Introduction to Modern Economic Growth constant, Europeans initiated very significant changes in the economic institutions of different societies The impact of European colonialism on economic institutions is perhaps most dramatically conveyed by a single fact–historical evidence shows that there has been a remarkable Reversal of Fortune in economic prosperity within former European colonies Societies like the Mughals in India, and the Aztecs and the Incas in the Americas were among the richest civilizations in 1500, yet the nation-states that now coincide with the boundaries of these empires are among the poorer nations of today In contrast, countries occupying the territories of the less-developed civilizations of North America, New Zealand and Australia are now much richer than those in the lands of the Mughals, Aztecs and Incas USA CAN Log GDP per capita, PPP, in 1995 10 BRB MUS GAB MYS ZAF PAN BWA CRI KNA LCA NAM GRD FJI GTM LKA SWZ IDN GUY AGO ZWE BLZ VCT TZA SGP CHLBHS ARG VEN URY PER DMA BOL HND CMR GIN CIV SEN COM PAK SDN GHA VNM LSOIND GMB TGO CAF HTI BEN LAO KEN UGA NPL BGD TCD MDG ZAR BFA NGAZMB NER ERI BDI MLI RWA MWI MOZ ECUTUN DZA DOM PRY JAM PHL SURMAR CPV EGY SLV MEX COL TTO BRA HKG AUS NZL NIC MRT COG SLE 50 Urbanization in 1995 100 Figure 4.4 Urbanization and Income today The Reversal of Fortune is not confined to such comparisons To document the reversal more broadly, we need a proxy for prosperity 500 years ago Fortunately, urbanization rates and population density can serve the role of such proxies Only societies with a certain level of productivity in agriculture and a relatively developed system of transport and commerce can sustain large urban centers and a dense 184