An earlier and shortened version of this paper was given as a speech at a lunch for members of the Cambridgeshire Chamber of Commerce on Thursday, 4th January 2007.

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Prevailing views suggest the Industrial Revolution began in Europe because markets had gradually become more efficient and by the 18th century the scope of economic activity was far larger than in other parts of the world. This paper compares the actual performance of markets in Europe and China, two regions of the world that were relatively advanced in the pre-industrial period, but would start to industrialize about 150 years apart. The analysis covers economies that account for about two-fifths of the world’s population in the mid-18th century, and it considers some three centuries of data. Our findings suggest that relative levels of market function in China and Europe were similar prior to the Industrial Revolution. Higher efficiency in Europe is seen only in the nineteenth century when industrialization was already underway. Moreover, these improvements occurred in a dramatic and sudden fashion, further casting doubt on an evolutionary view of market development. Rather than being a key condition for subsequent growth, gains in efficiency appeared simultaneously with the turning point of modern growth. We discuss the implications of these findings for a number of explanations for long-run

Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s).

Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s).

Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s). Papers may only be downloaded for personal use only. Globalization, 1870-1914

We survey aggregate growth in a sample of 27 European countries during the interwar period. We discuss the available data, possible explanations for a slowdown in growth rates and test the explanatory power of several hypotheses put forward in the literature.

"Give me your tired, your poor, Your huddled masses yearning to breathe free, The Wretched refuse of your teeming shore. Send these, the homeless, tempest‐tost to me, I lift my lamp beside the golden door!" Emma Lazarus, 1883 This wonderful sonnet captures the spirit of the free immigration era in the 19th century U.S.A. The welfare state idea, still in its embryonic state in Europe, had yet to be brought to the U.S. shores. Free migration has been the subject of extensive theoretical investigation, dating back to Adam Smith (1776) who pointed out that curtailing free migration has a similar (and negative) effect to curtailing free flows of capital. In his words: "Whatever obstructs the free circulation of labour from one employment to another, obstruct that of a stock likewise; the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it." Nevertheless, whereas free capital mobility is widespread, free migration is very rare in practice.

migrants attracted by industrial agglomerations?:

At the turn of the twentieth century, a large number of Europeans, mostly from Italy and Spain, left their homelands and headed to the distant shores of Argentina in response to the good economic opportunities, fertile land and hopes for a better future that were to be found there. At the time, Argentina was one of the most vibrant world economies. Between 1870 and 1930, around seven million people migrated from Europe to Argentina, although nearly three million returned at some different point during those years. Also foreign capital responded to the opportunities offered by Argentina, and British financial institutions funded an important part of the construction of national infrastructure needed to support growth. In contrast, European migration to Argentina virtually stopped in the 1950s, and in the next 30 years or so the country become a net exporter of professionals who were fleeing economic decline, poor opportunities and authoritarian regimes. Moreover, during this period, financial capital steadily left Argentina looking for safer places. Nowadays, and in contrary to the flow of people a