Overt suppression had a long pedigree, ranging in time from the First Emperor’s (perhaps doubtful) burning of numerous historical and didactic books to the safely attested great book proscription of the 1770s that caused the permanent loss of more than four-fifths of the 2,665 targeted texts. But it is striking that such measures were on the whole far less common and systematic than the countless doctrinal and intellectual persecutions that run like a red thread through European history. It appears that the overwhelming weight of imperial authority muted conflict: as Derk Bodde ingeniously observes, the relative weakness of Western oppressors—constrained in their actions by exit options and internal divisions of social power—made it easier for dissenters to resist, which led to more intense struggle. In China, by contrast, intellectuals’ acceptance of imperial control was a deeply ingrained habit and it reduced the odds of open clashes.178
In the final analysis, whether particular policies promoted or impeded economic development and innovation may well be a secondary issue. Two features were crucial: the latent potential for doing harm, and the structural lack of diversity. Concerning the first point, the scale of malignant intervention mattered less than “the simple fact that government might interfere any time it saw fit.”179
Such interventions went far back. When the regent Wang Mang usurped the throne from the Han in 9 CE, he reportedly instituted a series of ambitious economic reforms from land-distribution schemes, a ban on private land transactions, and the abolition of slavery to the confiscation of private bullion stocks and the distribution of a bewildering variety of fiduciary coins. It remains unclear just how much damage was done: the relevant sources date from after the restoration of the Han dynasty in 23 CE and are implacably hostile to the Wang Mang regime and thus prone to exaggerate its shortcomings. Even so, we get a sense of the unsteady nature of the usurper’s decision-making: some of his measures were already repealed during his reign. The disruptive potential of radical decrees emanating from the imperial court was considerable.180
The “New Policies” that were adopted under the Northern Song are a more recent and much-better-documented example of this approach. Promoted by a faction led by the imperial chancellor Wang Anshi in the 1070s, they were designed to raise state capacity and boost commercial development by means of expansive intervention: the state increased the money supply, imposed price and wage controls, and offered state loans to farmers. Implementation was intermittent, governed by ongoing power struggles between reforming and opposing factions that persecuted one another to the best of their abilities. After several policy swings over the course of a few decades, the defeat and retreat of the Song in the 1120s discredited the program and led to its demise. Once again, the key point is not the substantive content of these measures but the manner in which they were decided and reversed in response to highly volatile power dynamics at a monopolistic center.181
The second problem associated with monopoly was even more serious: over the long run, imperial persistence lowered diversity in policy approaches. This is well illustrated by China’s traditional governmental emphasis on preserving the agrarian economy and especially the free peasantry, which was considered the foundation of the imperial edifice. Vries labels this prioritization “agrarian paternalism”—the premise that the state’s chief responsibility was to stabilize the social order and ensure human welfare by protecting family farms.182
Given the recurrence of massive peasant revolts in Chinese history, this preoccupation made perfect sense if the overarching goal was maintenance of existing arrangements. Chinese policies reflect ancient concerns that appear as early as the Confucian Analects: “I hear that rulers of states and heads of families fear inequality, but not poverty; they fear instability, but not scarcity of people.”183
Kent Gang Deng has elevated this conservative stance into the defining principle of Chinese economic history: a “trinary structure” composed of “interlinked counterpoises” between agricultural dominance, a free peasantry, and physiocratic government that evolved in the Warring States period and proved highly resilient over time. The Song embrace of commercialism remained the only significant exception to this norm. In Europe, by contrast, rural production systems and social relations varied greatly, from the enclosure movement and the proletarianization of the labor force that facilitated rationalization and capitalistic exploitation of the countryside in England at one end of the spectrum all the way to Russian serfdom at the other.184
Conducive to the survival of an imperial behemoth and its ruling bureaucracy, Chinese-style agrarianism was antithetical to the deliberate promotion of commercial development. Thus, China’s merchants and entrepreneurs were not merely constrained by the aforementioned configuration of social power that has been traced back to antiquity: this constraint was also a direct function of imperial self-preservation and perpetuation. Transcending individual dynasties, the government’s agrarian-paternalist bias reveals the true impact of monopolistically centralized policy choices: they shaped outcomes over the long run primarily because there was no institutionalized political space for alternatives—space that Europe’s competitive state system provided in abundance.
Taxation and Corruption
Even so, policymaking, however persistent or capricious, was arguably a lesser impediment to modernizing development than the generically laissez-faire tendencies of the imperial monopolist. China’s empire, just as many others, was a “capstone” state, perched atop local and regional societies. If anything, this detachment grew over time. Having absorbed the lessons of multiple more or less successful previous iterations of imperial rule, the Ming and Qing regimes had perfected this style of governance. Spared any serious outside competition, they contented themselves with fragmented fiscal operations, low centralized revenue, and modest state capacity.185
In this environment, free markets operated under benign neglect, dominated by groups with little faith in imperial institutions but ample trust in family and lineage. As a result, support for entrepreneurship was privatized and lacked public backing. Protection of property rights and contract enforcement were weak spots. Whereas in Europe, competing states offered formal enforcement because they sought out revenue from contract registration and conflict resolution, the Chinese government gave less weight to formal arrangements.186
Low state capacity adversely affected the financial sector. Whereas European credit markets benefited from the mountains of public debt incurred by warring governments, no such stimulus existed in China. The empire did not issue public debt until the mid-nineteenth century. There had generally been little demand: either taxes were sufficient to cover expenses, or potential lenders would have been reluctant to provide funds to a monopolist in times of crisis. During crises, the government would fall back on currency manipulation and predation on the wealthy. These options in turn exposed merchants to bullying and made them less inclined to trust the authorities.
Moreover, the sheer physical scale of the empire helped substitute movements of resources across regions (i.e., transfers in space) for credit (i.e., transfer in time). After all, the ability to concentrate extensively distributed means as needed had always been a hallmark and key benefit of large empire: yet it also represented a disincentive to more sophisticated solutions that might have spurred further innovation and growth. As a result, China’s financial system remained underdeveloped.187
Limited demand for private credit also contributed to this outcome. Not only did the dominance of labor-intensive rice farming and household handicraft production fail to generate strong demand for financing: when needed, lineages and clans provided resources for their members. Empire played a role in this as well: as we will see below, the expansion of these bodies and their social significance was meaningfully linked to the persistence of imperial rule.188
Thanks to more restrained military spending, taxes were low compared to those levied in much of early modern Europe. For various reasons, regular per capita tax income actually decline
d under the Qing: dues were often not fully collected, levies relied on registers that dated from the Ming period and were only schematically updated, and newly cultivated land frequently went unregistered. Moreover, endemic corruption siphoned off revenue.189
These tendencies were part of a time-honored pattern. Whereas newly installed dynasties managed to override vested interests, in the later stages of their rule, elite groups had learned how to conceal assets, which in turn diminished the state’s ability to respond to popular risings triggered by elite predation and demographic pressures. Only under the Song and after the mid-nineteenth century did serious external or internal threats impel fiscal intensification.190
In the late imperial period in particular, neo-Confucian agrarian paternalism and low fiscal intakes degraded the state’s infrastructural capacity to lows that “limited potential for economic growth along Schumpeterian lines”—growth born of creative destruction of established practices—in favor of less sustainable Smithian growth driven by market expansion, intensification, and specialization of labor. Weak fiscal institutions also “left little scope for the state to promote economic development,” not least because consumption-focused welfare schemes such as granaries absorbed civilian funds.191
Low state capacity and rampant corruption conspired to weaken de facto protection of industrial and commercial property rights. We owe to Chen Qiang an illuminating model of real tax rates as a measure of property rights protection. The “real” tax burden was composed of the central tax rate (revenues levied and received by the imperial authorities), which could be low; local tax rates, that is, rents taken by officials; and the public-security tax rate, defined as the cost of poor governance and banditry. Once all these complementary elements are taken into account, the real tax rate in late imperial China appears to have been both high and highly variable, sensitive as it was to frequent turnover among officials and changes in security conditions.192
While the considerable fiscal exertions and adequate officials’ salaries of the Song period—driven by competitive pressures—helped contain rent-seeking and security risks, the Ming and Qing regimes, programmatically focused on frugality and simplicity, kept central taxes too low, which had the unwelcome effect of raising the real tax rate. Underpaid and understaffed local offices embraced institutionalized corruption, extracting fees from traders and manufacturers. Corruption incomes that amounted to a large multiple of official stipends highlight the scale of the problem, which was exacerbated by a weak judicial system.193
As a result, late imperial real tax rates need not have been lower than they had been under the fiscally aggressive Song, but were made more burdensome by their greater randomness. This might even have contributed to the deurbanization that occurred under the Ming and Qing: the concentration of officials in major cities negatively impacted commerce and encouraged manufacturers and bankers to decamp for more peripheral locations.194
In all of this, the degree to which the empire enjoyed hegemonic status was of critical importance. Song policymaking had been galvanized by severe and growing competitive pressure from the northern periphery. It was not ideological commitment to small central government and light taxation as such that accounted for the late imperial inclination to let things slide: the absence of serious challenges made this predisposition viable in the first place.195
It is one of the supreme ironies of history that ostensibly benign policies in China—low taxes, a largely hands-off approach to the economy, and basic food relief schemes for the general population—constrained development whereas the wasteful and blood-drenched nexus of ceaseless war, ever-rising taxes, and fierce protectionism in Western Europe boosted it in the end.196
Firms and Clans
Late imperial China’s property rights regimes were not favorable to the creation of large and vertically and horizontally integrated industrial and commercial firms. Even though firms functioned better than earlier scholarship was prepared to accept, they were held back by a very limited regulatory framework that made codified law a poor means of enacting rules regarding business affairs.197
The rise of kinship networks from the Song period onward checked concentration of landownership—and thus agricultural productivity—and more generally promoted a kin-based and collectivist value system, kin morality, and personal modes of rule enforcement. During the same period, the Western European model of corporate organization favored a generalized and individualistic value system, generalized morality, and impersonal enforcement. These differences shaped institutional evolution in China, constraining civil and commercial law, credit, and the development of impersonal exchange, features that undergirded Western innovation and progress. Over time, lineage trusts adopted a rentier mentality that privileged broad portfolios over the efficiency of individual firms and helped keep unprofitable ventures afloat.198
The secular expansion of clan networks cannot be separated from imperial persistence. Direct promotion by the state was unlikely to have been decisive: although the Song permitted ancestor worship beyond aristocratic houses, the Ming extended this right to all commoners, and the early Qing took a more active role in encouraging this mode of social organization, state measures tended to be reactive to existing private activity rather than a driving force in their own right. On the whole, the imperial state was simply too weak to launch or sustain this extremely widespread process.
Its influence was more indirect. After the destruction of the Tang aristocracy in the early tenth century, officials in the reconstituted empire of the Song were eager to establish their own networks as markers of status and vehicles of advancement. Their preferences proved seminal beyond their own circles, and were taken and emulated by aspirational commoners. Repeated imperial restoration sustained this trend and facilitated the gradual spread of lineage networks.199
While Europe Took Off
Had China begun to move in a more promising direction when it was overtaken by the European expansion? Revisionist scholarship has made much of the easing of restraints and economic growth that took place under the Qing. Markets performed similarly well in late eighteenth-century China and Western Europe, although by some measures Britain already claimed the top spot. And we must not forget that while China was still enjoying the fruits of peace, the wars and trade barriers of Europe did not merely promote but also burdened economic development.200
Even so, most indicators leave no doubt that economic divergence was already well under way. Real wages in the most economically developed parts of China were lower than their European equivalents in Britain and the Netherlands, and real incomes declined during the eighteenth and into the nineteenth centuries. Capitalistic features remained underdeveloped: the share of wage workers in the English labor force was much larger than in China. Commercial networks bypassed most of the countryside because of high transportation costs and the lack of access to waterways in the north. In the late eighteenth century, interregional integration consequently began to wane.201
Even the economy of the Yangzi delta region, the most advanced in China, continued to be shaped by Malthusian processes and an agricultural sector dominated by peasant households and a ruling class that preyed on them. Living standards and agricultural labor productivity were in decline. In England, by contrast, workers who were relatively well protected from extra-economic coercion had become dependent on market relations for their subsistence and operated under intense competitive constraints.202
Although permanent partnership firms had by then come into existence, China still lacked a market for formally trading shares, and partnerships relied on equity investments rather than credit. Pawnbrokers remained the principal source of credit, and there were no genuine banks in the European sense. In part because of this, interest rates and the real cost of capital were much higher than in Western Europe.203
At best, therefore, conditions reflected what Zhao calls “mid-dynasty prosperity,” an intermediate phase of pragmatic management of a large stable empire afte
r the economy had recovered from the dislocations of the Ming–Qing transition but before population growth curbed Smithian growth—yet without any discernible potential for transformative change. From this perspective, there was no compelling reason that this mid-Qing flourishing should not have petered out just as previous efflorescences had done, even if European aggressors had not appeared on the scene. In fact, the White Lotus rebellion of the 1790s, fully half a century prior to the Opium Wars, was a typical sign of late dynastic decline.204
Review of two millennia of imperial history offers ample support for this reading. On average, two centuries passed between the founding of a new dynasty and the onset of serious popular rebellions that undermined it. Under the Qing, risings commenced about 150 years into their rule, followed by the cataclysmic Taiping rebellion another half century later. Comparatively speaking, these crises arrived right on time.205
More specifically, the growth of an unmarried male population and signs of Malthusian pressures in the eighteenth century cast the subsequent famines and risings as the culmination of a drawn-out process. And even if the strength of these demographic and resource constraints remains contested, there can be no doubt that—in von Glahn’s words—the “lack of significant innovation in productive technologies” placed a growing burden on the agricultural base. At the same time, England benefited hugely from an agricultural revolution that supported both ongoing population growth and concurrent urbanization.206
In all of this, details matter little. A simple counterfactual shows why. Even if, on that occasion, imperial destabilization and breakdown could somehow have been avoided or, perhaps more plausibly, if an equivalent empire could swiftly have been put back together after such a breakdown and resumed business as usual—featuring ostensibly benevolent and light-handed central policies such as low taxes, agrarianism, basic welfare provisions, and the preservation of peace—such outcomes were not likely to precipitate transformative innovation.207
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