The usual development conversation about determinants of per capita income revolves around modern choices of institutions or economic policies. But what if history is the main determinant of development today?
A paper by Diego Comin, Erick Gong, and myself was just published in the American Economic Journal: Macroeconomics. We collected crude but informative data on the state of technology in various parts of the world in 1000 BC, 0 AD, and 1500 AD.
1500 AD technology is a particularly powerful predictor of per capita income today. 78 percent of the difference in income today between sub-Saharan Africa and Western Europe is explained by technology differences that already existed in 1500 AD – even BEFORE the slave trade and colonialism.
Moreover, these technological differences had already appeared by 1000 BC. The state of technology in 1000 BC has a strong correlation with technology 2500 years later, in 1500 AD.
Why do technological differences persist for so long? The ability to invent new technologies is much greater when you have more advanced technology already. James Watt had acquired a lot of tech experience in the mining industry which he used to invent the steam engine. Other people with the ability to make steel could then slap his steam engine on a vehicle running along steel rails and give us railroads.
Past technology alters probabilities of future success, but does not completely determine it. The most famous counter-example: China was historically technologically advanced and did NOT have the industrial revolution.
A large role for history is still likely to sit uncomfortably with modern development practitioners, because you can’t change your history. But we have to face the world as it is, not as we would like it to be: deal with it. Perhaps when you acknowledge the importance of your own history, you are then more likely to transcend it.