The road to the Industrial Revolution: hypotheses and conjectures about the medieval origins of the ‘European Miracle’
By Jan Luiten van Zanden
Journal of Global History, Vol.3 (2008)
Abstract: The article uses various ways of measuring the efficiency of institutions regulating market exchange, such as interest rates, the skill premium, and the level of market integration, to try to answer the question about the quality of institutions in the different parts of Eurasia in the centuries before the ‘Great Divergence’. It appears that Western Europe, from as early as the late medieval period, had a relatively well-developed set of institutions. By contrast, South and Southeast Asian institutions were much less geared towards well-functioning markets. However, Japan and China in the seventeenth and eighteenth centuries developed institutions that were relatively efficient, and resulted in relatively high levels of commercial exchange. A number of hypotheses are then reviewed that may help to explain a European head start dating from the late Middle Ages.
Introduction: One of the big questions of economic history, and perhaps of the social sciences in general, is why Western Europe developed into an industrial society and generated a process of ‘modern economic growth’ continuing until today. Before the Industrial Revolution, which, according to most economic historians, occurred in the second half of the eighteenth century, living standards hardly increased at all whereas, in the two centuries after 1820, per capita GDP of the population of the world has grown from 667 dollars in 1820, to 1525 dollars in 1913, and to 6012 in 2000 (all expressed in international dollars of 1990). In the industrialized world, income per head increased by a factor of 15–20.