This chapter traces three grand transformations of the North American economy. The first process – the shift from a rural agricultural economy to an urban industrial economy and the emergence of ‘modern economic growth’ – began before 1870. The second process – the shift from growth based on increasing factors of production per person to growth based on enhancing the productivity of the factors – began at the turn of the twentieth century. It was tied to the emergence of the United States as a global economic leader. The third process – the shift from an internally focused industrial economy to a globally integrated, information-based economy – began after 1970. Focusing on these transformations complicates the story of balanced growth common in macro-growth accounts, but is crucial for our understanding of the growth of the North American economy.

The British Industrial Revolution marked the beginning of modern economic growth. This breakthrough built upon earlier episodes of GDP per head growth with the economy remaining on a plateau between these episodes. Growth was accompanied by structural change, with the declining share of agriculture matched by the rise of services as well as industry. As a result, Britain improved its position relative to the rest of Europe (the Little Divergence) and also improved its position relative to the leading Asian economies (the Great Divergence). The chapter examines the proximate sources behind economic growth in Britain during 1700–1870, including investment, growth in the number of workers, and accumulation of human capital. Together, these factors accounted for about two-thirds of the increase in output growth, leaving the other third to be explained by total factor productivity growth. However, the ultimate sources of Britain’s growth lay deeper in geography and institutions. The chapter also examines the effects of the Industrial Revolution on living standards and the impact of trade and empire.

Human societies have always needed safety nets to catch those who end up in need. The risks have always been there. Only recently has there been a global surge in government social spending. The major historical issues raised by this long delay are introduced in this chapter. Readers are given spoiler alerts about whether it had to be government that spread the nets, and about whether large-spending countries got the mix of social spending wrong more often than did low-spending governments. The conventional arguments for and against tax-based social spending are introduced.

Many believe that prosperity is a zero-sum game. A zero-sum game is one in which for every winner there is a loser. Think of sports or other competitive games. When the Chicago Cubs finally won the World Series in 2016, it meant that the Cleveland Indians lost. If you and I play chess, whichever of us wins, the other loses. Because markets are competitive, and because firms (and individuals) compete against each other, some of them will succeed and others will fail. This can make it seem as if markets, like baseball or chess, are zero-sum. One firm or one individual succeeds, but at the expense of other firms or individuals. And if one person were to succeed tremendously – perhaps she becomes a billionaire – it might seem that the only way she could have done so is by defeating a lot of other people: how else could she have gotten all that money?

This chapter recounts the breakdown of the international monetary system during the First World War and the subsequent reconstruction of the gold standard in the postwar decade, focusing on Britain's return to gold in 1925. Throughout the 1920s, central bankers cooperated with one another to guide the world back to gold, but fixed exchange rates and gold convertibility did not usher in nirvana. Britain, in particular, suffered from elevated unemployment and struggled to defend sterling's parity. London's decision to suspend gold convertibility in 1931 not only signaled the end of an era, but was to many countries the first salvo in what would become the monetary war.

Describes the infrastructure of the Treasury market on the eve of the Accord, including the gradual, not yet completed, suspension of wartime ceilings on Treasury yields, methods for selling securities in the primary market (regular and predictable bill auctions versus fixed-price cash and exchange offerings of coupon-bearing debt), and the role of dealers in secondary market trading.

Chapter 1 deals with two main topics. One is to assess the reasons for the outbreak of war in the Pacific. Japanese economic motivations for war as an investment in building a Greater East Asia Co-Prosperity Sphere are given particular weight. Second, the chapter analyzes Japan’s economic plans for Southeast Asia at the outset of occupation, how these changed as the war turned against Japan, and the implications for Southeast Asia of Japanese military reversals and heavy merchant shipping losses. Emphasis is placed on Japanese economic weakness compared to American and it is concluded that Japan had no prospect of winning a Pacific War and only limited chances of securing a favourable negotiated peace.

This chapter introduces an analytical framework suitable for studying ancient and premodern economies in a comparative perspective. It defines the economy in objective terms, discusses difficulties that must be addressed in developing a comparative understanding of ancient economies, and summarizes the general organization of the volume.

In 1976 UK economic policy making and fiscal strategy was transformed as a result of an exchange rate crisis that brought in the International Monetary Fund. Monetary targeting began to be a theme of policy debate. A central part of the pre-1979 influence and effective power of the Bank of England rested on the fact that the British domestic financial market was self-contained or cut off from the rest of the world, through the use of capital and exchange controls, applied to UK residents (corporations and individuals) but not to international holders of sterling. In 1976, as part of the IMF rescue package, exchange controls had been tightened, with a prohibition of use of sterling in trade financing that did not involve the UK. The incoming Conservative government started with a partial decontrol in July 1979, when restrictions on direct overseas investments were removed, and portfolio investment also became easier. In October 1979 exchange controls were completely abolished, a move which challenged the Bank of England’s control of the money supply.

Chapter 2 examines the first financial bubble, which occurred in 1720. Following the War of the Spanish Succession, the countries of Europe, particularly France and Britain, were heavily indebted. John Law invented the bubble in order to help the French government reduce their debt burden. He did so by creating a scheme whereby the Mississippi Company would refinance the government debt. Following Law’s lead, the directors of the South Sea Company proposed a similar scheme to refinance Britain’s public debt. Subsequently, the shares prices of the both the Mississippi Company and South Sea Company exploded and then dramatically collapsed. In addition, in Britain there were nearly 200 bubble companies floated on the stock market and the shares of existing companies also experienced a bubble. The chapter briefly discusses similar episodes elsewhere, especially in the Netherlands, but none of these were on the same scale as in Britain or France. The chapter then moves on to discuss the causes of the bubble. The debt conversion schemes turned unmarketable government debt into very marketable company shares. Part-paid shares leveraged the buying of shares in both countries and John Law’s bank meant that France’s entire monetary policy was directed towards creating the bubble. The bubble’s creators were also adept at stimulating speculative investment. The chapter concludes by examining the consequences of the bubble, which were severe and long-lasting in the case of France and minor in the case of Britain.

Although Europe between 1870 and 1939 enjoyed a period of long-run economic growth and unprecedented improvements in living standards, it also suffered from major social conflicts, rising nationalism, and witnessed experiments at new forms of political organization. This chapter looks at the connections between changes in political representation, economic development, and state capacity. It begins by discussing the difficulties of switching from a society run by the landed elites to one under universal suffrage and competitive party politics. This is followed by looking at the impact of the First World War on the development of state capacity. Then we consider the rapid economic growth that took place, and how a combination of rising industrial demand for unskilled labour, emigration, and international trade threatened a major switch in income distribution away from the landed elites to urban workers. The chapter concludes by examining how the economic and social problems caused by the First World War and the collapse of the international economy in the 1930s led to the strengthening of liberal democracy in some countries, but the appearance of social democracy and fascism in others.

This chapter traces the origins of the European monetary unification project. The 1957 Treaty of Rome called for monetary policy coordination within the EEC. To achieve this, a committee of governors of the EEC central banks was created (1964). The governors chose the BIS in Basel as their meeting place to underline their independence from the EEC in Brussels. In the 1970s, after the breakdown of the Bretton Woods system of fixed exchange rates, the committee played a key role in the attempts to restore stable exchange rates within Europe, leading to the creation of the European Monetary System (EMS). In 1988–9, the BIS hosted the Delors Committee for the study of monetary union in Europe. The conclusions of the Delors Committee provided the basis of the 1992 Maastricht Treaty, which set the EU on the path of monetary union. Once this decision had been taken, the role of the BIS as host and agent of the EMS came to an end, and the committee of governors – soon recreated as the European Monetary Institute (EMI) and then European Central Bank (ECB) – moved from Basel to Frankfurt. The chapter ends with an assessment of the euro crisis of 2011–12.

This chapter explains the historical development of an internationalist conception of trade from Adam Smith to the 1930s. It then examines the establishment of GATT, initial reactions to the organization, and the early work of the secretariat. Efforts to establish what became GATT began during the war and involved British and American governments. The participation of other countries, including Australia, Canada, and India, also influenced the rules and purpose of GATT. The reaction to GATT showed that trade elicited divisive and polarized opinions, a trend that continued throughout its history. In its first few years, GATT had limited capabilities, but an effective secretariat led by Eric Wyndham White. This account revises the widely held view that British and American governments clashed over the postwar trade system. It challenges the belief that the USA created GATT. It shows that the GATT secretariat was proactive, committed to an internationalist trade agenda, and determined to maintain its independence.