Lecture 6

The Great Divergence and the

Little Divergence
Wednesday, February, 12th, 2025 and Monday, February, 17th, 2025

a. The Great Divergence

b. Why was Britain first?
c. Diffusion of the First Industrial Revolution:
Catching up, Ricardian rules, List’s reactions
d. European Expansion or World Globalization?
Great Divergence and Little Divergence
• The Great Divergence: that which occurs between Western Europe
and the rest of the world in the 18th and 19th centuries.
• The Little Divergence: the one that occurs between European
countries in the 17th and 18th centuries.
• They are two ways of seeing the differentiating impact of the
industrial revolution as a breaker of Malthusian equilibria and the
changing locus of economic and political power.

• Main reading: Robert C. Allen, Global Economic History.

The Great Divergence
 Until 1500…
• Until 1500 (Pomeranz says until around 1750) Europe did not surpass the
great Asian empires either technologically or economically.
• By the end of the Middle Age:
• The Islamic world and the Chinese world have more advanced economic
systems than Europe.
• Italian merchants acquired new business and accounting techniques
from these empires.
• Great inventions of the Middle Ages (compass, printing press,
gunpowder...) are Chinese.
• The demographic growth of China and India reveals advances in
agriculture.
 The mercantilist era (ss. XVI-XVIII)
• There is an increase in trade with Europe after the arrival of the
Portuguese.
• In the Asian Empires:
• The evolution of the legal system is comparable to that of Europe.
• The property regime is not so insecure and they have forms of quasi-
private property in agriculture and manufacturing.
• Education levels are similar to Europeans.
• The evolution of productivity and real wages is similar to that of
Europe.
• But, after a certain moment, north-western Europe becomes much
richer and powerful.
Great Divergence: when?
Silver, grain
and real
wages in
Britain, China
and India,
1550-1850.
Wages as a
percentage of
English
wages.
Unequal trajectories also within Europe
 Lessons on non-European empires: China

• The case of China. Extractive institutions (tributary states),

but moderately. Little power of merchants. Power of tax
collectors and high officials. There is no ecclesiastical
counterpower. Very closed economy. The relationship with
the rest of the world has been tense (the major moments of
violence have been invasions). This has led to several
closures. Peak moment: the great maritime voyages of the
early 15th century, and the subsequent radical closure.
 China (cont.)
• Extractive institutions? Inclusive? Maybe neither one nor the
other. Traditionalism and fear of the unknown, which could
be negative for everyone. When China opens up, four
centuries later, it will be under the pressure of the gunboats,
and against the will of the people. We think that trade
openness is usually perceived as a possibility of greater
inequality. It is only popularly accepted when the gains are
obvious.
 China (2)
• R.B. Wong, in Cambridge History of Capitalism, thinks that China is
best interpreted in Malthusian terms. A unified state, which
guarantees peace and great works. And trade. And moderate taxes.
• The population is increasing, driven by improvements in productivity.
The Malthusian ceiling is reached. But there are no wars or
epidemics. The population survives, increases, densifies.
• Labour becomes too cheap to make mechanization profitable.
Lessons on non-European empires: India
• India is open to trade, especially the coast, but it used to be governed from the
center/north.
• Britain will be the first Indian empire built from the coast.
• Initially the East India Company was looking for cotton fabrics to buy spices.
• It will end up looking for Indian muslins on their own merits and selling them to
Indians, and deindustrializing India.
• The most promising moment was at the end of the 17th century/beginning of the
18th, when India was more manufacturing oriented and when England was not
yet.
• We can talk about economic institutions that improve, in internal governance,
with English colonization, but that worsen in external governance. English
colonialism is extractive, even if economic institutions are more inclusive. (on
this issue Allen is much more critical than the chapter author of Cambridge
History of Capitalism).
Lessons on non-European empires: Middle East
Its peak is during the 11th century. Then came very destructive invasions
(Crusaders, Mongols, etc.).
The result will be a weakened state, which must distribute a lot of power
and resources (temporary ownership of land) to maintain armies and to
collect taxes. Military and tax collectors will be the privileged classes.
There will be no room for a mercantile bourgeoisie. The Middle East
stagnates (relative decline) when the West takes off. Extractive
institutions, but not too much.
Are there lessons from the Institutional
model?
• I refer to Acemoglu, Johnson & Robinson (2024 Economics Nobel
Prizes), many contributions, made popular thanks to Why Nations
Fail? (2012).
• They distinguish Inclusive institutions, good for growth, from
Extractive institutions, very negative for growth.
• England or the Netherlands in the Early Modern Ages are good
examples of building inclusive institutions, but inward looking.
• Their relation with other territories is always extractive, and only
create inclusive institutions outside Europe for themselves and their
own governance.
 Are there lessons from the European
experience?
• European political fragmentation is fundamental.
• It stimulates territorial and colonial expansion, trade, tax competition,
protection of the persecuted, creativity. It minimizes power.
• Greater bellicosity.
• Repeated population reduction, without significant capital
destruction.
• It will end up modifying the marriage model, of late and non-universal
fecundity, which raises the Malthusian ceiling.
But, which are the causes of the
industrial revolution?
Innovation and human capital? Yes.
• There were few incentives to innovate through patents. But scientists,
discoverers, academics, entrepreneurs, they were all working for the
industrial revolution. There were important earning expectations due
to strong growth in demand.
• The labour aristocracy also participates in the innovative process by
improving and making previous innovations applicable to production.
• Technologies mostly already known.
• Increase in demand for education.
• This greater density of human capital can explain the superiority of
the innovative process and also why wages were higher in England.
Trade and markets? Yes.
• GB had worldwide naval access. Naval superiority from navigation
laws. Great geostrategic situation.
• America: Elastic supply of land.
• Africa: Elastic supply of slave labor.
• Everywhere: Elastic supply of raw materials and food that lowers the
cost of labor and industry. Ex.: raw cotton.
Demand? Yes.
• Increase in the size of the market from America to Asia.
• Trade increases the elasticity of both supply and demand for textile
manufactures. Amplifies the dimensions and impact of the industrial
revolution. (Cheap) production for mass consumption is born.
• Increased demand prevents prices from collapsing (further) due to
increased supply and technological change.
• An "industrious" revolution: the supply of work responds to the
incentives of demand, working more hours.
Necessary causes to become an industrial
power
• High rate of capital accumulation due to high savings and low interest
rates.
• Technological innovation.
• Abundance of coal and iron.
• Large domestic market due to population growth.
• Increase in agricultural productivity.
• Mix of mercantilist policies (conquest of colonial markets) and free
trade (market conquest by comparative advantage), outwards, and
free trade, inwards.
Other necessary causes in Europe:

• Political fragmentation that generates greater competition in the

intellectual market and for innovation.
• System of states: political competition and military competitiveness.
• Common culture in Europe: ideas flow across borders.
 Allen: Why Was England First?
• Allen looks for the essential differences.
• England: the reason must be found in the British price and wage
structure.
• High wages in relation to the price of capital and coal:
incentives to replace labour with capital and to mechanize.
Labour must be saved.
• In Africa and Asia, cheap labour produces the opposite effect.
• Generally speaking, factor costs explain the diffusion of
industrialization.
 Why not India?
• Cotton industry: Expansion at the expense of India, China and the
Middle East.
• Especially India: calicos (from Calicut), muslins, dacas (from Dacca), all
from India (and current Bangla Desh).
• Strong demand, labour costs and technological imbalances
(bottlenecks) stimulate the mechanization of cotton spinning.
• Because of high wages England could initially only compete with India
in coarse fabrics.
• Protection and mechanization will do the job.
 Why not China?
• During the 18th century, because labour in China was too cheap to
appreciate the gains of mechanization.
• Even in the most prosperous areas, such as Shanghai, due to the cost
of capital, but above all, of energy.
• Nevertheless, XIIIth and XIVth centuries China seemed fit for
industrialization.
 Xina al segle XIV, Wang Zhen, 1313.

Domestic spinning in England (s. XVIII):

putting out or Verlagsystem. Spinning jenny (Hargreaves, 1768)
 SubsistenceRatiofor Labourers
income/cost of subsistencebasket

6
London
5
Amsterdam
4
Vienna
3

2 Florence

1 Delhi

0 Beijing
1375 1475 1575 1675 1775 1875
Robert C. Allen (2009): 140.
Relative price of labour (in wages) compared to
capital

England
Real prices of wood and coal in London,
in grams of silver per energy unit

Wood

Mineral Coal
 Little Divergence and Catching-Up
• Most of Western countries lost the industrialization race.
• Nevertheless, they reacted quite soon and deployed industrialization
policies.
• They made intense efforts to “catch-up” Britain.
• The later these efforts, the less successful.
• Those that failed to catch-up during the nineteenth or early twentieth
centuries, had to deploy “big push” policies during the twentieth
century.
 Catching-up essentials (Allen)
1) Creation of a unified national market, eliminating internal tariffs and
building a transport infrastructure.
2) Enact foreign tariffs to protect national industries from British
competition.
3) Creating banks to stabilize currency and to finance industrial investment.
4) Establishing mass education to improve manpower.
Allen applies this framework (the “classical model”) to European and US
industrialization (chapter 4).
He considers that Russia, Japan and some Latin American countries
attempted to do the same during late XIXth century and early XXth century
(chapter 8).
Industrialization diffusion
• Industrialization begins to spread, at the end of the 18th century, to
countries and regions with endowments of factors similar to the
British one: New England, some regions of France, Wallonia,
Catalonia, Lombardy...
• Great Britain - already the United Kingdom - became very jealous of
its industrial power during the Napoleonic wars and prohibited the
export of machinery.
• The British victory over Napoleon awakens awareness of the political
importance of industrialization.
• The desire and will to imitate British industrialization appears.
 Diffusion:
Imitation and imitation with differences
• We can distinguish between diffusion patterns by imitation (Marx,
Rostow) and diffusion patterns by imitation with differences
(Gerschenkron).
• The first correspond to countries or regions with factor endowments
similar to the British. The paradigm is Belgium, that is a small England,
with a lot of coal, a lot of iron ore, a long and intense textile
manufacturing tradition (woolen and linen) and high wages.
• The belgian difference will be the lack of enough capital, that will be
solved with the invention of investment banking.
Diffusion: imitation with differences
• Imitations with differences (in response to relative backwardness) will
correspond to countries that have to replace or compensate for the
lack of some of the typical elements of the British case.
• For example, France and New England (USA) do not have abundant
coal, but they do have a lot of hydraulic power potential.
• The lack of preparation of its population will be combated with a
great effort of mass schooling.
More imitations with differences
• Other countries will have different shortcomings. For example, the
German states will not have a unified market. The customs union
(Zollverein, 1834) will overcome this problem and allow the rapid
development of the railway.
• Nor will they have high wages, nor cheap capital, but coal and iron in
abundance. They will imitate the Belgian innovation of investment
banking, expanding it to mixed banking (commercial and investment).
• Low wages will be combated with a great educational effort, not only
mass schooling, but the promotion of secondary and higher technical
education.
• Even so, Germany finds itself wanting to industrialize starting from far
behind Britain. Its compensatory tool is tariff protection. The USA
also applies it even though the distance already protects them a lot.
 Imitation or adaptation?
• Not all countries can or want to imitate GB.
• They may feel unable to bridge the gap or not interested in doing so.
The lack of interest can come precisely from the cost of its productive
factors. If the work is very cheap, why mechanize? If the land is
abundant and the subsoil is rich in minerals, why industrialize? They
will be cases like Russia. It will also be the Spanish case.
• Others can bet on complementarity. Great Britain, in 1846, abolished
the "Corn Laws" (laws protecting cereal imports) and opened its
market to agricultural products from all over the world. Some
countries, such as Netherlands and Denmark, decided to take
advantage of the opportunity. Others, such as France, Italy and Spain
will do the same. The first to do so was Portugal.
Free-trade or protectionism?
• Remember the abolition of the "Corn Laws". What they are, what they
mean, what battles were developed to maintain or suppress them, who
defended what, the role of David Ricardo, that of Chartism, and the
consequences of its abolition as well as Richard Cobden's free trade
campaign, and the Cobden-Chevalier treaty.
• Remember the reactions in countries that aim to be GB's competitors, such
as Germany and the USA: tariff protectionism. Before competing you need
to strengthen yourself: Friedrich List.
• Some countries will strongly bet on David Ricardo: Portugal, Holland and
Italy (since Unification), on the agricultural side, but also Belgium on the
industrial side. Others will bet strongly on List to develop their industry:
Germany and the US. Others will be divided or doubtful. France will
gradually change its attitude, and in 1860 it becomes free-trader. Spain will
be divided and doubtful.
 International trade: a short summary of theories
• For mercantilists it is a zero sum game.
• For Adam Smith it is very good. Mutually enriching. It is part of the
increase in the division of labor, the source of the increase in productivity,
the source of the wealth of nations. Adam Smith only thinks in terms of
trade for absolute advantage: trade occurs when the goods or services
exchanged are cheaper in absolute terms.
• For David Ricardo there is another foundation of international trade:
comparative advantage. It is traded based on the internal cost structure of
one country compared to that of another. You export what is
comparatively (in your structure) cheaper, and you import what is
comparatively more expensive. The example of Portugal and England: wine
and fabrics are cheaper in Portugal, but wine is relatively cheaper than
cotton textiles in Portugal while cotton textiles are relatively cheaper than
wine in England.
• For Heckscher & Ohlin, much later on, is the Ricardian idea, but expressed
as factor endowments: you export the most intensive products in your
most abundant factor, and you import the most intensive products in your
scarcest factor.
International trade: Friedrich List reaction
• Friedrich List (1789-1846)
• “The National System of Political Economy” (1837)
• A political liberal (pro free elections), nationalist, promoter of his own
ideas (Zollverein –1834-, railway development)…. But critical to British
classical economists.
• Very attentive to the United States, where he had a lot of success.
• He strongly defended using tariffs to protect the “infant industries”
until they reach maturity and are able to compete in world markets.
Are there advantages in growing later?
• Theorists of industrialization and economic growth have had to wonder
about the advantages of growing later given the empirical observation that
backward economies that industrialize grow faster and can even surpass
their "masters".
• The backward countries that industrialize, greatly accelerate their growth:
“take off”, “big spurt”,…
• This observation has been structured by Moses Abramovitz in his "catching
up" theory to which Robert Allen refers a lot.
• Allen, in fact, organizes his entire book around this concept and how it has
been applied, taking into account the weight of relative prices (factor
costs).
• He distinguishes the classical XIXth century “catching-up” policies and the
XXth century “Big Push” policies (Soviet Union, Japan and East Asia, China)
 To sum up
Great Divergence and Great Convergence: why it took so
much time to catch up?

• Pomeranz (2000): the Great Divergence in wealth between the rest

and the West began with the industrial revolution (ca 1750) and the
advent of modern economic growth
• In 18th century: real income gap was between the most advanced
countries (Britain, Netherland and Belgium) and many other regions,
including central and southern Europe
• During19th century: many Western countries caught up with the
Northern European countries, but the Rest did not
 The origins of the Great Divergence
The comparative economic history perspective (Allen)
• Comparative advantage: countries that trade with each other specialize in the production
of the commodities that they can produce efficiently
• With the industrial revolution, the West drove the Asian manufacturers
out of business
• Not a matter of institutions but of commerce and coal
• Industrial technology was cost effective where salaries were high (not
where salaries were low)
• Manufacturing disappeared and population was redeployed into
agriculture…
• … Becoming exporters of wheat, cotton, rice etc
• Colonies’ economic policies were subordinated to colonial power
• India from exporter of textiles to exporter of agricultural goods
• Underdevelopment was a consequence of 19th century globalization and
Western industrialization
 Catching up
Moving away from the pattern of comparative advantage
• Biased technical change plus globalization promoted the industrialization of western countries
and the deindustrialization of Asia
• Technical change and transport turned colonial and independent countries in underdeveloped
countries
• So in 20th century: the problem was not to modernize traditional societies, because
underdevelopment had been the result of 19th century globalization and Western industrial
development
• Need to catch up in education, capital and productivity
• How to get these countries out of underdevelopment? “Catching up” or “Big push”
1. Standard model: Tariffs, protectionism, state intervention, banks, education -
Germany
2. Big push model: building up all the elements of an advanced economy
simultaneously \ everything is built ahead of supply and demand - Japan
Now we go a step backwards…
…. Using extensively Allen, chapters 6 and 7
European Expansion or World Globalization?
• For centuries, the European expansion has allowed the Western
World to control most of the rest of the world under strict
mercantilist policies.
• This cannot be considered a “globalization”. It is not so even in purely
economic terms: Price convergence.
• Kevin O’Rourke and Jeffrey Williamson (2002) have assessed than
price convergence between European powers and extra European
destinations only exists after the 1820s.
• Nevertheless, factor price convergence only starts by 1870s, although
limited to trade and factor movements among independent (or quasi
independent) countries. Not among countries under a colonial
relation.
The Atlantic economy: the triangular trade
• The triangular trade was the most profitable in the modern era and until
the end of slavery in the Americas.
• European countries exported textile manufactures and weapons to Africa.
• African countries bought European products by selling slaves.
• Slave transporters/traders sold slaves to the Americas: British colonies in
North America (and after US independence, the southern states),
Caribbean islands, and Brazil. They were mainly used as labor for the
plantations.
• The transporters/traders returned to Europe carrying the product of the
plantations: mainly sugar and cotton in flakes. Also tobacco, coffee, cocoa,
rum.
Triangular
trade of the
Royal African
Company,
1673-1713,
in pounds
and in % of
value.
Coexistence with the Imperial fleets
• During the 16th-18th centuries there was another axis of business in
the Atlantic economy: the Castilian imperial fleets, which crossed the
Atlantic to bring silver to the House of Contracting in Seville (and later
Cádiz). There were a couple of them a year, and the merchant ships
were heavily escorted.
• The Castilian fleets (and any of their ships) were the preferred target
of the corsairs. Since there were always European powers at war with
Castilian, the pirates bought the patent of hearts and became
privateers. Most famous: William Drake.
• Returning to America, the fleets carried European manufactured
goods.
The Atlantic economy: supply and demand
1) European manufacturing supply, towards Africa and America.
2) African manufacturing demand and African slavery supply.
3) American slave demand and American food and raw materials
supply.
4) World silver demand and American silver supply.
5) In the system periphery, supply of transport services (American
colonies), smuggling against Empires with Royal monopolies, and
growing food supply towards slave plantations and mines (wheat from
Northern US states, and from the South Cone –Rio de la Plata, tasajo-).
 Africa: always poor?
• Africa - sub-Saharan Africa - never had an agricultural civilization like those
in Asia, Europe and America. Geographical and climatic reasons made it
more difficult, combined with low density, high soil fertility, and high
human mortality.
• Lack of cultural elements such as legal system, metric system, arithmetics...
that characterized other agrarian societies.
• West Africa: population growth was limited by tropical diseases.
• Low population density and high transport costs: limit to specialization.
Underutilized work. Slash and burn system. There was no class of landless
peasants, nor a demand for land to buy or rent. Cultivation of yams, and
obtaining wine and palm oil provided enough food for subsistence.
• African states lacked the cultural and legal institutions that other agrarian
societies used to have.
 The slave trade – the arrival of Europeans
• The slave trade was functional and traditional in African societies.
• Slave trade from the 16th century: Great demand for labor in the Americas. The
first Europeans to arrive in Africa from the Gulf of Guinea find that African chiefs
offer them slaves in exchange for their products.
• In three centuries some twelve million slaves will be sold in America (and a
similar number in Asia). You must add those dead during the crossing, and those
dead during the captures.
• Destructuring of African societies.
• From 1807, with the anti-slavery movements in Great Britain (prohibiting and
prosecuting the slave trade), the slave trade fell in the West, although it
continued, often illegally. It will last until slavery is abolished in the USA (1865), in
Cuba (1886) and in Brazil (1888). (It remained in the rest of the world)
• Only the “legitimate" trade could born in Africa.
• The incentive to export is the possibility of importing manufactures.
• Changes in the system of land ownership with the aim of increasing production for export.
 Colonialism in XIXth century
• Imperialist race: Intensification of colonialism in Africa in the late XIXth
century (although it begins in the XVth century).
• Greater perverse effects on growth than in other regions of the world.
• Creation of systems of government that had little or nothing to do with
pre-colonial reality. "Indirect" government.
• Transport systems aimed at the export of raw materials (not market
integration).
• Educational systems were not created: low literacy rates.
• The land is taken from the natives: Expropriation of land that passes into
the hands of Europeans (plantations and mining).
• Labor control systems (Apartheid).
Current African poverty in historical perspective
• Explanations for the lack of economic growth:
• Fall in agricultural income (long-term fall in prices):
• Existence of substitute products.
• Competition (Asia).
• Expansion of production.
• Little increase in productivity (low level of mechanization).
• Lack of industrialization:
• Comparative advantage.
• Lack of complementary companies.
• Low wages (capital intensive technology is not profitable).
• Other explanations:
• Institutions (endemic wars, corruption, anti-agricultural policies)
 The colonial economy in America (1):
The Caribbean and the Atlantic South America

• Brazil and Antilles:

• Plantation model with slave labor.
• Initially enslaved Native Americans and later enslaved
Africans.
• South Cone:
• Little native population.
• Distance from Europe: little trade.
Colonial economy (2): Mexico and the Andes
• Mexico and the Andes:
• High population density, large cities, productive agriculture, political and religious
organization, gold and silver.
• The Conquerors overthrew and replaced the Inca and Aztec elites. Christianization
• Falling native population but still enough for exploitation to be profitable. the half
• Geography makes it difficult to export agricultural products:
• Peru: distance from Europe.
• Mexico: high transport costs from the plantation to the ports.
• The only good they can export is metals. Disadvantages of silver as the
main export product:
• Inflationary effects.
• Little generation of jobs.
• Concentration of income. inequality
 Latin America: Inequality and institutions
• The distribution of income depended on internal factors. Great
inequality that has negative effects after independence.
• Inequality also caused by the great concentration of productive
factors in a few hands (mines, plantations) managed by the
Castilian/Portuguese/Northern European elites.
• Extractive institutions to deal with it (remember Acemoglu and
Robinson)
 Colonial economy: North America
• Import of British manufactures (lower cost thanks to economies
of scale achieved).
• Economies exporting basic products ("staples"): Canada: cod,
hides, wood; USA: sugar, corn, wheat.
• The price of the lower export product (the difference was at least the
cost of transport).
• Export income represented a large part of the colony's income.
• The profits for the colonists and their capital were higher than for the
Europeans (the difference covered, at least, the risk and cost of
emigrating).
• Southern Colonies:
• Caribbean slave model: European capital and enslaved African labor.
• The model is replicated in the southern US.
• Distribution of income:
• New England: more egalitarian (little presence of slaves, since the yield
did not cover the cost).
• Southern colonies: less egalitarian (most of the population were slaves).
• High literacy rate (important for export activities).
“Real” wages of unskilled workers
Real wages are higher
tan in Europe

Massachusetts (Boston)
has no “staples”

(less labour demand

and migration moved
toward other colonies)

Allen, 2011
 North-South divergence in America
• Parallel to the start of industrialization in Europe, North-South
division in America.
• Geographic factors:
• Potential effects of trade.
• North America is most favored by trade:
• Closer to Europe.
• Favorable interior geography.
• Demographic factors:
• Different density of the indigenous population.
• High mortality of Europeans in the Caribbean and Amazonia (tropical
diseases).
• For the natives, the arrival of the Europeans was a catastrophe (diseases,
war, slavery):
• However, in the south, the majority of the population are still indigenous. 1/5
whites; 3/5 indigenous; 1/5 half-breeds.
• In the north, Europeans gradually replaced the natives.
 The USA after independence
• Declaration of Independence in 1776 and Constitution in 1789

• The new “staple”: cotton (high foreign because of British Industrial

Revolution)
• Mechanic cotton gin (1793)

• Nevertheless:
• Cotton X are only 7% GDP
• Wages keep growing
 USA after independence
• Great increase in the demand for cotton from the consolidation of the
industrial revolution in Great Britain and in Europe.
• Strong growth in GDP per capita, population and GDP.
• Explanations of US growth:
• Export raw materials:
• The export sector generates demand for other products.
• The export sector drags the rest of the economy.
• High wages:
• Abundance of land and border factor.
• Incentives for mechanization (labor saving).
• Industrialization support policies:
• Education
• Transport improvements: market expansion.
• Creation of a national bank (stabilize the currency and provide credit).
• Protectionism (progressive increase in tariffs after independence).
 USA post independence (2)
• More democratic institutions: access to universal education (public
schools, only for white population), access to land also universal (only for
white), universal right to vote for the white population.
• Importance of education: financed by local governments and councils.
Ability to read contracts, accounting, and projects necessary to obtain a
good return on financial investments.
• Size of agricultural holdings, small but optimal and economically viable.
Abundant and free land that is being occupied as the railway is deployed.
Higher productivity and lower costs than in European agriculture, despite
the fact that yields per ha. are inferior
• But... Southern slaveholding states.
• Debate on the viability of slavery.
• With the War of Secession (1861-66) slavery is abolished (Abraham
Lincoln). Triumph of the North and the interests of the industry:
• Protectionism.
 Independence: LatinAmerica (1)
• End of the Spanish Empire
• Political fragmentation, economic fragmentation. Very high costs.
• Economic stagnation after independence. Lost decades?
• Deindustrialization: Falling real wages.
• Unable to compete with British imports: protectionism.
• Tariffs: main way of collecting taxes.
• Latin America is part of the block of economies exporting food and
raw materials that will make up the block of poor Third World
countries.
 Independence: Latin America (2)
• Reasons for the divergence:
• Institutions?
• Economic policies.
• Technology supply and demand:
• Differences in wages.
• Differences in the level of education.
• Institutions: access to education limited to white elites. To vote you
need to know to read and write (only available to white elites). Access
to land limited to white elites.
• During the 20th century, Latin America, after Africa, will be the most
unequal continent in the world.