2023 (20), №2

Exploring the Three Factors of Economic Development and Their Role in the Emergence of the Great Divergence and Little Divergence

For citation: 

Smirnov, I. O. (2023). Exploring the Three Factors of Economic Development and Their Role in the Emergence of the Great Divergence and Little Divergence. AlterEconomics, 20(2), 291–308. https://doi.org/10.31063/AlterEconomics/2023.20-2.1

Abstract:

The Fourth Industrial Revolution has generated a fresh impetus to investigate the underlying reasons for sustained economic growth. To better understand the present-day situation, it is helpful to examine historical periods such as the Great Divergence and Little Divergence, which respectively saw Europe and Northern Europe experience significant economic growth compared to the rest of the world or region. However, many existing explanatory models contain inconsistencies, especially when applied to the Little Divergence. This study uses institutional theory, statistical analysis, and comparative analysis of theoretical models to propose an origi­nal model for institutional change leading to long-term growth. This model suggests that three factors, namely ethical and economic motivation for intensifying economic activity, along with social institutions that support collective action, led to the development of a market-based economy in early-modern Europe. Institutions are found to be responsible for consolidating short-term economic growth rather than just motivating individuals to work harder. The model is tested against historical data from five European countries between the 12th and 17th centuries — Italy, Spain, the Netherlands, England, and France. The study concludes by suggesting further research possibilities for developing predictive models that explain long-term growth in modern economies.

PDF full
Downloaded: 93

Ilya O. Smirnov — Post-Graduate Student, Far Eastern Federal University; https://orcid.org/0000-0002-9624-8419 (10, Russkiy island, Vladivostok, 690920, Russian Federation; e-mail: smirnovIlya1998@gmail.com).

Acemoglu, D. (2000). Political Losers as a Barrier to Economic Development. The American Economic Review, 90 (2), 126–130. https://doi.org/10.1257/aer.90.2.126

Angeles, L. (2011). Institutions, Property Rights, and Economic Development in Historical Perspective. Kyklos, 64 (2), 157–177.

Bosker, M., Brakman, S., Garretsen, H., de Jong, H., Schramm, M. (2007). Ports, plagues and politics: explaining Italian city growth 1300–1861. European Review of Economic History, 12 (1), 97–131. https://doi.org/10.1017/S1361491608002128

Braudel, F. (1986). Material’naya tsivilizatsiya, ekonomika i kapitalizm [Civilization and Capitalism]. Vol. 1. Moscow, the USSR: Progress, 624. (In Russ.)

Braudel, F. (1988). Material’naya tsivilizatsiya, ekonomika i kapitalizm [Material Civilization, Economy and Capitalism]. Vol. 2. Moscow, the USSR: Progress, 632. (In Russ.)

Broadberry, S. (2013). Accounting for Great Divergence. Economic History Working Paper, 184/13. London, UK: London School of Economics and Political Science. http://eprints.lse.ac.uk/54573 (Date of access: 20.01.2023).

Butel, P., & Crouzet, F. (1998). Empire and Economic Growth: The Case of 18th Century France. Journal of Iberian and Latin American Economic History, 16 (1), 177–193. https://doi.org/10.1017/S0212610900007096

Celetti, D. (2020). France in Levant: Trade and Immaterial Circulations in the “Long Eighteenth Century”. Journal of Early Modern History, 24 (4–5), 383–406. https://doi.org/10.1163/15700658-12342662

Court, V. (2020). A Reassessment of the Great Divergence Debate: Towards a Reconciliation of Apparently Distinct Determinants. European Review of Economic History, 24 (4), 633–674. https://doi.org/10.1093/ereh/hez015

Croxton, D. (2013). Westphalia, the Last Cristian peace. New York: Palgrave Macmillan, 452.

Dmitrieva, M. I. (2017). Narodnye pravitel’stva i “partii”: obrazy vlasti v Siene XIV v. [People’s Governments and “Parties”: Images of Power in Siena of the 14th Century]. Proslogion: Problemy sotsial’noy istorii i kul’tury srednikh vekov i rannego Novogo vremeni [Proslogion: Studies in Medieval and Early Modern Social History and Culture], 3 (1), 7–26. https://doi.org/10.24411/2500-0926-2017-00001 (In Russ.)

Dobuzinskis, L. (2014). Adam Smith and French Political Economy: Parallels and Differences. In David F. Hardwick (Ed.). Propriety and Prosperity (pp. 54–74). London, UK: Palgrave MacMillan. https://doi.org/10.1057/9781137321053_4

Elliott, J. (1992). A Europe of Composite Monarchies. Past and Present, 137, 48–71.

Epstein, S. R. (1999). The rise and decline of Italian city states. Economic History Working Papers, 51/99. Department of Economic History. London, UK: London School of Economics and Political Sciences. http://eprints.lse.ac.uk/22389 (Date of access: 20.01.2023).

Findlay, R. (2002). Globalization and European Economy: Medieval Origins to the Industrial Revolution. New York: Columbia University Department of Economics Discussion Paper Series, 46.

Fouquet, R., & Broadberry, S. N. (2015). Seven Centuries of European Economic Growth and Decline. Journal of Economic Perspectives, 29 (4), 227–244. http://dx.doi.org/10.1257/jep.29.4.227

Fratianni, M., & Spinelli, F. (2006). Italian City-States and Financial Evolution. European Review of Economic History, 10 (3), 257–278. https://doi.org/10.1017/S1361491606001754

Goldstone, J. (2021). Dating the Great Divergence. Journal of Global History, 16 (2), 266–285. https://doi.org/10.1017/S1740022820000406

Grafe, R., & Irigoin, M. A. (2006). The Spanish Empire and Its Legacy: Fiscal Redistribution and Political Conflict in Colonial and Post-Colonial Spanish America. Journal of Global History, 1 (2), 241–267.

Greif, A. (2018). Instituty i put’ k sovremennoy ekonomike. Uroki srednevekovoy torgovli [Institutions and the Path to the Modern Economy: Lessons from Medieval Trade]. 2nd Edition. Moscow, Russia: HSE Publishing House, 536. https://doi.org/10.17323/978-5-7598-1732-1 (In Russ.)

Henriques, A., & Palma, N. (2022). Comparative European Institutions and the Little Divergence, 1385–1800. Journal of Economic Growth. https://doi.org/10.1007/s10887-022-09213-5

Hodgson, G. (2017). 1688 and All That: Property Rights, the Glorious Revolution and the Rise of British Capitalism. Journal of Institutional Economics, 13 (1), 79–107.

Hoffman, P. (1994). Early Modern France: 1450–1700. Fiscal Crises, Liberty, and Representative Government 1450–1789 (pp. 226–252). Stanford: Stanford University Press.

Hurley, D. (2011). Spanish Colonial Economies: An Overview of the Economy of the Viceroyalty of Peru, 1542–1600. Ezra’s Archives, 1 (1), 1–20.

Koenigsberger, H. (1978). Monarchies and Parliaments in Early Modern Europe. Theory and Society, 5 (2), 191–217.

Kononchuk, D. V., & Smirnov, I. O. (2022). Eshche raz o konfutsianskom faktore v genezise kapitalizma v Kitae [To the Issue of the Confucian Factor in the Genesis of Capitalism in China]. Gumanitarnye issledovaniya v Vostochnoy Sibiri i na Dal’nem Vostoke [Humanitarian research in the Eastern Siberia and the Far East], 2 (60), 78–85. https://doi.org/10.24866/1997-2857/2022-2/78-85 (In Russ.)

Kraye, Jill. (1996). The Cambridge companion to Renaissance humanism. New York: Cambridge University Press, 320.

Lachman, R. (2014). Hegemons, Empires, and Their Elites. Sociologia, Problemas e Practicas, 75, 9–38.

Minashin, N. I. (2007). Seti doveriya i formirovanie gosudarstva. Opyt Niderlandov [Trust networks and the Formation of the State. Dutch Experience]. Politiya [Politeia], 3(46), 61–74. https://doi.org/10.30570/2078-5089-2007-46-3-61-74 (In Russ.)

Moshensky, S. Z. (2016). Zarozhdenie finansovogo kapitalizma [The Origin of the Financial Capitalism]. Kiev, Ukraine: Planet, 278. (In Russ.)

Murav’eva, L. A. (2015). Ekonomika Gollandii zolotogo veka (XVI-XVII vv.) [The economy of the Netherlands in the Golden Age (16th — 17th centuries)]. Mezhdunarodnyy bukhgalterskiy uchet [International accounting], 8 (350), 58–70. (In Russ.)

Muravyeva, L. A. (2017). Ekonomika zapadnoevropeyskogo Srednevekov’ya (V-XV vv.) [The Economy of West-European Middle Ages (V-XV centuries)]. Uchet. Analiz. Audit [Accounting. Analysis. Auditing], 6, 92–101. (In Russ.)

Naumova, E. I. (2015). Istoriya ponyatiya “Kapitalizm”: ot politicheskogo lozunga k nauchnomu terminu [The History of Capitalism as an Idea and a Term]. Mezhdunarodnyy zhurnal issledovaniy kul’tury [International journal of cultural research], 1 (18), 108–115. (In Russ.)

North, D. (1997). Instituty, institutsional’nye izmeneniya i funktsionirovanie ekonomiki [Institutions, institutional change and economic performance]. Moscow, Russia: Economic Book Foundation: «Nachala», 180. (In Russ.)

Nureev, R. M. (2007). “Velikaya transformatsiya” Karla Polan’i: proshloe, nastoyashchee, budushchee [Karl Polanyi’s “The Great Transformation”: Past, Present, Future]. Moscow, Russia: HSE, 321. (In Russ.)

Pleijt, A., & Zanden, J. L. (2020). A Tale of Two Transitions: The European Growth Experience, 1270–1900. Maddison-Project Working Paper WP-14. https://www.rug.nl/ggdc/historicaldevelopment/maddison/publications/wp14.pdf (Date of access: 20.01.2023).

Rozinskaya, N. A. (2015). Istoki sovremennoy ekonomicheskoy sistemy: Angliya ili Gollandiya [Origins of a Modern Economic System: England or Holland]. Zhurnal institutsional’nykh issledovaniy [Journal of Institutional Studies], 7 (3), 50–63. https://doi.org/10.17835/2076-6297.2015.7.3.050-063 (In Russ.)

Shovlin, J. (2003). Emulation in Eighteenth-Century French Economic Thought. Eighteenth-Century Studies, 36 (2), 224–230. https://doi.org/10.1353/ecs.2003.0021

Skinner, Q. (2018). Istoki sovremennoy politicheskoy mysli [The foundations of modern political thought. Vol. 1. The Renaissance]. Moscow, Russia: Delo Publ., 464. (In Russ.)

Smith, R. (1971). Spanish Mercantilism: A Hardy Perennial. Southern Economic Journal, 38 (1), 1–11.

Sombart, W. (1903). Sovremennyy kapitalizm [Modern Capitalism]. Vol. 1. Moscow, Russian Empire: Izdanie S. Skyrmunt, 584. (In Russ.)

Van Bavel, Bas. (2010). The Medieval Origins of Capitalism in the Netherlands. Bijdragen en mededelingen betreffende de geschiedenis der Nederlanden, 125, 45–79.

Weber, M. (2020). Protestantskaya etika i dukh kapitalizma [The Protestant Ethic and the Spirit of Capitalism]. Moscow, Russia: AST Publishers, 320. (In Russ.)

Zabaev, I. V., & Kostrova, E. A. (2020). Etos vs gabitus: eticheskiy komponent v “Protestantskoy etike” M. Vebera [Ethos versus Habitus: The Ethical Component in Max Weber’s “The Protestant Ethic and the Spirit of Capitalism”]. Sotsiologiya vlasti [Sociology of Power], 4, 45–67. https://doi.org/10.22394/2074-0492-2020-4-45-67 (In Russ.)