Introduction to Modern Economic Growth USA 10 CAN AUS SGP HKG Log GDP per capita, PPP, in 1995 NZL CHL ARG VEN URY MYS COL BRA BLZ GTM DOM PRY MEX PAN CRI JAM PHL ECU PER TUN DZA IDN MAR SLV GUY BOL EGY LKAHND NIC VNM HTI PAK IND LAO BGD 10 Urbanization in 1500 15 20 Figure 4.5 Reversal of Fortune: urbanization in 1500 versus income per capita in 1995 among the former European colonies among the former European colonies reflects something unusual, something related to the intervention that these countries experienced The major intervention, of course, was related to the change in institutions As discussed above, not only did the Europeans impose a different order in almost all countries they conquered, there were also tremendous differences between the types of institutions they imposed on in the different colonies.4 These institutional differences among the former colonies are likely at the root of the reversal in economic fortunes To bolster this case, let us look at the timing and the nature of the reversal a little more closely When did the reversal occur? One possibility is that it arose shortly after the conquest of societies by Europeans but Figure 4.8 shows that the previously-poor colonies surpassed the former highly-urbanized colonies starting in 4In some instances, including those in Central America and India, the colonial institutions were built on the pre-colonial institutions In these cases, the issue becomes one of whether Europeans maintained and further developed existing hierarchical institutions, such as those in the Aztec, the Inca or the Mughal Empires, or whether they introduced or imposed political and economic institutions encouraging broad-based participation and investment 186