Five Astrologers and a Giraffe

Wednesday, Nov 10, 2010

China went from a state of economic and technological exuberance in around AD 1000 to one of dense population, agrarian backwardness and desperate poverty in 1950. According to Angus Maddison's estimates, it was the only region in the world with a lower GDP per capita in 1950 than in 1000. The blame for this lies squarely with China's government.

Pause, first, to admire the exuberance. China's best moments came when it was fragmented, not united. The economy first truly prospered in the unstable Zhou dynasty of the first millennium BC. Later, after the Han empire fell apart in AD 220, the Three Kingdoms period saw a flourishing of culture and technology. When the Tang empire came to an end in 907, and the 'Five Dynasties and Ten Kingdoms' fought each other incessantly, China experienced its most spectacular burst of invention and prosperity yet, which the Song dynasty inherited. Even the rebirth of China in the late twentieth century owes much to the fragmentation of government and to an explosion of local autonomy. The burst of economic activity in China after 1978 was driven by 'township and village enterprises', agencies of the government given local freedom to start companies. One of the paradoxical features of modern China is the weakness of a central, would-be authoritarian government.

By the late 1000s, the Chinese were masters of silk, tea, porcelain, paper and printing, not to mention the compass and gunpowder. They used multi-spindle cotton wheels, hydraulic trip hammers, as well as umbrellas, matches, toothbrushes and playing cards. They made coke from coal to smelt high-grade iron: they were making 125,000 tonnes of pig iron a year. They used water power to spin hemp yarn. They had magnificent water clocks... Art, science and engineering flourished. Bridges and pagodas sprang up everywhere. Woodblock printing quenched a raging thirst for literature. The Song era had, in short, a highly elaborate division of labor: many people were consuming what each other produced.

Then came the calamities of the 1200s and 1300s. First the Mongol invasion, then the Black Death, then a series of natural disasters, followed by the all too unnatural disaster of totalitarian Ming rule. The Black Death, as I shall argue in the next chapter, spurred Europe into further gains from trade and escaping the trap of self-sufficiency; why did it not have the same effect in China, where it left the country half as populous as before and therefore presumably rich in surplus land to support disposable income? The blame rests squarely with the Ming dynasty. Western Europe only bounced back from the Black Death because it had regions of independent city states run by and for merchants, notably in Italy and Flanders. This made it harder for landowners to reimpose serfdom and restrictions on peasant movement after the plague had briefly empowered the laboring classes. In Easter Europe, Mamluk Egypt and Ming China, serfdom was effectively restored.

Empires, indeed governments generally, tend to be good things at first and bad things the longer they last. First they improve society's ability to flourish by providing central services and removing impediments to trade and specialization; thus, even Genghis Khan's Pax Mongolica lubricated Asia's overland trade by exterminating brigands along the Silk Road, thus lowering the cost of oriental goods in European parlours. But then, as Peter Turchin argues following the lead of the medieval geographer Ibn Khaldun, governments gradually employ more and more ambitious elites who capture a greater and greater share of the society's income by interfering more and more in people's lives as they give themselves more and more rules to enforce, until they kill the goose that lays the golden eggs. There is a lesson for today. Economists are quick to speak of 'market failure', and rightly so, but a greater threat comes from 'government failure'. Because it is a monopoly, government brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets rather than the service of their customers; pressure groups form an unholy alliance with agencies to extract more money from taxpayers for their members. Yet despite all this, most clever people still call for government to run more things and assume that if it did so, it would somehow be more perfect, more selfless, next time.

Not only did the Ming emperors nationalize much of industry and trade, creating state monopolies in salt, iron, tea, alcohol, foreign trade and education, but they interfered with the everyday lives of their citizens and censored expression to a totalitarian degree. Ming officials had high social status and low salaries, a combination that inevitably bred corruption and rent-seeking. Like all bureaucrats they instinctively mistrusted innovation as a threat to their positions and spent more and more of their energy on looking after their own interests rather than goals they were put there to pursue. As Etienne Balazs put it:

The reach of the Moloch-state, the omnipotence of the bureaucracy, goes much further. There are clothing regulations, a regulation for public and private construction (dimensions of houses); the colors on wears, the music one hears, the festivals -- all are regulated. There are rules for birth and rules for death; the providential State watches minutely over every step of its subject, from cradle to grave. It is a regime of paperwork and harassment, endless paperwork and endless harassment.

Do not be fooled by the present tense: this is Ming, not Maoist, China that Balazs is describing. The behavior of Hongwu, the first of the Ming emperors, is an object lesson in how to stifle the economy: forbid all trade and travel without government permission; force merchants to register an inventory of their goods once a month; order peasants to grow for their own consumption and not for the market; and allow inflation to devalue the paper currency 10,000-fold. His son Yong-Le added some more items to the list: move the capital at vast expense; maintain a gigantic army; invade Vietnam unsuccessfully; put your favorite eunuch in charge of a nationalized fleet of monstrous ships with 27,000 passengers, five astrologers and a giraffe aboard, then in a fit of pique at the failure of this mission to make a profit, ban everybody else from building ships or trading abroad...

Part of the problem was that a Chinese artisan could not flee to work under a more tolerant ruler or in a more congenial republic, as Europeans did routinely. Because of its peninsulas and mountain ranges, Europe is much harder to unify than China: Ask Charles V, Louis XIV, Napoleon or Hitler. For a while the Romans achieved a sort of European unity, and the result was just like the Ming: stagnation and bureaucracy. Under the emperor Diocletian (just as under the emperor Yong-Le) 'tax collectors began to outnumber taxpayers', said Lactantius, and 'a multitude of governors and hordes of directors oppressed every region -- almost every city; and to these were added countless collectors and secretaries and assistants to the directors.'

The Rational Optimist, Matt Ridley, 2010, Pages 180-184, http://www.amazon.com/Rational-Optimist-How-Prosperity-Evolves/dp/006145205X.