China V. Europe: The Big Picture

Unified China and Divided Europe

Chiu Yu Ko, Mark Koyama, Tuan-Hwee Sng January 2013

Abstract

This paper studies the persistence and consequences of political centralization and fragmentation in China and Europe. We argue that the severe and unidirectional threat of external invasion fostered political centralization in China while Europe faced a wider variety of external threats and remained politically fragmented. Our model allows us to explore the economic consequences of political centralization and fragmentation. Political centralization in China led to lower taxation and hence faster population growth during peacetime than in Europe. But it also meant that China was relatively fragile in the event of an external invasion. We argue that the greater volatility in population growth during the Malthusian era in China can help explain the divergence in economic development that had opened up between China and Europe at the onset of the Industrial Revolution.

Chiu Yu Ko and Tuan-Hwee Sng, Department of Economics, National University of Singapore. Mark Koyama, Department of Economics, George Mason University.

Since Montesquieu, scholars have attributed Europe’s success to its political fragmentation (Montesquieu, 1748, 1989; Jones, 1981; Mokyr, 1990; Diamond, 1997). Nevertheless throughout most of history, the most economically developed parts of the world belonged to large empires, the most notable of which was imperial China. This contrast poses a puzzle that has important implications for our understanding of the origins of modern economic growth: Why was Europe perennially fragmented after the collapse of Rome, whereas political centralization was a stable equilibrium for most of Chinese history? Can this fundamental difference in political institutions account for why modern economic growth began in Europe and not in China?

This paper proposes a unified explanation for this twin divergence. We emphasize the role of geography in shaping the external threats confronting continental landmasses such as China and Europe. Our model predicts when and where empires are more likely be stable based on the extent and nature of the external threats that they face. It also sheds light on the growth consequences of political centralization and fragmentation.

Historically, China faced a large unidirectional threat from steppe nomads.

E.g., Mongols, Manchus, Jurchen, etc. coming down on horse from the northern grasslands. There weren`t many steppe nomads, but they were extremely scary. And their culture was so radically different that when the Mongols conquered China, their first thought was to burn it all down and turn it into pasture for their horses. Eventually, the Chinese were able to convince the various nomadic conquerors that they would enjoy Chinese restaurants and Chinese laundries, but it was kind of nerve-racking.

In contrast, the Himalayas shielded China from the South Asian subcontinent, due east is a high desert, and Indochina is a rugged, smaller region that wasn`t all that much of a threat to the vast population of China.

Europe confronted several less powerful external threats from Scandinavia, Central Asia, the Middle East, and North Africa. We show that if multitasking is inefficient, empires will be unstable in Europe and political fragmentation the norm. On the other hand, empires were more likely to emerge and survive in China because the nomadic threat threatened the survival of small states more than larger ones. Political centralization allowed China to avoid wasteful interstate competition and thereby enjoy faster economic and population growth during peacetime.

Hero dramatizes that ideology of centralization. The Muscovites had a similar get big or die trying ideology, as I noted in 2001. I recall reading somewhere that the Czarist foreign ministry once sent a memo to the Czar saying that they had searched through the archives and were proud to report that of the 40 wars Russia had fought, Russia had started 38 of them.

The Russians took a terrible beating from the steppe during the Mongol rule of 1300-1500, which permanently affected their national character.

Whereas the English were off on their nice island. The English had the perfect set up to eventually dominate the world politically-culturally: they didn`t need to be wholly militaristic and autocratic because they had natural defenses. But they needed some degree of centralization to defend themselves from invasion: a serious but not overwhelming challenge that was conducive to building a state that was strong but not too strong.

However, the presence of multiple states to protect different parts of the continent meant that Europe would be relatively robust to negative shocks. Consequently, economic growth should be more continuous and less cyclical in Europe than in China.The framework we introduce has important implications for growth theory. Models of unified growth contain a scale-effect that implies that larger economies should be the first to experience modern economic growth (Galor and Weil, 2000; Galor, 2005, 2011). Our theory suggests that because it was more centralized, China was more vulnerable to negative shocks and therefore more likely to experience periodic growth reversals. As a steady increase in the stock of population is important for cumulative innovation to occur, the start-stop nature of China’s growth diminished its chances of escaping the Malthusian trap, while the European economy was able to expand gradually to the point where the transition from stagnation to growth was triggered.

I`d add a point I picked up from David Landes` late 1990s history of everything: different ages of marriage. Chinese girls seemed to marry around 18, while English girls married around 25. So, the Chinese population shot up faster, and then came crashing down when the centralized government broke down and with it the conditions necessary for supporting such a dense population per square mile.

In contrast, Europeans followed the Rev. Malthus`s advice before he gave it, and tended to limit their reproduction through celibacy, temporary or permanent. So, outside of the Black Death, populations were more stable than in China.