The Great Divergence: China, Europe, and the Making of the Modern World Economy - Kenneth Pomeranz

 

The Great Divergence: China, Europe, and the Making of the Modern World Economy 

Kenneth Pomeranz

(The Princeton Economic History of the Western World) Kindle Edition

The Great Divergence brings new insight to one of the classic questions of history: Why did sustained industrial growth begin in Northwest Europe, despite surprising similarities between advanced areas of Europe and East Asia? As Ken Pomeranz shows, as recently as 1750, parallels between these two parts of the world were very high in life expectancy, consumption, product and factor markets, and the strategies of households. Perhaps most surprisingly, Pomeranz demonstrates that the Chinese and Japanese cores were no worse off ecologically than Western Europe. Core areas throughout the eighteenth-century Old World faced comparable local shortages of land-intensive products, shortages that were only partly resolved by trade.


Pomeranz argues that Europe's nineteenth-century divergence from the Old World owes much to the fortunate location of coal, which substituted for timber. This made Europe's failure to use its land intensively much less of a problem, while allowing growth in energy-intensive industries. Another crucial difference that he notes has to do with trade. Fortuitous global conjunctures made the Americas a greater source of needed primary products for Europe than any Asian periphery. This allowed Northwest Europe to grow dramatically in population, specialize further in manufactures, and remove labor from the land, using increased imports rather than maximizing yields. Together, coal and the New World allowed Europe to grow along resource-intensive, labor-saving paths.

Meanwhile, Asia hit a cul-de-sac. Although the East Asian hinterlands boomed after 1750, both in population and in manufacturing, this growth prevented these peripheral regions from exporting vital resources to the cloth-producing Yangzi Delta. As a result, growth in the core of East Asia's economy essentially stopped, and what growth did exist was forced along labor-intensive, resource-saving paths--paths Europe could have been forced down, too, had it not been for favorable resource stocks from underground and overseas.

A Grande Convergencia; Fim da Divergencia? - Book Review (WSJ)

Não concordo, integralmente, com todos os argumentos de Mahubani, embora, no geral, ele tenha alguma razão, ou seja, o mundo está se diversificando, com maior crescimento na Ásia Pacífico e menor nos países do velho capitalismo ocidental. Mas não estou seguro que estes últimos estejam condenados a serem suplantados pelos da região asiática. Algumas evidências são aplastantes, mas não podemos descartar a economia da inteligência por causa de alguns indicadores ainda baseados na produção material de bens e serviços. 
Quem, infelizmente, fica de fora dessas tendências decisivas para a economia mundial é a América Latina. Parece que estamos condenados a estacionar, como aliás fizemos no último meio século.
 Paulo Roberto de Almeida

• BOOKSHELF
• The Wall Street Journal, March 19, 2013, 5:22 p.m. ET

A New Concert of Nations

In 1990, a billion people earned enough income to consider making discretionary purchases. By 2010, the figure had more than doubled.

By TOM NAGORSKI

The Indian scholar Brahma Challaney recently gave a talk at the Asia Society in New York about the coming global water-supply crisis. It was a dispiriting forecast: drought and pollution, even wars over water. That same morning brought dreary news from other fronts: a fresh threat from North Korea, another atrocity in Syria, a frightening smog alert from Beijing.
Anyone feeling the weight of the world's woes will be grateful for Kishore Mahbubani's "The Great Convergence," a sweeping survey that proves to be, in large measure, a counterweight to global gloom and doom. Mr. Mahbubani, dean of the Lee Kuan Yew School of Public Policy in Singapore, is under no illusions about the troubles we face, but he takes the longer view, reaching back a few decades to see an upward trend and to marvel at how far we have come.
Under Mr. Mahbubani's lens, we see a plunge in the rates of extreme poverty and early-childhood deaths; a rise in literacy; a drop in the number of armed conflicts. "Major interstate wars," says Mr. Mahbubani, "have become a sunset industry." The good-news numbers are remarkable. In 1990, one billion human beings earned enough income to consider making discretionary purchases beyond mere necessity; by 2010, the figure had more than doubled. Mr. Mahbubani has lived this change. He was raised, he says, in "a typical third world city . . . [with] no flush toilets, some malnutrition, ethnic riots and, most importantly of all, no sense of hope for the future." The city was Singapore, today an economic juggernaut with a per-capita income that outranks America's.
Such statistics are presented as evidence of a "great convergence," a phrase that Mr. Mahbubani first spotted in a Financial Times column by Martin Wolf, in which the columnist was describing a convergence of global interests, values and economic fortunes. Of course, nothing says "convergence" like the rush to connectivity, and while we know this story well, Mr. Mahbubani's treatment still startles: Eleven million cellphone subscriptions, world-wide, in 1990; 5½ billion today. In 1985 the world's fastest computer, the Cray 2, the size of a washing machine, was prohibitively expensive and required coolants to avoid overheating. Today the Cray 2's match is the iPad 2, and it runs on 10 watts of power.

Enlarge Image

The Great Convergence By Kishore Mahbubani
(PublicAffairs, 315 pages, $26.99)

Mr. Mahbubani is a big-picture writer and thinker, a Thomas Friedman with a strong Asian perspective, and like Mr. Friedman he is inclined toward the aphorism or analogy. When he eventually leaves his world-is-improving narrative to fret about future geopolitics, he does so with a maritime metaphor: "People no longer live in more than one hundred separate boats. Instead they all live in 193 separate cabins on the same boat. But this boat has a problem. It has 193 captains and crews, each claiming exclusive responsibility for one cabin. However, it has no captain or crew to take care of the boat as a whole."
This passage sounds Mr. Mahbubani's second theme: If we are gaining ground and converging in inspiring ways, we still lack an effective architecture for global governance. The need is critical, Mr. Mahbubani believes, because that metaphorical boat may soon run into an iceberg. The new arrivals in the Asian middle class, for example, will expect the trappings of success: a car, a refrigerator and so on, and our planet won't be able to support them. For Mr. Mahbubani, the answer is some kind of global stewardship, one especially concerned with the environment, the economy and security. In short, we need a global referee.
But how to get there? Mr. Mahbubani skewers existing structures—the United Nations, the International Monetary Fund, the G-20—as either ineffectual or beholden to the great powers. The largest carbon emitters, to take a favorite example, have rejected global protocols (the U.S.) or signed them and pursued a "development first" strategy (China and India). It's hard to argue with Mr. Mahbubani on that point but also hard to see how a new global architecture is possible when the great powers aren't interested.
One great power, of course, is particularly uninterested, and in these pages Mr. Mahbubani casts the U.S. as an arrogant actor, a hegemon with no patience for multilateralism. Here his argument weakens from overreach. America's frustration with the U.N. is not, as he argues, merely a matter of self-interest; it is also rooted in real concerns about mismanagement and certain U.N. policies. As for Mr. Mahbubani's charge that the U.N. acts only "when the residents of Park Avenue" (his phrase for the five permanent members of the Security Council) are affected, that just isn't so. We have seen U.N. interventions in Somalia, Kosovo and Libya, none of which was exactly a "Park Avenue" interest.
But Mr. Mahbubani has a good idea for reforming the Security Council itself (a kind of staggered, tiers-of-influence plan), and he has good questions for Americans. Are we ready to accept being "No. 2" on the global stage, at least by certain metrics? In fewer than five years China's share of global income (only 2% two decades ago) will surpass that of the U.S., and yet the political discourse in America suggests an unwillingness to face that outcome, let alone plan for it. "The West will not lose power," Mr. Mahbubani writes. "It will have to share power."
In the end, he remains hopeful because he really believes it's the long view that matters. If Southeast Asia—a war-torn, poverty-riven corner of the globe only a half-century ago—is today a region of peace and prosperity, then, Mr. Mahbubani believes, much else is possible. "In this rapidly changing world of ours," he writes, ". . . miracles can happen."

Mr. Nagorski is executive vice president of the Asia Society and the author of "Miracles on the Water: The Heroic Survivors of a World War II U-Boat Attack."

A version of this article appeared March 20, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: A New Concert Of Nations.

 

Por que o Ocidente dominou o mundo? - Niall Ferguson (TED)

Niall Ferguson: The 6 killer apps of prosperity

TED: http://www.ted.com/talks/lang/en/niall_ferguson_the_6_killer_apps_of_prosperity.html


Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture -- call them the 6 killer apps -- that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.


Niall Ferguson
History is a curious thing, and Niall Ferguson investigates not only what happened but why. (Hint: Politics and money explain a lot.) Full bio and more links

Let's talk about billions. Let's talk about past and future billions. We know that about 106 billion people have ever lived. And we know that most of them are dead. And we also know that most of them live or lived in Asia. And we also know that most of them were or are very poor -- did not live for very long. Let's talk about billions. Let's talk about the 195,000 billion dollars of wealth in the world today.We know that most of that wealth was made after the year 1800. And we know that most of it is currently owned by people we might call Westerners: Europeans, North Americans, Australasians. 19 percent of the world's population today, Westerners own two-thirds of its wealth.

Economic historians call this "The Great Divergence." And this slide here is the best simplification of the Great Divergence story I can offer you. It's basically two ratios of per capita GDP,per capita gross domestic product, so average income. One, the red line, is the ratio of British to Indian per capita income. And the blue line is the ratio of American to Chinese. And this chart goes back to 1500. And you can see here that there's an exponential Great Divergence. They start off pretty close together. In fact, in 1500, the average Chinese was richer than the average North American. When you get to the 1970s, which is where this chart ends, the average Briton is more than 10 times richer than the average Indian. And that's allowing for differences in the cost of living. It's based on purchasing power parity. The average American is nearly 20 times richer than the average Chinese by the 1970s.

So why? This wasn't just an economic story. If you take the 10 countries that went on to become the Western empires, in 1500 they were really quite tiny -- five percent of the world's land surface, 16 percent of its population, maybe 20 percent of its income. By 1913, these 10 countries, plus the United States, controlled vast global empires -- 58 percent of the world's territory, about the same percentage of its population, and a really huge, nearly three-quarters share of global economic output. And notice, most of that went to the motherland, to the imperial metropoles, not to their colonial possessions.

Now you can't just blame this on imperialism --though many people have tried to do so -- for two reasons. One, empire was the least original thingthat the West did after 1500. Everybody did empire.They beat preexisting Oriental empires like the Mughals and the Ottomans. So it really doesn't look like empire is a great explanation for the Great Divergence. In any case, as you may remember, the Great Divergence reaches its zenith in the 1970s,some considerable time after decolonization. This is not a new question.

Samuel Johnson, the great lexicographer, [posed] it through his character Rasselas in his novel "Rasselas, Prince of Abissinia," published in 1759."By what means are the Europeans thus powerful;or why, since they can so easily visit Asia and Africafor trade or conquest, cannot the Asiaticks and Africans invade their coasts, plant colonies in their ports, and give laws to their natural princes? The same wind that carries them back would bring us thither?"

That's a great question. And you know what, it was also being asked at roughly the same time by the Resterners -- by the people in the rest of the world --like Ibrahim Muteferrika, an Ottoman official, the man who introduced printing, very belatedly, to the Ottoman Empire -- who said in a book published in 1731, "Why do Christian nations which were so weak in the past compared with Muslim nationsbegin to dominate so many lands in modern timesand even defeat the once victorious Ottoman armies?" Unlike Rasselas, Muteferrika had an answer to that question, which was correct. He said it was "because they have laws and rules invented by reason." It's not geography.

You may think we can explain the Great Divergencein terms of geography. We know that's wrong,because we conducted two great natural experiments in the 20th century to see if geography mattered more than institutions. We took all the Germans, we divided them roughly in two, and we gave the ones in the East communism, and you see the result. Within an incredibly short period of time,people living in the German Democratic Republicproduced Trabants, the Trabbi, one of the world's worst ever cars, while people in the West produced the Mercedes Benz. If you still don't believe me, we conducted the experiment also in the Korean Peninsula. And we decided we'd take Koreans in roughly the same geographical place with, notice, the same basic traditional culture, and we divided them in two, and we gave the Northerners communism. And the result is an even bigger divergence in a very short space of time than happened in Germany. Not a big divergence in terms of uniform design for border guards admittedly, but in almost every other respect, it's a huge divergence. Which leads me to think that neither geography nor national character, popular explanations for this kind of thing, are really significant.

It's the ideas. It's the institutions. This must be truebecause a Scotsman said it. And I think I'm the only Scotsman here at the Edinburgh TED. So let me just explain to you that the smartest man ever was a Scotsman. He was Adam Smith -- not Billy Connolly, not Sean Connery -- though he is very smart indeed. (Laughter) Smith -- and I want you to go and bow down before his statue in the Royal Mile; it's a wonderful statue -- Smith, in the "Wealth of Nations" published in 1776 -- that's the most important thing that happened that year ...(Laughter) You bet. There was a little local difficulty in some of our minor colonies, but ...

(Laughter)

"China seems to have been long stationary, and probably long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions. But this complement may be much inferior to what, with other laws and institutions, the nature of its soil, climate, and situation might admit of." That is so right and so cool. And he said it such a long time ago.

But you know, this is a TED audience, and if I keep talking about institutions, you're going to turn off. So I'm going to translate this into language that you can understand. 
Let's call them the killer apps. 
I want to explain to you that there were six killer apps that set the West apart from the rest. 
And they're kind of like the apps on your phone, in the sense that they look quite simple. They're just icons; you click on them.But behind the icon, there's complex code. It's the same with institutions. 
There are six which I think explain the Great Divergence. 

One, competition.
Two, the scientific revolution. 
Three, property rights.
Four, modern medicine. 
Five, the consumer society.
And six, the work ethic. 

You can play a game and try and think of one I've missed at, or try and boil it down to just four, but you'll lose.

(Laughter)

Let me very briefly tell you what I mean by this,synthesizing the work of many economic historiansin the process. Competition means, not only were there a hundred different political units in Europe in 1500, but within each of these units, there was competition between corporations as well as sovereigns. The ancestor of the modern corporation, the City of London Corporation, existed in the 12th century. Nothing like this existed in China, where there was one monolithic statecovering a fifth of humanity, and anyone with any ambition had to pass one standardized examination, which took three days and was very difficult and involved memorizing vast numbers of characters and very complex Confucian essay writing.

The scientific revolution was different from the science that had been achieved in the Oriental world in a number of crucial ways, the most important being that, through the experimental method, it gave men control over nature in a way that had not been possible before. Example: Benjamin Robins's extraordinary application of Newtonian physics to ballistics. Once you do that,your artillery becomes accurate. Think of what that means. That really was a killer application.(Laughter) Meanwhile, there's no scientific revolution anywhere else. The Ottoman Empire's not that far from Europe, but there's no scientific revolution there. In fact, they demolish Taqi al-Din's observatory, because it's considered blasphemousto inquire into the mind of God.

Property rights: It's not the democracy, folks; it's having the rule of law based on private property rights. That's what makes the difference between North America and South America. You could turn up in North America having signed a deed of indenture saying, "I'll work for nothing for five years.You just have to feed me." But at the end of it, you've got a hundred acres of land. That's the land grant on the bottom half of the slide. That's not possible in Latin America where land is held ontoby a tiny elite descended from the conquistadors.And you can see here the huge divergence that happens in property ownership between North and South. Most people in rural North America owned some land by 1900. Hardly anyone in South America did. That's another killer app.

Modern medicine in the late 19th century began to make major breakthroughs against the infectious diseases that killed a lot of people. And this was another killer app -- the very opposite of a killer,because it doubled, and then more than doubled, human life expectancy. It even did that in the European empires. Even in places like Senegal,beginning in the early 20th century, there were major breakthroughs in public health, and life expectancy began to rise. It doesn't rise any fasterafter these countries become independent. The empires weren't all bad.

The consumer society is what you need for the Industrial Revolution to have a point. You need people to want to wear tons of clothes. You've all bought an article of clothing in the last month; I guarantee it. That's the consumer society, and it propels economic growth more than even technological change itself. Japan was the first non-Western society to embrace it. The alternative,which was proposed by Mahatma Gandhi, was to institutionalize and make poverty permanent. Very few Indians today wish that India had gone downMahatma Gandhi's road.

Finally, the work ethic. Max Weber thought that was peculiarly Protestant. He was wrong. Any culture can get the work ethic if the institutions are there to create the incentive to work. We know this because today the work ethic is no longer a Protestant, Western phenomenon. In fact, the West has lost its work ethic. Today, the average Korean works a thousand hours more a year than the average German -- a thousand. And this is part of a really extraordinary phenomenon, and that is the end of the Great Divergence.

Who's got the work ethic now? Take a look at mathematical attainment by 15 year-olds. At the top of the international league table according to the latest PISA study, is the Shanghai district of China.The gap between Shanghai and the United Kingdom and the United States is as big as the gap between the U.K. and the U.S. and Albania and Tunisia. You probably assume that because the iPhone was designed in California but assembled in China that the West still leads in terms of technological innovation. You're wrong. In terms of patents, there's no question that the East is ahead.Not only has Japan been ahead for some time,South Korea has gone into third place, and China is just about to overtake Germany. Why? Because the killer apps can be downloaded. It's open source.Any society can adopt these institutions, and when they do, they achieve what the West achieved after 1500 -- only faster.

This is the Great Reconvergence, and it's the biggest story of your lifetime. Because it's on your watch that this is happening. It's our generation that is witnessing the end of Western predominance.The average American used to be more than 20 times richer than the average Chinese. Now it's just five times, and soon it will be 2.5 times.

So I want to end with three questions for the future billions, just ahead of 2016, when the United States will lose its place as number one economy to China. The first is, can you delete these apps, and are we in the process of doing so in the Western world? The second question is, does the sequencing of the download matter? And could Africa get that sequencing wrong? One obvious implication of modern economic history is that it's quite hard to transition to democracy before you've established secure private property rights. Warning: that may not work. And third, can China do withoutkiller app number three? That's the one that John Locke systematized when he said that freedom was rooted in private property rights and the protection of law. That's the basis for the Western model of representative government. Now this picture shows the demolition of the Chinese artist Ai Weiwei's studio in Shanghai earlier this year. He's now free again, having been detained, as you know, for some time. But I don't think his studio has been rebuilt.

Winston Churchill once defined civilization in a lecture he gave in the fateful year of 1938. And I think these words really nail it: "It means a society based upon the opinion of civilians. It means that violence, the rule of warriors and despotic chiefs,the conditions of camps and warfare, of riot and tyranny, give place to parliaments where laws are made, and independent courts of justice in which over long periods those laws are maintained. That is civilization -- and in its soil grow continuallyfreedom, comfort and culture," what all TEDsters care about most. "When civilization reigns in any country, a wider and less harassed life is afforded to the masses of the people." That's so true.

I don't think the decline of Western civilization is inevitable, because I don't think history operates in this kind of life-cycle model, beautifully illustrated by Thomas Cole's "Course of Empire" paintings. That's not the way history works. That's not the way the West rose, and I don't think it's the way the West will fall. The West may collapse very suddenly.Complex civilizations do that, because they operate, most of the time, on the edge of chaos.That's one of the most profound insights to come out of the historical study of complex institutions like civilizations. No, we may hang on, despite the huge burdens of debt that we've accumulated, despite the evidence that we've lost our work ethic and other parts of our historical mojo. But one thing is for sure,the Great Divergence is over, folks.

Thanks very much.

(Applause)

Bruno Giussani: Niall, I am just curious about your take on the other region of the world that's booming,which is Latin America. What's your view on that?

Niall Ferguson: Well I really am not just talkingabout the rise of the East; I'm talking about the rise of the Rest, and that includes South America. I once asked one of my colleagues at Harvard, "Hey, is South America part of the West?" He was an expert in Latin American history. He said, "I don't know; I'll have to think about that." That tells you something really important. I think if you look at what is happening in Brazil in particular, but also Chile,which was in many ways the one that led the way in transforming the institutions of economic life, there's a very bright future indeed. So my story really is as much about that convergence in the Americas as it's a convergence story in Eurasia.

BG: And there is this impression that North America and Europe are not really paying attention to these trends. Mostly they're worried about each other. The Americans think that the European model is going to crumble tomorrow. The Europeans think that the American budget is going to explode tomorrow. And that's all we seem to be caring about recently.

NF: I think the fiscal crisis that we see in the developed World right now -- both sides of the Atlantic -- is essentially the same thing taking different forms in terms of political culture. And it's a crisis that has its structural facet -- it's partly to do with demographics. But it's also, of course, to do with the massive financial crisis that followed excessive leverage, excessive borrowing in the private sector.That crisis, which has been the focus of so much attention, including by me, I think is an epiphenomenon. The financial crisis is really a relatively small historic phenomenon, which has just accelerated this huge shift, which ends half a millennium of Western ascendancy. I think that's its real importance.