Making the Modern World Economy

548 MAKING THE MODERN WORLD ECONOMY

© The Historical Association 2002

© The Historical Association 2002. Published byBlackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UKand 350 Main Street, Malden, MA 02148, USA.

Feature Book Review Making the ModernWorld Economy

PATRICK O’BRIENLondon School of Economics and Political Science

The Great Divergence: Europe, China and the Making of the Modern WorldEconomy. By Kenneth Pomeranz. Princeton University Press. 2000. x +382pp. £40.00.

Pomeranz, a leading economic historian of Ming and Qing China,has written a seminal book that explains Europe’s precocious tran-sition into a network of modern industrial economies. He confronts

canonical hypotheses (some going back to the Enlightenment, but mostembodied in the writings of Marx and Weber), with his own expertiseon China combined with critical and wide reading of recent work onthe economic histories of Europe, India, Japan and Southeast Asia.Properly read, considered and compared (as it is in this excellent book),post-imperial historical research has ‘degraded’ Marxian and Weberianassertions that the political, institutional and cultural frameworks withinwhich economic activities in Asia were embedded for centuries beforethe industrial revolution, differed from Europe in ways that signific-antly impeded the evolution and integration of commodity and factormarkets; the development of financial intermediation; the spread ofprivate property rights; the operations of mercantile networks; proto-industrialization; and, above all, commercialization within agriculture.What Pomeranz sees is an economic ‘world of surprising resemblances’across Eurasia. His masterly survey of the literature has effectively trans-formed a corpus of Marxian and Weberian interpretations into question-able hypotheses.1 After Pomeranz it can no longer be asserted that, forseveral centuries before the industrial revolution, western Europeaneconomies experienced virtually exceptional transitions to capitalismor that they evolved differentiated legal, behavioural, institutional andpolitical frameworks for the formation, integration and regular operation

1 See D. S. Landes, The Wealth and Poverty of Nations: Why Some are so Rich and Some so Poor(1998); S. K. Sanderson, Social Transformation: A General Theory of Historical Development(Oxford, 1995); and M. Weber, General Economic History, trans. F. H. Knight (New York, 1961).

PATRICK O’BRIEN 549


of markets, thereby allowing for progress (albeit at a slow rate and withlimited help from new technologies) down a path prescribed in modelsof economic growth derived from Adam Smith’s Wealth of Nations.

Pomeranz locates and analyses Asian ‘cultures’ that encouraged indus-trious and ambitious households to transform their extra earnings intodisplays of possessions and luxuries. Contrary to the expectations ofWerner Sombart and his modern followers, Pomeranz’s book reveals thatcommon attributes of material life appeared in too many cities, townsand villages across the Eurasian land mass for historians to single outthe rise of material culture as something peculiar to the acquisitive house-holds of western Europe. He recognizes, however, differences in the scaleand scope of impediments placed by states everywhere in the path ofSmithian growth. His book – and in more depth and detail, the workof his colleague, R. Bin Wong2 – undermines the endlessly repeated(but implausible) notion that dynastic and territorial rivalries amongEuropean states consistently provided more favourable conditions forthe spread and integration of markets during the early modern era ofmercantilism and warfare. More simplistic versions of that hypothesisconflate virtuous circles and cycles for development flowing from eco-nomic competition with the destructive violence and rivalries of Euro-pean power politics. Furthermore, notions repeated since the writings ofMontesquieu, that the emperors and bureaucracies of despotic easternempires ruled over their economies (and ergo their fiscal bases) in ‘irra-tional’ ways that can be represented as more predatory, arbitrary, andconsistently and peculiarly malign towards private enterprise, now lookanachronistic.3

In the recently reconstructed but emergent ‘world of surprising resem-blances’ Eurocentric, canonical accounts of Smithian growth – of eco-nomies growing up gradually but inexorably on distinctive trajectorieswithin a restricted promontory of Eurasia – look untenable simplybecause too many of those ‘seminal traits of the occident’ turn out to benot only ubiquitous but prior features of the Orient.4 Perhaps Marxianand/or Weberian perceptions could be revived and underpinned byfurther research and debate. That research (or even search among extanthistories) might delineate and measure discernible differences in the scale,scope and intensity of Smithian growth across time and space. As recentreconfigurations of European economic history become acceptable (to allbut an anachronistic generation of historians), and as debate moves fromthe realm of acrimony towards conversation, we may witness a revivalof more nuanced and carefully specified long-run historical explanationsfor divergences in productivity and living standards between east and

2 R. Bin Wong, China Transformed: Historical Change and the Limits of European Experience (Ithaca,1997).3 A. Macfarlane, The Riddle of the Modern World: Of Liberty, Wealth, and Equality (Basingstoke,2000).4 M. Hodgson, Rethinking World History (Cambridge, 1993).



west, which historians have long agreed became unmistakable over thenineteenth century and stark in the twentieth century.

Meanwhile, Pomeranz and other revisionists offer provocative explana-tions for both the ‘late’ and the ‘great’ divergence in standards of livingbetween Europe and Asia. First, that in different ways and for differentreasons and along different chronologies, imperial governmental struc-tures in the Orient became increasingly inefficient and incapable of pro-viding their subject populations and territories with the order, protectionagainst external aggression, and other public goods required to maintainsatisfactory levels of private economic activity and innovation. In short,political, geopolitical and administrative decline within the Safavid,Ottoman, Mogul and Ming–Qing empires preceded and thereby madespace for the rise of the west. Investigations into the nature, extent andsignificance of decline (clearly affecting oriental empires in the eighteenthcentury) may well lead to the kind of insights now coming on stream fromcomparative histories of early modern European states, which are con-cerned with the evolution of political arrangements and policies con-ducive or obstructive towards economic growth and innovation.5

Nevertheless, the core of the Pomeranz explanation for divergence isa quintessentially classical growth story which marshals an impress-ive array of historical scholarship around concepts, connections andmechanisms derived ultimately from the writings of Smith, Malthusand Ricardo. Pomeranz represents cultivatable land as a relatively fixedfactor of production. Before chemical fertilizers, additions to the stocksof useful and reliable knowledge allowed only for incremental and lim-ited technological progress. Upswings in population growth led (only inextremes and in some regions) to Malthusian crises, but commonly bothin western Europe and in the Ming–Qing empires to shortages of land-intensive crops and agrarian raw materials, including basic foodstuffs,timber utilized for manufacturing and construction, wood converted intofuel and energy for both industrial and domestic purposes, and fibresderived from plants and animals for purposes of transformation intotextiles. Over two or more centuries before 1750, during which popula-tion growth in Europe and China advanced at comparable rates, theChinese economy coped with the ‘pressure of numbers’ by intensifyinglabour in order to relieve shortages of food and agrarian raw materials.For Pomeranz, and others who reject Weberian explanations for the greatdivergence, the problem is to explain how and why European economiesdid not proceed down the same path as China, but instead avoideddiminishing returns to labour engaged in agriculture and proto-industries,and gradually diffused mechanized techniques of production acrossmanufacturing and transportation. Pomeranz poses this central macro-question cogently: ‘why’, he asks, ‘did England’s economy not continueto develop like the economy of the Yangzi Delta?’

5 S. R. Epstein, Freedom and Growth: The Rise of States and Markets in Europe, 1300 –1750 (2000).



The range of answers taken into account is wide. They are nuanced,eloquently elaborated and carefully supported. The contrasts thatPomeranz selects for emphasis can be distinguished between endogenousand exogenous potential and possibilities for the avoidance of diminish-ing returns to land available to China and to Europe. First, he arguesthat Chinese agriculture, after millennia of successful land management,was closer to its production-possibility boundary than Europeanagricultures. Possibilities for coping with population pressures throughextensions to margins of cultivation and cropping, tenurial reform, in-vestment in the infrastructure for inter-regional trade and specialization,the reallocation of pasture to arable, the control of water, foodstabilization policies, and so on, had already been carried further in Chinathan in Europe. While Europe not only enjoyed some discernible (but alasunmeasurable) opportunities for taking up ‘slack’ within the agrariansystem, the potential gains from commerce and specialization withinnorthern and southern, eastern and western parts of that continent re-mained greater than the already well-established and effectively exploitedpatterns of inter-regional trade within the Chinese empire. Indeed, whendemographic pressures intensified over the eighteenth century, the poten-tial for trade within that empire unfortunately diminished because ratesof population increase became faster among China’s poorer, less urban-ized regions of primary production. The northern and inland regionsadjusted by reallocating surplus agricultural labour into proto-industry;consuming higher proportions of both the food and agrarian raw mater-ials produced within their boundaries; and importing fewer manufacturedgoods. Thus, China’s precocious Smithian growth and path dependencyupon a mix of labour-intensive crops (including rice) and agrarian tech-niques rendered the imperial economy more ‘ecologically vulnerable’ thanEurope to population pressures when they intensified over the centurypreceding the industrial revolution.

Pomeranz insists (and traduces a not entirely sufficient body of evid-ence to support his view) that Britain and other European economies wereon a similar trajectory of diminishing returns and rising costs for the pro-duction of food, fuel and fibres. The west, however, postponed the onsetof more severe ecological problems and shortages during the early phasesof industrialization in the eighteenth century, and circumvented them overthe nineteenth century, by exploiting two ‘windfalls’ of massive signific-ance, namely, endowments of cheap and accessible energy in the form ofcoal, and the fecund soils and abundant natural resources of the Americas.

In highlighting the latter Pomeranz has, in effect, returned the atten-tion of historians to exogenous (overseas) sources of western Europe’seconomic advance, emphasized by Adam Smith and Karl Marx andelaborated in recent decades by Wallerstein and the world systems schoolof historical sociology.6 Pomeranz recognizes that a line of British

6 I. M. Wallerstein, The Modern World System (New York, 1974).



economic historians had already explored the widespread ramificationsof endowments of cheap fossil fuels in allowing Britain to escape from‘Malthusian traps’ before the rest of Europe.7 It is not difficult to acceptthe major conclusion, associated with Wrigley’s famous book,8 that thesubstitution of coal and steam power to provide the heat and energysupplied to other economies by animals, wind, wood and water powerand spin-offs from the mining, transportation and utilization of coal –including the construction of canals, precision engineering, and, aboveall, the impetus provided by coal for the development, improvement anddiffusion of engines for the provision of energy from steam – were ofenomous significance. They became central for the aptly named ‘age ofsteam’. Yet that age (1846–1914) remained imminent rather than domin-ant during the first stages of the industrial revolution, which occurreddecades before that particular golden age of liberal capitalism.9 In addi-tion, and to revert to Marc Bloch’s reciprocal mode of comparative his-tory, the question of why China failed to exploit its known and veryconsiderable deposits of coal and thus become more like Britain, Belgiumand Westphalia is, perhaps, not pursued by Pomeranz in the depth thatsuch a salient contrast demands. Chinese coal may well have been morecombustible and less well-located than European deposits, but it stayedbelow ground as an abundant and presumably potentially more efficientsource of energy compared to the manpower, wind and water that theChinese continued to use throughout the nineteenth century. Referencesto geology and geography do not seem to be sufficient to explain whyChina remained virtually an outsider throughout the age of steam.

Finally, and to return to Smith and overseas expansion, Europeans– not Chinese, Arabs or Indians – discovered, conquered, infected, plun-dered, colonized, and eventually established mutually beneficial com-mercial relationships with the Americas. That protracted enterprise wasnot costless and long-term gains from transatlantic trade should neitherbe designated as ‘peripheral’ (as I suggested before climbing onto a learn-ing curve some eighteen years ago) nor reified (as they continue to bein the writings of Immanuel Wallerstein, James Blaut, and the worldsystems school of historical sociology) as the ‘motor’ driving Europe’sbenign transformation to successful industrial market economies over thecourse of the nineteenth century.10

7 See M. Flinn, The History of the British Coal Industry, 1700–1830 (Oxford, 1984); J. R. Harris,Essays on Industry and Technology in the Eighteenth Century (Aldershot, 1992); and J. U. Nef, TheRise of the British Coal Industry (1932).8 E. A. Wrigley, Continuity, Chance and Change: The Character of the Industrial Revolution in England

(Cambridge, 1988).9 G. N. von Tunzelman, Steam Power and British Industrialization to 1860 (Oxford, 1978).

10 J. Blaut, The Colonizer’s Model of the World: Geographical Diffusionism and Eurocentric History(New York, 1993) and Eight Eurocentric Historians (New York, 2000). See also The Costs and Benefitsof European Imperialism from the Conquest of Ceuta (1415) to the Treaty of Lusaka (1974), specialissue, Revista de Historia Economica, i (1998), ed. P. K. O’Brien and L. Prados de La Escosura,pp. 29–89.



Material benefits to Europe from overseas expansion did not comeon stream for several decades after 1492, and accrued eventually anddisproportionately to two latecomers and, in effect, free riders – theNetherlands and Britain. No doubt, quantitative exercises in nationalaccountancy designed to measure the macro-economic significance oftransatlantic commerce, either for the development of Europe as a wholeor even for particular countries such as the Netherlands or Britain,are fraught with conceptual and statistical difficulties. No economic his-torian could deny that the establishment of colonies regulated alongmercantilist lines, together with slave plantations in the new world, turnedthe terms and conditions for trade in favour of Europe – compared, thatis, to trade with Asia, and certainly to a counterfactual scenario, wherebythe settlement and the build-up of viable and independent economiesin the Americas depended upon unregulated, but unprotected, privateinvestment and the immigration of free labour from Europe rather thanthe enslavement of Amerindians and the export of slaves from Africa.11

Furthermore, recent research has clarified the importance of the com-plex and multifaceted role played by Chinese, Indian and Southeast Asiandemand for New World silver in maintaining the profitability andmomentum of European investment in the Americas for some two cen-turies before the industrial revolution. That momentum also promotedan entirely gradual movement towards the integration and growth of anembryonic global economy, within which the maritime towns and regionsof Europe, Africa, Asia and the Americas interacted, usually with pro-gressive effects for both European and Asian development.12

The issue now at stake is to specify and, if possible, measure the macro-economic significance of Europe’s connections with the Americas, Africaand Asia before the industrial revolution and to deal in depth and detailwith the Pomeranz hypothesis that coal, together with the resources ofthe Americas, rescued the west from diminishing returns. For clarifyingthe questions, for reconfiguring the history of Europe in a global con-text, and for raising discussion and conjecture to an altogether morescholarly level of discourse, Europe’s historians should read this book andthank an American historian of China.

11 R. Blackburn, The Making of New World Slavery: From the Baroque to the Modern, 1492–1800(1997).12 Metals and Monies in an Emerging Global Economy, ed. D. Flynn and A. Giraldez (Aldershot,1997).

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