Sunday, November 04, 2007

Why China Did Not Industrialise First?

Greg Clark (and others) ask why the ‘industrial revolution’ as it is known, did not happen elsewhere first rather than in Britain. Among the countries mentioned as candidates for an IR is China.

In The Bayesian Heresy (3 November)(here)

There is an interview with Joel Mokyr in latest World Economics- some excerpts below:

In a recent paper in the Journal of Economic Perspectives, David Landes has revisited the question of why China was not the first country to have an Industrial Revolution. Why did China fail to have the first Industrial Revolution, given that it is generally agreed that China was the world’s technological leader until about five hundred years ago?

Well, 1500 is perhaps a bit late in the game… 1350 would be my break point on China’s technological leadership. Why not China? This is undoubtedly one of the big questions in human history. China certainly had the numbers in terms of population if you believe the Jones–Kremer story. We know that eighteenth-century China is a very sophisticated, commercialised, monetised, economy with good property rights. What I think was the missing ingredient in China was that Francis Bacon was not Chinese. This is the first part of the story. The ‘Baconian Revolution’, and the founding of the Royal Society is pivotal to what is happening in Europe. Essentially this revolution created bridges between the people who make things with the people who know things. That’s what really counts. It doesn’t matter how many smart people you have who know things if they do not have contact with the people who make things out in the fields, factories and workshops. This contact raises important questions, such as, How do we fix this machine so that it works better? How do we make this? How do we break through this barrier? What Bacon and other Enlightenment thinkers bring to this story is a pragmatic, material, set of questions. They were not creating things to demonstrate metaphysical points about the wisdom of the creator, or attempting to foresee the future using astrology, or dabbling in the occult. They wanted to help the farmer and the manufacturer with practical down-to-earth knowledge. That is the essence of Francis Bacon’s message and it did catch on.

Was there nothing like this in China?

The Chinese do not have anything that looks like an Enlightenment. The Chinese court controls everything, whereas in Europe the Industrial Enlightenment and Baconian program are driven by private individuals, not by governments. The whole intellectual process in China is largely government controlled, manipulated and managed. There are European countries which also follow this model and they are the ones who do not make it to the convergence club; for example, countries such as Spain, dominated by a counter-Reformation, and Russia, ruled by a tyrannical government.

The second part of the story is not so much to do with technology but with the institutional aspects of the Enlightenment. This is the belief that the economic game is not zero sum. The idea that trade between regions and countries could lead to mutual gain is one that the mercantilists rejected. Mercantilism is essentially a system of rent seeking based on the assumption that wealth is increased by grabbing as much as you can. The new thinking rejected this idea and suggested that such behaviour would, more than likely, cause the overall size of the economic pie to decline.

The ultimate culmination of this new thinking is Adam Smith’s book The Wealth of Nations, published in 1776.

The ideas are already in the air a century before this. Joseph Schumpeter once said that the Wealth of Nations does not contain anything new. But Schumpeter did not like Adam Smith very much so he would say that, wouldn’t he? [laughter]..."

Interestingly, the turn away from a modern growth trajectory by China in the 14-15th century almost coincides with the re-appearnce of the commercial base activity that in three hundred years led to the beginning of the long epriod of increasing returns to scale, know as the IR today.

By the time, late last century, that China recovered from its distraous experiemnt with government ownership under communism, the 'barbarian' west had leapt forward to the highest living standards the world has ever know. Millennia of steady per capita subsistence gave way from the end of the 18th century to steadily growing per capita incomes of the mass of the people. The poor today in the developed countries enjoy an affluence (opulence Smith called it) greater tha the rich elites of the previous eras, and the rich elites today are fabulously wealth on top.

All history before this transformation is the history of the rich and powerful elites in local societies gradually enjoying rising per capita incomes while the mass of the labouring and war fighting poor remained poor and on subsistence. But the crucial thing is what the rich elites of these previous societies spent the surpluses upon.

If they used them for productive purposes, allowing commercial societies to grow, slowly and gradually, and accumulated surpluses for further investment, they prepared the ground for what became known as the industrial revolution, or, more accurately for what is now known as capitalism.

If they used them for their glorification (pyramids), for wars, for waste and prodigality, they eventually declined, and Western Europe is covered by their ruins, called 'civilisations'. That knowledge accumulated, along with ignorance, is itself a precondition of science; that science allied to technology persisted is an explanation of why in Europe, but less so elsewhere once China stagnated, allied to commerce eventually flowered in the 18th century in North-west Europe and not China.


Blogger TCG said...

Stick to discussions of Adam Smith.

10:40 pm  
Blogger Gavin Kennedy said...


The debate about why the commercial society in Britain produced the first sustained growth in per capita income and which carried the economy towards opulence for all and not just the historical elite of the previous millennia is very much an important part of Adam Smith's legacy.

His growth theory explains much of what troubles neoclassical economics growth theory - it explains so little because of its stylised restrictions and assumptions.

Adam Smith can be seen purely in isolation and judged purely on what has survived from his writings. This is about his legacy, not just his texts (which are very well covered here).

Greg Clark's Farewell to Alms asserts Smith's irrelevance to ' amd Wealth Of Nations. Clark asks: why ? Adam Smith's growth theory provides answers and it seems to me perfectly consistent with Adam Smith's thinking to take up that debate.

Exactly what do you mean by 'stick to disucssions of Adam Smith if you disqualify discussing the 'four ages of man'?

I am genuionely interested in your take on where I am going wrong.

7:18 am  

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