Student name: Mila van der Ende
Sudent number: 509351
Course number: CH1103
The creation of the Great Divergence
The term “the great divergence” was first introduced to the scholarly world by Kenneth Pomeranz around the year 2000. He used the term for the big gap between rich and poor countries that began to grow with the industrialization of some countries1 Pomeranz suggests that certain regions of China, India and western Europe were quite similar in terms of agricultural productivity, their commercial development and the ability of some of their firms to earn capital around the 1750s. The Great Divergence in wealth between the West and the rest of the world grew when the industrialization and the economic growth emerged in Britain. 2 But why did the industrial revolution happen in Europe? Why not in Asia? And another question that comes up is why did the emergence of the industrial revolution create such a big gap between the rich and poor countries?
There are some theories about why the industrial revolution started in Britain, and not other parts of the world. One of them is that capitalism was a Western invention and also the spark that led to economic development. It also claims that Europe was more dynamic and different from the rest of the world of which it came to rule in some parts. This theory is supported by Marxists who came to the conclusion that the parts of the world outside of Europe were lacking internal dynamics to support a transition to capitalism on their own, which eventually should leed to the industrial revolution.
There are also other theories that support the idea that the differences between China and the industrialised part of Europe are not that big. Some people who have studied the Great Divergence state that China was an important part of the economy of the world. In the second half of the eighteenth century China contained about one-third of the earth's inhabitants. This could indicate that it also was the economy with the biggest GDP in the world. This eventually leads to different claims by writers like Pomeranz who think that at least in some parts of North-western Europe, real wages were higher than in the richest parts of Asia. But in their estimates, the differences are not that big, especially not compared to those that originated with industrialization. In this theory, the wealth of these continents is measured by wages, while it should actually be measured by income instead. It is important to be careful with thinking that there is a strong relationship between wealth and development. For example, The Dutch Republic was considered one of the richest countries in the world until 1820, but it industrialized a little late compared to other countries in Europe. Also, the cost of being the first industrialized nation, like Britain, was not that high and practically could have been done by some other nations. I would like to add that the industrial revolution might have meant technological and economic development, but it also brought along a lot of issues concerning the health of the people.
China did not take much initiative on a global scale, they did not travel to other continents a lot. China owned a lot of silver, but this was only because it was brought to them by the Europeans.
So not all of the claims about China being an important economy are true or efficiently explained.
What can be said about China is that its economy was healthier and its importance bigger than what is suggested by some Eurocentric stories. But how does one measure the importance and health of a nation? It is possible to look at real wages, but this is not the best indicator. A good addition could be the life expectancy or income. If one looks at these indicators, a similarity between China and Europe can be recognized. Early modern China actually had a sophisticated system of production and trade and was a place in which many innovations took place. It was familiar with private property and property rights and had well-functioning commodity markets. It was a highly developed commercial society. It had a government that was not continuously interfering in the economy and it had quite a large foreign trade. Both China and Europe were at first dependent for their wealth on quantity and quality of their land. They both came across the same problems and they at first did not use fossil fuels extensively.
The reason that the industrial revolution occurred in England and not any other part of the world might have to do with the British manufacturing wages that were quite high in the eighteenth century because of the high productivity in tradable products and services. Since the 1750's the population of Britain increased but labor remained expensive. There had been a long continuity in experimenting to find a mechanical solution to problems with the production and usage of coal.
For the ones who wanted to invest in machinery, it was important to have low-interest rates which Britain had.
Another reason is that Britain had India as their colony, which they maintained for quite a while. China also had a lot of unused resources, but they did not use or search for it as actively as Britain did. The British overseas imperialism focussed a lot more on exploring and controlling the regions that they had taken over, which the Chinese overland imperialism barely did. It also contained much more land.3
The Great Divergence can also be explained with the early globalization of Europe which created direct and indirect economic benefits that the far Eastern countries did not have. 4
There have been some Eurocentric views on the Great Divergence that assume that there have been big differences between the West and the rest because of the West's industrialization and development which put them a big step ahead of other parts of the world. There also have been people who have concluded that China actually was not that different from Europe which suggests that Europe actually was not that far ahead of them. This idea has been supported by concrete arguments as well as questionable arguments. An issue that comes up with trying to measure the development of China and Europe is the question of with which tools one should be measuring. Trying to measure development with very limited tools will also create a very weak indication of development, so it is important to include many different tools and to make sure that they are a good indication of that which you are measuring. A deceiving thing that could happen during this measuring is that the tools that are used are in favor of one party or the other.
Pomeranz is a supporter of the idea that there are similarities between Europe and China in the 1750s, which I believe to be true, but he does not use the correct tools to prove it.
In this paper, I have only made use of a couple of sources that supported or did not support Pomeranz idea. In order to create a complete and un-bias depiction of this idea, more research needs to be done and more different ideas would need to be taken into consideration.
Bibliography
Dobado-Gonzalez, Rafael, Alfredo Garcia-Hiernaux, David E. Guerrero. “West versus Far East: early globalization and the great divergence” Cliometrica, Springer-Verlag Berlin Heidelberg, 2015
Jones, Geoffrey. Business History, the Great Divergence and the Great Convergence, Harvard Business School, 2017
de Vries, Peer. “The California School and Beyond: How to Study the Great Divergence?” History Compass Nr 8/7, University of Vienna, 2010