Suresh Naidu: What produced the real wage hockey stick? - unit 1

Introduction

• Discussion on a recent journey taken to Coventry in Northern England.

  • Lack of free Wi-Fi on the train became a point of contemplation.

  • Comparison made with historical living conditions.

  • Reference to individuals living eight hundred years ago, highlighting:

    • Diet consisted of "thin watery gruel."

    • Average life expectancy of approximately 45 years, if fortunate.

• The role of economic historians:

  • Understanding societal transformations over time.

  • Addressing current global disparities in wealth and living standards.

Speaker Introduction

• Name: Suresh Naidu

• Title: Assistant Professor of Economics at Columbia University.

Historical Context of Economic Change

• Recognition of England as the birthplace of the Industrial Revolution.

  • Specific focus on Northern England, especially cities like Manchester and Liverpool.

  • These locations exemplified the first wave of self-sustaining economic progress.

• Inquiry into how such progress was achieved:

  • Learning from historical experiences of various countries for better future outcomes.

Analysis of Economic Forces

Overview of Real Wages

• Presentation of a graph displaying real wages in England:

  • Timeline: From December to present.

  • Initial observation: Prolonged periods of low wages, indicating widespread poverty.

  • Notable increase in wages occurring after a significant event.

Key Forces Explained

1. Biological Scarcity

   • Historical reference: The Black Death in 1348.

     • Estimated population loss of 30-50% in Britain.

   • Consequences of reduced population:

     • Fewer individuals sharing the same amount of resources.

     • Expected outcome: Improvement in living standards and rise in wages post-Black Death.

   • Subsequent population recovery:

     • Increased wages lead to higher birth rates.

     • Anticipated decline in wages as population grows, leading to reduced scarcity.

2. Technological Productivity

   • Definition: Degree of output produced per individual.

   • Graphical evidence:

     • The blue line represents GDP per capita, a measure of output.

     • Sustained increase observed beginning late 18th century.

     • Correlation established: Increased output per person allows for a higher standard of living.

   • Discrepancy noted:

     • Wages do not necessarily increase in direct proportion to the rise in productivity.

3. Institutions and Policies

   • Key historical movements at the start of the 19th century:

     • Rise of worker and political movements:

     • Trade union movement.

     • The Chartist movement.

     • Establishment of the British Labour Party.

   • Institutional transformations led to:

     • Aligning wages with the greater availability of resources per person.

Summary of Economic Transformation

• The interplay of the three identified forces:

  • Biological Scarcity

  • Technological Productivity

  • Institutions and Policies

• These forces collectively facilitate England's transition from poverty to wealth.

Broader Implications

• Lessons derived:

  • The three forces are not confined merely to England's economic history.

  • They offer insights into why certain countries have not undergone similar economic transformations.

  • Understanding economic history serves as a crucial tool for both:

  • Comprehending past societal evolutions.

  • Informing future economic policies and actions to promote growth.