The Great Divergence is a monumental historical argument for why European economies diverged from Asian Economies in the 18th and 19th centuries, achiThe Great Divergence is a monumental historical argument for why European economies diverged from Asian Economies in the 18th and 19th centuries, achieving the first large-scale sustained growth in GDP per capita the world had ever known. It was first published in 2000 and has generated substantial debate since then, I am not expert enough to have a view on the overall debate but this book certainly shifted my thinking—and the accretion of argument and detail is much, much more than the thumbnail summary I had been familiar with before reading the book or that you will be if you read the rest of this review.
The summary of Kenneth Pomeranz’s argument: Around 1800 living standards were similar in the Yangzi delta area of China and England/the Netherlands (the book shifts the reference points back and forth from these particulars to Europe more broadly vs. Asia more broadly, sometimes even including Japan and India). If anything China was closer to market capitalism with more freely alienable land, rental contracts, market sales of produce, and fewer state monopolies and guilds to interfere with the, say, rural textile production. Other supposed advantages of the European system were non-existent or small including double-entry bookkeeping (not widely used in Europe plus China sophisticated accounting), the capitalist spirit of Weber, focus on luxury goods/consumption, joint stock companies (weren’t important until railroads), better patent system (didn’t matter much because technology did not play much role until later in the takeoff), etc.
But for two developments: (1) the European conquest of the Americas and importation of large-scale slavery and (2) the fortunate location of English coal deposits, both Europe and Asia were reaching ecological limits where land technology was not getting better, timber prices were rising, less land for raising cattle/sheep, reduced manure and fertilizers, etc. This ecological constraint would have capped both of their growth.
The Americas, however, relieved the ecological constraint by allowing large-scale imports of sugar, cotton, timber and much more—enough to replace more than all of the available English land. The Americas also exported silver and some gold which went to Asia to purchase manufactured goods, especially from India. At the same time, English coal also relieved the ecological constraint, created a massive energy supply that overcame the Chinese advantage in energy efficiency, and was critical for industries like iron, glass, beer etc. China had coal too but it was unfortunately located in the North which had been depleted by Mongol invasions, plagues, floods, etc.
The alternative to the Pomeranz argument is the idea the the European industrial revolution was less inflection point than something that was growing slowly over many centuries and so another cause or set of causes was already present and it was not these two key features that differentiated them from Asia. Pomeranz brings an enormous amount of detail to bear in arguing against every aspect of this thesis but at times one worries that he is simply collecting data to support his case. He also makes simpler arguments like if the differences were centuries in the making why not much divergence as late as 1800.
As I said, this summary does not do justice to the book. It is filled with enormous amount of detail. Which system was closer to markets, for example, is addressed in man, many ways like looking at wage disparities between rural laborers in agriculture and textiles or looking at interest rate differentials.
The modern approach to economic history is to focus on statistical analysis of well identified deep historical questions, something that was summarized and advanced well in The Journey of Humanity: The Origins of Wealth and Inequality. This book is a reminder that deep historical comparative scholarship criss-crossing across many, many areas can both help better understand the rise of the West and the complex interactions of the global economy at a critical period of divergence.
P.S. Would welcome people’s thoughts on this book or recommendations on alternative histories of the great divergence....more
This book impressively crams thousands of years of Chinese history (and a bit of Chinese pre-history) into 252 pages. It marches through chronologicalThis book impressively crams thousands of years of Chinese history (and a bit of Chinese pre-history) into 252 pages. It marches through chronologically with chapters for each dynasty and their modern-day equivalents.
In the introduction Linda Jaivin announces, "In writing a short history, a wise person might focus on a few key themes or personalities. I'm not so wise. Faced with deciding between key individuals, economic and social developments, military history, and aesthetic and intellectual currents, I chose... everything." And it mostly works. It never feels like The Long March but it does sometimes feel like a march with what feels like every Emperor name checked in some way along with many of their wives, concubines, and children. Plus every writer, artist, thinker and more. But it also does all basically fit together and help connect a lot of dots that I already knew.
I also appreciated that the author was genuinely immersed in Chinese history and culture and not just tossing the book off on a lark. There was a precision to the descriptions of language, the debates over issues (e.g., Confucius) that worked really well.
An indispensable guide to China's economy: the reforms that made it what it is today, the challenges it still faces, and defenses against the many criAn indispensable guide to China's economy: the reforms that made it what it is today, the challenges it still faces, and defenses against the many criticisms the Chinese economy has gotten from abroad. Keyu Jin writes with one foot in two worlds. She is Chinese but educated as a visiting student in the United States and currently divides her time between London where she teaches at the London School of Economics and Beijing. These two worlds, plus a deep grounding in economic research, help convey her enthusiasm and sympathy of the Chinese economy in a way that is maximally designed to be understood and convey the sympathy to a Western audience. Jin has lots of criticisms of the economic model--mostly in the "more reform needed" mode--but on some fundamental issues proximate to politics you get the sense that she would not deviate from the party line, so to speak.
The first part of the book is a good summary of how China emerged as a global power. Jin gives some credit to China pre-1978 which greatly expanded literacy and reduced child mortality. But the story is really about a series of reforms that were based on the notion of gradualism (Deng's phrase, "crossing the river by groping for the stepping stones."), going from agriculture to Special Economic Zones (SEZs) to increasing competition and accountability for State Owned Enterprises and finally opening up to trade. Later in the book she describes the current set of reforms, including greater openness to capital.
Jin argues that the heavy role of the state worked well in China because, "it purposefully seeks to offset the rigidities of a central authority and its institutional deficiencies by giving tremendous economic authority and autonomy to local governments." So competition by local governments with leaders measured by GDP (and broader criteria now) and promoted accordingly helped ensure that national strategies were being effectively implemented.
Jin has a lengthy and interesting discussion of the financial system, including the puzzle of the very low return and high volatility to Chinese-listed equities, the underdevelopment of capital markets and financial institutions, and the concerning rise of shadow banking, including Wealth Management Products and Local Government Financing Vehicles. All of this built atop a system in which property is a disproportionately large share of GDP, source of revenue for local government, and a potential bubble, at least in first tier cities. Although she is relatively critical and points to the need for reforms, she also is defensive (likely rightly so) about the government's assets and capacity to defend against a financial crisis.
The technological discussion is interesting too and also at times critical, including of the share of Chinese going to college, the overemphasis on rote memorization and quantity over quality, and the lack of openness--all of which is getting in the way of progress.
In one of the places where I query whether was are getting the full story she presents the Chinese attack on big tech as entirely principled, "After numerous cases of data abuse, the government made a dramatic move in 2021 by introducing new restrictions on certain big tech, education, and gaming companies. These include fines for the most well-known internet companies in China: the e-commerce giant Alibaba, delivery and shopping platform Meituan, and ride-sharing company Didi."
Finally, Jin's conclusion is optimistic but tempered by some concern, "does China have the soft power—the transparency, predictable policies and reliable mechanisms, and trust from the international system?"
Overall, would strongly recommend this book both to better understand the Chinese economy (and to a lesser extent Chinese society, particularly the more affluents parts of it in the major cities) and also to understand China's perspective on what it is doing both internally and globally. I particularly appreciated the ways in which it was grounded in a combination of personal experience and rigorous economic research, all conveyed in a highly accessible and engaging manner....more
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