The Great Divergence

For two centuries since the year 1800 humans have overcome scarcity in a remarkable fashion. A worker who used to earn two dollars in Britain in the early eighteenth century now makes more than a hundred dollars now. The supply of goods and services available to the common folk has increased twenty nine times in Finland—a country considered backward in the early modern era. A rapid industrialization that started in Britain and the low countries spread to western Europe and America and caused the wages and in turn the quality of life to increase a never seen before fast rate. What caused this “Great Divergence”? This essay will explore a few causes for this phenomenon.

Climate

For the last 12,000 years earth’s climate has been warming. From 500BC to 500AD, earth had the best periods climate wise and it coincides with the peak of the classical civilizations in Greece and Rome. From 500AD climate was worse off until the middle ages. Weather in the modern world has been fairly stable and is a prerequisite for something like a great divergence to take place.

Technology

Was the great divergence caused by the progress of technology? The answer is most likely not. During the middle ages, a construction boom took hold in the east and west. Huge gothic cathedrals were constructed across France, Belgium and Germany, Cologne, a city of 25,000 built twenty eight churches between 1150-1250. The stonemasons of Europe did not particularly understand the geometry of the structures they were building. They were improvising on the templates passed down from generations and building bigger and bigger buildings. This indicates that technology was evolving through the middle ages and human ingenuity was always at work solving problems at hand. So it was not just the march of technology that caused the great divergence.

Supply

Common folk in western Europe did not consume tea or coffee in the late seventeenth century, but by the middle of the eighteenth century it was common to drink tea or coffee. As trade with Asia increased people were exposed to the luxuries of tea, coffee and pottery. They started to demand better goods. This demand drove merchants to produce or procure goods. People started to work more to make money to be able to afford these luxuries (industrious revolution).

Enlightenment

The total sum of useful human knowledge grew during the enlightenment. The knowledge gained in this era was different from the theoretical works of Newton, Galileo etc. It was a revolution in practical knowledge. Scotland led the world in improving productivity by observing and improving industrial processes. The goal of this knowledge gathering was human betterment and not some creative thirst quenching. There was a healthy skepticism of previous knowledge and a borderless dispersion of all knowledge.

**Note:**It’s different from today, where companies do R&D to gain markets and money—human betterment is often a side effect.

Imperialism

Gunpowder originated in the east, but Europeans perfected its use. The nation states of Europe were in an intense competition amongst themselves and spent a lot of their taxes on weapons. The kings and princes of Europe were raised in a military culture where war meant glory. The ruling class bore no cost of the war but gained a lot of the spoils in case of victory. This caused Europe to lean into imperialism and expand their colonies. This brought them access to a wider variety of resources from the colonies and it acted as a catalyst for growth. See Why Was It Europeans Who Conquered the World?

Protestant reformation

Was it the protestant work ethic? Perhaps not, but Protestantism had a lot of good effects. Protestant towns across Europe had a higher entrepreneurial spirit. Education levels were higher in protestant towns, with girls being educated as well. The protestant countries of Britain and Netherlands were the first to pull away during the industrial revolution.

Liberalism

Was it the change in spirit of some nations? Liberalism allowed most people in a society to have an equal opportunity. It allowed everyone irrespective of rank or lineage to have a go at bettering their lives—the pursuit of happiness. This caused an explosion of ideas as a lot of ideas were tried. The creativity of the ordinary collective was unleashed. To me this feels like a strong cause. See https://www.youtube.com/watch?v=4x1uZESt5n0

Coal

Britain had the most accessible coal deposits and a labour force with high wages. This allowed capital to be invested in machines and this could have caused rapid industrialization.

The industrial revolution has propelled humanity to the modern world. Since the 1970s, the flywheel has slowed down, wage growth has stagnated in America, apart from the Asian tigers, countries find it harder to industrialize. Life expectancy of white non college educated males in the US is going down, foretelling the future of other demographic groups. Do we need minor tweaks to get the flywheel of growth restarted or have we entered a new phase—the great stagnation?

(Essay written to capture the thoughts from the MIT course—Technology and the Global Economy, 1000-2000)