Bishnupriya Gupta

The Early Modern Great Divergence: Wages, Prices and Economic Development in Europe and Asia, 1500-1800

Contrary to the claims of Pomeranz, Parthasarathi and other ‘world historians’, the prosperous parts of Asia between 1500 and 1800 look similar to the stagnating southern, central and eastern parts of Europe rather than the developing northwestern parts. In the advanced parts of India and China, grain wages were comparable to those in northwestern Europe, but silver wages, which conferred purchasing power over tradable goods and services, were substantially lower. The high silver wages of northwestern Europe were not simply a monetary phenomenon, but reflected high productivity in the tradable sector. The ‘Great Divergence’ between Europe and Asia was already well underway before 1800.

Lancashire, India, and Shifting Competitive Advantage in Cotton Textiles, 1700–1850: The Neglected Role of Factor Prices

In the early eighteenth century, wages in Britain were more than four times as high as in India, the worlds major exporter of cotton textiles. This induced the adoption of more capital-intensive production methods in Britain and a faster rate of technological progress, so that competitive advantage had begun to shift in Britains favour by the late eighteenth century. However, the completion of the process was delayed until after the Napoleonic Wars by increasing raw cotton costs, before supply adjusted to the major increase in demand for inputs.

Partial Privatization and Yardstick Competition: Evidence from Employment Dynamics in Bangladesh

We analyse the dynamics of public and private sector employment in Bangladesh, using the natural experiment provided by the partial privatization of the jute industry. The public sector had substantial excess employment of workers initially, but this excess was substantially eroded by the end of the period we studied. The extent of erosion differs between white-collar and manual worker categories, with excess employment persisting only in the former. Our findings suggest that partial privatization increases the efficacy of yardstick competition in the regulation of public firms, because heterogeneous ownership undermines collusion between public sector managers, and also makes excess employment more transparent to the general public.

Wages, Unions, and Labour Productivity: Evidence from Indian Cotton Mills

Clark and Wolcott attribute the low productivity of Indian cotton textile workers to their preference for low work effort, and suggest that unions resisted an increase in work intensity. This article argues that low wages were due to surplus labour in agriculture. Low wages allowed the persistence of managerial inefficiencies and resulted in low productivity and work effort. It uses firm-level data from all the textile producing regions in India to examine the relationship between unions and labour productivity. The findings show that fewer workers were employed per machine in the unionized mills in Bombay and Ahmedabad, compared to the mills in less unionized regions. These findings suggest that unionization increased wages and compelled managers to raise productivity

Europe in an Asian mirror : the great divergence

Why did sustained industrialization and modern economic growth first take off in western Europe and not elsewhere? Attempts to address this historical conundrum have spawned a large literature related to the theme of “European exceptionalism.” It champions the view that Europe, in particular northwest Europe, had superior, and in some cases exceptional, economic conditions and social institutions long before its economic take-off in the modern era. This widely prevalent and often contentious view has recently been contested by a new wave of historians and specialists on Asia such as Ken Pomeranz, Bin Wong, and Prasannan Parthasarathi. They marshalled evidence to show that living standards in the advanced parts of China and India were on a par with those of northwest Europe in the eighteenth century. The revisionists have also put forward various hypotheses to reinterpret the traditional story of the “rise of the West and the fall of the Rest” in terms of factor and resource endowments, the impact of Western colonization and, most importantly, historical path dependencies. This chapter provides a broad but selective survey of the major hypotheses and evidence regarding historical comparisons of the economic performances of India and China versus western Europe. We begin with a review of the latest research on the comparison of real wages across Eurasia, which reveals that living standards in the advanced parts of China, Japan, and India as measured by real wages seem to have been closer to the lagging parts of Europe – namely, southern and central Europe – than to northwest Europe, as was claimed by the revisionists

Why did Collusion Fail? The Indian Jute Industry in the Inter-War Years

In March 1937 the Indian jute industry abandoned its collusive agreement after nearly two decades. The cartel had been formed after the wartime boom ended, in 1919. It sought to regulate the hours worked and the capacity in use to reduce output. The participants in the cartel were mainly British firms. The industry saw increased entry during this period. Many of the new entrants were Indian firms. The cartel encouraged the participation of new firms. However, free riding was widespread as many of the new firms stayed outside. This was well known and the cartel discussed strategies for punishing the outsiders, but did not act until 1937. Theory suggests that cartels use price wars to punish non-compliance. Empirical work on cartels has found price wars to be less important as an enforcement mechanism. Genesove and Mullin emphasise the importance of communication at the meetings of the National Sugar Institute in the United States in the inter-war period. These meetings provided the means of sustaining collusion instead of treating unilateral actions as cheating and resorting to punishment. Only severe non-compliance tended to lead to retaliation. Levenstein finds that price wars in the American Bromine cartel at the turn of the nineteenth century were less frequent and less severe than theory predicts. Gupta sees the breakdown of the International Tea Cartel in 1931 and 1932 as a failure to arrive at agreed market shares rather than punishment for cheating. The case of the Indian jute cartel of the inter-war period is an interesting one. The cartel had a long history of effective output restriction organised by British firms. Figure 1 shows trends in output, exports and prices. Although the industry reduced real output and export in the 1920s, both increased in the 1930s while output restrictions were in place. The high level of output kept prices low. The cartel accepted entry and conceded market share to the new entrants in the 1920s even when the latter stayed outside the cartel. The social status of the new entrants was often different from that of the cartel members. Several new firms were Indian owned. Recent work by Podolny and Scott Morton shows that the British shipping cartels of 1879–1927 were less likely to be predatory if the new entrant had high social status. The jute cartel did not adopt a predatory stance with regard to entry nor did the cartel discriminate according to the

States and Development: Early Modern India, China, and the Great Divergence

Can differences in state capacity explain the Great Divergence between Asia and Europe? Evidence from India and China suggests that customary property rights provided de facto rights to land and community ties substituted for de jure property rights in mercantile activities. Economic activity did not face an undue risk of expropriation. China and India generated lower fiscal revenue per capita compared to Europe. We explain the big difference in revenue per capita between the two Asian countries and England in the early modern period. In terms of the differences in the threat of internal and external conflicts. The large empires in Asia faced a disproportionate threat of internal rebellions and traded off fiscal capacity for appeasement of local ruling groups and their military support in external conflicts.