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-19 th 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: £ (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)

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), Why isn’t the whole world developed?*

Clark’s Take Differences in cotton textile efficiency ca 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 20 th century  First step to the path to industrialization  Technology not particularly complex  Ready markets for yarn and cloth

Britain’s advantage?

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

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?