All quiet before the take-off? Pre-industrial regional inequality in Sweden (1571-1850)

by Anna Missiaia and Kersten Enflo (Lund University)

This research is due to be published in the Economic History Review and is currently available on Early View.

 

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Södra Bancohuset (The Southern National Bank Building), Stockholm. Available here at Wikimedia Commons.

For a long time, scholars have thought about regional inequality merely as a by-product of modern economic growth: following a Kuznets-style interpretation, the front-running regions increase their income levels and regional inequality during industrialization; and it is only when the other regions catch-up that overall regional inequality decreases and completes the inverted-U shaped pattern. But early empirical research on this theme was largely focused on the  the 20th century, ignoring industrial take-off of many countries (Williamson, 1965).  More recent empirical studies have pushed the temporal boundary back to the mid-19th century, finding that inequality in regional GDP was already high at the outset of modern industrialization (see for instance Rosés et al., 2010 on Spain and Felice, 2018 on Italy).

The main constraint for taking the estimations well into the pre-industrial period is the availability of suitable regional sources. The exceptional quality of Swedish sources allowed us for the first time to estimate a dataset of regional GDP for a European economy going back to the 16th century (Enflo and Missiaia, 2018). The estimates used here for 1571 are largely based on a one-off tax proportional to the yearly production: the Swedish Crown imposed this tax on all Swedish citizens in order to pay a ransom for the strategic Älvsborg castle that had just been conquered by Denmark. For the period 1750-1850, the estimates rely on standard population censuses. By connecting the new series to the existing ones from 1860 onwards by Enflo et al. (2014), we obtain the longest regional GDP series for any given country.

We find that inequality increased dramatically between 1571 and 1750 and remained high until the mid-19th century. Thereafter, it declined during the modern industrialization of the country (Figure 1). Our results discard the traditional  view that regional divergence can only originate during an industrial take-off.

 

Figure 1. Coefficient of variation of GDP per capita across Swedish counties, 1571-2010.

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Sources: 1571-1850: Enflo and. Missiaia, ‘Regional GDP estimates for Sweden, 1571-1850’; 1860-2010: Enflo et al, ‘Swedish regional GDP 1855-2000 and Rosés and Wolf, ‘The Economic Development of Europe’s Regions’.

 

Figure 2 shows the relative disparities in four benchmark years. If the country appeared relatively equal in 1571, between 1750 and 1850 both the mining districts in central and northern Sweden and the port cities of Stockholm and Gothenburg emerged.

 

Figure 2. The relative evolution of GDP per capita, 1571-1850 (Sweden=100).

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Sources: 1571-1850: Enflo and. Missiaia, ‘Regional GDP estimates for Sweden, 1571-1850’; 2010: Rosés and Wolf, ‘The Economic Development of Europe’s Regions’.

The second part of the paper is devoted to the study of the drivers of pre-industrial regional inequality. Decomposing the Theil index for GDP per worker, we show that regional inequality was driven by structural change, meaning that regions diverged because they specialized in different sectors. A handful of regions specialized in either early manufacturing or in mining, both with a much higher productivity per worker compared to agriculture.

To explain this different trajectory, we use a theoretical framework introduced by Strulik and Weisdorf (2008) in the context of the British Industrial Revolution: in regions with a higher share of GDP in agriculture, technological advancements lead to productivity improvements but also to a proportional increase in population, impeding the growth in GDP per capita as in a classic Malthusian framework. Regions with a higher share of GDP in industry, on the other hand, experienced limited population growth due to the increasing relative price of children, leading to a higher level of GDP per capita. Regional inequality in this framework arises from a different role of the Malthusian mechanism in the two sectors.

Our work speaks to a growing literature on the origin of regional divergence and represents the first effort to perform this type of analysis before the 19th century.

 

To contact the authors:

anna.missiaia@ekh.lu.se

kerstin.enflo@ekh.lu.se

 

References

Enflo, K. and Missiaia, A., ‘Regional GDP estimates for Sweden, 1571-1850’, Historical Methods, 51(2018), 115-137.

Enflo, K., Henning, M. and Schön, L., ‘Swedish regional GDP 1855-2000 Estimations and general trends in the Swedish regional system’, Research in Economic History, 30(2014), pp. 47-89.

Felice, E., ‘The roots of a dual equilibrium: GDP, productivity, and structural change in the Italian regions in the long run (1871-2011)’, European Review of Economic History, (2018), forthcoming.

Rosés, J., Martínez-Galarraga, J. and Tirado, D., ‘The upswing of regional income inequality in Spain (1860–1930)’,  Explorations in Economic History, 47(2010), pp. 244-257.

Strulik, H., and J. Weisdorf. ‘Population, food, and knowledge: a simple unified growth theory.’ Journal of Economic Growth 13.3 (2008): 195.

Williamson, J., ‘Regional Inequality and the Process of National Development: A Description of the Patterns’, Economic Development and Cultural Change 13(1965), pp. 1-84.

 

Is committing to a free trade policy enough? Evidence from colonial Africa

by Federico Tadei (Department of Economic History, University of Barcelona)

 

Africa1898
French map of Africa from 1898, showing colonial claims. Originally published as “Carte Generale de l’Afrique’. Available at Wikimedia Commons.

Recent Brexit negotiations have led to intense debate on the type of trade agreements that should be put in place between the UK and the European Union. According to Policy Exchange’s February 2018 report, the UK should unilaterally commit to free trade. The assumption underlying this argument is that the removal of tariffs has the potential to reduce consumer prices due to greater competition and lower protection of domestic industries, which would promote innovation and increase productivity.

But the removal of tariffs and protectionist policies might not be sufficient to implement free trade fully. My research on trade from colonial Africa suggests that a legal commitment to free trade is not nearly enough.

Specifically, it appears that during the colonial period the British formally relied on free trade encouraging competition between trading firms, while the French made use of their political power to establish trade monopsonies and acquire African goods at prices lower than in the world markets.

Yet the situation on the ground might have been quite different than what formal policies envisaged. Did the British colonies actually enjoy free trade? Did producers in Africa who lived under British rule receive higher prices than those living under the French?

To answer these questions, I measure the degree of competitiveness of trade under the two colonial powers by computing profit margins for trading companies that bought goods from the African coast and resold them in Europe.

To do so, I use data on African export prices and European import prices for a variety of agricultural commodities exported from British and French colonies between 1898 and 1939 and estimated trade costs from Africa to Europe. The rationale behind this methodology is simple: if the colonisers relied on free trade, profit margins of trading companies should be close to zero.

Tadei Figures

On average, profit margins in the British colonies were lower than in the French colonies, suggesting a higher reliance on free trade in the British Empire (see Figure 1). But if we compare the two colonial powers within one same region (West or East Africa) (Figures 2 and 3), it appears that the actual extent of free trade depended more on the conditions in the colonies than on formal policies of the colonial power.

Profit margins were statistically indistinguishable from zero in British East Africa, suggesting free trade, but they were large (10-15%) in West African colonies under both the French and the British, suggesting the presence of monopsony power.

These results suggest that, in spite of formal policies, other factors were at play in determining the actual implementation of free trade in Africa. In the Western colonies, the longer history of trade and higher level of commercialisation reduced the operational costs of trading companies. At the same time, most of agricultural production was based on small African farmers, with little political power and ability to oppose de facto trade monopsonies.

Conversely, in East Africa, production was often controlled by European settlers who had a much larger political influence over the metropolitan government, increasing the cost of establishing trade monopsonies and allowing better implementation of colonial free trade policy.

Overall, despite formal policies, the ability of trading firms in West Africa to eliminate competition was costly in terms of economic growth. African producers received lower prices than they would have in a competitive market and consumers paid more for imported goods. Formal commitment to free trade policies might not be sufficient to reap the full benefits of free trade.

Religion and development in post-Famine Ireland

by Stuart Henderson (Ulster University)
The full paper has been published on The Economic History Review and is available here 

 

The role of religion in economic development has attracted increasing debate among scholars in economics, and especially economic history. This is at least partially attributable to the normalization in recent times of conversations relating to the effect of religion on social progress. This paper adds a new perspective to that debate by exploring the relationship between religion and development in Ireland between 1861 and 1911. The paper highlights a religious reversal of fortunes—a Catholic embourgeoisement—in the years following the Great Irish Famine.   

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Figure 1. St Patrick’s Cathedral, Armagh (Roman Catholic). Available at <https://commons.wikimedia.org/wiki/File:Armagh,_St_Patricks_RC_cathedral.jpg&gt;

 

Ireland is a rather curious case. Here the effect of the Protestant Reformation manifested, not through a conversionary zeal spreading the land, but rather by the movement of people across the Irish Sea. In the centuries that followed, the Protestant minority, and particularly adherents of the Anglican Church, gained economic and social supremacy. By contrast, the Roman Catholic majority were socioeconomically disadvantaged, and denied the societal privileges offered to their Protestant counterparts.

Slowly, however, the balance of power began to shift. Penal laws, which discriminated particularly against Roman Catholics, were overturned, and eventually The Roman Catholic Relief Act of 1829 marked the culmination of Catholic Emancipation.
However, the legal watershed of Catholic Emancipation did not resolve the uneven balance of economic power between Protestants and Catholics. The arrival of a National System of Education in 1834, was a marker of the amelioration of religious inequality, but arguably it was the Great Famine in the mid-nineteenth century that truly transformed the prevailing social paradigm.

The Great Famine had a disproportionate impact on Roman Catholics given their lower social status and geographic situation. While devastating, the Famine catalysed a new sense of purpose in Catholic society—peasant religion and superstition were suppressed as the Roman Catholic Church benefitted from a new religious fervour, religious personnel bolstered the provision of education, and a rationalisation of the farming family meant a population more receptive to the social control provided by the Church.

 

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Figure 2. Literacy by selected denominations in 1861
Of the population 5 years old and upwards. Calculated using: Census of Ireland, 1861 (P.P. 1863, LX), p. 558.

 

However, the effects of the Famine were hardly a mere religious awakening. With Catholic education in Catholic hands, the Catholic population became increasing literate. Literacy aided in occupational advancement and the diffusion of political consciousness. Moreover, with the entrenchment of barriers to Catholic progression—for example the predominance of Protestants in banking—rising literacy likely fuelled discontent and thus nationalist sentiment.

The economic progress of Roman Catholics in the post-Famine decades is statistically examined in the paper. Put simply, the results suggest a Catholic–Protestant convergence over the decades following the Famine. Roman Catholics were rapidly closing the literacy gap and rising in occupational status as Protestant dominance receded. There is also evidence provided which suggests that commercial activities in more Catholic-concentrated areas were catching up with less Catholic-concentrated areas. Indeed, the general trajectory observed is referred to as a Catholic embourgeoisement as Catholics were becoming a more middle-class people—increasingly “alike” their Protestant counterparts.

For Protestants, the prevailing cultural dichotomy—which had long been to their advantage—was perhaps relevant in the economic convergence of the denominations after the Famine, and indeed in ultimate independence. Societal separation meant that the Catholic majority had a religious identity around which to coalesce. Therefore, as legal barriers receded and human capital increased, Catholics began to create an institutional alternative to that provided by the “Protestant” state, with their own network of schools, banks and professionals. Moreover, such movements were likely self-reinforcing, as Catholic professionals aided a new generation to follow their ascent.

The significance of this development is considered further towards the end of the paper. Ireland’s obvious majority–minority structure is contrasted with the Netherlands where no religious majority prevailed. In the latter, this led to a society organised into distinct segments (or pillars), which coexisted in relative harmony. By contrast, in the Irish case, despite the economic convergence of the denominations, independence resulted. The movement towards independence was arguably aided by the mutually beneficial relationship between the Roman Catholic Church and nationalism—the Church, with its body of adherents, provided legitimising capital for nationalism, while nationalism espoused a vision of Ireland that was consistent with the teaching of the Church. Moreover, for individual Roman Catholics, such nationalist vision was likely attractive since it offered the opportunity for societal equality beyond simply materialistic gains—opportunity which the existing state apparatus was slow to provide.

Hence, in understanding the development of Ireland in the post-Famine era, this paper provides not only an important quantification of Catholic progress, but also widens the debate to what Amartya Sen eloquently calls ‘development as freedom’. In doing so, it emphasises the short-sightedness of a narrow materialistic view of societal development, and instead offers a more nuanced perspective on the Irish case.

 

To contact the author: s.henderson1@ulster.ac.uk