Economic growth and economic development 199

Introduction to Modern Economic Growth population Figure 4.4 shows the relationship between income per capita and urbanization (fraction of the population living in urban centers with greater than 5,000 inhabitants) today, and demonstrates that even today, long after industrialization, there is a significant relationship between urbanization and prosperity Naturally, high rates of urbanization not mean that the majority of the population lived in prosperity In fact, before the twentieth century urban areas were often centers of poverty and ill health Nevertheless, urbanization is a good proxy for average prosperity and closely corresponds to the GDP per capita measures we are using to look at prosperity today Another variable that is useful for measuring pre-industrial prosperity is the density of the population, which is closely related to urbanization Figures 4.5 and 4.6 show the relationship between income per capita today and urbanization rates and (log) population density in 1500 for the sample of European colonies Let us focus on 1500 since it is before European colonization had an effect on any of these societies A strong negative relationship, indicating a reversal in the rankings in terms of economic prosperity between 1500 and today, is clear in both figures In fact, the figures show that in 1500 the temperate areas were generally less prosperous than the tropical areas, but this pattern too was reversed by the twentieth century There is something extraordinary and unusual about this reversal A wealth of evidence shows that after the initial spread of agriculture there was remarkable persistence in urbanization and population density for all countries, including those that were subsequently colonized by Europeans Extending the data on urbanization to earlier periods shows that both among former European colonies and non-colonies, urbanization rates and prosperity persisted for 500 years or longer Even though there are prominent examples of the decline and fall of empires, such as Ancient Egypt, Athens, Rome, Carthage and Venice, the overall pattern was one of persistence It is also worth noting that reversal was not the general pattern in the world after 1500 Figure 4.7 shows that within countries not colonized by Europeans in the early modern and modern period, there was no reversal between 1500 and 1995 There is therefore no reason to think that what is going on in Figures 4.5 and 4.6 is some sort of natural reversion to the mean Instead, the Reversal of Fortune 185