University of California, Berkeley — Publications

The Great Divergence Reconsidered: Europe, India and the Rise to Global Economic Power

Article

The context for Studer’s interesting and largely successful book, as indicated by its title, is Pomeranz’s influential monograph comparing Europe and Asia and the research of other members of the so-called California School.1 According to these scholars, the two continents showed little difference in economic development prior to the nineteenth century. The subsequent divergence of their economic fortunes cannot be attributed to culture, religion, family structure, political institutions, and other long-lived, deep-seated features, since these factors had done nothing previously to hold Asia back or give Europe a leg up. Rather, the Great Divergence reflected special factors, such as coal deposits that proved fortuitous for Europe given nineteenth-century technological developments and the acquisition of a military capacity that enabled the European powers to gain colonial control of overseas territories and their resources.This thesis rests uneasily with the large literature pointing to the expansion of trade, advances in technology, and improvements in living standards in Europe in preceding centuries—for example, with the literature emphasizing that Europe experienced a commercial revolution involving the articulation of local, regional, and transnational markets before the Industrial Revolution. It is possible that similar developments also occurred in Asia but that they have not been adequately documented by historians. Recently, however, Shiue and Keller have shown a way forward.2 Using differences in grain prices across regions as a measure of market development, they found that markets were as well developed in China as in Europe during the eighteenth century. Indirectly, their findings provided additional ammunition for the California School.But China is not Asia, as Studer reminds us in undertaking an analogous exercise for India and reaching different conclusions. Grain prices varied more across regions in India than in Europe during the eighteenth and nineteenth centuries. Geography was a major reason for this difference, he argues, given that the cost of waterborne transport was one-tenth that of transporting freight by road. Europe had an advantage not only in navigable rivers but also in natural harbors and strategically located islands. The railway helped when it came to India in the 1850s, but the question is why it failed to help more. One answer, not really considered in this book, is that India’s system, overseen by the British colonial authorities, was built to enhance military command and control, not to service markets. Another answer is cumulative causation: Once European markets began to integrate, the results set in motion a process of further economic development and market growth with which India has been unable to keep pace until now.Studer handles his data carefully and uses appropriate econometric methods, rendering his results entirely convincing. Along with broad-based comparisons of Europe and India, he provides a focused analysis of Switzerland and Pune—two hilly, inland regions with no access to sea harbors. In this case, too, the comparison favors Europe or, more precisely, Switzerland, suggesting that physical geography, though important, is not the only factor at play.Ultimately, the challenge for Studor is to link his statistical findings for grain prices back to the larger historical debate that motivated the exercise. Are price differentials an adequate measure of market development? Do we understand the roles of geography, technology, and institutions in the evolution of those markets? Do we know more now than we did before this study about whether market development was at the root of the Great Divergence? Statistical studies like Studer’s can only hint at the answers to these larger questions. But this is not to dismiss their value; ultimately they are how we make progress on scholarly debates.

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