Why China Stagnated

by Don Boudreaux on June 29, 2006

in History

In his compelling lead article in the Spring 2006 issue of the Journal of Economic Perspectives, economic historian David Landes wonders why the industrial revolution didn’t happen first in China.  His answer is unequivocal: although it had lots of genius, China had neither the institutions nor the culture to transform this genius into widespread prosperity.

Almost every element usually regarded by historians as a major contributory cause to the Industrial Revolution in north-western Europe was also present in China [some 500 years before the wealth explosion that began in Europe in the 18th century].

So why, specifically, was there no industrial revolution in China?

Why indeed?  Sinologists have put forward several partial explanations.  Those that I find most persuasive are the following:

First, China lacked a free market and institutionalized property rights.  The Chinese state was always stepping in to interere with private enterprise — to take over certain activities, to prohibit and inhibit others, to manipulate prices, to exact bribes [p. 6].

And as Landes points out on page 7, the Ming dynasty’s attempt to prohibit all trade overseas certainly didn’t help matters.

Landes goes on to criticize severely the Chinese state’s — and people’s — ignorant belief that their culture was so superior to others that they had nothing much to learn from others.

Note that such a belief is truly ignorant and fatal — not just of and for the Chinese centuries ago, but of and for any people at any time and at any place.

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