Lecture 9: Can exploitation explain
“The Rise of the West”?
ECON 451
Fall 2012
Professor David Jacks
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First, a review of the course so far and its
questions:
1.) Why was there so little growth before 1800?
2.) Why was there a turning point around 1800?
3.) Final question: why was there a take-off in
economic growth after 1800?
Introduction
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The Great Divergence: 1500/1800/2000.
Role of initial conditions, especially among
likely contenders.
Some pulling away by 1800…only to give way
to massive dispersion.
Introduction
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Introduction
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But much of the economic interaction of nations,
outside of European core, decidedly nonvoluntary.
Frank’s assessment of European economic
achievements: “Western development and Third
World underdevelopment are opposite faces of
the same coin.”
Exploitation & divergence
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Almost all such arguments revolve around the
idea that the Great Divergence was coincident
with another bog geo-political development.
The past 500 years which marks the beginning
of the Great Divergence also coincided with the
rise (and fall) of European empires.
Exploitation & empire
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Empire itself not exactly an unprecedented turn
of events, if anything, quite the opposite.
What was different was the geographic scale.
1.) Spanish in Western Europe, Latin America,
and spots in Asia
2.) Russians in Eastern Europe and the spine of
Asia
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This process came to a head in the 19th century
in the Old World:
1.) Indonesia: from VOC to crown via French
Wars.
2.) China: informal empire via Opium Wars.
3.) India: from EIC to crown via Sepoy Revolt.
4.) Africa: Scramble & the Congress of Berlin.
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1913: fully 90% of Africa and 65% of Asia
under European control.
(But 90% of LA independent…)
Britain as the exemplar:
13 million square miles and 450 million people
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Exploitation & empire
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Arguments with respect to the role of
exploitation seen through the trade statistics:
1.) Indonesia provided fully 1/3 of Dutch
government revenue in the 1850s.
2.) Britain annually drained sums up to 5% of
Indian GDP from the 1850s.
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At the same time, not clear if the timing is right.
Empire’s “big push” comes in the nineteenth
century.... after the onset of industrialization.
Leaves us with the question of which was cause
and which was effect: the Great Divergence or
European overseas colonization?
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Perhaps.
One view: Great Divergence dependent upon the
early profits of Europe’s trade with ROW and
not its later manifestation, overseas colonization.
Marx, for one, argued strongly for this line of
thought, seeing the origins of European
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“The discovery of gold and silver in America,
the extirpation, enslavement and entombment in
mines of the indigenous population of that
continent, the beginnings of the conquest and
plunder of India, and the conversion of Africa
into a preserve for the commercial hunting of
blackskins, are all things which characterize the
dawn of the era of capitalist production. These
idyllic proceedings are the chief moments of
primitive accumulation.”
Das Kapital, Volume I.
Exploitation & empire
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Marx’s obsession with the individual fortunes
won from the backs of others.
However, something missing from this view:
from lump-sum transfer (what you take from one
would be given to another) to sustained
economic growth?
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One early example of work which tried to relate
these profits to subsequent economic
development is that of Eric Williams.
British industrial revolution came on the backs
of West Indian slaves.
Specifically, the profits associated with the slave
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The weakness of Williams’ argument comes
from the fact that he never really pins down
what he means.
As Solow writes, “in the broadest terms,
Williams is relating something about slavery to
something that is happening in Great Britain”.
But at the heart of it, Williams may have been
onto something after all.
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One of his (many) theses relates to the rising
power of the British merchant class due to
infusions of West Indian profits.
Note relation to work of Acemoglu et al. on
“The Rise of Europe”:
Empowerment of merchants over monarch→
Demands for institutional change→
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Combining the existence of exploitation with the
importance of institutions: why the West grew
rich, but also why the Rest remained poor?
Engerman and Sokoloff: prevalence of slavery
correlated with low levels of subsequent
development in the Americas.
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The common element that this work shares with
that of Acemoglu et al. is that:
1.) institutions matter
2.) institutions differ
3.) institutions persist
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