European Economic History

Economics 343:01

Professor Eugene N. WhiteFall 2010

Lecture 1Why is this course important?

• We are going to examine the central question of long-term economic growth: Why do some countries/economies “succeed.”

• Why did some countries first escape poverty?• Why did/have some countries gain sustained

economic growth and rising standards of living?• What are the policies or conditions that encourage

economic growth?• Can rapid growth be taken for granted?• Focus on Western Europe—source of modern

growth

Measuring Modern Growth (Success)

• GDP– Total Real Output/Annual real growth (Who is #1?

#2? #3?.....)– Real Output per capita/Real growth per capita

• Distribution of Income and Wealth• Quality of Life (affected by distribution, pollution,

environment) – Life Expectancy– Infant Mortality– Height– Literacy

China is everyone’s mind…NYTimes 8/16/2010• China Passes Japan as Second-Largest Economy• SHANGHAI — After three decades of spectacular growth, China

passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday. The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

• Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

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First Industrial Revolution

Second Industrial Revolution

Third Industrial Revolution

2003: Haiti $740, Burundi $477, Afghanistan $668, Zaire $212

$425

The Big Picture in One Slide!

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PULLING AWAY FROM THE PACK?

More Details

Another way to look at

the facts

So!……Why do some countries succeed? Many candidates.

• Culture/Religion• Natural Resources• Climate (Geography)• Genetics• Political-Economic Regime

• A Lot to Sort Out!

One Suggestive ComparisonSouth Korea and North Korea

• Culture/Religion

• Natural Resources

• Climate (Geography)

• Genetics

• Political-Economic Regime

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Or, electric lights from a satellite

What is Western Europe?

Economic Growth?

• The basic model• Y = f (K, L, N)• We will cover period 1200 to

present.• Huge Change---Institutions and

Markets---Both Essential for Growth

Some Big Issues• How do economies make the transition from

stationary to growth economies? What is the role of institutions and government?

• What is the role of technology? Can technological change be promoted?

• What is the role of industrialization? What effects does it have on the standards of living and on the distribution of income and wealth? What is the proper role of government?

• How did the modern state arise? What are its effects on growth?

• How did financial markets arise---what do they contribute to growth?

Some Big Issues• What is the role of market integration?

Nationally? Internationally? Exports/Imports? Globalization?

• What monetary/exchange rate regime should be adopted? (gold or paper money standard /fixed or floating exchange rate).

• Can depressions/financial crises be avoided?• Why did the “nation-state” flourish, then begin to

retreat in Europe?• Why did the Europeans feel that a European

Union was needed?• How successful is the EU? What are its

prospects?