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4 - China: The Start of the Great Divergence

from Part I - Regional Developments

Published online by Cambridge University Press:  03 June 2021

By
Christopher Isett
Edited by
Stephen Broadberry  and
Kyoji Fukao
Stephen Broadberry
Affiliation:
University of Oxford
Kyoji Fukao
Affiliation:
Hitotsubashi University, Tokyo
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Summary

Economic growth in China prior to 1870 was kept in check by the performance of its agricultural sector, where diminishing returns to labour reduced effective demand, discouraged investment in manufacturing, and kept the urban share of population from growing. Economic recovery from the Wars of Transition (1644–1681) ended in 1740, when the rate of growth of total output – especially of food – fell below the rate of population growth. For the next century and a half, the economy shrank on a per capita basis. The resulting higher cost of capital relative to labour discouraged the adoption of labour-enhancing tools, even as the decline in the average size of farms raised demand for basic goods. Symptomatically, labour remained stuck in farming and a preponderance of manufacturing activity remained attached to the peasant household. For a period, the expansion of the frontiers coupled with labour intensification elsewhere were sufficient to feed the population, support trade, and fund the state. After 1800, however, environmental degradation took its toll and markets disaggregated. A period of rising social insecurity and political instability set in at the moment when China faced rising external threats from industrialized and industrializing nations.

Keywords

ChinaGreat DivergenceLittle Divergencepropertydemographyagriculturetradeproto-industryenvironment.
Type
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The Cambridge Economic History of the Modern World , pp. 97 - 122
Publisher: Cambridge University Press
Print publication year: 2021

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