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Economic And Institutional Arguments Do Not Provide Satisfactory Explanations For The Rise Of Europe Over China Notes

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Jonathan Lindsell 25/04/2011 "Economic and institutional arguments do not provide satisfactory explanations for the rise of Europe over China, it is cultural differences (and some luck) that account for that." Discuss Up to 1400, China led the West in terms of complexity, quality of life, and economicpolitical power. However by the mid nineteenth century, the tables had turned so dramatically that Britain, a country a fraction of China's size, was able to dominate the behemoth twice in the Opium Wars. China's economy supported a bureaucratic elite of c.2% of its population, whilst Europe had a non-productive population of about 15%, colonies around the world, flourishing trade and economy, and a rapidly advancing industry. What accounts for this 'Great Divergence'? Many historians would argue that the different economic systems of Europe and China, and the governmental institutions that backed them explain the difference. However there were in fact deeper factors which themselves dictated the economic and institutional arrangements; conflict culture, unity and disunity, limited kingship or total autocracy. Growth occurs if the output of a country rises faster than its population, otherwise the benefits of the growth are absorbed by the larger number of people (a la Malthus), and the GDP does not rise. For growth to happen in a sustained manner, property rights need to be secured so that socially productive activity is also worthwhile to the individual. Governments are needed to define and protect such property rights, and are paid for this service in taxes. They then need to establish an efficient economic framework that enables cheap capital, enables trade and promotes enterprise and invention. Europe managed, to a large extent, to conform to this successful model, whilst China for the most part did not. The reasons for the difference in the governments attitude to the economy, however, rests more in social, cultural and geographical factors. The issue of property rights seems to be an open and closed case. If intellectual property is not protected, then inventors have no incentive to work hard and take time away from more profitable exploits, since as soon as they unveil their new creation, any peer would be able to use it himself free of charge, or the government could appropriate it for his own uses. Patent laws are thus necessary to promote innovation, making it profitable for the individual who advances or creates a mechanism. By selling it, the item of course becomes useful to his country too. Even within Europe we can see that the protection of property created economic differences between Britain and Holland, whose economies flourished first and greatest, compared to Spain and France, which remained autocratic to a level, for example the Spanish monarchy giving a monopoly to shepherds that allowed them to graze their flock on any land in Spain, making it risky and unprofitable for farmers to put much effort in getting the best yield from their crops. The difference between Western European countries and China were far more marked, with the despotic Emperors able to harness any innovation to his own uses for no price. Not only did China's Qing government fail to protect property, but also did little to help trade. It limited ocean-going ships (below) which clearly meant that there could be little trade with countries asides those directly bordering it, until the expansion of the "Silk Road" and until European powers began to force ports open. Europe, on the other hand, had been trading from Roman times and by the nineteenth century had a vast network, with centres such as London and Antwerp holding goods from many of


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