Global and Political Economic Environment
Assignment No: 1Page|
China has been one of the world’s most dynamic economies in recent decades,
but theindustrial revolution occurred in Europe rather than China because European entrepreneurs were eagerto adopt machines to cut down on high labor costs.One of the big debates in economics is about the causes of the arguably most dramatic change indevelopment trajectory in (recent) world history, the industrial revolution.
Before about 1800, growth did occur, but it was mainly “extensive”, leading to more people but
almost no growth in income per capita.
After about 1800 this changed, and growth beca
me (increasingly) “intensive”, focused on an
almost continuous growth of GDP per head.There is consensus about the fact that this change in growth pattern started in northwestern Europe,and gradually spread to large parts of the western and, after a lag, eastern and southern world.
The Great Divergence debate
Recent literature, most famously Kenneth Pomeranz’s The Great Divergence (2000), has suggested thatChina’s level of economic performance was more or less at par with that of Western Europe.
Moreover,the lower Yangzi delta formed a core of economic prosperity comparable with the North Sea area, themost developed part of Western Europe.Pomerantz argues that even in the eighteenth century, China was not inferior to Europe in terms of technology, social structures that could support technological innovation, large pools of accumulated
capital, etc. According to him, the reason that Europe “succeeded” and China did not was largely
determined by pure chance
a lack of large deposits of coal and iron ore close to each other and theabsence of large outward migration (after Zheng He, the greatest world traveler before Columbus,discovered Madagascar, the African Horn, and Saudi Arabia in the early fifteenth century, the emperorsof the Ming Dynasty prohibited the construction of big ships and the Middle Kingdom experienced self-
imposed isolation for four centuries). Pomeranz’s argument is that mass emigration from Europe played
a crucial role in the transition to the modern growth regime from a Malthusian regime.2 Whentechnological progress accelerated in the nineteenth century but the population growth rates stillremained high and growing (0.6 percent in 1820-70) because the demographic transition had not yetoccurred, mass migration to North America helped to alleviate pressure on a scarce resource, land, andto avoid diminishing returns.In a similar vein, land scarcity is seen as a factor that stimulates urbanization and industrialization. It is
argued that “during the Song Dynasty, despite the
fact that China lost a significant amount of arableland to invading nomads as its population peaked, China witnessed a higher urbanization level, moreprosperous commerce and international trade, and an explosion of technical inventions and institutionalinnovations. However, after China significantly improved its man-to-land ratio in the period after theSong only to find itself induced deeper into the agrarian trap, resulting in reduced urbanization,withering foreign trade, a declining division of labor
, and stagnation in technology”