A major thesis of Clark is that China at one time or another apparently had every condition or feature advanced to explain the sui generis Industrial Revolution, or that the advanced explanation fails on other grounds.
While neither you nor I can really speak to how much the Emperors respected debts in general, respecting debts and obligations in general is definitely in keeping with Confucian thought, and it’s not as if English kings were all that respecting, even in those early times when the king was weakest:
“1290: King Edward I (1272-1307) invaded Scotland and would put John de Balliol (1292-1296) on the Scottish throne. The Exchequer of the Jews, a small Jewish Community in England earned its living by lending money and lived under Royal protection. A large number of Knights is in debt to the Jews. The Jews foreclosed on the Knights land for failure to pay and sold it to recover their money. The King feared land would thereby accumulate in too few hands and challenge the Kings power base. Using this pretext the Jews in London and York are massacred and the Jewish ghettos sacked during the Baron wars. The remaining Jews are forced to France after being relieved of their possessions.”
Considering China’s long history of commercial expansion and innovation and great merchant fortunes, with financial instruments and arrangements not exceeded until the 1500s in Europe, if even then, it’s hard to think that China really suffered much from arbitrary and unjust laws.
Anyway, to this day, the English-speaking countries, which, with the exception of India (which you can almost regard as a medium-sized English-speaking country inside a much larger country) are the only countries using common-law judicial systems, are better at creating wealth than any other countries, even thoroughly Westernized ones like France.
Even including the Confucian countries like China & South Korea & Japan? Keep in mind that before the Lost Decade, Japan had a higher per capita than France (by almost $1000). And then there are other non-English-controlled countries like Argentina:
“Not so long ago Argentina really did seem ″doomed to success,″ to use a favorite rallying cry of Eduardo Duhalde, the country’s fifth president since December. Early in the 20th century this was the seventh richest country in the world, with a per capita income ahead of those of Canada, France, the Netherlands, Italy, Japan and Spain and not far behind that of the United States.”
The classic work on how property rights leads to wealth is still Adam Smith’s The Wealth of Nations, written at the start of the industrial revolution and in the middle of an agricultural revolution. England went from over 80% agricultural workers in 1870 to only 30% in 1800, freeing up labor for the industrial revolution; this occurred largely through capital investments in land improvements, for example draining, marl, and lime (http://www.bahs.org.uk/26n1a1.pdf). Smith captures well the legal changes going on, and that he saw as encouraging capital investment, such as the decline of the guilds, the replacement of primogeniture and the complex system of tenancies in land with alienable fee simple ownership, and the resultant enclosure movement, in which commons were replaced by single proprietor control of land.
Roughly speaking, Japan and the rest of East Asia converted to Roman law (the law of Western Europe outside of England) between the mid 19th (Japan) and mid 20th centuries. The process Smith describes was also a partial Romanization of English law into what we now know as the modern common law. So all countries to successfully industrialize have done so under variations of the Roman or English common law, and the English common law itself borrowed quite a bit from the Roman substantive law. (Contrast to Roman procedural law, which is awful, but that’s another story).
The interaction of the decline of political property rights with the industrial revolution is complicated. On the one hand, political corporations such as the East India Company and the West Indies and American colonies were very important to the British economy at that time. Overseas trade provided timber, cotton, and many other industrial inputs. On the other hand, the decline of political property rights in land led to the alienable ownership and the decline of the guilds that Smith and the new capitalists championed.
I particularly commend Book 3 Ch. 3 and Book 4 Ch. 7 of Wealth of Nations which cover much of this, albeit from Smith’s Romanist view. Sadly, most people never get past the famous Book 1.
East Asian institutions are hard to compare, first because their population may have an IQ advantage that makes up for institutional handicaps, and second because we don’t really know what they were: at least here in the West our knowledge of their old legal systems is extremely poor, and they underwent radical Westernization in the late 19th and 20th centuries. Clark’s genetic theory can’t explain why Britain declined so rapidly after about 1870 from being the leader in industrialization and a globe-straddling empire to being just another of dozens of medium-sized industrialized countries today. Political and legal developments, in particular the Reform movement, can, but that is a topic for another day.
Not up to your scholarly level, I don’t think. I’m largely going on the reading/research I did using De Roover and others to write http://en.wikipedia.org/wiki/Medici_Bank , where I was struck by the wretched subterfuges that merchants had to resort to and the general lack of sophistication, which struck me as quite different from Chinese systems with genuine fiat currency, undisguised interest, and general sophistication (there may’ve been Chinese insurance in there too, but I’ve forgotten any details of that).
Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.
A major thesis of Clark is that China at one time or another apparently had every condition or feature advanced to explain the sui generis Industrial Revolution, or that the advanced explanation fails on other grounds.
While neither you nor I can really speak to how much the Emperors respected debts in general, respecting debts and obligations in general is definitely in keeping with Confucian thought, and it’s not as if English kings were all that respecting, even in those early times when the king was weakest:
Considering China’s long history of commercial expansion and innovation and great merchant fortunes, with financial instruments and arrangements not exceeded until the 1500s in Europe, if even then, it’s hard to think that China really suffered much from arbitrary and unjust laws.
Even including the Confucian countries like China & South Korea & Japan? Keep in mind that before the Lost Decade, Japan had a higher per capita than France (by almost $1000). And then there are other non-English-controlled countries like Argentina:
The classic work on how property rights leads to wealth is still Adam Smith’s The Wealth of Nations, written at the start of the industrial revolution and in the middle of an agricultural revolution. England went from over 80% agricultural workers in 1870 to only 30% in 1800, freeing up labor for the industrial revolution; this occurred largely through capital investments in land improvements, for example draining, marl, and lime (http://www.bahs.org.uk/26n1a1.pdf). Smith captures well the legal changes going on, and that he saw as encouraging capital investment, such as the decline of the guilds, the replacement of primogeniture and the complex system of tenancies in land with alienable fee simple ownership, and the resultant enclosure movement, in which commons were replaced by single proprietor control of land.
Roughly speaking, Japan and the rest of East Asia converted to Roman law (the law of Western Europe outside of England) between the mid 19th (Japan) and mid 20th centuries. The process Smith describes was also a partial Romanization of English law into what we now know as the modern common law. So all countries to successfully industrialize have done so under variations of the Roman or English common law, and the English common law itself borrowed quite a bit from the Roman substantive law. (Contrast to Roman procedural law, which is awful, but that’s another story).
The interaction of the decline of political property rights with the industrial revolution is complicated. On the one hand, political corporations such as the East India Company and the West Indies and American colonies were very important to the British economy at that time. Overseas trade provided timber, cotton, and many other industrial inputs. On the other hand, the decline of political property rights in land led to the alienable ownership and the decline of the guilds that Smith and the new capitalists championed.
I particularly commend Book 3 Ch. 3 and Book 4 Ch. 7 of Wealth of Nations which cover much of this, albeit from Smith’s Romanist view. Sadly, most people never get past the famous Book 1.
East Asian institutions are hard to compare, first because their population may have an IQ advantage that makes up for institutional handicaps, and second because we don’t really know what they were: at least here in the West our knowledge of their old legal systems is extremely poor, and they underwent radical Westernization in the late 19th and 20th centuries. Clark’s genetic theory can’t explain why Britain declined so rapidly after about 1870 from being the leader in industrialization and a globe-straddling empire to being just another of dozens of medium-sized industrialized countries today. Political and legal developments, in particular the Reform movement, can, but that is a topic for another day.
Apart from a few very useful graphs Clark’s work is rather poor and this theories are silly. He needs to learn far more about both evolution and law to form useful theories in those areas. See http://unenumerated.blogspot.com/2007/09/institutional-changes-precedent-to.html and http://unenumerated.blogspot.com/2007/08/why-industrial-revolution.html.
Those are interesting links & comments, thanks!
gwern, do you have reference(s) for Chinese “financial instruments and arrangements not exceeded until the 1500s in Europe”? Thanks in advance.
Not up to your scholarly level, I don’t think. I’m largely going on the reading/research I did using De Roover and others to write http://en.wikipedia.org/wiki/Medici_Bank , where I was struck by the wretched subterfuges that merchants had to resort to and the general lack of sophistication, which struck me as quite different from Chinese systems with genuine fiat currency, undisguised interest, and general sophistication (there may’ve been Chinese insurance in there too, but I’ve forgotten any details of that).
Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.
If it’s any good, interest (or ursary) was only legalised in England in 1571, up to a value of 10%.
Citation: Praise and Paradox; Merchants and craftsmen in Elizabethan popular literature, Laura Caroline Stevenson.