Kenneth Pomeranz

It's complicated

In this book Kenneth Pomeranz tries to answer the question why Europe developed economically faster than elsewhere in the 19th and 20th century. He does so by primarily comparing a core part of Western Europe (mostly England, but also the Netherlands, France, Germany and Denmark) with China and to a lesser extent Japan, Southeast Asia and India. These are areas with the highest population density, and thus the greatest urge to specialisation, and the areas that Mr. Pomeranz knows most about.

Mr. Pomeranz' theory comes down to the assertion that the most developed parts of Europe and East Asia were both heading for a "proto-industrial cul-de-sac" where production barely stayed ahead of the rise in population. There are many similarities in the level of economic development and the differences are insufficient to explain the "great divergence". Europe became a "fortune freak" in the 18th century when it broke through the fundamental constraints of energy use and resource availability that had previously limited everyone's horizons; East Asia could have produced its own Industrial Revolution some time later. Britain was greatly helped by its global shipping function and by the silver and plantation products from the Americas to overcome ecological boundaries at and near its home. These meant more than the operation of markets, family systems or other institutions.

What the book taught me most of all was my great lack of knowledge of the (economic) history of these societies to judge any theory about this matter. It is equally difficult to summarise this book that is full of facts, assumptions and nuances. Particularly in the first chapters much of the "evidence" is restricted to specific cases or circumstantial due to lacking statistics. In these chapters Mr. Pomeranz often looks at equivalent factors in both areas without offering a full overview first. This makes reading the book often a bit tedious to read. Unfortunately, Mr. Pomeranz is no Jared Diamond (and he probably would not want to be one), although he is better on China in areas where statistics are absent. Also, I would have appreciated a more detailed analysis of the economic conditions and the motivation of the people involved in the invention and exploitation of the machines that stood at the basis of the Industrial Revolution in England and its European followers. As a plus of this book, the list of references Mr. Pomeranz gives is a goldmine for further study.

The author claims that before 1800 Europe had no significant edge over Asia. Europe lagged in agriculture, land management and in the inefficient use of fuel wood and other land-intensive products. Europe's technological leadership was not enough for a break-through. Life expectancy in Asia was likely a bit higher and the birth rate a bit lower than in Europe. Northwestern Europe was ahead in industrial technology, but that can only offset against other areas (p.44), e.g. weaving or porcelain production. The early use of coal was directed at a reduction of the dependency on fire wood and mechanisation often aimed at quality improvement rather than saving labour costs. The Chinese already had all knowledge required to build a steam engine except for the piston before the 18th century. The author stresses the importance of European instrument making (like clocks) and gun production for producing an efficient steam engine. Also, the availability of coal in Britain, Europe's most dynamic economy, and the type of mines (having problems with water, rather than combustion as in China) was very fortunate. China's coal was further away from its economically most developed areas. In Europe, Holland used mainly peat instead of coal.

In terms of market economics and structure, the author sees no material European advantage either. More land in Western Europe was difficult to buy and sell than in China, delaying the introduction of productivity improving practices until the 19th century. European labour migration pales in comparison to China's. The Chinese state facilitated mass migration of more than 10 million people to areas where labour was scarce, whereas many Brits going to the Americas had to accept indentured servitude. The Qing promoted spinning and weaving among women in its rural population as a basis for strong families. Western Europe's guilds lost their control of textile production much slower. British but not early Dutch wages remained static for centuries despite economic ups and downs. Wage differences between segments of the labour market were persistent. Both Japan and China seem to have had more integrated markets.

Mr. Pomeranz equally ranks China's consumption of everyday luxuries (tea, sugar) as equal or higher than the most developed parts of Europe. England had reached the limits of its agricultural production; only fertilisers invented in the mid-19th century could improve output. England was dependent upon its colonies to satisfy the needs of its soaring population. Elite material possessions like furnishings and clothes increased strikingly in Europe, China, Japan and India. In all, but least in India, a fashion system of luxury came into existence. Mass consumer demand may have been slightly higher in Europe. This almost certainly applied to housing. The strengthening of public office under the Qing may have slowed down the development of fashion. Mr. Pomeranz dismisses the claim that China was not interested in (exotic) imports, pointing at those from Southeast Asia. Silver for re-monetising China's economy was more valuable for the country than other products of the Europeans.

Mr. Pomeranz claims that Western capitalist institutions did not cause the divergence. For long times there was more capital available than projects to invest in. Some of these institutions were only useful for specific purposes like the trading companies. The overland tea trade between China and Russia very much resembled the English Muscovy Company. Chinese accounting was more advanced than that used by most Western companies until the late 19th century. Joint-stock company structures and professional managers were used and many companies operated across large geographical areas. China's political economy was less favourable to international business. It expansion was directed at Central Asia and was of no interest to coastal China. China also discouraged staying overseas for more than a trading season. The Chinese state borrowed very little and gave almost no monopolies. Public finances offered fewer opportunities, including innovation. In England changes in the security of property against confiscation and taxation had little effect on interest rates. Such changes do not give an important competitive advantage. Interest rates were lower in Amsterdam and London than in India and China, but we do not know their inflation rate. Most early industrial projects in Britain were financed by entrepreneurs or their kin. Most technologies required in the early Industrial Revolution were cheap. Europeans had an edge where they managed to obtain monopolies or near-monopolies, e.g. in spices or later in coffee by adding new production centres. These monopolies were created with military and political power rather than superior commercial organisation. The crucial breakthrough to construct railways was technical rather than financial.

Before synthetic fertiliser, synthetic fibres and cheap mineral energy for making synthetics economical, there were limits on the ability of labour and capital to substitute for land. Japan, China and Europe had the greatest need for a breakthrough. They had the least empty land and misallocated labour. China and Japan kept food production up at the expense of serious deforestation and hillside erosion. Europe but not England could still somewhat improve its product mix. Despite a fall in English per capita consumption it became heavily reliant upon the New World and Oceania. The construction of merchant ships was shifted to places like Quebec, Bombay and Madras. Particularly the availability of (fire-)wood was becoming problematic. Coal provided significant relief. China had used its land more efficiently. China experienced no coal boom and the spread of people to the north of China and upper Yangzi made China more ecologically vulnerable.

Europe was helped in its industrial revolution by the Americas' production of goods that required land and labour. The use of (mainly male) slaves led to an increased market economy between the various points involved (Europe, North America, Caribbean and Brazil). Silver mining increased even when prices fell and imports were often a monopoly, creating another windfall for Europe. New World silver was in high demand in a re-monetising China. Gold was used to buy textiles in India to exchange them for slaves. Without New World sugar, Britain could not have provided the 2-2.5 thousand calories per day its citizens consumed. Cotton clothes reduced the caloric intake quite a lot. Half of the increase in Britain's revenues came from import taxes. At the same time in China peripheral areas saw a reduction in agricultural income and shifted partly to proto-industrial production.

There is a good interview with Mr. Pomeranz here. His book is put into perspective here.… (mere)