Australian Exceptionalism? Inequality and Living Standards 1821-1871

Although the Australian historical literature covering the colonies’ first century from 1788 to 1871 is packed with assertions about Australian living standards and inequality exceptionalism, there has been very little evidence offered to confirm them. This paper establishes the Australian facts about living standards and inequality trends between the 1820s and the 1870s. We first explore the end-period benchmark, 1871, where previous literature 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, underwent a “lost growth decade” and southern destruction. In addition, both countries had to deal with a mineral rent bust. The revised calculation for 1861 reports 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 (relatively) fast growth. It was the latter, a conclusion reached in two ways. First, our new purchasing-power-parity estimates Australian town living standards below London and US cities in the 1830s. Second, when measured properly we report an exceptionally fast growth performance between 1821 and 1871. In addition, we ask whether convicts had similar living standards as free urban unskilled in the 1830s when convicts were still nearly half of the labor force. We follow this by documenting inequality trends between the 1820s and 1870s. Here we find exceptionalism since there is little evidence supporting rising income inequality prior to 1871.