The region now known as South Asia consists of five large nations – India, Pakistan, Bangladesh, Nepal and Sri Lanka, and several smaller nations. Most debates and controversies in the economic history of South Asia usually relate to the area and population under India, Pakistan and Bangladesh, which together formed a large part of the territory of the British Indian Empire between 1858 and 1947.

This area is geographically very diverse, containing the Himalayan mountains in the north, the huge fertile floodplains of the two great Himalayan river systems, the Indus and the Ganges, the world's largest delta, a long coastline, arid uplands, tropical dry forests and savannah and the Thar desert in the west. It is also socially very mixed, consisting of many language groups, almost all religions of the world and social practices in one region that are vastly different from those in another. Politically, too, the region was never united. The densely populated floodplains and deltas were territories where several large empires formed and disintegrated from before the Christian Era. These empires lived mainly on land taxes. The seaboard and the arid zones, on the other hand, were controlled by smaller and poorer states, usually more dependent on trade. A loose integration of these worlds was achieved during the reign of the great Mughal emperors (1526–1707), but it did not last. The empire fell apart in the early eighteenth century, giving rise to a cluster of semi-independent successor states.

With its geography and history being as varied as just described it is surprising that the economic history of South Asia should exist as a coherent discourse at all. The reason that it does has to do with the trajectory that unfolded after the fall of the Mughal Empire. Two developments imparted a certain unity in the pattern of economic change thereafter. First, the British Empire in South Asia, which rose to power between the mid-eighteenth century and the mid-nineteenth, achieved a degree of political, bureaucratic and military centralization that the region had not seen before. The process of centralization built upon a different system of taxation and, in turn, a different relationship between the state and the elites from before.

North-western Europe played a crucial role in the world economy: it was the pioneer of the ‘modern’ market economy and of ‘modern economic growth’ that resulted from it, and came to control large parts of the world. At the same time, there were quite different roads to modernity, even in this relatively small part of the world; the United Kingdom held the middle in between early developers (in the Low Countries) and latecomers (the Nordic countries and Ireland). The urban, most dynamic core of the region was in Flanders and Brabant in the late Middle Ages, then moved to Holland in the seventeenth century, and crossed the North Sea in the second half of that century, when England started its growth spurt that would result in the Industrial Revolution of the post-1750 period. After 1800 the techniques and institutions of the Industrial Revolution began to spread from the UK to Belgium at first, but within a few decades to almost all parts of north-western Europe. Gradually, the process of economic growth spread to the rest of the region; the nineteenth century saw the ‘catching up’ of the northern countries, which had not developed rapidly before 1800. In the twentieth century this process of convergence within north-western Europe continued; after 1945 the UK lost its prominent place within the world economy to become the ‘sick man’ of the region in the 1960s and 1970s, but it rebounded afterwards. The northern countries continued their spectacular advance during the twentieth century, becoming the best examples of welfare states with strong economies based on high levels of human capital formation and innovativeness.

There are many stories to tell about the economic development of this region, but we have to focus on three: (1) why this part of the world experienced rapid economic expansion between 1500 and 1850, resulting in the British Industrial Revolution; (2) how this economic core region developed after 1850, when its model – and in particular its technologies – were increasingly copied elsewhere; and (3) how the more ‘marginal’ parts of the region (Scandinavia, Ireland) caught up from about the mid-nineteenth century onwards.

The United States and Canada have been among the richest nations in the world for the past two and a half centuries, as shown by the gross domestic product (GDP) per capita estimates in Figure 3.1. The US and Canada are endowed with large amounts of fertile soil and natural resources. Before becoming colonies of European nations after 1500 and the countries they are today, the areas were lightly populated relative to many other areas. Seeing opportunities to obtain access to land, large numbers of people have migrated from the rest of the world. The populations in the US and Canada were able to take great advantage of these resources by establishing governments and economies that gave people extensive political and economic freedoms, strong protection of property rights and largely unbiased rule of law. Both countries have managed largely to avoid the destructiveness of warfare on their home territories, although their participation in various wars elsewhere have involved sacrifices that slowed their progress. The nature of the governments led to broad-based educational systems designed to educate the whole population, first at the elementary school level in the mid-1800s then to the high school level in the early 1900s and with broad-based university educational opportunities after the Second World War. The combination of all these factors have allowed their populations to develop a wide range of innovations in goods and services, productive processes and organization of the economy. Economic growth has not been positive in every year, as the economies have gone through a variety of short-lived recessions and one decade-long Depression. Despite these hiccups the economies of Canada and the US have experienced growth patterns that have led them to maintain their statuses as being among the richest nations in the world.

Pre-colonial development

Most scholars believe that the early populations of North America first moved across a land bridge near Alaska into the continent thousands of years ago. People lived in relatively small groupings of hunters and gatherers distributed throughout North America with lifestyles strongly tied to their local environments. Native Americans in the eastern United States and Canada often trapped game in forests and produced some maize and other crops. North-west Indian tribes near rivers that ran to the sea often had stable food sources. The Plains Indians often travelled over large swaths of territory while hunting and gathering.

In this volume, twenty-seven authors from many different countries and all world regions have jointly written a history of the global economy. They have considered a set of development indicators for income, health (height), education (numeracy), democracy and institutional quality that allowed the identification of periods of welfare improvement or decrease in all world regions. Insights could be obtained into the economic history of Africa, Asia, the Middle East and other world regions – important parts of the world that could not be studied using such a comparative, non-Eurocentric and long-term development approach before. This global approach changes the way we understand the economic history of the world.

What can be learned from this book? It is certainly impossible to summarize all the results regarding global economic development of this volume in a short conclusion. The only strategy that we can follow – in order to round up this volume – is to emphasize some recurrent themes that were discussed in several chapters. One of the most fascinating findings was the large mobility between countries that developed faster and others that lagged behind. It has often been overlooked by historical descriptions of Africa, for example, how some countries and regions experienced growth spurts and rapid educational development during phases of their development. In west Africa during the nineteenth century and again during late colonialism, the development of ‘rural capitalist’ peasants (Austin) was quite promising, even if later civil wars and problematic institutional designs ended this. Similarly, Poland and other parts of east central Europe experienced a period of surprisingly high welfare after inviting skilled Jewish immigrants and setting constraints to the king in the sixteenth century (again, this governance system became problematic later). These less well-known examples of development episodes are not as present in the historical narratives because they later failed. However, failure was not always predetermined; economic history allows us to identify the reasons for success and failure. In this volume, we also included the hitherto little discussed countries and episodes of development.

Many, if not all, Eurasian countries from the late medieval to early modern periods saw their population growing, output expanding and commerce flourishing, despite the notable differences in the ways in which territorial and administrative consolidation proceeded. Japan was no exception: by the seventeenth century the country became densely populated, and the subsequent centuries saw land productivity increasing, and industry and commerce expanding. This chapter begins with an exploration of the population issue: how population growth became sustained. Then, the core sections trace changes in population, urbanization, output growth by sector and per capita gross domestic product (GDP) in the period from 1600 to 1874. Japan's early modern performance will be compared with other Eurasian countries and the ways in which growth was achieved will be discussed. The final section touches on Japan's growth process since the Meiji Restoration of 1868 and the subsequent periods up to 2010.

Population and trade developments before 1600

Located at the eastern end of Eurasia, Japan is an island country, located less than 200 km off the Korean peninsula but 800 km from the coast of China, the civilized pool of both knowledge and parasites in East Asia. This geographical position had a demographic implication. The physical distance ‘tended to insulate the archipelago from disease contacts with the world beyond. This was, however, a mixed blessing, for insulation allowed relatively dense populations to develop which were then vulnerable to unusually severe epidemic seizure when some new infection did succeed in leaping across the water barrier and penetrating the Japanese islands’ (McNeill 1979: 133). This is what actually happened, says McNeill. The Japanese archipelago remained sparsely populated long after the first contact with mainland China, which ‘meant that a number of important and lethal diseases that became chronic in China could not establish themselves lastingly among the Japanese until about the thirteenth century’ (McNeill 1979: 133–34). This dating may be debatable. There is a possibility that the critical threshold was passed much later than he assumed. But he was probably right in arguing that: ‘As long as the island populations were not sufficient to enable such formidable killers as smallpox and measles to become endemic childhood diseases, epidemics of these (and other similar) infections coming approximately a generation apart must have cut repeatedly and heavily into Japanese population, and held back the economic and cultural development of the islands in drastic fashion’ (McNeill 1979: 135).

Almost all the literature on the economic past of Sub-Saharan Africa has aimed at explaining, directly or indirectly, why the sub-continent is relatively poor. At the end of the colonial period, which for most African countries was about 1960, it was conventionally assumed that very little had changed in African economic history, especially before what, for most of the continent, was the relatively short period of colonial rule. The focus on poverty as the problem requiring explanation sometimes obscures other aspects of African economic history, such as the achievements of African farmers, traders and states, including improvements in food security, and episodes of economic growth. On the whole, however, the historical research carried out over the last fifty to sixty years (since Dike 1956) has used these achievements as means both of qualifying the notions of general poverty and stasis, and as sources of insight into why the overall economic development of the region has not been faster. This chapter begins by introducing alternative explanations of Africa's relative poverty, and then traces the history of poverty and economic development in African economies over successive periods. Finally, we will review the overall descriptions of African economies as historically static and therefore remaining poor, and comment on the major interpretations.

Interpretations

The main explanations for Africa's historic – if relative – poverty can be grouped in different ways: perhaps most fundamentally, external versus internal, and institutional versus resources. The two most influential strands of external explanation for Africa's historic poverty, dependency theory and its rational-choice counterpart, are themselves institutional, in the sense of focussing on the way resources are controlled, organized and exploited, rather than on the resources, natural and human, as such. Dependency theory, which was brought to Africa in the 1970s (Rodney 1972, Amin 1976, see also Wallerstein 1976) is the view that the development of the West was simultaneously – and by the same process – the underdevelopment of the Rest. A rational-choice counterpart of dependency theory was provided by a group of growth economists in the 2000s (Acemoglu et al. 2001, 2002, Acemoglu and Robinson 2010, Nunn 2008). Both externalist interpretations are ultra-Eurocentric, attributing Africa's fate to European decisions: during the external slave trades (the largest of which was carried on in European and American ships rather than by North African desert caravans or Arab dhows), and then under colonial rule.

European countries and regions have followed many different paths to modernity. How were some countries able to achieve significant development accelerations during some periods? Why did living standards in these countries regress during other periods? This chapter focuses on the countries of eastern, southern and central Europe.

The core events of the Industrial Revolution have attracted much attention; however, because these events occurred in England and Scotland, many countries between Portugal and Russia have received less coverage in economic history books. This lack of research is astonishing because the history of these countries is exciting. In fact, it may seem to the historian that these regions were racing towards higher standards of living. There was considerable change over time in which the region was ahead in this race. For example, southern Europe clearly led in productive capacity and education during the late medieval and early modern periods. Recent studies indicate that the national incomes of Spain and Italy were higher than that of the UK in 1500 and that Italy had higher educational levels. Spain was likely also a world leader in quasi-parliamentary participation during the Middle Ages (van Zanden et al. 2012). Hence, skilled workers during this period migrated from north to south, especially to Italy, not the other way as some workers migrate today.

Figure 2.1 presents the human capital development of three European regions (north-west, south and east) between 1450 and 1800. Because educational indicators, such as school enrolment and literacy, are unavailable for all countries during this early period, we use the following basic numeracy indicator: the share of people who were able to report their own age correctly (in years). The eventual human capital leadership of north-western Europe was not a given during the late fifteenth century. Rather, southern Europe exhibited higher levels of numeracy than the rest of Europe. Only after the beginning of the sixteenth century was human capital higher in north-western Europe. In general, Europe experienced a human capital revolution between 1450 and 1800. The increase in numeracy from approximately 50 per cent to nearly 100 per cent represents a difference as large as that existing between rich and poor countries during the early twentieth century.

Some of the countries included in this chapter present the highest living standards in the world (Australia, New Zealand and Singapore), while others stand as the poorest (Papua New Guinea and Timor-Leste). It also includes several middle-ranked countries that even half a century ago were considered to be ‘developing’ (Malaysia, Thailand, Indonesia), and others that remain in that category (Philippines, Vietnam, Laos, Cambodia). The chapter includes countries that, in the past century, have transformed their societies, over-thrown colonialism, endured wars and invasions and undergone extensive economic change, and others that have developed in comparative peace. The diversity of economic and social conditions in this region, and the problems and opportunities these countries face, serve as a microcosm of the issues facing many countries around the globe.

For most observers, a distinguishing feature of this region has been the rapid economic transformation of a select handful of Asian ‘tigers’ in the second half of the twentieth century. Remarkable though these changes were, it is worth recalling that all of the nations in this chapter possess deep social and cultural origins; many with foundations in long existent and ancient civilizations that flourished centuries ago. A second factor shaping the economies of this region has been their histories of turbulent, often violent, political, institutional and social change. In some countries this began with the domination of European nations, especially after 1800, and continued in different forms until as late as the beginning of the twenty-first century. The consequences of colonial rule and in some cases war, and struggles for independence, still influence economic attitudes and policies of these countries.

A central theme running through this chapter is the importance of trade and its impact on living standards. Many of the countries of Southeast Asia have a long tradition of trading with others. The marked rise in gross domestic product (GDP) per capita, life expectancy and heights (all of which are indicators of improving material well-being) after the Second World War reflect the importance of trade for a country's living standards. A second theme that emerges is the need for institutional and political stability, and an absence of violence, to advance economic outcomes. Countries with the lowest levels of violence clearly demonstrate higher material outcomes, and those most recently scarred by war lag behind those that have had more time to rebuild.

For many years of our recent past, one's country of birth predicted the income and welfare level of the majority of the population: if you were born in a western European country or a country that was a previous European settlement (such as the US), you would be relatively well off by global standards. If you were born in the developing world, this would often not be the case. Many observers perceived this almost as a natural law. Even if that might still hold on average, the rapid rise of income in China and other threshold economies over the last years cast doubt on the persistence of development differences. This is even truer after the recent crisis in Europe and the US and after the reappearance of territorial war in Europe.

To answer today's questions, it is crucial to understand the economic history of the past: which countries developed positively during the various periods of their history? This book of the history of the global economy will trace the developments of many individual countries and their world regions. The ingredients of success (or failure) will be the main focus. What was a good economic policy? Was there investment in education? Was there an absence of war? Were there growth-promoting institutions?

In this volume, twenty-seven authors of various nationalities and intellectual traditions will present the welfare development of the global economy and its components in a concise and accessible way. The authors will reflect on the considerable increase in knowledge of global economic history and the history of world regions that has occurred over previous years, both in the developed world as well as in countries with traditionally lower research density in Africa, the Middle East, Asia and other world regions. A special focus of this volume will be on developing countries that have received less attention in former world economic histories: was, for example, Africa always a continent of relative poverty, or were there periods of economic growth in some of its regions? Why did Asia fall behind in the early nineteenth and twentieth centuries?

In recent years, the Middle Eastern region has been characterized in newspaper reports by its many conflicts between religious and political groups. To understand the present situation, it is important to study the region's development over the last few centuries. The first impression of Middle Eastern history is the great heterogeneity of its development. We cover the geographic region between Morocco and Afghanistan (including the former Soviet Republics in central Asia and the Caucasus that have a substantial Muslim population). These countries have experienced multi-faceted development over the past five centuries. However, prominent economic historians of these world regions, such as Charles Issawi (1982), have distilled some common features that characterized many of the Middle Eastern countries. One common factor was contact with Europe during the nineteenth century, which Issawi described as a ‘challenge’. Just before the First World War, European merchants (and sometimes their governments) had taken over many important positions in Middle Eastern economies outside agriculture. In contrast, Issawi interprets the developments during the twentieth century as a ‘reaction’ in which many Middle Eastern political leaders aimed at reducing the European influence. They also tried to mitigate the role of religious minorities in economic core positions of their countries.

Since Issawi (1982) and Owen (1993) wrote their famous overviews in the 1970s and 1980s, some progress has been made in the quantitative analysis of long-run economic trends of the Middle East. Most famously, Şevket Pamuk has presented his estimates of urban real wages and national income estimates for a number of countries in this region. Coşgel and Ergene (2012) have studied the development of early modern inequality based on tax registers for northern Anatolia and additional sources. Others have focused on complementary issues that are discussed below. Another theme that was studied with considerable effort was the development of the ‘biological standard of living’. The development of human stature can serve as an indicator of two key welfare components, nutritional quality and health. This development was reconstructed for a number of Middle Eastern economies. The Middle East actually had a relative advantage over Europe during the middle of the nineteenth century (Stegl and Baten 2009). Since the 1880s, however, there has been a dramatic change in the biological standard of living relative to Europeans. It seems plausible that this shift in relative welfare also influenced a deep feeling of injustice in the Middle Eastern population.

It is difficult to talk about the economic history of Latin America as a whole. Latin America is a large world region, a mixture of countries of different sizes, geography, climate, population, socio-economic structures and factor endowments. However, the existence of common features in Latin American history is clear: the Iberian colonial experience, specialization in natural resource-based products and primary export patterns are examples of these common traits that make it possible to distinguish Latin American countries from other regions and to consider them as a unit of analysis.

Latin America is not part of what is regarded as the ‘developed world’. None of the countries has attained uniformly high enough living standards. Even more, some of them are still very poor and have large segments of their populations on the sidelines of modern economic and social development processes. Even so, Latin America as a region has made large strides in bringing about very notable economic, social and political changes over the last decades. These transformations have placed the region on a development path that has enabled it to attain middle-income status on a global scale.

Despite these changes in most Latin American countries, there are aspects that remain unchanged. The bulk of the Latin American countries have not been able to leave their natural resource-based production patterns completely behind them. Their pattern of trade specialization has held them back from gaining access to more technologically dynamic segments of the global market or segments in which the growth of demand is more robust. This, coupled with the region's markedly cyclical access to capital markets, has undercut its development efforts.

Conversely, other countries and regions have been able to leverage their natural resource endowments in ways that have enabled them to bring about sweeping economic changes. With differing degrees of success at different stages in their development processes, the United States, Canada, Australia, New Zealand (a group of countries that we will call, using Maddison's terminology, the ‘Western offshoots’) and the European Nordic countries provide examples of countries that have taken advantage of their natural resource endowments to place themselves upon development paths that have been more successful than those followed by Latin American countries.

In the two millennia dynastic history of China, the five centuries of 1500–2000 encompass four political regimes, the Ming (1368–1644), Qing (1644–1911), Republican (1911–49) and Communism since 1949. The five centuries saw regime changes and dramatic ideological shifts and reversals (especially following the collapse of Qing in 1911, the last imperial dynasty) as well as the resilience of historical and political legacy.

This chapter provides a brief account of major economic changes in the last five centuries and offers some major quantitative indicators on long-term welfare. The emphasis of the narrative is on the importance of ideological and institutional changes to China's long-term economic trajectory.

Introduction

The beginning century of our study marked the final century of Ming's imperial dynastic rule. It was a century that also saw the maturing of a highly centralized, unitary political regime governed by an absolutist emperor at the top of the power pyramid, aided by a formal bureaucracy recruited through a highly structured national Civil Service Examination rooted in Confucius classics. But whatever impersonality and neutrality remained of China's imperial regime, they were more than often compromised by the emperor's personal rule, and his personal entourage of eunuchs, consort and other inner court staffs (Ma 2012). Beyond the borders of China, Ming and Qing reigned supreme in East and Southeast Asia throughout the so-called tributary states trade system, where neighbouring small states remained in the status of near protectorate under which limited trade was conducted. China remained more or less isolated politically beyond East Asia until aggressive Western imperialism reached its shore by the mid-nineteenth century.

The claim that China was the world's leading economy in the fifteenth to eighteenth centuries was somewhat misleading based on a conflation of aggregate for the per capita terms. Maddison (2007) was credited with the claim of China being the world's leading economy; based largely on guesstimates, he puts China's annual income at about 500 or 600 international dollars (in 1990 prices), at about 80 per cent (in 1500) and 35 per cent (in 1700) of the world's leading but much smaller economies of the time, Britain and the Netherlands. But Maddison was right in trumpeting the aggregate size of the Chinese economy. Entering into Qing, China saw a doubling of territory and a tripling of population between the fifteenth and eighteenth centuries.