Among countries colonized by European powers during the past 500 years, those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal weighs against a view that links economic development to geographic factors. Instead, we argue that the reversal ree ects changes in the institutions resulting from European colonialism. The European intervention appears to have created an “ institutional reversal” among these societies, meaning that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the late eighteenth and early nineteenth centuries, and resulted from societies with good institutions taking advantage of the opportunity to industrialize.

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Reversal of fortune: geography and institutions in the making of the modern world income distribution*

The rise of Western Europe after 1500 is due largely to growth in countries with access to the Atlantic Ocean and with substantial trade with the New World, Africa, and Asia via the Atlantic. This trade and the associatedcolonialism affected Europe not only directly, but also indirectly by inducing institutional change. Where "initial" political institutions (those established before 1500) placed significant checks on the monarchy, the growth of Atlantic trade strengthened merchant groups by constraining the power of the monarchy, and helped merchants obtain changes in institutions to protect property rights. These changes were central to subsequent economic growth.

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The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth

Why did the industrial revolution take place in eighteenth-century Britain and not elsewhere in Europe or Asia? In this convincing new account Robert Allen argues that the British industrial revolution was a successful response to the global economy of the seventeenth and eighteenth centuries. He shows that in Britain wages were high and capital and energy cheap in comparison to other countries in Europe and Asia. As a result, the breakthrough technologies of the industrial revolution - the steam engine, the cotton mill, and the substitution of coal for wood in metal production - were uniquely profitable to invent and use in Britain. The high wage economy of pre-industrial Britain also fostered industrial development since more people could afford schooling and apprenticeships. It was only when British engineers made these new technologies more cost-effective during the nineteenth century that the industrial revolution would spread around the world.

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The British Industrial Revolution in Global Perspective

The Cambridge Economic History of Europe

Among countries colonized by European powers during the past 500 years those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal is inconsistent with a view that links economic development to geographic factors. According to the geography view, societies that were relatively rich in 1500 should also be relatively rich today. In contrast, the reversal is consistent with the role of institutions in economic development. The expansion of European overseas empires starting in the 15th century led to a major change in the institutions of the societies they colonized. In fact, the European intervention appears to have created an "institutional reversal" among these societies, in the sense that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the 19th century, and resulted from societies with good institutions taking advantage of industrialization opportunities.

/pdf/reversal-of-fortune-geography-and-institutions-in-the-making-4p4rwhs746.pdf

Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution

Introduction Part I. General Problems and Historical Events: 1. Trade and civilisation in the Indian Ocean: social, cultural, economic, and temporal dimensions 2. The rise of Islam and the pattern of pre-emporia trade in early Asia 3. The Portuguese seaborne empire in the Indian Ocean 4. The Dutch and English East India companies and the bureaucratic form of trade in Asia 5. Emporia trade and the great port-towns in the Indian Ocean Part II. Structure and la longue duree: 6. The sea and its mastery 7. Ships and shipbuilding in the Indian Ocean 8. The land and its relationship with long-distance trade 9. Commodities and markets 10. Capital and trade in the Indian Ocean: the problem of scale, merchants, money and production 11. Conclusion.

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Trade and Civilisation in the Indian Ocean: An Economic History from the Rise of Islam to 1750

Before the age of Industrial Revolution, the great Asian civilisations - whether located in the Middle East, India, South-East Asia, or the Far East - constituted areas not only of high culture but also of advanced economic development. They were the First World of human societies. This 1985 book examines one of the driving forces of that historical period: the long chain of oceanic trade which stretched from the South China Sea to the eastern Mediterranean. It also looks at the natural complement of the seaborne commerce, its counterpart in the caravan trade. Its main achievement is to show how socially determined demand derived from cultural habits and interpretations operated through the medium of market forces and relative prices. It points out the unique and limiting features of Asian commercial capitalism, and shows how the contribution of Asian merchants was valued universally, in reality if not legally and formally. Professor Chaudhuri's book, based on more than twenty years' research and reflection on pre-modern trade and civilisations, was a landmark in the analysis and interpretation of Asia's historical position and development.

Trade and Civilisation in the Indian Ocean

Trade and Civilisation in the Indian Ocean: An Economic History from the Rise of Islam to 1750.

This book explores the dynamic interaction between economic life, society and civilisation in the regions around and beyond the Indian Ocean during the period from the rise of Islam to 1750. Within a distinctive theory of comparative history, Professor Chaudhuri analyses how the identity of different Asian civilisations was established. He examines the structural features of food habits, clothing, architectural styles and housing; the different modes of economic production; and the role of crop raising, pastoral nomadism, and industrial activities for the main regions of the Indian Ocean. In an original and perceptive conclusion, the author demonstrates how Indian Ocean societies were united or separated from one another by a conscious cultural and linguistic identity. However, there was a deeper structure of unities created by a common ecology, technology, technology of economic production, traditions of government, theory of political obligations and rights, and a shared historical experience. His theory enables the author to show that the real Indian Ocean was an area that extended historically from the Red Sea and the Persian Gulf to the sea which lies beyond Japan.

K. N. Chaudhuri

Papers

Trade and Civilisation in the Indian Ocean: An Economic History from the Rise of Islam to 1750

Trade and Civilisation in the Indian Ocean

Trade and Civilisation in the Indian Ocean: An Economic History from the Rise of Islam to 1750.

Asia Before Europe: Economy and Civilisation of the Indian Ocean from the Rise of Islam to 1750

The Trading World of Asia and the English East India Company, 1660-1760.