Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

News How does Europe still have a lot of money?

  1. May 14, 2012 #1
    European nations were colonial powers hence plundered a lot of countries and became rich.

    But now that they are no longer in power, how are they still so rich ?
  2. jcsd
  3. May 14, 2012 #2


    User Avatar
    Gold Member

    they work and produce things.
  4. May 14, 2012 #3


    User Avatar
    Staff Emeritus
    Science Advisor

    This is such an oversimplification of a continent that has been populated for over 30,000 years that it's unreal. Admittedly the more recent millennia have had more of an effect on the present but to write Europe off as purely an old imperial power and incorrectly suggest that its wealth was totally a product of theft is monstrously incorrect.
    The history of European economics is incredibly long. Helpfully there was a series of huge disruptions in the first half of the last century that provide a good backdrop for what we see in the present day: two huge wars (IIRC the British Empire, the biggest ever known, was nearly bankrupted in just a handful of years by those activities, amongst an even more complex history of course). That somewhat simplifies matters because preventing war in Europe ever again was one of the driving ideologies behind the establishment of the organisation that has evolved into the modern European Union. So if you want to learn more, start here and here.
  5. May 14, 2012 #4


    User Avatar
    Gold Member

    Historian Niall Ferguson has a book (Civilization) and a Ted talk on this subject and spends a bit of time rebutting the West got rich through imperialism and plunder idea. Yes the West did imperialism, but that is not what made it rick. He points out that practically *everyone* tried empire - Chinese Dynasties (Ming, Qing), Ottomans, Mongols, Aztecs, Mayans, Czarist and Soviet Russians, Nippon Japan, and so on, but only the West got rich, until recently when Asia and others have joined in. He makes a good case that the reasons for success lie elsewhere: competition, scientific revolution, rule of law and democracy, medicine, consumerism, work ethic

  6. May 14, 2012 #5
    They have printing presses! Debt does not make one rich, no matter how one spins it, neither does inflation. The day is approaching fast when all this will come to a head, then we will see western governments are only as rich as they are capable of plundering their own people. When those people say hell no, governments will start to default, I only hope we see this during our lifetime! Future generations wil be working from the womb to the grave paying for our careless ways if something doesn't change.
  7. May 14, 2012 #6


    User Avatar
    Gold Member

    If you actually think that a default is preferable to a more moderated recovery from our stupidity, I can only suggest that you read some economics.

    If Greece, as the most likely example, defaults, how do you suppose they will feed themselves? They only produce 60% of the food they consume and no one is going to sell them anything for worthless Drachmas, and that's just ONE example of how they will descend into chaos.
  8. May 14, 2012 #7


    User Avatar
    Staff Emeritus
    Science Advisor
    Gold Member

  9. May 14, 2012 #8


    User Avatar

    Staff: Mentor

    ...people buy. :wink:
  10. May 15, 2012 #9
    Well, first you must realize what wealth actually means.

    Does it mean having a lot of money? No, because if it did, all you had to do would be to print more money and you would be rich. This is obviously wrong. No, what having wealth actually comes from is: what can you do with the money that you have.

    The answer to that question is that it depends on the quality of the services that are available. If with your money you can buy everything you want, both basic necessities, like good food/health care/houses and luxuries like technology/good cars/vacations, then you must by all definitions be considered wealthy. As such, what makes a whole region rich, is that it has very good living standards, such that as many services as possible are available to as many people as possible.

    Note however, that the wealth is not the same throughout europe, some countries are a lot better off than ofthers. I think you will find a good correlation between countries that are considered rich and countries that have good scores on democracy and stability, such that high living standards can be achieved.
  11. May 16, 2012 #10
    Nice xenophobic way of starting a topic. What makes a country rich is its GDP, which measures production of goods and services. Europe has high GDP/capita, which means European countries are productive countries.

    I think you're confounding 'wealth' with 'variation of wealth', which is something I see a lot of people do nowadays because of the crisis.

    Even though Europe went through an economic depression, that only made GDP go down a few %, so it's still a rich area. Even in the case of countries who have deficits problems, that doesn't make them poor, it only makes them lose a part of the wealth (because of the inevitable downfall of GDP caused by austerity measures).
    Even if a government of a country goes bankrupt, the country can still continue to be rich, although it'll lose a great part of its GDP. Look at Iceland, they went bankrupt but they kept on being a rich country. A country doesn't stop producing all the things it produced all of a sudden.
  12. May 16, 2012 #11
    In my opinion, the main change that led to increased wealth was industrialization, the transition of society from subsistent agricaltural to modern industrial one.
    Once such transformation happened it seems to me that it is easier to continue to support it and generate increased wealth based on existing infrastructure.

    Transition from agricultural to modern society needs a lot of capital. It is difficult to talk about all Western Europian countries since they have different histories, but speaking roughly western europian countries patrtly took capital from colonies. In other words, colonies provided important part of capital needed for industrialization.

    Countries that did not have colonies or were late in the game had much more difficult time to industrialize. Some are still not fully industrialized with high numbers of subsistent farmers.Such countries had to take loans from richer countries, under those rich countries conditions that there not always in the interests of the countries taking loans.

    This maybe one of the reasons why India is not as rich as England.
  13. May 17, 2012 #12
    But, does that mean there has been no change in the wealth of European nations after giving independence to asian and African countries ?
  14. May 17, 2012 #13
    You should look on existing research about impact of loss of the colonies on Europe. I do not have all materials ready at the moment. In some sense yes, it did have impact, for example England was a world power when it had colonies, and it lost world dominance when it lost its colonies.

    But it seems to me that the main transition from agricultural society to an industrial was more important one, and after loosing colonies, countries did not return back to preindustrial societies. They already have necesary infrastracture to go forward and did not need colonies that much since industrial production by its nature is exponential one, comparing to previous modes of production.
  15. May 17, 2012 #14
    There was a change, the GDP has been rising consistently.
  16. May 17, 2012 #15


    User Avatar
    Gold Member

    Counter examples of wealthy or rapidly becoming wealthy countries without colonies: Japan, United States, all of Western Europe a decade or so after WWII, China since 1980. Try this reasoning instead:
  17. May 17, 2012 #16

    Regarding United States, it had much more effective thing, it had slavery. According to University of Houston digital history page, slavery was indispensable in US industrialization.

    http://www.digitalhistory.uh.edu/historyonline/con_economic.cfm [Broken]

    Regarding Japan, it is a factual mistake to claim that Japan did not have colonies during its industrialization at the turn of the 19-20 century. Japan is an interesting case, since it is a rare example of Asian country that was not invaded and devastated by western countries. Seeing rapid European expansion, they decided to imitate it. That included colonial expansion of Japan and extraction of resources from its colonies for industrial development.

    According to encyclopedia Britannica :

    http://www.britannica.com/blackhistory/article-25929 [Broken]

    So an argument can be made that success of Japan was a result of copying western way of industrialization through colonial expansion.

    Regarding Western European countries after WWII, most of them were already highly industrialized countries with highly trained industrial workforce and not landless peasants. And they become so during their colonial times. So it is a poor example of industrialization from agricultural to modern industrial without colonies. Germany was so industrialized that it could conquer almost all Europe. Of course, a lot of infrastructure was destroyed, but a lot also survived, such as trained industrial workforce for example. Of course help of US (being afraid of communists taking over Europe) in the form of Marshal plan also helped.

    Regarding China, it is still in the process of industrial development and it still did not become fully industrial country. Time will tell if China will succeed in it.

    Interesting fact regarding China is that prior european and american opium wars on China (first opium war 1839 to 1842 and the second opium war from 1856 to 1860), in 1820 GDP of China accounted for about 32.4% of the world GDP. GDP per capita before european invasion was about 89% of world average. And at 2011 with all its great economic growth China is still around only 10% of world GDP.

    Modern China's industrialization is mainly based on foreign multinationals. China does not have yet significant national industry on par with developed industrial countries. It may be dangerous, since if something will happen, (for example Chinese workers will want the same compensation for their work as American ones) and foreign multinationals will pull off China, the Chinese may have little more than what they started with.

    Regarding your reference to Niall Ferguson, it seems he is a great fun of counterfactual history and his argumentation, according to some historians, in his Civilization book is quite odd.
    From wikipedia:
    Last edited by a moderator: May 6, 2017
  18. May 17, 2012 #17
    I disagree. It's the people self desires to move away from rural areas towards cities. This is the reason why industrialization takes over agricultural. I doubt you need a lot of capital.

    It's easy to come with theories that might appear to explain how countries get rich. However, they rarely work IMO. There are few models like Solow–Swan growth model that try to explain the growth by looking at t productivity, capital accumulation, population growth and technological progress but with very limited accuracy.
    Last edited: May 17, 2012
  19. May 17, 2012 #18
    I haven't looked at Niall Ferguson work. But, you are wrong in saying that only west got rich. You simply cannot compare Mongols, Aztecs, Mayans, and West etc. These are civilizations of different times that enjoyed their golden times. West is just one of them. It will eventually collapse like all others did and get replaced by some other at some time in future IMO
  20. May 17, 2012 #19
    History of English industrialization contradicts it. English industrialization was a very long process, since England was the first country to do it and it started with enclosures. Future industry will need landless peasants, that their land was taken from them and therefore they would be forced to move to the cities to work on newly open factories.
    So peasants were forced by aristocrates from their common lands that they worked on for centuries and were considered theirs by common law.

    Also one should remember that most workers in Manchester, the heart of industrial Revolution, were Irish and Jewish. Irish were forced to Manchester because of potato famines. Despite the famine and potato crops failure it was exported from Ireland when the population was dying from starvation.

    But you are right in a sense that industrialization is a complicated social process that involves many components and it is difficult to talk about it all in the forum context.
  21. May 18, 2012 #20


    User Avatar
    Gold Member

    Recall that the point at hand is your proposal that countries "that did not have colonies or were late in the game had much more difficult time to industrialize", in the context of this thread which is about how Europe has a lot of wealth. The many possible tangents about imperialism do not provide support to that point.

    Prior to Korea in 1910? No I do not think so.

    Yes of course *Imperial* Japan annexed a large share of China and the Pacific in the 20th century, starting with Korean, until Imperial Japan was destroyed. Do you not concede the Japan was *already* an industrial power by this point? Recall that Japan fought Russia in an even match in 1904.

    Fallacy. Japan may or may not have copied others in the 20th century via imperialism, but it was <i>already</i> an industrial power.

    True, and true to a similar degree in Eastern Europe and also to a degree in the USSR.
    The point is most of Europe and the USSR was severely impoverished after the war, yet W. Europe became relatively wealthy within several decades after the war, and not E. Europe and not the USSR. That point is relative to anyone looking for answer to the OP's question. BTW, I believe the post WWII generation of W. Europe deserves great credit for that reconstruction.

    Irrelevant. China has the second largest GDP in the world. The amount of agricultural based, non industrial society remaining out in the provinces is irrelevant to the fact that China's $6 trillion highly industrial economy that currently is in place was built without colonies.

    Irrelevant. Chinese per capita GDP was about the same from 1500 all the way through 1950. China opened to a market economy in the late 1970s. Then, and only then, the Chinese economy took off.

    From Maddison, the primary source for all the pre-industrial era GDP figures. GDP per capita:


    Which means what? If you are interested, what about his arguments (competition, science, work ethic, ...).
    Last edited by a moderator: May 6, 2017
  22. May 18, 2012 #21
    Would it be safe to say that, Europeans colonised the world because of industrialisation. As only then they had to get raw materials for new industries and create artificial markets in the colonies by taxing local production? So now that they don't have those colonies how are they still able to support industries?
  23. May 19, 2012 #22


    User Avatar

    Staff: Mentor

    No. Colonization started hundreds of years before the industrial revolution.
  24. May 19, 2012 #23


    User Avatar
    Gold Member

    I think above the term used in various places above was meant to be imperialism, not colonization. Colonization has likely been going on since the beginning of homo sapiens.
  25. May 19, 2012 #24
    No, you recall wrongly. My observation, if you read carefully previous posts, was that one of the most important things in the wealth generation was a transition from agricultural mode of production to modern industrial one. Such transition requires a lot of capital that was not available in the agricultural societies. This capital usually has to come from outside. In the case of Europe this capital came from colonies. Such a transition also requires a complete change in the way of life of the people, one needs to force people from the land to become industrial workers. One needs to train them. There is a need for new kind of infrastructure. In other words, society should come through a very deep transformation.

    Once such transformation happened, the new industrial methods allow a society to generate wealth much easier, in other words productivity is increasing exponentially and people are used to the new industrial way of living. One does not need to use the same colonial methods as were used before and during this transformation. The new industrial methods can generate so much wealth that agricultural societies could not dream about. That is why Europeans do not need colonies any more. They can control industrial production and their former colonies through modern technology and finance.

    Most poor countries in the world did not yet complete this transformation. They still have large agricultural population that is involved in subsistence farming. Unlike Europeans, they do not have colonies to drain resources from. That is why it is extremely difficult for them to complete industrialization. So the only way is to ask for loans from the rich guys, their former masters. This creates another level of control of europeans over their former colonies. And loans of course are given on conditions that are beneficial to rih countries not necessary poor ones.

    That is why examples of mheslep are not only irrelevant, but support my observation. US had slavery. Japan was imperial power during its industrialization. Europeans after WWII were definitely already industrial nations not agricultural ones. The Europeans also had great help from the US (since US was afraid of spread of communism) and was therefore for this reason and its past were able to rebuild. Rebuilding is easier than to move from an agricultural society to industrial without external help. And China is not yet fully an industrial state. It does not have an independent national industry, most of the industry is controlled by foreign companies who are attracted by very cheap labour. The whole point of industrialization is not just the generation of wealth but increased level of standard of living. As soon as standard of living will start to converge to a European one, there will be no point for foreign companies to stay there. And China will remain with little more that it started with.

    First, Japanese expansion started prior to 1910. The Japanese colonial period is generally recognized as 1895-1945. http://histories.cambridge.org/extract?id=chol9780521223577_CHOL9780521223577A006

    Second, Japan was not yet industrial country at 1910, since majority of its population were not industrial workers but peasants. It started the process of industrialization, but it needed a lot of capital to continue.

    The fact that Japan fought Russia in 1904-1905 is irrelevant. Russia also was not an industrial country at that time. 80% percent of its population were peasants, most of which were illiterate.

    Wrong, country with most of its population being still peasants cannot be considered industrialized country.

    See the beginning of the my post. To say that USSR was not be able to rebuild itself after WWII is a factual mistake.

    From wikioedia: http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union
    This is truly remarkable and probably the only example of successful industrialization without external help and in such short period of time. Now regarding reconstruction:


    It mean that his methods and arguments are considered controversial by historians.
  26. May 19, 2012 #25
    Chound, it is a bit more complicated. I just do not have time for the long reply, I will be out of town. Part of the answer is in my previous post. The rest I will try to write than I can.
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook