The World Economy Over the Last 2,000 Years

19 06 2012

This graph probably won’t surprise any readers who are familiar with the literature on the Great Divergence: it is well-known among historians that the relatively large share of world economic activity enjoyed by the West in the last few centuries is rather atypical. For most of recorded history, Asia, not the North Atlantic region, was the centre of the world economy.  Nevertheless, it is worthwhile reposting it here.  This elegant graph was produced by Michael Cembalest, an analyst at JP Morgan, using data generated by the late great Angus Maddison.

A couple of quick thoughts.

First, it is clear that US relative decline began in the late 1940s, as the economies of Europe and Japan began to pick themselves up off the floor. The next few decades saw continued US relative decline, coupled with rapid advances in living standards in the US. The lesson, relative decline doesn’t have to be scary. Luckily, we don’t live in zero-sum-game world.

Second, the brownish-orange part of the graph shows just how important India was at one point. It reminds me to read Prasannan Parthasarathi‘s new(ish) book   Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600-1850. Cambridge: Cambridge University Press, 2011. This book on the Great Divergence focuses on India, not China.  Another book to put on the summer reading list. I know from published reviews that the author thinks that India’s failure to industrialise was basically due to British rule. It will be interesting to see how he responds to the arguments Greg Clark offered in A Farewell to Alms.