An Empirical Analysis of the Chinese and British Economic Development History

Abstract:  Despite a Eurocentric historical narrative, this essay challenges the notion that the Industrial Revolution occurred solely in Europe, arguing that China exhibited similar Smithian growth indicators, and proposes alternative explanations involving geological factors, colonialism, and institutional support for technological innovation as key drivers of the Great Divergence between China and Britain.

For a long time, the discussion of why Industrial Revolution happened in Europe but not China has been fixated on a eurocentric narrative. Because of the success of the western industrial development and colonial powers since the 18^th century, historians and scholars only try to interpret and summarize the Chinese economics using theoretical frameworks derived from Western Europe historical experience. It is as if the Chinese society is a mummy awaiting to be awakened by the Western world. For example, witnessing the deceleration of traditional Chinese technology inventions while the Britain became stronger technologically especially during the Opium War, there is a supremacy calling out to China asking if “it should copy the West or ignore it” (Mokyr, pg. 219). However, through scrutinizing various economic, technological, and social factors, it is to be found that the Western Europe exhibited no more advantages than China in terms of population growth, standard of living, productivity, technology advancements and commercial expansion. As a matter of fact, all these indexes come down to one conclusion that Smithian dynamics worked just as well in China as in Western Europe (Pomeranz, 426)[1]. What this implies is that Smithian growth with increased specialization, expansion of market and greater trading is not the primary source of the Great Diversion. Thus, this essay has three parts: a discussion of how and why Smithian growth plays minimal roles with an empirical analysis of Chinese and British economic development; how Pomeranz’s theories of geological coal mines serve as an alternative explanation to institutional and economic factors; how a lack of Schumpeterian growth including institution supports and technological innovations exacerbated the deceleration of Chinese industrial revolution.

To start off, it is almost a universal opinion that China followed a Smithian growth during the 18^th century, but what worth noticing here is Pomeranz disruptive argument that the Yangzi Delta resembles a lot of Smithian economic growth similarities comparable to the Western Europe, and therefore could not account for the Great Divergence. Even though China has slowed down its technological changes, it has still experienced a great economic growth, spanning from better living standard to greater extent of commercialization, from agricultural and handicraft labor division to longer life expectancy. The first example is that there was a comparable increase in national consumption on non-essential goods in both China and Europe. According to Pomeranz, the European grain-buying power decreases between 1430 to 1550 followed by a decrease in leisure time and increase in spending in expensive durable goods. The same thing happened in China. Followed by decreasing rice-buying power is people’s increasing consumption of non-essential goods such as better clothes, tobacco, sugar and eating utensils (Pomeranz, 428)[2]. Quantitative evidence has confirmed this assumption as exhibited by the following table. It shows that Chinese per capita consumption of sugar in the Lower Yangzi is similar to that of Britain in 1750 at 10lbs. Not to mention the average per capita consumption of both sugar and tea in China in 1750 and 1840 exceeds those of Europe except Britain as a whole. The Chinese per capita tea consumption in 1840 almost tripled the Non-Russian Europe in the same year.

Table 1. Tea and Sugar Consumption in China and Europe (Kenneth Pomeranz, pg. 430)[3]

In addition to consumption levels, other Smithian indicators also show an economically developed Yangzi Delta. For instance, Chinese birth rates were equal to or lower than European ones throughout the 1550 to 18850; the population growth ran faster from 1550 to 1750; and finally, the death rates were lower. When it comes to income level, Yangzi Delta farm laborers spent similar percentage of their disposable income on basic supplies as to poor rural English farmers at around 55% (Pomeranz, 426)[4]. To sum up, Smithian growth plays little to no role in addressing the Great Divergence between Britain and China because they had the same level of growth.

According to Pomerantz, it is not China failed in developing into industrialization, but Britain successfully escaped the “resource constraints” following Smithian developments (Pomeranz, pg.426)[5]. China presents a counterargument to Boserup Simon’s theory that population pressure, as one of the results of Smithian growth, would lead to technological progress to drive higher efficiency. As a labor-incentive rice economies, China has too much of a dense population that it does not have enough incentives to substitute labor into machines. Moreover, the Yangzi Delta has already developed advanced handicraft industry with some exquisitely delicate machineries that constrained the incentive to develop automotive equipment. In contrast, lacking former advanced inventions and developments, the Britain had the incentives to go on a labor-saving invention economy featuring more and better productions.

This, therefore, shifts our question to what other factors drive the divergence between China and Britain. And it is this question that has a less universal answer and where scholars divide into two major groups of assumptions. The first explanation is uniquely led by Kenneth Pomerantz who argued that two fortuitous factors influenced the development gap —locations of coal and colonialism, aka. The New World. The second explanation resembles a Schumpeterian growth arguing that it is technological innovations and supportive intuitions that promoted the British development.

Firstly, the geographical location and geological conditions of coal mines in Britain and China fortuitously resulted in different industrialization pace. Geographically, British mines are closer to economic centers which helped reduced the transportation costs and promoted the usage. Ecologically, British mines needed water to pump out constantly motivated the invention and application of coal-fired steam engine. In contrast, there is less incentives to use coals because Chinese coal mines are far from economic centers which raises the transportation price. And because Chinese mines faced more problem with ventilation, it did not develop any technical breakthroughs.

In addition to this, another factor that widened the gap between China and the West in Industrial Revolution was the ecological relief brought about by British colonial expansion. While the Britain has opened up the New World to resolve the issue of deforestation, increasing population and stagnant production, China has never thought about colonizing and partnering which peripheries. To make sense of such difference fundamentally, one has to understand the difference in political environment and political structure of both empires (Pomeranz, pg. 437)[6].

The British Empire acted as the "mother country" for which all the resources of the colonies served. In comparison, the Qing Empire was an empire that never established the idea of colonization influenced by its long-lasting tribute culture. For maintaining stability, the Qing Empire will extract resources from Yangzi Delta to stabilize the border. The Qing solved the problems of insufficient arable land and rising fuel and food prices by encouraging the flow of population to remote areas while the Britain drove its population to acquired colorizations. As a result, Britain mainland became more energy and capital intensive and its New World helped land saving. According to Pomeranz's estimation, the products brought back to the British mainland by the American colonies were equivalent to the yield of 25 million acres of land, while the total cultivated land in the British mainland at that time was only more than 20 million acres. Slavery production in the Americas also contributed to the rise of the Industrial Revolution. Due to the expansion of the market, technological updates and even revolutionary developments naturally arise.

Even if affluent areas in the Ming and Qing dynasties had a higher standard of living, institutional factors such as technological innovation without encouraging rewards, extremely underdeveloped theoretical/formal rationality influenced by Confucian ideology has led merchants extremely restricted to conduct businesses, gather wealth as well as political, military, and ideological power against the power of the state. Just as what Landes argued, China lacked a free market and institutionalized property rights. And its scientific expertise is involved in the larger values of the society. To just name a few, the immense restrictions on economic behaviors such as manipulation of prices, prohibition of transactions, governmental control over resources such as salt and iron all made the Chinese economic and political environment abysmal to compete against the Britain (Landes, pg. 6)[7].

In conclusion, in comparison to Smithian growth, Schumpeterian growth helps explain the underlying reasons of the Great Divergence. Landes’ arguments illustrate how power and disposition of the state prohibited technological inventions in China. And how China’s suppression and lack of institutional support for private enterprises and commercial activities exacerbated the economic development. Pomeranz’s opinion on colonialization illustrates a fundamental political structure difference that influenced the gap between the two countries. Last but not least, the geological factor of coal mines opens up a new gate in the economic history of the Great Divergence, insinuating a new means of research that is to understand the contingency of history.

[1] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, page 426 [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[2] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, page. 428 [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[3] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, page 430. [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[4] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, page. 426. [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[5] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[6] Pomeranz, Kenneth. “Political Economy and Ecology on the Eve of Industrialization: Europe, China, and the Global Conjuncture.” The American Historical Review, vol. 107, no. 2, page 437. [Oxford University Press, American Historical Association], 2002, pp. 425–46, https://doi.org/10.1086/532293.

[7] Landes, David S. “Why Europe and the West? Why Not China?” The Journal of Economic Perspectives, vol. 20, no. 2, American Economic Association, 2006, pp. 3–22, http://www.jstor.org/stable/30033648.