Scholars have proposed numerous theories to explain why the Great Divergence occurred.
Coal In metallurgy and steam engines the
Industrial Revolution made extensive use of coal and
coke – as cheaper, more plentiful and more efficient than wood and
charcoal. Coal-fired steam engines also operated in the railways and in shipping, revolutionizing transport in the early 19th century. Kenneth Pomeranz drew attention to differences in the availability of coal between West and East. Due to regional climate, European coal mines were wetter, and deep mines did not become practical until the introduction of the
Newcomen steam engine to pump out groundwater. In mines in the arid northwest of China, ventilation to prevent explosions was much more difficult. Another difference involved geographic distance; although China and Europe had comparable mining technologies, the distances between the economically developed regions and coal deposits differed vastly. The largest coal deposits in China are located in the northwest, within reach of the Chinese industrial core during the
Northern Song (960–1127). During the 11th century, China developed sophisticated technologies to extract and use coal for energy, leading to soaring iron production. The southward population shift between the 12th and 14th centuries resulted in new centers of Chinese industry far from the major coal deposits. Some small coal deposits were available locally, though their use was sometimes hampered by government regulations. In contrast, Britain contained some of the largest coal deposits in Europe and already used more coal than wood even before the Industrial Revolution began. The centrality of coal to the Industrial Revolution was criticized by Gregory Clark and David Jacks, who show that coal could be substituted without much loss of national income. Similarly, Deirdre N. McCloskey says that coal could easily have been imported to Britain from other countries. Moreover, the Chinese could move their industries closer to coal reserves.
New World s by the end of the 18th century A variety of theories posit Europe's unique relationship with the
New World as a major cause of the Great Divergence. The high profits earned from the colonies and the slave trade constituted 7 percent a year, a relatively high rate of return considering the high rate of depreciation on pre–industrial capital stocks, which limited the amount of savings and capital accumulation. Early European colonization was sustained by profits through selling New World goods to Asia, especially silver to China. According to Pomeranz, the most important advantage for Europe was the vast amount of fertile, uncultivated land in the Americas which could be used to grow large quantities of farm products required to sustain European economic growth and allowed labor and land to be freed up in Europe for industrialization. New World exports of wood, cotton, and wool are estimated to have saved England the need for 23 to of cultivated land (by comparison, the total amount of cultivated land in England was just 17 million acres), freeing up immense amounts of resources. The New World also served as a market for European manufactures. Chen (2012) also suggested that the New World as a necessary factor for industrialization, and trade as a supporting factor causing less developed areas to concentrate on agriculture supporting industrialized regions in Europe.
Slave trade In his book
Capitalism and Slavery (1944),
Eric Williams argued that the profits from slavery "provided one of the main streams of that
accumulation of capital in England which financed the industrial revolution". This line of argument was not taken up by most economic historians in subsequent decades, but some of Williams' arguments have been revived in the twenty-first century. Historian James Walvin argues that slavery was "fundamental to the way the West emerged".
Political fragmentation in 1648
Jared Diamond and Peter Watson argue that a notable feature of
Europe's geography was that it encouraged political
balkanization, such as having several large peninsulas Hence, this stimulated China, which is near the steppe, to build a strong, unified state. In his book
Guns, Germs, and Steel, Diamond argues that advanced cultures outside Europe had developed in areas whose
geography was conducive to large, monolithic, isolated empires. In these conditions policies of technological and social stagnation could persist. He gives the example of China in 1432, when the
Xuande Emperor outlawed the building of ocean-going ships, in which China was the world leader at the time. On the other hand,
Christopher Columbus obtained sponsorship from
Queen Isabella I of
Castile for his expedition even though three other European rulers turned it down. As a result, governments that suppressed economic and technological progress soon corrected their mistakes or were out-competed relatively quickly. He argues that these factors created the conditions for more rapid internal superpower change (Spain succeeded by France and then by the United Kingdom) than was possible elsewhere in Eurasia.
Justin Yifu Lin argued that China's large population size proved beneficial in technological advancements prior to the 14th century, but that the large population size was not an important factor in the kind of technological advancements that resulted in the Industrial Revolution. Early technological advancements depended on "learning by doing" (where population size was an important factor, as advances could spread over a large political unit), whereas the Industrial Revolution was the result of experimentation and theory (where population size is less important). Before Europe took some steps towards technology and trade, there was an issue with the importance of education. By 1800, literacy rates were 68% in the Netherlands and 50% in Britain and Belgium, whereas in non-European societies, literacy rates started to rise in the 20th century. At the early stages of the Industrial Revolution, there was no demand for skilled labor. However, during the next phases of the Industrial Revolution, factors that influence worker productivity—education, training, skills, and health—were the primary purpose. Economic historian
Joel Mokyr has argued that political fragmentation (the presence of a large number of European states) made it possible for heterodox ideas to thrive, as entrepreneurs, innovators, ideologues and heretics could easily flee to a neighboring state in the event that the one state would try to suppress their ideas and activities. This is what set Europe apart from the technologically advanced, large unitary empires such as China. China had both a printing press and movable type, yet the industrial revolution would occur in Europe. In Europe, political fragmentation was coupled with an "integrated market for ideas" where
Europe's intellectuals used the lingua franca of Latin, had a shared intellectual basis in Europe's classical heritage and the pan-European institution of the
Republic of Letters. The historian
Niall Ferguson attributes this divergence to the West's development of six "killer apps", which he finds were largely missing elsewhere in the world in 1500 – "competition, the scientific method, the rule of law, modern medicine, consumerism and the work ethic". Economic historian Tuan-Hwee Sng has argued that the large size of the Chinese state contributed to its relative decline in the 19th century: One reason why Japan was able to modernize and adopt the technologies of the West was due to its much smaller size relative to China. Stanford political scientist Gary W. Cox argues in a 2017 study,
Other geographic factors Fernand Braudel of the
Annales school of historians argued that the
Mediterranean Sea was poor for fishing due to its depth, therefore encouraging long-distance trade. Furthermore, the
Alps and other parts of the
Alpide belt supplied the coastal regions with fresh migrants from the uplands. The
peninsulas of the Mediterranean also promoted political
nationalism which brought international competition. Economists
William Easterly and
Ross Levine compared the theories of that economic development is influenced directly by geographic endowments such as tropical location, germs, and crops, compared to the theory that these endowments only influence economic development indirectly, by influencing what types of institutions developed during colonization. They found no support for endowments directly effecting development beyond their ability to explain institutional development.
Efficiency of markets and state intervention , circa 1670 A common argument is that Europe had more free and efficient markets than other civilizations, which has been cited as a reason for the Great Divergence. In Europe, market efficiency was disrupted by the prevalence of
feudalism and
mercantilism. Practices such as
entail, which restricted land ownership, hampered the free flow of labor and buying and selling of land. These feudal restrictions on land ownership were especially strong in continental Europe. China had a relatively more liberal land market, hampered only by weak customary traditions. Bound labor, such as
serfdom and
slavery were more prevalent in Europe than in China, even during the
Manchu conquest. Urban industry in the West was more restrained by
guilds and state-enforced monopolies than in China, where in the 18th century the principal monopolies governed salt and foreign trade through
Guangzhou. Pomeranz rejects the view that market institutions were the cause of the Great Divergence, and concludes that China was closer to the ideal of a market economy than Europe. Economic historian
Paul Bairoch presents a contrary argument, that Western countries such as the United States, Britain and Spain did not initially have
free trade, but had
protectionist policies in the early 19th century, as did China and Japan. In contrast, he cites the
Ottoman Empire as an example of a state that did have free trade, which he argues had a negative economic impact and contributed to its
deindustrialization. The Ottoman Empire had a
liberal trade policy, open to foreign imports, which has origins in
capitulations of the Ottoman Empire, dating back to the first commercial treaties signed with France in 1536 and taken further with
capitulations in 1673 and 1740, which lowered
duties to only 3% for imports and exports. The liberal Ottoman policies were praised by British economists advocating free trade, such as
J. R. McCulloch in his
Dictionary of Commerce (1834), but later criticized by British politicians opposing free trade, such as
prime minister Benjamin Disraeli, who cited the Ottoman Empire as "an instance of the injury done by unrestrained competition" in the 1846
Corn Laws debate:
Wages and living standards Classical economists, beginning with
Adam Smith and
Thomas Malthus, argued that high wages in the West stimulated labor-saving technological advancements. Revisionist studies in the mid to late 20th century have depicted
living standards in 18th century China and pre–Industrial Revolution Europe as comparable. According to Pomeranz, life expectancy in China and Japan was comparable to the advanced parts of Europe. Similarly, Chinese consumption per capita in calories intake is comparable to England. According to Pomeranz and others, there was modest per capita growth in both regions, the Chinese economy was not stagnant, and in many areas, especially agriculture, was ahead of Western Europe. Chinese cities were also ahead in public health. Economic historian
Paul Bairoch estimated that China's GNP per capita in 1800 was $228 in 1960
US dollars ($ in 1990 dollars), higher than Western Europe's $213 ($ in 1990 dollars) at the time. Similarly for
Ottoman Egypt, its per-capita income in 1800 was comparable to that of Western European countries such as
France, and higher than the overall average income of Eastern Europe and Japan. Economic historian Jean Barou estimated that, in terms of 1960 dollars,
Egypt in 1800 had a per-capita income of $232 ($ in 1990 dollars). In comparison, per-capita income in terms of 1960 dollars for France in 1800 was $240 ($ in 1990 dollars), for
Eastern Europe in 1800 was $177 ($ in 1990 dollars), and for Japan in 1800 was $180 ($ in 1990 dollars). According to Paul Bairoch, in the mid-18th century, "the average
standard of living in Europe was a little bit lower than that of the rest of the world." According to Robert Allen, at the end of the Middle Ages, real wages were similar across Europe and at a very high level. In the 16th and 17th century wages collapsed everywhere, except in the
Low Countries and
London. These were the most dynamic regions of the early modern economy, and their living standards returned to the high level of the late fifteenth century. The dynamism of London spread to the rest of England in 18th century. Although there was fluctuation in real wages in England between 1500 and 1850, there was no long term rise until the last third of 19th century. And it was only after 1870 that real wages begin to rise in other cities of Europe, and only then they finally surpassed the level of late 15th century. Hence while the Industrial Revolution raised GDP per capita, it was only a century later before a substantial raise in standard of living. However, responding to the work of Bairoch, Pomeranz, Parthasarathi and others, more subsequent research has found that parts of 18th century Western Europe did have higher wages and levels of per capita income than in much of India, Ottoman Turkey, Japan and China. However, the views of Adam Smith were found to have overgeneralized Chinese poverty. Between 1725 and 1825 laborers in Beijing and Delhi were only able to purchase a basket of goods at a subsistence level, while laborers in London and Amsterdam were able to purchase goods at between 4 and 6 times a subsistence level. As early as 1600 Indian GDP per capita was about 60% the British level. A real decline in per capita income did occur in both China and India, but in India began during the
Mughal period, before British colonialism. Outside of Europe much of this decline and stagnation has been attributed to population growth in rural areas outstripping growth in cultivated land as well as
internal political turmoil. The earliest evidence of a major health transition leading to increased
life expectancy began in Europe in the 1770s, approximately one century before Asia's. Robert Allen argues that the relatively high wages in eighteenth century Britain both encouraged the adoption of labour-saving technology and worker training and education, leading to industrialisation.
Luxury consumption by
Hendrick Avercamp, 1620s Luxury consumption is regarded by many scholars to have stimulated the development of
capitalism and thus contributed to the Great Divergence. Proponents of this view argue that workshops, which manufactured luxury articles for the wealthy, gradually amassed capital to expand their production and then emerged as large firms producing for a mass market; they believe that Western Europe's unique tastes for luxury stimulated this development further than other cultures. However, others counter that luxury workshops were not unique to Europe; large cities in China and Japan also possessed many luxury workshops for the wealthy, and that luxury workshops do not necessarily stimulate the development of "capitalistic firms".
Property rights Differences in
property rights have been cited as a possible cause of the Great Divergence. This view states that Asian merchants could not develop and accumulate capital because of the risk of state expropriation and claims from fellow kinsmen, which made property rights very insecure compared to those of Europe. However, others counter that many European merchants were de facto expropriated through
defaults on government debt, and that the threat of expropriation by Asian states was not much greater than in Europe, except in Japan. Government and policies are seen as an integral part of modern societies and have played a major role in how different economies have been formed. The Eastern societies had governments which were controlled by the ruling dynasties and thus, were not a separate entity. Their governments at the time lacked policies that fostered innovation and thus resulted in slow advancements. As explained by Cohen, the east had a restrictive system of trade that went against the free world market theory; there was no political liberty or policies that encouraged the capitalist market (Cohen, 1993). This was in contrast to the western society that developed commercial laws and property rights which allowed for the protection and liberty of the marketplace. Their capitalist ideals and market structures encouraged innovation. Pomeranz (2000) argues that much of the land market in China was free, with many supposedly hereditary tenants and landlords being frequently removed or forced to sell their land. Although Chinese customary law specified that people within the village were to be offered the land first, Pomeranz states that most of the time the land was offered to more capable outsiders, and argues that China actually had a freer land market than Europe. However,
Robert Brenner and Chris Isett emphasize differences in land tenancy rights. They argue that in the lower Yangtze, most farmers either owned land or held secure tenancy at fixed rates of rent, so that neither farmers nor landlords were exposed to competition. In 15th century England, lords had lost their serfs, but were able to assert control over almost all of the land, creating a rental market for tenant farmers. This created competitive pressures against subdividing plots, and the fact that plots could not be directly passed on to sons forced them to delay marriage until they had accumulated their own possessions. Thus in England both agricultural productivity and population growth were subject to market pressures throughout the early modern period. A 2017 study found that the presence of secure property rights in Europe and their absence in large parts of the Middle-East contributed to the increase of expensive labour-saving capital goods, such as water-mills, windmills, and cranes, in medieval Europe and their decrease in the Middle-East.
High-level equilibrium trap The
high-level equilibrium trap theory argues that China did not undergo an indigenous industrial revolution since its economy was in a stable equilibrium, where supply and demand for labor were equal, disincentivizing the development of labor-saving capital.
European colonialism A number of economic historians have argued that
European colonialism played a major role in the
deindustrialization of non-Western societies.
Paul Bairoch, for example, cites
British colonialism in India as a primary example, but also argues that European
colonialism played a major role in the deindustrialization of other countries in Asia, the Middle East, and
Latin America, and contributed to a sharp economic decline in
Africa. Other modern
economic historians have blamed
British colonial rule for India's deindustrialization in particular. The colonization of India is seen as a major factor behind both India's deindustrialization and Britain's Industrial Revolution. though Indian textiles still maintained a competitive advantage over British textiles up until the 19th century. Economic historian Prasannan Parthasarathi, however, has argued that there wasn't any such economic decline for several post-Mughal states, notably
Bengal Subah and the
Kingdom of Mysore, which were comparable to Britain in the late 18th century, until British colonial policies caused deindustrialization. promoted spinning
Indian cotton cloth by hand on the
spinning wheel as a
self-sufficient alternative to British machine-woven imports.|alt=A man with spectacles draws thread from a wheel. Up until the 19th century, India was the world's leading cotton textile manufacturer, with
Bengal and
Mysore the centers of cotton production. In order to compete with Indian imports, Britons invested in labour-saving
textile manufacturing technologies during their Industrial Revolution. Following political pressure from the new industrial manufacturers, in 1813, Parliament abolished the two-centuries-old,
protectionist East India Company monopoly on trade with Asia and introduced import
tariffs on Indian textiles. Until then, the monopoly had restricted exports of British manufactured goods to India. Exposing the Proto-industrial hand spinners and weavers in the territories the British East India Company
administered in India to competition from machine spun threads, and woven fabrics, resulting in
De-Proto-Industrialization, with the decline of native manufacturing opening up new markets for British goods. British colonization forced open the large Indian market to British goods while restricting Indian imports to Britain, and raw cotton was imported from India without taxes or tariffs to British factories which manufactured textiles from Indian cotton and sold them back to the Indian market. India thus served as both an important supplier of raw goods such as cotton to British factories and a large
captive market for British manufactured goods. In addition, the capital amassed from
Bengal following its conquest after the
Battle of Plassey in 1757 was used to invest in British industries such as textile manufacturing and greatly increase British wealth. Economic decline in India has been traced to before British colonial rule and was largely a result of increased output in other parts of the world and Mughal disintegration. India's share of world output (24.9%) was largely a function of its share of the world population around 1600. The introduction of railways into India have been a source of controversy regarding their overall impact, but evidence points to a number of positive outcomes such as higher incomes, economic integration, and famine relief. Per capita GDP decreased from $550 (in 1990 dollars) per person in 1700 under Mughal rule to $533 (in 1990 dollars) in 1820 under British rule, then increased to $618 (in 1990 dollars) in 1947 upon
independence. Coal production increased in Bengal, largely to satisfy the demand of the railroads. A
2001 paper by
Daren Acemoglu, Simon Johnson, and
James Robinson found that nations with temperate climates and low levels of mortality were more popular with settlers and were subjected to greater degrees of colonial rule. Those nations benefited from Europeans creating more inclusive institutions that lead to higher rates of long term growth. Subsequent research has confirmed that both how long a nation was a colony or how many Europeans settlers migrated there are positively correlated with economic development and institutional quality, although the relationships becomes stronger after 1700 and vary depending on the colonial power, with British colonies typically faring best. Acemoglu et al. also suggest that colonial profits were too small a percentage of GNP to account for the divergence directly but could account for it indirectly due to the effects it had on institutions by reducing the power of absolutist monarchies and securing property rights.
Culture had the largest merchant fleet in Europe in the 17th century It has been argued the attitude of the
East towards innovation is one of the other factors that might have played a big role in the West's advancements over the East. According to
David Landes, after a few centuries of innovations and inventions, it seemed like the East stopped trying to innovate and began to sustain what they had. They kept nurturing their pre-modern inventions and did not move forward with the modern times. China decided to continue a self-sustaining process of scientific and technological advancement on the basis of their indigenous traditions and achievements. The East's attitude towards innovation showed that they focused more on experience, while the West focused on experimentation. The East did not see the need to improve on their inventions, so they focused on their past successes. While they did this, the West was focused more on experimentation and trial by error, which led them to come up with new and different ways to improve on existing innovations and create new ones. Rosenberg and Birdzell claim that the so-called
Eastern culture of respect and unquestionable devotion to the ruling dynasty was as a result of a culture where the control of the dynasty led to a silent society that "did not ask questions or experiment without the approval or order from the ruling class". On the other hand, they claimed that the West of the late medieval era did not have a central authority or absolute state, which allowed for a free flow of ideas (Rosenberg, Birdzell, 1986). Moreover, there is another researcher who wrote that Christianity considered to be a critical issue to the emergence of liberal societies. This eastern culture also supposedly showed a dismissal of change due to their "fear of failure" and disregard for the imitation of outside inventions and science; this was different from the "
Western culture" which they claimed to be willing to experiment and imitate others to benefit their society. They claimed that this was a culture where change was encouraged, and sense of anxiety and disregard for comfort led them to be more innovative.
Max Weber argued in
The Protestant Ethic and the Spirit of Capitalism that capitalism in northern Europe evolved when the
Protestant work ethic (particularly
Calvinist) influenced large numbers of people to engage in work in the secular world, developing their own enterprises and engaging in trade and the accumulation of wealth for investment. In his book
The Religion of China: Confucianism and Taoism he blames
Chinese culture for the non-emergence of capitalism in China. Chen (2012) similarly claims that cultural differences were the most fundamental cause for the divergence, arguing that the
humanism of the Renaissance followed by
the Enlightenment (including revolutionary changes in attitude towards religion) enabled a mercantile, innovative, individualistic, and capitalistic spirit. For
Ming China, he claims there existed repressive measures which stifled dissenting opinions and nonconformity. He claimed that
Confucianism taught that disobedience to one's superiors was supposedly tantamount to "sin". In addition Chen claimed that merchants and artificers had less prestige than they did in Western Europe.
Wen-yuan Qian pointed out intellectuals passing through the
imperial examination system were limited to neo-Confucian texts well into the
Yuan dynasty.
Justin Yifu Lin argued for the role of the imperial examination system in removing the incentives for Chinese intellectuals to learn mathematics or to conduct experimentation.
Yasheng Huang argued that the imperial examination system monopolized the most capable intellectuals in service of the state, sustained the propagation of Confucianism, and preempted the emergence of ideas that could challenge it. One of the central teachings of Confucianism is that one should remonstrate with authority. Many Confucians throughout history disputed their superiors in order to not only prevent the superiors and the rulers from wrongdoing, but also to maintain the independent spirits of the Confucians. Furthermore, the merchant class of China throughout all of Chinese history were usually wealthy and held considerable influence above their supposed social standing. This is true especially in the Ming and Qing dynasties, when the social status of merchants had risen to such significance that by the late Ming period, many scholar-officials were unabashed to declare publicly in their official family histories that they had family members who were merchants. Consequently, while Confucianism did not actively promote profit seeking, it did not hinder China's commercial development either. Of the developed cores of the
Old World, India was distinguished by its
caste system of bound labor, which hampered economic and population growth and resulted in relative underdevelopment compared to other core regions. Compared with other developed regions, India still possessed large amounts of unused resources. India's caste system gave an incentive to elites to drive their
unfree laborers harder when faced with increased demand, rather than invest in new capital projects and technology. The Indian economy was characterized by vassal-lord relationships, which weakened the motive of financial profit and the development of markets; a talented artisan or merchant could not hope to gain much personal reward. Pomeranz argues that India was not a very likely site for an industrial breakthrough, despite its sophisticated commerce and technologies. Aspects of
Islamic law have been proposed as an argument for the divergence for the
Muslim world. Economist
Timur Kuran argues that Islamic institutions which had at earlier stages promoted development later started preventing more advanced development by hampering formation of corporations, capital accumulation, mass production, and impersonal transactions. Other similar arguments proposed include the gradual prohibition of independent religious judgements (
Ijtihad) and a strong communalism which limited contacts with outside groups and the development of institutions dealing with more temporary interactions of various kinds, according to Kuran. Economic historian Paul Bairoch noted, however, that
Ottoman law promoted
liberal free trade earlier than Britain and the United States, arguing that free trade had a negative economic impact on the Ottoman Empire and contributed to its deindustrialization, in contrast to the more
protectionist policies of Britain and the United States in the early 19th century.
Representative government progressively limited the power of the
English monarchy, a process that arguably culminated in the
English Civil War. A number of economists have argued that representative government was a factor in the Great Divergence. Representative governments however were accountable to broader segments of the population and thus had to protect property rights and not rule in arbitrary ways, which caused economic prosperity.
Globalization A 2017 study in
The American Economic Review found that "globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years 1850–1900." The states that benefited from globalization were "characterised by strong constraints on executive power, a distinct feature of the institutional environment that has been demonstrated to favour private investment."
Chance A number of economic historians have posited that the Industrial Revolution may have partly occurred where and when it did due to
luck and
chance.
The Black Death Historian
James Belich has argued that the
Black Death, a bubonic plague pandemic occurring in Afro-Eurasia from 1346 to 1353, set the conditions that made the Great Divergence possible. He argues that the pandemic, which caused mass death in Europe, doubled the per capita endowment of everything. A labor scarcity led to expanded use of waterpower, wind power, and gunpowder, as well as fast-tracked innovations in water-powered blast furnaces, heavily gunned galleons, and musketry. Koyama and Rubin suppose that the Black Death had some moments that might have positively affected development. The labor scarcity that resulted from the Black Death led women to enter the workforce and drove active markets for agricultural labor. The resulting drop in the population led to falling rents and rising wages, undermining the
feudal and
manorial relationships that had characterized medieval Europe.
Guilds and journeymanship A 2017 study in the
Quarterly Journal of Economics argued, "medieval European institutions such as guilds, and specific features such as
journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within closed kinship systems (extended families or clans)". Guilds and journeymanship were superior for creating and disseminating knowledge, which contributed to the occurrence of the Industrial Revolution in Europe. As kinship networks in Western Europe began to dissolve under relentless religious pressure, new
voluntary associations based on shared interests and abstract rules (e.g.
charter towns,
professional guilds, and
universities) instead of blood relationships grew as replacements. The growth of these new institutions caused the
Urban,
Commercial and
Legal revolutions of the High Middle Ages, provided a
colossal market for mass-produced books when the printing press appeared in the 15th century, and created the cultural scaffolding for the
Scientific Revolution. Historian and
philosopher of technology Lewis Mumford argues that the roots of the
Industrial Revolution’s synchronized and standardized
mass production were
medieval innovations in timekeeping and the
movable type printing press. ==Economic effects==