In the past three decades scholars have reconsidered what set Europe off from the rest of the world as the site of state formation and economic changes that led to modern nation-states and industrialized economies. The themes, of course, are far older. They recur in the inquiries of great social thinkers from Montesquieu and Adam Smith to Karl Marx and Max Weber. Europe’s, particularly England’s, success moved scholars to assess other societies from a European benchmark. Quite diverse social science scholarship presumed that there was a unique and European-defined path to modernization and prosperity. But in the 1980s doubts about...

A thousand years ago China was a vast empire. So it was a hundred years ago. A thousand years ago Europe was politically fragmented. It was still so a hundred years ago. These contrasts might suggest that massive differences in the scale of polities are constants in the histories of these regions. From this perspective it would be easy for us simply to take the divergent political structures as givens and put our energies into tracing their consequences for economic change. We could then appeal to either geographic determinants or cultural constants for the early and persistent Chinese success at...

The variation in family and household structure across Eurasia is astounding. Whether the age of marriage or the role of kin is involved, nothing seems alike in preindustrial China and Europe. Because demography matters for important economic phenomena, including the rate of savings, the structure of markets, and, ultimately, economic growth, scholars have leaned heavily on variation in household structure to explain the different pace of economic change in China and Europe (A. Smith [1776] 1976: 76–77; E. L. Jones 1981: 17–21). In doing this, they have relied on the notion that the European nuclear household (with one generation of...

The study of market institutions is a central endeavor of economics. Understanding how one party extends credit to another has sparked an abundant literature. One key lesson from this research is that not all exchanges can be supported by formal contracts. Some market transactions are too trivial to make a contract or a suit after nonperformance worthwhile. Others involve dimensions of performance that third parties cannot observe. In this case informal means and, in particular, reputation and repeated interaction serve to sustain markets and their implicit credit relationships. Because the size, frequency, and complexity of deals vary from one contract...

Our analysis of contracting arrangements put a significant emphasis on the size of the Middle Kingdom and the importance of long-distance trade in explaining why China relied on informal arrangements more than Europe did. That the size of the Chinese empire encouraged the early rise of long-distance markets is well established (Pomeranz 2000). Upon reflection this should cast doubt on a common thesis in economic history that political competition is directly beneficial to economic growth. Political competition historically has meant violent and expensive domestic and international conflict rather than well-ordered and cheap elections or even armed peace. Empires, such as...

By 1700, as we saw in Chapter 4, the seeds of a capital-intensive, machine-using economy were sprouting in Europe. Although this new sector remained small through the eighteenth century, it was growing, most notably in England. For the next 150 years China, unlike North America or the European continent, made little effort either to adopt or to develop capital-intensive methods of production. By the eighteenth century divergence had clearly set in and would grow for a long time. Some readers may be willing to grant that differences in political structure played some role in moving Europe toward machines and keeping...

In literature and social science the rapacious despot is hard to kill. In fiction he survives countless defeats because the hero demands a nemesis. In the social sciences the despot endures because he serves as a perfect foil for the virtuous political regimes that allow their people representation. Indeed, the despot’s rapacity leads to leaving his subjects destitute, while more liberal regimes promote the material well-being of their citizens. It is no surprise, then, that the despot is regularly pressed into service to drag absolutist France and Spain down behind the Netherlands and England (North 1981; De Long and Shleifer...

We have seen in previous chapters that economic growth due to gains from trade was more easily achieved in China than in Europe during the early modern era. Despite differences among the kinds of economic institutions most typical of China and those most typical of Europe, we can find no evidence that these differences made for significantly different likelihoods of economic growth in one rather than the other. Nor do differences in the representative nature of political institutions play the often-anticipated role of serving economic growth. But it is easy to be suspicious that these claims must somehow be specious,...

This book has considered a classic question in economic history: why did sustained economic growth arise in Europe rather than in China? The preceding seven chapters argue that political processes drove the economic divergence between the two world regions. This divergence became increasingly visible in the nineteenth century, but its causes are located in far earlier times. For centuries, China’s peaceable empire was more prosperous and more stable than Europe’s warring polities. But war, which offered to those who lived through it little more than misery (and even less to those who perished), also produced a series of distortions that...