EH1: SB TOPIC 2
Wages, Prices and the Great
Divergence
TOPIC 2: WAGES, PRICES AND THE GREAT
DIVERGENCE: LECTURE OUTLINE
•
•
•
•
•
A. SILVER AND GRAIN WAGES
1. The Great Divergence Debate
2. Wages and Prices in Europe
3. Wages and prices in Asia
4. Explaining Europe-Asia Wage-Price
Differences
2
1. THE GREAT DIVERGENCE DEBATE
1. WHEN DID THE GREAT DIVERGENCE BEGIN?
• Recent emergence of group of revisionist
“world historians”, many based in California,
who claim “Great Divergence” between
Europe & Asia occurred only after 1800
3
1A. CONVENTIONAL VIEW
• Although Industrial Revolution saw shift to
continuous steady state growth of per capita
income circa 1800, Early Modern period 15001800 saw levels effect from capital deepening
• Huge literature examined institutional
developments underpinning this: rise of
market economy with incentive structures for
accumulation and innovation
• Policy implications: development is difficult
since institutional frameworks hard to change
4
1B. CALIFORNIA SCHOOL VIEW
• Conventional view is Euro-centric
• Deny any divergence between Europe & Asia
before 1800
• Explanations of post-1800 development:
• Pomeranz: coal deposits & colonies
• Parthasarathi, Frank: exploitation of colonies
5
1C. CRITICAL ASSESSMENT
• Broadberry/Gupta:
• Great Divergence began during Early Modern
period
• Advanced parts of Asia on same development
level as European periphery by 1800
6
1D. CONCEPTS
• Silver wage: daily money wage in terms of
silver content.
• Silver is world currency. Debasement possible
by reducing silver content, but all prices here
corrected for this.
• Grain wage: amount of grain that daily silver
wage can purchase
7
1E. FINDINGS
• Although grain wage in most advanced parts
of Asia close to NW European level until 1700,
silver wage much lower (as in European
periphery)
• High silver wages in NW Europe not simply
monetary phenomenon (inflow of bullion
from New World), but result of high
productivity in traded goods sector (services &
industry)
8
Findings
• Early existence of key features of relationship
between developed country and LDC:
– Wages in LDC meet food needs of population at
LDC food prices, but not at developed country
prices
– Manufactures produced in LDC relatively
expensive at LDC prices but competitive on world
market because of low wages in developed
country prices
9
2. WAGES AND PRICES IN EUROPE
2A. SILVER WAGES AND GRAIN WAGES
• TABLE 1: Daily wages of unskilled and skilled building
workers in terms of silver content: silver wage
– Substantial silver wage growth in NW Europe, with GB
overtaking Netherlands during C18th.
– Considerable fluctuations, less trend growth in S. Europe,
starting from same level as NW Europe in 1500
– Fluctuations & only weak trend growth in central & E.
Europe, starting from lower level in 1500
– Regional variation similar for unskilled & skilled workers;
skill premium 50% in NW, 100% in south, central & E.
Europe
10
TABLE 1: Silver wage (grams of silver per day)
A. Unskilled
labourers
Northwestern Europe
London
Southern England
Amsterdam
Antwerp
Paris
Southern Europe
Valencia
Madrid
Milan
Florence
Naples
Central & eastern
Europe
Gdansk
Warsaw
Krakow
Vienna
Leipzig
Augsburg
150049
155099
160049
165099
170049
175099
180049
3.2
2.5
3.1
3.0
2.8
4.6
3.4
4.7
5.9
5.5
7.1
4.1
7.2
7.6
6.6
9.7
5.6
8.5
7.1
6.9
10.5
7.0
8.9
6.9
5.1
11.5
8.3
9.2
6.9
5.2
17.7
14.6
9.2
7.7
9.9
4.2
--2.9
3.3
6.6
6.3
-3.8
3.5
8.8
8.0
5.9
4.7
5.3
6.9
-4.1
-4.8
5.7
5.1
3.2
-4.8
5.1
5.3
2.9
-3.8
-8.0
3.1
-3.8
2.1
-1.9
2.7
-2.1
2.1
2.5
2.9
2.6
1.9
3.1
3.8
3.2
3.4
4.4
3.5
4.0
4.3
2.7
2.9
3.5
3.9
4.7
3.8
1.9
2.2
3.2
3.7
4.2
3.7
3.4
2.9
3.0
3.1
4.3
4.8
4.9
2.4
2.1
4.4
--
11
Silver wage
• Silver wage shows conventional pattern: NW
Europe pulls ahead of previously more
developed South, with central & E. Europe
continuing to lag behind
• Strong positive correlation with urbanisation
ratios
12
Grain wage
• TABLE 2: Grain wage = volume of wheat or rye
that daily silver wage buys. Regional pattern of
grain wage is mirror image of silver wage:
– Negative trend in all regions
– Highest level of grain wage in central & E. Europe
13
TABLE 2: Grain wage (kg of grain per day)
A. Unskilled
labourers
Wheat
Southern England
Antwerp
Paris
Valencia/Madrid
Florence/Milan
Rye
Amsterdam
Krakow
Vienna
Leipzig/Augsburg
150049
155099
160049
165099
170049
175099
180049
10.1
8.8
6.8
10.7
4.7
6.3
7.2
4.9
7.4
3.4
4.0
7.7
6.0
6.3
4.4
5.4
7.4
7.2
7.6
6.1
8.0
9.8
7.2
8.6
5.2
7.0
9.6
6.0
4.8
3.3
8.6
-8.4
-2.8
10.3
48.7
18.6
9.6
8.6
27.9
7.6
5.6
11.5
15.7
9.9
6.0
13.3
18.7
9.0
9.5
17.8
22.7
8.0
8.4
14.0
23.0
7.0
6.1
10.7
-3.1
5.8
14
2B. RELATIVE PRICES AND REAL
CONSUMPTION WAGES
• High silver wages in NW Europe did not lead
to high grain wages before C19th
• Real consumption wages may still have risen
through increased consumption of non-agric
goods & services.
• TABLE 3: Real consumption wage of unskilled
building labourers, based on basket of
commodities, with London 1500-49 = 100
(Allen)
15
TABLE 3: Real consumption wage (London 1500-49=100)
Northwestern Europe
London
Amsterdam
Antwerp
Paris
Southern Europe
Valencia
Madrid
Florence/Milan
Naples
Central & eastern
Europe
Gdansk
Warsaw
Krakow
Vienna
Leipzig
Augsburg
150049
155099
160049
165099
170049
175099
180049
100
97
98
62
85
74
88
60
80
92
93
59
96
98
88
60
110
107
92
56
99
98
88
51
98
79
82
65
79
-62
73
63
56
53
54
62
51
57
69
53
-51
--
51
58
47
88
41
42
35
50
--26
33
78
-67
88
-62
50
75
74
60
34
50
69
66
65
61
35
39
72
72
67
63
57
63
73
45
58
61
53
55
61
64
63
50
44
50
40
82
40
27
53
--
16
Real consumption wage
• TABLE 3 removes some perplexing aspects of
grain wage data in TABLE 2:
– Real consumption wage data show opening gap
between NW & rest of Europe, as with silver wage
data
– High grain wages of central & E. Europe don’t
translate into high real consumption wages since
urban wage earners bought bread not grain &
other non-grain items were expensive
17
Real consumption wage
• But real consumption wage data still show
declining living standards in Europe, 15001800. Divergence due to constant real wage in
NW & collapse in periphery.
• TABLE 3 based on assumption of constant
annual number of days worked. But what
about “Industrious Revolution”?
18
2C. STRUCTURAL CHANGE
• Allowing for Industrious Revolution is one way
of producing modest upward trend of real
wages in NW Europe (< 0.2% p.a.)
• Structural change would be another way, with
shift to higher paying jobs in cities
19
Urbanisation
• Already noted correlation between silver
wages and urban development. TABLE 4:
MIDDLE AGES:
• 2 main urban centres in late medieval period,
in Low Countries and N. Italy
• Urban development lagged in central & E.
Europe
20
TABLE 4: European urbanisation rates (%)
Scandinavia
England (Wales)
Scotland
Ireland
Netherlands
Belgium
France
Italy CN
Italy SI
Spain
Portugal
Switzerland
Austria (Czech, Hung)
Germany
Poland
Balkans
Russia (European)
EUROPE
1300
-4.0
-0.8
-18.2
5.2
18.0
9.4
12.1
3.6
3.0
0.6
3.4
1.0
5.2
2.1
5.4
1400
-2.5
-2.1
-21.9
4.7
12.4
3.3
10.2
4.1
2.0
0.5
3.9
1.3
4.6
2.3
4.3
1500
0.7
2.3
2.3
-17.1
17.6
5.0
16.4
12.7
11.4
4.8
2.8
0.8
5.0
5.4
7.7
2.0
5.6
1600
2.1
6.0
1.5
1.0
29.5
15.1
6.3
14.4
18.6
14.5
11.4
2.7
1.6
4.4
6.6
13.3
2.2
7.3
1700
4.3
13.2
5.3
5.1
32.5
20.2
8.7
13.0
16.1
9.6
9.5
3.3
1.7
5.4
3.8
14.0
2.1
8.2
1750
4.6
16.4
11.5
5.1
29.6
16.5
8.7
13.6
19.4
9.1
7.5
4.6
2.6
5.7
3.4
12.3
2.5
8.0
1800
4.6
22.1
23.9
7.3
28.6
16.6
8.9
14.2
21.0
14.7
7.8
3.7
3.1
6.1
4.1
9.8
3.6
8.8
1870
5.5
43.0
36.3
14.2
29.1
25.0
18.1
13.4
26.4
16.4
10.9
8.2
7.7
17.0
7.8
10.6
6.7
15.0
21
Urbanisation
EARLY MODERN PERIOD
• Urbanisation stalled in N.Italy after 1500
• Brief surge in Portugal and Spain following
voyages of discovery
• But most dramatic growth in early modern
period in NL and GB
• Urban development continued to lag in
central & E. Europe
22
KEY QUESTION
• Were advanced parts of Asia more like NW
Europe (as claimed by Pomeranz &
Parthasarathi), with high silver wages but
modest grain wages?
• Or were they more like peripheral Europe,
with low silver wages as well as modest grain
wages?
23
3. WAGES AND PRICES IN ASIA
3A. SILVER WAGES AND GRAIN WAGES IN INDIA
• TABLE 5: daily wages of unskilled & skilled
workers in terms of silver content & amount
of grain they could buy.
24
TABLE 5: Indian silver and grain wages, 1595-1874
A. Northern and western India
Silver wage
(grams per day)
Unskilled Skilled
1595
0.67
1.62
1616
0.86
1623
1.08
1637
1.08
2.37
1640
1.29
1690
1.40
1874
1.79
5.27
B. Southern India
Silver wage
(grams per day)
Unskilled Skilled
1610-13
1.15
1600-50
1.15
1680
1.44
2.44
1741-50
1.49
1750
(3.02)
(7.56)
1779
0.86
1790
1.44
Wheat grain wage
(kg per day)
Unskilled Skilled
5.2
12.6
3.0
3.8
3.8
8.3
4.5
4.3
2.5
7.5
Rice grain wage
(kg per day)
Unskilled Skilled
3.1
7.5
2.4
2.9
2.9
6.5
3.5
Rice grain wage
(kg per day)
Unskilled
Skilled
5.7
3.2
3.9
6.9
2.1
(4.2)
(10.5)
1.1
1.8
25
NORTH & WEST INDIA
• Broad trend for silver wage to rise, with skilled
wage double unskilled wage.
• Silver wages failed to increase as much as
grain prices, so grain wages trended
downwards
26
SOUTH INDIA
• Southern figures generally accord well with Northern
data, but Parthasarathi’s figures for 1750 in
parentheses. Difficult to square with other data
• Parthasarathi claims support from work of Brennig.
But:
– Parthasarathi finds high grain wage as result of high money
wage and conventional grain price
– Brennig finds high grain wage as result of conventional
money wage but low grain price
• Neither Parthasarathi’s high money wage nor
Brennig’s low grain price fits into the wider picture of
trends over time and across regions
27
3B. AN ANGLO-INDIAN COMPARISON
• TABLE 6: Direct Anglo-Indian comparison of silver
wages & grain wages for unskilled workers
SILVER WAGES:
• Great Divergence already well established by
C16th:
• Indian silver wage little more than one-fifth
English level in late C16th, falling to c. oneseventh of English level during C18th
• Even if included Parthasarathi’s estimates, Indian
silver wage still only 40% of English level
28
TABLE 6A: Anglo-Indian comparison of silver wages
A. Silver wages (grams of silver per day)
Date
Southern
India Indian wage as %
England
of English wage
1550-99
3.4
0.7
21
1600-49
4.1
1.1
27
1650-99
5.6
1.4
25
1700-49
7.0
1.5
21
1750-99
8.3
1.2
14
1800-49
14.6
1.8
12
29
GRAIN WAGES
•
•
•
Indian grain wage remained close to English
level until end of C17th
Sharp divergence in C18th , as result of rise
in English grain wage as well as decline in
Indian grain wage
India looks more like peripheral parts of
Europe than developing NW Europe
30
TABLE 6B: Anglo-Indian comparison of grain wages
B. Grain wages (kilograms of grain per day)
England
India
Date
(wheat)
(wheat)
(rice, on wheat
equivalent basis)
1550-99
6.3
5.2
1600-49
4.0
3.8
1650-99
5.4
4.3
1700-49
8.0
3.2
1750-99
7.0
2.3
1800-49
8.6
2.5
Indian wage as %
of English wage
83
95
80
40
33
29
31
3C. SILVER WAGES AND GRAIN WAGES IN
CHINA
• Detailed data on grain prices available by region for
Qing dynasty (1644-1911) as result of monthly
reporting system
• No systematic money wage data, since money wages
typically supplemented by substantial food
allowances (even among urban building workers).
Have to rely on scattered estimates for agricultural
labourers
• Focus on Yangzi delta region, claimed by Pomeranz to
be on same development level as England in 1800
32
Yangzi delta
• TABLE 7: Silver & grain wages in Yangzi delta:
– Small drop in silver wages between Late Ming & Mid Qing
periods
– Unskilled silver wage in China about same as in India, small
fraction of silver wage in NW Europe
– Price of rice increased between Late Ming & Mid Qing
periods, so grain wage declined sharply
• Grain wage in Yangzi delta similar to Indian grain
wage
33
TABLE 7: Daily wage of hired farm laborers in the
Yangzi delta, 1573-1850
Money wage (taels)
Silver wage (grams of silver)
Grain wage (kg of rice)
Late Ming
1573-1644
0.04
1.5
3.0
Mid Qing
1736-1850
0.033
1.2
1.5
34
Anglo-Chinese comparison
• TABLE 8: Anglo-Chinese comparison, similar to
Anglo-Indian comparison:
– Silver wage already much lower in Yangzi
delta than in England by Late Ming period.
– Yangzi delta grain wage close to English
level in Late Ming period, but had fallen
decisively behind by Mid Qing period.
35
TABLE 8: Anglo-Chinese wage comparison
A. Silver wages (grams of silver per day)
Date
Southern
Yangzi
Chinese wage as %
England
delta
of English wage
1550-1649
3.8
1.5
39
1750-1849
11.5
1.7
15
B. Grain wages (kilograms of grain per day)
England
Yangzi delta
Date
(wheat)
(rice)
(rice, on wheat
equivalent basis)
1550-1649
5.2
3.0
4.5
1750-1849
7.8
2.0
3.0
Chinese wage as %
of English wage
87
38
36
3D. URBANISATION AND STRUCTURE OF
THE CHINESE ECONOMY
• TABLE 9: Urbanisation ratio in China compared
with Europe. Rozman’s data for all urban areas
adjusted onto basis of cities of > 10,000
inhabitants, for comparison with Europe:
– Urbanisation already higher in Europe than in
China during Ming dynasty
– Europe’s advantage had grown substantially by
early C19th (esp in England & Wales).
37
TABLE 9: Urban shares of the population in China and
Europe, 618-1820 (%)
China
All urban
Cities > 10,000
Europe
Cities > 10,000
Tang
618-906
Song
960-1279
Ming
1368-1644
Early Qing
1644-1736
Early 19th
century
4.7
3.0
5.2
3.7
6.5
4.9
6.8
6.0
5.9
3.8
--
--
7.6
9.2
10.0
38
Chinese urbanisation
• TABLE 10: Regional breakdown of urbanisation
ratios for China suggests much flatter
development gradient than in Europe:
– Most developed part of China (Yangzi delta) is in
Jiangsu, in east central China
– Urbanisation ratio highest here, but scale of difference
with poorer regions not large
• Urbanisation data, like wage data, suggest Yangzi
delta on same development level as peripheral
parts of Europe, not the NW core.
39
TABLE 10: Regional variations in the Chinese
urbanisation ratio in the mid-19th century (%)
Northern China
Shandong
Shanxi
Henan
Northwestern China
Shaanxi
Gansu
East central China
Anhui
Jiangsu
Zheijiang
Central China
Hubei
Hunan
Jiangxi
Southeastern China
Fujian
Guangdong
Guangxi
Southwestern China
Guizhou
Yunnan
Sichuan
All urban
Cities >10,000
4.4
4.0
5.0
2.6
2.0
2.2
7.3
4.3
4.5
2.3
4.0
7.4
6.1
1.9
5.6
4.1
6.0
5.2
6.3
4.0
2.8
3.8
8.2
6.7
6.1
5.3
5.0
3.3
5.8
4.4
6.0
3.3
2.5
3.6
40
4. EXPLAINING EUROPE-ASIA WAGEPRICE DIFFERENCES
4A. BULLION FLOWS AND PRICE INFLATION
• Although silver wages in India & China much
lower than in NW Europe as far back as C16th,
grain wages quite close until end of C17th.
Could this just be a monetary phenomenon?
• One possible explanation could be flow of
precious metals from New World into Europe
during C16th. Quantity Theory of Money
would suggest higher prices & wages without
any real effect on standard of living
41
Bullion flows and inflation
• There was price inflation in Europe during C16th,
attributed by some writers to bullion flows (e.g.
Hamilton; Braudel & Spooner)
• But this does not work as explanation of much
higher silver wages in Europe cf Asia. Bullion also
flowed to Asia.
• Higher silver wages result of real economic
development. This clear when consider regional
patterns within Europe, since although prices
moved together closely, wages diverged
42
CONVERGENT PRICES
•
•
•
•
•
Bullion flows entered Europe through Spain, but prices
moved closely together in all European countries (Abel)
This consistent with classical price-specie-flow
mechanism: initial increase in Spanish prices leads to
reduction in exports & increase in imports, & hence to
Spanish BOP deficit
Spanish BOP deficit  outflow of bullion from Spain 
rising price level in bullion receiving countries
Problems with timing of bullion flows & inflation in
particular countries  reformulation in terms of
monetary approach to BOP
Law of one price: price of traded goods increases 
increase in money demand
43
DIVERGENT WAGES
•
•
•
While prices rose along same trend in all
European countries, Spain lost its position as
high silver wage country, while England saw
biggest long run gains
Suggests shift of silver wage leadership from S.
Europe to NW Europe reflected real economic
forces rather than monetary forces
India & China look more like stagnating parts of
European periphery than NW core
44
4B. ECONOMIC DEVELOPMENT AND THE
REAL EXCHANGE RATE
• Development economists see rel between PPPconverted & ER-converted levels of p.c. income as
conditioned upon real factors affecting structure
of economy (e.g. Kravis; Bhagwati)
• We see relatopnship between grain wages &
silver wages on comparative basis as related to
these same structural characteristics
• Key results can be shown in 2-country, 2commodity Ricardian model, with constant
returns to single factor of production, labour
45
Model assumptions
• Applying model to early modern international
economy:
• Treat grain as non-tradable commodity &
cloth as tradable commodity.
• Grain bulky & costly to transport so price not
equalised between Europe & Asia
• Cloth widely traded between Europe & Asia
• 2 countries, Asia and Europe (i = A, E)
46
Results
• One international price for tradable good measured
in common unit of account, silver.
piT = pT
• With single factor, labour, silver wage equal to
revenue productivity of labour:
wi = pT αiT
(1)
Hence country with higher productivity in tradable
sector has higher silver wage
• Wages equalised across sectors within each country,
so this is also silver wage in grain sector.
47
Price of non-tradables
• Price of non-tradable commodity equal to
silver wage divided by productivity in nontradable sector:
piN = wi / αiN
(2)
• Substituting for wages from (1):
piN = αiT pT / αiN
(3)
• Price of non-tradable commodity reduced by
high productivity in non-tradable sector as
well as increased by high productivity in
tradable sector
48
Grain wage
• Grain wage is silver wage divided by price of
non-tradable commodity. Rearranging (2):
wi / piN = αiN
(4)
• Grain wages affected only by productivity in
non-tradable sector, not by productivity in
tradable sector
49
Real consumption wage
• Consumption price given by weighted geometric
average of prices of tradable & non-tradable
goods. Real consumption wage given by:
wi / pi = (αiT)β(αiN)1-β
(4)
• If grain wage equal in England & India but silver
wage higher in England, real consumption wage
lower in India by factor depending on weight .
• Low silver wages in Asia reflected low
productivity in cloth sector. Asian countries
produced cheaper grain as result of lower silver
wages, so grain wages almost as high as in NW
Europe
50
CONCLUSIONS
• Prosperous parts of Asia 1500-1800 look similar
to stagnating parts of European periphery rather
than developing NW core
• Although Indian & Chinese grain wages
comparable to NW Europe, silver wages
substantially lower. This is exactly pattern
observed in less developed parts of Europe
• Great Divergence well underway before 1800.
• Need to understand higher productivity in
European traded goods sector at this time as
reflecting developments in distribution as much
as production (e.g. EIC and VOC)
51
TOPIC 2: WAGES, PRICES AND THE GREAT
DIVERGENCE: LECTURE OUTLINE
•
•
•
•
•
B. WELFARE RATIOS
1. The respectability basket
2. The subsistence basket
3. Welfare ratios in Europe and Asia
4. Welfare ratios within Asia
52
WELFARE RATIOS
• Allen (2001) introduced a novel way of comparing
wages across countries , which has caught on
• He asked if money wages were sufficient to buy
the goods needed to sustain life for a family
• Allen did this by first working out the cost of a
basket of goods, with expenditure weights
derived from the budget studies of Sir Frederick
Eden and other social investigators from the late
C18th and early C19th
53
Welfare ratios
• The welfare ratio is the number of such baskets that
can be purchased with a worker’s daily wage
• The basic idea is that if this ratio is above one, then a
society is living above subsistence and is able to
reproduce, and as the ratio increases further, to
thrive
• Allen et al (2011) compare Europe and Asia using this
welfare ratio methodology, and find, like Broadberry
and Gupta, that from the C18th, the richest parts of
Asia were on a par with the periphery of Europe,
rather than the core
54
1. THE RESPECTABILITY BASKET
• In the first basket of goods that Allen (2000) worked
with, a working adult was assumed to require 2,500
calories per day, with bread supplying over 1,500
calories
• A substantial share of calories was obtained from
products that the respectable worker would want to
consume: meat, dairy produce and beer
• The protein intake was also considered in arriving at
this basket
• In slightly modified form, this has come to be known
as the “respectability basket”
55
TABLE 1: The respectable lifestyle: basket of goods
Quantity
per person
per year
Bread
Beans/peas
Meat
Butter
Cheese
Eggs
Beer
Soap
Linen
Candles
Lamp oil
Fuel
Total
234 kg
52 litres
26 kg
5.2 kg
5.2 kg
52 each
182 litres
2.6 kg
5m
2.6 kg
2.6 litres
5.0 M BTU
Price,
Spending
Nutrients/day
grams of
share (%)
Calories
Grams of
silver per
protein
unit
0.693
36.0
1,571
64
0.477
5.5
370
28
2.213
12.8
178
14
3.470
4.0
104
0
2.843
3.3
54
3
0.010
1.1
11
1
0.470
20.0
212
2
2.880
1.7
--4.369
4.8
--4.980
2.9
--7.545
4.3
--4.164
4.6
--450.956
100.0
2,500
112
Soure: Allen (2009: 36)
56
Welfare ratios using the
respectability basket
• Allen (2000) assumed that since women and children
required less calories than a working male adult, a
family of a father, mother and 3 children required 3
baskets, with an additional allowance of 5% for rent
• He then calculated the welfare ratio as the silver
wage divided by the silver cost of 3.15 respectability
baskets
• A problem which Allen encountered in his (2000)
paper was that for much of the time in most
European countries, welfare ratios for unskilled
building labourers were below one
57
TABLE 2: Welfare ratios: building labourers
Antwerp
Amsterdam
London
Florence/Milan
Naples
Valencia
Madrid
Paris
Strasbourg
Augsburg
Leipzig
Vienna
Gdansk
Krakow
Warsaw
1500-49
1.40
1.37
1.42
0.92
1.04
1.15
-0.89
1.27
0.92
-1.24
1.07
0.97
--
1550-99
1.28
1.07
1.26
0.78
0.77
0.90
0.80
0.87
0.74
0.72
0.49
0.89
0.73
1.06
1.11
1600-49
1.36
1.34
1.16
0.73
1.01
0.89
0.74
0.85
0.70
0.58
0.61
0.88
0.96
0.92
0.93
1650-99
1.28
1.42
1.37
0.72
-0.76
-0.87
0.56
0.93
0.80
0.91
1.05
0.96
1.01
1700-49
1.34
1.55
1.58
0.70
0.96
0.75
0.87
0.80
0.57
0.80
0.75
0.87
1.05
0.85
0.67
1750-99
1.28
1.41
1.42
0.51
0.75
0.59
0.64
0.74
0.61
0.71
0.64
0.71
0.89
0.88
0.93
1800-49
1.21
1.13
1.41
0.39
0.47
-0.95
1.08
0.85
-0.80
0.54
0.62
0.60
1.18
Source: Allen (2000: 428)
58
2. THE SUBSISTENCE BASKET
• If welfare ratios were less than one for sustained
periods of time, this implied that workers were
not earning enough to work and reproduce
• This was clearly an unsatisfactory conclusion to
reach, since Europe managed over this period to
make the transition to modern economic growth
• Allen’s solution was to come up with the
subsistence or “bare bones” basket
59
TABLE 3: Subsistence incomes: baskets of goods
Sorghum
Oats
Beans/peas
Meat
Butter/oil
Soap
Cotton/Linen
Candles
Lamp oil
Fuel
Total
European oats
Nutrients/day
Quantity
per
person per Calories Protein
year
---72
1,657
155 kg
14
187
20 kg
3
34
5 kg
0
60
3 kg
--1.3 kg
--3m
--1.3 kg
--1.3 ltr
--2.0 M BTU
89
1,938
Beijing sorghum
Nutrients/day
Quantity
per
person per Calories Protein
year
55
1,667
179 kg
---14
187
20 kg
2
21
3 kg
0
67
3 kg
--1.3 kg
--3m
--1.3 kg
--1.3 ltr
--2.0 M BTU
71
1,942
Source: Allen (2009: 37).
60
Subsistence basket
• Workers with low wages did not consume
large amounts of meat, dairy produce and
beer
• Furthermore, in Europe, they got most of their
calories from cheap grains such as oats, rather
than from expensive wheat bread
• In Asia, poorer unskilled workers consumed
sorghum rather than rice
61
3. WELFARE RATIOS IN EUROPE
AND ASIA
• Allen et al (2011) fist compare the welfare ratio of
unskilled male labourers in Beijing with 4 European
cities in the C18th and C19th (Figure 1, here)
• During the C18th, Beijing’s welfare ratio trended
downwards from a just under 2 to just above 1 by
the beginning of the C19th, where it fluctuated until
the 1870s
• Living standards in C18th Beijing were roughly on a
par with the peripheral parts of Europe, represented
here by Milan and Leipzig
62
FIGURE 1: Welfare ratios for unskilled male workers
Source: Allen et al. (2011: 27).
63
Welfare ratios in Europe and Asia
• Welfare ratios in London and Amsterdam were
already substantially ahead of the rest of Europe,
with a value of 3 to 4 in the C18th
• This does not mean that those workers ate 3 or 4
times as much oatmeal as they needed to survive
• Rather they consumed higher quality foodstuffs
(beef, beer and bread) and a wider range of non-food
items
• By this stage, even most unskilled workers in London
and Amsterdam could afford the respectability
lifestyle
64
4. WELFARE RATIOS WITHIN ASIA
• It is also useful to compare welfare ratios
within Asia (Figure 2)
• The first point to note is that welfare ratios
were no higher in the Suzhou than in Beijing.
This is significant because Suzhou was in the
Yangzi Delta
• Canton in southern China also had welfare
ratios fluctuating between about 1 and 2
65
FIGURE 1: Welfare ratios in Asia
66
Welfare ratios within Asia
• Allen et al. also bring India into the analysis,
finding that welfare ratios in Bengal were
about the same as in other parts of Asia
• Finally, Kyoto/Tokyo also fluctuates around
the same level as the other Asian cities
• These conclusions confirm the findings of
Broadberry and Gupta (2006): NW Europe was
already substantially ahead of the rest of
Europe and Asia by the C18th
67
Early Modern Great Divergence
• Contrary to the claims of the California School,
the Great Divergence was therefore already
underway well before 1800
• It is therefore necessary to reach back at least
into the early modern period to understand
the origins of the Great Divergence
68