World Growth since 1800

Technological improvements

Speed of diffusion of information Pre-1800: very slow

Roman times: 1 mile/hour 1800: 2.7 miles/hour

Mid-19th century 1865: 12 miles/hour 1881: 119 miles per hour

Technological improvements

Decrease in costs of transportation: Expansion of railroads

Faster and more cost-effective steamships

Transport of 1 ton of cotton 1793: £31 (London-Bombay) 1907: £0.9-1.5 (Liverpool-Bombay)

Technological improvements

Mechanized factory Before the IR: apprenticeships From the IR: unskilled labor, minimal supervision.

Territorial expansion By 1900 European states controlled 35% of the

land surface of the world.

World Growth since 1800

Rest of the world did not follow the European rapid growth path.

Gap in material living standards 1800: 4:1 Now: 50:1

Concentration of global economic output (Western Europe, North America, and Oceania)

12%

20%

12%

25%

51%

45%

0%

10%

20%

30%

40%

50%

60%

1800 1913 2000

Population

Output

Anatomy of Divergence by Clark Divergence

NOT explained by Access to capital Access to resources Access to technology

explained by the relative efficiency of utilization of technology.

(*) Gregory Clark. Why Isn’t the Whole World Developed? Lessons from the Cotton Mills. The Journal of Economic History, Vol. 47, No. 1 (Mar. 1987), 141-173

Why isn’t the whole world developed?*

Clark’s Take

Differences in cotton textile efficiency ca. 1910 NOT explained by: Input substitution Differences in technology Management Workers’ training

So, what is it? It’s local culture!

Why does it matter?

Because it gives evidence on a potential explanation of underdevelopment.

It rejects the view that poor countries remain poor due to: inability to absorb advanced technologies, lack of management skills, lack of appropriate institutions, lack of economies of scale.

The case

Detailed study of cotton textiles in the early 20th century

First step to the path to industrialization

Technology not particularly complex

Ready markets for yarn and cloth

Britain’s advantage?Manufacturing Costs

0.0

0.5

1.0

1.5

2.0

India France England New EnglandSource: Clark (1987), Table 1

En

gla

nd

= 1

A question of efficiency?

Corrected by labor efficiency, competition with England is reduced to India, Japan, and China.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0 2 4 6 8 10

wage ($/week)

ma

ch

ine

ry p

er

wo

rke

r

Source: Clark (1987), Table 3

England

India

Explaining differences or not…

Capital-Labor Substitution

Raw Materials-Labor Substitution

Technology

Labor Experience

Local Effects

In India: “The operatives in this mill refuse to attend more machinery.”

In Mexico: “the Mexican operatives are very conservative, […], it has yet been found impossible to persuade them to run any larger number of automatic looms.”

Q & A

Professor Clark, the conclusion of your paper

implies cultural determinism?!

Yes!

What about Professor Gupta that claims that it

was a question of nutrition?

Oh well, she is wrong!

Are “we” just lazy…?

Similar problems in other industries in poorer countries

Inefficiency a major factor in underdevelopment

Questioning

Evidence: Can we extrapolate the evidence from one industry and infer

that the problem with underdeveloped countries is culture? Methodology:

So, it’s not technology, it’s not labor quality, then can we conclude that it IS culture?

Conclusions: Can developing countries overcome the “culture of laziness /

stubbornness”? Is culture an institution? If so, is it endogenous or

exogenous?