In 2019, observations from global income distribution data reveal that individuals in the bottom 10% of countries, which are predominantly affected by extreme poverty, typically live on average daily incomes of merely a few dollars.

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The data used to create the 'History's Hockey Stick' graph originates from the extensive work of economic historian Angus Maddison. His compilations of scarce historical data are supplemented by more recent estimates from other economic historians, ensuring the graph reflects ongoing research and the most current information available.

Data Sources for the History's Hockey Stick Graph

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

The substantial increase in living standards seen in the countries was not experienced under Spanish colonial rule or during the post-independence period of most Latin American nations in the early 19th century.

Latin American Growth

China, which was once wealthier than Britain, experienced a significant economic downturn, and by the mid-20th century, its GDP per capita had dropped to only one-fourteenth of Britain's. This decline in per capita income took place during a long period of foreign intervention from the early 19th century to the middle of the 20th century. Although China was not formally colonized, foreign nations controlled important ports like Hong Kong and Macau, restricting the Chinese government's ability to make independent economic decisions. This period of foreign control ended with a revolution that brought the Communist Party to power.

China's Economic Decline

In the present day, living standards in India are considerably higher than they were seven centuries ago. This improvement is demonstrated by factors such as enhanced access to food, better sanitation facilities, and more effective management of infectious diseases, all contributing to an increased life expectancy. However, when measured against contemporary global benchmarks, a majority of India's population remains impoverished.

India's Progress in Living Standards and Persistent Poverty (14th Century to Present)

For each country the data points shown at the previous step have been joined with straight lines. Before 1800 we can’t see how living standards fluctuated from year to year.

Living Standards Visualization: Pre-1800 Limitations

The 'great divergence,' a trend illustrated by historical data visualizations such as Figure 1.1, refers to the significant increase in income inequality between countries. This divergence began around the seventeenth century and accelerated during the eighteenth century with the Industrial Revolution. A key aspect of this divergence was the fundamental alteration of the global geography of production, as the economic and military rise of Britain and Europe shifted the location of where most goods and services were produced. As a result, some nations experienced rapid economic growth and became vastly wealthier, while others lagged behind, establishing the stark global economic disparities seen in later periods.

The Great Divergence: Global Economic Inequality and the Industrial Revolution

Around a thousand years ago, the global economy was characterized by relatively minor income disparities between different countries, a phenomenon often described as an 'economically flat' world. As depicted in visual data like Figure 1.1, while some regional income variations existed, these differences across nations were minimal, especially when compared to the significant inequalities that developed in subsequent periods. This historical state contrasts sharply with the present day, where global income disparities are widely recognized as substantial.

Early Global Economic Equality and Later Disparities

Depending on the inquiry, we may want to examine either levels or growth rates. Gross domestic product per capita in five countries,(Britain,Japan,Italy,China,India) allows for easy comparison of GDP per capita levels among countries and throughout history. On the other hand, the illustration of the  living standards in five countries (1000–2018) using the ratio scale, enables comparisons of growth rates across nations and time periods. With a ratio scale, a series exhibiting constant growth appears as a straight line, as the percentage or proportional growth rate remains unchanged. A steeper line in a ratio scale graph signifies a more rapid growth rate.

Comparing GDP Per Capita Levels and Growth Rates Across Nations

Historical accounts from the 14th to 17th centuries reveal a world where economic inequality *within* a country was far more significant than the differences *between* countries. While some regions, like Italy, were moderately wealthier than places such as Britain, India, and Japan, these international disparities were overshadowed by the vast gap between the rich and poor within any given society. An individual's economic destiny was primarily determined by their parents' social position and their gender, with social status often marked by titles like feudal lord, serf, royalty, subject, merchant, or even enslaved person. In this era, the specific country a person was born in was a much less critical factor for their financial prospects compared to the modern day.

Intra-Country vs. Inter-Country Inequality in the 14th-17th Centuries

- Comparing pre-1800 data points in Britain, Japan, Italy, China, and India
- Comparing Britain, Japan, Italy, China, and India
- Britain
- Japan
- India and China
- China and Japan

Examples Using GDP to Calculate National Economic Growth 1000-2000CE

As an alternative to the static data presented in Figure 1.1, an interactive chart is available that provides Gross Domestic Product (GDP) data for a significantly larger number of countries. This resource allows for a broader exploration and comparison of global economic trends beyond the six nations highlighted in the main figure.

Alternative Interactive Chart for GDP Data

The 'hockey stick' pattern of economic growth is not a uniform phenomenon that appears identically in all nations. Both the existence of the pattern and its specific characteristics, such as the timing and steepness of the upward 'kink', differ significantly between countries. For example, Britain's growth was gradual and began around 1650, whereas Japan's was sharper and occurred around 1870. In contrast, China and India saw their living standards decrease during Western Europe's initial takeoff, with their own growth kinks emerging much later in the latter half of the 20th century.

Variability of the 'Hockey Stick' Growth Pattern Across Countries

The 'hockey stick' growth pattern in Britain is distinguished by its timing and shape. Economic growth began relatively early, around 1650, and the upward 'kink' was less abrupt and more gradual compared to the experience of other nations.

Britain's Early and Gradual 'Hockey Stick' Kink

In contrast to Britain's experience, Japan's 'hockey stick' pattern is defined by a significantly sharper and more pronounced upward kink. This rapid acceleration in economic growth is identified as starting around 1870.

Japan's Sharp 'Hockey Stick' Kink around 1870

In economics, the fundamental starting point for any analysis is data concerning the world's regions and their populations. Empirical information, such as the historical GDP figures used in the 'hockey stick' graph, provides the essential basis for understanding economic life and developing economic theories.

Data as the Foundation of Economics

The Black Death was a devastating pandemic that spread from Asia into Europe during the 14th century, primarily along trade routes, arriving in the 1340s. The plague had a catastrophic demographic effect on Europe, causing the death of an estimated 25 million people, which constituted nearly one-third of the continent's total population. This historical event stands in stark contrast to the conditions of abundance in other parts of the world at the time, such as Bengal, as observed by traveler Ibn Battuta.

The Black Death: Spread and Demographic Impact in 14th Century Eurasia

Since 1975, both India and China have experienced very rapid growth in average incomes. This period of accelerated economic expansion marks the upward turn of their respective 'hockey stick' growth curves, allowing them to begin narrowing the economic gap with wealthier nations.

Accelerated Post-1975 Economic Growth in India and China

This 2021 work by Stephen Broadberry, titled 'Accounting for the great divergence: recent findings from historical national accounting', provides a synthesis of contemporary research findings that use historical national accounts to explain the large-scale economic divergence between different parts of the world.

Broadberry's 2021 Synthesis on the Great Divergence

The Total Economy Database is a significant data source that provides information for long-run economic analysis, including the data used to illustrate historical trends in GDP per capita and living standards.

Total Economy Database as a Source for Historical Economic Data

A 2018 study by S. Broadberry, H. Guan, and D. Li, titled 'China, Europe and the Great Divergence: A Study in Historical National Accounting', offers a key dataset and analysis for understanding China's long-term economic history. It uses historical national accounts to compare the economic trajectories of China and Europe, contributing to the study of the Great Divergence.

Broadberry, Guan, and Li's 2018 Study on China's Economic History

The research of economist and historian Bishnupriya Gupta analyzes India's economic performance, focusing on the stagnation and decline in living standards before independence in 1947, as well as the accelerated prosperity that followed. A video presentation by Gupta explains this long period of economic decline during British rule and analyzes the reasons for the accelerated economic growth after independence. A key part of her wider research is a 2015 study with S. Broadberry and J. Custodis, which provides GDP per capita comparisons between India and Britain from 1600 to 1871, offering evidence for the Great Divergence.

Bishnupriya Gupta's Research on India's Economic Stagnation under British Rule and Post-Independence Growth

Some academics raise concerns about the accuracy of historical GDP estimates for countries outside of Europe. The primary reason for this skepticism is that the economic structures of these nations were significantly different, potentially making the standard estimation methodologies, which were often based on European models, unsuitable.

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