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when did cross-nation economic inequality emerge and why?
emerged after 1500 first with mercantilism, then the IR, then modern economic growth, and then the world trade system driven development of underdevelopment
why, by 2000, is the Dover-Circle-Plus 20-25 times richer than sub-Saharan Africa?
the success of its âfive foundationsâ- national markets, infrastructure, banks, schools, and tariffs
true or false: cultural differences were the key to the Great Divergence
false
what was the true key/factors of the great Divergence?
institutions, geography, and resources
why did Western Europe, particularly Britain, industrialize first?
high wages, abundance of energy in the form of coal, and low capital costs
global trade and colonization provided raw materials and capital
institutions and policies enables secure property rights and banking supported the industrial expansion
what are the three phases of economics that Allen highlights?
mercantilist (1500-1800)
catch-up (1800-1900)
20th century
what is the Great Divergence?
the economic disparities between Western Europe and the rest of the world; the economic gap that emerged after 1750, where Western Europe, especially Britain, began sustained economic growth, while other regions like China and India lagged behind
what major factories contributed to the disparities in development between the US, Britain, Egypt, and India?
industrialization (amount of manufacturing a country does, more manufacturing means higher incomes)
globalization and colonialism (colonies and trade networks benefited earlier colonizers)
high wages drove industrialization (India and Egypt had lower wages and high capital costs)
economic policies (Us and Britain adopted unified national market, external tariffs, chartered banks, and mass education)
literacy and skills
in the 1500s, income differences were _______ between countries
small
what invention sparked colonialism and the start of the Great Divergence?
Full-rigged ships allowed for longer voyages- sparked the Age of Exploration
what was the role of English and Dutch East India Companies role in the Great Divergence?
with new transportation technology, they were able to obtain raw materials at a lower price- this meant lower prices for consumers in North-Western Europe (globalization)
what happened to countries that industrialized?
led to growing cities and urbanization; higher demand for workers which meant workers had more bargaining power
what happened as wages started to rise in North-West Europe?
agricultural revolutions due to growing cities and need to support large populations
education became more affordable (lead to higher literacy rates)
how did the income gap grow between countries (1800- present)?
industrialization and deindustrialization
China and India were manufacturing powerhouses but industrialization meant Britain and US increased manufacturing
what were the results of the comparison of real wages in London and Beijing?
Londonâs real wages were rising steadily since 18th century
Beijingâs real wages remained ow barely changing
caused difference in living standards
what is bare-bones subsistence?
level of poverty where you are barely just surviving
what is a poverty-trap?
when people are at bare bone subsistence, they cannot reinvest in their future (no education, healthcare, technology, etc)
they canât improve their situation because they are in poverty and they are in poverty because they cannot improve their situation
how did the price of labor dictate industrialization/deindustrialization?
when labor is cheap, there is no incentive for labor-saving technology
when labor is expensive, there is an incentive to innovate to invent machines that could do work more cheaply
what slowed down technological progress in places like India?
poverty-trap; labor is cheap
the Great Divergence was the result of
globalization, technological advancements, industrialization, high wages, and strategic economic policies
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