11,000BC; Max Weber’s focus on the Protestant religion in Europe after
ca.1520; Daren Acemoglu’s and others stress on proximity to the Atlantic trade
system; and Douglass North’s focus on the protection of property rights.
This book begins with a comparative examination of the proximate determi-
nants of economic growth (labour, capital and productivity), using the work of
mainly economic theorists to compare and contrast their impact. I then take a
step back to examine the deeper determinants of economic growth, critically
examining the strengths and weaknesses of each determinant separately and
eschewing a single favourite story in favour of a comparative perspective. We
should recognize that good economic policy is not just about spotting a prob-
lem and proposing a remedy (the naive analysis of many economists) but also
in examining the deep constraints on the choice and effectiveness of policy
tools.
A comparative and historical focus
We can learn a lot about the contemporary world through a comparative and
historical perspective. An example is the concern voiced by the media and
politicians in much of the developed world in recent years about the rise of
China and India. China and India both experienced a sudden sustained accel-
eration in economic growth from 1980 onwards and in view of their large phys-
ical size and populations many argue that the twenty-first century will be the
‘Asian Century’. Commentators worry that Chinese and Indian firms are
becoming a competitive threat to developed-country firms’ exports by absorb-
ing technology from developed countries and combining it with much cheaper
labour. A comparative (and historical) perspective can place this debate in a
more realistic context and raise an important question that is usually forgotten
when the media or politicians focus only on recent economic change, as the
following three examples illustrate.
First,China and India are returning to (though are still a long way from) the
central place in the world economy that they held in the centuries leading up to
the Great Divergence. The fall of Asia (not the rise) was the real historical aber-
ration. In 1820 India and China accounted for around 50 per cent of world GDP
and Western Europe 25 per cent. In 1973 the share of India and China had
shrunk to less than 8 per cent and Western Europe’s had surged to 51 per cent.
By 2003 India and China were approaching again their historical norm with a
share of 23 per cent and Western Europe had slowly declined to 40 per cent.
Second, the impact of China and India on the developed world in terms of
changing patterns of trade, investment or economic growth is little different
from the earlier impact associated with the rapid economic growth of Japan
after the 1950s. Between 1987 and 2003 GDP growth averaged 7.85 per cent
in China (7.86 per cent between 1952 and 1978 in Japan), export growth aver-
ag ed 14.4 per cent a year (13.2 per cent per annum in Japan) and China
increased its share of world GDP from 4.6 to 17 per cent (3 to 7.8 per cent in
Japan) (Maddison, 2007:380–1).
Introduction 11