Economic Indicators of Living Standards

The first part of the book is primarily concerned with economic indicators of well-being. Kenneth Pomeranz's contribution extends his path-breaking book The Great Divergence (2000) by considering more information on relative living standards in Europe and Asia.

Eighteenth-century Chinese living standards can also be compared with living standards in the 1920s and 1930s, and those comparisons suggest a significant deterioration. Pomeranz proposes a Smithian explanation of the fall—intra- regional trade declined and with it consumption possibilities. Also, the decline in trade led to greater pressure on the land and resource base throughout the country. The result was deforestation and a greater variance in river levels that further reduced farm output. The poverty of China early in the twentieth century was not the result of centuries of backwardness but represented a decline from an eighteenth-century peak.

Li Bozhong's work on Chinese agriculture is an important beam in the revisionist reconstruction of Asian economic history. Smith's notion that the economy was

‘stationary’ is part of the bedrock of the traditional account. Li shows, instead, that productivity rose substantially in the seventeenth and eighteenth centuries.

Prasannan Parthasarathi is well known for having argued that southern Indian living standards were on a par with England's in the eighteenth century. He extends these arguments in this volume in two ways. First, he offers additional mid-eighteenth-century evidence from Bengal that implies that the real incomes of its weavers, spinners, and farm workers were similar to those in South India and in Britain. Second, he offers a compelling explanation of high real wages and the competitiveness of Indian industry. Labour markets, he argues, were highly competitive. The various states of India competed among themselves for labour. They did this by investing in agricultural improvements including water control systems. As a result, the distribution of cultivation in eighteenth-century India had much less to do with soil characteristics than it did with the existence of well-organized states that could develop irrigation schemes. Abundant supplies of food meant that its price was low Cheap food meant that wages (measured in silver) were low compared to Europe while real wages were similar. India's competitiveness in the manufacture of cotton textiles in the eighteenth century could be reconciled with the high standard of living of her population.

Robert Allen has studied the history of real wages across Europe from the late Middle Ages to the nineteenth century. These comparisons show that living standards were high and at about the same level around 1500 in all the cities studied.

The chapter by Philip Hoffman, DavidJacks, Patricia Levin, and Peter Lindert as well as the chapter by Jan Luiten van Zanden concentrate on the measurement of economic well-being in Western Europe. Both chapters make improvements in the cost-of-living indices used to convert money incomes into purchasing power equivalents (real incomes). Van Zanden introduces house rents into the consumer

price index (CPI) for Holland. This is important as rent increased very rapidly. Hoffman et al. argue that the spending patterns of the rich and the poor were very different, and that the prices of foods, which had great weight in the spending of the poor, inflated more rapidly than the prices of manufactures or the wages of servants, which had greater weight in the spending of the rich. Using social group-specific consumer price indices, therefore, shows that inequality increased even more than appears from the examination of nominal incomes. Hoffman et al. argue that house rents rose rapidly in France and England, as well as Holland, and that rise contributed to rising inequality by raising the real income of the rich relative to the poor. Both chapters suggest that the seventeenth and eighteenth centuries witnessed a sharp rise in inequality in northwestern Europe.

Japan was a key part of the global trading system, and its economy has been studied more systematically than that of other countries in Asia. Osamu Saito draws on that research and extends it with new data in his chapter on Japanese real wages between 1727 and 1894. He argues that Japanese growth in this period was qualitatively different from that in Europe, as exemplified by van Zanden's study of Holland, for instance. While GDP per head rose more rapidly than the wage rate in the Netherlands, the two economic indicators grew at the same rate in Tokugawa and early Meiji Japan. Saito argues that agricultural productivity growth in Japan meant that the marginal product of labour rose at the same rate as the average. The supply price of labour from the peasant sector thus increased over time, labour remained in agriculture, and wages rose in step with national income per head. Contrary to the usual revisionist view, it was differences in farm organization (not similarities) that explain the high Asian standard of living.

Jamie Reis expands the definition of the standard of living beyond the consumption of goods and services to include literacy. The ability to read and write increased dramatically in Europe between the Middle Ages and the Industrial Revolution. When Gutenberg invented the moveable type in 1453, perhaps 10% of the European population could read. By 1800, the proportion had risen everywhere and had reached about two-thirds in the leading economies of northern Europe. Some of this rise was related—as both cause and effect—to economic expansion, but, Reis argues, the increase in literacy went far beyond what was needed for economic development. In the Low Countries, Britain, and France, the ‘over-investment’ in education was manifest as the acquisition of literacy by unskilled workers. For these people—and no doubt for many who were more prosperous—the ability to read was a consumer good that enriched life. Reis shows that the value of this ability, as measured by the cost of acquiring it, was a significant proportion of the wealth of working people.

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