Bayesian Investor Blog

Book review: State, Economy, and the Great Divergence: Great Britain and China, 1680s – 1850s, by Peer Vries.

Yet another book on why Britain and China diverged dramatically starting around 1800. This one focuses on documenting the differences between the regions, with relatively little theorizing.

Some interesting differences of possible relevance to the divergence:

• British per capita tax collections were 15 times China’s [1]; Vries emphasizes the underlying British bureaucratic competence.
• Britain changed its tax rules often; China treated tax rules as if set in stone.
• British tax policy caused it to promote standardization of a wide variety of weights and measures, which helped long-distance trades; China had nothing similar.
• Britain’s taxation was more egalitarian than China’s (but still much less egalitarian than today).
• British government debt looked recklessly high; China consistently had a surplus.
• British elites wanted to keep the masses poor (to make them industrious); China’s elites seemed neutral or had slight preferences for the poor to prosper.
• Most British workers were nearly slaves – laws restricted their mobility due to the expectation that most who left their area of work were beggars/thieves; China was less restrictive.
• Britain condoned or supported powerful monopolies; China broke up concentrations of merchant power / capital under the assumption that they came at the expense of ordinary people.
• Britain had three times as much farm land per capita as China.
• Britain was more urban, so it had more commercial / monetary activity.
• China denied that anything outside its borders mattered. Britain had a fairly global worldview.

Mercantilism

Vries says Britain was more mercantilist than modern economists claim, and that mercantilism was probably good for Britain. I still think mercantilism was mildly harmful. There were enough other differences between regions that one set of mildly harmful policies can easily be offset by other good policies.

Why did people at the time support mercantilism? I’m sure I could come up with hypotheses about why they were simply wrong. But the book suggests a more interesting possibility: they cared mostly about the success of their government compared to neighboring governments, and willingly embraced negative-sum competition.

China was less mercantilist (Vries calls it “agrarian paternalist”), due to factors such as complacency about its status relative to the outside world, and due to less need for international trade, given that its size meant that the equivalent of trade between Britain and France got treated as inter-province trade.

Implications for Competing Explanations

The main target of this book is Pomeranz’s book The Great Divergence, which has received undue respect in academia [2].

According to Vries,

• Pomeranz was too eager to deny institutional and cultural differences;
• Pomeranz exaggerated the differences in access to a frontier – China had a frontier that was somewhat like Britain’s North American land; obscured by being within China’s nominal border;
• China failed to adequately use the coal that it had access to, due to apathy and/or incompetence.

Vries may be slightly unfair to Pomeranz at times, but Vries seems mostly more right than Pomeranz.

Comparing to some other explanations:

• Vries’ analysis sounds quite similar to Fukuyama’s Political Order and Political Decay, especially on the significance of European military competition being more intense than for China.
• Clark’s Farewell to Alms – seems slightly strengthened by Vries’ evidence.
• Nick Szabo’s ideas about the printing press – seems consistent with Vries’ evidence, but not clearly strengthened by this evidence
• Bernstein’s Birth of Plenty – Vries argues against Bernstein’s claim that Britain had more secure property rights when the divergence began, but supports Bernstein’s claims about good communication/transportation, and Bernstein’s other claims are compatible with Vries’ evidence. Bernstein’s ideas could be altered to focus much more on the cultural factors that eventually led to secure property rights. That would water down the libertarian implications that Bernstein seems to want, but wouldn’t drastically change Bernstein’s points.

Methods / Style

Was Vries wise to focus on the 1680-1850 time period? I’m fairly confident that the divergence became nearly inevitable before 1800, and I wouldn’t be surprised if the main causes were firmly entrenched by 1680. So I’m a bit concerned that this book focuses more on symptoms than underlying causes.

Vries is less clear than I’d like about the problems associated with comparing two very different sized nations. He partly handles this by sometimes referring to larger parts of Europe. He almost never compares Britain to the Yangzi Delta region (which Pomeranz claims was most comparable to Britain).

I found the book’s style to be somewhat difficult. It’s aimed mostly at serious historians, with often more detail than I wanted, and many complaints about mistakes made by other historians.

I bought this book before noticing that Vries had previously written another book on this subject, and it seems quite possible that I chose the wrong one for my goals.

Conclusion

The book left me more pessimistic about ever getting a clear answer to what caused the great divergence. There are too many hypotheses, and only one divergence at this level of development, so there’s no practical way to falsify many of them.

[1] – the book indicates that it’s less clear whether the regions differed much in how burdensome the taxes were, so this evidence is more compatible with libertarianism than it superficially appears. Vries mostly refers to how much tax revenue the central government received, which was often very different from what the taxpayers paid, especially in China.

[2] – I have an abundance of cynical ideas for why Pomeranz is popular: his writing style is atrocious, so that having taken the effort needed to understand him can function as a mark of high status; he appeals to environmentalist intuitions; multiculturalists need something like Pomeranz’s approach in order to claim that all cultures are equally good.