Economic History of the World

It has long been recognized that economic performance of a country is linked in some way with characteristics of its population. Which characteristics and in what proportion has been matter of much investigation. Max Weber has influentially argued for religion, others have used more encompassing terms like culture or heritage. I’ve also read about inquires into relationship between IQ and the wealth of nations.

Obviously the idea is not easy to capture and quantify, but I think most people would agree that there is some underlying truth to it. Nations are obviously different in many aspects. But which of them influence their welfare?

One particular term that is used here in Croatia is mentality. Often in the context of something being a good idea or policy and “our mentality” preventing successful execution, but sometimes also in positive contexts.

I can’t begin to describe how annoying I find the concept. Why? Because if national mentality exists, it’s a product of centuries of collective expirience and a persistant feature. Government policy may shift incentives around and influence behaviour of individuals, but changing the mentality of the nation would be beyond the power of bureaucrats.

The idea that economic development is largely dependent on a variable that for practical purposes doesn’t vary at all is a pretty depressing one. I refuse to accept it . We have to be able to change our situation through conscious effort.

I am not saying that characteristics of a population can’t be measured at all. I’m saying that it’s doubtful whether we can derive anything meaningful from those measurements. Here is an interesting work by Geert Hofstede (you can compare any two countries on the site):

Those variables are as good indicators of values/mentality as any. But how do they relate to economic performance? I’ve looked through the country list and found no obvious relationships. It seems that if there are any, they are as elusive as the definition of mentality itself.

To crown my recent big update of the Croatian part of the site, I’ve also taken some time to refresh my memory about Rondo Cameron’s A Concise Economic History of the World and write a review. The book is one of the few attempts at global history that didn’t end up as five volume series so you will find it recommended reading at many university courses on the subject. While it boasts the subtitle From Paleolithic Times to the Present it is mostly concerned with the period around the industrial revolution. Cameron doesn’t like the term, but provides a good narrative of the phenomenon. He has mostly concentrated on the factors that explain the differences in economic development of European countries. For example, development of China and India isn’t much discussed, nor are the reasons for it being different than that of Europe.

I have added more content to the portion of my site that is in Croatian. It is now richer for a book review and also the complete book Bogatstvo svijeta - ekonomska geografija za svakoga by Jurij Semjonov. This is a very enjoyable book on economic history and economic geography from 1937. I have the Croatian edition and it says it’s a translation but doesn’t mention which is the original language, title or publisher. Strangely, I couldn’t find anything about Jurij Semjonov on the internet either. I’ve tried a plethora of other spellings (Yuri Semyonov, Urii Semenov…) without success. I’m so used to finding everything quickly that this genuinely surprised me.

I’ve added another book review in Croatian. This time it is Kratka povijest ekonomije, Croatian translation of German youth book Geschichte der Wirtschaft (History of Economy) by Nikolaus Piper. I ran into it in the library and took under an hour to read it. If you expect a youth book to be childish you would be wrong with this one, it’s completely serious. It is probably a decent introductory text about the subject, especially since Rondo Cameron’s A Concise Economic History of the World, which is itself very condensed, has about four times more text.

I’m very good at finding stuff online. I don’t have time or will to actually read or see it all but I still find and even hoard a lot of information . Here are some video lectures I found which are exactly about the topic of this blog: world economic history. I can’t vouch for their quality as I haven’t watched them yet. Hopefully someone will find something useful.

Why the Industrial Revolution took off in Europe but failed in East Asia

Kenneth Pomeranz (University of California at Irvine)

Click.

The Industrial Revolution and the Great Divergence: World Economic Growth since 10,000 BC
(3 lectures)

Gregory Clark (University of California, Davis)

Click.

An Introduction to Global Economy History
(3 lectures)

Patrick O’Brien (London School of Economics)

Click.

Collapses of Ancient Societies and their Lessons for Today

Jared Diamond (UCLA)

Click.

An Empire of Wealth: The Epic History of America’s Economic Power

John Steele Gordon

Click.

My review of Jared Diamond’s Guns Germs and Steel (in Croatian) can be read here. If there’s still someone who hasn’t read it: it’s a great book and I recommend it if you are interested in global history. My objections are minor (more about them in the review). Anyway, it is a popular book, but be warned: it doesn’t read like a thriller and isn’t packed with action and humor. Mostly facts and careful interpretations. Diamond is a scientist after all, and scientists are careful about what they say

I found some useful charts to further illustrate the performance of the countries from my previous article. The source is Prospects of Economic Integration: Are the New Member States Ready to Catch-Up in the Wider EU? (1.7 MB .ppt presentation). Here they are:

Among the candidates for entry into European Union there is a common perception that membership in the EU is going to accelerate economic growth of the aspiring member. Only two years have passed since ten countries have entered EU in 2004, too short a period to make any meaningful observations.

Instead, I attach the data about GDP/capita levels in members that have joined EU earlier (it was then called European Economic Community). Ireland became a member in 1973, Greece in 1981, Spain in 1981 and Portugal in 1986. Greek part of Cyprus joined in 2004.

The new members are supposed to benefit from at least two things:
1) integration into the huge free trade zone that EU is and
2) adjustment funds from the richer members

All countries mentioned were below 75% of EU average in GDP/capita and thus eligible for funds that would allow them to converge to it. Have they suceeded?

Ireland, known because of its later growth as the Celtic tiger, only picked up with growth in the last decade of the 20th century. This is despite being a destination of EEC adjustment funds for longer time than any other member.

Spain expirienced solid growth after its EEC membership, which is often mentioned as case in point of membership accelerating economic growth.

Portugal has started from a very low level, had some good growth which seems to have dissapeared in 2000. I don’t know the cause, but until then Portugal and Spain seemed to follow a similar growth pattern.

Greece not only failed to converge to the EU average, but actually diverged for a period. This has been a mystery for analysts. Greece has had relatively large military and social expenditures and it accumulated a lot of debt under the socialist government but that is not enough to explain the lag. Greece has also been a reciever of generous EU funds.

Cyprus is the control country . It especially lends itself to comparisons with Greece. Whatever be the cultural influences on economic growth they cancel each other in this case since both countries are populated with Greeks. The difference in economic performance can most likely be attributed entirely to differences in economic policy.

What can one conclude from all this? Not too much, of course. Every country has its own story to tell (I might cover some of them in more depth in subsequent posts) but the least we can say is that strong economic growth is possible for a European country without membership in the European Union. As for how much the membership helps growth, I’d say that the jury is still out. EU has literally thrown billions at Ireland, Portugal and Greece (my favourite example, thank you Greece for not growing for a period ), with mixed results. Ireland is now at 40% above the average EU GDP/capita, but the case of Portugal and Greece (both at about 20-25% below it) is far from spectacular.

I have uploaded my review of Freakonomics in Croatian. I like the title of the book but I was underwhelmed by the content, possibly because I was exposed to most of the issues discussed prior to reading it. The only really cool insight is the point about Roe vs. Wade ruling in the 1970s decreasing the crime rates across the US in the 1990s. Levitt’s proof seems fairly convincing but then again, I haven’t read the refutations (I know that there are quite a few).

Statistics are essential in the study of economic history. Unfortunately, there is a huge problem concerning historical statistics: for most of human history we have none. Writing has been invented most likely for the purpose of keeping accounts (most Sumerian texts still being dug out are inventory lists) but national accounts are a more recent invention. That means that in estimating economic performance for periods before modern states we have to do a lot of guessing. A combination of preserved documents (censuses, church records…) and archeological evidence is used to make those guesses as educated as possible. The task is very difficult and the margin of error can be fairly large.

I want to point to an excellent source of historical statistics.

Angus Maddison has done enormously useful work in this area. He has compiled tables with data on population and economic performance. He did it for for all regions of the world and an impressive period - two millenia! Thanks to this excellent effort, we can now compare regions of the world at a glance. If you’re into quantifying things like I am, the very idea should make you warm around the heart. I’m so impressed I’ve ordered Maddison’s book The World Economy: Historical Statistics from Amazon.

But what I’m getting at is that much of this data is also available online. Here is the link to the main table:

World Population, GDP and Per Capita GDP, 1-2006 AD (xls)

Angus Maddison’s web page also gives some sneak peaks at his other books, as well as sample tables and charts from them.