How Rich Were Countries Before the Industrial Revolution?

The late Angus Maddison undertook an heroic effort to estimate income levels in different countries over the past two millennia. Now, a team of economic historians has updated his data. What did they find?

Here is their own Conclusion:

Summing up, a substantial amount of new work has been published in the past ten years which is generally consistent with the picture Maddison put forward in his 2001/2003 framework. The most severe criticisms at his estimates by Pomeranz (2000) and other specialists on Asian economic history, that he systematically underestimated real incomes in large parts of Asia in the 18th and early 19th century, has generally been proven wrong: detailed research by scholars working on India, Indonesia, Japan and China has shown that the magnitude of the real income gap as estimated by Maddison was about right. Another important result is that Maddison might have overestimated growth in Europe between 1300 and 1800, and that levels of real income were already quite high during the late Middle Ages. We now also know much more about long term trends in real incomes in Western Europe (England, Holland, Spain, Germany etc.), in the United States, in Japan, India and South Africa than we knew ten years ago.

Two main points:

  • NW Europe was already richer than Asia before the Industrial Revolution (contrary to the revisionist or multicultural school).
  • NW Europe was growing richer already in the Middle Ages.

Together, these results mean that there was more than one Great Divergence: there was a preindustrial divergence (medieval to 1800) and then an industrial divergence as Europe shot even further ahead (after 1800). This is an additional reason to reject the revisionist or multicultural school – whom I discussed and criticized here)

Some more details:

There was an early divergence in income between Europe and Asia:

The debate on the “Great Divergence” between Europe and Asia … whether the level of economic development (in terms of GDP per capita) in China (and India and Japan) before industrialization was comparable to Western Europe (Pomeranz 2000). Maddison’s estimates for that period have been criticized because they show an already substantial gap in real incomes between the different parts of EurAsia; in Western Europe the average GDP per capita was about 1200 dollars, whereas China and India were estimated at between 500 and 600 dollars. Recent studies on this topic generally confirm Maddison’s interpretation

There was slow early modern income growth in NW Europe:

The most important finding from this new work is that probably growth in Western Europe was more gradual than was implied by the previous Maddison-synthesis. … Between 1300 and 1800 growth did occur, however, but it was mainly concentrated in the North Sea area, where England and Holland grew from about 900 dollars at about 1300 to more than double that level – 2100 (Great Britain) to 2600 (Holland) dollars – in 1800.

There was continuous income growth in NW Europe since the Middle Ages:

there is consistent growth of GDP per capita in the North Sea area from c 900 dollars before the Black Death, to more than 2000 dollars at about 1800, making it into the most prosperous part of the world economy at that time; real incomes in North America develop similarly, and show continues growth between 1650 and 1800. The Industrial Revolution that began in the UK (and quickly spread to Western Europe and North America) was therefore not a sudden break in economic performance, but a continuation of the growth record since the Late Middle Ages (Van Zanden 2009).

All this of course raises the fundamental question: why?

  • Why was NW Europe already the richest area before the Industrial Revolution?
  • Why did income growth begin in the Middle Ages and continue on thereafter?
  • What was so unusual about the North Sea area?

Jutta Bolt and Jan Luiten van Zanden, The First Update of the Maddison Project Re-Estimating Growth Before 1820 Maddison-Project Working Paper WP-4 January 2013 (pdf)

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One response to “How Rich Were Countries Before the Industrial Revolution?

  1. Pingback: Two Great Divergences | Breviosity

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