For centuries, Asia was at the forefront of global economic prosperity, with China and Sub-continent leading the way in trade and manufacturing. However, a significant shift occurred, resulting in the Great Divergence, where Europe, particularly Western Europe, overtook Asia in terms of economic growth and development. Understanding the factors that contributed to this divergence is crucial for comprehending the contemporary global economic landscape. Pakistan, like many developing nations, faces significant economic challenges. To overcome these hurdles and achieve sustainable growth, it is essential to draw lessons from historical case studies, such as the Great Divergence between Europe and Asia.
Before the rise of Europe, Asia dominated global trade. China, renowned for its porcelain production, and Sub-continent, with its exquisite textiles, were highly sought after in European markets. The demand for these goods fuelled a vibrant trade network across the Sub-continent Ocean, with silver from the Americas playing a crucial role in facilitating commerce. Despite this economic dynamism, Asia faced limitations that ultimately hindered its ability to maintain its leading position. These factors included ecological constraints, such as deforestation and soil erosion, and political challenges, such as the limited role of markets and the dominance of state-controlled economies.
Europe’s response to the influx of Asian goods was multifaceted. Mercantilism, a policy that aimed to maximize exports and minimize imports, was adopted to protect domestic industries from foreign competition. While often inefficient, these policies inadvertently spurred the development of new industries. The discovery of vast resources in the Americas, including silver and other commodities, provided Europe with a significant advantage. This influx of wealth fuelled economic growth and supported the development of new technologies. The Industrial Revolution, concentrated in Britain, marked a turning point. The availability of coal as a cheap energy source, coupled with technological innovations, enabled Britain to dramatically increase productivity and output. This, combined with the development of new transportation and communication networks, propelled Britain to the forefront of the global economy.
The precise timing of the Great Divergence between Europe and Asia remains a subject of scholarly debate. Some historians argue for an early divergence in the 13th century, while others place it in the 18th century. Regardless of the exact timing, the underlying causes are complex and multifaceted.
One school of thought emphasizes the role of ecological constraints. While Europe, particularly Britain, was able to overcome these limitations through the exploitation of coal and resources from the Americas, Asia, particularly China, faced challenges related to deforestation and soil erosion. This resource scarcity hindered economic growth and technological advancement. Another perspective highlights the importance of state intervention. The British state played a crucial role in supporting industrialization, albeit often unintentionally, through policies aimed at protecting existing industries. In contrast, the Chinese state was less effective in promoting economic development and innovation. Moreover, the nature of competition between European and Asian economies differed significantly. Europe experienced intense competition among nation-states, driving innovation and efficiency. Asia, while characterized by competition within regions, lacked the same level of external pressure.
Understanding the historical trajectories of Europe and Asia provides valuable insights for developing countries seeking to achieve economic prosperity. While the context has changed dramatically since the 19th century, some lessons remain relevant. Firstly, the importance of education and human capital development cannot be overstated. A skilled workforce is essential for driving innovation and productivity. Secondly, fostering a conducive business environment that encourages entrepreneurship and investment is crucial. Thirdly, investing in infrastructure, particularly transportation and energy, is vital for connecting markets and facilitating economic activity. Finally, integrating into the global economy through trade and foreign investment can accelerate development, but it is essential to avoid excessive reliance on any single market. While the historical factors that contributed to the Great Divergence offer valuable insights, it is essential to acknowledge that the contemporary global economy is significantly different from its 18th-century counterpart. Technological advancements, globalization, and the rise of emerging economies have reshaped the economic landscape.
Developing countries today face a range of challenges, including poverty, inequality, climate change, and political instability. To address these challenges and achieve sustainable development, they must adopt a multifaceted approach that combines economic growth with social progress and environmental sustainability. In addition, the increasing interconnectedness of the global economy means that developing countries are no longer isolated from the economic fortunes of developed nations. The rise of China and other emerging economies has created new opportunities for developing countries to participate in global value chains and benefit from trade. However, it also poses challenges, such as competition for resources and markets. To navigate these challenges and seize the opportunities, developing countries must implement policies that promote innovation, entrepreneurship, and inclusive growth. This includes investing in education, healthcare, and infrastructure, as well as creating a conducive business environment that attracts foreign investment. The Great Divergence between Europe and Asia offers valuable lessons for understanding the historical evolution of the global economy. While the factors that contributed to this divergence are complex and multifaceted, the insights gained from studying this period can inform contemporary economic development strategies.
Now let bring our beautiful yet strategically placed homeland into the picture. The Pakistani economy is plagued by several persistent issues. A chronic shortage of electricity and gas hampers industrial production and economic growth. Inadequate infrastructure, including roads, railways, and ports, hinders trade and investment. Frequent political upheavals and instability create an uncertain environment for businesses and investors. Corruption is a pervasive problem that undermines economic efficiency and discourages investment. Despite these challenges, Pakistan also possesses significant opportunities. A large, young population represents a demographic dividend, with potential for a productive workforce. The country is rich in natural resources, including minerals, agriculture, and hydropower. Its strategic location makes Pakistan an attractive destination for investment and trade. But hey, the bight side reflects that a safe web of motorways, which is essential to promote trade capitalising on the strategic location, is nearly complete. The last corridors connecting the largest province by land Baluchistan and a minute length in Sindh remains after which the first stage of safe roads will be complete connecting Pakistan.
To address the challenges and capitalize on its opportunities, Pakistan can consider the following policy recommendations. Firstly, the energy sector requires urgent attention. Investing in renewable energy sources can reduce dependence on fossil fuels, while improving energy efficiency through technological upgrades and conservation measures can enhance overall energy security. Encouraging private sector participation in the energy sector can enhance capacity and reduce reliance on government subsidies. Infrastructure development, as reflected upon previously, is crucial for Pakistan’s economic growth. Prioritizing key projects, such as roads, railways, and ports, can improve connectivity and facilitate trade. Public-private partnerships can attract private investment and expertise in infrastructure development. Ensuring proper maintenance and upkeep of existing infrastructure is essential to avoid costly repairs and disruptions.
Now I am opening a can full of diverse worms, political stability and good governance are fundamental for creating a conducive business environment. Strengthening democratic institutions, combating corruption, and upholding the rule of law can instil confidence among investors and promote economic growth. Investing in education and human capital development is essential for a competitive workforce. Increasing spending on education can improve literacy and numeracy rates. Promoting vocational training and skills development can equip the workforce with the necessary skills to meet the demands of the modern economy. Expanding access to higher education can foster innovation and entrepreneurship. Economic diversification is crucial to reduce reliance on a few commodities. Promoting exports of non-traditional products can increase foreign exchange earnings and create new markets for Pakistani goods and services. Attracting foreign direct investment (FDI) in various sectors can bring in capital, technology, and expertise. Supporting the growth of small and medium enterprises (SMEs) can create jobs and promote entrepreneurship. Lastly, social safety nets are essential for addressing poverty and inequality. Implementing targeted social programs can provide support to vulnerable populations and ensure that the benefits of economic growth are shared equitably.
By recognizing the importance of education, innovation, infrastructure, and global integration, developing countries and my homeland can overcome the challenges of the 21st century and achieve sustainable economic prosperity. Drawing lessons from historical experiences, such as the Great Divergence between Europe and Asia, can provide valuable insights for policymakers and stakeholders of Pakistan.
Mus’haf Khan
The writer is a Fintech-DFS advocate, Policy Enabler & former Advisor of the Government of Punjab.
