It would be unthinkable for American undergraduates to be offered courses in the economic history of their own state, rather than the United States as a whole. In sharp contrast, most existing textbooks on European economic history are country-specific, implying the risk that students will misinterpret continent-wide phenomena as having been purely national in scope, and as having had purely national causes. The time has come for a textbook on European economic history that takes an explicitly pan-European approach, with the material organized by topic rather than by country.

This project thus aims to provide a unified economic history of modern Europe, explicitly modeled on R. Floud and D. McCloskey's (1981) path-breaking Cambridge Economic History of Britain. Each chapter has been written by two or three leading experts in the field, who between them have been able to cover all of the three major European regions (northern Europe, southern Europe, and central and eastern Europe). Following the pattern established by Floud and McCloskey, we have broken down the project into two volumes covering the periods 1700–1870 and 1870–2000. Each volume contains chapters based on the dominant themes of modern economic history: aggregate growth and cycles; sectoral analysis; and living standards. The approach is quantitative and makes explicit use of economic analysis, but in a manner that is accessible to undergraduates.

Volume 1 of this new economic history of modern Europe is centered on the transition to modern economic growth, which Kuznets (1974) defined in terms of the following six characteristics: (i) high rates of growth of per capita product and population; (ii) a high rate of growth of output per unit of all inputs – that is, total factor productivity; (iii) high rates of structural transformation from agriculture to industry and services, and from personal enterprise to large-scale impersonal organization of firms; (iv) changes in the structure of society and its ideology, including urbanization and secularization; (v) opening up of international communications, or globalization; and (vi) the limited spread of growth, leading to the divergence of living standards between “developed” and “under-developed” nations. The transition to modern economic growth occurred in Europe between 1700 and 1870, beginning in Britain, but spreading quite rapidly to other parts of western Europe.

Viewed in the grand sweep of history, this change was undoubtedly radical, and must be ranked alongside other epoch-making changes such as the change from hunting and gathering to settled agriculture. In recent decades, however, as it has proved increasingly possible to reconstruct the path of economic development at this time, it has become clear that the changes were more gradual and spread more widely across the economy than earlier generations had thought, thus calling into question the use of the term “Industrial Revolution.”

Documenting globalization

Introduction

The period from 1870 to 1914 represented the high-water mark of nineteenth-century globalization, which, as Chapter 4 in Volume 1 showed, had been developing since the end of the Napoleonic Wars. This chapter will explore several dimensions of this globalization, as well as its effects on the European economy. Since the topic is vast, our focus will be on the links between Europe and the rest of the world, rather than on the growing integration of the European economy itself, although that will be alluded to.

Nineteenth-century globalization involved increasing transfers of commodities, people, capital, and ideas between and within continents. The most straightforward measure of integration is simply the growing volume of these international flows, perhaps scaled by measures of economic activity more generally: for example, the ratio of commodity trade to GDP, or the number of migrants per head of population. Another measure is the cost of moving goods or factors of production across borders, and this cost will show up in international price gaps. Because it is less easy to measure integration in the international “markets” for ideas and technology, these flows are often not discussed in economists' accounts of globalization, but they are sufficiently important to be briefly considered here, problems of quantification notwithstanding.

Having documented the increasing integration of international markets in the late nineteenth century, we then discuss some of the effects of this unprecedented globalization.

The economic history of Europe since 1870 can be divided into three phases. The first, which lasted until the First World War, was an age of globalization, and of European economic and political dominance worldwide. The Industrial Revolution, which was covered in Volume 1, led to the introduction of new steam-based technologies such as the steamship and railroad, which dramatically lowered transport costs, while the telegraph speeded the transmission of information. The Industrial Revolution also produced a dramatically asymmetric world, in which industrial output became increasingly concentrated in Europe and its overseas offshoots. Europe used the military power which flowed from this fact to dominate Asia and Africa politically, either through overt imperialism or in more indirect ways. The net result was a dramatic economic integration of Europe with itself and the rest of the world, despite trade policies which occasionally attempted to shield European farmers from overseas competition.

The promises which the Industrial Revolution had held out to ordinary workers were increasingly being realized across Europe during this period. According to the figures in Chapter 2, growth averaged a little over 2 percent per annum between 1870 and 1913. Real wages grew, and ordinary people lived longer, healthier and better-educated lives. While the period was certainly marked by business cycle fluctuations, governments on average found that the constraints imposed upon them by the gold standard were not excessively onerous.

Introduction: the rise and fall of European mercantilism

At the start of the first millennium, western Europe was the most peripheral region in Eurasia. Like Africa, its exports largely consisted of forest products and slaves, and it had direct economic links with just two other Eurasian regions – eastern Europe and the Islamic world. By contrast, the Islamic world had direct economic contacts with all the regions of the then known world: eastern and western Europe, sub-Saharan Africa, the steppe societies of central Asia, and the highly developed civilizations of south Asia, southeast Asia, and east Asia (Findlay and O'Rourke, 2007).

By the eighteenth century, western Europe was no longer a peripheral appendage of the Eurasian landmass, but had become geographically and politically central. It was now in direct contact with all other regions of Eurasia, as well as with sub-Saharan Africa, but more importantly it controlled both North and South America, which were fully integrated into the world economy, importing slaves from Africa, exporting a variety of colonial goods to Europe, and exporting silver both to Europe and to Asia via the Philippines. As for eastern Europe, it was now in direct contact not just with central Asia and the Muslim world, but with east Asia and North America as well, as a result of Russia's Siberian conquests, which would prove to be the most enduring of all the European imperialisms of that time.