Capitalism and Democracy

Capitalism and Democracy

A Fragile Alliance

New Horizons in Institutional and Evolutionary Economics series

Theo C.M.J. van de Klundert

Capitalism is driven by technological revolutions, leading to alternating periods of regulation and deregulation in leading economies. Technologically backward countries face a different situation as they have to catch up with the leaders. Against this backdrop, Theo van de Klundert examines the relationship between capitalism and democracy, combining economic theory and historical description to analyse long-run economic development. Emphasis is placed on the interrelation between economic and political power, and a robust state-of-the-art overview of today’s political economy is presented.

Chapter 6: A tale of two continents

Theo C.M.J. van de Klundert

Subjects: economics and finance, economic psychology, institutional economics, political economy


In the preceding chapters, we have indicated that the (first) Industrial Revolution occurred in England in the final quarter of the eighteenth century. The question arises as to why this revolution took place in this specific country and why the countries on the European continent lagged behind. England, in turn, lost its lead in the economic domain to the US around 1900. Again, the question arises what caused these diverging developments. Nowadays, the economic positions of the US and Europe (EU_15) are comparable. Has this already been the case for a long time, or has Europe only succeeded in bridging the gap after the Second World War? What are the consequences for Europe if this process of catching-up has been completed? How must Europe then proceed? One should not expect that unambiguous answers can be given to all of these questions, but there is a lot to say about the issues of ‘forging ahead’ and ‘catching-up’. No macroeconomic data are available for the first great surge (1771– 1829), according to the classification of Perez (2002). Starting from 1820, data are available for per capita production in a number of countries. Table 6.1 depicts GDP per capita in the US and in some European countries in the period 1820–1913. These figures are index numbers.

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