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Chapter One
Back to the Future?
Once upon a time, China, India and other Asian and Middle Eastern countries did shape our world, and for many centuries China was the biggest economy and most populous country on the planet. Before 1500, China was, by all accounts, a great power, and even though other dynasties and empires in Asia and the Middle East existed before or emerged subsequently, China retained a prominent, if not dominant role for at least another 300 years. In 1820, China still accounted for about a third of world output.
The years 1500 and 1800 are often referred to as global ‘tipping points’. The former corresponds roughly to the surge in European maritime and navigational zeal, not least following Christopher Columbus’ voyage to the Americas, while the latter more or less identifies the point at which China’s relative decline, compared with Europe, turned into absolute decline and effective obscurity on the global stage.
After the beginning of the 19th century, China went into an economic decline that continued into the first three decades of the People’s Republic. It is of no small consequence to ask how and why this decline occurred, bearing in mind that China had once been decades, if not centuries, ahead of Europe in the development of agriculture, industry and social organisation. The purpose of this chapter is to see what lessons can be drawn as we ponder whether or not today’s uprising is taking us back to a long-forgotten global system. In other words, have the last two hundred years of Euro-centric historical focus and economic development simply been a short aberration in over 2000 years of economic and political history?
This is important for two reasons. First, it isn’t only China among the world’s emerging nations that is making waves in the global economy. The balance of economic power is clearly shifting towards Asia, including the heavily populated countries of India and Indonesia, and the manufacturing hubs of South Korea, Taiwan, Malaysia and now, Vietnam. Second, the contemporary debate focuses on simple economic measures, such as GDP growth, exports, financial flows, and infrastructure development as signposts of the rapid emerging market ‘catch-up’ relative to the US, Europe and Japan. It is, however, underlying geopolitical, demographic and institutional characteristics and trends which will be far more important for how economic power will be configured in the global system of the future. In thinking about how China may shape or shake the world, it is worth going back to the future and to the time when the balance of power lay in the Orient, and when Europe emerged to dominate the global system.
Once upon a time
In the West, we pay scant attention to the way the world used to be organised and structured. We learn about the Roman Empire but few people are aware that in the first century the Han dynasty in China, straddling two hundred years either side of the birth of Jesus Christ, had achieved a comparable level of development to the Roman Empire1, or that China, then more of an empire than a country, was even then the largest economy in the world.
We learn about life in the Middle Ages, the succession of kings and queens, the Crusades, the Black Death, the siege of Vienna and other events, but often without proper geopolitical context. Little, if any, attention is paid to the development of Chinese, Indian and Arab civilisations. Normally, in this whirlwind tour of how we got to where we are today, we move swiftly on, as it were, to Columbus and then, by way of the exploits of 16th century Portugal, 17th century Netherlands, and 18th century Britain, to the Industrial Revolution and European hegemony.
The Euro-centric version of world history neglects the fact that, for centuries, Europe comprised a collection of interesting but warring and unremarkable societies on the periphery of an interconnected and multi-polar global system. China’s Ming and Qing dynasties (1368-1911), and the empires of Persia (Safavid, 1500- 1722), India (Mughal, 1526 to mid 19th century), and the Ottomans (1299-1922) were of far greater significance than Europe before the Industrial Revolution2.
In contrast to these civilisations, which were spread over large landmasses and unified by secular or religious leaders, Europe was handicapped by its geography. The ice and large water masses to the north, west and south, the vulnerability to invasion from the east, and the internal geography of mountain and river systems all contrived to make and keep Europe geopolitically incoherent and ‘balkanised’, literally, into competing states.
The demographics of Asia and Europe offer some insights into their economic development, not least because of the paucity of other economic data, but also because bigger populations typically meant bigger production and bigger armies. The population of Europe in 1000 is estimated to have been about 40 million compared with about 170 million in Asia, which corresponded to roughly 60% of the world’s total. By 1750, Asia’s population had grown to 600 million, or about 68% of total population, outpacing Europe’s population increase which reached about 140 million.
Angus Maddison estimates that China and India accounted for about a half of world GDP, and twice that of Europe for the 600 years until about 1700. By 1820, both countries were still one and a half times as big as Europe3. The higher level and faster growth of population in Asia contributed to the higher level of output overall, but in terms of output per head, the two large Asian countries had begun to slip behind Western Europe during the 15th century, possibly earlier.
Thomas Malthus, an English 18th century scholar, proposed that rapid population growth would be self-correcting because it would outpace food production, and that famine and war would result4. If he had been right even then, however, China and India would not have been able to support a fourfold expansion in population and nearly treble output per head of population over this period. Even if we are sceptical about economic statistics from long ago, the evidence of continuous, if erratic, progress in the development of agriculture, trade, industry, urbanisation and culture, leaves no question that China was the most advanced civilisation in the world.
By the end of the 19th century, however, something had changed and China began a lengthy period of upheaval and secular decline. In 1900, it represented little more than 13% of world GDP. Following the Russian revolution, the Chinese Communist Party was formed in 1921, first collaborating with but then fighting the Chinese Nationalist Party, or Kuomintang, which captured Beijing in 1928 and set up a government in Nanjing. Both sides were preoccupied with the Japanese occupying forces during the Second World War, but after the Japanese surrender, the Communists took up arms against their nationalist foes.
By the time Mao Zedong led the Communist Party to power in 1949, China’s world population share had fallen to 20%, and its world GDP share had fallen to 5%. China experienced several sequential and disorienting political shocks, including collectivisation and cooperativisation in agriculture (1955-1956), the Great Leap Forward, or forced restructuring of industry and agriculture that resulted in terrible famine (1958-1961), the Cultural Revolution, or revolutionary campaign to purge China of liberal bourgeois forces (1966-1969), and subsequent political instability until 1976. Throughout this period, China stood still economically, and did not stir until sweeping reforms were introduced in 1978.
So, what happened? If Asia had been the dominant part of a global system for many centuries, why did it falter, going first into relative, and then absolute decline? Why did the Industrial Revolution, which transformed Europe and then America, happen in an unknown village called Coalbrookdale in Lancashire in northern Britain, not in the Yangtse delta, which was China’s most populous and dynamic region? To answer these questions could fill several books, and provoke endlessly heated and complex debates among economists and historians5. Here, I can only sketch out the very broadest of contours of the shift in power from the Orient to the West. Yet this search for answers reveals important insights into our understanding of today’s uprising in China and other emerging markets.
The role of geography, ecology and maritime adventure in economic development is important, but doesn’t tell us anything as far as China’s booming factories and America’s financial woes of today are concerned. On the other hand, the role played by demographics, technology and institutions, including legal and judicial structures, in driving economic and political development remains as potent today as ever.
A change of heart
Western thought sometimes views China as a giant landmass that has traditionally been inward looking, and economically and technologically backward. The historical evidence does not support this observation, at least not consistently. According to data compiled by Professor Angus Maddison, Asia constituted the lion’s share of the global economy for millennia, and China’s economy was always at its heart6.
In the first millennium, China had already made many advances that Europeans would only make much later, for example, in the use of farm cattle and farm implements, the exploitation of crop rotation and new varieties of rice, the production of iron and salt, and textiles and water-powered spinning machines. China had private ownership, basic property rights (though only for its gentry), productive agriculture, and openness to trade. For a long time, the caravan trails of the Silk Road took spices, silk and cotton out of China, while new crops and payments for trade in silver travelled in the opposite direction. China was the leading producer and exporter of porcelain ceramics, silk, zinc and cupronickel (for coinage), and occupied a dominant position in trading cotton and silk textiles, gold, copper and tea.
Under the Ming Dynasty (1368-1644), China was a populous and agriculturally fertile country. Its inland waterway system was run by a well-educated Confucian bureaucracy. It invented movable type printing technology in the 11th century – some 400 years before Gutenberg introduced it to Europe. It was a country of huge libraries, extensive trading networks, and flourishing industries. China’s iron industry produced about 125,000 tons a year (a level of output far larger than in Britain in the early stages of the Industrial Revolution), not least to supply an army of a million.
China invented the magnetic compass, and built huge ships. In 1420, the Ming navy had 1350 combat vessels, including 400 floating fortresses, and 250 ships designed for long-range sailing7. Apart from guns, munitions, printing and ships, China also became a world leader in metallurgy and transportation. From what can be discerned from the time, China had a strong edge over Europe in matters of culture, mathematics, engineering, and navigational and other technologies.
Despite China’s unquestioned achievements and economic status, history records some interesting developments that go some way in explaining why China was prone to autarky and closing doors to engagement with the outside world, and unable to generate the spark for an industrial revolution. For example, China pioneered the use of coke in iron ore production several hundred years before Abraham Darby succeeded in the same venture in Britain in 1709. However, just as Darby’s ironworks started to boom, the blast furnaces and coke ovens in northern China were abandoned, as the country succumbed to internal rebellions, wars and, later, the commercial intrusion of foreigners. The iron ore industry would not be revitalised until the 20th century, but other aspects of Chinese economic advancement were also compromised during the 18th and 19th centuries. China’s canal system was allowed to decay, the army was starved of adequate equipment, astronomical clocks were disregarded, and printing was restricted to scholarly works and not used to disseminate practical knowledge widely or encourage criticism8.
Consider also China’s maritime exploits. In the 15th century, several decades before Vasco da Gama found a route to India, the Chinese mariner Zheng He sailed (1405-1433) to Arabia, East Africa, India, Indonesia and Thailand trading gold, silver, porcelain and silk for exotic animals and ivory. His initial ‘treasure fleet’ consisted of 317 ships – the largest of which was 400 feet long (compared with Christopher Columbus’ ‘Santa Maria’ which measured 85 feet) – and 27,000 crewmen. Indeed it was the largest fleet assembled for a single voyage until the 20th century9.
As in industry, so it was in exploration. Just as Europeans began to set sail around the world, China’s ships were increasingly docked, as a conservative Confucian bureaucracy, which did not care for conflict, and was suspicious of merchants and traders – and prone to confiscate their property – viewed maritime and naval activities as unimportant or contrary to the interests of the state.
Zheng’s maritime expeditions spread Chinese knowledge, products and people as well as his own diplomacy and influence, to other lands. At home, however, the bureaucracy became nervous that foreigners would become so in awe of China’s power and magnanimity to those who acknowledged its symbolic suzerainty, that they would extract economic and political advantages that would be costly, and perhaps ruinous. The Chinese authorities felt they were self-reliant and self-sufficient, and were suspicious of foreign influence. They closed down the open-door policy to the outside world, and the door would not open again in a meaningful way until Deng Xiaoping celebrated Zheng’s exploits and the Ming Dynasty’s engagement of the outside world in a keynote speech in 1984.
In any event, internal political struggles between factions of the Chinese court eventually culminated in the destruction of the fleets, a ban on the building of ships with more than two masts, breaches of which became a capital offence, and even on ocean-going voyages10. China’s institutional behaviour clearly compromised its capacity to exploit maritime and other technology for the purposes of economic development. Such behaviour, however, was not the only reason that economic advantage slipped away.
People power
The significance of anecdotes can be overstated, but they conform to political and institutional patterns that run through Chinese history and economic development.
Demographics also play a vital part in economic development. After all, more people mean more workers, and more output. More skilled people mean a higher quality of output and higher productivity. On this basis, China should have had a big advantage over Europe.
The much larger population in China did mean there were more mouths to feed and, consequently, Chinese farmers and households might have had a smaller agricultural surplus to invest. Once basic survival needs had been satisfied, there would have been less produce or money available to save and invest. In Europe, however, the reverse should have happened, where smaller families and lower fertility rates would have resulted in larger surpluses. But if these demographic differences had been really important, Chinese and European economic development would have parted company long before it actually happened.
Moreover, because European populations were much more heavily concentrated in smaller geographic areas, it is possible that the real wages of workers rose faster than in China, where labour was much more plentiful, spread out and cheaper. In other words, higher real wages in Europe could have helped to accelerate and sharpen the incentive to find mechanised and labour-saving devices. In turn, these would have raised the amount of capital per worker, and hence productivity growth. It’s a theory, and one of many that have been proposed to explain China’s tardiness in economic and industrial development compared to Europe. As I have pointed out, however, China was no laggard when it came to economic achievement until a mere 200 years ago, and held its own in the global economy, even if Europeans were doing a fair bit of catching up until then.
The lie of the land
Geography played an important role in shaping economic and political fortunes. The milder and wetter northern European climate may have conferred advantages that were not as robust in China’s more arid and hotter climate. It could have offered Europeans greater protection against disease, drought and natural disasters. It could have helped to sustain more fertile soil which, in turn, allowed spare agricultural land to be used for animal grazing, the deployment of animals for industrial purposes, and food production. That said, China’s cultivation of, for example, rice and beans (as opposed to wheat in Europe, for example), its use of horses in agriculture, and its development of water supplies and waterways for transport and irrigation testify to a comparable, if different, path of agricultural development.
The European climate certainly forced citizens to confront a phenomenon that was less pressing in China – flooding. Eventually, the need to overcome flooding would encourage innovations that led to the steam powered pump and, later, the more generic and industrial use of steam power that would spur the Industrial Revolution in northern Europe.
There are, however, more important geographic factors that shaped China’s and Europe’s progress. Europe’s more complicated geography was an integral part of its political fragmentation. There were no great landmasses to enable armies to establish control, and no broad and silty river areas, such as existed in China, India, and Egypt, to be exploited by mass agriculture. And there were large mountain ranges and forest areas that kept populations separate. Political fr...
