2.5 The Beginning of Divergence of the West and Asia

• In Professor Sachs’ analysis, which are the main dynamics that seek to explain why history turned decisively in favor of Europe?
• What does Professor Sachs say about the role of the development of capitalist institutions in regards to divergence?

We’ve been discussing the fourth wave of globalization, the age of ocean-based navigation and the emergence of global scale capitalism with all its remarkable energy and its brutality.

It is the age when Europe takes the lead in the world. Why did this happen, fundamentally? This remains one of the most important topics of human history and one of the most debated and contentious topics.

For us to step back and try to understand how this evolved during this fourth wave of globalization, it’s good to put some numbers to the page, or at least to put some graphs to the page.

And what you’re looking at here is an estimate by the late and great macro-historian, Angus Maddison, of the share of the world’s population in five different places that I’ve identified, in Europe, in what will become the United States, China, India and Africa.

What one can see is that in the period starting with Columbus and da Gama, 1500, and coming up to 1820, just essentially at the end of the Napoleonic Wars, China and India dominate. They are the two huge populous countries, each with about a quarter of the world’s population.

And China’s population actually rising between 1700 and 1820 from around a quarter of the world’s population estimated by Maddison in 1700, to around a third of the world’s population, even a little bit higher than that as of 1820.

During this whole period Europe is about one-seventh of the population, something around 14% of the world’s population. The population living in what is today’s geographic boundaries of the United States, 1% of the world’s population. And Africa consistently around 10% of the world population and then declining after 1700, perhaps through the pressures of the slave trade and the pressures of increasing European colonization of coastal Africa.

If we look at estimates of the economy, which track to an important extent, these patterns of population, we see that Maddison estimates that as a share of world output, the situation for India and for China is roughly the same as their share of the world population.

For each, perhaps, 25% of total world output in the 16th Century, 17th Century, 18th Century, within those two behemoths. In other words, this was still an Asia-centered world economy, up to 1800. China and India were not only populous but they were relatively productive in per capita terms, perhaps not so different from the per capita income levels of Europe at the time.

AIt’s not till the 19th Century that Europe’s huge predominance of technological advantage, military advantage, industrial power really definitively shows itself. So what are the main issues that are posed by this period of history? When did the divergence between western ascendancy and at least relative, if not, absolute Asian decline take hold? Why is that Europe colonized Asia rather than Asia colonizing Europe?

Among the European powers, why is it that England, which has not played any decisive role in our story till now, turned out to be the decisive power of the 19th Century? How decisive was war for Europe’s advantage?

Was war the real key to understanding Europe’s ascendancy or was war a reflection of a deeper set of forces, such as technological dynamism?

We should go back to that hinge moment of history when China, the great technological power, decides unilaterally to put an end to its ocean-going exploration and demonstration of state power, the end of the great voyages of Admiral Zheng He in 1433.

That was a hinge of history. It was a decision not forced on China, so I wouldn’t say it was intrinsic to China’s physical geography. It wasn’t intrinsic to its resource base, it was not compelled by fiscal crisis, as far as we know, certainly not as a long-term decision. One could say that it was a decision of state craft. One could even call it one of the worst public policy decisions in human history, because it was almost voluntarily forfeiting China’s lead.

And by the next moment when China and the west directly confront each other, that would in the 19th Century, maybe you could date it to 1839, to the first opium war between Britain and China, in which Britain as the now dominant force is able decisively to defeat China.

So statecraft played a role. But looking more deeply beneath the question of China’s choice at that moment is an observation that many, many historians have made, famously E.L. Jones among them, which is that China by dint of creating a continental scale statecraft with relative peace in China prevailing over centuries, what we would regard as a fundamental triumph of statecraft compared to Europe which was at war and squabbling among the dukes and the princes and the kings and bloodshed for centuries, in the end created an environment in which Europe became the specialists of warfare.

And so Jones and many, many other historians emphasized the fact that China made the decision to close because it was a unitary state. Whereas such a decision was literally impossible in Europe, because no single political entity dominated Europe.

The countries competed with each other for know-how, for technology, for military advantage, for colonies, for economic advantage, as well. There are other dynamics that we should take into account. We know that many of the concepts, much of the mathematics, many of the astronomical capacities and observations came from the east to the west. But we also know that from the Renaissance forward, the notion of a scientific enterprise based on close observation, systematic knowledge and increasingly, where possible, experimentation led to a scientific revolution in the west.

And one can fairly say that da Vinci, Galileo and Isaac Newton epitomize that revolution. And that revolution played its role both directly and indirectly in the technological revolutions that would follow.

One could also argue, and many historians do, that the competition of different powers in Europe allowed for a more openness of ideas in general. If one state was repressive, another might invite the free thinkers, the scientists, the explorers into their domain as part of their competition with their neighbors. It’s argued by many economists that it was the development of capitalist institutions, the joint stock company, limited liability, insurance that funded and provided risk protection of ocean navigation that provided crucial advantage and ultimately was the source of divergence.

As I noted in an earlier chapter, the Song Dynasty was also a period of great institutional fluorescence in the economic and financial sphere. So one shouldn’t necessarily read too much uniqueness into the advances of capitalist institutions per se, though they definitely played a role in advancing economic power, which also provided a base for increased investments and in the divergence of military power, as well.

Geography no doubt played some role, as well. We’re jumping ahead of the story a little bit, but with the Industrial Revolution the presence of low cost, easily available coal was definitely a part of the success of certain parts of Europe in 19th Century industrialization. And the advantages of having those resources or being able to bring the resources from the Americas, which was just a short skip across the Atlantic Ocean, was definitely an advantage for Europe.

We should also remember the many great historians that have argued that the play of ideas fundamentally were part of the emergence of the dynamism of Europe. And one of the great theses in this regard is by the early 20th Century brilliant sociologist Max Weber, who said that it was actually the religious spirit of Protestant Christianity, specifically Calvinism that was one of the great spurs to money-making, profit-making and rationality of enterprise that enabled this astounding creation of global-scale industry.

And so the ideas of that kind of prudential, rational investment for wealth creation, claims Max Weber, with many critics as well saying, not quite so, but Weber’s thesis that it is the overall intellectual milieu that says that money-making is not only sound, but actually a proof of God’s favor no less that was one of the spurs to the remarkable energy that went to building the modern world economy.

So the divergence took place. Statecraft, resources, happenstance, the irony of interstate warfare leading to learning by doing in military prowess. As late as 1800, one wouldn’t have noted a remarkable, and much less noted, a decisive gap of income and power between Europe and Asia.

But in the 19th Century, that gap was massively on display and massively increased. Europe conquered large parts of Asia, proved its military prowess, proved its economic and technological advantage. And that’s the story that we’re going to turn to next.