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Why China Stagnated

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In his compelling lead article in the Spring 2006 issue of the Journal of Economic Perspectives [2], economic historian David Landes [3] 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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