CHAPTER 6
Why Did the West Win
(Temporarily)?
To confront world history is to confront the ultimate questions of human destiny…. One must look at history, particularly world history, as the reflection of a desired future…. To avoid the challenge of a global perspective is to abdicate in the face of the historian's central task—to decipher the meaning of history. To reject world history in a time of crisis is to renege on the historian's ultimate responsibility of confronting society with its past in a meaningful and useful way…. World history has become a pursuit of world unity.
Paul Costello (1994: 213, 8–9, 215)
This chapter poses the question why the West won (temporarily). It offers two answers and inquires into the possible relations between them. One answer is that the Asians were weakened, and the other answer is that the Europeans were strengthened. That may sound platitudinous, but it is not if we consider what weakened Asians, what strengthened Europeans, and what may in turn have related these two processes. Moreover, this very question/answer combination is not platitudinous: virtually all other contending “explanations” rest on the supposition or assertion that Asia was and supposedly remained “traditional.” They also allege that Europe first pulled itself up by its own bootstraps to “modernize” itself and then graciously offered this “modernization” to Asians and others. According to the West and thanks to its “demonstration effect,” this offer of “civilization” and “progress” was accepted voluntarily by some. Others had to have it imposed by the force of colonialism and imperialism. Allegedly, other Asians, not to mention Africans, Latin Americans, and even some Europeans (and quite a few North Americans) languish in their traditional juices.
The evidence and argument in the previous chapters show that Asians were no more “traditional” than Europeans and in fact largely far less so. Moreover as we will argue below, the Europeans did not do anything—let alone “modernize”—by themselves. That contention turns the tables on the historiography and social science of the last century or so, and indeed also on the humanities of the type “the East is East, and the West is West, and never the twain shall meet.” They did meet, albeit not at all on the alleged Eurocentric terms, and the question is why?
This book has sought to build up, chapter by chapter, the global scaffolding that will permit the construction of at least preliminary answers derived from the structure and dynamic of the world economy as a whole. Chapter 2 outlined the productive and trade framework and regional interconnections of the global economy. Chapter 3 signaled how money went around the world circulatory system and provided the lifeblood that made the world go round. Chapter 4 examined the resulting world population and economic quantities, technological qualities, and institutional mechanisms, and noted how several regions in Asia maintained and even increased their global preponderance. Chapter 5 proposed a global marcohistory analysis, with which we can perceive how events and processes are often cyclically related around the world.
This chapter inquires whether and how the world economic advantage of Asia between 1400 and 1800 may have been turned to its own disadvantage and to the advantage instead of the West in the nineteenth and twentieth centuries. Some world economic connections and a possible mechanism that may have generated or at least permitted this interchange were explored in chapter 5: the long, expansive cycle (or “A” phase) that began in 1400 appears to have lasted into the eighteenth century but then turned into a “B” phase decline, at least for Asia. World economic cycles and especially crises generate both danger and opportunity—as the Chinese understand the word “crisis.” However, these differ from one economic sector and region to another in accordance with their place and role in the world economy as a whole. So now we can use these lessons and the scaffolding from the previous chapters to inquire into the whys and wherefores of “the Decline of the East and the Rise of the West.” The present chapter is organized into four main sections: (1) Is there a several-centuries-long world economic “roller coaster” cycle, whose “expansive “A” phase turned into a contractive “B” phase for Asia? (2) When and how did the “Decline” of Asia manifest itself? (3) How did Europe and the West “Rise”? (4) How are this decline and rise related by the world economic structure through global and regional population, economic, and ecological dynamics?
Is There a Long-Cycle Roller Coaster?
We found in chapter 5 that, in the absence of a general “seventeenth-century crisis,” the long global economic expansion lasted from 1400 in Asia into at least the mid-eighteenth century. This finding now permits us to pursue the Gills and Frank half-millennium-long cycles into early modern times. One of the initial incentives to write this book, we may recall, was to inquire about what the recognition of the existence of an old world system with its long “A/B” cycles beginning long before 1500 (Frank and Gills 1993) implies for Immanuel Wallerstein's “modern world-system” after 1500. These cycles had expansive “A” phases followed by contractive “B” phases, each of which lasted from two to three centuries. We traced, identified, and dated these cycles common to most of Afro-Eurasia since 1700 B.C. (Gills and Frank 1992; also in Frank and Gills 1993) and then back to 3000 B.C. (Frank 1993a). The question becomes whether these long cycles continued into early modern times and if so to what effect.
Without seeking to review the entire history of these long cycles again here, it may be noted that a new major period of expansion spanned the years A.D. 1000/1050 to 1250/1300. That was the period especially of the major technological, productive, commercial and general economic development under the Song dynasty in China. William McNeill (1983) regards China to have been the most important “center” of the world at that time. George Modelski and William Thompson (1996) place in China the first four of their approximately fifty-yearlong Kondratieff cycles, beginning with A.D. 930. Also Wallerstein (1992: 586–8) notes that “the patterns of expansion and contraction are clearly laid out and widely accepted among those writing about the late Middle Ages and early modern times in Europe…. Thus 1050–1250 + was a time of expansion in Europe (the Crusades, the colonizations)…The ‘crisis’ or great contractions of 1250–1450 + include the Black Plague.” Janet Abu-Lughod (1989) characterized the first century from this last phase, 1250 to 1350, as at first expansionary, but then contractionary after 1300. She did so on the basis of her analysis of a “thirteenth-century world system” in all of Afro-Eurasia. Gills and Frank (1992; also in Frank and Gills 1993) sought to review both periods as first an expansionary “A” phase until about 1250 and then a contractive “B” phase crisis until about 1450, and in the Afro-Eurasian world economy and system as a whole.
Gills and Frank (1992) dated the renewed period of “A” phase expansion as beginning about 1450, perhaps too closely following Wallerstein (1974) in his analysis of the European world-economy. We did not give adequate weight even to Ravi Palat and Wallerstein (1990), who identify the beginnings of a major expansion in India in 1400. The present review of the world economy also suggests that this expansion began in 1400, not only in India but also in Southeast Asia and probably in China.
At its marginal western end, Venetian and Genovese activities in the Black Sea and eastern Mediterranean, as well as the Genovese expansion westward through the Mediterranean and into the Atlantic, were minor parts of this world economic expansion. So were the Spanish “reconquista” on the Iberian Peninsula and all Iberian initiatives into the Atlantic. These went first to the Azores and to the Madeira and Canary islands and then around and along the shores of West Africa. This Iberian expansion laid the basis in turn for the search and discovery of a way to the prosperous and golden East Asia. The Iberians went both westward around the globe via the Atlantic and then onward via Cape Horn and Panama and/or Mexico across the Pacific, and eastward around Africa via the Cape of Good Hope. The latter would have been not only the shorter route but also the one that offered earlier and greater economic benefits from the riches of the regions bordering the Indian Ocean and the South China Sea. Only the discovery of the Americas with its golden and silver monetary riches then made the westward journey profitable. It offered the Europeans their first real opportunity to ante up in the Asian-dominated global casino. Moreover, it was initially and primarily the Asian economy that was again open for business and flourishing since 1400.
The question then becomes until when did this expansive “A” phase in the aforementioned long cycle last? When this cycle was first traced back to 1700 B.C., we really stopped at 1450 and “provisionally accepted the main outlines” of other students of cycles since then (Gills and Frank 1992; also in Frank and Gills 1993: 180).
In the revision of his test of this cycle and its phase datings on the basis of urban growth data, Andrew Bosworth (1995: 224) now writes that “it seems hasty of Gills and Frank to sound the death knell for longer term cycles…and embrace instead shorter Kondratieff waves (if that is in fact their position). The two phenomena…are not necessarily incompatible.” Well, that may have been our pragmatic position de facto; but de jure we also considered that in principle the two kinds of cycles may nest within each other. That is indeed the thesis in the discussion of the “Monetary Analysis and the Crises of 1640” in chapter 5 above, even if I have not yet pursued how several Kondratieffs may nest in one long-cycle phase (but see our discussion of Modelski and Thompson in chapter 5).
But the more examined question is how long this (possible) “A” phase lasted. The answer is—to at least 1750. Bosworth also pursued a similar question with his urban growth data and concludes that they also “reinforce” the view of a longer “A” phase: for all twenty-five largest cities in the world, the fit to the long cycle is not good because of a sixteenth-century dip. However, “the relative urban hierarchy for East Asia (measuring the growth of its largest cities within the set of the 25 largest cities) is high until about 1650, after which it proceeds along with the ratio of the European/Atlantic city system. This ‘tottering’ lasts for more than a century” (Bosworth 1995: 221–2). In his Figure 8.4 the lines for relative urban hierarchy among East Asian and European/Atlantic cities do not cross until about 1825, when Asian economic and political power waned. London displaces Beijing as the world's largest city in 1850. As noted in chapter 4, Rhoades Murphey (1977) also puts the crossover between the decline of the East and the rise of the West at about 1815.
Therefore it again appears that this (so far last) world economic long cyclical phase of expansion lasted—at least in Asia—over three centuries, from the fifteenth through the seventeenth centuries and into at least the first part if not to the end of the eighteenth century. The evidence on the seventeenth century reviewed above also lends support to the notion of a continuation of the “long sixteenth-century” expansion from 1400/1450 throughout the seventeenth and into at least the early eighteenth century. Moreover, the major expansion of production and growth of population remained in Asia, as already noted in chapter 4, while Europe only caught up very belatedly. Both expansions were fueled by the inflow of American money brought by the Europeans. In terms of world historical reality and development, it was really (only) American money that permitted the Europeans to increase their participation in this mostly Asian-based productive expansion of the world economy. Moreover, we must conclude that the strongest and most dynamic parts of the world economy still remained in China and India.
I argue therefore that these and other major Asian economies had, and continued to have, a pattern of long cyclical economic growth reaching the upper turning point of its expansive “A” phase, then passing on to a contractive “B” phase. Moreover, these Asian economies were of course all connected to each other. Therefore, it cannot be “coincidental” and should not be surprising that they were experiencing such expansive and contractive phases nearly simultaneously, if that is what was happening. However, these Asian economies were not only related to each other, they were all part and parcel of a single global economy, which presumably had its own long cycle of development. The argument here is that the upward “A” phase since about 1400 of such a long cycle reached its upper turning point and gave way to a succeeding long “B” phase, especially for the more central economies in Asia between 1750 and 1800. Moreover, as I argued in Frank (1978a) and again in chapter 5, the shorter Kondratieff long cycle was in a “B” phase from 1762 to 1790.
That long “A” phase of expansion that came to an end in Asia in the late eighteenth century and its subsequent (cyclical?) decline offered the still marginal West its first real opportunity to improve its relative and absolute position within the world economy and system. Only then could the West go on to achieve a (temporary?) period of dominance. The contemporary analogy is that the present world economic crisis permits the rise of what are now called the “Newly Industrializing Economies” (NIEs) in East Asia, again at the “margin” of the world economy. We may note that like these East Asian NIEs now, Europe then engaged first in import substitution (at that time in what was the “leading” industry of textiles previously imported from Asia), and increasingly also in export promotion—first to their relatively protected markets in West Africa and the Americas and then to the world market as a whole.
There are also earlier historical analogies in which some but not all marginal and peripheral “marcher states” innovatively challenged “core” economies, societies, and polities (or, empires), as Christopher Chase-Dunn and Thomas Hall (1997) argue. The previously (semi-) peripheral economies took advantage of the opportunities (and tried to avoid the dangers) generated by crises at the center/s of the world economy/system (Gills and Frank 1992; also in Frank and Gills 1993). It cannot be emphasized too much or too often that this positional change (as in musical chairs) each time owed more to the relatively sudden system-wide crisis at its center than to any long “preparation” or previously predictable “rise” of the previously (semi-)peripheral region or its newly “leading” sectors.
Thus, we are led to inquire whether the late eighteenth century may have begun a “B” phase world political economic decline in Asia to the benefit of the previously relatively marginal and now rapidly ascending Europeans. The previously identified world system cycle (Gills and Frank 1992; also in Frank and Gills 1993) implies that the simultaneous “fall” of so many important powerful states—the Ottomans, Mughals, Safavids, Qing, and Hapsburgs—would be the accompaniment of a world system crisis and “B” phase. We will speculate a bit at the end of this chapter about the historical continuation of this long cycle, whose “B” phase appears to have begun in Asia at the end of the eighteenth century. The consideration of related theoretical problems is postponed to chapter 7.
We must still pose the important historical question of just when, not to mention why, political economic declines really began in Asia and whether they were part of a long-cycle “B” phase or not. These related questions also have far-reaching theoretical and ideological implications: were these declines in the East also initiated and caused, or only accelerated—if even that—by “the Rise of the West”?
The Decline of the East Preceded the Rise of
the West
This heading is borrowed from Janet Abu-Lughod's masterful Before European Hegemony (1989). Alas, she did not pursue the matter beyond A.D. 1350. We have seen that the “East” took several centuries more to “decline,” and that the “West” did not really “rise” until very belatedly. We are able to say very little about why the Asian economies and the Ottoman, Safavid, Mughal, and Qing empires declined. Indeed, the discussion of the eighteenth century in Asia has been ambiguous and confusing:
For a considerable time now, in the historiography of Indonesia, India and the Arabic countries, the eighteenth century has been seen as a period of decline. The English saw the decline as justification for empire; the Dutch saw in the period an eclipse of the noble Company; the Arabs only regarded it as background to their modern period. In recent years this notion of decline has been criticized by historians working in each of these major regions…. [Some warn] about the danger of taking political fragmentation as evidence of decay…. [Yet] for most features of the economy the meagre evidence processed so far suggests continuity rather than sharp change. (Das Gupta and Pearson 1987: 132–3)
Nonetheless, we must follow Fletcher's admonition and look for possible systemic processes and causes in Asia's eventual “decline.” Moreover, that has been my procedure for earlier periods, which has produced some significant tentative findings reported in Frank and Gills (1993) and Frank (1993a). So we should also inquire if and how the decline of the East and the rise of the West may have been systemically related.
M. Athar Ali has recently addressed the same issue. How he poses the question is worth quoting in full, although his own tentative answer seems less than satisfactory. He notes that the fall of the Mughal empire has been attributed to all manner of “internal” factors—from too much bad influence of women to institutional inadequacies that made peasant exploitation inefficient but therefore all the more severe, which generated growing nationalism. He observes that a synthesis of all relevant factors is yet to be attempted; but, before even trying, we first need to place them in “the proper context.” Ali observes that
In following the scholarly discussion over the break-up of the Mughal Empire, I have been struck by the fact that the discussion should have been conducted in such insular terms. The first part of the eighteenth century did not only see the collapse of the Mughal Empire: The Safavid Empire also collapsed; the Uzbek Khanate broke into fragments; the Ottoman Empire began its career of slow, but inexorable decline. (Ali 1975: 386)
Ali goes on to suggest that it would be straining one's sense of the plausible to assert that it was coincidental for the same fate to overcome all these large regions at the same time. Therefore, also following Fletcher (1985), we should inquire whether it is possible to discover some common factor that caused these simultaneous events. Ali continues:
There is one remarkable point too, which may serve as a guideline in our search. The break-up of the empires directly precedes the impact from the armed attack of the Western colonial powers, notably Britain and Russia. But it precedes the impact with such a short interval that the question must arise whether the rise of the West was not in some ways, not yet properly understood, subverting the polity and society of the East even before Europe actually confronted the eastern states with its superior military power. It is a regrettable gap in our study of economic history of the Middle East [sic!] and India, that no general analysis has been attempted of the changes in the pattern of trade and markets of these countries, as a result of the new commerce between Europe and Asia. (Ali 1975: 386)
Ali's own attempts at a tentative answer are not satisfactory however, because of how he begins: “the major event between 1500 and 1700 was certainly the rise of Europe as the centre of world commerce” (Ali 1975: 387). The evidence amassed in this book contradicts this point of departure and obliges us to look for a different explanation. Ali goes on to suggest that European economic influence must have disrupted and weakened the Asian economies, not only relatively but also absolutely (Ali 1975: 388). This supposition is also contradicted by the evidence for the sixteenth century, especially for the seventeenth century, as well as for part of the eighteenth century, during which the Asian economies were, on the contrary, strengthened.
Then Ali argues that the supposed diversion of Asian income to Europeans and its denial to the ruling classes in Asia obliged the latter to increase agrarian exploitation to keep themselves afloat, and that “of course, spell[s] the end of the great empires” (Ali, 1975: 388). However, increased exploitation, especially of those working on the land, is usually not so much the result of declining income by those who rule them, as the result of greater and rising market opportunities to generate income for the latter from those who work the land for them. That has been the common experience in plantation and other agrarian export economies (Frank 1967). That polarizes the economy and society, making the rich richer and the poor poorer. Below, we will observe ample evidence for this in the seventeenth and eighteenth centuries in India and China as well.
In that way, economic expansion combined with polarization of income and status also resulted in atrophy in the very process that generated it. Therefore, the political stability of the Asian empires may have been undermined not so much by European competition in their economies, as Ali suggests. The growing economic and political strains in Asia may instead have been generated more by the Europeans' supply of silver and by the resultant increased purchasing power, income, and demand on domestic and export markets in the world economy and especially in Asia. That presumably increasingly skewed the distribution of income, which could have led to constraints on effective demand and growing political tensions, as we will see below.
Only in the second half of the eighteenth century, especially in the last third, did trends toward decline accelerate in the Ottoman, Indian, and Chinese empires. The decline was earliest and most accelerated perhaps in Persia and then in India, with the gradual loss of competitive advantages in textiles and the reversal of bullion flows (that is, outward rather than inward) after mid-eighteenth century.
So unless it was in Safavid Persia or in Timurid and/or Bukharan Central Asia, the earliest decline seems to have occurred in India; and it is also the one for which the most studies are readily available to us. So let us start with India, and go on to examine other parts of Asia after that.
THE DECLINE IN INDIA
Historiography on India has long debated whether and to what extent especially British colonialism was responsible for famine and deindustrialization first in Bengal and then elsewhere in India. Ironically, Western-aligned and Indian nationalist observers agree that the British victory at the Battle of Plassey in Bengal in 1757 marked the most important disjuncture. Western-aligned observers tended to argue that Britain brought civilization and development to India. Some Indian nationalist writers in the nineteenth century (reviewed by Chandra 1966) and many Soviet, Indian, and other “anti-imperialist” ones (including Frank 1978a) in the twentieth century have seen the decline of India as the result of the defeat in that Battle, which led to British colonization. That began the “Rape of Bengal” by the British East India Company, the destruction of the textile industry, the zamindari (large holdings) and ryotwari (small holdings) structure of landownership, the “drain” of capital from India, and so on.
Without wishing to pursue this dispute here, there is nonetheless legitimate doubt about just when and where economic decline began in India and elsewhere. Those who argue that it only began after 1757, or, like Amiya Bagchi, only after 1800, or indeed really only from about 1830 as Burton Stein (1989) suggests, must confront at least some evidence that significant economic decline had already started before any of these dates. Contrary to received allegations about “stagnation” in India and elsewhere in Asia prior to the arrival of the Europeans, we observed in chapters 2, 3, and 4 and in the section on a “seventeenth-century crisis” in chapter 5 that substantial economic growth continued in India well into the eighteenth century. That is also the summary judgment of the historical evidence about eighteenth-century India by Stein (1989). In his view, however, British policy did not cause significant economic damage in India until about 1830.
Yet others have observed beginnings of economic decline in India about a century earlier. “There is a definite decline in both silk and cotton production in Bengal from the early 1730s” (Rila Mukherjee, private communication 1995). Mukherjee (1994) offers evidence from Kasimbazar, a major Bengali silk-producing center, where the number of merchants supplying silk to the British East India Company declined from an average of 55 merchants with investments of 17,000 rupees in the period 1733–1737 to 36 merchants with 7,000 rupees in 1748–1750. After a crisis in 1754, these merchants vanished from the factory records overnight. Procurement/supply problems had been on the increase, and the hinterland was breaking down as elsewhere in coastal India. However, Bengal was also suffering from declining demand for its silk as Chinese competition grew in Bombay and Madras. Mukherjee (1990/ 91) also studied Jugdia, the most important Bengali cotton-producing area. There too, matters were “coming to a crisis in the production sphere” at the same time. There were problems of procurement such as late deliveries, shortfalls in supply, deteriorating quality, sudden price hikes, and general unreliability, so that “by the mid-eighteenth century we can already foresee some of the signs of deindustrialization” under the impetus of both stronger foreign capital and weaker local mercantile organization (Mukherjee 1990/91:128). It seems strange then that Richard Eaton's (1993) study of the Bengal frontier finds little or no economic decline, and at most a shift of economic activity from west to east toward and within Bengal before the mid-eighteenth century.
P. J. Marshall (1987: 290) also observes that “the stability of Bengal itself, which had lasted for several decades, began to crack in the 1740s. A stark picture is painted in a recent assessment….” Then he quotes from K. N. Chaudhuri (1978), who refers to a “push [of] the economy of Bengal towards the brink of general collapse.” Chaudhuri (1978: 308) himself goes on to refer to “the disruption of textile production…. ” Moreover, Chaudhuri (1978: 309, 294) observes that “the 1730s were a bad time for southern India” and that “the great Anglo-French wars of the mid-eighteenth century further dislocated trade that was already in serious difficulties; Madras suffered particularly severely.” Sinnappah Arasaratnam (1986: 211), questioning whether the Coromandel trade underwent stagnation or decline, writes that especially after 1735, “there is no doubt that the region saw a downturn in economic activity and therefore in commerce.”
Tapan Raychaudhuri and Irfan Habib, in volume 1 of The Cambridge Economic History of India, add that
considerably more important than the decline of shipping in Bengal was the downfall of the great commercial marine of Gujarat in the early eighteenth century. Here again it is worth noting that the decline of Gujarat's maritime trade, although hastened by the growing political insecurity, had begun before the breakdown of law and order really began to bite…. The decline of the Mughal port of Surat and the disappearance of the fleet which was based at that port—the actual figures falling from 112 vessels in 1701 to 20 in 1750—were arguably the most important developments in the trade of the Indian Ocean during the period. (Raychaudhuri and Habib 1982: 433)
Yet, Surat in the west and Masulipatam and other Coromandel coast centers and their hinterlands to the east had declined in the early decades of the eighteenth century, as a consequence of the simultaneous weakening of the Mughals, Safavids, and Ottomans (Das Gupta and Pearson 1987:140). Europeans were able to take commercial competitive advantage of this Asian decline and of their Asian competitors' distress elsewhere as well. Marshall observes that these
would have been difficult times for Asian ships whether the Englishman was offering his services in competition with them or not…. Only when their Indian counterparts were drastically weakened…did the English influence on western Indian trade begin to grow…. All Asian ships appear to have been losing ground in southeast Asia and China to British ships from Madras and Calcutta in the early eighteenth century. (Marshall 1987: 293, 292)
However, the Indian economic difficulties seem to have spread and/or deepened in the third and fourth decades of the century, and also seriously to have affected the heretofore competitively strongest regions, like Bengal. Moreover, the average annual imports (based on invoice values and sales values) from Asia by both the Dutch and British East India companies declined in the decades of the 1730s and 1740s (but recovered in the 1750s), “confirming the assumption that this was a period of marked competition in the European-Asian trade” (Steensgaard 1990d: 112–3). Chinese merchants were massacred in Dutch Batavia in 1740. It was also a time of “a general European recession in the colonial trade” (Steensgaard 1990dl no) and a time of war—of Jenkins' Ear beginning in 1739 and of the Austrian Succession in 1740, which Walter Dorn (1963:164) characterized as “in essence a commercial one, a struggle of rival merchants” fought about overseas commerce (Frank 1978a:no). But this observation is not limited to Dorn: “The last war which was undertaken altogether on account of the colonies [was] the Spanish war of 1739,” observed Adam Smith ([1776] 1937: 899).
Returning to India, it does seem important to inquire further whether political problems and then European colonialism may well have come on the heels of and only accelerated an already earlier and still ongoing economic decline in various parts of India—and elsewhere. At the same time, it is also important to inquire whether, how, and to what extent such decline was related to or even in part generated by a European rise, even before European political/military colonial intervention in the declining region.
Arasaratnam (1995) considers this matter with regard to the Coromandel coast. Dutch colonial intervention in Southeast Asia and British efforts to profit more from the China trade simultaneously disadvantaged the Coromandel coast and its Indian merchants. Growing Dutch VOC political and commercial control in Indonesia and especially in Java and its choking effects on Malacca also cut into the long-standing Coromandel ties with Southeast Asia. These had been both bilateral and multilateral as part of the wider trading network outlined above, and both were severely damaged. The British East India Company's growing direct links with China also served to cut Coromandel out of previously important trading business. Arasaratnam summarizes some commercial changes in the early and mid-eighteenth century and “the single most decisive feature” for Coromandel, the decline in its trade with Southeast Asia:
As far as Coromandel was concerned, European trade, in its new forms and directions, cut deep into the trade that had been traditionally carried on in that region…. It was this [Southeast Asian] artery that was punctured violently by the Dutch in the course of the seventeenth century. Indian trading links were cut off one by one with the Moluccas, Macassar and the Celebes, Bantam and the north Javanese ports, [and the] west coast of Sumatra. In a series of military and naval actions, these ports and markets were shut off from competitive trading. It meant denial of a lucrative export market in textiles for the Coromandel shippers. It meant the wresting from their hands of the import trade in spices to Coromandel. And it meant the denial of mineral—gold and tin—which had formed a profitable import to India. It must be emphasized that these were achieved by brute force and not by superior commercial expertise…. The boom in the China trade in the second half of the eighteenth century and the consequent changes to the inter-regional trade of Asia constituted the final blow to the Coromandel trade…. Coromandel like Bengal, was drained of bullion to purchase Chinese exports, leading to a general shortage of capital. The Coromandel merchants had little or no role to perform in this newly emerging trade pattern…. The extension of direct English control over important parts of the country dispensed with their role as middlemen…. As the amount of power wielded by the Europeans grew, so also did [the Indian political power brokers'] dependence on it and their commitment to it. They were decidedly on the side of the European in their confrontation with the merchants and helped to undermine the interests of the merchants. Likewise they took the side of their European masters against the hinterland power and contributed to undermining the latter in the interest of the former. (Arasaratnam 1995: xiv-28, 29, 41, 40)
In summary, there is substantial evidence that economic decline in India and in particular in the Bengali textile industry had already began before the Battle of Plassey in 1757. The accompanying political disarray of the Mughals and others rendered Asians vulnerable to predatory European merchant, naval, and ultimately political power. The Europeans captured the carrying trade from the indigenous shipping and merchants in the mid-eighteenth century in Indian waters on a new scale. India was the first Asian political economic power to begin the “fall” to European hegemony.
THE DECLINE ELSEWHERE IN ASIA
The same issue arises with regard to other regions of Asia, in particular in West, Southeast, and East Asia. In the Ottoman Empire, economic expansion seems to have peaked in the late seventeenth century. The Ottoman economy became gradually weaker during the first half of the eighteenth century and decline accelerated in the last third of the century. Ottoman economic power was gradually undermined in the late eighteenth century by the ascendance of new industrial centers and the increasing commercial dominance of the Europeans. Political power began to be eclipsed by the Europeans at the turn of the eighteenth to the nineteenth centuries, following Napoleon's expedition to Egypt.
In the eighteenth century, Ottoman foreign trade as a whole stagnated and therefore declined as a share of growing world trade. In particular, trade with Europe declined, and among Europeans the French increasingly replaced the British as Ottoman trading partners. Moreover in the late eighteenth century, Ottoman exports and even domestic markets began to suffer from foreign competition and apparently from the French connection, especially with the Americas. Cheaper cotton from North American began to displace that from Anatolia, and cheaper Caribbean coffee to displace Arabian coffee exported through Cairo. Caribbean sugar invaded the domestic market. All these competing products were produced by slave labor in the Americas.
The Ottoman economic “decline” seems to have accelerated after 1760. Among the indications are the following: Migration from rural to urban areas increased. More and more agricultural land, both absolutely and relative to the total, owned by the relatively landed rich was exempted from taxes. Concomitandy, tax-farming increased on the remaining agricultural population, already poor. That increased their poverty further, contributed to driving them off the land, and made the distribution of property and income increasingly unequal. The production and export of agricultural and other raw materials increased only slowly. However their share of total exports increased rapidly, as cotton textiles and manufacturing exports decreased. Especially after 1760, the weaving and export of cotton cloth declined; and some of the foreign trade was replaced by Ottoman interregional trade. Ottoman state control weakened as the strength of its central institutions waned, and regional decentralization grew. Market-derived state revenue declined at Istanbul and several other cities. Contemporary documents quoted in Charles Issawi (1966: 30–37) also testify to increasing French and decreasing Ottoman competitiveness at one Ottoman port city after another.
The 1760s were also years of inflection and subsequent decline, according to various studies of Ottoman textile and other industries (see Islamoglu-Inan 1987), especially by Mehmet Gene. In Aleppo, the beginnings of decline were already evident in 1750 (Masters 1988: 30 ff.). Halil Inalcik and Donald Quataert (1994: 703) summarize: “These trends are based on incomplete evidence, but they fit with a general impression of faltering commercial conditions in the last decades of the eighteenth century and the first decade of the subsequent century.” Huri Islamoglu-Inan (private communication 1996) questions even this “decline” of the Ottoman economy in view of its partly successful competition with British textiles both at home and abroad in the mid-nineteenth century.
What these observers do not inquire about but we may consider is whether, how, and to what extent this Ottoman “faltering of commercial conditions” at the end of the eighteenth century was also part of the European-Atlantic economy's Kondratieff “B” phase since 1762, which presumably helped to reduce Ottoman markets in the West and maybe to increase the competition from colonial slave production in the West. Apparently, the Ottomans were not able, or at least were less able, to benefit from the renewed “A” phase recovery at the turn of the century, while the Europeans did. The cotton textile exports Islamoglu-Inan refers to may have derived some benefit from this recovery. However later in the nineteenth century, the Europeans destroyed much of the Ottoman textile industry and prevented its establishment in Egypt by Mohammed Ali, despite his desperate efforts to do so (Issawi 1966).
In Qing China, the decline came later. In the eighteenth century, China undoubtedly experienced economic and population growth. Its recuperation from the crisis in the middle of the seventeenth century, discussed in chapter 5, may have been “delayed” by the Ming/Qing succession and reorganization of the country until say 1683, when Taiwan was reincorporated and all restrictions on trade were lifted. Then, a veritable economic boom started in China. However, silver imports declined drastically in the 1720s and even more so at mid century, before increasing again after 1760 and being especially high in the 1780s (Lin 1990). In 1793 Emperor Ch'ien-lung (Qianlong) wrote King George III through the English ambassador to China the oft-quoted letter that “as your ambassador can see for himself, we posses all things. I set no value on objects strange or ingenious, and we have no use for your country's manufactures…. There was [is] therefore no need to import the manufactures of outside barbarians in exchange for our own produce” (Frank 1978a: 160).
Wolfram Eberhard (1977) dates the beginning of Qing Chinese internal decline to the Shantung rebellion in 1774 and the resurgence of the White Lotus Society in 1775 (the same time, we may observe, as the American Revolution and other events during the 1762–1790 Kondratieff “B” phase analyzed above). Europeans replaced Chinese traders in the China Sea only at the end of the eighteenth century; and even then the balance of trade remained heavily in China's favor (Marks 1996: 64). As is well known, it was only the British recourse to opium grown for them in India that finally reversed this situation in the nineteenth century.
Thus in China, rapid economic dislocation occurred only in the early nineteenth century, via the opium trade and its bullion drain of silver out of China, which destabilized the entire economic system. This weakening process culminated in the Opium wars and the “fall” of China. Victor Lippit's “The Development of Underdevelopment in China” (in Huang 1980) deals almost exclusively with the nineteenth century. Lippit does rather well in denying the historical or theoretical basis of most received attempts to explain China's underdevelopment. These attempts at explanations have been made in terms of “the family system” (Marion J. Levy), “pre-industrial stage theory” (A. Eckstein, John King Fairbank, L. S. Yang), and “the vicious circle of poverty” (Ragnar Nurske), none of which can account for any of China's success before 1800, nor for much of the lack of the same after 1800 (also see Lippit 1987).
However, Lippit attributes too much causative influence to the weight of Chinese bureaucracy and class structure. Indeed, as I already argued in my own contribution to C. C. Huang's book (Frank 1980), Lippit's contribution is mistitled for several reasons, only one of which is that he sees stagnation in China while its economy was still expanding before 1800. Indeed, he later rectifies this judgment himself in Lippitt (1987: 40, 42) when he recognizes “renewed economic expansion” and “thriving economic activity” between the sixteenth and eighteenth centuries. Nonetheless in both books, he attributes nineteenth-century “underdevelopment” to class-generated internal weaknesses and virtually dismisses all influences of China's position in the world economy.
Evidence of some economic decline and sociopolitical crisis can also be found in mainland Southeast Asia during the last third of the eighteenth century (Tarling 1992: 572–95). However new research by Anthony Reid (1997) and his colleagues complicate this picture. Their revisionist thesis is that “there was a distinct commercial expansion in the region from about 1760” accompanied by a decline in most indices of Dutch VOC activity. The arrival of ships at Malacca grew from 188 in 1761 to 539 in 1785, of which 54 and 242, respectively, were captained by Malays, 55 and 170 by Chinese, and 17 and 37 by British. Almost half of these and almost all of the increase represent ships arriving from Siak, only 20 from China and about 40 from India (Reid 1997: tables 1, 2). Yet Reid also finds that Southeast Asian sugar exports reached a (temporary) peak in 1760 and that Dutch VOC imports of textiles to archipelago Southeast Asia declined from 272,000 pieces to 102,000 (Reid 1997: table 5). And Reid's comment is that “assembling the relevant data suggests that for imported textiles, as for exports, the new upturn occurred precisely in the period when documentation is most difficult at the end of the eighteenth century” (Reid 1997). These findings, and/ or the lack of them, then also raise the question: was there really such an upturn precisely after 1760? Not only is the documentation scarce, but the declining Dutch VOC trade from India may reflect not only the economic decline of both (perhaps to the benefit of the British East India Company since arrivals from Indian ports remained stable between 1765 and 1785). Also arrivals from the still relatively flourishing Chinese ports tripled from 7 to 21 ships but remained quantitatively quite modest compared to the intra-Southeast Asian ones (Reid 1997: table 2). Moreover, any purported “distinct commercial expansion” in Southeast Asia would have had to go against the cyclical trend elsewhere in the world. Indeed, according to Reid's table 4, the value of average annual Southeast Asian exports of pepper, coffee, and sugar were (in thousand Spanish dollars) 864 in the 1750s; 1,236 in the 1760s, 1,043 in the 1770s, 1,076 in the 1780s, and 1,310 in the 1790s. That makes for a 50 percent increase over the fifty years from 1750 to 1800, including a 5 percent increase after 1760 (even with the absolute decline in the 1770s and 1780s)! That hardly sounds like a “distinct commercial expansion,” which on further reflection seems more like a storm in a Southeast Asian teacup. So Southeast Asia as well may have remained in step with other regions.
We need more empirical confirmation of major regional and/or even pan-Asian economic decline, accompanied or followed by an inflection in the population growth rate by the mid-eighteenth century. That would place the late eighteenth-and then nineteenth-century rise of Europe to relative dominance into a rather different light and historical perspective. In that case, neither the Eurocentric European exceptionalist nor the Indo-, Sino-and other Asian nationalist interpretations of this period would be adequate. Perhaps there really was a long economic cycle in whose downward “?” phase one after another region and empire in Asia declined. Then, the previously rather marginal Europeans and later the North Americans were able to take advantage of this Asian cyclical “B” phase decline, like the East Asian NIEs today: it is then that the Europeans staked out their own claim to leadership and hegemony in the world economy—temporarily! However, not only did “the Rise of the West” follow “the Decline of the East.” The two were also otherwise structurally and cyclically dependent on each other as inextricably interrelated parts of a single global economy. That is what I seek to demonstrate in the following sections.
How Did the West Rise?
So how did the West rise to win this competition—temporarily? The introduction to this book reviewed a number of received theories and answers, all of which allege one or another or a whole combination of European and by extension Western exceptionalisms. The introduction also contended that all of these theories, Marxist, Weberian, and/or whatever, are fundamentally flawed by their Eurocentrism. J. M. Blaut's (1993a) The Colonizer's Model of the World: Geographical Diffusionism and Eurocentric History analyzes a dozen of these answers and their flaws chapter and verse. Our first chapter cites Goody, Said, Bernal, Amin, Hodgson, Tibebu, and Lewis and Wigen, who also demystify this Eurocentrism. However, they mostly concentrate on ideological critiques of the manifest and hidden ideologies under review. Also cited is my own critique (Frank 1994, 1995) of the “modern capitalist world-economy/system” alternative proposed by Braudel and Wallerstein. But my earlier work too is limited mostly to a critique, although Frank and Gills (1993) offers an alternative world system interpretation of world history before 1500.
The historical/empirical sections of the present book demonstrate that the real world during the period from 1400 to 1800, not to mention earlier, was very different from what received theory has alleged. Eurocentric history and “classical” social theory, but also still Wallerstein's “modern world-system” suppose and/or allege European predominance, which simply did not exist. Until about 1800 the world economy was by no stretch of the imagination European-centered nor in any significant way defined or marked by any European-born (and European-borne) “capitalism,” let alone development. Still less was there any real “capitalist development” initiated, generated, diffused, or otherwise propagated or perpetrated by Europeans or the West. That occurred only by the stretch of the Eurocentric imagination, and even that only belatedly after the nineteenth century, as Bernal has already emphasized. A related question then is whether there had already been any “capitalist [development of] underdevelopment.” For Latin America and the Caribbean, that argument (Frank 1966, 1967) can probably still stand, and perhaps for the slave trade regions of Africa as well. The argument was that in India, this process only began after the Battle of Plassey in 1757 (Frank 1975, 1978a). However, this historical review does raise some question as to what extent the Indian and other Asian decline was “imposed” by Europe, not to mention by “capitalism.”
For, the data in the preceding sections have shown unequivocally that the world economy was preponderantly Asian-based. Europeans had been clamoring to attach themselves to it for centuries before Columbus and Vasco da Gama, which is what propelled them to seek some, any, and especially a golden way to do so in the first place. And yet for centuries after these European (not world!) pioneers, other Europeans still only clambered very belatedly, slowly, and marginally to attach themselves to the Asian economic train. Only in the nineteenth century did they succeed in finding a place in the locomotive.
CLIMBING UP ON ASIAN SHOULDERS
So how did the West rise? The answer, literally in a word, is that the Europeans bought themselves a seat, and then even a whole railway car, on the Asian train. How were any—literally—poor Europeans able to afford the price of even a third-class ticket to board the Asian economic train? Well, the Europeans somehow found and/or stole, extorted, or earned the money to do so. Again, how so?
The basic answer is two-fold, or three-fold. The most important answer is that Europeans obtained the money from the gold and silver mines they found in the Americas. The secondary answer is that they “made” more money, in the very good business first of digging up that silver—or more accurately, obliging the indigenous peoples of the Americas to dig it up for the Europeans. The Europeans also engaged in a variety of other profitable businesses they ran in—and to—the Americas. These were first and foremost the slave plantations in Brazil, the Caribbean, and the North American South; and, of course, the slave trade itself to supply and run these plantations. The Europeans employed and exploited perhaps a million workers at any one time in this profitable business, by Blaut's estimate (1993a: 195). Europeans were able to make still more money selling their own European-made products to these and other people in the Americas, products for which Europe otherwise would have found no other market, since they were not competitively salable in Asia.
The Keynesian multiplier did however operate also in Europe, first through the infusion of the American-derived money itself, and then also through the repatriation and investment in Europe of profits from the Americas, Africa, and from the “triangular”—including especially the slave—trade among them. Of course, Europe also derived profits from the aforementioned European production and export of its goods to the Americas and Africa. All these European sources of and machines for finding and making money have been alluded to in the earlier empirical sections of this book. They need not be elaborated on here, because they have already been researched and demonstrated countless times over, without however seeing some of their implications nor drawing the necessary conclusions, outlined below.
In order to avoid a tedious recounting or Marx's language of “capital dripping with blood and sweat,” it should be sufficient to allude to everybody's favorite observer, Adam Smith:
Since the first discovery of America, the market for the produce of its silver mines has been growing gradually more and more extensive. First, the market of Europe has become more extensive. Since the discovery of America, the greater part of Europe has improved. England, Holland, France and Germany; even Sweden, Denmark and Russia have all advanced considerably both in agriculture and manufactures…. Secondly, America is itself a new market for the produce of its own silver mines; and as it advances in agriculture, industry and population…its demand must increase much more rapidly. The English colonies are altogether a new market…. The discovery of America, however made a most essential [contribution]. By opening up a new and inexhaustible market to all commodities of Europe, it gave occasion to a new division of labour and improvements of art, which, in the narrow circle of ancient commerce could never have taken place for want of a market to take off the greater part of their produce. The productive powers of labour were improved, and its produce increased in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants…. (Smith [1776]1937: 202, 416)
As Smith knew, it was America (in a word) that accounted for the increase in the real revenue and wealth of the inhabitants of Europe. Moreover, Smith repeatedly argues that even Poland, Hungary, and other parts of Europe that did not trade with the Americas directly, nonetheless also derived indirect benefit for their own industries from the same. Moreover of course, as Ken Pomeranz (1997) emphasizes and analyzes, the European exploitation of native, bonded labor and slave labor imported from Africa in combination with the resources of the Americas not only afforded Europe additional resources for its own consumption and investment but also lightened the pressure on scarce resources in Europe itself.
Smith also recognized Asia as being economically far more advanced and richer than Europe. “The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal in the East Indies, and in some of the eastern provinces of China…. Even those three countries [China, Egypt, and Indostan], the wealthiest, according to all accounts, that ever were in the world, are chiefly renowned for their superiority in agriculture and manufactures…. [Now, in 1776] China is a much richer country than any part of Europe” (Smith [1776]1937: 20, 348, 169).
Moreover, Smith also understood how the poor Europeans were able to use their new money and increased wealth to buy themselves tickets on the Asian train. Continuing with the third point in his discussion excerpted above, Smith writes:
Thirdly, the East Indies [Asia] is another market for the produce of the silver mines of America, and a market which, from the time of the discovery of those mines, has been continually taking off a greater and greater quantity of silver…. Upon all these accounts, the precious metals are a commodity which it always has been, and still continues to be, extremely advantageous to carry from Europe to India. There is scarce any commodity which brings a better price there [and it is even more advantageous to carry silver to China]…. The silver of the new continent seems in this manner to be one of the principal commodities by which the commerce between the two extremities of the old one is carried on, and it is by means of it, in great measure, that those distant parts of the world are connected with one another…. The trade to the East Indies, by opening a market to the commodities of Europe, or, what comes to the same thing, the gold and silver which is purchased with those commodities, must necessarily tend to increase the annual production of European commodities…. Europe, instead of being the manufacturers and carriers for but a small part of the world…have now [1776] become the manufacturers for the numerous and thriving cultivators of America, and the carriers, and in some respect the manufacturers too, for almost all the different nations of Asia, Africa, and America. (Smith [1776] 1937: 206, 207, 417, 591; my emphasis)
The Asian market for the Europeans was the same thing as silver, as Smith remarked, for two related reasons: One is that silver was their only means of payment. The other is that therefore the Europeans' main business was the production and trade of silver as a commodity itself. That was the main source of the profits Europeans derived from their trade both within Asia and between Asia and Europe.
Braudel declares himself “astonished,” “as a historian of the Mediterranean,” to find that the late eighteenth-century Red Sea trade was still the same “vital channel” in the outflow of Spanish-American silver to India and beyond as in the sixteenth century. “This influx of precious metal was vital to the movements of the most active sector of the Indian, and no doubt Chinese economy” (Braudel 1992: 491). India “had in fact been for centuries subject to a money economy, partly through her links with the Mediterranean world” (Braudel 1992: 498). “Cambay (another name for Gujarat) could only survive, it was said, by stretching out its arm to Aden and the other to Malacca” (Braudel 1992: 528). Gold and silver “were also the indispensable mechanisms which made the whole great machine function, from its peasant base to the summit of society and the business world” (Braudel 1992: 500). Braudel himself concludes that “in the end, the Europeans had to have recourse to the precious metals, particularly American silver, which was the ‘open sesame’ of these trades” (Braudel 1992: 217). “From the start, Spanish America had inevitably been a decisive element in world history” (Braudel 1992: 414). “Is not America…perhaps the true explanation of Europe's greatness?” (Braudel 1992: 387).
Precisely that is also the explanation of Blaut (1977, 1992, 1993a), who in all these regards seems to be the modern alter ego of Adam Smith. Both understand and explain the first two answers to the question of how the poor Europeans managed access to the thriving Asian market: (1) they used their American money, and (2) they used the profits of both their production/imports from and their exports to America and Africa, and their investment of the proceeds of all of these in Europe itself.
However, the third answer alluded to above is that Europeans also used both the American silver money and their profits to buy into the wealth of Asia itself. As Smith noted, and all the evidence reviewed above shows, Europe used its commodities, or what comes to the same thing, the only commodities it could sell in Asia, that is its American gold and silver, to buy Asian products. Moreover, as also documented above, Europe used its silver purchasing power to muscle in on the intra-Asian trade, which the Europeans called “country trade.” As noted above, it was the silver—and gold—trade itself that was really the mainstay of the European companies. Consider for instance this summary of Dutch VOC strategy:
The European precious metals, the Japanese silver obtained mainly against Chinese silk and other goods, and the gold obtained in Taiwan mainly against Japanese silver and Indonesian pepper were invested primarily in Indian textiles. These textiles were exchanged largely for Indonesian pepper and other spices but also sent to Europe and various Asian factories. The bulk of the pepper and other spices was exported to Europe but a certain amount [was] used for investment in various Asian factories such as those in India, Persia, Taiwan and Japan. Raw silk from Persia and China also found its way to Europe…. The pattern of Dutch participation in intra-Asian trade was determined in part by the requirements of the trade with Japan which was by far the most important Asian source of precious metals for the Company during the seventeenth century…. In certain years precious metals procured in Japan were of greater value than those received at Batavia from Holland. (Prakesh 1994: 1–192, 193)
More graphical still is a frequently quoted description of Dutch trade in 1619 from VOC director Jan Pieterszon Coen himself:
Piece goods from Gujarat we can barter for pepper and gold on the coast of Sumatra; rials and cottons from the coast [of Coromandel] for pepper in Bantam; sandalwood, pepper and rials we can barter for Chinese goods and Chinese gold; we can extract silver from Japan with Chinese goods; piece goods from the Coromandel coast in exchange for spices, other goods and gold from China; piece goods from Surat for spices; other goods and rials from Arabia for spices and various other trifles—one thing leads to another. And all of it can be done without any money from the Netherlands and with ships alone. We have the most important spices already. What is missing then? Nothing else but ships and a little water to prime the pump…. (By this I mean sufficient means [money] so that the rich Asian trade may be established.) Hence, gentlemen and good administrators, there is nothing to prevent the Company from acquiring the richest trade in the world, (quoted in Steensgaard 1987: 139 and by Kindleberger 1989, who cites Steensgaard 1973 [same as 1972] but writes “sufficient money” and omits the last—and for present purposes the most significant—sentence!)
That is, Europeans sought to muscle in on “the richest trade in the world, ” but it took the Dutch rather more than just “a little water [“meaning money]” to pump this Asian well of treasures and capital, and of course that money came from the Americas. Thus, Europeans derived more profits from their participation in the intra-Asian “country trade” than they did from their Asian imports into Europe, even though many of the latter in turn generated further profits for them as re-exports to Africa and the Americas. So the Europeans were able to profit from the much more productive and wealthy Asian economies by participating in the intra-Asian trade; and that in turn they were able to do ultimately only thanks to their American silver.
Without that silver—and, secondarily, without the division of labor and profits it generated in Europe itself—the Europeans would not have had a leg, or even a single toe, to stand on with which to compete in the Asian market. Only their American money, and not any “exceptional” European “qualities,” which, as Smith realized even in 1776, had not been even remotely up to Asian standards, permitted the Europeans to buy their ticket on the Asian economic train and/or to take a third-class seat on it. That is looking at this European “business” in Asia from the demand side. The concomitant supply side, emphasized by Pomeranz (1997), is of course that their American money permitted the Europeans to buy real goods, produced with real labor and resources in Asia. These goods not only increased consumption and investment beyond what it otherwise could and would have been in Europe; they also diminished the pressure on resources in Europe itself.
To refer to another analogy, their American-supplied stakes permitted the Europeans an entry into the Asian economic casino. Why were they ultimately able to prosper there? Only because of their unending, albeit fluctuating, flow of American silver and gold. That is what provided the Europeans with their one competitive advantage among their Asian competitors, for these did not have money growing on American trees. However, even with that resource and advantage, the Europeans were no more than a minor bit player at the Asian, indeed world, economic table. Yet the Europeans gambled their American stakes for all they were worth in Asia and held out there for three centuries. Even though the Europeans also reinvested some of their Asian earnings to buy into still more and better seats at the Asian economic table, they were able to continue doing so only because their supply of cash was being continually replenished from the Americas. Witness that even in the eighteenth century, the Europeans had nothing else to offer any Asians, for European manufactures were still not competitive. However, Smith exaggerated worldwide sales of European manufactures, unless we read his qualification of “to some extent” as meaning almost nothing.
Certainly, the Europeans had no exceptional, let alone superior, ethnic, rational, organizational, or spirit-of-capitalist advantages to offer, diffuse, or do anything else in Asia. What the Europeans may have had, as we will consider further below and in our conclusions, is some of what Alexander Gerschenkron's (1962) calls the advantages of “backwardness” afforded by their position, as Chase-Dunn and Hall (1997) also observe, at the (semi-)periphery of the world economy!
So how is it that this otherwise apparently hopeless European gamble in Asia panned out—and finally hit the jackpot? Only because while the Europeans were gathering strength from the Americas and Africa, as well as from Asia itself, Asian economies and polities were also becoming weakened during part of the eighteenth century—so much so that the paths finally crossed, as in Rhoades Murphey's (1977) diagram, at about 1815. However, in the half century before that, another—fourth—element entered into the European/Asian equation. Adam Smith is also known for arguing that colonies did not pay, even though he wrote a chapter “On Colonies” and argued primarily against colonial monopolies. Moreover, Smith wrote just before the major technological inventions and innovations of the industrial revolution in Britain and Europe. This is not the place to enter into the arguments about whether there really was such a “revolution” and whether European rates of capital accumulation really did “take off,” as W. W. Rostow (1962) and others have contended.
SUPPLY AND DEMAND FOR TECHNOLOGICAL
CHANGE
R. M. Hartwell, who was one of the foremost students of the industrial revolution, observed that
J. H. Clapham wrote in 1910 that “Even if…the history of'the' industrial revolution is a 'thrice squeezed orange’, there remains an astonishing amount of juice in it.” Indeed, half a century later interest in the industrial revolution is increasing…. On the causes of the industrial revolution, for example, there is silence, simplicity or confusion. What was the prime mover, or what complex of movers was responsible? Agricultural revolution? Population growth? Improved technology? Increased trade? Capital accumulation? All of these have their supporters. Or must explanations be sought in noneconomic forces? Changes in religion, social structure, science, philosophy and law?…There seems to be little agreement…. The most difficult problem is to determine the extent to which this stimulus was exogenous (i.e., independent of the economy)—for example, an increase in demand through international trade…and to what extent it was endogenous (i.e., generated within the economy)…? (Hartwell 1971: 131, no, 115)
However, the real problem is what economy? My contention is that the key to the confusion is to be found in Hartwell's last sentence: Clap- ham's orange that was already thrice squeezed almost a century ago and innumerable times since then has always been regarded as only a British, European, or at most a “Western” fruit. Yet Graeme Snooks (1994:1–2) writes “we have only begun to scratch the surface of a field that needs to be ploughed long and deep…[and] we need to view the Industrial Revolution from an entirely different vantage point to those traditionally used.” Snooks and his contributors propose several different ones, but all of them continue to search for root and cause in Europe alone, in the “dynamic quality of England (and of Western Europe generally) throughout the pre-modern period” and over the entire past millennium at that (Snooks 1994: 11, 43 ff.). So despite their “entirely different” vantage point, in all this time and even still today, no one has really even attempted a globally holistic world economic/systemic explanation of the whole orange tree that could satisfy the maxim cited from Leopold von Ranke in my opening epigraph: “There is no history but universal history—as it really was”!
The question is how and why beginning around 1800 Europe and then the United States, after long lagging behind, “suddenly” caught up and then overtook Asia economically and politically in the one world economy and system. It is important to see that this pursuit and victory was part of a competitive race in the single global economy, whose structure and operation itself generated this development. That is, a number of well-known technological and other developments and investments in new productive processes took place in (Western) Europe and then in the United States. But it simply will not do to attempt to account for these departures by looking for their roots only or even primarily in a thousand years of history only in Europe, as Snooks (1994, 1996) still proposes in his “new perspectives on the industrial revolution” or as Robert Adams (1996) does in his “inquiry into Western technology,” which also examines only Europe, except when he goes back to the Iron and Bronze ages in the eastern Mediterranean and West Asia.
Yet, these technological developments of the industrial revolution should not be regarded as only European achievements. Instead, they must be understood more properly as world developments whose spatial locus moved to and through the West at that time after having long moved about the East. The relevant question is not so much what the “distinctive” European features or factors are of the industrial revolution as how and why this industrial shift took place from East to West.
We have already observed above that the answers to the reasons for this shift must be sought in both the decline of the East and in the rise of the West. The heretofore received “answers” to the “why/how?” question suffer doubly or triply. They suffer first from the misattribution of the reasons for the supposed exceptionalisms of superiority to Europe, which Blaut and others have already shown to be without any foundation in historical fact. Moreover, they suffer from looking for the reasons for the rise of Europe within Europe itself in the first place, and therefore neglecting analysis of the related decline of the (several) Easts. However, these two cases of misplaced concreteness also imply a third failure: they fail to look for the reasons of “the Rise of the West” and “the Decline of the East” in the structure and operation of the whole world economy itself. We have already observed how and why Europe was such a laggard in the economic race until well into the eighteenth century and how it improved its position by buying a ticket on the Asian train and then displacing some of its passengers, primarily through the European access to and use of American money.
The question remains, however, why and how Western Europeans and Americans then bested the Asians at their own game through recourse to the technological advances of the industrial revolution. How and why were these made then and there? A fully satisfactory answer may be still beyond us—but certainly no more than it is beyond all the erroneous ideological Eurocentric answers that others from Marx to Weber and their latter-day followers have proffered. A world economic analysis can certainly and easily do better than that even with the still limited elements, hypotheses, and evidence offered in an only very preliminary way below.
Technological progress through the invention and application of labor-saving machinery has frequently been attributed to the profitability of the same in a high-wage economy, particularly in North America. High wages create an incentive to reduce costs of production by replacing this high-wage labor with labor-saving machinery. And wages in North America were relatively high from early on, as so many observers including Marx pointed out, because the population/land-resource ratio was low and the expanding frontier offered an escape from low-wage drudgery. Therefore, it has been argued that in the nineteenth and twentieth centuries, the incentive to invent, innovate, and use labor-saving machinery increasingly shifted across the Atlantic from Europe to America—in the world market competition to reduce costs of production and maintain or gain market share.
We can and should apply the same kind of analysis and argument to the invention, innovation, and application of labor-saving machinery during the industrial revolution in Europe. Of the increase in the British growth rate in the eighteenth century, 80 percent—and 30 percent of the total growth between 1740 and 1780—have been attributed to increased productivity alone (Inkster 1991: 67). Europeans also, even more so than Americans, were in a race and struggle in the world economy, in which they had to compete for their markets primarily with Asians. However, Europeans were also relatively high-wage/high-cost producers. That is precisely why, as we observed above, Europeans were unable to sell virtually anything to Asians, who were much more productive and competitive with much lower wage costs. How and why so? Well, because also the population/land-resource ratio was relatively higher in many parts of Asia, certainly in China and India, than it was in the more sparsely settled Europe.
Moreover, Europe also had a frontier—in the Americas and later also in Australia, as Benjamin Higgins (1991) has pointed out. Certainly during much of the nineteenth century, European emigration across the Atlantic to the Americas served to lower the population/land-resource ratio well beyond what it otherwise would have been. Thus, the lower European population and its safety-valve emigration to the Americas both served to generate incentives for labor-saving machinery in Europe far more than the Asian population/resource base did.
Adam Smith was writing just as the inventions of the industrial revolution were getting up steam; he observed at the end of his chapter on “The Wages of Labour” that
the liberal reward of labour…increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion of the encouragement it receives…. where wages are high, accordingly we shall always find the workmen more active, diligent and expeditious, than where they are low…. the high price of provision, by diminishing the funds destined for the maintenance of servants, disposes masters rather to diminish than to increase the number of those they have…. [When there is an] increase in wages of labour…the owner of [capital] stock which employs a great number of labourers, necessarily endeavours, for his own advantage…to supply them with the best machinery which either he or they can think of. What takes place among the labourers in a particular workhouse, takes place, for the same reason, among those of a great society. The greater their number, the more they naturally divide themselves into different classes and subdivision of employment. More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. There are many commodities, therefore, which, in consequence of these improvements, come to be produced by so much less labour than before, that the increase of its price is more than compensated by the diminution of its quantity. (Smith [177611937: 81, 83, 86)
In a later section on the “effects of the Progress of Improvement upon the real Price of Manufactures,” Smith observes that so far in his and the preceding century the cost of production had already declined and in the future could decline most remarkably in manufactures made of coarser metals. On the other hand, he reports that in the clothing manufacture there had been “no such sensible reduction of price” (or cost of production). However, Smith does remark on three capital improvements and many smaller ones in coarse and fine woolen manufactures; but Smith does not yet in 1776 mention any such technological progress or “industrial revolution” in the cotton textile industry!
As A. E. Musson (1972) observes in the introduction to his Science, Technology, and Economic Growth in the Eighteenth Century,
there seems little doubt, however, that—whatever the motives of inventors—innovators or entrepreneurs were certainly much influenced by economic factors, such as relative prices, market possibilities, and profit prospects. Of this there is plentiful evidence in specialized historical studies of particular firms, too well known and numerous to list here. (Musson 1972: 53)
However, these relative prices and profit prospects, of course, were relative to world market possibilities, especially in competitive industries like textiles, which began the industrial revolution in Britain.
Indeed, Smith himself had already compared Europe, India, and China in this respect in 1776. Discussing their relative costs of transportation, he observed that in comparison to the expense of land-carriage in Europe the availability of inland navigation in China and India was already labor-saving and reduces the real and the nominal price of many manufactures.
Analogously, there was a certain rationale that chlorine bleaching of textiles, which had previously been done by exposing them to much sun, was invented and introduced where there was little sun to be had—in Britain. Similarly, its use of coal as the fuel for the industrial revolution was certainly induced and rendered economical by the growing shortage of wood for charcoal (that shortage also existed in China, but there capital was in shorter supply and coal more expensive).
Hartwell (1971: 268) observed that “there is general agreement that there was no capital shortage [in Britain] in the eighteenth century, although the implication of this admission is not always appreciated.” The main implication that is not always appreciated—indeed apparently not ever and also not by Hartwell himself—is that Britain and all of these other “economies” were connected through a single worldwide division of labor and circulation of goods and money. Therefore, the competitive forces of relative demand-and-supply shortages and availabilities of labor and capital operated not just in Britain, but also worldwide. That is, the combined demand-and-supply, both-sides-of-the-coin analysis must also be extended to the single global economy as a whole. Indeed, Smith himself began to do so in his above noted comparison of labor and other costs of transportation in Europe and Asia. It is difficult to understand let alone to accept therefore that although Snooks (1996) also stresses relative factor prices, contributors like E. A. Wrigley (in Snooks 1994) limit their analysis of competition to Britain and Western Europe. Indeed, Wrigley reexamines the writings of the classical economists from Adam Smith to David Ricardo regarding the relative prices of labor, capital, land, and other natural resources; yet unlike them(for example, Ricardo's law of international comparative advantage), Wrigley's focus is on Britain alone. Snooks goes further but writes that “the Industrial Revolution emerged from a thousand years of fierce competition between a large number of small, equally matched Western European kingdoms” (Snooks 1994:15).
Yet most certainly in the textile market, which was the primary locus of the industrial revolution, Britain and Western Europe had to compete primarily with India and China, as well as West Asia. Thus, relative supply-and-demand differences generated differential regional and sectoral comparative costs and comparative advantages in relation to each other around the whole world. These structural differences could then be the basis of differential rational microeconomic labor, land, capital, and labor-saving technological responses by the various enterprises, sectors, and regions of the single global economy. The argument here is that this (and not so much “internal” European circumstances) is where we must look for the real explanation of the incentive and option for investment in and application of technological advance in some parts of the world economy. The argument is not that “internal” European circumstances were not relevant to the economic decision-making process there. It is that circumstances “internal” to Europe (or to Manchester, or to James Watt's steam-engine shop) were created by its participation in the world economy. That is, the structure and dynamic of the world economy/system itself generate the differential comparative costs, advantages, and rational responses to the same all around the world and everywhere in the world.
It is gratifying to find a the similar, albeit more limited argument, by Giovanni Arrighi:
Our thesis has been that the main historical\] link between the three moments of the industrial expansion [in the fourteenth, sixteenth/early seventeenth, and late eighteenth centuries] in England was integral to an ongoing financial expansion, restructuring, and reorganization of the capitalist world-economy, in which England was incorporated from the very start. Periods of financial expansion were invariably moments of intensifying competitive pressures on the governmental and business institutions of the European trade and accumulation system. Under these pressures, agro-industrial production declined in some locales and rose in others, primarily in response to the positional disadvantages and advantages of the locales in the changing structure of the world-economy. (Arrighi 1994: 209)
Indeed, except that the world economic structure and process in question was not only that of Europe but the entire world as a whole. Also noteworthy is the period, industry, and the extent of the restructuring involved: Arrighi, following Nef (1934), Wallerstein, and others, stresses centuries-long industrial “expansion” and not “revolution.” In each cyclical occasion, the sectoral locus centered in textiles, which was probably the productive industry (as distinct from the financial service sector) in which competition was most rife. However, the first adjustment improved England's competitive position only relative to Flanders and the second one relative only to northern and southern Europe. Only the third adjustment managed Significantly to alter Britain's competitive position worldwide. Even that required over half a century, as net textile imports to the previous competitive leader, India, did not exceed its exports until 1816.
We cannot accompany this world development here, but we may illustrate it by citing a couple of testimonies from the beginning of the eighteenth and nineteenth centuries. Reference was already made in chapter 5 to the 1703 Anglo-Portuguese Treaty of Methuen that consolidated British access to the Portuguese market, which had been opened by three prior treaties since 1642. The British statesman J. Methuen waxed loud and clear about it in December 1702: “This agreement will have this consequence in Portugal that all their own manufactures, which at this time make a vast quantity of ill cloth and dear, will be immediately laid down and totally discontinued; and the cloth or stuffs of no other nation will be able to come into competition with those of England” on the Portuguese market. His Portuguese critic Luis da Cunha agreed at least on the facts that “what the British want is to improve their manufactures, and to ruin those started in Portugal” (cited in Sideri 1970: 57, 59). And so it turned out, as related in Frank (1978a,b), which also signals the irony that a century later Ricardo would defend British industry by exemplifying his “law of comparative costs/advantage” with the exchange of British textiles for Portuguese wine!
Regarding competition in the world textile market, we may return to Braudel:
The incentive worked the other way round—providing a stimulus to the threatened industry in Europe [by Indian exports]. England's first step was to close her own frontiers for the greater part of the eighteenth century to Indian textiles, which she re-exported to Europe and America. Then she tried to capture for herself this profitable market—something that could only be achieved by making drastic reductions in manpower. It surely is no coincidence that the machine revolution began in the cotton industry…. England, held back by high domestic prices and labour costs which made her the most expensive country in Europe, could no longer cope with the competition from the French and Dutch on the markets closest to home. She was being beaten to it in the Mediterranean, in the Levant, in Italy and in Spain…. [but] remained ahead in Portugal, which was one of her most ancient and solid conquests…and in Russia. (Braudel 1992: 522, 575)
In 1776, Adam Smith observed that “the perfection of manufacturing industry, it must be remembered, depends altogether upon the division of labour…[which] is necessarily regulated, it has already been shown, by the extent of the market”; Smith then added in the same paragraph that “without an extensive foreign market, they could not well flourish” (Smith [1776] 1937: 644). Perhaps Smith had read Matthew Boulton's 1769 letter to his partner James Watt: “It is not worth my while to manufacture [your engine] for three countries alone; but I find it very well worth my while to make it for all the world” (cited in Mokyr 1990: 245). Why then in their analysis of the factors that account for the industrial revolution do Mokyr, Snooks, and others view factor price and product competition primarily in British and at most in West European terms? By 1800, four out of seven pieces of cotton cloth produced in Britain were exported (Stearns 1993: 24); and these in turn accounted for one-fourth of all British exports—and one-half by 1850 (Braudel 1992: 572). By 1839, the Belgian Natalis Briavoinne was able to look back and observe:
Europe was for centuries dependent on India for its most valuable products and for those of most extensive consumption: muslims, printed calicoes, nankeens, cashmeres…for which she could only pay in specie…. There was hence impoverishment for Europe. India had the advantage of less expensive and more skilled workforce. By the change brought about in the mode of fabrication…Indian workers cannot compete…[and] the balance of trade is henceforth in our favor, (cited in Wallerstein 1989: 24)
The next competitive struggle (or the struggle long ongoing but now altered) was in transportation, in which the Asian economies had also excelled. European steam-powered railroads and ships finally made far-reaching incursions on world trade only in the nineteenth century, after having failed to reduce transportation costs Significantly during the three preceding centuries, as we observed in chapter 4.
The zillions of microeconomic decisions in the world market also have macroeconomic effects and causes as well. These macroeconomic relations have given rise to analyses by Marxist and other “supply-side” economists as well as by Keynesian and other “demand-side” economists. Both in turn have been combined, albeit so far rather inadequately, in attempts by L. Pasinetti (1981) and others to understand technological progress and also by Joseph Schumpeter (1939) and others to trace its long cyclical ups and downs. We cannot really assess and pursue these analyses here, other than to note how essential a real “revolution” still is in economics, which would finally achieve a double, quadruple, or indeed sextuple marriage of micro-and marcoanalysis, and also of supply-side and demand-side analysis, as well as of cyclical and “development” analysis, and finally would create an “extended family” of such economic analysis on a world economic/demographic/ecological scale. For a critical assessment and a very general indication of where and how to pursue such an economic analysis, see Frank (1991c, 1996).
What we can and must do, however, is at least to pose the question of how and where the technological advances of the industrial revolution may have been part and parcel—and therefore must also be accounted for and explained by—microeconomic options in macroeconomic contexts, and vice versa, within a pattern of Kondratieff long cycles and perhaps even longer world economic cycles.
Therefore perhaps, world economic conditions were ripe for some enterprises, sectors, and regions to improve their micro-and macropositions through measures of the “Newly Industrializing Economy” (NIE) type. Moreover, these measures could only be applied when world economic conditions became ripe for them; and these were more critical than any prior, long “preparation” by those who invoked them.
We have observed how this European noncompetitiveness in the world economy and in Asian markets in particular was counterbalanced, and even then only partly so, by the recourse Europeans had to American sources of money. Moreover, this flow and supply of money had to be constantly replenished. But even a temporary supply failure or decline in the American supply of money, as in part of the seventeenth century, a fortiori left Europeans essentially out of business in Asia. This American money-supply problem therefore generated either temporary and/or growing incentives for Europeans to compete in the world market by lowering their costs of production. The alternative would have been to be able to maintain or even increase their access to and reliance on American silver, as well as to the Asian credit that was guaranteed by this silver money. Can it be shown that after the mid-eighteenth century the availability to Europe of American money began a relative decline that threatened European market (share) penetration? That would have generated incentives for Europeans to protect and enhance their competitiveness on the world market by lowering their labor costs of production instead.
I have long since argued that the period after 1762 was a Kondratieff “B” phase in which profits declined at home and abroad for Europeans, especially from Caribbean sugar plantations and the slave trade, although the Mexican supply of silver rose again (but the Brazilian supply of gold petered out) (Frank 1978a). I have also argued that it was this Kondratieff “B” phase that generated the inventions of the industrial revolution (as well as the American and French political revolutions) in the last third of the eighteenth century. The simultaneous progressive (long cyclical?) weakening—for whatever reason—of the Asian economies and empires and the European Kondratieff “B” phase offered the typical opportunities and incentives for some previously rather marginal economies and sectors to vie for a better competitive position in the world economy. Some regions and sectors in Europe grabbed this opportunity to become in effect NIEs (like some East Asians today). They reduced their costs of production through labor-saving and energy-generating mechanization, which offered new possibilities to increase world market share—first by import substitution in European markets and then by export promotion to world markets. The higher European wages and factor costs of production supplied the opportunity and incentives to do so.
At least two other—and mutually related—circumstances offered a helping hand: One was the aforementioned economic and political difficulties of their indigenous and other competitors in some Asian markets.
However, the political economic weakening of their Asian competitors by their respective and common (cyclical?) decline also facilitated the greater European incursions in Asia. There, competitive indigenous market access, not to mention export, was also suppressed by political/ military oppression. They underlay both the “Rape of Bengal,” in what had been the richest region of India, as well as its extension through conquest and colonization by the British to other parts of India, and the semicolonization of China through the “open door” to European capital in the nineteenth century. These and other European colonial enterprises simultaneously opened colonial markets for industrial production and supplied capital to support British investment in its own industry. At the turn of the century, productivity in China still remained high, indeed still in the nineteenth century perhaps higher than in Japan (Inkster 1991: 233). So since China was economically still too productive and politically still too strong to be easily penetrated, the British had recourse to Indian-grown opium to force “open the door” in an attempt to take over—which despite all nineteenth-century efforts never succeeded very far.
Though we do not yet have a fully adequate “explanation” of these economic and political difficulties, the suggestion here is that it should be sought in the context of the microeconomic demand-and-supply conditions analyzed by Adam Smith for Europe and by Mark Elvin (1973) for China. But we must extend it to the world economic scale. The other circumstance, supplies and sources of capital, is discussed in the following section.
SUPPLIES AND SOURCES OF CAPITAL
The other circumstance aiding greater European incursion is their, and especially the British, supplies and sources of capital. Regarding the supply of capital, Hartwell (1971: 268) reviews the works of several experts and is very explicit: “There is general agreement that there was no capital shortage [in Britain] in the eighteenth century, although the implication of this admission is not always appreciated.” One implication Hartwell discusses (citing Hill 1967) is that capital from agriculture and commerce was the result of “spectacularly large sums flow[ing] into England from abroad—from the slave trade, and, especially, from the seventeen-sixties, from organized looting of India” (Hartwell 1971: 269). This is what Marx called “primitive” accumulation of capital through colonial exploitation.
The question of whether colonies pay has given rise to a long debate. Adam Smith wrote that
the profits of a sugar-plantation in any of our West Indian colonies are generally much greater than those of any other cultivation that is known either in Europe or in America. And the profits of a tobacco plantation though inferior to those of sugar, are superior to those of corn [meaning the wheat grown in Britain]. (Smith [1776]1937: 366)
Nonetheless, like Paul Bairoch among many others, Patrick O'Brien (1982, 1990) has on several occasions dismissed any significant contribution of overseas trade and colonial exploitation to capital accumulation and industrialization in Europe. There could not have been any such, since by his calculations this trade, not to mention profits therefrom, amounted to no more than 2 percent of European GNP in the late eighteenth century. Yet he also goes on to argue that “neither quantification nor more historical scholarship will settle debates about the significance of oceanic trade for the Industrial Revolution…. For the history of European (and even British) industrialization the ‘perspective of the world’ [the reference is to Braudel's tide] for Europe emerges as less significant than the ’perspective of Europe’ for the world” (O'Brien 1990: 177). Alas, O'Brien and so many others could not get it more wrong. For as Braudel well put it, Europe was able to consume beyond its means and invest beyond its savings. However, it did and was able to do both primarily as a function of the structure and development of the entire world economy as a whole.
Though Bairoch, O'Brien, and others deny these foreign contributions, José Arruda again reviews the debate on colonial sources of capital and markets, and concludes that
in short, commercial investments made in the colonies, integrated into the circuit of mercantile capital and tied to the bonds of mercantile policies, substantially and strategically contributed to the economic growth of Western Europe. They opened new areas for investments—areas essential for the growth and mobility and circulation of capital…. THE COLONIES DID PAY (Arruda 1991: 420, capitals in original)
Indeed, the colonies did pay. They supplied not only almost free money, but also servile labor and the cheap sugar, tobacco, timber, cotton, and other goods produced in the Americas for European consumption. Moreover, it was their American money that afforded Europeans access to the silk, cotton textiles, and spices they were able to buy from Asia and the additional money they were able to make from their participation in intra-Asian's “country trade.”
Therefore, it is relevant to our present concerns to record the profits Europe derived directly from its colonies (including also from India after the Battle of Plassey) before the 1815 crossover date in European and Asian “effectiveness.” Ernest Mandel (1968: 119–120) estimated the European colonial booty between 1500 and 1800 at 1,000 million gold pounds sterling, of which 100 to 150 million reached Britain from India alone between 1750 and 1800. This inflow of capital facilitated if not financed Britain's investments in the new industrial revolution, especially in steam engines and textile technology. For instance, as Eric Williams (1966: 102–3) recalled “it was the capital accumulated in the West Indies that financed Watt and the steam engine. Boulton and Watt received advances…. ” Yet by 1800 the capital invested in steam-operated industry in all of Europe was still less than what its colonial profits had been. The most scrupulous student of the British economy for that period, Phyllis Deane (1965), detailed “six main ways in which foreign trade can have helped to precipitate the first industrial revolution” (quoted in detail in Frank 1978a: 227).
Perhaps, as Robert Denemark suggests, another “test” of whether and how much this influx of colonial capital did pay is whether that drove down the rate of interest and thereby rendered the investments cheaper and more possible in Britain and other parts of Europe. The monetary historian John Munro (private communication 1996) responded to my query that in Britain the rate of interest declined from 12 percent in the early 1690s and 8 percent after the establishment of the Bank of England in 1694 to 3 percent in 1752. By then, the rate of interest in Britain had become competitive with that on the Amsterdam money market, which had been funneling capital into Britain, where the Bank of England increasingly “managed” it.
This trend, which was only interrupted by temporary wartime increases in interest rates, is confirmed by P. G. M. Dickinson (1967: 470 and passim), who records interest rates on British public debt at 7 to 14 percent in the 1690s, 6 to 7 percent from 1707 to 1714 and 5 percent after that until the 1730s, when they declined to 3 to 4 percent and then to 3 percent by 1750. Moreover, Dickinson finds interest rates on private debt closely following that of public debt, in particular as massive Dutch funds flowed into the British market. Though much of that was managed by the Bank of England to support the public debt, some of that capital also flowed into private investment, and the public debt itself freed private capital to be invested elsewhere in the economy in turn.
British contemporaries were well aware of and welcomed this decline in interest rates and debated a myriad of domestic “English institutional” considerations to promote and extend them into the farthest reaches of the British Isles (Dickinson 1967). Adam Smith ([1776] 1937:38–39) remarked that the maximum legal rate of interest was reduced in steps from 10 to 5 percent by one king and queen after another, but “they seem to have followed and not gone before the market rate of interest,” which in turn he saw to be related to the demand for, and inversely related to the supply of, capital.
In addition to the Bank of England, the two other of the “three sisters,” the British East India Company and the South Sea Company, also made significant contributions to the flow into and the management of the stock of capital in Britain.
All of these and other sources of capital including the Amsterdam funnel were of course derived directly from the colonies. However, these also had influences that were indirect but no less significant, for this decline in the interest price of money in London and Amsterdam was derived from their participation in the worldwide structure and operation of the global economy as a whole.
Therefore, until any and all of these domestic institutional considerations can be shown to be more important than the underlying increase in the flow and stock of capital and its world wide sources, Denemark's hypothesis seems amply confirmed. Nonetheless, having capital was only a necessary but not a sufficient reason to invest it. The mere availability of a supply of potentially investable capital, as emphasized by Hartwell, with its source in colonial exploitation in particular and in international trade in general, would not be enough to induce or account for its actual investment in the cost-reducing, labor-saving, and power-generating equipment of the industrial revolution. That required marco-and microeconomic incentives.
In a global economy, however, even such local and or sectoral microeconomic incentives anywhere were related to and indeed derived from competitive participation in the macroeconomic world economic structure and dynamic as a whole. This is my third and main argument: in that single global economy and system, “the Decline of the East” and “the Rise of the West” must have been related. The question is how?
A Global Economic Demographic Explanation
Let us review this entire process of Asian decline and European rise once again in global demographic and economic terms. Doing so suggests that paradoxically it may have been the very expansion of economic production and population in Asia in the previous centuries that militated against its continuation after 1800: previous chapters have looked at the long global economic expansion, particularly in Asia, which was fueled—but not started—by the European-supplied American money. We also noted that this expansion was even greater in Asia than in Europe. The new American money seems to have generated inflation in Europe and relatively more expansion of production, settlement, and population in Asia, as noted in chapters 3 and 4. However, the population/land-resource ratio had already been higher in Asia to begin with; and this expansion Significantly increased pressure on resources in much of Asia. If the same happened less so in Europe (or as is argued below the latter had more escape valves), the global expansion may well have increased the relative and absolute population/resource gap between East and West.
A DEMOGRAPHIC ECONOMIC MODEL
The relations between population and economic growth in general and with technological development in particular have been the subject of long debate at least since Adam Smith, David Ricardo, and Thomas Malthus. Disagreement and/or uncertainty continues today among the most expert demographers and development economists. Dominick Salvatore (1988: xiii) notes for instance that conflicting conclusions still emerge from recent reports by the United Nations, the World Bank, and the Working Group on Population Growth and Economic Development of the U.S. National Research Council (1986). The latter's oft-cited report reviewed a vast literature on the subject, posed nine different summary questions, and arrived at only very tentative conclusions.
Thus, it may be vain indeed for someone as uninstructed as I to enter into the fray. For, with regard even to the explanation of the acceleration of population growth from the mid-eighteenth century onward in Europe alone, the weight of expert opinion has shifted from attributing it to a decline in mortality to an increase in fertility instead. Nonetheless the recent judgment by the eminent historian William Langer (1985: 5) is that it “can never be explained with any high degree of assurance or finality.” Far more hazardous therefore is any speculation about the possible relations of population, economic, and technological growth on the scale of the world as a whole and about its regional differentiation. Indeed, as Ronald Lee (1986: 96–97) writes of his own expert modeling and analytic attempts, “can we explain the relative technological performance of Africa, China and Europe in a framework of this sort?…Of course there are great difficulties, perhaps even absurdities, addressing issues at such a high level of abstraction and in such generality. None the less, I believe the questions are sufficiently interesting to warrant exploration.” I agree; not only are the issues interesting, but addressing them is vital for any comprehension of what really happened in the world. However, as this entire book has argued, that requires addressing the issues at an even greater—global—level of generality. Since the experts fear to tread there if only for fear of having their efforts dismissed as absurd, it falls to a foolish nonexpert to risk even more absurdity.
Lee (1986) himself reviews the “debate” between Thomas Malthus and Esther Boserup (1981), and proposes a “dynamic synthesis.” Malthus, it will be recalled, argued that through the law of diminishing returns, increasing pressure on resources itself will limit the growth of population. Prior to the latter-day revival of Malthusianism, Malthus seems to have been challenged by the rapid and massive population growth in the world, made possible by repealing the law of diminishing returns through technological development, which increases the supply of resources and/or their returns. Boserup (1981), in her study of long-term trends in population and technological change, went a step further—or rather, returned to Smith, for whom population growth generated increasing returns. Boserup proposed that the growth of population and its concomitant pressure on resources can itself generate technological advance, which abolishes these decreasing returns. Lee, following F. L. Pryor and S. B. Maurer (1983), whom he credits as pioneers, seeks a “synthesis” of the Malthus thesis and the Boserup antithesis. Along the way, he constructs at least six different models of how changes or the lack of changes in population and technology might hypothetically interact.
The micro- and macroeconomic “explanation” of rapid technological change in Europe before Asia around 1800 that I propose turns out to be a variation on one of Lee's hypothetical models. My explanation is not Malthusian, which does not contemplate this technological change; and it is also not Boserupian, which attributes such technological development to rapid population growth itself. Therefore and unlike Lee's, my proposition is not a synthesis of their thesis/antithesis. Instead it is a denial of both. Indeed, my proposition is another antithesis to Boserup's, but not to Malthus. My even more “abstract and general” proposition than Lee's is that higher population growth in Asia impeded technological advance generated by and based on demand for and supply of labor-saving and power-generating machinery and that lower population growth in Europe generated the incentives for the same—in competition with Asia! One or two of Lee's “hypothetical models” contemplates such a possibility, but Lee does not seem to pursue this possibility. My reasoning is far less sophisticated than Lee's models, graphs, and equations, but my procedure may be much more realistic because I introduce three additional variables to complicate Lee's models—but eventually to simplify a real-world explanation. These three additions are (?) I put Asia, Africa, and Europe into the same globally competitive world economic bag, which is the major thesis and procedure of this book; (2) I differentiate the distributions of income, supply of labor and its price, and demand for products within economic regions, and therefore also relatively among these same regional economic parts within the competitive world economy as a whole (as per the first addition); and (3) I allow for the supply of potentially investable capital and for sources of such capital from—and indeed also its absence in or drain to—regions other than the economic region in which that capital is invested to produce labor-saving and/or energy-generating equipment and facilities.
I can briefly anticipate the resulting “dynamic,” to whose plausibility Lee devotes scant attention if only because he does not give these three variables the attention they deserve in reality: around 1800, technological advance takes place in Europe, but not in Asia, which had higher population growth but also more polarization in its distribution of income and scarcity of capital. Yet it also does not take place in Africa, where the population/resource ratio was even lower than in Europe; Africa had no access to sources of investable capital from the outside, as Europe did.
A HIGH-LEVEL EQUILIBRIUM TRAP?
So let us again review this long “A” phase expansion since 1400 and suggest why and how the economies and societies of Asia and Europe may have become more differentiated. The world economic expansion since 1400 was accompanied by large increases in production, as observed in chapters 2, 3, and 4. This also permitted significant population growth in the major economies of Asia, notably since the mid-seventeenth century, as observed in chapters 2 and 4. Thus, it was the world economic expansion that produced these effects in the major core economies and societies of Asia, and it did so there more than in the more marginal Europe. For it was the more productive Asian economies that had responded “better” to the influx of new American money.
The less productive and more marginal economies of Europe, the Americas, and Africa were not able to respond as fast or as much through higher production (as we saw in chapter 4), and Europe at least experienced higher inflation instead (as noted in chapter 3). Moreover, population growth also remained low in Europe until 1750, as we saw in chapter 4. Between 1600 and 1750 the rate was only one-fourth of what it would become in the century thereafter (Livi-Bacci 1992: 68). Therefore, wages remained higher in Europe than in Asia.
In the major economies of Asia on the other hand, world and regional economic growth increased the population and productive pressure on the resource base, polarized the distribution of income, and thereby constrained effective domestic demand for mass consumer goods. The same structure and process pushed down the wage costs of production without increasing price incentives to invest capital in labor-saving or energy-generating techniques of production, as we will note below. Adam Smith ([1776] 1937: 72) observed that, compared with Europe, the higher supply of labor and especially the greater poverty of laborers “of the lower ranks of people in China” depresses the wages at which they are willing to work. Moreover, Marks (1997a) suggests that in China faster growth in the production of rice and slower increases in its price than in population militated against incentives to invest in further improvements in productivity, especially through labor-saving devices. Indeed as already suggested in chapter 4, agricultural improvements in China and perhaps elsewhere in Asia (and probably also increased fertility and reduced mortality) outpaced those of Europe. “But the irony, of course, is that the subsequent growth in China's population may well have precluded the emergence of self-sustaining economic growth based on industrial development” (Marks 1997a).
Elvin quotes Smith to this effect as part of his own well-known argument (1973) about the “high-level equilibrium trap.” He seeks to explain the absence of an industrial revolution in China when all the other conditions and “prerequisites” seemed to be abundant, as we observed in our review of production, trade, institutions, and technology. The essence of Elvin's thesis is that China had “gone about as fer as ya' can go” (to quote the observation about Kansas City in the musical Oklahoma) with the agricultural, transport, and manufacturing techniques developed in the preceding centuries on the basis of abundant human labor combined with scarce land and other resources. For instance, grazing lands were particularly scarce, because all agricultural land is scarce with a high and growing population; however, that made labor cheap. Therefore, low costs of transport by water and high costs of fodder for animals made heavy reliance on human-powered transport the rational alternative choice. For example, a 1742 reference to a water pump argued that it could save four-fifths of the labor needed to irrigate agricultural land. However, construction of the machine required copper, which was too expensive—indeed, literally was money sacrificed, since circulating cash coin was made out of copper. Therefore, investment in the making of such pumps was not economical or rational.
Elvin argues that it was not any institutional or other failure to “develop” but rather precisely the opposite, rapid growth of production, resources use, and of population based on the same, which rendered all resources scarce—other than labor:
Clearly the shortages of many resources grew more severe. In many areas there was a lack of wood for building houses and ships, and indeed machinery. There was a shortage of fuels…of clothing fibres…of draught animals…. Metals were in short supply, particularly copper…but also iron and silver. Above all, there was a shortage of good farmland: the quality of the new land brought under the plough in this period fell sharply. A major cause of these shortages was of course the continuing growth of population under conditions of relative technological standstill…[which] had all reached a point of sharply diminishing returns by the later eighteenth century. (Elvin 1973: 314)
Yet Elvin argues that it was these very same developments that
made profitable invention more and more difficult. With falling surplus in agriculture, and so falling per capita income and per capita demand, with cheapening labor but increasingly expensive resources and capital[,]…rational strategy for peasant and merchant alike tended in the direction not so much of labor-saving machinery as of economizing on resources and fixed capital…. When temporary shortages arose, mercantile versatility, based on cheap transport, was a faster and surer remedy than the contrivance of machines. This situation may be described as a “high-level equilibrium trap.” (Elvin 1973: 314)
Lee (1986: 124) following Boserup also suggests that China had too high a population density “to support further collective investments…[for a] technological breakthrough…China might have become caught up in a high-population, medium-technology attractive equilibrium,” like Elvin's “high-level equilibrium trap” discussed above. In that trap, cheap labor due to high population, expensive resources, and scarce capital render investment in labor-saving technology neither rational nor economical. The same would have been the case in India, about which Stein (1989: 11) observes that increased elite consumption and state demands for military expenditures “placed heavier demands upon labourers, diminishing their consumption and the prospects for their very survival, especially during the later eighteenth century,” as we observed above in our examination of the decline in India and elsewhere in Asia.
Tradeoffs determined by analogous demand-and-supply underlay the choices and development of fuel supplies and other sources of power. The range of their supplies may have been more locally or regionally restricted by transportation costs for their bulky raw materials, although timber had traveled long distances for millennia. However, the demand for these inputs to generate power for production was vitally affected by cost considerations, which were also derived from the worldwide competitive and/or protected market prices for products like textiles for which these fuels were inputs.
Lippit's (1987) dismissal of Elvin's argument on the grounds that Chinese surplus was high is unacceptable, because it is misplaced. Investable surplus and capital are only necessary but not sufficient conditions-for their investment. I have already argued that the issue is not only whether there was an investable surplus or not, but the extent to which it was rational or not to invest it in labor-saving and power-generating technology. The Chinese did after all make huge investments in interregional canals and other infrastructure within China. Elvin argues rightly, I believe, that the Chinese were economically rational, and that that is why they then shunned some investment within a Chinese and regional/local economy-wide demand-and-supply perspective and calculations. That also strengthens my argument that, with regard especially to export industries, this economic rationality must be extended worldwide, in China and elsewhere.
That is, the same argument can and should be applied both elsewhere and worldwide. Much Asian production and export, certainly Chinese silk, was highly labor-intensive to produce under high-labor supply/low-labor cost conditions. In India also, the previous centuries of economic growth and expansion had generated analogous supply and demand relations. There also, not “stagnation” but rather its opposites—economic expansion, population growth, and even institutional change, in a word the (normal?) process of accumulation of capital-must have led to a point of diminishing returns.
The Cambridge Economic History of India observes that “the remarkable cheapness of labour…rendered labour-saving devices superfluous” in India (Raychaudhuri and Habib 1982: 295). Habib also argues elsewhere (in Roy and Bagchi 1986: 6–7) that the abundance of skilled labor and “skill-compensation” in India rendered the adoption of labor-saving devices uneconomical there (although Amiya Bagchi is cited on p. 143 of their appendix as disagreeing with this point).
So, Elvin's approach and analysis may be applied not only in China but also in Southeast Asia, India, Persia, the Ottoman Empire or wherever—and among each of these from a world economic perspective. That includes Europe. There the labor-surplus/capital-shortage argument by Elvin about China (or its application also elsewhere in Asia) is on the opposite side of the coin from the analogous labor-shortage and therefore relative capital-surplus argument that Adam Smith made for Britain and Europe and others more recently for North America.
In Europe, higher wages and higher demand, as well as the availability of capital including that flowing in from abroad, now made investment in labor-saving technology both rational and possible. The analogous argument holds for power-generating equipment. Relatively high prices for charcoal and labor in Britain provided the incentive for the accelerated switch-over to coal and mechanically powered production processes before these also became more economical in areas with even greater surpluses of labor and/or shortages of nonmechanical power, fuel, and capital to develop them. The additional argument here is that, of course, world economic market competition between Europe and China, India, and other parts of Asia rendered such labor-saving and energy-producing technology economically rational for Europeans, but not for Asians.
All this is even more the case if the distribution of income is very unequal. Then, the top of the income pyramid does not generate enough demand for production that might benefit from lower labor costs, while the low incomes at the bottom of the pyramid keep or drive down wages. So a more unequal distribution of income also militates against technological innovation in labor-saving devices and investment in power-generating processes. So what can we say about the distribution of income?
Jack Goldstone (1991a) argues that, regardless of how the use of labor is organized, population growth in agrarian societies concentrates income and wealth and lowers wages and effective demand. Yet, we have argued above that more money and higher population also reinforced each other. All of these common causes could then have undermined economic viability and political stability. Is there evidence for such a process in seventeenth-and eighteenth-century Asia? Yes!
There is indeed reason to believe that it was the very long rise in production and population itself which contributed to subsequent decline at least in the growth rates of both. Evidence from Asia suggests that its rise in production and population put pressure on the resource base and polarized both economy and society: the distribution of income became increasingly unequal.
The changing distance between rich and poor modified the “upper” end of the social pyramid. Upward mobility and conspicuous consumption, especially by merchants and speculators, was enhanced, as documented for Ming China economy and society in Timothy Brook's (1998) history, The Confusions of Pleasure. Lippit (1987: 90) estimates the size of the economic surplus that the gentry and others extracted to have been at least 30 percent of national income in the nineteenth century. Earlier economic boom conditions may well have elicited both absolutely and relatively higher surplus. Analogous processes have also been described in India as a result of economic expansion before its nineteenth-century decline. Indeed his attempts to compare the available evidence from India and China (and Europe) in this regard, lead Pomeranz (private communication 1996) to believe that the distribution of wealth and income was even more skewed in India than elsewhere. That increased demand from the top of the social pyramid for luxury and imported goods diverted purchasing power from the mass market for locally and regionally produced consumer goods.
At the bottom of the social pyramid some people were pushed “down and out” and marginalized altogether. A larger group of displaced peasants became low-wage workers who formed an ever bigger pool of cheap labor. Among this large and perhaps growing segment of people at the bottom of society, low income at the same time reduced their effective demand on the market for goods and increased the supply of their cheap labor to produce goods, also for export.
Regarding India, Habib (1963a: 351) explains how “the Mughal Empire had been its own grave-digger.” Its governing class got much of its great wealth through the expropriation of the surplus produced by the peasantry. Habib (1963a: 320) quotes two contemporaries who observed that seldom if ever had the contrast been greater between “the rich in their great superfluity and the utter subjection and poverty of the common people” and “the country is ruined by the necessity of defraying the enormous charges required to maintain the splendour of a numerous court, and to pay a large army for keeping the people in subjection.” That must have reduced income and effective domestic mass demand and made for a low supply price of wage labor. Indeed, Habib (1963a: 324–9) testifies both to increasing exploitation over time of the peasants and to their resulting flight from the land, which increased the urban and other supply of labor, presumably at lower wages. This condition also contributed importantly to the downfall of the Mughals and their replacement by the Marahatas, who not only continued but even increased the exploitation of the peasantry. Ali (1975) also cites Habib as arguing precisely that there was intensified exploitation in agriculture and that this led to both the peasant and zamindar rebellion. (Increased earning opportunities would also increase exploitation of workers in British industry during the industrial revolution, as Friedrich Engels and Eric Hobsbawm later noted).
So how did the distribution of income in Asia compare with that in Europe and especially in Britain? Regarding China, Adam Smith ([1776] 1937: 72) observed that the poverty of the poorest there was far greater than any in Europe, so that the lowest European incomes were still higher than the lowest Chinese and perhaps other Asian ones. Moreover, Smith ([1776] 1937: 206) also observed that both the real wage of labor and the real quantities of the necessities for life that the laborers could purchase with their wages were lower in China and India than in most of Europe.
Nonetheless, Pomeranz (1997, private communications 1996) insists that while the distribution of income was indeed more unequal in India, in China it was more equal than in Europe. However, he also suggests that in China laborers were still able to draw on family support from the countryside for some of their subsistence, which was no longer available to urban workers in Europe, not in Britain. Pomeranz suggests that therefore workers would still have been able to manage on—and employers to pay—wages that were lower in China than in Britain or Western Europe, even if the Chinese distribution of income was not more unequal than that in Europe. So in this regard, rural family support in China could be regarded as the “functional equivalent” of a more unequal distribution of income, as in India.
More Significantly however, Pomeranz's suggestion can be translated into still another one: whatever the distribution of income in China, wage goods were still relatively and maybe absolutely cheaper there than in Europe and especially in relatively high-wage Britain. That is, relative to the costs of alternative mechanical inputs and other sources of power, the availability of cheap wage goods would still have made it more economical and rational to employ more labor and less capital in China than in Britain even at similar distributions of income. However, no matter through what institutional mechanisms these cheap subsistence wage goods were or were not distributed, they could only have been made available by an agriculture that was more productive and thereby able to produce these wage goods cheaper in China than in Britain and Europe. These observations in turn confirm, or at least are consistent with, two others: Agriculture was more efficient in China, as Marks (1997a) alleges (see chapter 4). And it was relative productive efficiency in Chinese agriculture that militated against labor-saving innovation and capital-using investment elsewhere in the economy, as Elvin (1973) and I allege.
Another answer may perhaps be sought in concomitant differences in price levels. The quantity theory of money (according to which prices rise proportionately to the quantity of money) may not be foolproof. Nonetheless, the evidence is that in general, the closer the source of and therefore the availability of silver/money, the higher the level of prices; and the more distant the money source and the lower its availability, the lower the level of prices. As we have seen, Europe was certainly closer to the American mines and received a greater and earlier supply of silver than did in turn West, South, and East Asia. Can it be shown that the combination of higher wages and higher prices in Europe, not to mention North America, still left most Europeans no more or even less well off than most Asians, while still affording a greater supply of low-wage labor at the bottom of the Asian social pyramid? In that case high wage levels in Europe and low ones in Asia would also have been compatible with the less certain but probable nearly level standards of living, and the possibly even lower ones in Europe, as Bairoch, Maddison, and others suggest. That would have been particularly the case if the distribution of that income was more unequal in Asia and/or if China or even India also had the cheap wage-good “functional equivalent” suggested above. These circumstances would also have made European goods less competitive than Asian ones in world and particularly Asian and even European markets.
Is there evidence to support, deny, or modify this proposition? Yes, there is. We have evidence both on relative population/land-resource ratios at the end of the period 1400–1800 and inferential evidence on earlier changes in the same period, based on previous rates of population growth. Moreover, we also have evidence on comparative population growth rates among major regions in the world and Eurasia, presented in chapter 4.
THE EVIDENCE: 1500–1750
So can we test this relative wage level microhypothesis and the related long-cycle macrohypothesis as part of a better world economic theory to account for the industrial revolution taking place in Europe and America and not in Asia—or Africa?
The evidence is certainly abundant, and some of it was cited above, that wages were much lower in Asia than in Europe and that for this reason European production was not competitive. Regarding relative population/land-resource ratios, Bairoch (1969: 154–5) examined ratios of population to hectares of cultivated land and projected them back to about 1800 in Asia. He found Asian ratios to have been three to four times higher, with 3.6 and 3.8 people per hectare in China and India, respectively, and only 1.1 in France and 1.5 in England in 1700 (however the ratio for Japan, albeit for 1880, was 5.0 per hectare).
Of course, data for population and its growth are sparse and uncertain, and on economic growth, not to mention their pressure on resources, even more so. However, tables 4.1 and 4.2 summarized world and regional population data from a large variety of sources, which did reveal a significant pattern. We noted that world population growth recovered after 1400 and experienced an upward inflection after 1600 and especially from the middle of the seventeenth century onward, probably for the economic and nutritional reasons outlined in chapters 2 and 4. Yet as we observed in chapter 4, from 1600 to 1750 Europe continued to account for an unchanging 18 to 19 percent of the world's population. Over the same period, the share of the world's population that lived in Asia increased from 60 to 66 percent. That is because, in the already more densely populated Asia, population grew at about 0.6 percent a year, while in Europe it grew at only 0.4 percent. According to the later figure of Livi-Bacci (1992: 68), the rate of population growth in Europe was only 0.3 percent, that is one-half or two-thirds that of Asia. As a result, according to tables 4.1 and 4.2, while from 1600 to 1750 population grew by 57 percent in Europe, it grew by 87 percent in all of Asia and by 90 percent in China and India. Moreover, the absolute increase was four times greater in Asia on its already scarcer resources, by no million from 1600 to 1700 and by 216 million to 1750, compared to increases of only 26 million and 51 million respectively in Europe.
Thus, the population/land-resource ratio increased more in Asia than in Europe. This difference by itself suggests that the availability of cheap labor also increased much more in Asia than in Europe. That would be all the more the case if the inequality in the distribution of income also became greater in Asia than in Europe. That was suggested above both because of the more rapid population increase itself and also because of a greater increase in production and income in Asia. In Africa, population remained stable or declined, with what effect on the distribution of income we do not know. However, we do know that unlike Europe, Africa had no significant inflow of investable capital from elsewhere and also not the same degree of competition with Asia in world markets as Europe had. Therefore, we need not expect any changed incentive to innovative labor-saving technology in Africa. Lee does not mention that reason but suggests that Africa may have been caught in a “low-level equilibrium trap” for other reasons as well.
THE 1750 INFLECTION
How and why did population change especially in the second half of the eighteenth century? Historians and demographers have noted an unexplained inflection in population growth rates beginning about 1750. Table 4.1 shows half-century world population increases of about 20 percent from 1650 to 1700 and again to 1750, but a higher 23 percent from 1750 to 1800. In Asia however, the corresponding rates were 26 percent before 1750 and only 20 percent from 1750 to 1800, and in India they dropped from 30 percent in the half century before 1750 to 20 percent in the half century after that. For this period, rather different growth rates emerge from Clark (1977), as summarized in table 4.2. World population totals increased by 24 percent in the first half century, but only by 14 percent in the second one, and then recovered to 21 percent from 1750 to 1800. In China, population growth rates were about 50 percent in the first and last half centuries but inexplicably only about 40 percent in the intervening one from 1700 to 1750. However, Clark does show a significant decline in Indian population growth rate from 33 percent in the half century before 1700 to zero in the half century after 1750 and an absolute decline of 0.5 percent from 1750 to 1800 (after the Battle of Plassey in 1757).
Other data suggest even greater relative declines of population growth in Asia and an increase in Europe. According to the estimates by Carr-Saunders (1936) that are still used by the United Nations, the world population growth rate declined from about 0.3 percent a year in the century before 1750 to 0.2 or even 0.1 percent in the half century to 1800. Most of that was due to the even more rapid decline in Asia from 0.6 percent a year to 0.13 or 0.14 percent a year between 1750 and 1800. Within Asia, the growth rate, according to more recent estimates, was I percent in China but only 0.1 percent in India, during its economic decline, conquest, and colonization by Britain (Nam and Gustavus 1976:11). So the eighteenth-century reversal from high to lower population growth rates in Asia emerges clearly from all of these population estimates, despite the differences among them.
In Europe on the other hand according to table 4.1, population growth accelerated from 15 percent between 1650 and 1700 to 22 percent between 1700 and 1750, to 34 percent in the half century between 1750 and 1800 and 41 percent from 1800 to 1850. In table 4.2 the growth rates for Europe are similar, rising from 17 percent in the first of these half centuries and 23 percent in the second one to 33 percent in the third one from 1750 to 1800. That is, in Europe the growth rate of population suddenly took off from the previous annual 0.3 or 0.4 percent to 1.6 percent a year for 1750–1800. The latest Livi-Bacci (1992: 68) figures for Europe are 0.15 percent from 1600 to 1750 and 0.63 percent from 1750 to 1800 (which would make them even lower relative to Asian ones in the earlier period). Notwithstanding the differences in these estimates, no one disputes that population growth rates took off in Europe, while they did not in Asia and indeed may have reversed in India. Moreover, these same trends continued and indeed accelerated in the first half of the nineteenth century.
The once proffered suggestion—that fertility rather than mortality generated this increase in population growth due to increased demand for child labor from the industrial revolution itself—is easily disconfirmed. For the population increase was not limited to newly industrializing Britain or even to northwestern Europe but was greatest in Eastern Europe and Russia. The latter's expansion into Siberia supported and funneled off its population growth, but their industrialization was generally slower than in Western Europe. As Langer (1985) suggests, we may never know exactly why population took off in Europe; but we know that it did and that in Asia it did not.
Does this evidence about the reversal of Asian and European population trends after 1750 tend to disconfirm my suggested explanation for the reversal of Asian and European fortunes and the location of the industrial revolution first in the Europe? No. Can we have it both ways? Yes.
The absolute and relative changes in population growth rates in Asia and Europe after 1750 do not necessarily detract from this explanation and perhaps even offer additional support for it. To begin with, the lower rates of population growth in Asia are a manifestation and confirmation of the decline of Asia, which is central to my explanation. Similarly, the increase in population and its growth rate in Europe are also a manifestation of the economic “Rise of Europe” and the West. Additionally however, it may be argued that under these new circumstances there indeed was a Boserup effect! Boserup (1981) herself suggests that the population/land-resource ratio in Europe did not favor technological innovation in agriculture or industry before the mid-eighteenth century. She emphasizes that European population growth offered this stimulus only after that time and that Europe had no immediately prior increase in agricultural productivity. However especially after 1800, the even faster European population increase could well also have supported innovation in labor-saving technology and less laborious and cheaper generation of power and use and handling of materials, as Boserup claims. For that to become possible however, there had to be a marked expansion of the market for European products not only at home but also abroad.
However, Europe also had to have a source of sufficient capital to make these technological investments possible and affordable, as well as the expanding market to make the investments profitable. Beginning especially after the Battle of Plassey in 1757 and from 1800 onward, these conditions were met by and in the world economy. The very decline of Asia, not to mention European colonialism, simultaneously offered Europeans the necessary increase in markets and market share as well as an additional inflow of investable capital. Moreover, emigration to the Americas made it possible to drain off much of the new surplus population from Europe. This population at the European frontier in combination with the additional new resources available in the New World then further expanded the world market for European production and exports. None of this would have been possible without the structure and conjuncture\in the world economy around 1800, on which I have insisted in this book.
Another important aspect of this structure and conjuncture is examined by Pomeranz (1997). He argues that the previous long period of economic and population growth—our long “A” phase which he also finds predominant in China—exerted differential ecological demands and opportunities on the resource base among various regions in the world. By the end of the eighteenth century, according to his analysis, these ecological pressures in turn stimulated and favored the conversion to new sources of power in Britain and Western Europe, especially from coal instead of wood and through steam instead of mechanical and animal traction. This ecological/economic incentive and the demographic/ economic structure and conjuncture were of course related and require further analysis in relation to each other.
CHALLENGING AND REFORMULATING THE EXPLANATION
This demographic and world marco- and microeconomic explanation of technological change around 1800 can be challenged on some empirical grounds and with some analytical reservations. However, this will also permit reformulating and strengthening the argument. The evidence and reasoning that follows builds on a tripartite e-mail discussion held between August and October 1996 among Ken Pomeranz, Jack Goldstone, and myself. It attempts to construct a stronger synthesis of our arguments that is empirically and analytically more acceptable to all of us and better defensible to the reader. The main issue is how to account for the technological change around 1800 and whether and where to invest to reduce comparative costs of production and to extend markets in terms of world market-wide competition.
1. The main challenge to the simple demand and supply hypothesis was that the technological innovations of the industrial revolution were less labor “saving” than labor “extending” and increased the productivity of both labor and capital.
2. Direct wage rates or costs may have been as high (or even higher) in some parts of China (for example, in the Yangzi Valley and the South), though probably not anywhere in India, as in some parts of Europe, especially England.
3. The distribution of income may have been similar—and not more skewed, as I contended—in China and Europe, although it probably was more unequal in India.
4. The problem of absolute, relative, and worldwide comparative wage costs—in entrepreneurial calculation as in our analysis of the same—is related also to local and regional problems of labor allocation.
5. There were some economic differences in labor allocation especially between agriculture and industry, which were related to some institutional differences. However, it is less clear to what extent these differences were underlying causes of the observed allocation of labor or whether they were only different institutional mechanisms through which the labor allocation were organized. Particularly important differences were (a) labor was bonded in India; (b) women in China were tied to the village and their labor was restricted to agriculture and domestic industry such as spinning; (c) some industrial workers in China could still draw directly on subsistence goods produced by women tied to the village and agriculture; this was less true in England, where subsistence goods often had to be acquired through the market; and (d) enclosures of more land to produce more and cheaper wool for textiles—the “sheep ate men” saying—expulsed male and female labor from the land into urban employment (and unemployment) in England and perhaps elsewhere in Europe.
6. The industrial revolution was initiated with cotton textiles, but these required both a growing “external” supply of cotton (for Europe it came from its colonies) and a “world” market for all in which everybody had to compete (except China, which still had a growing and protected domestic and regional market).
7. The industrial revolution also required and took place in the supply and production of more and cheaper energy, especially through coal and its use in making and using machinery to generate steam power, first stationary and then also mobile. The critical role of coal and its replacement of wood as a source of fuel in Britain is demonstrated by Wrigley (1994).
8. These sources of power technically and economically first required (and permitted) concentration of labor and capital in mining, transport, and production. Then they also permitted faster and cheaper long-distance transport via steam-powered railway and shipping.
9. Investment in such “revolutionary” industrial power, equipment, organization, and the labor necessary to make them work was undertaken only where it was economically rational and possible to do so, depending on (a) labor allocation and cost alternatives; (b) location and comparative costs of other productive inputs (for example, timber/coal/animal/human sources of power and transport, as well as raw materials like cotton and iron), which were related to the geographical location of these resources and to ecological changes in their availability; (c) capital availability and alternative profitable uses; and (d) market penetration and potential.
THE RESULTING TRANSFORMATIONS IN
INDIA, CHINA, EUROPE, AND THE WORLD
At the beginning of the nineteenth century these nine factors generated the following transformations in the world economy.
In India. India's competitive dominance on the world textile market was threatened despite cheap and also bonded skilled labor. Domestic supplies of cotton, food, and other wage goods continued to be ample and cheap; and productive, trade, and financial organization and transport remained relatively efficient despite suffering from increasing economic and political difficulties. However, supplies of alternative power and materials, particularly from coal and iron/steel, were relatively scarce and expensive. Therefore, Indians had little economically rational incentive to invest in innovations at this time. They were further impeded from doing so first by economic decline beginning in the second quarter of the eighteenth century or earlier; then by the (resulting?) decline in population growth and British colonialism from the third quarter of the century on; and finally from a combination of both decline and colonialism as well as the “drain” of capital from India to Britain. India switched from being a net exporter to being a net importer of cotton textiles in 1816. However, India did continue to struggle on the textile market and began again to increase textile production—by then also in factories—and exports in the last third of the nineteenth century.
In China. China still retained its world market dominance in ceramics, partially in silk, increasingly in tea, and remained substantially self-sufficient in textiles. China's balance of trade and payments surplus continued into the early nineteenth century. Therefore, China had availability and concentration of capital from both domestic and foreign sources. However, China's natural deposits of coal were distant from its possible utilization for the generation and industrial use of power, so that progressive deforestation still did not make it economical to switch fuel from wood to coal. Moreover, transport via inland canals and coastal shipping, as well as by road, remained efficient and cheap (but not from outlying coal deposits).
This economic efficiency and competitiveness on both domestic and world markets also rested on absolutely and comparatively cheap labor costs. Even if per capita income was higher than elsewhere, as Bairoch notes, and its distribution was no more unequal than elsewhere (as Pomeranz and Goldstone claim), the wage-good cost of production was low, both absolutely and relatively. Labor was abundant for agriculture and industry, and agricultural products were cheaply available for industrial workers and therefore to their employers, who could pay their workers low subsistence wages. Goldstone (1996) emphasizes the importance of one factor: women were tied to the villages and therefore remained available for (cheap) agricultural production. Pomeranz (1997) emphasizes a related factor: urban industrial workers were still able to draw for part of their subsistence on “their” villages (as in Yugoslavia during industrialization after World War II), which was produced cheaply in part by the women to whom Goldstone refers. In other words from the perspective of the entrepreneurial industrial employer and the market, wage goods were absolutely and relatively cheap because agriculture produced them efficiently and cheaply with female labor. The “institutional” distribution of cheap food to urban and other workers in industry, transport, trade, and other services was functionally equivalent to what it would also have been if the functional distribution of income had been more unequal than it was. The availability of labor was high, its supply price low, its demand for consumer goods attenuated; and there was little incentive to invest in labor-saving or alternative-energy-using production or transport. Elvin (1973) sought to summarize such circumstances in his “equilibrium trap.” Even so, China still remained competitive on the world market and maintained its export surplus. As Emperor Ch'ien-lung explained to King George III of England, China had “no use for your country's manufactures.”
In Western Europe. Western Europe and particularly Britain were hard put to compete especially with India and China. Europe was still dependent on India for the cotton textiles and on China for the ceramics and silks that Europe re-exported with profit to its colonies in Africa and the Americas. Moreover, Europe remained dependent on its colonies for most of the money it needed to pay for these imports, both for re-export and for its own consumption, production, and export. In the late eighteenth and early nineteenth centuries, there was a decline in the marginal if not also in the absolute inflow of precious metals and of other profits through the slave trade and plantations from the European colonies in Africa and the Americas. To recoup and even to maintain—never mind to increase—its world and domestic market share, Europeans collectively, and its entrepreneurs individually, had to attempt to increase their penetration of at least some markets, and to do so either by eliminating competition politically and militarily or undercutting it by lowering its own costs of production (or sometimes both).
Opportunity to do so knocked when the “Decline” began in India and West Asia, if not yet in China. Wage and other costs of production and transport were still uncompetitively high in Britain and elsewhere in Europe. However especially after 1750, rising incomes and declining mortality rates sharply increased the rate and amount of population growth. Moreover, the displacement of surplus labor from agriculture increased its potential supply to industry. At the same time, Britain's imposition of colonialism on India reversed its perennial capital outflow to that country. Moreover, a combination of commercial and colonial measures permitted the import of much more raw cotton to Britain and Western Europe. Deforestation and ever scarcer supplies of wood and charcoal rendered these more expensive. From the second third of the eighteenth century, first relative and then absolute declines in the cost of coal made the replacement of charcoal (and peat) by hard coal increasingly economical and then common in Britain. The Kondratieff “B” phase in the last third of the eighteenth century generated technological inventions and improvements in textile manufacturing and steam engines (first to pump water out of coal pits and then also to supply motive power to the textile industry). At the beginning of the nineteenth century, an “A” phase (the first one so identified by Kondratieff) and the Napoleonic wars generated increased investment in and the expansion of these new technologies, including transport equipment, and also led to the incorporation of ever more available but still relatively high-cost labor into the “factory system.” Production increased rapidly; real wages and income declined; and “the workshop of the world” conquered foreign markets through “free trade.” Yet even then, British colonialism had to prohibit free trade to India and resorted to the export of opium from there to force an “open door” into China.
The Rest of the World. Most other parts of the world still fall through the cracks of our world economic analysis. But in brief, we can observe that most of Africa may have had population/land-resource ratios at least as favorable to labor-saving investment as Europe. However, Africa did not have an analogous resource base (except the still undeveloped one in Southern Africa), and far from having a capital inflow, Africa suffered from capital outflow. The same was true of the Caribbean. Latin America had resources and labor, but also suffered from colonial and neocolonial capital outflow as well as specialization in raw materials exports, while its domestic markets were captured by European exports. West, Central, and Southeast Asia became increasingly captive markets for (if not also colonies of) Europe and its industry, to which they supplied the raw materials that they had previously themselves processed for domestic consumption and export. In the nineteenth century, only the European “settler colonies” in North America, Australasia, Argentina, and Southern Africa were able to find other places in the international division of labor, and China and Japan were able to continue offering significant resistance. But that is another—later—story, which leads to the reemergence of East Asia in the world economy today.
In short, changing world demographic/economic/ecological circumstances suddenly—and for most people, including Adam Smith, unexpectedly—made a number of related investments economically rational and profitable: in machinery and processes that saved labor input per unit of output, thus increasing the productivity and use of labor and its total output; productive power generation; and in productive employment and productivity of capital. This transformation of the productive process was initially concentrated in selected industrial, agricultural, and service sectors in those parts of the world economy whose comparative competitive position made—and then continually remade—the import-substituting and export-promoting measures of such Newly Industrializing Economies both economically rational and politically possible. Thus, this transformation was and continues to be only a temporally localized and still shifting manifestation of a world economic process, even if it is not spread uniformly around the world—as historically nothing ever has been and is unlikely to be in the foreseeable future. The suggestion is that it was not overall poverty and still less tradition or failure that handicapped Asia in the world economic competition relative to Europe around 1800. Rather, in Marxist and Schumpeterian terms, it was their very success that generated failure. For the competitive handicap of the Asian economies was generated by its previous absolute and relative success in responding to the economic incentives of the long “A” phase expansion that the inflow of American money financed, which lasted through much of the eighteenth century. That turns all received theory on its head.
PAST CONCLUSIONS AND FUTURE
IMPLICATIONS
To conclude, we may summarize our findings and argument again and inquire into their implications for the future before proceeding in the next chapter to look into what all this means for social and economic theory as well as for world history—past, present, and future. The argument—and the evidence—is that world development between 1400 and 1800 reflects not Asia's weakness but its strength, and not Europe's nonexistent strength but rather its relative weakness in the global economy. For it was all these regions' joint participation and place in the single but unequally structured and unevenly changing global economy that resulted also in changes in their relative positions in the world. The common global economic expansion since 1400 benefited the Asian centers earlier and more than marginal Europe, Africa, and the Americas. However, this very economic benefit turned into a growing absolute and relative disadvantage for one Asian region after another in the late eighteenth century. Production and trade began to atrophy as growing population and income, and also their economic and social polarization, exerted pressure on resources, constrained effective demand at the bottom, and increased the availability of cheap labor in Asia more than elsewhere in the world.
Europe and then also North America (and if we wish to separate it out, also Japan at the other end of Eurasia) were able to take advantage of this pan-Asian crisis in the nineteenth and twentieth centuries. They managed to become Newly Industrializing Economies, first through import substitution and increasingly also by export promotion to and within the global world market. Yet this success, which was based on their previous marginality and relative “backwardness” in the global economy, may also prove to be relatively short-lived. These new, but perhaps also temporary, world economic centers are now experiencing absolute and relative social and economic atrophy analogous to that of the previously central Asian economies, while some of the latter seem to be recovering their economic and social impulse.
Thus, in analogy to other periods of cyclical decline and transition, the late eighteenth century was still one of competing and “shared” political economic power between the declining Asians and the rising Europeans. Only then was a new “hegemonic” order built, with European power at its center, in which a new period of industrial and economic expansion occurred, now with rapid capital accumulation in Europe itself. This nineteenth-century world hegemonic system was eventually followed by increasing intra-European rivalry and rivalry with the United States and Japan. These culminated in a general crisis and war between 1914 and 1945, leading to the construction of a new hegemonic order and renewed world economic growth under American leadership. However, the “American century” lasted only twenty years. The contemporary economic expansion in East Asia, beginning with Japan, then in the East Asian NIEs, and now apparently also in coastal China, may spell the beginnings of Asia's return to a leading role in the world economy in the future such as it held in the not so distant past.
We may speculate a bit about the continuation of this long cycle, whose “B” phase appears to have begun in Asia around 1800. From a long-term Asian and perhaps more global perspective, the ending of this long nineteenth-and twentieth-century “B” phase may have been signaled since the middle of the twentieth century by renewed political decolonization in the “Third” World, including liberation in China and Vietnam. These political events, of course, were also reflections of long-term political economic changes taking place within the West and the world it dominated, including the shift of hegemony from Western Europe to the United States.
At least two major simultaneous and related economic trends have made themselves felt from the early 1970s onward. One is the marked and still unexplained new slowdown of productivity growth throughout the West since the first major postwar recession beginning in 1973. It has also been accompanied by a decline in the average real wage and also unprecedented rampant polarization in the economy of the United States. This and the succeeding 1979–1982 recession have been wrongly attributed to the “oil shocks” of 1973 and 1979 (Frank 1980). It is notable, however, that oil exporters did pose another political economic challenge to the West and that all this economic turmoil, including “relocating” and “downsizing” its productive operations, as well as the political economic debacle in socialist Eastern Europe, have taken place within the West's long Kondratieff “B” phase since 1967.
Another simultaneous and related trend is the marked economic revival in and world impact of East Asia. It began in Japan and then in its former colonies Korea and Taiwan, but also included Hong Kong and Singapore among the first set of “four tigers.” Since then, revived economic growth has been spreading also to other “tigers” or “little dragons” elsewhere in Southeast Asia and to the “big dragon” on the China coast. This is the same South (and East) China Sea region, with its diaspora of “overseas Chinese,” which had been so prominent in the world economy in the previous long “A” phase from the fifteenth through the eighteenth centuries. Does that presage a renewed “A” phase there, perhaps also spreading to South and West Asia, in the twenty-first century?
Therefore, it is conceivable that the West and the East will again trade places in the global economy and in world society in the not too distant and already dimly foreseeable future. This inquiry and speculation into long cyclical downs and ups during the last seven centuries also poses a serious theoretical problem about how phases succeed each other in our long cycles. Its consideration, however, is perhaps best postponed to the discussion of cycles in our concluding, “theoretical” chapter.
These contemporary developments and future prospects demand new and better social theory to comprehend them and to offer at least some modest guide to social policy and action. It is my hope that this book's rather different historical perspective on the past can also shed more light on this present and future, which that past still helps generate and constrain. Therefore, the final chapter is devoted to drawing out the implications of this historical account of what errors our historiography and social theory should avoid and to inquiring into how it could do better.