Chapter 7
The Great Divergence since 1750
The fact that there are large inequalities in the contemporary world economy
is the central fact of our current economic existence. But when did these
inequalities emerge? Some scholars argue that much of the now developing
world had incomes little different from now-developed countries as recently as
- Inequality, it is claimed, is not long-standing or natural but is the result,
perhaps, of better economic policies in the now-developed countries, which
suggests poor countries should learn from developed countries what policies
work. Or perhaps the experience of colonialism which drained wealth that
promoted economic growth in the now-developed countries suggests a moral
case for massive amounts of aid to rectify that historical guilt? This chapter
finds that Western Europe did not have a particularly high (by historical stan-
dards) standard of living in 1750, but it was rising and then already had a
significant lead in per capita incomes over the rest of the world. This lead was
based on a long history of significant improvements in production, trade and
transport technologies in Europe. The lead goes back to as early as 1500 CE or
even 1350 CE. Whether this technological dynamism of Europe was indige-
nous or imported from outside misses the most important point. Over the long
term the origin of innovation is less important than receptiveness to ideas,
whatever their source, and the ability to build on ideas in a cumulative manner.
This is an important lesson for contemporary developing countries, where the
conditions of access to technology developed elsewhere, such as the activities
of MNCs (Chapter 3) or regimes of intellectual property rights (Chapter 10)
are crucial influences on long-term economic growth.
Europe in 1750: stagnation or growth?
There is good evidence that GDP per capita in Europe in 1750 CE was low but
also that there had been significant improvements in production, trade and
transport technologies in Europe in the centuries after 1000 CE. There is a
related controversy about whether average incomes in Europe in 1750 were
higher than those prevailing elsewhere, particularly in China and Japan.
Europe in 1750
Western Europe in 1750 had a level of GDP that was not impressive by long-
term historical standards. It was little different from other civilizations at their
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