Comparing Welfare Capitalism: Social Policy and Political Economy in Europe, Japan and the USA (Rout

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They kept nurturing their pre-modern inventions and did not move forward with the modern times. China decided to continue a self-sustaining process of scientific and technological advancement on the basis of their indigenous traditions and achievements. The East did not see the need to improve on their inventions and thus from experience, focused on their past successes.

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While they did this, the West was focused more on experimentation and trial by error, which led them to come up with new and different ways to improve on existing innovations and create new ones. In the early 19th century, Egypt under Muhammad Ali began a program of state-sponsored industrialization , [56] quick to adopt steam engine technology, and manufacturing boilers for installation in a number of industries, including ironworks , textile manufacturing , paper mills , and hulling mills.

Economic historian Jean Batou argues that Egypt had the necessary economic conditions for rapid industrialization in the early 19th century, and for the adoption of oil as a potential energy source for its steam engines later in the 19th century. Classical economists, beginning with Adam Smith and Thomas Malthus , argued that high wages in the West stimulated labor-saving technological advancements. However, more recent studies have depicted living standards in 18th century China and pre-Industrial Revolution Europe as comparable. There have been similar findings for India.

Real wages and living standards in 18th-century Bengal and Mysore were higher than in Britain, which in turn had the highest living standards in Europe.

Similarly for Ottoman Egypt , its per-capita income in was comparable to that of leading Western European countries such as France , and higher than the overall average income of Europe and Japan. According to Paul Bairoch, in the midth century, "the average standard of living in Europe was a little bit lower than that of the rest of the world. A number of economic historians have argued that European colonialism played a major role in the deindustrialization of non-Western societies. Paul Bairoch , for example, cites British colonialism in India as a primary example, but also argues that European colonialism played a major role in the deindustrialization of other countries in Asia, the Middle East, and Latin America , and contributed to a sharp economic decline in Africa.

Up until the 19th century, India was the world's leading cotton textile manufacturer, [97] with Bengal and Mysore the centers of cotton production. At the same time, the British East India Company 's rule in India contributed to its deindustrialization, with the decline of native industry opening up a new market for British goods. Luxury consumption is regarded by many scholars to have stimulated the development of capitalism and thus contributed to the Great Divergence. However, others counter that luxury workshops were not unique to Europe; large cities in China and Japan also possessed many luxury workshops for the wealthy, [] and that luxury workshops do not necessarily stimulate the development of "capitalistic firms".

Differences in property rights have been cited as a possible cause of the Great Divergence. Government and policies are seen as an integral part of modern societies and have played a major role in how different economies have been formed. The Eastern societies had governments which were controlled by the ruling dynasties and thus, were not a separate entity.

Their governments at the time lacked policies that fostered innovation and thus resulted in slow advancements. As explained by Cohen, the east had a restrictive system of trade that went against the free world market theory; there was no political liberty or policies that encouraged the capitalist market Cohen, This was in contrast to the western society that developed commercial laws and property rights which allowed for the protection and liberty of the marketplace. Their capitalist ideals and market structures encouraged innovation.

Pomeranz argues that much of the land market in China was free, with many supposedly hereditary tenants and landlords being frequently removed or forced to sell their land. Although Chinese customary law specified that people within the village were to be offered the land first, Pomeranz states that most of the time the land was offered to more capable outsiders, and argues that China actually had a freer land market than Europe. The conditional sale allowed the seller to return to the buyer many years after the sale, and many times, to demand extra payments. He also does not account for the inability of landlords to collect rent on second crops.

However, Robert Brenner and Chris Isett emphasize differences in land tenancy rights. They argue that in the lower Yangtze, most farmers either owned land or held secure tenancy at fixed rates of rent, so that neither farmers nor landlords were exposed to competition. In 15th century England, lords had lost their serfs, but were able to assert control over almost all of the land, creating a rental market for tenant farmers. This created competitive pressures against subdividing plots, and the fact that plots could not be directly passed on to sons forced them to delay marriage until they had accumulated their own possessions.

Thus in England both agricultural productivity and population growth were subject to market pressures throughout the early modern period. A study found that secure property rights in Europe, but not in large parts of the Middle-East, contributed to the increase of expensive labour-saving capital goods, such as water-mills, windmills, and cranes, in medieval Europe but its decrease in the Middle-East. A variety of theories posit Europe's unique relationship with the New World as a major cause of the Great Divergence.

The New World also served as a market for European manufactures. Chen also suggested that the New World as a necessary factor for industrialization, and trade as a supporting factor causing less developed areas to concentrate on agriculture supporting industrialized regions in Europe. The high-level equilibrium trap theory argues that China did not undergo an indigenous industrial revolution since its economy was in a stable equilibrium, where supply and demand for labor were equal, disincentivizing the development of labor-saving capital.

Rosenberg and Birdzell claims that the so-called "eastern culture" of "respect" and "unquestionable devotion" to the ruling dynasty was as a result of a culture where the control of the dynasty led to a "silent society" that "did not ask questions or experiment without the approval or order from the ruling class". On the other hand, they claimed that the West of the late medieval era did not have a central authority or absolute state, which allowed for a free flow of ideas Rosenberg, Birdzell, This so-called "eastern culture" also supposedly showed a "dismissal of change" due to their "fear of failure" and disregard for the imitation of outside inventions and science; this was different from the "western culture" which they claimed to be willing to experiment and imitate others to benefit their society.

They claimed that this was a culture where change was encouraged, and sense of anxiety and disregard for comfort led them to be more innovative. Max Weber argued in The Protestant Ethic and the Spirit of Capitalism that capitalism in northern Europe evolved when the Protestant work ethic particularly Calvinist influenced large numbers of people to engage in work in the secular world, developing their own enterprises and engaging in trade and the accumulation of wealth for investment. In his book The Religion of China: Confucianism and Taoism he blames Chinese culture for the non-emergence of capitalism in China.

Chen similarly claims that cultural differences were the most fundamental cause for the divergence, arguing that the Humanism of the Renaissance followed by the Enlightenment including revolutionary changes in attitude towards religion enabled a mercantile, innovative, individualistic, and capitalistic spirit. For Ming Dynasty China, he claims there existed repressive measures which stifled dissenting opinions and nonconformity.

He claimed that Confucianism taught that disobedience to one's superiors was supposedly tantamount to "sin". In addition Chen claimed that merchants and artificers had less prestige than they did in Western Europe. However, many scholars who have studied Confucian teachings have criticized the claim that the philosophy promoted unquestionable loyalty to one's superiors and the state.

The core of Confucian philosophy itself was already Humanistic and Rationalistic ; it "[does] not share a belief in divine law and [does] not exalt faithfulness to a higher law as a manifestation of divine will. One of the central teachings of Confucianism is that one should remonstrate with authority. Many Confucians throughout history disputed their superiors in order to not only prevent the superiors and the rulers from wrongdoing, but also to maintain the independent spirits of the Confucians.

Furthermore, the merchant class of China throughout all of Chinese history were usually wealthy and held considerable influence above their supposed social standing.

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Merchants in the meantime had also benefited from and utilized Confucian ethics in their business practices. By the Song period, the Scholar-officials themselves were using intermediary agents to participate in trading. Of the developed cores of the Old world , India was distinguished by its caste system of bound labor, which hampered economic and population growth and resulted in relative underdevelopment compared to other core regions. Compared with other developed regions, India still possessed large amounts of unused resources. India's caste system gave an incentive to elites to drive their unfree laborers harder when faced with increased demand, rather than invest in new capital projects and technology.

The Indian economy was characterized by vassal-lord relationships, which weakened the motive of financial profit and the development of markets; a talented artisan or merchant could not hope to gain much personal reward. Pomeranz argues that India was not a very likely site for an industrial breakthrough, despite its sophisticated commerce and technologies.

Aspects of Islamic law have been proposed as an argument for the divergence for the Muslim world. Economist Timur Kuran argues that Islamic institutions which had at earlier stages promoted development later started preventing more advanced development by hampering formation of corporations, capital accumulation, mass production, and impersonal transactions.

Quataert criticizes arguments rooted in Orientalism , such as "now-discredited stereotypes concerning the inferiority of Islam ", economic institutions having stopped evolving after the Islamic Golden Age , and decline of Ijtihad in religion negatively affecting economic evolution. In his book A Farewell to Alms , Gregory Clark argues that the human psychological traits such as literacy, numeracy, and delayed gratification needed for the divergence spread in England between and "at least culturally and perhaps also genetically".

Economic historian Joel Mokyr has argued that political fragmentation the presence of a large number of European states made it possible for heterodox ideas to thrive, as entrepreneurs, innovators, ideologues and heretics could easily flee to a neighboring state in the event that the one state would try to suppress their ideas and activities. This is what set Europe apart from the technologically advanced, large unitary empires such as China. China had both a printing press and movable type, yet the industrial revolution would occur in Europe. In Europe, political fragmentation was coupled with an "integrated market for ideas" where Europe's intellectuals used the lingua franca of Latin, had a shared intellectual basis in Europe's classical heritage and the pan-European institution of the Republic of Letters.

Economic historian Tuan-Hwee Sng has argued that the large size of the Chinese state contributed to its relative decline in the 19th century: The vast size of the Chinese empire created a severe principal-agent problem and constrained how the country was governed. In particular, taxes had to be kept low due to the emperor's weak oversight of his agents and the need to keep corruption in check. The Chinese state's fiscal weaknesses were long masked by its huge tax base.

However, economic and demographic expansion in the eighteenth century exacerbated the problems of administrative control. This put a further squeeze on the nation's finances and left China ill-prepared for the challenges of the nineteenth century. One reason why Japan was able to modernize and adopt the technologies of the West was due to its much smaller size relative to China. The historian Jeffrey G. Williamson has argued that India went through a period of deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire , with British rule later causing further deindustrialization.

Stanford political scientist Gary W. Cox argues in a study, []. When fragmentation afforded merchants multiple politically independent routes on which to ship their goods, European rulers refrained from imposing onerous regulations and levying arbitrary tolls, lest they lose mercantile traffic to competing realms. Fragmented control of trade routes magnified the spillover effects of political reforms. If parliament curbed arbitrary regulations and tolls in one realm, then neighboring rulers might have to respond in kind, even if they themselves remained without a parliament.

Greater economic liberty, fostered by the interaction of fragmentation and reform, unleashed faster and more inter-connected urban growth. Justin Yifu Lin argued that China's large population size proved beneficial in technological advancements prior to the 14th century, but that the large population size was not an important factor in the kind of technological advancements that resulted in the Industrial Revolution.

A number of economists have argued that representative government was a factor in the Great Divergence. A study in the American Economic Review found that "globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years A number of economic historians have posited that the Industrial Revolution may have partly occurred where and when it did due to luck and chance. The Old World methods of agriculture and production could only sustain certain lifestyles.

Industrialization dramatically changed the European economy and allowed it to attain much higher levels of wealth and productivity than the other Old World cores.

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Although Western technology later spread to the East, differences in uses preserved the Western lead and accelerated the Great Divergence. When analyzing comparative use-efficiency, the economic concept of total factor productivity TFP is applied to quantify differences between countries. The difference in productivity levels, therefore, reflects efficiency of energy and raw materials use rather than the raw materials themselves.

Some of the most striking evidence for the Great Divergence comes from data on per capita income. This change can be attributed largely to the mass transit technologies, such as railroads and steamboats , that the West developed in the 19th century. Clapham , William A. Housing and welfare regimes. Matznetter, Walter and Alexis Mundt. Clark and Kenneth Gibb. Have you created a personal profile? Login or create a profile above so that you can save clips, playlists, and searches.

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Back Institutional Login Please choose from an option shown below. Need help logging in? Reference Previous Chapter Chapter A Comparative Analysis Basingstoke, Hants: Palgrave Macmillan , Hall , Peter A. Hanushek , Eric A. Hega , Gunther M. Heidenheimer , Arnold J. Transaction Books , , pp. Imbeau and Robert D. Martin's , , pp. Transaction Books , Helliwell , John F. Rogers , Boyer , Robert J. And Then There was One? Huber , Evelyne , Stephens , John D. Parties and Policies in Global Markets Chicago: University of Chicago Press , Iversen , Torben , Stephens , John D.

Jakobi , Anja P. Routledge , a. Leuze , Kathrin et al. Lindert , Peter , Growing Public: Business and Welfare State Development Cambridge: Martin , Cathie Jo , Stuck in Neutral: Princeton University Press , Mosher , James S. Organisation for Economic Co-operation and Development , Pierson , Paul , ed.

Pierson , Paul , Politics in Time: Powell , Justin W. Ringer , Fritz K. Indiana University Press , Scharpf , Fritz W. Schmidt , Manfred G.

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