Tuesday, September 8, 2009

Re-Orient: Global Economy in the Asian Age

Given the level of social transformation and the extent of European rule at the time, anyone theorising about historical patterns from about 1840 to about 1970 was likely to be very impressed by the rise of the West. The subsequent retreat from Empire and Asian economic surge is likely to make one more sanguine. There is quite a scholarly debate currently going on about the ‘rise of the West’. From the C19th onwards, it was largely taken as read that the West rose and that this was a result of internal, and distinctive, features of Western/European society. What these features are might have been debated, but the general framework was largely accepted.

In more recent times, two overlapping lines of criticism have arisen, both seeking to dispute claims of Western distinctiveness. One is that the West/Europe was actually much more dependent on external influences than has been previously acknowledged. The other is that such rise that did occur was (mostly or entirely) a temporary epiphenomenon. The second line of criticism extends the first.

Andre Gunder Frank’s Re-Orient: Global Economy in the Asian Age strongly argues for both lines of criticism. He starts early, with a discussion of whether regarding Europe as even a genuine continent is a bit of overblown Eurocentrism (p.2), in passing endorsing that any claim of European superiority was ultimately based on race (p.4, also p.324).

I find two things revealing about the debate. First, it does force one to think more carefully and precisely about the success of Europe and Western civilisation. Second, it is quite revealing about the current sociology of Western academe.
It is, for example, probably no accident that Frank, R. Bin Wong, Janet Abu Lughod, Kenneth Pomeranz (John M. Hobson is an exception) are all Americans or resident in the US. No matter how politically progressivist one’s outlook, it is easier to think of Europe as declined and peripheral from an American perspective. Since the participants are all very impressed by the success and capacities of Asian societies (they are sometimes known as the “Californian” school), they somewhat reflect patterns within the US, of West Coast folk tending to look to Asia, East Coast folk to Europe (and, perhaps, Texans looking towards the developing world).

More particularly, there is a distinct “running down” of Europe, which Frank does at length. Europhobia replaces Eurocentrism. Frank goes on and on about the backwardness and economic incapacity of Europe. Talk of Europe being “backward” or “underdeveloped” evokes modern differences between, say the US and Chad. But one of the result of the great transformation we call “the Industrial Revolution” was to enormously increase the differences between the standard of living of countries. Prior to it, differences in average standards of living were much lower than they currently are. According to Angus Maddison’s estimates, the ratio of per capita GDP between the poorest area in the year 1500 (Africa) and the richest (Western Europe, which Frank would dispute) was 1:1.9. In 1998, it was 1:19 (Africa to US/Canada/Australia/NZ). Talk of European “backwardness” provides striking rhetoric, but it gets in the way of the analysis.

Frank displays that irritating habit common in modern academe whereby non-Westerners happily get allocated “hurrah” words but “boo” words are put in shudder-quotes while Westerners happily get allocated “boo” words but “hurrah” words are put in shudder-quotes. Claims of European superiority are allegedly based on race, but Frank’s own repeated claims of Asian superiority are apparently not. Frank also complains at length about the Eurocentrism of Western-created social science without considering why it was largely Western-created (or at least came to be Western-dominated) in the first place.

I find the wider debate, which Frank discusses, about “world-systems” tedious. It encourages unhelpful reifications. (Such as Antonio Negri & Michael Hardt’s prolonged wail about the evil capitalist world system frustrating the politics they like. A frustration that has nothing to do with any evil world system and everything to do with the politics they like not working due to humans not being as they want them to be, there being no reliable cognitive elite able to lead the way to social nirvana, the required information processing being beyond any centralised system, which also suffer deep problems of suppressing preferences and conflicts of interest.)

Such reifications Frank mostly avoids, since he is very interested in practical issues such as flow of money, trade, ideas. He is particularly critical of notions of “mode of production” as getting in the way of empirical analysis (Pp 322-3, 330ff). But even his talk of a world economy I find a little overstated—I would prefer to talk of (expanding) networks of trade interaction.

Frank argues at length, with much extremely useful information, that we need to think in terms of a world economy, and one in which Asia (India and particularly China) were at the centre of. He is deeply interested in interactions between the parts of the economy and the possibilities of long-run cycles across the entire Afro-Eurasia (and, after 1500) world economy. (He is a strong supporter of the notion of long, Kondratieff-style cycles across said economy.) He is largely persuasive about the former and at least intriguingly suggestive about the latter.

His geographical categories are rather problematic (“Europe”, “Asia”) while his tendency to shift boundaries of consideration as convenient mar his analysis. For example, he lumps Europe in with Africa and Americas and suggests they were less productive than Asia (P.156): almost certainly, but what about Europe alone?

Despite his deep concern for trade patterns, Frank is mainly struck by the scale of economic phenomena. Asia’s “dominance” turns out to be a strangely passive thing. Which allows him to acknowledge but downplay the increasing ambit of European trading activity. Yet scale is not enough on its own—Russia, for example, was perennially at a lower level of economic development (and was seen as such), no matter how large the scale of its activities.

The section I found most informative and fascinating was his discussion of money flows, mainly silver (Pp 133ff). This is where Frank’s Europhobia is most striking. Frank claims at length that the “lucky” discovery of American silver was the only thing that allowed “backward” Europe to participate in the global economy with any seriousness. He acknowledges that a major effect of the influx of silver into the economy was to improve China’s ability to export (since its goods were silver-cheap), so that Western export of silver from Americas stimulated production and population growth in Asia (Pp 157-158).

Yet nowhere in the book does he consider the necessary corollary: that the influx of silver from the Americas in Europe made European goods silver-dear. The inability of Europe to export manufactures to Asia was not a sign of European “backwardness” or “incompetence”, it was a natural effect of the massive flood of silver. Frank is so blinded by his Europhobia he actually quotes Adam Smith (Frank is fond of quoting Smith at length) in which Smith cites the lower price of silver (which means higher price of goods) in Europe (P. 173) and yet fails to draw the obvious corollary. Frank is happy to cite Smith against Europe, but not for.

This analytical failure then deeply flaws his entire analysis. For example, Frank sees the American silver boom as the lucky break from which European success followed. It permitted them to participate in the world economy “for free” and lowered the price of money making capital much cheaper (Pp 295-60). European export uncompetitiveness was “counterbalanced” by silver (P.292). No, it was caused by silver. Frank also fails to grapple with the huge question of differential performance within Europe. If silver was so central, why was it the Dutch and then the English who were in the forefront of European commercial expansion from 1550 onwards, not Spain or Portugal? Even with Spain and Portugal, the early period of Portugese success (Manuel the Golden) was not based on access to the Americas or American silver (though one takes Frank’s point they were still bit players even in the Indian Ocean).

But Frank suffers the problem that bedevils the “California school”. Yes, China was biggest single actor in economic system for centuries, probably millennia. Which makes its failure to continue to be so even more startling. The more peripheral Europe is painted as, the more startling its triumph becomes. The danger in critiques such as Frank’s is that they don’t “explain away” Europe’s startling success so much as not explain it at all. Even where one concedes luck, the question arises why Europe was able to exploit the opportunities that came it way to such a stunning degree.

I have previously discussed the curse of American silver. There is nothing like a huge natural resource bonanza to distort your economy and institutional development (a problem Australia suffered a mild version of when it picked the demonstrably inferior—given that protectionist Victoria had had a much worse 1890s recession than free trade NSW—Deakinite policy package over the free trade alternative).

The pattern as I see it is that the wealth of Iberia, however deleterious to its long-run development, generated various responses in European states. The French crown responded primarily by continuing the typical grand strategy of agrarian polities of trying to expand the territory under its control and directly attacking Spanish power. Lacking suitable contiguous territories permitting them to do that, the Netherlands and Britain responded by maritime attacks and investing in capital, particularly suitable institutions. This proved to be the long-term winner. That Europe had a range of states in continuous and relatively stable (but intense) competition helped drive both expansion and transformation. That it had a greater diversity of political institutions gave social selection more to work with.

What Europe had been developing since early in the medieval period was the habit of adapting other people’s ideas. Frank is aware of Europe being first civilisation to trade with (and thus interact with) entire globe (P.177). But he fails to grapple with the significance of this. A civilisation with a long history of adapting other people’s ideas that becomes the first to interact with the entire globe has achieved a huge advantage.

But Frank has an excellent point in suggesting that history has been read too much backwards. That is, European global dominance in the C19th was so dramatic and so broadly-based that scholars read too much into it and did so too far back. Marx, Weber and so forth were too “chrono-centric”, too impressed with current circumstances. Europe’s advantage accrued slowly, but then with increasing speed. Thus, as Frank notes, military technology does spread so that European military advantages before 1600 were minor. Even up to 1700 they are not striking within the Asian context. But Europe came to dominate military innovation to an extent that other civilisations (with the revealing exception of Japan) were unable to match.

Frank notes that Chinese economic growth was largely expressed in a rising population (P.156). Europe much less so (P.164). This suggests that European growth may have been more intensive (i.e. China produced kids, Europeans produced capital: presumably children in Europe were “dearer” and comparatively less produced. Though European population growth then took off after 1750.)

Frank’s argument is that prior to 1800 Europe is peripheral—yet its silver flows are central to the world economy (thus Frank argues that the Ming’s dynasty’s fatal crisis was ultimately due to a drop in American silver production). Europe is peripheral—yet by 1700 dominates three continents (Europe and the Americas) and by 1800 also dominates India is about to dominate a fourth continent (Australia). Europe is peripheral—yet its Atlantic economy is about to catapult it into global dominance. It is one thing to say European dominance was much slower than people acknowledge. It is another to bunch it all up to some sudden 1800 take-off (Frank is very emphatic that there is no sort of European hegemony before 1800 [P.332]). If Europe was so “lucky” to have its American conquests, but so “backward”, how come Asia was doing so well (as Frank keeps telling us) with only one continent? (Gee, they must have been really, really clever.)

It is, after all, somewhat plausible that having three, soon to be four, continents to play with somewhat important to European success. But why did they end up with those continents to play with? And why not Spain & Portugal as the leaders of European development? (As they got the most extra-European land first and so had it longest.)

Frank points to population/land-resource ratio as a cause for Europe being a high wage economy. Correct in general. Yet there are clear problems. England and Holland were the most densely populated, so should have had lowest wages, yet had the highest wages. Moreover, wages in Ireland were much lower than in Britain. Europe’s population was going up, so wages should have been going down (as they did in the late C13th). But it is not at all clear that this was happening. The compensating factor was increased capital (including the social capital of improving institutions). And this before the industrial revolution began to seriously affect the British economy. Institutional change was a striking European strategy: outside Europe it was engaged in much less and much later.

Frank wants to turn institutions into responses to underlying economic forces (P.325 et al). At one level, yes. Hunter-gatherer societies do not have institutions in the sense that industrial societies do. Nevertheless, he dramatically underestimates the key importance of institutions. Latin America is about a century older than Anglo North America as a European settlement yet the latter is much richer. The difference was Latin America was lumbered with Iberia-derived institutions, Anglo North America with British-derived ones.

Frank wants to equate Europe’s “free good” of silver with contemporary US’s “free good” of printing dollars other folk want, though he concedes that American productivity has a role in that (P.356-6). But why is the US so productive compared to, say, Brazil? Why do folk “over-invest” in American dollars? Because they want the security of its institutions which they judge stronger than their own.

Frank discusses how Asian labour was cheap, European labour was dear. (Europe the “backward” economy with expensive labour!) Frank notes the argument that, in agrarian societies, increased population leads to increased inequality (p.305). Frank argues that Europe had more equal and dearer wages, which encouraged capital substitution. But again, why the Netherlands and Britain specifically?

Frank argues that the Industrial Revolution (which he concedes was very much a new phenomenon) was a result of European interaction with the global economy (P.345). To a large degree, I agree. Apart from anything else, the way out of the “Gregory effect” of uncompetitive manufacturing exports due to their goods being silver-dear was mass production to drive their unit costs right down. Yet European actions still have to be understood in terms of actions within the European system, not least because that is where their trade and military activity was concentrated. (Perhaps the most striking thing about the European colonial empires is that they were acquired while the bulk of European forces remained in Europe deployed against other European powers and even those forces deployed overseas were often largely deployed against other Europeans.)

There is a hint of this when Frank tries to grapple with why Europe seems to be in a prolonged up phase while Asia is in a prolonged down phase in the last two centuries (Pp 349-50). But not enough. It is, however, surely a striking question why all the large non-European states who dominated Eurasia in 1600 (the Ottoman Empire, Safavid Iran, Mughal India, Ming China) either collapsed or went into decline between 1640 and 1740.

While I have spent a lot of time criticising Frank (and the “California school” literature), I do not want to leave the impression they are completely wrong. Frank’s immensely readable and informative book has been one of the most fun and enlightening books about global history I have read. The work of Frank and other “California school” scholars are very useful correctives. I agree with the following:
There were fluctuating but extensive Afro-Eurasian trade networks: the role of Europe was largely peripheral in these before 1500.
Europe learnt a lot from other civilisations and was not notably inventive (as distinct from adaptive) before at least 1500.
Europe’s expansion into Americas and creation of an Atlantic economy was important.
The Industrial Revolution was essentially a C19th affair.
Europe’s economic dominance took a long time to arrive.
Being ruled by someone else is not naturally conducive to development.
Analysis should start with the evidence, not presuppose it.
History needs a global framework to be most useful.
So they provide important and useful corrections. But, as is often the way with scholarly corrections, they overstate their case.

Consider the strange emphasis on the way Europeans treated non-Europeans in the “it was racism really” critiques. By far the worst slaughter for purely racial reasons was perpetrated by Europeans against fellow Europeans. Europeans practised maritime predation on each other (and Islam, as Islam did back) before they did so further afield. If one wanted to see how disastrous European rule could be for local inhabitants, one need go no further than Ireland. For the brutality of war, the Wars of Religion. The notion that Europeans treated non-Europeans systematically worse than they treated fellow Europeans is nonsense. (Though probably has extra plausibility in settler and former imperial societies, particularly ones with a history of slavery.) What is needed is genuinely universal analysis, not an inversion that replaces European virtue with European vice, Eurocentrism with Europhobia.


  1. An interesting commentary with some very insightful observations. I think you make too much of Frank’s alleged negativity toward Europe: the work’s character clearly owes something to the author’s need to counter more than a century of western supremacism, while economic history is itself a polemical trade, and in over-egging the pudding of supposed early western under-achievement he’s following in the footsteps of… well, pretty much everybody in the business.

    I agree that China’s lead in per capita income is overstated if it existed at all: it was certainly gone by the fifteenth century, and it won’t be coming back in our lifetime. I also agree that the whole world-systems approach leaves much to be desired, at least before Plassey. As late as 1800 all countries’ exports totalled little more than 2% of gross world product, against 12% a century later: all but a small fraction of activity went on strictly within the domestic economy, especially in the nations of what was to become the “periphery”.

    I agree very much that Europe’s fragmentation into rival states was a powerful stimulus to competitive development. I’m less convinced though that it was institutional peculiarities that gave Holland and then England their edge in the Europe of easy silver after 1470, except to the extent that both remained compact polities without sprawling Continental territories and with strong central authorities: both might be said to resemble as much the enlarged urban republics which in Italy had led Europe’s previous economic expansion in the 11th-13th centuries, as the extensive territorial realms of the west. Each had long enjoyed enviable agricultural productivity, a highly integrated national market and a tradition of commercial seafaring which enabled them in turn to take advantage of the new international liquidity following the “bullion famine” of the 14th and 15th centuries, hence their increased prosperity and high wages.

    There’s similarly more to the two Americas than British vs Iberian institutions. The south was an extractive domain founded on native labour, but the thirteen colonies were a settler state founded on formerly native land. And the north was tied commercially to the tiger economy of the 18th century, even long after political separation.

    I’m perplexed though at your contrasting Europe’s upturn with Asian decay in 1640-1740: in fact Europe too had its problems in 1620-1740 (falling prices, trade recessions and a succession of disruptive wars), and of course the period was an inglorious one for Spain, Italy and Germany; conversely, after the upheaval of 1644 China’s Qing dynasty is widely seen as having peaked in the latter half of the 18th century before entering its long decline. Both parts of Eurasia showed contradictory tendencies from one country to another, and yet both enjoyed overall growth.

    I’d disagree finally with the suggestion that Europeans treated each other worse than they did non-Europeans. The Nazis didn't consider Jews as Europeans in any meaningful sense. Unlike the nazi project, Ireland’s greatest disaster was the result of natural calamity and shortsighted British incompetence rather than a will to exterminate. Settler and slaveholding societies routinely went out of their way to minimise the presence of free indigenous peoples, but European rule in parts of tropical Africa sometimes showed similar regard for native lives or wellbeing, the Belgian Crown and Germany being the worst offenders.

    If Europeans killed more of one another in wars, that was because their conflicts tended to be more sustained, the two sides being more evenly matched in technology and organisation than in colonial campaigns against poorly-equipped tribesmen. It isn’t Europhobia to observe that tropical native populations were generally held in lower regard than white ones and treated accordingly, at least until the era of decolonisation and sometimes beyond, it’s simply the essence of the colonial project.

    - Dave P

  2. Thanks for your very thoughtful comments which I generally agree with. A couple of points:

    I’m perplexed though at your contrasting Europe’s upturn with Asian decay in 1640-1740
    I was merely pointing out that it is an interesting question why the Asian mega-states had such a bad time of it during that period. Europe certainly had its problems, but not to the same collapse-of-states extent.

    I’d disagree finally with the suggestion that Europeans treated each other worse than they did non-Europeans.
    So would I. My point is that you really cannot draw a line between the two.

    The Nazis didn't consider Jews as Europeans in any meaningful sense.
    So? We should buy into that? Besides, the whole Nazi lebensraum project was about displacement and murder of fellow Europeans on a vast scale.
    I would, however, be prepared to argue that the European experience of Nazi imperialism from fellow Europeans affected the status of imperialism generally.

    Ireland’s greatest disaster was the result of natural calamity and shortsighted British incompetence rather than a will to exterminate.
    True, but it is still a case of misrule, that is why Ireland was so poor and therefore so vulnerable.

    It isn’t Europhobia to observe that tropical native populations were generally held in lower regard than white ones and treated accordingly, at least until the era of decolonisation and sometimes beyond, it’s simply the essence of the colonial project.
    The imperial project surely? There were plenty of European peoples who came to feel thoroughly imperially repressed.
    The issue is more an imbalance of power. The stronger the imbalance of power, the worse the behaviour was likely to be. Tropical peoples suffered particularly strong imbalance of power.
    After the imperial project was well under way, racial thinking began to affect attitudes, but that is more about status-mongering within existing empires, not the imperial project as such.