On global inequality

Western Europe began to overtake the rest of the world long before it established colonial empires in Africa, Asia, and the Americas (source)


In Why Nations Fail, economist Daren Acemoglu sees global inequality as a legacy of colonialism. Wherever European settlers were numerous enough, they formed inclusive, democratic societies that aimed for sustainable growth. Wherever they were few in number, they created exclusive, undemocratic societies that sought to extract resources and do little else.

Colonialism thus caused a “reversal of fortunes”:

Among the countries colonized by Europeans, those that were more prosperous before colonization ended up as relatively less prosperous today. This is prima facie evidence that, at least in the sample that makes up almost half of the countries in the world, geographic factors cannot account—while institutional ones can—for differences in prosperity as these factors haven’t changed, while fortunes have. (Acemoglu & Robinson, 2012b)

Acemoglu is half-right. These differences in fortune are at least partly due to the different ways human societies organize themselves, i.e., their “institutions.” But is European colonialism responsible? Would non-European societies have continued onward and upward had it not been for the great European expansion that began around 1500 AD?

These questions have caught the interest of another economist, Michael Cembalest, who has charted per capita GDP in different world regions over the past two thousand years (Thompson, 2012). His conclusion? Europe, and Western Europe in particular, had already overtaken the rest of the world by the year 1500. The relative poverty of the non-European world cannot therefore be due to European colonialism. Instead, the arrow of causality seems to run in the other direction. Europe was able to expand into Asia, Africa, and the Americas because it already had a lead over those regions socially, economically, and technologically.

Europe’s rivals

This conclusion is all the more certain if we look at the two regions that still rivaled Western Europe in 1500. One was the Muslim world, centered on the Ottoman Empire. The other was East Asia, with China as its center. Neither region would suffer European encroachment and colonialism until much later, essentially no earlier than the late 1700s. But by then Western Europe had an even more commanding lead.

Acemoglu is right in saying that failed states suffer from ruling classes that seek to plunder wealth rather than create wealth. He is wrong, however, in seeing such rapaciousness as a perverse result of European colonialism. This mentality actually used to be normal among elites throughout the world, including those of Western Europe.

All states originate in warrior bands that seize power with a view to plunder and self-aggrandizement. In so doing, they seek to keep the plundering to themselves. Rival bands are outlawed, and the use of violence greatly limited. The State thus becomes a means for pacifying society and providing an environment that favors people who create wealth rather than steal wealth (Frost, 2010).

In time, this new economic environment leads to a new cultural environment. The violent male goes from hero to zero. Instead of being a desired sexual partner and a role model for younger males, he becomes a despised criminal to be tracked down and killed. The role model now becomes the industrious family provider. This cultural evolution is described by Gregory Clark with respect to England from the 11th century onward. With the pacification of society and the State’s monopoly on violence, successful individuals were now those who would settle disputes peacefully and display thrift, foresight, and sobriety—what would become known as middle-class values (Clark, 2007; Clark, 2009).

This process can lead to steady economic and material advancement. But it can also abort. There is no reason to assume that Europe’s rivals would have kept on going onward and upward. In fact, they were developing serious internal contradictions long before Europeans were able to exploit these weaknesses for their own benefit.

In some areas, like West Africa, this cultural evolution stalled during the early stages of State formation, specifically the one where the State imposes a monopoly on the use of violence. Lasting internal peace was impossible because of the large surplus of single males, itself due to a high polygyny rate. For these excess males, war of any sort was often their only means of securing women and becoming real men (van den Berghe, 1979, p. 65).

Ottoman Empire

Elsewhere, Clark’s model of cultural evolution would abort at a later stage. This was the case with the Ottoman Empire, which by 1500 had encompassed the Middle East, North Africa, southeastern Europe, and much of Ukraine and southern Russia. Yet pacification within this territory remained incomplete. Even at the height of its power, the countryside was often controlled by warlords, called ayans, who commanded their own private armies. Typically, the Ottoman state would try to co-opt the most powerful ones by appointing them to official posts or endeavor to play one off against another. And typically the results were disastrous. Furthermore, since the ayans were Muslim, effective action against them often meant arming the empire’s Christian subjects, but such action offended the sensibilities of Ottoman leaders (Jelavich & Jelavich, 1977, pp. 16-17, 28).

Thus, societal pacification was much less complete in the Ottoman Empire than in Western Europe. It was also largely confined to the empire’s non-Muslim subjects, who could not serve in the army and were normally forbidden to bear arms (Jelavich & Jelavich, 1977, pp. 5-6). They were thus the ones who would experience the kind of economic and demographic dynamism that was already making Western Europe so successful. Trade and industry became dominated by Greeks, Armenians, and Sephardic Jews. Slavic nations like the Bulgarians were able to rise from a position of subservience to one of relative dominance:

Thereafter [after 1829] Bulgaria became the chief supplier of food and of textiles for uniforms, blankets, and other military needs. From 1830 until 1878 the country enjoyed the market of the entire empire. It traded its agricultural products, including grains, honey, wax, silk, cattle, wine, and also manufactured goods such as pig iron, leather items, iron and metal work, and shoes and clothing. An active cottage industry specializing in woolen cloth developed in the Balkan Mountains (Jelavich & Jelavich, 1977, p. 129)

In contrast, Muslim Turks avoided trade and tried to become rentiers of one sort or another, e.g., landowners of estates worked by tenant farmers, soldiers in the pay of the army or local warlords, or civil servants:

It was estimated that half the people of Istanbul lived off the state in some way. Many, both in Istanbul and in the provincial capitals, became unsalaried hangers-on of pashas, hoping that position or graft would come their way. The crowd of relatives and parasites in the anterooms of every high official was one of the great curses of Ottoman administration, leading to favoritism, inefficiency, and bribery (Jelavich & Jelavich, 1977, p. 111)

The Muslim population thus missed out on opportunities in the expanding market economy and, hence, on opportunities for demographic growth:

By the end of the eighteenth century the Muslim population had entered a period of comparative economic and moral decline. […] This process of decay was clearly illustrated in the eighteenth century in the changing demography of the Balkan towns where Christian and national elements formed an increasingly larger proportion of the population (Jelavich & Jelavich, 1977, pp. 6-7)

We see here the same sort of change that Gregory Clark has described with respect to England: a steady expansion of what would become the middle class at the expense of less productive classes (Clark, 2007; Clark, 2009). During this early phase of capitalist development, early marriage and childbearing were the easiest way for a successful farmer or artisan to expand his workforce. Through downward mobility, such family lineages created an ever larger middle class while steadily replacing the lower classes through downward mobility. By 1800, they formed the bulk of the English population.

In England, this process of population replacement strengthened the country. In the Ottoman Empire, the consequences were different. As the Christian subject peoples grew in numbers and relative wealth, they increasingly saw secession as both feasible and desirable. What other option was there? The Ottoman Empire would never come under their control, and even the possibility of joint Muslim-Christian rule seemed unrealistic. The empire was, by definition, a Muslim state.

China

What about China? Here we see many similarities with Western Europe: a steady demographic expansion of middle-class lineages at the expense of the lower classes (Unz, 1980). Yet this process failed to translate into middle-class domination of Chinese society. Nor did it form a basis for sustained economic growth and technological progress. Indeed, from the 11th century onward, China entered a period of stagnation and relative decline.

One reason was that power fell into the hands of foreign elites: first the Mongols and then the Manchus. China’s population actually declined during the 12th and 13th centuries as a result of Mongol depredations. But the most lasting damage was done by the Manchus, who came to see their own subjects as potential enemies:

Some Chinese writers have argued that the conquest by the Manchus in 1644 (the Qing Dynasty) was a major setback for China. Thanks to inventions like paper and the printing press, China was arguably on the path toward capitalism. But under the Manchus, the amount of cultivated land fell, gunpowder weapons and naval technology was lost almost completely, and scientific thought was suppressed.

Deepak Lal follows this line of reasoning in greater depth. After 1433 the Chinese abandoned their navy and began to restrict foreign trade and contacts. The shipbuilding and sea-going skills thereafter degenerated. And China remained in relative isolation until the 19th century. This closure to the outside world amounted to a closing of the Chinese mind, comparable to that in Japan following its adoption of the policy sakoku under the Tokugawa. (The Great Divergence, 2009)

Chinese merchants were also impeded by the slow development of a true market economy. Economic transactions generally occurred face-to-face between buyer and seller in a specific location, either a shop or a marketplace. That was the “market.” The underlying reason seems to have been a low level of trust—a problem that still exists in China—which may in turn have reflected an incomplete pacification of Chinese society, as seen in the prevalence of banditry well into the 20th century. There was thus a strong tendency to favor close friends and kinfolk, while feeling indifferent to anyone beyond this charmed circle. In the absence of a high-trust environment, China became an economy of markets but not a market economy. Economic activity tended to be confined to specific places and specific points in time.

This lack of trust beyond close friends and kin might have reflected the family-centeredness of Chinese religions, particularly Confucianism, and their correspondingly weak and passive role in society beyond the family level. In European societies, religion assumed a more active and binding form, to the point that it could even dictate how the elites should behave (Fukuyama, 2011).

Conclusion

Circa 1500, the European world began a great expansion that would extend its domination over most of the planet. This expansion was far from fortuitous and seems to have resulted from internal processes that had been under way for some time within Europe itself. By 1500, there remained only two other civilizations of comparable strength: the Ottoman Empire and the Chinese Empire. Both, however, suffered from internal contradictions that prevented a similar sustained expansion. These contradictions were even more evident three centuries later when both empires began to face penetration by European powers on their own territory.

References

Acemoglu, D. & J. Robinson. (2012a). Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Random House.

Acemoglu, D. & J.A. Robinson. (2012b). ‘Why Nations Fail’ , comment on review by J. Diamond, August 16, The New York Review of Books, http://www.nybooks.com/articles/archives/2012/aug/16/why-nations-fail/

Clark, G. (2009).The Domestication of Man: The Social Implications of Darwin, ArtefaCToS, 2, 64-80 http://campus.usal.es/~revistas_trabajo/index.php/artefactos/article/view/5427

Clark, G. (2007). A Farewell to Alms. A Brief Economic History of the World, Princeton University Press, Princeton and Oxford.

Frost, P. (2010). The Roman State and genetic pacification, Evolutionary Psychology, 8(3), 376-389 http://www.epjournal.net/wp-content/uploads/EP08376389.pdf

Fukuyama, F. (2011). The Origins of Political Order: From Prehuman Times to the French Revolution, Farrar, Straus and Giroux.

Jelavich, C. & B. Jelavich. (1977). The Establishment of the Balkan National States, 1804-1920, Seattle: University of Washington Press.

Lal, D. (2001). Unintended Consequences: The Impact of Factor Endowments, Culture, and Politics on Long-Run Economic Performance, MIT Press.

The Great Divergence (2009), MrGlobalization, August 22 http://www.mrglobalization.com/change-and-innovation/187-global-development-and-the-great-divergence

Thompson, D. (2012). The Economic History of the Last 2000 Years: Part II, The Atlantic, June 20, http://www.theatlantic.com/business/archive/2012/06/the-economic-history-of-the-world-after-jesus-in-4-slides/258762/

Unz, R. (1980). Preliminary notes on the possible sociobiological implications of the rural Chinese political economy, unpublished paper. http://www.ronunz.org/wp-content/uploads/2012/05/ChineseIntelligence.pdf

van den Berghe, P.L. (1979). Human Family Systems. An Evolutionary View. New York: Elsevier.