1820s, 1830s, and 1870s are based on earnings per worker, the growth rates that

matter should be GDP per worker. And these are much faster than the growth rates of

GDP per capita. While the latter was 1.3 percent per annum, the former was 2.44

percent per annum, far exceeding her competitors’ growth rates.

From this analysis it emerges that Australia was well ahead of the United

States in 1871 mainly because it grew so much faster. And it grew faster in part

because Australia did not fight for independence (US per capita income fell by around

20 percent between 1774 and 1800: Lindert and Williamson 2016a: Ch. 4). Nor did

the Australian colonies engage in an equally destructive Civil War. But most

important, Australia grew faster because of booming wool and mineral exports.

4. How Rich Was Australia Before the Gold Rush?

Constructing Purchasing Power Parity for the Young Colonies

4.1 Free Labor Living Standards in the 1820s and 1830s

This section provides the first clear image of living standards in early colonial

Australia and the first comparative assessment of living standards at the dawn of

Australian economic and political development. We choose the 1820s as our starting

point after which Australia quickly evolved from a mixed convict-free colony (in

1828, convicts were 57 percent of the labor force) into a more conventional “free”

economy (in the late 1840s, convicts were only 10 percent of the labor force). 8

During this transition period the convict (public) sector coexisted with a much faster

growing private sector and the free and convict labor markets flourished side by side

8 We estimated convicts labor force participation using data on convicts’ labor force, excluding

children younger than 14, from Butlin et al (1986) and total labour force from Endres (1984). Similar

estimates are provided by Meredith and Oxley (2015: p. 114).

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