The Great Divergence -- China, Europe and the Making of the Modern World Economy -------- Kenneth Pomeranz

 

 

What accounts for the economic divergence of Europe from the rest of the world in the 19^th century? What was so special about Europe, or lacking in the Rest, that the Industrial Revolution happened in one place and nowhere else?

This issue, which has occupied a great deal of academic time and effort, is addressed by historian Kenneth Pomeranz in the book under consideration. In the interest of full disclosure, it must be said that it is a detailed, painstaking, academic work which makes it an occasionally tedious read for us non academics. That said, it offers the pleasure of fresh perspectives, qualified but categorical refutation of established ‘truths’, and fascinating insights into the workings of history. An extremely rewarding experience, all told.

The author argues that instead of simply asking why China did not become Western Europe, we also need to ask why Britain did not become the Yangtse Valley. This shift of perspective yields valuable insights.

Pomeranz insists that it is inappropriate to make historical comparisons using modern nation states as the entities being compared. Europe was very diverse before 1800 as was China. Comparisons of core areas in North Western Europe -- Britain, the Netherlands -- with core areas in China, and to an extent Japan and even India, are more appropriate. Comparing England with the Yangze Valley, the Japanese Kanto plains and perhaps Gujarat, would yield more valid results. The author focuses primarily on the Chinese core and establishes that before the 19^th century, North Western Europe in general had no significant edge over the Yangze valley; they were very similar. They all had commercialized agriculture, high and growing population, significant proto-industrialization (viz handicrafts) and reasonably developed markets. In fact, Chinese markets were perhaps more neo-classically ‘ideal’ than British markets. Europeans were no healthier than the Chinese who lived as long if not longer and Europe had no advantage in capital stock or even economic institutions that mattered in the context of the initial industrial breakout. The cotton textile industry that led the industrial revolution did not use joint stock companies to raise finance -- kin networks did the needful. Capital, in any case, was not the constraint at that point in time.

 The constraint was land and land-based products. This is the most important argument of the book. With rising populations, the cores at both ends of the Eurasian land mass were suffering from a growing supply problem of land-based products—wood for fuel and building, fiber for clothing and food. The cores were not quite at a Malthusian disaster stage, but supply problems had clearly emerged and were looming large. And here comes the divergence. The Chinese core could not resolve these problems while the European core – Britain -- managed to do so through a fortuitous combination of coal availability and acquisition of colonies.

 British coal was relatively easily available to the core, while Chinese coal was not, and that resolved the fuel issue. The colonies, especially in the New World, were major suppliers of calories --sugar, potatoes, and later, wheat and beef, cotton, tobacco and, most importantly, silver for which there was a huge demand in China, which had started re-monetization in silver from earlier on. In addition, they -- the New World colonies -- also absorbed surplus labour.

It is emphasized that European financial innovation, the so-called joint stock companies, were useful in the international trade space and these succeeded in the New World and the Old through the use of coercive force and, in the case of the Americas, the ruthless use of disease vectors to which the indigenous populations had no immunity. In one-on-one competition with local merchants in Asia the Companies did not demonstrate any particular edge.

 The slave trade contributed to the profitability of the New World colonies -- indigenous populations having been more than decimated and the use of European labour in quite the same low-cost fashion not being politically feasible. Profits from coercive international trade did help, of course, but were not as significant as the land- based products that the colonies provided.

The insights into trade patterns offered by the narrative are fascinating in themselves. Silver, through conquest, from the Americas to Europe and then to Asia, cotton textiles--amongst many other things -- to Europe and onward, in part, to Africa to be exchanged for slaves for the Americas, and sugar and cotton and other stuff back to Europe. And this is just one dimension of a very much more complex set of trade flows.

So, the bounties of nature, conveniently located coal and virulent disease vectors to which the New World had no immunity, combined with a willingness to use coercive force and human trafficking to promote their economic interests, appear to have been the principal European advantages in the race for economic development.

Emotive exaggeration? Not really, but you have to read the book to find out!

As always, this blog can provide only a glimpse of some of the important ideas that the author raises. The book needs to be worked through for the full flavors of the creation to be savored.

Happy reading.