European Economic History Economics 343:01 Professor Eugene N. White Fall 2010 Lecture 1 Why is this course important? • We are going to examine the central question of long-term economic growth: Why do some countries/economies “succeed.” • Why did some countries first escape poverty? • Why did/have some countries gain sustained economic growth and rising standards of living? • What are the policies or conditions that encourage economic growth? • Can rapid growth be taken for granted? • Focus on Western Europe—source of modern growth Measuring Modern Growth (Success) • GDP – Total Real Output/Annual real growth (Who is #1? #2? #3?.....) – Real Output per capita/Real growth per capita • Distribution of Income and Wealth • Quality of Life (affected by distribution, pollution, environment) – – – – Life Expectancy Infant Mortality Height Literacy China is everyone’s mind…NYTimes 8/16/2010 • • • China Passes Japan as Second-Largest Economy SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s secondlargest economy behind the United States, according to government figures released early Monday. The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year. Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009. The Big Picture in One Slide! 25,000 20,000 15,000 Second Industrial Revolution 10,000 First Industrial Revolution 5,000 $425 10 00 11 00 12 00 13 00 14 00 15 00 16 00 17 00 18 20 19 13 20 03 90 0 80 0 70 0 60 0 50 0 40 0 30 0 20 0 10 0 0 1 1990 US $ Per Capita Third Industrial Revolution Western Europe 2003: Haiti $740, Burundi $477, Afghanistan $668, Zaire $212 PULLING AWAY FROM THE PACK? 35,000 30,000 1990 US $ Per Capita 25,000 20,000 15,000 10,000 5,000 0 1600 1700 1820 Western Europe 1870 USA 1913 Former USSR 1950 China 1970 Japan 2003 India 2008 More Details Another way to look at the facts So!……Why do some countries succeed? Many candidates. • • • • • Culture/Religion Natural Resources Climate (Geography) Genetics Political-Economic Regime • A Lot to Sort Out! One Suggestive Comparison South Korea and North Korea • • • • • Culture/Religion Natural Resources Climate (Geography) Genetics Political-Economic Regime 18,000 16,000 1990 US$ Per Capita Income 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1950 1955 1960 1965 1970 1975 South Korea 1980 1985 North Korea 1990 1995 2000 Or, electric lights from a satellite What is Western Europe? Economic Growth? • The basic model • Y = f (K, L, N) • We will cover period 1200 to present. • Huge Change---Institutions and Markets---Both Essential for Growth Some Big Issues • How do economies make the transition from stationary to growth economies? What is the role of institutions and government? • What is the role of technology? Can technological change be promoted? • What is the role of industrialization? What effects does it have on the standards of living and on the distribution of income and wealth? What is the proper role of government? • How did the modern state arise? What are its effects on growth? • How did financial markets arise---what do they contribute to growth? Some Big Issues • What is the role of market integration? Nationally? Internationally? Exports/Imports? Globalization? • What monetary/exchange rate regime should be adopted? (gold or paper money standard /fixed or floating exchange rate). • Can depressions/financial crises be avoided? • Why did the “nation-state” flourish, then begin to retreat in Europe? • Why did the Europeans feel that a European Union was needed? • How successful is the EU? What are its prospects?