In this essay I aim to investigate two theories of economic growth of the western world;
the development of institutions and the exploitation of the periphery. This may give us
some indication of the causes of “The Great Divergence” and suggest methods by
which growth of other, less developed, countries can be accelerated.
Table of Contents
1. Introduction to Economic Growth Theories
1.1 Institutional Frameworks and Economic Development
1.2 Analysis of Imperialism and Peripheral Exploitation
1.3 Quantitative Assessment of Colonial Trade Profits
2. External Factors and Imperial Economics
2.1 Costs and Benefits of Colonial Expansion
2.2 Geographical and Cultural Influences on Growth
3. Measuring Living Standards and Economic Performance
3.1 Limitations of GDP per Capita as a Metric
3.2 The Informal Economy and Alternative Development Indicators
Research Objectives and Key Themes
This essay evaluates the primary drivers of the "Great Divergence," specifically contrasting the roles of institutional development and international exploitation in establishing the high living standards of the Western world.
- The role of social norms and property rights in incentivizing economic growth.
- The economic impact of imperialist trade systems and resource extraction from the periphery.
- Comparative analysis of growth rates between Western nations and the rest of the world.
- Critical examination of GDP per capita as a reliable metric for standard of living.
- The influence of non-economic factors like geography and environmental adaptation on productivity.
Excerpt from the Book
To what extent are the high living standards of the western world the result of the development of institutions that promote accumulation and innovation? To what extent are they the result of exploitation of other countries?
In this essay I aim to investigate two theories of economic growth of the western world; the development of institutions and the exploitation of the periphery. This may give us some indication of the causes of “The Great Divergence” and suggest methods by which growth of other, less developed, countries can be accelerated.
Institutions are social norms, defined as “rules of the game” which define and limit the set of choices that individuals can make. These human constrains can be social, political or economic and include; greetings, tipping and agreeing prices in a market. In the Western World they promote accumulation and innovation through their effects on transaction and production costs. This is because they structure incentives in human exchange. They provide incentives for individuals to engage in socially productive activities. It is crucial that people should be permitted by the institutional framework to keep the rewards of innovation and accumulation, i.e. property rights. Otherwise, they have no incentive to engage in behaviour that leads to growth and development. There is an incentive to invest in physical and human capital as well as to adopt more efficient technologies. This means resources are allocated more efficiently, encouraging prosperity.
Summary of Chapters
1. Introduction to Economic Growth Theories: This section introduces the core debate between institutional development and peripheral exploitation as causal factors for Western economic dominance.
2. External Factors and Imperial Economics: This chapter analyzes the costs of maintaining empires and evaluates whether colonial trade was truly a catalyst for Western industrialization or primarily a benefit to a small elite.
3. Measuring Living Standards and Economic Performance: This chapter critiques standard economic metrics, arguing that GDP per capita fails to account for environmental costs, the informal economy, and subsistence activities.
Keywords
Economic Growth, Great Divergence, Institutions, Imperialism, Exploitation, GDP per Capita, Living Standards, Property Rights, Industrial Revolution, Colonialism, Peripheral Countries, Human Development Index, World Economy, Resource Allocation, Productivity.
Frequently Asked Questions
What is the primary focus of this essay?
The essay investigates the origins of the Western world's high living standards, specifically evaluating the impact of institutional development versus the exploitation of the periphery.
What are the central themes discussed in the text?
The central themes include institutional economics, the historical costs and benefits of imperialism, geographical influences on growth, and the limitations of GDP as a metric for economic prosperity.
What is the author's central research question?
The author asks to what degree institutional structures promote innovation versus how much colonial exploitation contributed to the economic wealth of the West.
Which scientific methodology is employed?
The author utilizes a comparative historical-economic analysis, referencing quantitative data like Maddison's growth tables and evaluating historical trade profit estimates.
What is the primary content of the main body?
The main body treats the definition and role of institutions, analyzes the scale of colonial exploitation, discusses the cost-benefit realities of imperialism, and provides a critique of GDP as a measure of development.
Which keywords characterize this study?
Key terms include Economic Growth, Great Divergence, Institutions, Imperialism, Exploitation, and Living Standards.
How does the author define the "World Empire" versus the "World Economy"?
The author describes a "World Empire" as a system where the core receives direct tribute, whereas a "World Economy" is defined by the transfer of surplus from the periphery via profit from unequal exchange.
Why does the author argue that imperialism was not necessarily beneficial for the core nations?
The author argues that the costs of maintaining military and administrative colonial structures were often borne by all taxpayers, while the profits remained concentrated within a small, land-rich elite.
What is the "Malthusian Trap" mentioned in the text?
The "Malthusian Trap" refers to a historical state where population growth outpaced economic gains; the author highlights the industrial revolution as the event that first allowed Western nations to break out of this cycle.
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- Ali-Abbas Punjani (Autor:in), 2010, The causes of "The Great Divergence", München, GRIN Verlag, https://www.grin.com/document/214681
