Question

B. Summarize the main arguments in O’Brian (1982) and Acemoglu (2006) papers by focusing on the following points:

C. What do the “dependency school” scholars claim about the development of the North and South as to the sources of industrialization and capital accumulation?

D. How does O’ Brian (1982) try to refute the arguments of the dependency school? What is the main source of economic growth in Western Europe according to him? Is Atlantic trade important for economic growth in Western Europe for him? Why or why not?

E. Do you think that the econometric findings of Acemoglu et al (2006) support O’Brian’s conclusions? How do Acemoglu et al (2006) view the importance of Atlantic Trade as far as economic growth in Western Europe is concerned? Discuss.

Answer 1

C. Dependency school is a school of thought in contemporary social science which seeks to contribute to an understanding of underdevelopment, an analysis of its causes, and to a lesser extent, paths toward overcoming it.

• The North-South dependency relationship does not only deal with the inequality between the countries of the North and the South, but also in between the countries of the South. Any significant disturbance in the core countries will automatically have a negative effect on the periphery. Hence, the economy of the South is conditioned by the development of the economy of the North to which the former is subjected.
• According to this view, local governments or elites contribute to the continuity of specialization in primary commodities because they benefit from such specialization, even if their attitudes retard development of their countries. Part of the local elite made alliances with foreign companies engaged in industry or international trade, to strength economic relationships through policies that would restrict local industrialization and economic development. Such political or social relationships would strength primary commodities' exports and lower saving rates and capital accumulation domestically.
• Acemoglu (2009) emphasizes the idea that the main objective of the political elite may not be to serve the society, but to keep the control of political power for as long as possible, using it for their own benefit. In this case, political competition would rather reduce the incentives of the political elite to implement growth enhancing and welfare-promoting policies, motivating instead the implementation of distortionary policies aimed solely at impeding political rival groups from rising to power. This would consequently result in industrialization and capital accumulation in the richer countries.

D. In contrast to the dependency school O’Brien (1982, p. 2) writes that transoceanic trade could in no way be classified as decisive for economic growth of Western Europe. The transoceanic trade made little impact on the European economy before the 1550s and it was not until the late 17th century that commercial and industrial profits from European trade with Asia and America became visible and significant.

E. According to Acemoglu, the rise of Western Europe after 1500 is due largely to growth in countries with access to the Atlantic Ocean and with substantial trade with the New World, Africa, and Asia via the Atlantic. This trade and the associated colonialism affected Europe not only directly, but also indirectly by inducing institutional change. Where “initial” political institutions placed significant checks on the monarchy, the growth of Atlantic trade strengthened merchant groups by constraining the power of the monarchy, and helped merchants obtain changes in institutions to protect property rights. These changes were central to subsequent economic growth. The differential growth of Western Europe during the sixteenth, seventeenth, eighteenth, and early nineteenth centuries is almost entirely accounted for by the growth of nations with access to the Atlantic Ocean, and of Atlantic traders.