Introduction to Global Economic History
Introduction to global economic history
Perfect class notes (not including class 10, 11 & 12)
Class 1
Introduction to global economic history or an economic history of the
world
Use of Concepts and theories
In this class we will look into how this global economy came about and how/why it changed,
to understand the economy of today. Of course you have to know how the world looks like for
this course. You have
to know where the
countries are, or their
positions in the globe.
In this picture you see
Calvin & Hobbes,
Calvin doesn’t really
know it, “some big
purple country on the
map”. This way he
won’t find his way
back home. In this
course, during maps
will be used, so you
should know a bit
where to find the countries. For instance, the giant letter E for the US, isn’t enough, you should
be able to orientate it.
Global economic history, is a course, which historians started to teach only very recently. In
Belgium, we had Belgian history, there was European history, North-Atlantic history, and then
you had the rest (the South). Global history started only around 2000, in which everything that
happens beyond the North-Atlantic world is being covered also. It’s a very demanded skill,
people who are a bit older, have to be retrained in order to see how the world has changed.
Global Economic History, how to start? How would we teach it?
1
, Here you see two maps of the world. You know the
world is round, and when you put it on a flat surface,
you have to put something in the middle, and of
course we love to put ourselves in the middle. But
as the above map indicates, you could also put
America in the middle. Starting for instance, with
America, to understand world history. In China they
use the map below, because China is the land of the
middle. So, we have to look at the world economy
through different perspectives/maps, in order to
understand this process of globalization.
Global Economic History, when to start?
We could of course start at the very beginning, when the Homo Sapiens was created and started
to wonder around the world. We all started somewhere in Africa and the new spread ourselves
throughout the world. But because economy is central in this course, I rather prefer to start with
1500, the earliest time most historians started talking about globalization. It’s also called the
first globalization. Some consider it wasn’t a globalization at that time, but in this course it is.
1500, also called Anno Domini, meaning after Christ. Christ, is a rupture, a crucial element in
the history of mankind for all of us. It’s not per se true for everyone, mostly it’s a Eurocentric
way to look at it, so you could call it the 1500 Common Era. A routine, use of time, to split
before and after Christ, which is not generally accepted, “common era” is used to not have a
religious connotation regarding the division of time. In 1500, the world was re-united, in a
sense that we had a common place where human kind started, and wondered around the world.
It’s the time when Christoph Columbus (1492) went to America, and re-discovered the
American continent.
More people speak about globalization when you look at the period of 1870 onwards. So 1870,
Common Era, or 1870 Anno Domini – until 1914. It’s a period in which borders became less
important, innovations came into being like transport (steamboats) and communication
(telegraph, telephone), which was very important to link people and traders. It’s also the time
of the imperialist expansion; the battle for Africa at that time after which it split up into different
colonies. Also new multinational companies came into existence. So, you see some ingredients
of globalized already occurred in the period before WWI. The WWI was a rupture in the
extension of the space in which the economy takes place, there was de-globalization after
WWI.
It was only after WWII, from 1970 onwards that there was a third globalization, when space
became less important and that there was a larger market integration on larger scale.
So, we start early in 1500, and we will point at what was global at that time and to which extent
we can compare it with the globalization from 1970 onwards.
Global Economic History, how?
- In which language to teach at the University of Ghent
2
, A century ago everything was in French. We had a worldwide
reputation too, and a lot of people came to study here. In the end
of the 19th century we had for example quite a number of
Japanese students here to learn the new technology (photograph,
electricity), to go back home and to use it in their economic
development. The authorities played a role here.
However, the local population, spoke Dutch, they were Flemish.
There has been a struggle to make this university in which
science was taught in Dutch. The idea of the Flemish movement
was the make this university a training school for the Flemish
people, to make it possible for them to run the economy, in their
native tongue.
The picture: in 1930, it’s a Dutch institution. They finally conquered this university into Dutch.
It’s only recent that we may teach in another language. The authority agrees that English is a
tongue that should be taught, but it shouldn’t only be for language teaching, also for main
subject, main subjects also needed to be in Dutch. Since 2003, teaching exist in other languages,
but this course also exists in Dutch. Since 2012, this course is also taught in Dutch all over
Flanders. Furthermore, there is also a restriction on how many courses can be taught in Dutch,
certainly in bachelor programs. The exam of this course will be in English, but according to
the law you can apply for an exemption. As a Dutch speaking university, you have the right to
apply for this, by asking the faculty an authorization.
Why teaching in English? Doesn’t it create an additional burden? You have already to study
so many subjects, so why in English also? For some it may be an advantage, for some it will
be more difficult to earn the degree. One should think about who wins and who loses here. The
idea is to develop a strategy of internationalization. We can only attract foreign students this
way, or exchange our students. The brightest brains of the world can be attracted, to improve
the credits of the University.
What historians have to say about the economy?
This course is mostly taught to people of economics, but we have a very interdisciplinary
audience here. We have political scientists, human scientists, economists…You should be
aware in this course that sometimes things will sound basic because of this disciplinary
audience.
What is the advantage of teaching this course by a historian? If you look at economists, you
see that they look for iron laws which make hypothesis which are valid for the whole economy,
independent of space and time. You have, for instance, David Ricardo in the 19th century, who
created the law of diminishing return. If you put more and more people on one land you will
get less and less return out of it. Ricardo thought this law was valid for all times and places.
Kuznets, made a law on industrialization and inequality. He said that everywhere around the
world where one starts to industrialize, first you will have an increase in inequality, a widening
gap between rich and poor, and after a while the gap will diminish. According to him it was an
iron law which was valid everywhere. A more recent example, from the 21st century, Thomas
Pickett: he made a book about the change in inequality, but he concludes with a law which says
that the retour of wealth exceeds the overall growth of the economy, meaning that in the long
term the richer will only get richer. This idea that you should develop some law is strange for
historians. Historians try to be less natural scientists, to have less sharply defined theories…
3
,Although the economy depends more on how human beings act, it’s thus a more human
science, economists still try to make it into a more objective science. There are of course
different sorts of economies… (behavioral, institutional etc.) → but these are rather marginal
to the whole discipline “mainstream economics”. Historians don’t look for laws; they try to
understand how a society evolves/changes. But they see this economy within its broader
context. Within this course, not only numbers will be used, also another empirical basis, like
politics, institutions, the state, social/cultural/legal/demographic developments. As historian
we think it’s needed to embed the economic development within the global development of the
society.
We will also look at what happens at a certain time and place. Time- and space specific
developments play a crucial role in understanding how the world changes.
Focus on Global and Modern Economic Growth (sustained or sustainable and inclusive
growth)
We will focus on what happens in this graph,
this global and modern economic growth. As
you see, it starts with the first globalization,
what is the link with a modern economy (an
economy with continuous and
sustainable/inclusive growth, long-term
growth)? GDP/capita, is what a country
produces within one year per capita. You only
look at prices sold at the market. You see a
spectacular development of GDP/capita.
Britain was the first one to take off, US bypassed Britain by 1880-1890 but not included, Japan
had a slow start but then after an increase! You see that it depends on which country you take…
Industrialization is an important variable to explain the sudden increase in GDP/capita.
Before modern economic history
Before modern economic history, there was still economic development, but it was slow and
didn’t last very long. An explanation put forward for this is the Malthusian explanation which
states: when the economy starts to grow, shortly afterwards you will have a growth in
population, the population will grow exponentially while the economy will grow linear. This
different dynamic will cause that the population growth will stop this economic growth. There
was little technological innovation at that time, and when you put more people on a land, you
will get proportionally less return out of that land. The potential of economic growth was very
small and the demographic development which economic growth caused made then that this
economic growth never lasted.
Here you see the Malthusian trap
more clear. In the pre-industrial
economy, the aim of people was to
work in order to survive (food). The
Malthusian trap refers to the
growing development which leads
to more food, thus more
opportunities, causing a population
4
,growth. But the population growth has a faster rhythm than the economic growth, leading to
subsistence crisis. This crisis will lead to the fact that as well the population as the economy
will go back to their old status quo. This mechanism will make sure that there is no long-term
growth in the economy. So, sustainable growth was not possible here. The only way you could
stop it here, this starvation, this too much people for the amount produced in the economy, was
that you had to have moral restraint (for instance women not becoming pregnant). Only, moral
restraint could prevent the Malthusian trap. This vision is too pessimistic. But in Britain (18th
century) and in the Netherlands (19th century) it was different and a long-term growth was
possible. This course will show how that was possible.
The Modern Economy
1. The History of the Modern Economy
The history of the modern economy started to be studied as an industrialized economy. How
do we look at the economy now? From the three sector break down: primary sector
(agriculture); industry and services. Somebody has invented this, and we all know think this
the way how to look at our economy. Colin Clark was the one who invented this. He taught us
to look at the economy from this perspective. He said if you want to have economic growth
you should bet mostly on the second sector of industry. Industry is engines, but it’s not only
technology, it’s also the creation of a labour market, people who are free to offer their labour
to capital, it’s also (centralized) firms – fixed capital.
Modern economy is a capitalist economy
Is it a capitalist economy, then we must define what we mean by it…? Or is it rather a free-
market economy?
What is a capitalist economy? Karl Marx says it’s an exploitative system. The labour is the one
who creates value and he doesn’t get enough pay in relation to what he produces as value. Max
Weber & Werner Sombart, don’t consider it as an exploitative system, but rather as a rational
system, a system which is organized according to rational criteria.
Some also say that the modern economy is not a stable economy, we all know that there is
economic crisis, there are booms and there are busts. The business cycle is a central cycle in
the modern economy. Here you two important economists. John Maynard Keynes, said that
the modern economy is a very irrational system, it’s chaotic, no stability. Also Schumpeter said
this, he said it’s an irratic system, but he found this a more positive dimension of capitalist
development, in a sense that out of a crisis always something grew that was positive. With
every bust there is a boom.
Is the modern economy a global economy? Space plays a crucial role here. What is the relevant
of space for sustained economic growth?
2. How to address the history of the modern economy?
5
, You have different means/factors of production, namely land; labour and capital. Each of these
factors has a certain price, and each country has different factor endowments. Some have more
capital, land or labour, which influences the price of these factors of production. This is
important to understand the development of the economy.
We have also some summary statistics which are very useful, bringing quantitative information
in a nutshell together. For economic inequality you have the Gini coefficient. In demography
you have the TFR (total fertility rate) and the CFR (cohort fertility rate). For economic growth
you have GDP/GNP at PPP (purchase power parity), and HDI (human development index).
2.1. Measuring economic success (GNP/GDP)
The invention of GNP (Gross National Product) by macro-economists Colin Clark in 1937
which conquered the world. See Ngram Viewer: the most appropriate geographical unit of
measurement for economics. GNP popularity: you can see the evolution, after WWII it became
popular, afterwards even more. From 1975 not anymore, what happened? GDP has much more
success. Since 1975 it knew a tremendous growth. What is the difference between the two?
GNP looks at the citizenship of each firms, so a Belgium firm which produces in the US or
China is included in the GNP; while GDP looks at all the companies which sell products in a
certain country, independent from the origin of the company, much better to link it to
employment… the place of production is central here. GDP is now globally accepted (role of
the state/nation became less important).
The fundamental data for an analysis of economic success and its flaws
GDP has of course some flaws… To show this, see document from WikiLeaks – which shows
that GDP is constructed on all kinds of data. GDP are man-made and unreliable, whereas
electricity consumption, transport, amount of loans → these three figures to look at the speed
of economic growth. GDP is for reference only… the Chinese ambassador said. So, be aware
of these things. Some years ago, someone introduced a broader definition of the economy: in
order to calculate GDP, look at the prostitutes. How many people went there, and how much
did they paid for it… Time and again, methodology is changing.
Main problem is also government output, teaching for instance. How do you calculate them,
because it’s not really a market product, to assess the GDP?
There are also many economic activities not captured in market transactions (for instance,
housewives, environmental degradation causing negative growth in GDP).
One of the most important flaws is that it underestimates growth. All market transactions must
be calculated… This can be explained as follows:
→ GDP underestimates growth as price indexes are flawed (lighting): oil lamps, kerosene
lamps, lamps through electricity, light bulb, LEDs (= evolution). LEDs are more expensive,
but you get much more light out of it and for much longer, so replacement is not needed… That
will create an increase in GDP, because it’s more expensive. This progress is not calculated in
the GDP in the country, because the price will get down, it will be de-growth, we will spend
less on light on the long-term because it gives more light – so it’s not economic growth but de-
growth. This counts for many things, also computers… It adds less to GDP than it did ten years
6
Introduction to global economic history
Perfect class notes (not including class 10, 11 & 12)
Class 1
Introduction to global economic history or an economic history of the
world
Use of Concepts and theories
In this class we will look into how this global economy came about and how/why it changed,
to understand the economy of today. Of course you have to know how the world looks like for
this course. You have
to know where the
countries are, or their
positions in the globe.
In this picture you see
Calvin & Hobbes,
Calvin doesn’t really
know it, “some big
purple country on the
map”. This way he
won’t find his way
back home. In this
course, during maps
will be used, so you
should know a bit
where to find the countries. For instance, the giant letter E for the US, isn’t enough, you should
be able to orientate it.
Global economic history, is a course, which historians started to teach only very recently. In
Belgium, we had Belgian history, there was European history, North-Atlantic history, and then
you had the rest (the South). Global history started only around 2000, in which everything that
happens beyond the North-Atlantic world is being covered also. It’s a very demanded skill,
people who are a bit older, have to be retrained in order to see how the world has changed.
Global Economic History, how to start? How would we teach it?
1
, Here you see two maps of the world. You know the
world is round, and when you put it on a flat surface,
you have to put something in the middle, and of
course we love to put ourselves in the middle. But
as the above map indicates, you could also put
America in the middle. Starting for instance, with
America, to understand world history. In China they
use the map below, because China is the land of the
middle. So, we have to look at the world economy
through different perspectives/maps, in order to
understand this process of globalization.
Global Economic History, when to start?
We could of course start at the very beginning, when the Homo Sapiens was created and started
to wonder around the world. We all started somewhere in Africa and the new spread ourselves
throughout the world. But because economy is central in this course, I rather prefer to start with
1500, the earliest time most historians started talking about globalization. It’s also called the
first globalization. Some consider it wasn’t a globalization at that time, but in this course it is.
1500, also called Anno Domini, meaning after Christ. Christ, is a rupture, a crucial element in
the history of mankind for all of us. It’s not per se true for everyone, mostly it’s a Eurocentric
way to look at it, so you could call it the 1500 Common Era. A routine, use of time, to split
before and after Christ, which is not generally accepted, “common era” is used to not have a
religious connotation regarding the division of time. In 1500, the world was re-united, in a
sense that we had a common place where human kind started, and wondered around the world.
It’s the time when Christoph Columbus (1492) went to America, and re-discovered the
American continent.
More people speak about globalization when you look at the period of 1870 onwards. So 1870,
Common Era, or 1870 Anno Domini – until 1914. It’s a period in which borders became less
important, innovations came into being like transport (steamboats) and communication
(telegraph, telephone), which was very important to link people and traders. It’s also the time
of the imperialist expansion; the battle for Africa at that time after which it split up into different
colonies. Also new multinational companies came into existence. So, you see some ingredients
of globalized already occurred in the period before WWI. The WWI was a rupture in the
extension of the space in which the economy takes place, there was de-globalization after
WWI.
It was only after WWII, from 1970 onwards that there was a third globalization, when space
became less important and that there was a larger market integration on larger scale.
So, we start early in 1500, and we will point at what was global at that time and to which extent
we can compare it with the globalization from 1970 onwards.
Global Economic History, how?
- In which language to teach at the University of Ghent
2
, A century ago everything was in French. We had a worldwide
reputation too, and a lot of people came to study here. In the end
of the 19th century we had for example quite a number of
Japanese students here to learn the new technology (photograph,
electricity), to go back home and to use it in their economic
development. The authorities played a role here.
However, the local population, spoke Dutch, they were Flemish.
There has been a struggle to make this university in which
science was taught in Dutch. The idea of the Flemish movement
was the make this university a training school for the Flemish
people, to make it possible for them to run the economy, in their
native tongue.
The picture: in 1930, it’s a Dutch institution. They finally conquered this university into Dutch.
It’s only recent that we may teach in another language. The authority agrees that English is a
tongue that should be taught, but it shouldn’t only be for language teaching, also for main
subject, main subjects also needed to be in Dutch. Since 2003, teaching exist in other languages,
but this course also exists in Dutch. Since 2012, this course is also taught in Dutch all over
Flanders. Furthermore, there is also a restriction on how many courses can be taught in Dutch,
certainly in bachelor programs. The exam of this course will be in English, but according to
the law you can apply for an exemption. As a Dutch speaking university, you have the right to
apply for this, by asking the faculty an authorization.
Why teaching in English? Doesn’t it create an additional burden? You have already to study
so many subjects, so why in English also? For some it may be an advantage, for some it will
be more difficult to earn the degree. One should think about who wins and who loses here. The
idea is to develop a strategy of internationalization. We can only attract foreign students this
way, or exchange our students. The brightest brains of the world can be attracted, to improve
the credits of the University.
What historians have to say about the economy?
This course is mostly taught to people of economics, but we have a very interdisciplinary
audience here. We have political scientists, human scientists, economists…You should be
aware in this course that sometimes things will sound basic because of this disciplinary
audience.
What is the advantage of teaching this course by a historian? If you look at economists, you
see that they look for iron laws which make hypothesis which are valid for the whole economy,
independent of space and time. You have, for instance, David Ricardo in the 19th century, who
created the law of diminishing return. If you put more and more people on one land you will
get less and less return out of it. Ricardo thought this law was valid for all times and places.
Kuznets, made a law on industrialization and inequality. He said that everywhere around the
world where one starts to industrialize, first you will have an increase in inequality, a widening
gap between rich and poor, and after a while the gap will diminish. According to him it was an
iron law which was valid everywhere. A more recent example, from the 21st century, Thomas
Pickett: he made a book about the change in inequality, but he concludes with a law which says
that the retour of wealth exceeds the overall growth of the economy, meaning that in the long
term the richer will only get richer. This idea that you should develop some law is strange for
historians. Historians try to be less natural scientists, to have less sharply defined theories…
3
,Although the economy depends more on how human beings act, it’s thus a more human
science, economists still try to make it into a more objective science. There are of course
different sorts of economies… (behavioral, institutional etc.) → but these are rather marginal
to the whole discipline “mainstream economics”. Historians don’t look for laws; they try to
understand how a society evolves/changes. But they see this economy within its broader
context. Within this course, not only numbers will be used, also another empirical basis, like
politics, institutions, the state, social/cultural/legal/demographic developments. As historian
we think it’s needed to embed the economic development within the global development of the
society.
We will also look at what happens at a certain time and place. Time- and space specific
developments play a crucial role in understanding how the world changes.
Focus on Global and Modern Economic Growth (sustained or sustainable and inclusive
growth)
We will focus on what happens in this graph,
this global and modern economic growth. As
you see, it starts with the first globalization,
what is the link with a modern economy (an
economy with continuous and
sustainable/inclusive growth, long-term
growth)? GDP/capita, is what a country
produces within one year per capita. You only
look at prices sold at the market. You see a
spectacular development of GDP/capita.
Britain was the first one to take off, US bypassed Britain by 1880-1890 but not included, Japan
had a slow start but then after an increase! You see that it depends on which country you take…
Industrialization is an important variable to explain the sudden increase in GDP/capita.
Before modern economic history
Before modern economic history, there was still economic development, but it was slow and
didn’t last very long. An explanation put forward for this is the Malthusian explanation which
states: when the economy starts to grow, shortly afterwards you will have a growth in
population, the population will grow exponentially while the economy will grow linear. This
different dynamic will cause that the population growth will stop this economic growth. There
was little technological innovation at that time, and when you put more people on a land, you
will get proportionally less return out of that land. The potential of economic growth was very
small and the demographic development which economic growth caused made then that this
economic growth never lasted.
Here you see the Malthusian trap
more clear. In the pre-industrial
economy, the aim of people was to
work in order to survive (food). The
Malthusian trap refers to the
growing development which leads
to more food, thus more
opportunities, causing a population
4
,growth. But the population growth has a faster rhythm than the economic growth, leading to
subsistence crisis. This crisis will lead to the fact that as well the population as the economy
will go back to their old status quo. This mechanism will make sure that there is no long-term
growth in the economy. So, sustainable growth was not possible here. The only way you could
stop it here, this starvation, this too much people for the amount produced in the economy, was
that you had to have moral restraint (for instance women not becoming pregnant). Only, moral
restraint could prevent the Malthusian trap. This vision is too pessimistic. But in Britain (18th
century) and in the Netherlands (19th century) it was different and a long-term growth was
possible. This course will show how that was possible.
The Modern Economy
1. The History of the Modern Economy
The history of the modern economy started to be studied as an industrialized economy. How
do we look at the economy now? From the three sector break down: primary sector
(agriculture); industry and services. Somebody has invented this, and we all know think this
the way how to look at our economy. Colin Clark was the one who invented this. He taught us
to look at the economy from this perspective. He said if you want to have economic growth
you should bet mostly on the second sector of industry. Industry is engines, but it’s not only
technology, it’s also the creation of a labour market, people who are free to offer their labour
to capital, it’s also (centralized) firms – fixed capital.
Modern economy is a capitalist economy
Is it a capitalist economy, then we must define what we mean by it…? Or is it rather a free-
market economy?
What is a capitalist economy? Karl Marx says it’s an exploitative system. The labour is the one
who creates value and he doesn’t get enough pay in relation to what he produces as value. Max
Weber & Werner Sombart, don’t consider it as an exploitative system, but rather as a rational
system, a system which is organized according to rational criteria.
Some also say that the modern economy is not a stable economy, we all know that there is
economic crisis, there are booms and there are busts. The business cycle is a central cycle in
the modern economy. Here you two important economists. John Maynard Keynes, said that
the modern economy is a very irrational system, it’s chaotic, no stability. Also Schumpeter said
this, he said it’s an irratic system, but he found this a more positive dimension of capitalist
development, in a sense that out of a crisis always something grew that was positive. With
every bust there is a boom.
Is the modern economy a global economy? Space plays a crucial role here. What is the relevant
of space for sustained economic growth?
2. How to address the history of the modern economy?
5
, You have different means/factors of production, namely land; labour and capital. Each of these
factors has a certain price, and each country has different factor endowments. Some have more
capital, land or labour, which influences the price of these factors of production. This is
important to understand the development of the economy.
We have also some summary statistics which are very useful, bringing quantitative information
in a nutshell together. For economic inequality you have the Gini coefficient. In demography
you have the TFR (total fertility rate) and the CFR (cohort fertility rate). For economic growth
you have GDP/GNP at PPP (purchase power parity), and HDI (human development index).
2.1. Measuring economic success (GNP/GDP)
The invention of GNP (Gross National Product) by macro-economists Colin Clark in 1937
which conquered the world. See Ngram Viewer: the most appropriate geographical unit of
measurement for economics. GNP popularity: you can see the evolution, after WWII it became
popular, afterwards even more. From 1975 not anymore, what happened? GDP has much more
success. Since 1975 it knew a tremendous growth. What is the difference between the two?
GNP looks at the citizenship of each firms, so a Belgium firm which produces in the US or
China is included in the GNP; while GDP looks at all the companies which sell products in a
certain country, independent from the origin of the company, much better to link it to
employment… the place of production is central here. GDP is now globally accepted (role of
the state/nation became less important).
The fundamental data for an analysis of economic success and its flaws
GDP has of course some flaws… To show this, see document from WikiLeaks – which shows
that GDP is constructed on all kinds of data. GDP are man-made and unreliable, whereas
electricity consumption, transport, amount of loans → these three figures to look at the speed
of economic growth. GDP is for reference only… the Chinese ambassador said. So, be aware
of these things. Some years ago, someone introduced a broader definition of the economy: in
order to calculate GDP, look at the prostitutes. How many people went there, and how much
did they paid for it… Time and again, methodology is changing.
Main problem is also government output, teaching for instance. How do you calculate them,
because it’s not really a market product, to assess the GDP?
There are also many economic activities not captured in market transactions (for instance,
housewives, environmental degradation causing negative growth in GDP).
One of the most important flaws is that it underestimates growth. All market transactions must
be calculated… This can be explained as follows:
→ GDP underestimates growth as price indexes are flawed (lighting): oil lamps, kerosene
lamps, lamps through electricity, light bulb, LEDs (= evolution). LEDs are more expensive,
but you get much more light out of it and for much longer, so replacement is not needed… That
will create an increase in GDP, because it’s more expensive. This progress is not calculated in
the GDP in the country, because the price will get down, it will be de-growth, we will spend
less on light on the long-term because it gives more light – so it’s not economic growth but de-
growth. This counts for many things, also computers… It adds less to GDP than it did ten years
6
