2/3/2017 globalinequality:TheoriginsoftheGreatDivergence

globalinequality

F r i d a y, J u n e 3 , 2 0 1 6

The origins of the Great Divergence

Whiletheworldiswitnessingglobalconvergence(essenallythe
catchupofAsiawiththeWest),thedebatesabouttheoriginsofthe
GreatDivergencethetakeooftheWestandabsenceofgrowthin
theRestaregoingstrong.Ijustnishedanexcellentbook("Escaping
poverty")byPeerVrieswhoreviewstheoriginsofmoderneconomic
growthandproposeshisowntheoryonwhatmadetheWest,andin
parcular,GreatBritainstarttheIndustrialRevoluonandChinanot.

Vrieshastwocharacteriscswhicharenotabundant,inthesame
person,amongeconomists:erudionandcommonsense.Veryoen
commonsenseandcleverness,exhibitedbymorebusinessinclined
typesineconomics,gowithoutmuchhistoricalknowledge.Butheavy
erudionsomemesrendersauthorsotherworldly,astrangefeaturein
asocialscienstthateconomistsaresupposedtobe.

IwouldliketodiscussVriessbookunderfourheadings:
organizaonofthebook,histheoryofwhytheIndustrialRevoluon
happenedinEngland,hisviewwhyChinaschancestobeginan
industrialrevoluonwerenil,and(some)ofhiscriquesofother
economichistorians.

Organizaonofthebook.Vriesdividesthebookinthreeparts.
Intherst,hereviewsallfactorswhich,accordingtoeconomists,are
conducivetoeconomicgrowthingeneral;inthesecondpart,he
discusseseachofthesefactorsasitappliestotheexplanaonofthe
IndustrialRevoluon,andintheconclusion,hewellsummarizes
themagain.

Thecausesofgrowtharenicelydividedintodirectcauses,the
onesthatwewouldreadilyputintheproduconfuncon:geography
andfactorendowments;theproximatecauses:tradeandinnovaons;
andthedeepcauses:instuons,stateandculture.

Thestructurehascertainadvantagesofsymmetry,butIfoundita
bittedious.Ittaxesthepaenceofthereaderandprovokessome
faguebecauseessenallythesameissues(andevensomesentences)
arerepeatedinthegeneralandappliedsecons.Ialsothinkitis
unfortunatethatVrieshasnotsetupinaseparatechapterhisown
viewsontheoriginsoftheGreatDivergence.Asitis,hisviewshaveto
bepiecedtogetherfromvariouspartsofthebook.TothisIturnnext,
andIhopetofaithfullyreectVriesopinions.

WhydidEnglandtakeo?IfoundVriesexplanaonvery
compelling,perhapsbecauseitisalsosomewhateclecc.Butthe
realityseldomobeysourabstractschemata.VriesagreeswithBob
AllensviewthatthekeyingredientsinBrishindustrializaonwere
expensivelaborandcheapenergyandmoney.Thisledtolaborsaving
innovaonswhichwereattheoriginofthetechnologicalrevoluon.
ButEnglandalsohad,Vriesargues,averystronginfrastructalstate
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2/3/2017 globalinequality:TheoriginsoftheGreatDivergence

ButEnglandalsohad,Vriesargues,averystronginfrastructalstate
thatunl1830followedproteconistpoliciesandoenmanipulated
tarisandtaxestohelpdomescproducers,engaginginwhatwouldbe
todayviewedasindustrialpolicy.Furthermore,Englandhadabig
government,hightaxes,highgovernmentexpenditures,yugeNavy,
enormousdebttoGDPrao,andextravagantlyhighlypaidgovernment
ocials.Externally,thecountrypursuedimperialistandmercanlist
policies.Finally,andquiteimportantly,workersbecametheproletariat
whohadtogotothemarkettoselltheirlabor(thatis,lackedthe
cushionofworkingonownplotofland),andlaborforcebecame
commodied.

England,inthisshortsketch,presentsfourdisnguishing
features:
Favorablefactorendowments
Capitalism:raonalprotmakingandcommodicaonof
labor
Biggovernment

Outsideprojeconofpower(scalmilitary,mercanlistand
imperialiststate,p.433).

Itistheaddion(appendage,asitwere)ofanacquisive,
determinedandbigstatethatdisnguishesVriesexplanaonfrom
otherswhich,ashepointsout,presentanidealizedSmithianpictureof
agovernmentoflowtaxes,strongpropertyrights,andtolerable
administraonofjusce.Hisviewsontheimportanceoftheuseof
forceininternaonaltrade(ontheopenseas,thedisnconbetween
peaceful,consensualtradeandsimplepiracywasoenverythinifnot
simplynonexistent,p.148)makeshisviewsclosetoFindlayand
ORourkes(whoseworkVriescitesveryfavorably)andeventheworld
systemtheorists.Butwiththelaer,heagreesonlythatmercanlism
andimperialismhelpedWeststakeobutcannotexplainit.Which
bringsustowhyChinahas,asVriesseveralmesmenons,nil
chanceofstarngthetechnologicalrevoluon.

WhyChinadidnottakeo?HereVriesisobviouslyatoddswith
theCaliforniaschoolaswellaswithdependencytheorists(respecvely,
PomerantzandFrank)whobelievethatChinahadasgreatalikelihood,
say,around1750,ofbecomingtherstindustrialpowerasdidwestern
Europe.Vriesseesmanyreasonswhythiswasunlikely.Considerthe
fourfeaturesthatmadeEnglandtakeo:theyareallreversedinthe
caseofChina.Chinaslaborwascheap,energyandmoneywere
expensive.Chinesegovernmentwasweak,paternaliscandunableto
collecttaxes.Chinahadnoarmytospeakaboutandwasnotengagedin
militaryoperaonsbeyonditsborders.Andnally,produconinChina
wasorganizedinfamilyunits:itwasthelandofhouseholdmodeof
producon(p.204),orasMarxwouldhavesaid,peycommodity
producon.Thus,workerscouldstayathomeandworktogetherwith
theirfamilies,oenlivingcklosetothesubsistencelevel.Whatwas
lackingwasthereserveArmyoftheunemployedwhoinorderto
survivehadtofeedthecapitalistengineintheWest.

ButwhileChinawasveryunlikelytoachieveatechnological
breakthrough,itwasanequallyormoremarketorientedsocietyasthe
West,atleastasfarasmarketfortheconsumpongoodswas
concerned;ChinasmarketsweremoreintegratedthanEuropean,it
conductedgreateramountoflongdistancetrade,anditsgovernment
wasmuchsmaller.Soherewewould,lookingfromaneoclassicalangle,
beholdalltheingredientsthatshouldhelpChinagrow(integrated
market,smallgovernment,lowtaxes).Yettheydidnot.QingChina,in
eect,inVriesrendering,soundsmuchmoreSmithianthanBritain(p.
354)butpreciselybecauseitwasmoreSmithianitfailedtodevelop.
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Criques.AsIalreadymenoned,Vriespresentsarich,very
eruditereviewofanenormousliteratureandcriquesanumberof
narravesthathaveeitherenjoyedorsllenjoysignicantcurrency
amongeconomists.Letmemenon,forlackofspace,butafewthem.

JaredDiamondandIanMorrisaresavagedfortheir
geographicaldeterminism:Asgeneralstatements,claimsabout
challengesandresponses[aremechanisc],anddonotexplain
anythingatall(p.165).

GregoryClarkandOdedGalorwiththeirviewsontheimportance
offerlitybehaviorforhumancapitalformaonandinnovaoncannot
explainsuchseeminglyanomalousdevelopmentwherehighincreasein
populaondoesnotproducemoreinnovaons,ordeclineinferlity
doesnotimproveinvestmentinskills:uniedgrowththeoryhas
nothingtooerhistorians(p.197).

DaronAcemoluandJamesRobinsonstartfromanunproven
assumponthatmarketisalwaysgoodforgrowthandtheir
metanarraveisastylizedgeneralizaonofavery...posive
interpretaonofmodernhistoryofGreatBritainandtheUSA(p.
137).Inaddiontheyneverdeneextracveorinclusive
instuons.DavidLandesaswellasAcemoluandRobinson
reproduceallthestandardclichswhenitcomestoAsianinstuons
(p.59).

TheCaliforniaschoolisjustplainwrongonChinaslevelof
developmentbeingclosetotheEuropeanlevelpriortothetakeoand
AndreGunderFrankwriteswithhisusuallackofnuanceandoverdose
ofselfassurance(p.340).

PeerVrieshaswrienagreatbookfromwhichonecanlearna
lot,notsolelytoimproveonesunderstandingofthepastbutto
smulateonesthinkingaboutthefactorsthatmakeeconomiesgrow
today.

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