The differences in income levels, which characterise the present-day international economic order, are not self-evident. In the past these differences used to be much smaller. Around 1500 by far the greater part of the world population made its living in agriculture. Although some countries were richer than others, most people in most countries lived close to subsistence levels. The distribution of world income by region was therefore relatively equal (Bairoch, 1980; Cipolla, 1981: p. 220; Maddison, 2001). In contrast in the year 2000, the average income per capita in the twenty-seven richest countries was no less than fourteen times as high as that in the fifty-one poorest countries (see Table 1.1).

How did the present diversity of levels of economic development and welfare in the world economy come about? In order to examine possible answers to this question, this chapter will offer a rough outline of the history of European expansion and the development of the international economic order associated with it.

International economic order

Instead of presenting a formal definition of the slippery concept of international economic order, Box 2.1 identifies some of its important characteristics (Lewis, 1978b; Maddison, 1985; Maddison, 1989; Streeten, 1984).