Thank you to the organisers for inviting me to this conference. It's a great pleasure to be here in particular because many decades ago,
Patrick O'Brien got me and Jeremy started on this path of looking at big questions.
And so, you know, it's really nice to be here.
And Patrick may not agree with a lot of things I'm going to say today, but you know, it's still a good exercise.
So, uh, so I'm taking over from Leandro,
who's tried painted a very nice picture of what was driving the great divergence and kind of reinstating Palmer on this timeline.
I'm going to show you a much more disaggregated picture of Asia and in particular, look at three different countries India, China and Japan.
Just to recap where we are, you know where I'm coming from.
The big question that was posed by Pomerantz and the California school is when did Europe begin to diverge from Asia as a high growth economy?
And they argued that the conventional view is Eurocentric. If you look at the young C delta, it was as developed as England in the 18th century.
A similar argument was put forward by President and Parthasarathy on India.
Looking at the wages of weavers in South India,
Parthasarathy argued that the same amount of grain could be purchased by weavers in India as the weavers in in England in 1750.
So basically a similar type of view that the Great Divergence actually dates from colonisation, coal and other kind of advantageous things for Europe.
So what? What was the basis of this comparison? The basis of this comparison was quantitative and qualitative, but mainly qualitative.
There was some evidence of wages and the questions that Steve Bradbury and I started with is that how
representative were these numbers are the quantitative estimates that we found in this literature.
So we came up with this conclusion that we need to document an average value,
which is much more widespread and has many more wages that that than was there in Pomeranz book or in Parthasarathy Societies analysis.
So this is an exercise we did for a fairly long period of time,
collecting hundreds and hundreds of wage and price data on India in particular and some in China.
And the question was that, you know, what was the timeline of this decline?
So I'm going to show you what we found, but the two indicators that we used were single wages and grain wages.
So silver wages were comparable money wages across different countries,
and the grain wages were simply by dividing the silver wage by the look at the price of the local grain.
What we kind of argued in our 2006 paper was that high silver wages reflected high productivity in the tradable goods sector,
whereas a high grain raise reflected high productivity in the agricultural sector.
So we can find fairly low silver wages, but high grain wages, and that's the indicator of living standard the grain wage.
So the difference between Europe and Asia was not that great to start with.
In 6500, we also looked at the wages of skilled and unskilled workers,
and we found much higher skill premium in in Asia compared to Europe and which kind of,
you know, suggested that skill premium was lower in Europe because the the supply of skilled workers was much higher.
So this is this is an illustration from what we found if you look at the highlighted column there.
This shows the Indian grain wage as a proportion of the English grain wage.
And clearly it was 83 percent of the English wage in in 6500.
Ninety five percent in in the middle of the 17th century, but it began to fall soon after.
And by the middle of the 18th century, it was only about 40 percent of the English wage.
So we kind of argued in our paper that the timeline of the decline was indeed 7500 rather than 1800, as Pomerantz had argued.
So you can see here that by the. Middle of the of the 19th century, it's less than 30 percent of the English wage.
China looked pretty similar. I'm not. The Chinese data was worse than the Indian data,
but it was a fall from 87 percent of the English wage to about 40 percent of the English feeds within a similar time span.
So there were there are clearly some serious problems with the grain rates.
One is that it's a very simplistic notion of living standards.
People consume lots of different things. So how do we go from, you know, having just grain, a grain wage to a consumption basket?
And this was done really nicely by a paper by Bob Allan and co-authors where they tried
to construct a consumption basket using the basic grain and other consumption goods.
But then there is yet another problem with the whole idea of using wages as an indicator of living standards,
the most of the wage data that we used and others have used come from the urban sectors.
And we know that China, India and Japan until even today are mainly agricultural.
At the early 20th century were mainly agricultural economies.
So, so, so using the wage data really actually distorts the the living standards.
I'm going to come back to that in a minute. So just wanted to show you how Bob Allen and others constructed the wage basket.
They used two types of wage baskets the bare bone based bread basket,
which is the subsistence level basket and a and I'm a respectable basket which buys more than the subsistence level consumption.
The welfare ratios are constructed by looking at the actual wage and seeing how many consumption baskets this wage would buy.
And here the evidence was pretty unequivocal that the English worker was substantially above the barebones basket.
The welfare ratio of the English workers was much higher compared to the Chinese or the Indian workers,
who are mainly at the level of one bare-bones basket.
So you can see the the lines here, the.
So the top line, the the top that line is in is is London.
The grey line is actually Oxford. And then you see the bunch of Asian countries bunched together,
but they're clearly at a much lower level than the English living standards in the 18th century.
So let me now kind of look at what has then followed,
because this started this whole part of new research into the question of the great
divergence and what happened in this context is really a move from wages to incomes.
So how do we go from having just wages as an indicator of living standards
to constructing some income estimates or GDP per capita estimates for India,
China and Japan? So the question, of course, is is this wild speculation?
We know that the data is not perfect as it is today or, you know, anywhere even close.
But is it just wild speculation or can we claim some scientific basis of this construction?
So there is Madison's data, which is which was widely used before the new data has become available.
And I'm afraid that I'll show you the comparison.
These were really based on guesswork, and they gave a picture of of stagnant Asian economies and a more growth,
more buoyant European economies until the 1980s.
The new research is more has much better data. It's much more careful in its construction of the GDP numbers.
So for India, we have good data. After 1870, we have reasonably reliable data, patchy but reliable data for 15 ninety and later on.
For Japan, we have pretty good data from 17 from seven hundred and thirty and four China from nine hundred and eighty.
So this work owes a lot to Steve Bradbury, who got us all in in, you know,
frenzy to get different data from different parts of the world and construct these estimates of GDP per capita.
I just want to say how we did it.
This is done on the basis of a demand model, which means that let's look at the population of a country at a particular point of time.
How much? How much agricultural output would need to be produced to feed this population at a bare minimum.
Similarly, how much industrial commodities would be needed, such as cloth to close this population at a given point in time?
So the bare minimum estimates of GDP are constructed using population and the demand for the basic consumption goods.
Then we use the baby wage data that we already have to build some flexibility into this estimate.
Some countries were better off than the others, and therefore we do get some variation in terms of the consumption.
So the demand model gave us a set of numbers on GDP per capita, but clearly we can't be sure about it, right?
There is a lot of guesswork. There are some assumptions. So the main cross check is to find.
Supply side estimates, so output data for some benchmark years, and that was hard,
but I think we did it pretty carefully and we got some good supply side estimates based on output of agricultural products,
industrial products, etc. for certain when benchmark years and try to see whether it matched with the demand side estimates that we constructed.
And it did it. It matched pretty well.
So I can I think I can say with some conviction that our GDP numbers are not just they are not really wild guess guesstimates,
they are not absolutely accurate.
I have to say that, but they are pretty close and we have GDP per capita converted into 1990 dollars, which Leandro has already shown up.
So here you can see our estimates on the top. I don't know how well you can see that.
You can see our estimates on the on the on the top of the table and at the bottom of the table and Madison's estimate.
And if you focus on Japan, China and India, they don't change very much until much later, up to eighteen hundred,
they kind of stay pretty stagnant, whereas our estimates on the top of the graph show a trend for China, Japan and India.
India's data starts months later, but we still see a declining trend from 6500.
So when did the when did the great divergence begin?
And here I'm going to show you some different patterns for India, China and Japan.
So let me start with India. This is based on my work with Steve Rothbury and Johan custodians.
And this is a little bit of fancy graphics.
So this is Indian GDP decline from 6500 to 1870, followed by a relative decline with Britain.
The lower graph is much steeper than the graph above.
So the relative decline of India is not only driven by the slight that the slow decline of Indian GDP per capita,
but also the rise of British incomes or English incomes very, very fast.
After 17 50.
This is the data which Steve Bradbury, Agron and Lee constructed, this is should be at twenty eighteen for China.
The Dark, but the dark line gives you the high estimates for China, and the broken line gives you the low estimates of China.
So there are two estimates one based on data from the Yangzi Delta and the other is full of, you know, based on the rest of China.
And you can see, as in the Indian case, these are not that different fora for a long time, up to 7500.
They look pretty similar with the grey line for Europe.
But then the divergence began from 17 40, where Europe moved ahead and China began to decline, both according to the high and the low estimates.
So both India and China do show a decline in GDP per capita from 7500, you know,
which is very different from what I'm going to show you for for Japan in in in the next slide.
So why is it is Japan a special case? And here I think one, you know, there's a comment on Leandro estimates that once you add Japan to the story,
we lose the decline that we see in 17:00 because Japan looks very different from from India and China for a long time.
It looks similar to Britain in a particular way, which is that it doesn't have a sharp decline in GDP per capita at at any stage.
So the big difference is it did not decline. The GDP for Japan did not decline in absolute terms, as it did for India and China.
And this is this is my work with Steve Bradbury.
Jean Pascal, No George Fuko and Masanori Takeshima.
And you can see that as in the case of India and China, the Japanese GDP per capita declined from a fairly high share of the English GDP per capita,
but it did decline, but it did not decline at all in absolute terms.
So if you look at the highlighted section, a Japanese GDP was six hundred and sixty seven in 600,
rising to six hundred and seventy five then eight hundred and twenty eight, nine or three and 2011.
Whereas for China, it began to decline from 1100 to 1950 to seven hundred and twenty seven all the way down to 16:18 for India.
Again, there is a decline from six eighty two to six thirty eight all the way to five twenty six.
So the decline that we see in India and China never happened in Japan,
which kind of puts Japan in a very different category amongst the Asian countries and therefore,
you know, quite similar to to to Britain in in in in in in terms of the trend in GDP per capita.
So my concluding comments are the estimated historical GDP provides us with
some evidence that Europe did have higher living standards compared to Asia,
not in 6500 us as much as by 18 7400.
And we can think of the beginning of the Great Divergence as from 17 from the from the 17th century.
The little divergence in Asia explains why Japan stands out as an economic unit, and it never declined in absolute terms,
and it may explain why Japan was able to take off from 1868, and that's the topic which Karl Rove is going to pick up.
I think in the next talk, OK, I'm going to stop there.