The available sources and quantitative evidence for India do not, for the moment, allow for a similar “decomposition” of the market environment and integration process as performed for Europe in Chapter 4. Instead, we now return to the description of differences between India and Europe.

So far, the comparison has focused on describing the “average” picture for both large regions, thereby leaving aside differences in the extent of market integration within both the European continent and the Indian subcontinent brought about by differences in geography, climate, infrastructure, legal and political frameworks, or the general trade environment. The aggregate results, both for the extent of market integration within as well as between India and Europe therefore hide or blur some heterogeneity.

Now, we wish to narrow the geographical scope by focusing on a comparison of particular subregions to get a more specific understanding of differences between Europe and India and to explore whether such a micro view, which controls for physical geography, corroborates the broad findings of the macro picture presented in Chapter 3. The subregions in India and Europe that are to be compared should share some basic features to make this undertaking a fruitful one. Yet the choice of appropriate subregions is, to a certain degree, an arbitrary one, since differences and common features across regions exist along many dimensions. Luckily, Chapter 4 offered a good guideline for a choice of focus, showing that the most important differentiation to make in the early modern trade environment is arguably the one brought about by physical geography. Thus, the basic dividing line is whether a region has access to the sea, or to shipping more generally, or whether it is situated in the interior.

The idea that the reach of the market is associated with the level of economic development, and that the expansion of markets leads to an increased division of labor and thus to economic growth, made Adam Smith one of the best known economists of all time. It has also become one of the most popular explanations for economic development since Smith first identified the link more than two hundred years ago. This concept of Smithian, or trade-led, growth, has thrived not only within academia but also in popular economics and in policy making around the globe. Yet the empirical evidence on when and how markets became integrated, and on whether, when, and under which circumstances expanding markets promoted economic growth, is actually amazingly thin and often ambiguous.

One of the main motivations for this book is thus to improve the empirical – or quantitative – evidence on the historical process of economic integration, which is a central variable not only in writings on Smithian growth but also in various large bodies of literature on economic development. A substantial amount of new price and wage evidence is thus presented for both Europe and India with the aim of assessing the size and efficiency of markets as well as the process of market integration over time.

In this last chapter, we want to synthesize the findings of all the previous chapters on the levels and trends in market integration in India and Europe from the seventeenth to the early twentieth century. Based on these overall insights on the process of integration, we then return to the discussion about determinants for economic integration presented in Chapter 2 and assess which of the main factors are confirmed by the quantitative investigation. In the end, we take one further step and return to one of the main motivations for studying the process of economic integration, which is the great importance that is generally ascribed to trade and economic integration for economic development. We will thus review the various trade/integration–growth narratives and derive some general indication about their plausibility in the light of the new evidence on economic integration.

Market integration in India and Europe: a synthesis

The present book is first and foremost an attempt to improve the empirical – or quantitative – evidence on the historical process of economic integration, which features as a central variable in several large bodies of literature. A substantial amount of new price evidence has been collected for both Europe and India with the aim of assessing the efficiency of grain markets as well as the process of market integration through time.

GDP per capita was calculated by dividing the total GDP in Europe and India by total population in both territories. Note that for “Europe,” thirty-six countries in Western, Mediterranean, and Eastern Europe have been included. Not included are all former USSR territories and former Yugoslavian territories. “India” includes Pakistan and Bangladesh. All GDP and population data comes from Maddison, Historical Statistics for the World Economy, available at www.ggdc.net/maddison/ Historical_Statistics/horizontal-file_03–2007.xls

Sources and description of real wage data

India

Nominal wage data

All the wage data has been converted into grams of silver per day. 1 rupee was worth 10.78 grams of pure silver. In the few instances when the sources reported wages per month, they were divided by 30 to obtain daily wages. All in all, 391 nominal wage quotations for unskilled (or semi-skilled) laborer the entire period 1600–1900 could be gathered. The wages are for laborers, agricultural laborers, spinners, and weavers. Geographically, the data is slightly biased toward the east and the south, while there are more wage figures available for later years than for earlier years. Whenever there were no values for some years, simple interpolations were used to generate values. When more than one wage figure was available for some years, simple arithmetic averages were computed.

Market integration and economic development

The idea that the reach of the market is associated through the division of labor with the level of economic development, and that the expansion of markets, that is, the process of market integration, leads to economic growth, has made Adam Smith one of the best known economists of all time. It has also become one of the most popular explanations for economic development since Smith first asserted that connection more than two hundred years ago.

In a nutshell, the logic of the argument runs as follows. When, for some reason, market areas expand and formerly separated markets become part of one single market, their integration turns them into a single operating entity. This generates a territorial expansion of the division of labor, inducing a reallocation of resources within regions or national economies, leading to an increasing division of labor. Through the specialization of skills, this will eventually improve the general productivity and thus induce economic growth.

This appendix shows all the sources used for the analysis in Chapter 5. Again, all the sources and markets used for this chapter are listed for reasons of transparency, even though a good part of the data had been used in previous chapters already. Again, conversions used to turn capacity into weight measures are 76 kg/hl for wheat and 72 kg/hl for spelt, if not noted otherwise. Also, prices are wheat prices if not mentioned otherwise.

Sources of Grain Prices

Western India

Bombay, 1836–1914

Source for 1836–1862: Accompaniments nos. 1 to 9, p. 118. Tolas per rupee, calendar years.

Source for 1863–1914: Prices and Wages, various issues. Seers per rupee (earlier issues) and rupees per maund (later issues); average prices for calendar years.

Junnar, 1800–1827

Source: Divekar, V.D., Prices andWages, table 38. Average market prices for harvest years (June-May); seers per rupee. Wholesale prices.

Source: Divekar, V.D., Prices andWages, table 27. Average market prices for harvest years (June-May); seers per rupee. Wholesale prices.

Nimgaon Ketki, 1809–1827

Source: Divekar, V.D., Prices and Wages, table 38. Average market prices for harvest years (June-May); seers per rupee. Wholesale prices.