How did England move from the stagnant economic growth after the bubonic plague to the rapid growth of the modern age?
In a recent Economic Synopses essay, Guillaume Vandenbroucke, economist and assistant vice president at the St. Louis Fed, examined England’s growth path from 1270 to 2016 to better understand the underlying economic forces at play.
First, the author created a figure (shown below) plotting population and real gross domestic product (GDP) per capita from 1270 to 1650.
The figure shows a sharp decline in England’s population circa 1350 because of the bubonic plague pandemic, called the Black Death, he pointed out.
Though England’s population fell sharply, real GDP per capita increased since output didn’t change as quickly as the population decline, Vandenbroucke wrote.
“Suddenly, there was similar output with fewer persons and, so, more output per person,” he wrote.
England’s Population and Real GDP Per Capita, 1270-1650
SOURCE: Bank of England.
NOTE: Both series are normalized to 100 in 1270 so that they can be shown on the same plot.
The author also noted that real GDP per capita was stable after the bubonic plague.
“There is no clear trend and, in particular, no growth,” he wrote. “Economic historians have long established that this ‘stagnation’ was not specific to England but was a feature of the world’s economy as a whole for centuries.”
The Malthusian Theory of Stagnation
The author noted that the English economist Thomas Malthus (1766-1834) theorized that such stagnation was the result of two different effects:
- technological changes, especially in agriculture, which could make food and other production easier and thus spur further population growth
- fewer acres per person as a result of an increasing population
“In the end, GDP per capita could increase because of better technology or decrease because of less land per person,” Vandenbroucke wrote. “Which of these two effects dominates, if any, depends on the magnitude of technological progress and the importance of land in production.”
When the two effects are of similar size, GDP per capita remains constant as the population rises, which is what the figure shows, the author observed.
Rising Economic Growth
From 1650 to 1850, England’s economy went from stagnation to growth. At first, population grew at a slower rate than real GDP per capita, but after around 1700, it grew faster, the author observed. Over the full 200-year period, both grew at an average rate of 0.5%.
From 1850 to 2016, the growth rates for both the economy and the population were faster, as real GDP per capita grew at an average rate of 1.4% and the population increased at an average rate of 0.72%, the author noted. (Figures related to these two periods can be found in his Economic Synopses essay.)
Does the Malthusian theory explain the transition from stagnation to modern growth in England? Vandenbroucke pointed out the theory’s continued reliance on agriculture as a shortcoming.
“A better theory must account for the declining importance of agriculture and the rising role of industry in modern economies,” he said.
The author noted that one such theory encompasses the following:
- Industrialization and the advent of machines (capital) make land less critical in economic output.
- Scientific advancement and technological innovations are usually embodied in a new machine. Thus, capital is the way that technology impacts the economy.
- Unlike land, machines can be produced. Thus, when the population rises, capital per capita can remain stable or grow amid falling acreage per capita.
“This eliminates the negative effect of land per person in the Malthusian theory,” Vandenbroucke wrote. “In sum, as England industrialized, it became possible for both population and GDP per capita to increase faster.”
#Englands #History #Reveal #Economic #Growth
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