de VOC [Colourful Tragedy: The History
of Slavery in Asia under the VOC]. Hilversum: Verloren. The continuity between Portuguese
and VOC taxation procedures was pointed out to me by Catia Antunes.
16. This section deals only in passing with Burma (administered as it was from India and at the
time not recognized to be part of Southeast Asia), and Thailand (that was not subjected to
colonial control).
17. E. B. Locher-Scholten (1994), ‘Dutch expansion in the Indonesian archipelago around 1900
and the imperialism debate’, Journal of Southeast Asian Studies, 25 (1), 91–111. Reports on
the debates in the Dutch-language journal BMGN, 86 (1971) and the BMGN Low Countries
Historical Review, 128 (2010).
18. J. Gommans (2015), ‘Conclusion: Globalizing empire: The Dutch case’, in C. Antunes and J.
Gommans (eds), Exploring the Dutch Empire: Agents, Networks and Institutions, 1600–2000.
London: Bloomsbury, 270–2; Booth, Colonial Legacies, 67–87.
19. Population statistics from before 1900 are proverbially weak. The figure for 1800 is based on
approximations for Thailand, , and British Malaya, and almost certainly too low. In the case
of colonial Indonesia, improvement of statistics may explain a more than fivefold increase for
Java between 1800 and 1900 and a threefold increase for the Outer Islands between 1900 and
1950.
20. J. L. van Zanden and D. Marks (2012), An Economic History of Indonesia, 1800–2010.
London and New York: Routledge, 50–1.
21. On the late-colonial mode of production in the Outer Islands, see J. Touwen (2001),
Extremes in the Archipelago: Trade and Economic Development in the Outer Islands of
Indonesia, 1900-1942. Leiden: KITLV Press, 101–61.
22. G. R. Knight (2013), Commodities and Colonialism: The Story of Big Sugar in Indonesia, 1880-
1942. Leiden and Boston: Brill, 97–135.
23. J. T. Lindblad (1998), Foreign Investment in Southeast Asia in the Twentieth Century.
Basingstoke: Macmillan, 18–19.
24. H. Dick, et al. (2002), The Emergence of a National Economy: An Economic History of
Indonesia, 1800-2000. Crows Nest, NSW: Allen & Unwin, 128–9; Booth, Colonial Legacies,
91, 177.
25. Lindblad, Foreign Investment, 17.
26. Booth, Colonial Legacies, 105–7.
27. Dick, et al., The Emergence of a National Economy, 130.
28. C. P. Kindleberger (1962), Foreign Trade and the National Economy. New Haven: Yale
353
29. Booth, Colonial Legacies, 90.

30. Dick, et al., The Emergence of a National Economy, 124–7, 155; van Zanden, and Marks, An
Economic History of Indonesia, 96–100.
31. Touwen, Extremes in the Archipelago, 163–223; A. Booth (2014), ‘Trade and growth in
the colonial and post-colonial periods’, in A. Schrikker and J. Touwen (eds), Promises and
Predicaments: Trade and Entrepreneurship in Colonial and Independent Indonesia in the 19th
and 20th Centuries. Singapore: NUS Press, 24–7. On Chinese capital in the economy of late-
colonial Indonesia, see A. Claver (2014), Dutch Commerce and Chinese Merchants in Java:
Colonial Relationships in Trade and Finance, 1800–1942. Leiden and Boston: Brill.
32. Booth, Colonial Legacies, 30. The distinction between agriculture and other pursuits is not
always clear-cut since many rural dwellers did some non-agricultural work on the side.
33. Per capita GDP in dollars at 1990 price levels according to adjustment by the Geary-Khamis
procedure. Original data in A. Maddison (2003), The World Economy: Historical Statistics.
Paris: OECD, 180–1, as corrected or supplemented by Booth and Reid in the sources
cited. Regrettably, their figures do not offer corresponding information for Indochina. For
Singapore apart from British Malaya, see I. Sugimoto (2011), Economic Growth of Singapore
in the Twentieth Century. Singapore: World Scientific Publishing, 185.
34. Based on most recent statistical data from databank.worldbank.org.
35. See further, H. Hill (2013), ‘Southeast Asian macroeconomic management: Pragmatic
orthodoxy?’, Masyarakat Indonesia, 39 (2), 459–80.
36. My concern in this contribution is with general characteristics and trends in Southeast
Asia at large. By implication, little attention can be given to the true outlier, Brunei, which
on account of its huge oil reserves enjoys per capita incomes at the level of Norway and
therefore is more comparable with the emirates in the Middle East. Issues of poverty
alleviation and economic development are likely to play an all-important role in Timor Leste,
scheduled to become the eleventh member state of the ASEAN.
354
GLOSSARY
compiled by Karolina Hutková
Abolitionism Historical movement in Western Europe and America demanding the end of
slavery.
Anthropocene is a proposed current geological age, starting in the eighteenth century when
human activities began to have an important influence and impact on the Earth’s climate,
environment and ecosystem.
Assets-Backed Securities (ABS) Also called securitized product or structured credit. ABS are
securities backed by a pool of assets, such as leases, credit card debt, royalties, or receivables.
They are an alternative to investing in corporate debt.
Balance of Payments (BOP) statistical statement of net flows of all financial transaction between
residents of a country and the world in a particular time period. These transactions consist of
imports and exports of goods, services, and capital, and transfer payments such as foreign aid
and remittances.
Black Death Pandemic of pneumonic plague that swept Eurasia. In Europe it peaked in 1347–51
and according to estimates killed 30 to 60 per cent of the European population.
Bill of Exchange An instrument used primarily in foreign trade. It is a written order that binds
one party to pay a fixed sum of money to another party at a fixed time or on demand.
Bretton Woods System System for monetary and exchange rate management established in
1944 by the Bretton Woods Agreement. The Agreement was signed by forty-five, including
the United States, Canada, Australia, Japan, and several Western European countries. The
Agreement established the US dollar as reserve currency, fixed the US dollar to gold and
compelled signatories of the Agreement to peg their currencies to the US dollar. The Agreement
also established the International Monetary Fund (IMF) and the World Bank (WB) group. The
key role of the IMF was to bridge temporary imbalances of payment.
California School The work and scholarly interventions of global historians such as Kenneth
Pomeranz and Roy Bin Wong originally based at the University of California, Irvine and UCLA
focusing on the Great Divergence between Western Europe and China.
Clearing Bank A ‘bank for banks’, it uses a central clearing house to transfer credits and checks
between banks. The role of a clearing house is to facilitate exchange.
Colbertism Form of mercantilism pursued by Jean-Baptiste Colbert (1619–83), French minister
of finance under Louis XIV. The core principle of Colbertism was state intervention into
economy with the aim to accumulate gold. The goals of the economic policies were to achieve
a positive balance of payments, impose protective tariffs, support to domestic industry, create
systems of controls and inspection, and increase taxation.
Columbian Exchange The process of transfer of plants, animals, diseases, populations, and
technologies between the Old World and the Americas in the fifteenth and sixteenth centuries.
Commodity Chain Network of labour and production processes whose end result is a finished
commodity.
Corn Laws Tariffs and restrictions on imports and exports of food and grain in place in the
United Kingdom and repealed in 1846.
Cosmology System of beliefs about the nature of the universe internal to a certain culture or
religion. Modern physical cosmology is a branch of physics that studies the origin and
evolution of the universe.
Glossary
Credit Default Swaps (CDS) Most widely used credit derivative, it is used to transfer risk
associated with investing into a bond from one party to another without transferring this bond.
CDS is a financial swap agreement that forms an insurance against default risk.
Developmental State Type of state that takes an active role in development planning to facilitate
the transformation from agrarian to modern manufacturing economies, typical for Asia
after the Second World War. The legitimacy of the developmental state stems from achieving
economic growth and improvement of living standard. The state is also committed to solving
problems that arise as the outcome of social and economic restructuring.
(Niebor-) Domar Model Hypothesis explaining the causes of agricultural serfdom and slavery.
It assumes that land and labour are the only factors of production, land is of uniform quality,
location is ubiquitous, and marginal productivity of labour is constant. The hypothesis asserts that
free land, free labour, and non-working landowners (i.e. large-scale agriculture) cannot all exist
simultaneously. Only two can exist at one time and the combination depends on political factors.
Dutch Disease Negative economic impacts associated with large inflows of foreign currency.
Foreign currency inflows lead to the appreciation of domestic currency which makes domestic
products less competitive on exports markets. Dutch disease is often connected to discovery
of natural resources.
Dutch East India Company (VOC) Dutch chartered monopoly company founded in 1602. It
is normally considered the first listed public company. The Dutch government granted the
company the monopoly on trade between Cape of Good Hope and the Straits of Magellan.
By the eighteenth century the VOC became an important colonial power controlling the
Indonesian archipelagos. High level of debts and corruption led the Dutch government in 1799
to revoke the VOC’s charter and to take over the VOC’s debts and possessions.
Enclosure Process of enclosing English open fields and common land to create units of privately
owned land. Enclosure was legislated by the Enclosure Acts between 1604 and 1914.
English East India Company (EEIC) English Joint-stock monopoly company incorporated
by royal charter in 1600. Initially it started as trading body but became an agent of British
imperialism. After defeating the Indian powers at the Battle of Plassey (1757) it took control
over Bengal and gradually increased its territorial possessions in India. The EEIC’s trading
monopoly was removed by the 1833 Government of India Act; however the Company
continued to have administrative and political control of India until 1857.
Euromarkets Markets for transactions in dollars taking place outside the United States, free of
American regulations.
Export-led Industrialization Also known as ‘export-promotion industrialization’, economic and
trade polices focusing on promoting exports based on a country’s comparative advantage. In
general, export-led industrialization relies on the reduction of tariff barriers, floating exchange
rates, and subsidies to exporters. This strategy was implemented in post-Second-World-War
Japan, South Korea, Taiwan, Hong Kong, and Singapore.
Factor Endowments The amounts of land, labour, capital, and level of entrepreneurship a country
possesses.
Factor Prices The price at which means of production – land, labour, and capital – are sold.
Foreign Direct Investment (FDI) Investment made by an individual or company to acquire 10
per cent or more of shares or voting power in enterprises operating outside of the economy of
the investor.
Foreign Security Security, that is, shares, stocks, bonds, debentures issued in a currency other
than the home country of issuer.
Ghost Acres Term popularized by Kenneth Pomeranz. It refers to the agricultural land of the
Americas that enabled Europe to overcome the Malthusian trap of diminishing marginal
returns to land. The Americas supplied Europe with commodities and foodstuffs such as sugar,
timber, and cotton used both as industrial inputs and final consumer products.
356
Glossary
Global Value Chain (GVC) Series of activities performed by firms and workers in the production,
distribution, and sale of a product or service. Different stages of the processes of production,
distribution, and sale are normally located across several countries.
Glorious Revolution English political change of 1688 in which the English Parliament overthrew
King James II and offered the Crown to William III of Orange and his wife Mary II. The
Revolution led to fundamental redesigning of governmental and fiscal institutions, constrained
the power of the monarch and gave controlling powers to Parliament.
Gold Standard Monetary system in which participating countries agree to fix the prices of their
domestic currencies to a fixed quantity of gold.
Great Divergence Term popularized by Kenneth Pomeranz, referring to the economic divergence
between the West and the rest of the world that coincided with the Industrial Revolution.
Gross Domestic Product (GDP) GDP is used for measuring the size of a country’s economy. It
is the value of final goods and services produced within a country in a specific period of time,
normally a year.
Guild Professional body of artisans or merchants organizing and regulating the practice of a craft
or trade. In early modern Europe guilds were common and often had political power.
Holocene Current geological epoch, starting approximately 12,000 years ago.
Horizontal Integration Process of acquisition or merger of companies operating at the same
stage of production in the same or different industries.
Import-Substitution Industrialization Economic and trade policy whose objective is to replace
imports with domestically produced goods. It relies on a set of policies: active industrial
policy with subsidies for strategic sectors; protective barriers to trade; overvalued currency to
help manufacturers import capital goods; and restriction on foreign direct investment. This
development strategy was pursued particularly in Latin America in the 1950s and 1960s as well
as in several Asian and African countries.
Indentured Labour Indentured servants or labourers are employed by a contract to work for a
specified time for an employer. Indenture contracts were typically entered into in order to meet
a legal obligation, such as debts bondage, or to pay for a service – this was a typical way for
European workers to finance a passage to America.
Industrious Revolution Concept first proposed by the Japanese demographic historian Akira
Hayami and popularized by the Dutch/American economic historian Jan de Vries. It is a
process of reallocation of household resources characterized by increased demand for market-
supplied goods in the period 1600–1800. Since wages stagnated or even declined during this
period, households needed to supply more labour to the market. This was usually female or
children labour. Consequently also the supply of market goods increased.
Joint-Stock Company A type of a business company that is owned by shareholders through
stock. This type of business entity emerged in early modern Europe to support long-distance
trade. Early modern joint-stock companies were given monopolies on trade with specific world
regions. The best-known joint-stock companies were the English East India Company and the
Dutch East India Company.
Laisser-Faire Policies Policy of minimum government intervention. It is based on the assumption
of ‘natural’ self-regulation of markets and faith that unregulated individual activity will achieve
the best results for society as a whole.
Malthusian Theory Theory of population proposed by the English cleric and scholar Thomas
Robert Malthus (1766–1834). According to Malthus human populations grow at an exponential
rate while food production grows at an arithmetic rate. Population growth is limited by
‘preventive’ checks such as the postponement of marriage or celibacy, and by ‘positive’ checks
such as war and famine.
Mercantilism An early modern doctrine of political. Mercantilism never had clearly defined
policies and therefore is interpreted in different ways. In the most popular sense, mercantilism
357
Glossary
was a state policy focused on achieving a positive balance of payments on trade. Mercantilism
often advocated import-substitution policies.
Mortgage-Backed Securities (MBS) Type of asset-backed security secured by a mortgage or
collection of mortgages.
Old Regime Or Ancien Regime – political and social order of Europe from the late Middle Ages
to the French Revolution based on the power of absolute monarchy and on relatively fixed
social hierarchies.
Open Access Social Orders Social systems with open entry into social and political organizations.
In such system, social order is sustained through political and social competition.
Political Economy Discipline of the social sciences that studies both political and economic
factors that shapes society, state, and markets.
Poor Laws Body of legislation governing poor relief in England and Wales. They were developed in
the sixteenth century and reformed regularly over the following centuries. The Poor Laws provision
was administered through parishes. From the seventeenth century workhouses, places offering
employment and accommodation to the destitute, became an important part of the system.
Prebisch-Singer Thesis Thesis that posits that over the long period the price of primary
commodities declines relative to the price of manufactured goods. This is caused by the low
elasticity of demand for primary commodities (demand for them does not increase with
income). It implies that the terms of trade for countries specialized in exports of primary
commodities deteriorate over time.
Price Elasticity of Demand Percentage change in demand for a product after a change in the
price of this product. If the quantity of demanded product considerably changes in response to
its price change, the product is price elastic.
Primary Commodities Raw or unprocessed materials, according to OECD definition: food and
live animals, beverages and tobacco, and crude materials.
Proto-industry Pre-modern system of rural manufacturing widespread especially in European
textile production. Primary production units were households, production was organized by
merchants who provided raw materials and sold final goods on national and international
markets.
Putting-out System of production in which merchant-entrepreneurs provide (‘put out’)
material to rural households to produce goods taking advantage of low wages in rural areas.
This system of subcontracting was particularly common in the pre-modern European textile
industry.
Schumpeterian Growth Economic growth driven by innovations which are the outcome of
creative destruction. ‘Creative destruction’, a term coined by Joseph Schumpeter, is a process of
industrial transformation. It identifies product and process innovation mechanisms by which
new replaces old and outdated practices, products, and so forth.
Serfdom Legal and economic system in which tenant farmers are bound to land by their landlord,
typical of medieval Europe.
Smithian Economic Growth Growth that results from increasing density of markets.
Stock Type of security that is based on the fractional ownership of the corporation. Stocks are of
two types: common and preferred. The holder of common stock is entitled to vote on corporate
decisions. The holder of preferred stock does not have this right but is entitled to a certain level
of dividend payments before any dividends can be issued to other shareholders.
Structural Adjustment (SAPs) Set of economic polices introduced as a condition to qualify for
IMF and WB loans. The goal of SAPs was to reduce fiscal imbalances of borrowing countries
and make their economies more market oriented. SAPs put emphasis on free market policies of
privatization, fiscal austerity, elimination of trade barriers, and deregulation.
Tacit Knowledge The opposite to formal, codified or explicit knowledge. Tacit knowledge is
knowledge embedded in a person and can be acquired only through personal experience and
social contact.
358
Glossary
Terms of Trade The ratio between the index of export prices and the index of import prices. It
is used as a measure of country’s economic health. If country’s terms of trade are improving it
means that it can buy more imports for every unit of exports.
Transaction Costs Costs incurred in market exchange and in overcoming market imperfections.
They are search and information costs, bargaining and decision costs, and policing and
enforcement costs. High transaction costs can prevent market exchange.
Triangular Trade Trading system operating between West Africa, the Caribbean and Europe
exchanging slaves, primary commodities and manufactured goods.
Useful and Reliable Knowledge Knowledge of natural phenomena linked to technology and
technology advancement. It can be seen also as a pool of best-practice knowledge
Vertical Integration Process in which firm acquires further stages of the same production path,
such as when a manufacturer acquires its supplier and/or distributor.
‘Wimbledon Effect’ British financial institutions and the City of London’s dependence on foreign
banks.
World-Systems Theory Or World-System Analysis, is a macro-scale approach to the study of
global and world history first developed by the sociologist Immanuel Wallerstein. It emphasizes
the emergence of a world economic system and analyses the power structures and relations
between different world areas.
359
INDEX
Abu-Lughod, Janet 140, 151 regulation of fertility 85

‘active consumer’ 119 rice farming 197
Africa silver in 279–81
agricultural and labour productivity 256–8 social structures 85
agricultural techniques 254 Spanish American silver in 272
economies with external markets 257 trading networks 198
emergence of capitalist institutions 260–4 Asia-Pacific Economic Cooperation (APEC) 205
enslaved people 105, 141, 259 Association of South East Asian Nations
external trade 258, 259–60 (ASEAN) 337, 351
Industrial Revolution 260 Atlantic slave trade 104, 107, 258–9, 264
institutional patterns 254–5
intercontinental biotic exchanges 158 Bacon, Francis 73
labour-extensive path of Bagchi, A. K. 328
development 256, 260 Baines, Edward 28
labour markets and tax 92 Bairoch, P. 143, 146
land-extensive techniques 254, 255–6 Baltic Exchange 232
period and agency in history 251–3 Bank of England 232, 280, 281
resources 253–4 Barbados
slave trade in 148, 258–9, 262, 264–5 labour organization 105
‘Age of Commerce’ 337–8, 339, 340, 341, 351, 352 plantation system 107, 108
agrarian fundamentalism 23, 31 Baring crisis 151, 230
alchemists and astrologers 58 Battle of Plassey (1757) 307
Allen, Robert 9, 22, 27, 123, 131 n.33 Bayly, C. A. 3, 122, 144, 145, 151, 322
America. See United States Becker, Gary 125
American banks 239 Beckert, Sven 217
American Civil War (1861–5) 166, 324, 329 Berg, Maxine 76
American Revolution 111, 118 Bianchi, Marina 119
Amerindians and diseases 158, 159 'Big Bang’ 240
Anthony, David 71 ‘Big Five’ 236
Anthropocene 169–71 big push industrialization 195
Anti-Peonage Act (1867) 188 biogeochemical cycles 169
apprenticeship contract 89, 182 Black Death 47, 85
archaic globalization 122 Blackstone, William 184
‘archaic system’ of exchange 144 Boxer Rebellion (1900) 292
Archimedes 57 Braudel, Fernand 5, 40, 87
Aristotle 55, 57 Brenner, Robert 32
artisanal knowledge 27 Bretton Woods system 224, 240
ASEAN-4 countries 204, 205 Britain. See also Industrial revolution
Asia American plantations in 109–10
agriculture and watermills in West 70 cooking practices 127
divergence between Europe and 22–6 cotton imports 112
Europe's trade with 140–1 economic growth 44, 46–8, 107, 146
family firms in 84 exporter of capital 230
industrialization in 195–6, 210–12 first development plan for Africa 261
intellectual engagement 59 and foreign trade 146, 231
intercontinental biotic exchanges 158 imports 143
microelectronics technology 204 income levels in 110
Index
industrialization 28, 114 education in 60–1

labour contracts and public order in 176–80 and Europe 23, 25, 39
level of patenting 73 excess consumption of goods 119–20
luxury goods from Asia 76 export surpluses 30
merchandise export 138, 140 factory production 293
plantation system and Great Divergence 104 failure of political institutions 38
products and goods 328 females and fertility 85
supplier of cotton textiles 22 foreign trade 293
supported planters 113 GDP 198, 289–90
transoceanic trade 114 guilds 88
British Empire 149, 183, 220, 234, 237, 303, 319, Han Chinese in 288
321, 323–4 import-substitution industrialization 200
Broadberry, Stephen 23, 24, 40, 48, 51, 328 Indian opium to 288
Buchanan, Francis 24 industrialization of 168
budgets and probate inventories 125–6 invention and innovation 68
Bundesbank 240 Japan's relationship with 296
Burke, Edmund, III 68, 69 and late Ming 61, 62, 76
Burnard, Trevor 271 lineage-based businesses 87
Butterfield, Herbert 55, 59 living standards and human capital 290
buyer-driven global commodity chain 219 Mao period 204
meritocratic system 60
Cain, P. J. 149 ‘most advanced’ regions of 39
‘California School’ 32, 38, 40, 54, 330 Neo-Confucian texts in education 60
Cambridge History of Capitalism 7 population growth 85
capital export 230, 234–5 printed books in 76
capitalism 5, 20, 31 under Qing dynasty 61, 75, 76, 288,
European 311, 312 289, 291–2
industrial 217 secondary education 60
institutions 260–4 silver and 141, 277
slavery and 113 under Song dynasty (960–1279 CE) 60,
war 217 170, 290
capital markets 26 technical knowledge 67
captive linkages 222 technological advances in 62, 67
captive market 149–50 textile producers 22
carbon dioxide 170 transport development 294
Caribbean wage and price data 29
land cover change in 163 water problem 210
sugar plantation in 216 and Western knowledge 61, 62
Carnatic 321 Yangzi Delta farming 22–3
cassava 161, 258 Christian, David 140
Catastro de Ensenada 278 Christianity 57
catch up industrialization 195 European 55
Chamber of Mines of South Africa 224 nature in sacred texts 57, 58
chartered companies 87 Cipolla, Carlo 40
Chicago Board Options Exchange 241 Citigroup 243
China City of London 231, 232, 239, 240
agricultural wages in 35 n.19 city states 91–2
capital markets in 26 Clapham, John 28
coal deposits 21 Clark, G. 145
coal use in 170 clearing banks. See joint-stock banks
code of Nature laws 63 Clingingsmith, D. 328
commercial ports 199 clover 172 n.11
consumption of own products 120, 121 coal
damage by imperialism 36 n.38 deposits 21
divergence debate in 30–3 use 170
economic change in 291–2, 294–5, 297 Coal Question (Jevons) 28
361
Index
Cobden-Chevalier treaty (1860) 143 Deutsche Überseeische Bank 233

coffee production 217 Diamond, Jared 68, 69, 72
Columbian Exchange 158, 159, 160, 161, 162, diseases, Amerindians and 158, 159
164, 165, 172 n.11, 304 Domar’s model 175
commercial bank 232, 240 Drescher, Seymour 175
Commercial Revolution 145 drug crops 160
'Commodities of Empire’ 216 Dupré, Sven 71
commodity chains 218–21 Dutch. See Holland
Comptoir d’Escompte 232 Dutch disease syndrome 150, 156 n.62
consumer choice 119 Dutch East India Company. See Vereenigde
consumer revolution 125, 307 Oostindische Compagnie (VOC)
consumption 118, 307 Dutch Revolt 89
economic history of 122–3, 126–7
‘Great Divergence’ and 119–22 East Asia. See also China; Japan
of luxury goods 118 definition 287
contract of engagement 182 economic change in modern 291–5
contrat de travail 187 in Japanese Empire 295–7
Cook, Harold 71 in seventeenth to nineteenth centuries 287–90
cooking practices and coal 127 trading networks 198
coolie labour 346 East India Company (EIC) 87, 94, 121, 127,
Copernicus 56 148–9, 151, 198, 280, 281, 288, 306, 321,
Corn Laws (1860) 143 322, 323
cosmography 54, 55, 56, 57, 62 ecological relief 21–2
cost of living 124 ecological teleconnections 165, 167, 168
Cottereau, A. 180 economic growth and development
cotton British 44, 46–8
demand for 166 Dutch 41–4
imports 112, 128 family and 84–6
Indian 128, 129 institutions in 83
printed 132 n.57 liberalization period 138
production in United States 106, 284 n.18 plantation system 104–6
textile consumption 127 polycentric rule 93–4
craft guilds 88 trade and 137, 145–7, 154 n.38
Crafts, Nick 145 economic history 1–2
Crédit Lyonnais 232 Chinese 31
credit markets 88 pre-modern era 54
Crosby, Alfred 158, 162 economic organization 85
crowd diseases 158 education, Chinese 60–1
cupellation 272 ‘efflorescences’ 41
Curtin, Philip 151 Elman, Ben 59
Elvin, Mark 54, 75
David Daokui Li 23 Engerman, S. W. 113, 146
Davis, John 218, 226 n.9 engine science 69
Davis, Ralph 145 England
Deane, Phyllis 145 demographic decline 47
Deaton, Angus 156 n.62 Dutch agricultural techniques 48
Decker, Michael 70 economic growth 107
deforestation 163 ‘engine science’ 69
de-industrialization 150, 328–9 fiscal-military state in 108
Delong, Brad 169 growth of colonial trade 107–8
Deng, Kent 23, 29 and India 24
de Plijt A. M. 40 market share from Holland 47–8
Deutsch-Asiatische Bank 233 naval wars with Holland 53 n.17
Deutsche Bank 233, 239 royal power in 93
Deutsche Termin Börse (DTB) 241 silver/gold ratio in 280
362
Index
technological innovation 78 political economy 311–14

transformation of labour 186 population patterns 85
transoceanic trade 112 potatoes in 160–1
wealth of British America vs. 111 probate inventories 125
English Civil War 108 public finance 26
Epicurus 57 raw materials import 146
Euclid 57 role in global economy 303
Eurasian system 140 science and knowledge systems 27–8
Euro-Atlantic centrism 271 science and religion 55
Eurobond market 238–9 supported discovery voyages and intra-
Euro credit 239, 243 continental exploration 58
Eurodollar market 238 tariffs and import ban 142
Euromarkets 238, 239 technical development 67–8, 76, 77
Europe 54 trade and imports 120, 304–5, 307, 308
African slave trade and 149, 304 trade with Asia 140–1, 304–5
appeal of Asian commodities 121 urban interests 94
Central 300–1 ventures of seafarers 74
chartered and joint-stock companies 87 European Marriage Pattern (EMP) 84–5
Christianity 55 exotic goods 121, 127
circulation of technical knowledge 76 export-oriented industrialization 142, 146, 204,
commerce and silver trade 272–3, 205, 213 n.22
277, 279–81
commercial revolution 40 factor market
conception of educated and wealthy elites 57 effects 151
conflict between ‘ancients and moderns 58 integration 150
craft and merchant guilds 88–9 factor prices 72
cultural change 55 family and economic development 84–6
culture and exotic goods 127 ‘family economy’ 84
definition 316 n.1 family firms 84, 86–7
divergence between Asia and 22–6 family-owned private banks 231
during early Middle Ages 72 family systems 85–6, 95
economy 20–1, 38, 56, 299–300, 301, 302 financial crisis
embrace of new knowledge 54 of 1873 143
financial centres 233 of 2008 244
GDP growth in northwest 40 financialization 244
and globalization 303–9 Financial Modernisation Act 240
imperialism 162 Findlay, Ronald 148
indentured servants 183 first age of globalization 138
Indian cotton and 128 first modern globalization (1850–1914) 229–34
individualist behaviour in Western 84 First Opium War (1839–42) 307
industrialization 38, 309–11 First World War 138, 152, 234–5, 314
inequality 123–4 fiscal capacity 91, 92, 93
intrusion in Indian Ocean 148 fiscal-military state
investigations in natural philosophy 58 Europe and 313
liberalization period of economy 138 plantation system and 107–8
living standards 123 Flynn, Dennis 6, 141
luxury expenditure in 118 Fogel, Robert W. 113
mixed farming system 210 forced free trade 200
modern economic growth 309–11 Forced Labour Convention (1930) 263
‘most advanced’ regions of 39 foreign direct investment (FDI) 346–7
natural philosophy in 55, 57, 58–62 foreign loan 231, 232, 237
Northern 301 fossil fuels 165, 170
Northwestern 300, 307 Foundling Hospital, London 126
overseas colonization 27, 38, 308 Fourth Anglo-Dutch War (1780–4) 343
patents for invention 73 France
363
Index
capital export 230 Goody, Jack 68

labour norms in 176 Gordon, Robert 67, 68, 74
plantation and economic growth 103 Graeco-Arabic translation movement 71
servants 180–1 The Grand Tour (Nugent) 77
trade unions in 187 Great Acceleration 170
Frank, Andre Gunder 5, 38, 67–8, 69, 120 Great Depression 152, 237, 244, 293, 297,
Frankema, Ewout 261 308, 314
Franklin, Benjamin 109 ‘Great Divergence’ 2, 7, 19–33, 307, 308, 330
free labour 177, 260, 262 and consumption 119–22
free trade 143 contribution of science 27–8
French Revolution 28, 180 debate in China and India 30–3
Europe and Asia 22–6
Galen 55, 57 national accounts for Britain and
Gee, Joshua 109, 113 Holland 39–41
Gereffi, Gary 219 plantation system and 104
Germany 138, 140, 233, 236 problem 38–9
‘ghost acres’ 28, 102, 110, 113 quantitative data 29–30
GINI coefficient 214 n.39 role of institutions 26–7
Giráldez, Arturo 6, 141 structure vs. conjuncture 20–2
Glahn, Richard Von 32 in technology 75
Glass-Steagall Act (1933) 240 ‘Great Specialization’ 308
global commodities Greif, Avner 84
and commodity chains 218–21 Gross Domestic Product (GDP) 23, 39, 42–4,
critiques 225 46–7, 50, 53 n.21, 117 n.46–7
global value chain (GVC) 221–4 Guha, Ranajit 323
histories 215–18 guilds 90
global commodity chain (GCC) 219–21, 225, 226 Gupta, Bishnupriya 24, 328
global exchange system 140 Gutas, Dimitri 71
global finance gutta-percha 166–7
first modern globalization Gyranthera caribensis 164
(1850–1914) 229–34
innovations and deregulations Habakkuk, John 145
(1973–2000) 240–4 Habib, Irfan 31, 123
overview 229 Habsburg Empire 300–1
wars and depression (1914–73) 234–40 Haitian Revolution 162
Global Financial Centres Index 243 Hammond, James Henry 112
globalization 6–7, 145, 303–9 Hanhui Guan 23
agricultural stagnation 332–4 Harley, C. Knick 109
de-industrialization 328–9 Haute Banque 232
divergence 328–32 Headrick, Daniel 75
hard 145 hedge funds 241
measures 324, 326 hedonic indices 119
soft 145 Herbst, Jeffrey 263
global science 27 Hersh, Jonathan 271
global trade 153 n.9, 307–8 hierarchical linkages 223
reconfiguration 143–5 High Admiralty Court 279
shape and scale 137–8, 140 highly performing Asian economies (HPAEs) 337
shift in 147 Higman, Barry 105
global value chain (GVC) 221–4, 225, 226, 227 Hippocrates 55, 57
n.23, 228 n.28 Hobsbawm, Eric 28, 29, 123
Glorious Revolution (1688) 113, 184 Hobson, John 68
gold 215–16, 218, 220, 223–4 Hoffman, Philip 124–5
Goldberg, Ray 218, 226 n.9 Holland
Gold Control Act (1963) 224 economic growth 41–4
‘Golden Age’ 41, 42 and England 47–8, 53 n.17
Goldstone, Jack 32, 38, 54, 68, 78 imperialism 344–5
364
Index
maritime power consolidation 148 wood shortages 21

plantation in Europe and Southeast Asia 107 industrial capitalism 217
Holocene 169 Industrial Enlightenment 68, 78
Holy Roman Empire 300 industrialization 146, 151
Homogenocene 158 Asian 210–12
Hong Kong 242, 243 big push 195
Hopkins, A. G. 149, 252, 261 catch up 195
Hopkins, Terence 218 of China 168
Horden, Peregrine 70 European 38, 309–11
Horn, Jim 110 export-oriented 142, 146, 204, 205, 213 n.22
Horrell, Sarah 123, 125 and global trade 143–5
Hotten, Jean-Baptiste 103 and ‘industrious revolution’ 125
Houphoet-Boigny, Felix 263 initial conditions 197–8
House of Morgan 235 labour-intensive 196
Huang, Philip 32 local-resource 196, 209–10
Hudson, Pat 108 in monsoon Asia 195–6, 198–203
Hudson’s Bay Company 149, 305 plantations and 112–13
Human Development Index 205 post-war diffusion of 203–6
Humphries, Jane 123, 125 resource-intensive 206–9
Hundred Days’ reform (1898) 292 Industrial Revolution 8, 20, 28, 40, 67, 68, 72, 76,
Hunt, Lynn 127 78, 83, 103, 107, 112, 113, 122, 145, 165–8,
211, 260, 330, 331
imperial benefits 109–12 industrious revolution 121, 122, 125, 126,
imperialism 162, 296 179, 307
import-substitution industrialization 200, Inikori, Joseph 258
202, 204 institutional economics 83
incentive-punishment mechanism 149 ‘institutionalization of innovation’ 75
income per capita, population and 41–2, 47 intercontinental biotic exchanges 158–62
indentured immigrants intercontinental trade 140, 141, 198, 303–4,
vs. slaves 182–4 317 n.17
after abolition of slavery 184–6 international capital flows 229, 230
independent contractors 186 international financial centres 233–4
independent workers 187 International Labour Organization 261, 263
India International Monetary Fund (IMF) 238, 241, 253
British East India Company and 148 intra-Asian trade 195, 200, 202, 203
circulation of technical knowledge 76 investment banks 232, 233, 236, 239, 240, 242, 243
colonization of 331–2 Ironmonger, Duncan 119
diet 123 Islamic world
divergence debate in 30–3 crops and farming techniques 70
and Europe 25 printing press and handwritten word 72
export surpluses 30 technological complexes in 68, 69
indentured contracts in 1916 188
labourers in 24 J. P. Morgan 236
labour-intensive industries in 196 Jacob, Margaret 27
living standards 332 Japan
Marx and 20 capital markets in 26
merchants and bankers in eighteenth commercial ports 199
century 322 economy 292, 295
relied on skilled services and capital 150 excess consumption of goods 120
silver and grain wages 24, 330 imperialism 296, 297, 298 n.20
standards of living in 23–4 import-substitution industrialization 202
textile exports 321, 324, 326 industries in 294, 298 n.19
textile market 328 labour-intensive industrialization 200
textile producers 22, 329 Meiji modernization programme 296
Third Five-Year Plan period 204 modernization 295
use of tube wells 210 relationship with China 296
365
Index
resource-intensive industrialization 206–7 wages and 123, 124

silver output 272 Locke, John 184
Tokugawa 289 ‘locked country policy.’ See sakoku
traditional family structure 85 Lockyer, Charles 123, 280
Jevons, William Stanley 28, 118 London as financial centre 235
Johannesburg stock exchange 223–4 London gold market 218, 221
joint-stock banks 231, 232 London International Financial Future Exchange
joint-stock trading companies 87, 96 (LIFFE) 241
Jones, Eric 19, 21, 28, 74 London Metal Exchange 232
London Stock Exchange 232, 240
Kaufsystem 312 Long Term Capital Management (LTCM) 241
Kindleberger, Charles P. 349 Low Countries - see Holland
King, Gregory 107 luxury goods
Korzeniewicz, Miquel 219 vs. staple foods 124
Kozul-Wright, Richard 143 consumption 118, 119
Kuznets, Simon 265, 294 prices 124
Laborde, Jean-Joseph 103 McCants, Anne 132 n.45

labour McCloskey, Deirdre 145
abolition of slavery 184–6 MacLeod, Christine 72
agricultural 180–1 macro-inventions 74
coercion 175–6, 257, 260 Maddison, Angus 25, 169, 289
contracts and public order in Britain 176–80 Magellan Exchange 158, 162
force in silver mining 274 maize 161
great transformation in twentieth malaria 163
century 186–7 Malthusian constraints 41, 84, 85, 110, 113
indentured immigrants vs. slaves 182–4 Malthusian equilibrium 47, 330
industrial 181 Malthusian threats 54
markets and tax 92, 312 Manila Galleon 277
migration 187–9 manioc. See cassava
norms and regulation in France 176, 180 Mann, Julia de Lacy 22
organization 105 Mantoux, Paul 28
labour-extensive path 256 maps 58
labour-intensive industrialization 196, 197, Marché à Terme des Instruments Financiers
200, 210 (MATIF) 241
Lancaster, Kelvin 119 Marglin, Stephen 29–30
Landes, David 19, 21, 25, 28, 67, 75 market linkages 222
land-extensive techniques 254, 255–6 Marks, Robert 32
land rights 255 Marquis of Pombal 107
Latin America, silver production in 273–6 Marx, Karl 1, 20, 38, 322
Lee, James 32 Marxism 1, 31, 33, 263
Lemire, Beverly 126 Master and Servant Acts 177, 178, 179
Leontief, Wassily 226 n.9 Mediterranean 70, 72
Le Roy Ladurie, Emmanuel 95 Meiji modernization programme 296
Lewis, Michael 70 Menard, R. 183
liberalism 143, 152 mercantilist policies 94, 142, 313
liberalization 138, 278 merchant banks 231, 232
Li Bozhong 31, 32 merchant guilds 88
Li Hongzhang 291 meritocratic system 60
lineage, concept of 87 Merton, Robert 241
‘Little Divergence’ 40, 44 Middle East
living standards 25–6, 122, 132 n.45 family firms in 84
European 123 Islamic law and business practices 87–8
and human capital in China 290 social structures 85
in India 23–4, 332 migration and factor market effects 151
366
Index
mining 274 Pacific War (1941–5) 289

Ministry of International Trade and Industry 207 Paris 103, 236, 242
The Mint 281 Parthasarathi, Prasannan 19, 20, 21–2, 23, 24, 27,
Mintz, Sydney 216, 217 31, 68, 75, 76, 120, 332
modern economic growth 41–2, 47, 294 Pascali, Luigi 153
modern imperialism 148 patents 73
modern management methods 105, 106 Pearl River delta 208
modern science 56 pepper trade in Southeast Asia 339–40
modular linkages 222 Permanent Settlement 323
Mokyr, Joel 8, 27, 54, 68, 77, 78, 145 peso de a ocho 285 n.44
monotheistic Christendom 55 Piketty, Thomas 123
monsoon Asia, industrialization in 198–203 plantation system
Morgan, Philip 110 in America 102–3, 163–5
Morineau, Michel 281 and economic growth 104–6
mortgages 241 and fiscal-military state 107–8
Mowery, David 74 and Great Divergence in Britain 104
Mukhia, Harbans 31 and industrialization 112–13
Mundell-Fleming’s trilemma 240 modern management methods 105, 106
Mysore 24 and slave trade 104
Plato 55, 57
Napoleon Bonaparte 280 Plebeian families and cotton clothing 128
National City Bank 233, 236 Plessis, Alain 232
Natives Lands Act (1913) 263 Pliny 57
natural philosophy 55, 57, 58–62 Poincaré, Raymond 236
Nature laws, code of 63 Polanyi, Karl 174 n.36
Needham, Joseph 54, 55, 59, 63, 67, 75 political philosophy 60
Nef, John 28 political structures 91
neo-Africa 162 politics, trade and 147–51
Neo-Confucianism 60 polycentric states 93–4
men educated in philosophy 61 Pomeranz, Kenneth 2, 6, 19, 20, 21, 22,
ruling ideology 292 26, 27, 28, 32, 38, 39, 54, 68, 86,
neo-Europes 162 102, 106, 110, 119, 120, 121,
Netherlands. See Holland 146, 271
New Poor Law (1834) 177, 186 population and income per capita 41–2, 47
New York 233, 236, 238 population statistics 353 n.19
New York Stock Exchange 232, 240 port cities, maritime trade and 151
Nieboer-Domar hypothesis 257 Portugal 107
‘non-competing’ good 154 n.25 Postlethwayt, Malachy 109, 113
North, Douglass 6, 19, 21, 83 potatoes 160–1, 172 n.11
North America Censuses - pre-modern 39
British 109–10 Knowledge - prescriptive 76, 78
horses in 159 Price Waterhouse 232
population increase in 109 Priestley, Joseph 63
Nugent, Thomas 77 producer-driven global commodity
chain 219
O’Brien, Patrick 7, 8, 23, 27, 29, 108, 146, 147, 273 property rights 96
Offer, Avner 119 protection 73, 312
Opium War (1842) 289, 306 to taxation 91
Ordinance of Labourers 177 Knowledge - propositional 76, 78
O’Rourke, Kevin 7, 145, 148, 283 n.11 protestant refugees from France 48
orphans and thieves 126 proto-industry 84, 312
Oshima, Harry 197 Ptolemy 55, 57
Ottoman Empire 38, 72, 88, 91, 92, 259, 299, public finance 26
306, 307 Purcell, Nicholas 70
overseas banks 231, 232, 237 Purchasing-Power-Parity (PPP) 213 n.19
367
Index
Qing constitutional movement (1903–11) 292 slaves

quebracho tree 167 indentured immigrants vs. 182–4
on plantations 104–5
Raychaudhuri, Tapan 123 trade 104, 113, 141, 147–8, 159, 161, 183, 262,
Reid, Anthony 337–8 264–5, 304
relational linkages 222 Smith, Adam 51 n.1, 89, 121, 149, 271,
Republic of Letters 56 281, 282
resource-intensive industrialization 206–9, 211 soil science 266 n.13
The Restoration 184 Solow, Barbara 104
Richards, Paul 257 South Asia. See also India
Riello, Giorgio 132 n.57 British Empire and economy of 323–4
Roman Catholic Church 55, 57 definition 319–20
Rosenberg, Nathan 75 eighteenth-century transition 321–3
Rostow, W. W. 145 Europeans in trade 320–1
globalization 324, 326, 328–34
Saint-Domingue 103–4 South Asian Association for Regional
sakoku 306 Cooperation 319
salted cod 217 Southeast Asia 354 n.36
Schofield, R. S. 175 change and discontinuity 351–2
Scholes, Myron 241 colonialism in 344–5, 347, 350
science economic growth and structure 337
history 53, 55 European participation in expansion 340–1
modern 56 export production and expansion 349–50
and religion 55 foreign direct investment (FDI) 346–7
role in divergence debate 27–8 history from 1480 to 1630 337–8
Scientific Revolution 56, 68 income disparities 351
Scitovsky, Tibor 119 maritime 198
seafront industrial complex 207–8 openness to world markets 337
secondary education 60 pepper exports 339–40
Second Industrial Revolution trading in 339, 348
309, 310 twin system of labour mobilization 346
Second World War 237, 314 VOC 341–4
securitization process 242 South Korea 208
Self-Strengthening Movement (1860–94) 291, 292 ‘sprouts of capitalism’ 31, 32
Seven Years’ War 113 Squatriti, Paolo 70
Shammas, Carole 122, 123 state functions 93
Shanghai Baoshan Ironworks 208 Statute of Artificers and Apprentices (1562) 177
shopkeepers’ guilds 88 Statute of Labourers (1350–1) 177
silk cultivation 166 steam engines 170
Silk Road 71 steam shipping 154 n.22
silk routes 140 stolen goods 126
silver structural transformation 47
in Asia 279–81 Sturgeon, T. J. 227 n.23
in China 141 Styles, John 126
in Europe 279–81 Subrahmanyam, Sanjay 7
production in Latin America 273–6 sugar plantation
Spanish trade 276–9 and Aedes aegypti 163–4
trade and early modern world in Caribbean 216
economy 272–3 development and labour 183
Singapore 242–3 syphilis 172 n.8
Sino-Asian centrism 271
Sivramkrishna, Sashi 24 Taiping Rebellion (1850–62) 291
slavery Taiwan and industrialization 208
abolition of 184–6, 262, 263 Talbot, John 227 n.25
and capitalism 113 tannins 167
368
Index
Taussig, Frank 218 cotton production in 106, 284 n.18

taxes cotton to Britain 112
on consumer goods 118 deregulation movement in 240
labour markets and 92 Eurasian staples in 160
Taylor, Alan N. 145 European settlement 306
technological creativity 72–5 export 138, 140
technological development 67–8, 69, 76 forests in 103, 164
global divergences in 75–8 immigrant animals 159
movement of culture groups 71 imports of slaves 141, 175
‘Roman’ and Islamic’ 70 income levels 110
travelling of people 71 luxury expenditure in 118
technological drift 74 patenting in 73–4
technological leadership 77, 78 plantations in 102, 163–5
techno-pessimism 68 population and vegetation in 158
Third Five-Year Plan period 204 R&D system in 75
third-party enforcer 91, 93 silver in Spanish America 271, 277
Third World 146, 147 technological leadership of 78
Thomas, Robert Paul 21 vector-borne African diseases to 158
Thompson, E. P. 179 wealth of British America 111
Tokugawa Shogunate 306 unskilled wages 25–6
Tokyo 242 urbanization 94
Tongzhi Restoration (1861–75) 291 urban markets 95
toolkits and travelling knowledge 69–71 US Silver Purchase Act (1934) 297
trade 157
Asia-Europe vs. Atlantic 121 Van den Woude, Ad 42
colonial, in England 107–8 van Leeuwen, Bas 42
and economic growth 137, 145–7, van Zanden, Jan Luiten 42
154 n.38 Vasco Da Gama 304
forced free 200 vegetable oils as lubricants 168
free 143 Vereenigde Oostindische Compagnie (VOC) 87,
and imports in Europe 120 149, 151, 198, 306, 321, 340–3
intercontinental 198, trade vertical integration 186
intra-Asian 195, 200, 202, 203 Von Glahn, Richard 6
liberalization 278 Voth, Hans-Joachim 271
and politics 147–51 Vries, Jan de 6, 42, 120, 121, 122, 125, 126, 127,
shape and scale of global 137–8, 129, 141, 145, 179
140 Vries, Peer 68
slave 104, 113, 147–8
statistics 213 n.18 Wadsworth, A. P. 22
transoceanic 114 wages
unions 187 vs. food prices 124
volume and composition 324, 326 agricultural 35 n.19, 181
to West Indies 109 industrial 181
transaction costs 83 and living standards 123, 124
transnational banks 243, 245 n.16 and price data 29
Treaty of Balta Limani (1838) 307 silver and grain 24, 274
Treaty of Nanking (1842) 289 unskilled 25–6
Treaty of Shimonoseki (1895) 292 Wallerstein, Immanuel 5, 40, 218
treaty port system 291, 296 Wallerstein world-systems theory 5, 112
tributary states system 287 Wallis, J. J. 83
Wall Street Crash (1929) 237
Union blockade of the Confederacy 166 waqf 87
United States 67 Warburg, Siegmund 239
arrival of Africans in 162 war capitalism 217
British migration to 110–11 War of the Three Kingdoms 107
369
Index
Washbrook, David 322 world economy and global environment

Watson, Andrew 70, 71 4–7, 157
Weber, Max 1, 20, 38, 55, 85 Anthropocene 169–71
Weingast, B. R. 83 biological exchanges (1492–1800) 158–62
Western imperialism 31, 75, 287, 289, Industrial Revolution 165–8
291 plantation system of America 163–5
West Indies World Systems School 54
developing trade to 109 world-systems theory 218
wealth of 111, 117 n.46 world trade. See global trade
whale oil 168 Wrigley, E. A. 22, 28, 175
White Lotus (1796–1804) 288 Wu Chengming 31
Williams, Eric 28, 113
Williamson, Jeffrey G. 7, 145, 283 n.11, Yangzi Delta 21, 22–3, 32, 208
328 yellow fever 163
windmills development 70–1
women Zacatecas 274
education and labour participation 86 Zahedieh, Nuala 107, 108, 113
and fertility in China 85 zamindars 323
Wong, R. Bin 32, 38 Zanden, Jan Luiten van 40
workhouse system 177 Zhang Zhidong 291
World Bank 238, 253, 264, 337 Zheng Yangwen 121
370
371
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GLOBAL ECONOMIC HISTORY

Edited by Tirthankar Roy and Giorgio Riello

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First published in Great Britain 2019

Copyright © Tirthankar Roy, Giorgio Riello and Contributors, 2019

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ISBN: HB: 978-1-4725-8842-5

Typeset by Deanta Global Publishing Services, Chennai, India

Introduction: Global Economic History, 1500–2000

Part I Divergence in Global History

1 The Great Divergence Debate Prasannan Parthasarathi

2 Data and Dating the Great Divergence Jack A. Goldstone38

3 Useful and Reliable Knowledge in Europe and China Patrick O’Brien54

4 Toolkits, Creativity, and Divergences: Technology in Global

5 Families, Firms, and Polities: Pre-modern Economic Growth, and the

6 Plantations and the Great Divergence Trevor Burnard102

7 Consumption and Global History in the Early Modern

Part II The Emergence of A World Economy

8 Trade and the Emergence of a World Economy, 1500–2000

9 The Global Environment and the World Economy

10 Labour Regimes and Labour Mobility from the Seventeenth to the

11 Varieties of Industrialization: An Asian Regional Perspective

12 Global Commodities and Commodity Chains Bernd-Stefan Grewe215

13 The Rise of Global Finance, 1850–2000 Youssef Cassis229

Part III Regional Perspectives to Global Economic Change

15 The New World and the Global Silver Economy, 1500–1800

16 Economic Change in East Asia from the Seventeenth to

17 Europe in the World, 1500–2000 Peer Vries299

18 South Asia in the World Economy, 1600–1950 Bishnupriya Gupta and

19 Changing Destinies in the Economy of Southeast Asia J. Thomas Lindblad337

Table 2.1 Growth in Holland, 1510s–1800s: GDP, population, and

Figure 2.1 GDP and GDP per capita in Holland, 1510–1800 43

Gareth Austin is Professor of Economic History at Cambridge University.

Tirthankar Roy is Professor of Economic History at the London School of Economics.

Giorgio Riello and Tirthankar Roy

Economic history and its global turn

Global economic history: Debates and questions

World economy: The history of a concept

of ‘globalization’ through trade, supporters of ‘hard globalization’ argue that a world

The tools of global economic history

The structure of this book

structuring of a world economy. He challenges established classifications that oppose

important contemporary writings explain divergence as a consequence of conjunctures

Structure versus conjuncture

of capitalism, which transformed the approach to economic activity, making it more

differentiation of science along geographical boundaries and views it as a global enterprise,

How much divergence, and when?

The conjunctural approaches of Pomeranz and Parthasarathi rest on arguments on

The role of institutions

in the nineteenth century) or really major public investments in physical and

The role of science

Telling what’s right

neoclassical or non-neoclassical frameworks better describe the workings of the economy

The divergence debate in China and India

In the English-speaking-and-reading world, the divergence debate has been dominated

ensued as it became clear that the absence of a thorough capitalist transformation in

The problem of the great divergence

The challenge of new data

in their comprehensiveness and detail is a true achievement.7 Such datasets survey

2 Data and Dating the Great Divergence Jack A. Goldstone38

3 Useful and Reliable Knowledge in Europe and China Patrick O’Brien54

6 Plantations and the Great Divergence Trevor Burnard102

12 Global Commodities and Commodity Chains Bernd-Stefan Grewe215

13 The Rise of Global Finance, 1850–2000 Youssef Cassis229

17 Europe in the World, 1500–2000 Peer Vries299

19 Changing Destinies in the Economy of Southeast Asia J. Thomas Lindblad337

Figure 2.1 GDP and GDP per capita in Holland, 1510–1800 43