China was not poorer than Europe throughout history!

This weekend’s Economist magazine had an article (“A not-so-golden age”) which I found odd. It questioned the claim that China had historically been a wealthy country. In recent years historians have come to believe that, until the late 18th century, China was wealthier than Europe. It was only then that a “Great Divergence” set in. According to a very recent study, however, carried out at Oxford University, Peking (is it still called that?) University and Tsinghua University, China’s economy has lagged behind Europe for centuries. The Great Divergence of the 18th century was not such a Great Divergence after all.

Evidence for great wealth in China

My initial reaction to reading the Economist article was that I find this hard to believe. Anecdotal evidence points in a quite different direction. In the 13th century, Marco Polo was amazed at the activity in Hangzou’s harbour, saying that it had more ships in it in a day than his native Venice had in year. Again, the (re)construction of something as awe-inspiring as the Great Wall of China by the Ming dynasty must have consumed enormous amounts of wealth. I have never visited it myself, but just seeing photos of it running up and down mountains and valleys makes this very clear. There are a legion of other examples. So, I thought, I will take some convincing that this new theory is correct.

Photo by Jakub Halun, showing the Great Wall running through very inhospitable terrain

In fact the study’s findings are rather more nuanced than a quick skim of the article suggest.

Firstly, we are talking about GDP per person, rather than GDP as a whole.

Secondly, the research finds that bits of Europe, not Europe as a whole, were surpassing China (as a whole) in personal wealth at different times: Italy around 1300, Holland and England in 1400. The huge size of China, however, makes it more comparable to Europe in toto than any of its individual countries.

The Great Divergence between Europe and China

Kenneth Pomeranz’s book The Great Divergence makes just this point in arguing for the (to me) very persuasive case that the populations of the Yangtze delta were comparable in personal wealth to the inhabitants of even the most advanced regions of Europe in the mid-18th century.

The Economist article does indeed refer to this argument, thus somewhat undermining its earlier headline statements. Indeed, it says that, on this basis, although England and Holland were still richer than the Yangtze delta in 1800, the point at which they overtook it turns out to be around 1700. This (the article acknowledges) is not so different from Kenneth Pomeranz’s estimate of the mid- to late-18th century.

This is a very different thing than the blanket – and totally misleading – claim at the top of the article, which was that China has lagged behind Europe ever since the 11th century.

The Industrial Revolution had deep roots

So when the Economist (which, by the way, I think is a really great magazine) says that these findings “challenge a hitherto common belief that China and Europe had similar living standards for centuries until the West’s industrial revolution” – this isn’t really true.

The article does make a point that deserves consideration, however. This is that the recent study shows that the “Great Divergence” had begun before the industrial revolution got going in Europe, in the late 18th century. This in turn implies, the article says, that “European wealth and Chinese poverty cannot be explained by industrialization: they must reflect institutional differences”.

I’m sure that this is true – up to a point – but only when you look at the broader context of late 18th century economic developments. In my view there must have been institutional differences which explain why Europe did have an industrial revolution and China did not; I can’t go along completely with Pomeranz’s view that it was such contingent conditions as Britain’s easy access to coal which accounts for the emergence of industrialization. But I don’t want to go into this argument here. What I would say is that, bringing the date forward for Britain overtaking the Yangtze delta to1700 implies (if indeed it is true) that the industrial revolution was itself the product of increasing wealth rather than simply the cause of it. When this wealth started to accumulate in Britain is a matter for debate, but as the study under discussion suggests, England was already amongst the wealthiest countries in Europe as early as 1400. It is easy to draw a straight line of causation from the Black Death to the emergence of industrialization.

By Peter Britton (NOT Pedro Magnifico, as it says in the blog page; this is just a test name which I used by mistake here, but I can’t be bothered to redo the post now under my own name!)