Introduction: Economic Growth, Cultural Change, and the Making of the Modern World

THE PROBLEM OF WESTERN WEALTH AND WHERE IT CAME FROM

At some point in the not-too-distant past, a watershed occurred in world history, which some have called the “great divergence” (Pomeranz 2000). In the Middle Ages, tales of the fabulous wealth of the East – China and the Indies – dazzled Europeans. From the stories of Marco Polo to the stream of silks, porcelains, jewels, and other luxuries flowing along the Silk Road of trade routes through the Middle East, Asia seemed to be the font of wealth. From Constantinople to Cathay, Europeans believed that vast populations, stunning cities, and swarms of traders produced unimaginable wealth. Finding a way to reach and obtain a share of that wealth became the goal of Europe’s states, and its most daring explorers, in the fourteenth through nineteenth centuries.

Yet by the twentieth century, this relationship had been profoundly reversed. Instead of bywords for wealth, the vast populations of China and India became known for horrific poverty. At the beginning of the twenty-first century, while the populations of the United States and the leading European nations enjoy per capita output of roughly $100 (U.S.) per day, tens of millions of east and south Asians subsist on incomes of two or three percent of that amount. Instead of daring explorers seeking the riches of the East, we now see daring streams of immigrants from Asia seeking their way to the riches of the West.

Whether this great change, and the yawning gap that has opened between the wealth of the West and the poverty of the East, is seen as source of pride or guilt by those in the West, explaining the change itself remains perhaps the central question facing the social sciences today. Whether in history, economics, political science, or sociology, scholars have been seeking to explain how the West grew rich, and to distill lessons from that experience that might help impoverished populations in other regions of the world.

Yet so far, the social sciences have not succeeded as well as we would hope. Theories and explanations of the divergent trajectories of the West and “the rest” have emerged and multiplied, so that instead of a clear explanation, we have many conflicting points of view that seemingly give opposed and contradictory accounts of this change. As we shall see below, we have explanations based on institutions, on culture, on geography, on demography, and other factors. In practical terms, all of the policy prescriptions for economic development outside the West based on such theories have failed to close the gap between the West and the rest. Although living standards have generally risen around the world, mainly due to the spread of Western-produced medicines, food crops, and fertilizers, the internal generation of exponential economic growth still seems elusive for many peoples and nations. While a few non-Western nations have achieved spectacular economic success, such as Japan, parts of China and islands of Chinese (including Hong Kong, Singapore and Taiwan), and South Korea, many more nations remain mired in poverty. Despite decades of efforts involving global banking and lending institutions and international foreign aid, the populations of Africa, the Middle East, South and Southeast Asia, Central Asia, and Latin America still face a yawning gap between their economic productivity and that of the leading nations of the West (Birdsall 2002). Attacks have been launched – both in street protests and in academic circles – against precisely those experts and institutions that are held to best embody our practical wisdom on how populations grow rich, such as the World Economic Forum, the World Bank and International Monetary Fund (Stiglitz 2002).

In the chapters that follow, after briefly reviewing theories of economic growth and the great divergence, we shall look more closely at the empirical facts of growth – how it occurred, when it occurred, and where it occurred. We shall find that most of our current theories fit poorly with the empirics of growth. It is thus not terribly surprising that they remain contradictory and difficult to reconcile, and have not proved a sound basis for policies to foster growth.

In this book, I shall take as my main two stalking horses for studying the empirics of economic growth the histories of Britain and of China. This of course results in an inexcusable neglect of Africa, Latin America, India, Japan, Southeast Asia, the Middle East, and the rest of Europe, and I will in fact comment on all of these regions and the critical role they have played in world economic history. However, to trace the detailed facts of economic growth over several centuries in even two distinct territories is daunting enough, and the choice of England and China provides two areas for which the demographic and economic history is among the best detailed. Moreover, even those global economic histories that claim to contrast “Europe” and “Asia” in fact rely overmuch on comparisons drawn from England (or perhaps England, Holland, and Northern France) and China – or even small parts of China, such as the Yangzi delta. I hope that by being explicit about my limited comparisons, it will make clear the cautious and limited validity of any conclusions I draw, and leave the way open for further regional and global comparisons to improve and correct this analysis.

Most importantly, England and China represent opposite poles of the great divergence – the seats on the seesaw of economic change, if you will. England, on the outer edge of Europe and long considered even by other Europeans as a laggard in the production of wealth compared to such regions as northern Italy, France, and the Low Countries, came by the 1870s to be regarded as the richest and most powerful country in Europe, the model for the creation of wealth. China, which had long considered itself the center of the political and economic universe, one of the great civilizations of Asia and the world, came by the 1870s to be militarily and economically over-run – by England! – and regarded even by other Asian nations as enfeebled, impoverished, and impossibly backwards. Most of the theories of economic growth and the great divergence that we shall discuss below were in fact based on understandings of England’s great success, and China’s relative failure. It thus seems appropriate that an effort to revisit and revise those theories be based on the best empirical data for the cases that they tried to explain.

THEORIES OF THE RISE OF THE WEST

Theories of the rise of the West take a wide variety of positions on how the West obtained its wealth. Most modern economists argue that the West created its own wealth, pulling itself up by its bootstraps and creating a new trajectory for itself, while the rest of the world remained mired in a traditional situation of modest growth, frequently punctuated by crises, reversals, and stagnation. By contrast, historians inspired by the views of the great 19th century social critic Karl Marx often argue that the West grew rich mainly at the expense of others, by drawing wealth from the worlds’ other peoples through trickery and violence, slavery and exploitation. Many scholars, going back at least to the early 19th century German sociologist Max Weber, have argued that distinctive elements in the religions or broader cultural frameworks of the West enabled it to accumulate and produce wealth in ways unrivalled in other cultures. Still other scholars focus more on material factors, such as characteristics of the ecology and natural resources, and especially the balance between these and the growth of population, as creating markedly different conditions for growth in Europe versus other regions.

In fact, these rough distinctions are not exclusive, and individual scholars have often advocated several or some combinations of these factors. However, to facilitate discussion, I shall take each of these broad kinds of arguments in turn. For shorthand, I label these schools of explanation “the four A’s” of the rise of the West: Accumulation, Aggression, Attitude, and Abstinence.

ACCUMULATION IN THE RISE OF THE WEST

A number of authors have stressed a kind of foundational, wealth-leads-to-more-wealth view, in which Europe is seen as having certain advantages that allowed or encouraged exceptional accumulation of productive capital.

In some accounts, the key advantages initially accrued to agriculture, where innovations that provided higher productivity produced larger surpluses. These in turn allowed labor to be released from agriculture to engage first in craft production, and then in factory work. In addition, the boost to agricultural productivity allowed the work-force to grow without a severe fall in incomes per capita, thus sustaining both the health and productivity of the labor force, while also maintaining their purchasing power and allowing for growing markets and demands for manufactured goods. In this view, an “agricultural revolution” that boosted productivity to new, higher levels, was an essential and facilitating element that spurred the rise of the West (Jones 1974, Brenner 2002, Overton 1996).

These boosts in agriculture in the West, and the absence of an equivalent effect in the East, are often considered to be inherent in the trajectories of rain-fed wheat/corn (e.g. European) vs. monsoon/irrigation-fed rice (e.g. Chinese) systems of agriculture. Because the latter is clearly capable of producing much higher outputs of grain per acre of farmed land by increasing the input of labor, it has often been argued that Chinese agriculture inevitably tended to produce ever higher yields per acre, but at the cost of soaking up ever higher inputs of labor. As a result, it is suggested that the productivity of labor stagnated, and Chinese agriculture was unable to produce the higher levels of output per person achieved in the West (Bray 1984, 1986; Brenner 2002; Huang 1990, 2002).

Yet just because Chinese agriculture did produce higher yields per acre, there is no reason to deduce from this that for any particular time it also produced lower yields per person than European or even English agriculture. Testing this proposition requires careful attention to mixes of crops, effective average yields over time, use of human and animal labor, fertilizers, and so forth. Moreover, while we will examine this issue in more detail below, it is important to note that over long stretches of time, say the centuries from 1200 to 1800 AD, both English and Chinese population and output experienced large cycles of ups and downs, depending on weather, mortality, and political stability or crises (all of these often interlinked). In certain periods, such as after the Black Death in England, or in the recovery from the Ming-Qing transition in China, large tracts of land were open for cultivation, productivity per person soared, and incomes and agricultural output per capita appeared to be as high as they ever were in England in the 18th century. Yet in neither of the earlier cases did a “take-off” into exponential economic growth ensue.

In fact, Chinese agricultural productivity per worker was as high as that in England well into the 18th century. Much like the intensive commercial agriculture of 17th century Holland, but on a much larger scale, Chinese agriculture supported extensive commercial trade, networks of cities, and urban and rural crafts industries. Nonetheless, these never provided the foundation for rapid industrial growth.

To turn to the modern era, one of the most strikingly successful development ventures of our time is the “green revolution,” which greatly increased the productivity of crops grown in Asia, and was widely adopted in India, the Philippines, and southeast Asia. Productive commercial agriculture has also spread widely in Africa and Latin America, which now export huge quantities of coffee, cacao, palm oil, and other agricultural products. Yet while this modern “agricultural revolution” vastly increased output per person, it has not generally spurred modern industrial growth in those nations, most of which still hold large impoverished rural populations.

In sum, higher agricultural output, even if reflecting increased productivity of labor in agriculture, is not a sufficient explanation of what triggers rapid, modern-style economic growth. There is no automatic transfer of agricultural surpluses into industrial enterprises. Greater agricultural output may simply go to more food consumption, acquisition of luxuries, or greater leisure. It may surely be true that in a closed economy that cannot import food, increased agricultural output is necessary to sustain large population increases without a fall in living standards and purchasing power. Yet in fact, as we shall see below, England became ever more dependent on food imports precisely at the time of its industrial revolution. Thus even if one grants that Europeans did achieve higher agricultural output per person in the 18th century, that seems to be neither necessary, nor sufficient, to explain the amazing industrial growth of the 19th century.

Another set of scholars have therefore focused attention less on agriculture than on those material resources most critical for industrialization, such as coal and iron. England was long thought to be exceptionally fortunate in enjoying plentiful, easily accessible coal resources near good water transport in Newcastle, along with good supplies of iron, nickel, and other industrial raw materials (Wrigley 1988, Pomeranz 2000). By contrast, other countries – even those such as China, which had earlier exploited its own coal reserves – were held to find it more difficult to bring together the key resources for modern industry. In addition, the discovery of the New World – with its territories opened by depopulation to provide agricultural exports such as cotton, sugar, and tobacco to Europe, and its gold and silver mines exploited to produce easy liquid wealth – supplemented the raw mineral stocks of Britain in a way that non-European societies could not emulate (Pomeranz 2000, Frank 1999). It was an edge in having the raw materials for specific industries, namely coal and iron, and the precious metals that created ready money, that gave Europe, and England in particular, the lead in the race to industrialize.