The great divergence

Abstract This chapter examines the origins and dynamics of global economic inequality, tracing how industrialization, trade, and wages shape the great divergence. It begins by contrasting economic history with economics and explains how Europe’s ascent after 1500 generates enduring disparities between rich and poor nations. The chapter divides modern economic history into three phases—mercantilism, nineteenth-century industrialization, and twentieth-century convergence—each marked by shifting global wealth and technological diffusion. It analyses GDP and real wage data to show how industrialization expands, and de-industrialization reshapes Asia. Finally, the chapter concludes that high wages, by fostering education and innovation, drive escape from the poverty trap.