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Title: Australian Exceptionalism? Inequality and Living Standards 1821-1871

Author(s): Laura Panza, Jeffrey G Williamson

Publication Date: January 2017

Keyword(s): Colonial Australia, exceptionalism, growth, inequality and living standards

Programme Area(s): Economic History

Abstract: Although the Australian historical literature covering the colonies' first century from the initial convict settlement in 1788 at Botany Bay to the post-gold rush census of 1871 is packed with assertions about Australian living standards and inequality exceptionalism - compared with western Europe and America, there has been very little evidence offered to confirm them. This paper will establish the Australian facts about living standards and inequality trends between the 1820s and the 1870s. Where do we find exceptionalism, compared with the United States, and where not? And can exceptionalism be readily explained by the fact that the US was undergoing a dramatic industrial revolution while Australia was following its commodity-exporting comparative advantage? We start by exploring the end-period benchmark, 1871, where previous literature (since Michael Mulhall in 1892) has reported a big Australian income per capita and living standard lead. We ask whether 1871 is a poor choice for making these comparisons, and whether 1861 would be better. The US had just fought a Civil War and underwent a 'lost growth decade' and southern destruction in the 1860s (Lindert & Williamson 2016b). In addition, both countries had to deal with a mineral rent bust, one in Victoria and the other in California and Nevada. The result for 1861 without the devastated American south or the mineral-rich Victoria, California, and Nevada is a smaller Australian living standard lead, but a significant lead nonetheless. Next we ask whether Australia was born (relatively) rich or grew (relatively) rich by commodity-export-led (relatively) fast growth. It was the latter, a conclusion reached in two ways, indirectly la Angus Maddison backcasting and directly la historic purchasing-power- parity living standard estimates for the early years. Our new purchasing-power-parity estimates of working class living standards in the 1820s and 1830s place Australian towns below London. This not-born-relatively-rich conclusion is confirmed indirectly by an exceptionally fast growth performance between 1821 and 1871. In addition, we ask whether the convicts had similar living standards as free urban unskilled in the 1830s (the convicts were still nearly half of the labor force). We follow this with two additional questions: Was the 1871 Australian distribution of income as unequal as it was in the US and Western Europe then? Or was it exceptionally equal? If the latter, was it also as equal in the 1820s as it was in America in 1800? While we cannot yet answer either question, we can document inequality trends between those two dates by exploiting various proxies. Here we find exceptionalism since there is little evidence supporting rising income inequality over the half-century prior to 1871.

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Bibliographic Reference

Panza, L, Williamson, J. 2017. 'Australian Exceptionalism? Inequality and Living Standards 1821-1871'. London, Centre for Economic Policy Research.