Friday, January 25, 2013

Urbanization and the Great Divergence

The Great Divergence between Western Europe and Asia, in particular China, according to revisionist authors like Ken Pomeranz, André Gunder Frank and Roy Bin Wong, has been a recent phenomenon, from around the early nineteenth century (and some would argue it will be a short lived one too; I expressed my doubts here). The graph below (source: Persson, 2010) shows rates of urbanization in Western Europe and China for a very long period.

Note that, by the renaissance of the twelfth century, Italy, particularly Northern Italy, shows a significant increase in the rate of urbanization, eventually returning to the levels of the Roman Empire. Chinese rates of urbanization are flat, in comparison, in this period. Mind you, the Song Dynasty period was a period of rapid growth in China. By the sixteenth century the rates of urbanization in Western Europe take off, with nothing comparable in China, until recent times.

Rosenthal and Wong (2011, p. 111) argue that "war was responsible for Europe’s urban manufacturing," while Chinese manufacturing remained eminently rural. And there are good reasons associated with the Military Revolution Theory to suggest Western European hegemonic rise was associated to guns and sails, as famously put by Carlo Cipolla.

From my perspective what is great about the graph is the suggestion that Western European growth, and eventually the Industrial Revolution, can be associated to the growth in demand. Note that urbanization goes hand in hand with the expansion and transformation of the patterns of consumption. In cities, that have to be built and all sorts of infrastructure and services must be provided, people have access to new consumption goods, and the significant expansion of demand is what forces supply to adjust. In that sense, urbanization, more than population growth, is a good measure of consumption expansion. And urbanization is certainly one way in which Western Europe was already diverging from Asia as far back as the twelfth century.


  1. War is also a demand rather than a supply driven phenomenon.

  2. What would you point as the leading factors responsible for this "early divergence"? Don´t you think that the idea of "optimal" state competition, something that could be found in Europe and not so much in China, present in Diamond´s book is important in this regard?


IMF Programs: Past and Present

A roundtable with Daniela Gabor, Roberto Lampa and Pablo Bortz, on the IMF and its Programs this Thursday in Buenos Aires, organized by ...