History. Lecture 2 (2013)

Apunte Inglés
Universidad Universidad Pompeu Fabra (UPF)
Grado International Business Economics - 2º curso
Asignatura International Business & Economic History
Año del apunte 2013
Páginas 9
Fecha de subida 22/06/2014
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TOPIC  2:  Preindustrial  economies     2.1.  Population  and  agricultural  technology     Before  the  industrial  revolution  all  economies  were  based  largely  on  agricultural   production.   -­‐ In  the  pre-­‐industrial  period  agricultura  was  the  factor  determining  total   output  in  the  economy,  productivity,  rates  of  growth  and  so  on   -­‐ In  the  pre-­‐industrial  period  no  country  had  enough  food  surpluses  as  to   export  massive  amount  of  food.  Each  country  had  to  produce  its  own  food   supplies       At  the  end  of  the  nineteenth  century,  countries  like  Belgium  or  England  only  had   around  20%  of  its  population  employed  in  agriculture  while  Spain  or  Ireland,  the   yellow  ones,  hadn’t  still  made  any  industrial  development  and  had  their  population   mainly  employed  in  agriculture.   The  red  and  blue  countries  improved  the  productivity  along  the  years  so  they   needed  fewer  workforces  to  produce  the  same  food.  This  phenomenon  is  called   Agricultural  Revolution.     Before  the  industrial  revolution,  population  grow  at  a  very  low  rate:       In  the  world  before  1800,  the  long-­‐run  rates  of  population  growth  were  very  small   because  births  rates  were  no  higher  than  the  death  ones.  Because  of  that,  the  life   expectancy  was  really  low.  (Life  expectancy  can  be  calculated  by  1/death  rate)   The  relation  between  death/birth  rates  and  life  expectancy  was  negative.  If  one  of   them  went  up,  the  other  would  go  down.  In  fact,  the  population  before  1800  was   stationary  because  birth  rate  was  equal  to  death  rate.     We  can  highlight  an  important  episode  during  this  period:  the  Black  Death  (1348)   that  almost  killed  30%  of  the  population.  It  had  a  lot  of  consequences  in  the  long   run.     2.2  The  Malthusian  trap     The  world  population  in  the  long  run   1700-­‐  600  million   1800  –  800  million   1900  –  1.6  billion   1950  –  2.4  billion   2020  –  8  billion     Why  population  grew  so  slowly  in  the  pre-­‐industrial  period?       This  theory  was  formulated  by  Thomas  Malthus  in  1798.  Malthus  lived  in  a  period   of  transition,  from  pre-­‐industrial  times  to  the  era  of  modern  economic  growth.   The  Malthusian  model  supplies  a  mechanism  to  explain  the  long-­‐run  population   stability  before  1800.  We  have  3  mainly  assumptions:   1. Each  society  has  a  birth  rate,  increasing  with  material  living  standards.   2. The  death  rates  in  each  society  declines  as  living  standards  increase   3. Material  living  standards  (y)  decline  as  population  increases.     The  following  figure  shows  us  the  3   previous  assumptions.    The   subsistence  income  (y*)  is  the   material  income  where  birth  rates   =  death  rates.  This  is  the  income   that  allows  population  to   reproduce  itself.  With  a  higher   material  income,  the  population  is   growing.  With  a  lower  material   income,  the  population  declines.   The  bottom  graph  helps  us  to   understand  how  the  Malthusian  eq   works.   Suppose  we  start  at  a  point  No  with   income  Yo  where  the  population  is   increasing.  As  the  population  is   increasing,  Y  decreases.  As  Y   decreases,  Birth  rate  decrease  and   Death  rate  increase.  Therefore,  the   economy  will  always  move  in  the   long  run  to  the  subsistence  income  point  where  the  population  stabilize.     Besides  what  modern  societies  think,  preindustrial  societies  were  not  typically   starvation  economies.  Even  the  lower  subsistence  wages  were  well  above  the   biologically  determined  minimum  daily  requirement  diet.  Indeed,  with  favourable   conditions  they  were  at  times  wealthy.     Why  do  we  say  that  material  living  standards  decline  as  population  increases?   We  are  talking  about  the  famous  Law  of  Diminishing  Returns.  As  a  recall,  the  law   holds  that,  if  one  of  the  inputs  to  production  is  fixed,  then  employing  more  of  any   other  inputs  will  increase  output,  but  with  smaller  increments.   In  the  preindustrial  era  land  was  the  production  factor  fixed.  This  limited  supply   implied  that  average  output  per  worker  would  fall  as  the  labour  supply   (population)  increased,  as  long  as  technology  remained  unchanged.   Consequently  average  material  income  per  person  fell  with  population  growth.         The  next  graph  shows  the   relationship  between  labour  input   and  the  value  of  output.  In   economics  the  increase  in  the  value   of  output  from  adding  one  more   worker  is  called  marginal  product   and  in  market  economies  this  equals   the  wage.  Average  output  per  person   diminishes  as  population  rises.         Changes  in  the  Birth  Rate  and  Death  Rate  Schedules     Different  societies  have   different  birth  and  death  rate   schedules,  that  birth  and   death  rates  at  given  incomes,   and  these  schedules  can   change  over  time.  In  figure   2.3;  the  birth  rate  schedule   has  increase.  In  the  short  run   Births  exceed  Deaths  and  the   population  grows.  Then  when   we  achieve  the  new   equilibrium  where   population  is  greater  and   income  is  lower.   Then:     -­‐ ébirth  rate  à  êY   -­‐ ê  birth  rate  à  éY   Preindustrial  society  could   thus  raise  Y  by  limiting  births.           If  death  schedule  moves   down,  population  falls.   This  drives  down  real   income  until  death  rate  I   equal  to  birth  rate.  At  the   new  point  population  is   higher  and  income  lower.                               Changes  in  Technology     For  each  society,  depending  on  the  land  area  and  the  production  level,  there  was  a   schedule  connecting  each  population  level  with  a  given  real  income  level.  This  is   called  the  technology  schedule.       The  next  graph  shows  us  an   improvement  in  technological   schedule.   The  immediate  change  is  a   increase  in  real  income  which   leads  into  a  reduced  death  rate   where  births  are  greater  than   deaths  and  population  grew.   The  growth  of  population  only   ended  when  income  returned   to  subsistence.  At  the  new   equilibrium  the  only  effect  was   to  increase  population  but   there  was  no  lasting  gain  in   living  standards.           This  Malthusian  trap  exhibits  a   counterintuitive  logic.     Malthusian  “virtues”:   Anything  that  raised  the  death  rate  schedule  increased  material  living  standards   because  population  decreased.  Some  examples  are:   -­‐ Fertility  limitation   -­‐ Bad  sanitation   -­‐ Violence   -­‐ Harvest  failures   -­‐ Infanticide   -­‐ Income  inequality     Malthusian  “vices”   Anything  that  reduced  the  death  rate  scheduled,  reduced  material  living  standards   because  population  increased.  Some  examples  are:     -­‐ Fecundity   -­‐  Cleanliness   -­‐ Peace   -­‐ Public  grnaries   -­‐ Parental  solicitude   -­‐ Income  equality   -­‐ Charity   -­‐ Hard  work     How  the  preventive  and  imperative  checks  limit  the  population  growth?       In  both  cases  we  can  talk  about   a  vicious  circle.  For  instance,   the  red  one  shows  that  if   population  increases,  prices   increase,  real  income  decrease,   mortality  increase  and  then   population  decrease  and  we   start  again  the  circle  but  the   other  way  around.  They  were   trap  in  a  stationary  point  where   in  the  long  run  population   didn’t  increase.                           The  Malthusian  model  and  economic  growth   Thought  technology  was  advancing  before  1800,  the  rate  of  advance  was  always   slow  relative  to  that  in  the  world   after  1800.   In  the  following  graph  we  can  see   that  English  population  showed   dramatic  variation  in  the   preindustrial  period.  From  1200  to   1650,  as  population  change  under  the   influence  of  disease  shocks,  the   income-­‐population  points  lie  along   one  downward-­‐sloping  line.  This   implies  a  stagnant  production   technology  for  450  years.  After  1650,   the  technology  curve  shifts  upwards,   but  not  fast  enough  to  cause   insignificant  increases  in  output  per  per  person.  In  particular,  in  the  later  18th   century  all  technological  advances  increased  population  without  any  change  in   income  gains.  Societies  could  not  scape  from  the  Malthusian  equilibrium.     Human  and  animal  economies   The  economic  we’ve  derived  can  be  applied  to  all  animal,  and  indeed  plant,   populations.  Before  1800  there  was  no  fundamental  distinction  between   economies  of  humans  and  those  of  other  animal  and  plant  especies.  Thus   Malthusian  model  dominates  in  evolutionary  ecology  as  well.  For  animal  and  plant   especies  population  equilibrium  is  similarly  attained  when  birth  rates  equal  death   rates.  Hence  the  industrial  revolution  after  1800  represented  the  first  break  of   human  society  from  the  constraints  of  nature.     Political  economy  in  the  Malthusian  Era   Malthus  wanted  to  establish  that  poverty  was  not  the  product  of  institutions,  and   that  consequently  changes  in  political  institutions  could  not  improve  the  human   lot.  As  we’ve  seen  in  the  case  of  a  technological  change,  his  case  was  compelling.   The  arguments  of  Mathus  not  only  suggested  the  inability  of  government,  they  also   implied  that  many  government  policies  –taxation,  monopolies  –  would  similarly   have  no  effect  on  human  welfare  in  the  long  run.     The  Neolithic  Revolution  and  Living  Standards   The  great  economic  transformation  of  the  preindustrial  era  was  the  Neolithic   Revolution:  the  move  from  hunter-­‐gatherer  societies  to  those  with  economies   based  on  cultivated  crops  and  domesticated  animals.  The  evidence  showed  that   the  living  standards  declined  after  the  Neolithic  revolution  due  to  the  reduction  of   the  death  rate  as  people  were  able  to  store  food  by  themselves.  On  the  other  hand,   increased  disease  mortality  from  greater  population  densities  helped  increase   material  living.  The  net  result  of  these  effects  could  go  either  way  so  the  effect  in  a   Malthusian  world  is  inherently  ambiguous.   Agriculture  was  adopted  because  it  was  a  higher  technology  and  it  should  have   generated  higher  incomes.  But  it  wasn’t  really  that  way  around.     Criticism  of  Malthus:  Income  inequality  and  living  standards   The  Malthusian  model  takes  no  account  of  income  distribution.  Thus,  decision   made  by  the  different  classes  could  affect  the  population.  For  example,  if  a  king   raise  the  taxes,  the  income  per  person  would  decrease  and  so  population.  We  will   finally  end  up  on  the  same  stationary  equilibrium.     2.3.  Some  technical  innovations:  Agriculture  Revolution     During  this  period  some  innovation  were  made  in  the  agricultural  field.  Some  of   them  are:       - The  introduction  of  new  crops  like  maize  and  potato.     - Replacement  of  fallow  land  for  crops  such  as  turnips  and  clover  making   land  more  productive  while  its  recovering  and  feeding  the  animals.  (18th   century  Britain).     - 17th  century  Dutch  people  “created”  new  land  to  meet  urban  demand  of   food  by  taking  it  from  the  sea  using  dykes.     - More  intensive  use  of  fertilizers.     - 19th  century  England:  “Norfolk  four-­‐course”  crop  rotation:  wheat-­‐turnips-­‐   barley-­‐clover  (one  year  each).  Turnips  and  clover  were  used  to  feed   animals,  which  raised  meat  output,  decreased  prices  and  increased   - In  France  and  other  parts  of  Europe  turnips  were  substituted  with  sugar   beet.       In  the  Mediterranean  and  South  Europe  the  problem  was  not  shortage  of  land,  but   periodic  unemployment  that  occurred  through  the  year.     - Some  lands  that  until  that  moment  were  used  only  as  natural  grazing,  were   plowed  up  and  cereals  sown  instead.     - Cereal  rotations  were  shortened.     - Land  sown  with  vines  and  olives  were  increased.       Other  factors  behind  technical  innovations  and  productivity  improvement     - Economic  growth     - Price  increments     - Urbanization     - Collapse  of  Ancient  Regime     - High  Farming     - Enclosures       In  conclusion:     - Agricultural  revolution  in  the  17th  and  18th  century  was  a  necessary  step   for  posterior  industrial  revolution  and  industrial  revolution.  For   industrialization  to  occur,  it  had  to  be  possible  to  produce  more  food  with   fewer  people.     - There  is  no  coincidence  that  those  countries  that  first  improved  agricultural   productivity  were  ahead  in  Industrial  Revolutions           However,  it  is  not  clear  that  agricultural  revolution  happened  before   modern  economic  growth  began.  It  seems  that  economic  growth  in  18th   century  and  agricultural  revolution  went  hand  in  hand.     In  any  case,  agricultural  revolution  was  not  an  easy  process  from  a  social   point  of  view.  It  entailed  the  transition  of  peasants  into  rural  and  urban   wageworkers.  It  brought  the  consolidation  of  farming  capitalism.     ...