I’m going to begin by doing something that I normally wouldn’t:

presenting my argument almost exacty as I made it back in 2000. I do

this not because none of these arguments need revision, but because

doing so provides a baseline for some of the debates that have

followed. I will then turn to some comments on where discussions have

gone since then. I won’t come close to touching on all of this work –

with luck we’ll get to some more of it in Q and A, and you’ll get to

more of it in subsequent readings and discussions. So let’s begin

Part I.

Since the 1960s, European economic historians have moved away from

an older image of industrialization as a sudden, British, big bang,

re-inserting it in long stories of slowly-growing markets, division of

labor, many small innovations, and the accumulation of small profits,

across a much large area than Britai. Such gradual market-driven

growth was surely crucial, but it didn’t differentiate Europe from

East Asia. Smithian dynamics worked there, too, but didn't transform

basic possibilities -- eventually, highly developed areas everywhere

faced resource constraints, in part because commercialization and

proto-industrialization accelerated population growth, and most food,

fuel, fiber and building materials still came from the land. Britain,

I argue, needed for its escape not only technology and institutions,

but coal, the New World, and various favorable conjunctures -- in

Flanders and even Holland, proto-industrialization arguably led to

results more like the Yangzi Delta or Japan’s Kinai region than like

19th century England. (It’s important here to compare like with like:

Jiangnan/England, not China/England.) Thus, IR again becomes a

1
discontinuity to be explained -- because its just as easy to see

Europe as "china manque" as vice versa, or Egland as Flanders manque.

In a powerful synthesis of the gradualist story, Jan DeVries has

embedded the IR in a larger "industrious rev." -- which helps resolve

a paradox. The purchasing power of European day wages fell sharply

from 1430 to 1550, and didn’t clearly surpass 1430 levels until the

19th century, even in London and Amsterdam; they didn’t even equal

1430s levels before the late19th or even early 20th century in most

other European cities.(STRASBORG and ALLEN OVERHEADS) But if grain-

deflated wages don’t suggest much early modern economic progress,

other measurements do: death inventories, for instance, show

significant increases in people’s possessions. This could occur

because people spent more hours per year working for the market,

generating cash that bought new possessions, as well as stable amounts

of increasingly expensive bread. People may have had less leisure,

and definitely spent less time making goods for their own households

-- in other words, they specialized more and bought other things, some

of which “saved time” on domestic chores.

Something similar happened in parts of China (and maybe

elsewhere). Rice-deflated day wages mostly fell after about 1100, but

circa 1750, earnings for farmers and textile producers in the Yangzi

Delta still matched up well against England. (It’s worth noting here

that wage earners were a much smaller part of the population in China,

and for institutional reasons, earned far less than even most tenant

farmers.)[OVERHEADS] In agriculture, where the comparison is tenant-

2
to-tenant, rough parity lasted into the 1820s – for textile workers,

it ended sometime in the 18th century, even though that comparison is

skewed in China’s favor, because most Chinese textile workers owned

their own spinning wheels looms and worked for themselves, earning

some of the returns that went to employers in England. Meanwhile, our

very limited evidence suggests that nutritional standards held up, and

did not lag Europe’s. Rough nutritional parity is also suggested by

Chinese life expectancies (OVERHEAD), which were close to England’s

-- and therefore above most of the Continent’s --until almost 1800,

and indirectly by birth rates. Contrary to mythology, Chinese birth

rates were apparently no higher than European ones between 1550 and

1850, while population probably grew a bit faster, suggesting that

Chinese death rates were at least no higher.

Perhaps even more interesting, though is the evidence of increased

consumption of "non-essentials" by ordinary Chinese between about 1500

and 1750, Whie quatitative data is frustratingly scarce – in part

because very few of these goods were either taxed or imported,

depriving us of 2 data sources that are invaluable in Europe – we do

have lots of scattered nformation from travelers' accounts, local

gazetteers, elite complaints about pop. consumption, etc. For those

commodities where I could construct very rough measurements, China

circa 1750 stacked up well against Europe, and Jiangnan against

England. (OVERHEAD)

But of course these resemblances didn’t last. From

1750 -1900, production, consumption,and spoecialization all jumped

3
forward in Europe, while in China per capita non-grain consumption

almost certainly declined -- 1900 figures for cloth and sugar, for

instance, are below even my most conservative estimates for 1750.

Much of the difference is ecological, but not in the sense that

"population pressure" was producing more serious problems within

Chinese cores than in European ones. I've reconstructed nitrogen

fluxes from dry-farming areas of North China and England, circa 1800,

and they do not show more severe soil depletion in China: if I threw

in South China’s paddy rice regions the comparison would lop-sidedly

favor China. (OVERHEAD) Even for deforestation, there's no clear

Western Eur advantage circa 1750, despite much sparser pop -- Chinese

use land and fuel very intensively, and they're actually better off in

some ways than Europe, and declining less rapidly.(OVERHEAD) A feature

of Western Europe’s 19th C. breakthrough that is too little remarked

on is that some improtant ecological variables stabilized despite

unprecedented growth in both pop. and per K consumption, while much

slower early modern growth had produced serious, and accelerating

strain – though certainly not everywhere. Archeological evidence

points to serious soil degradation in various parts of West and

Central Europe, which confirms reports of generally stagnant or

declining yields (though there were also areas, mostly right around

cities, where yields were rising); forests shrank dramatically,

sandstorms became more common, etc. Why does much of this stabilize

in the 19th century?

4
 One crucial factor is the switch in a few areas to sub-terranean

energy sources: above all, English coal. This is a story of

innovation, but also one of luck: Chinese coal deposits are just much

too many land-locked miles away from core regions to be economical

before railways; and mines so remote from concentrations of skilled

artisans were not well-positioned for technological change, anyway.

Moreover, 18th century Chinese coal mines, being mostly in very dry

areas, wrestled with sudden gas explosions, not (as in England) with

flooding – and it was pumping water which created perfect conditions

for refining a bulky, initially very inefficient steam engine (the

early ones converted less than 1% of the energy they used to motion,

and in 1800, 80% of them were at the pit-head, where fuel was

virtually free) – eventually creating a machine that transformed any

number of processes. The Yangzi Delta, meanwhile, lacked all kinds of

energy -- coal, timber and water power, as well as ores – and simply

never developed much energy-intensive industry.

Secondly, Western Europe benefited from soaring imports of land-

intensive products, especially from the New world. As demand for

food, fiber, building materials and fuel (Malthus' four necessities)

grew with population, cores everywhere, to one degree or another, had

to acquire these land-intensive products by trading with a periphery

that wanted the manufactures, mostly textiles, that cores produced.

But that trade tended to run into one of two problems. In a place

like Eastern Europe, with many barriers to factor mobility and many

people outside the cash economy, the response to external demand is

5
limited – and indeed, the Baltic trade plateaued by 1650, at a

fraction of the size of China’s long-distance staple trades. (Though

it was, of course, large enough to significantly facilitate economic

growth and exit from agriculture in the Netherlands.) But over the

longer haul, the freer trade of advanced Chinese regions with their

interior also hit limits. With hinterland families more or less free

to allocate their own labor, the export boom and commercialization

stimulated population growth in places like North China and the Middle

Yangzi during the 18th century; and as the best land filled up, some

labor switched into handicrafts, reducing raw materials surpluses for

export and reducing demand for imported textiles. What had been by far

the world’s largest long-distance staple trade plateaued and then

declined as the peripheries gain population and develop more

handicrafts. Moreover, the terms of trade shifted sharply against

manufactures and thus against the YD: the same piece of cloth bought

half as much rice in 1840 as in 1750. This constrained the

development of the core regions:. Yangxzi Delta pop. is flat 1750-

1850, and the share of labor in non-agriculture probably fell. MOKYR

OVERHEAD (Moreover as the YD became a smaller part of China’s

population, its relatively high consumption levels had less weight in

Chinese aggregates.) (what I like best about this model is that I

stole it from Joel Mokyr’s work on the Low Countries in the 18th and

19th centuries– showing that you don’t need any special pathology to

explain what happened in the YD -- much if it was a normal process of

leveling off in the absence of big technological change or

otherpositive shocks.)

6
 The New World, however, was different. Smallpox, etc.,

depopulates the region, and much of the labor force was replaced by

slaves -- who were purchased from abroad. MOROEVER, NW slaves engaged

in less subsistence production than coerced cash-crop workers in old

world did -- thus despite their poverty, they were a significant

market for coarse cloth, etc. Consequently, the circum-Caribbena

slave region (from Brazil to US south) becomes the first periphery to

look like a modern one – spending a lot on imported capital goods (in

this case human, kidnapped, capital goods) and a fair amount on mass

consumer goods – paid for with continually growing land-intensive

exports, which helped NW Europe weather the pressures of renewed and

then accelerated population growth in the 18th and 19th centuries.

Meanwhile, the Yangzi Delta was running into problems with

import sub. in at least some of its peripheries. Somewhat

similarly,Japan’s advanced Kinai and Kanto regions have no population

growth from 1720-1860, while various outer han gained population,

developed their own handicraft industries as domainal monopolies

lapsed, and saw their rice surpluses shrink significantly. So East

Asia’s most advanced regions may have suffered from markets working

very well while factor endowments were not different enough among

regions: this led to an increasing dispersion of proto-ind.,

ecological cul de sac, while Europe reaped benefits from limits on

markets and import substitution(bound labor, colonial monopolies).

Normalizing China’s experience this way,then, suggests the

importance of relaxing land constraints – both through mining and the

7
New World – for British and later Northwest European growth. Even in

1830 -- before the great mid-century boom in North American grain,

meat, and timber exports, the tenfold increase in England’s sugar

consumption over the rest of the century, and so on – local

substitutes for Britain’s New World imports would have required about

23,000,000 acres (mostly to replace cotton imports). That figure

exceeds even the 15,000,000 acres of forest that Wrigley estimates

were rendered unnecessary by coal production circa 1815; it also

exceeds Britain’s total arable and pasture land put together. Without

such new resources, ecological constraints might have hobbled English

growth, much as the filling up of the Chinese interior hobbled the

Yangzi Delta.

For current purposes, then, the Great Divergence made five key

points. The first is methodological: we should be comparing like with

like in terms of scale and in terms of place within its regional

economic system, not simply comparing things that happened to become

20th century nation-states: thus China and Europe, or the most advanced

areas within each of those units (the Yangzi Delta and Britain or

Britain plus the Netherlands), but not Britain and China, unless we’re

looking at the impact of specific national government policies (and

these are rarely the big story). Second, the Great Divergence –

defined as the richest parts of Europe pulling ahead of the richest

areas anywhere else – comes relatively late (probably in the late 18th

century), which rules out a lot of the old explanations such as only

Europe having property rights, or rationality, or what Landes called

“the spirit of enterprise” – because if those were true, the

8
divergence should have come much earlier. Third, a late divergence

meant that the opening up of significant difference in per K income

(a quantitative difference) roughly coincided with a huge historical

watershed: the emergence of sustained per capita growth in Britain

(and then elsewhere) based on huge increases in resource consumption

per capita (especially energy), on-going, relatively rapid ,

technological change, and somewhat later, increases in human capital

that were made possible by this initial growth and helped to keep the

growth going (via further technological improvements, among other

things). The quantitative and qualitative divergences were distinct,

but their coincidence in time was no accident–in part because it

indicated that a place like the Yangzi delta, which did not get the

qualitative breakthrough, had not necessarily been inferior at

generating the older kind of Smithian growth, based on exp0anding the

division of labor and exploiting almost all the opportunities within a

production possibility frontier defined by more or less fixed

resources and technology. Fourth, because modern growth came late, and

at a time when opportunities for Smithian growth were having trouble

keeping up with increasing population pressure, the resource bonanzas

of the late 18th and especially the 19th century were crucial, with both

fossil fuels and American “ghost acreage” doing much to relieve

potential constraints on growth in a period in which technological

change, though picking up, was still not rapid enough to overcome

resource pressures by itself (especially since the most transformative

tehcnologi8es were themselves highly resource-intensive). Finally,

this suggested that to the extent that western European institutions

9
made the crucial difference, they were not the institutions of

relatively free trade, open opportunity, and secure property – which

did not distinguish the region from East Asia – but institutions

associated with mercantilist empire-building, overseas coercion, etc.,

which harnessed vast new peripheries to NW European cores.

So 20 year’s later, what can we add to this story, and what must

we change about it? There’s been a lot more quantitative work done

than was available then, especially on national income and on urban

wages – mostly in Europe, but to some extent elsewhere as well. It

indicates that if “the Great Divergence” means incomes in the most

advanced places in Europe surpassing those in the most advanced places

in East Asia, then it probably happened somewhat earlier than I said

-- mostly because stagnation or even decline hit YD earlier than I had

thought – by no later than 1750. (The Broadberry et. al. estimate of

a sharp decline in per capita GDP throughout the 1700-1840 period

seems to me inconsistent with much of what we know about the first

half of the century in particular, but a substantial overall decline

foe China as a whole, gathering speed in the second half of the 18th

century and particularly in the early 19th, seems quite likely. If we

look at some other indicators quantitiative indicators (remembering

that Qing GDP estimates are very fragile), we see signs of decreasing

market integration, starting in relatively poor NC by perhaps as early

as 1730, and evident even in the LY by 1780 or so. That’s the pattern

I expected, with breakdown beginning in “peripheries” and spreading to

more functional “cores,” but it seems to have begun earlier than I’d

thought. Reconstructions of “typical” farm incomes also suggest that

10
mid-18th C YD may not have been that much above early 17th – and by

early 19th, it’s below it; what’s still up for grabs is where the peak

was in begtween those dates, and thus when decline started and how bit

it was. Li and Van Zanden reconstruction shows 2 Delta counties well

behind Netherlands by 1820 – but with an awful lot of that having

happened in just the last 20 years of that period.

And as that suggests, the more general idea of a late GD holds

up in 2 senses. First, note that we’re now mostly arguing about when

in the 18th century to put this versus older stories that plumped for

much earlier dates, often based on cultural/political markers of

dubious economic significance (the Renaissance, even the Greeks)

and/or aggregated estimates for all of “China,” with very speculative

GDP numbers (such as very low estimates of Ming GDP that have now been

retracted). Second, note if the case for an earlier 18th c GD is based

on declining Chinese economic performance over some substantial

portion of the 18th century, then that still leaves open the question of

when even the most advanced parts of Europe began to exhibit modern

income growth – i.e. sustained periods of simultaneous growth in

population and per capita income. As recent work by Jack Goldstone

shows, Dutch GDP in 1750-1800 only briefly reached 10% above its 1640

peak, and was back down to 5% above that peak by 1800-1807; during the

long period from the 1640s-1750, it had been almost completely

stagnant (never rising above 2% above the 1640 peak). And that 1640

peak, in turn, represented a return to an earlier peak in per capita

GDP around 1590, which had been followed by an apparent decline as

population surged in the next couple of decades. Similarly, Goldstone

11
looks closely at the improved GDP time series for Britain compiled by

Broadberry et al and finds that if you leave out a brief (though very

impressive) growth spurt in the late 1300s and another in the late

1600s, per capita GDP for 1270-1750 comes to 3 ten-thousandths of 1 %

per year. (And both of those spurts in per capita GDP came during

periods of population decline, albeit slight decline in the second

case.) Broadberry et. al. do seem to show a half-century of solid per

K growth combined with population growth after 1750, but as Goldstone

again shows, this rests on an estimate of rapid growth in agriculture

that is at odds with everybody else’s numbers. Without those anomalous

figures, per capita GDP growth falls to 0.2% per year: better than the

YD’s probable regression in this period, to be sure, but not much

basis for claiming that Britain (much less “the West”) had clearly

entered a new era of sustained growth before 1800.

It is true, as Stephen Broadberry has pointed out in a response ot

Goldstone, that there’s a difference between a long-run pattern in

which growth alternates with stagnation and one in which it alternates

with regression, and it is possible that that’s what we’re looking at

– but if the growth/stagnation pattern averages out to very slow

growth, and the regression (at least for the richest part of China)

was concentrated at the end of the period we’re looking at (nobody

doubts that the 19th century was very bad almost everywhere in China)

that still sounds like (a) a pretty late great divergence and (b) a

weak indication that the North Sea region was safely launched on a

path of modern growth. Maybe that region just managed to dodge

another extended period of stagnation (or even decline)that was on the

12
horizon, at least in part due to external resource bonanzas that

kicked in as population pressure was rising, more or less as I

originally suggested.

None of that, of course, means that the GD didn’t happen or that

there weren’t things going on in Europe much earlier than 1750 that

contributed to that eventual divergence; very few indeed, it would be

strange to claim that there hadn’t been: very few historical phenomena

of any importance are without some deep roots. In particular, it is

clear that at least in England and the Netherlands, there were

reasonably robust long-running trends in urbanization and urban labor

productivity – though it took a long time, as we’ve just seen, for

that dynamism to outweigh the much more sluggish performance of the

large agricultural sector. (Data for urban China is particularly

lousy, especially for the service sector, but it does seem that

productivity growth there was less sustained, and that the percentage

of the population in cities probably feel during the 18th century

population boom. Japan might turn out to be a more promising place to

look for sustained urban dynamism outside Europe.) And there has been

some very interesting work in the last 20 years on technological

change and on human capital – though both are quite hard to quantify,

and the relationship between the two before the rise of systematic,

science-based R & D (a late 19th century phenomenon) is very hard to

specify. I don’t think a clear picture has emerged yet, but we know a

lot more about possible elements of an explanation.

13
 Meanwhile, we also know more than did in 2000 about some things

that were once considered significant parts of the story of divergence

and now seem unlikely to be a big deal. For instance, work by Bob

Allen, Jan Luiten Van Zanden, Li Bozhong and others has shown that

agricultural labor productivity in the Yangzi Delta probably kept pace

with that in Britain and the Netherlands almost into the 19th century,

while land productivity was much higher, and TFP was therefore

probably higher. It is also clear that the YD figures are much higher

than those for various parts of continental Europe that became earlier

followers of the IR than the Delta was. Given the number of stories

that have attempted to ground British industrialization in a prior

“Agricultural Revolution” that supposedly liberated labor and

generated capital, this is uite significant; whatever combination of

explanations we settle on for European breakthroughs (and their

absence in China), it looks as if we should not be looking at the

countryside. To take another example, the large amount of literature

over the last 25 years or so showing that European guilds were not

nearly as much of a barrier to European growth as we once thought thye

had been means that their dissolution couldn’t have been as important

to later growth as certain market-centered stories once held, and that

at least one example I used of European institutions that were less

friendly to “Smithian growth” than Chinese ones was exaggerated.

Some critics of the so-called “California school” have

suggested that our story of the GD is simply “coal and colonies,” but

that was never the argument. I probably leaned on the resource-

constraint argument harder than other members of this very loosely-

14
knit school, and I always said that these were not sufficient

explanations of the divergence, but important factors in keeping open

a window for escape from a world in which land was an important

constraint on growth.

At some high level of generality this is actually a very banal

claim – it’s obvious that you can’t keep moving people out of

agriculture and feeding more people unless agricultural productivity

goes WAY up, you bring lots more land under the plow (which was not

possible at home) or you are getting lots of agricultural commodities

from elsewhere, and it’s equally obvious that modern economic growth

has depended on enormous supplies of inanimate energy (which was a

crucial part of the difference between Smithian and modern growth).

However, it is equally obvious that neither imported resources nor

fossil fuels were purely exogenous gifts: one had to be able to mine,

ship, and use the fossil fuels, and overseas resources weren’t purely

a return on violent extraction.

The GD – the book, that is -- aimed to call attention to

factors that I thought were often improperly minimized, and so push

our discussion of causes along, rather than to give a simple answer to

those questions. (Maybe it didn’t always read that way, but that was

the intent.) And I think that intervention has been useful: I would

call attention, among other work, to the 2005 Williamson and O’Rourke

article “From Malthus to Ohlin.” They ask when and how Britain was

able to transition from a world in which the wage/rent ratio always

fell when population rose (a relationship which held quite strongly

15
from 1500 – 1730, weakening but not vanishing over the rest of the 18th

century) to one in which population trends had become essentially

irrelevant to that ratio (which they say describes their data for

1842-1936)no longer true. They conclude that this happened in stages

between 1730 and 1842, and (astonishingly, even to me) conclude that

the ability to import land-intensive products accounted for as much of

the breakdown of that relationship between the wage/rent ratio and

population as all other factors put together.

One need not go that far, of course, to accept that there has

been something really different about the economic world of the last

couple of centuries, and that having been successful in that world was

not simply a continuation of having been especially successful all

along. Understanding how and why the divergence happened is much more

difficult than the already difficult tasks of estimating its size and

timing. But we’ve now made a lot of progress and what and when, and

we’re also getting a better picture of the many continuities and

discontinuities that go into the hows and whys. In short, we’ve come

a long way since 2000.

16