States, and where not? 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 in the next section by exploring the end-period benchmark, 1871.

Here we ask whether 1871 is a poor choice for making living standard comparisons,

and whether 1861 would be a better choice. After all, the US had just fought a Civil

War and underwent a “lost growth decade” as a result. In addition, both countries had

to deal with a mineral rent bust, but mineral-rich Victoria was a far bigger share of the

Australian economy than mineral-rich California and Nevada were of the US. The

result for 1861 is a smaller Australian living standard lead, but a significant lead

nonetheless. Next we document Australia’s growth and assess her living standards in

the 1820s and 1830s by computing purchasing-power-parity estimates of the working

class. In addition, we ask whether the convicts enjoyed a similar advantage in the

1830s (as did southern slaves in 1774 America relative to the working poor in

England). We follow this by illustrating Australia’s inequality trends by exploiting

proxies. Here we find exceptionalism since there is little evidence supporting rising

income inequality over the half-century prior to 1871.

2. Who Was Richest in the 1860s, Australia or the United States?

The literature dealing with the question “was Australia richest in the late

nineteenth century?” has a long tradition. It starts with Michael Mulhall who more

than a century ago estimated that Australian 1891 per capita income (in £ sterling)

was 3.1 percent above the United States and 19.3 percent above the United Kingdom

(Mulhall 1892, p. 320). Since then, the literature has improved the quality of the

estimates (Butlin 1970; Maddison 1995, Sinclair, 2009), including showing how high

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