Trade Specialization, Industrial Growth and Economic Development in the Nordic and the Southern Settler Societies, 1870–1970

This chapter discusses some possible explanations for two stylized facts that are linked to each other. The first stylized fact concerns the reversal of fortunes between the Nordic Societies and the Southern Settler Societies from the nineteenth century to today. The second stylized fact relates to structural transformation in a broad sense, measured as the degree of industrialization, the share of manufactured goods in total exports or the changes in the structure of the manufacturing sector in favour of more dynamic branches. The chapter argues that structural transformation cannot be simply equated with growth; it has its own dynamics, and it provides the key to understanding the reversal of fortunes. The challenge to find a coherent explanation is that the factors responsible for structural transformations shifted over time. The chapter reviews the commonly invoked theoretical frameworks offered to explain why structural transformations have differed between these regions, such as the staple theory, the role of distance, contradictory demographic movements, inequality levels and patterns of asset distributions. Each of them offers insights into the underlying mechanisms for specific time-periods, but none of them can singlehandedly explain the different divergence episodes since the late nineteenth century.