Jason Furman's Reviews > The Great Divergence: China, Europe, and the Making of the Modern World Economy

The Great Divergence is a monumental historical argument for why European economies diverged from Asian Economies in the 18th and 19th centuries, achieving the first large-scale sustained growth in GDP per capita the world had ever known. It was first published in 2000 and has generated substantial debate since then, I am not expert enough to have a view on the overall debate but this book certainly shifted my thinking—and the accretion of argument and detail is much, much more than the thumbnail summary I had been familiar with before reading the book or that you will be if you read the rest of this review.

The summary of Kenneth Pomeranz’s argument: Around 1800 living standards were similar in the Yangzi delta area of China and England/the Netherlands (the book shifts the reference points back and forth from these particulars to Europe more broadly vs. Asia more broadly, sometimes even including Japan and India). If anything China was closer to market capitalism with more freely alienable land, rental contracts, market sales of produce, and fewer state monopolies and guilds to interfere with the, say, rural textile production. Other supposed advantages of the European system were non-existent or small including double-entry bookkeeping (not widely used in Europe plus China sophisticated accounting), the capitalist spirit of Weber, focus on luxury goods/consumption, joint stock companies (weren’t important until railroads), better patent system (didn’t matter much because technology did not play much role until later in the takeoff), etc.

But for two developments: (1) the European conquest of the Americas and importation of large-scale slavery and (2) the fortunate location of English coal deposits, both Europe and Asia were reaching ecological limits where land technology was not getting better, timber prices were rising, less land for raising cattle/sheep, reduced manure and fertilizers, etc. This ecological constraint would have capped both of their growth.

The Americas, however, relieved the ecological constraint by allowing large-scale imports of sugar, cotton, timber and much more—enough to replace more than all of the available English land. The Americas also exported silver and some gold which went to Asia to purchase manufactured goods, especially from India. At the same time, English coal also relieved the ecological constraint, created a massive energy supply that overcame the Chinese advantage in energy efficiency, and was critical for industries like iron, glass, beer etc. China had coal too but it was unfortunately located in the North which had been depleted by Mongol invasions, plagues, floods, etc.

The alternative to the Pomeranz argument is the idea the the European industrial revolution was less inflection point than something that was growing slowly over many centuries and so another cause or set of causes was already present and it was not these two key features that differentiated them from Asia. Pomeranz brings an enormous amount of detail to bear in arguing against every aspect of this thesis but at times one worries that he is simply collecting data to support his case. He also makes simpler arguments like if the differences were centuries in the making why not much divergence as late as 1800.

As I said, this summary does not do justice to the book. It is filled with enormous amount of detail. Which system was closer to markets, for example, is addressed in man, many ways like looking at wage disparities between rural laborers in agriculture and textiles or looking at interest rate differentials.

The modern approach to economic history is to focus on statistical analysis of well identified deep historical questions, something that was summarized and advanced well in The Journey of Humanity: The Origins of Wealth and Inequality. This book is a reminder that deep historical comparative scholarship criss-crossing across many, many areas can both help better understand the rise of the West and the complex interactions of the global economy at a critical period of divergence.

P.S. Would welcome people’s thoughts on this book or recommendations on alternative histories of the great divergence.