January 22, 2011


West Is Best?:Why Civilizations Rise and Fall: a review of Why the West Rules--For Now by Ian Morris (Timur Kuran, January/February 2011, Foreign Policy)

The regions that failed to keep up with Europe could not match the West's economic infrastructure. Most important, they failed to develop institutions for pooling labor and capital on a large scale and to develop sustainable organizations capable of reallocating resources efficiently. In the Middle East, religion, and culture more broadly, mattered, but not for the cosmological reasons that Needham might have thought. Rather than Islam's supposed conservatism, lack of curiosity about the natural world, or unwillingness to learn from foreigners, it was Islam's inheritance and marriage rules that created the stumbling block. These rules fragmented capital, blocking the establishment of large and durable private enterprises. Meanwhile, in South Asia, Hinduism hindered large-scale, impersonal cooperation by encouraging families to hold capital within family enterprises.

Some believe that China, India, and the Middle East would have eventually industrialized on their own if the West had not done so first and colonized them. Morris is skeptical: "Even though Eastern and Western development scores were neck-and-neck until 1800, there are few signs that the East, if left alone, was moving toward industrialization fast enough to have begun its own takeoff during the nineteenth century." That is true. Yet having ignored economic institutions, Morris is not able to justify his claim, exposing the inadequacy of his index as a measure of development. If by 1800, Europe had already developed all the key components of the modern economy and China had not, the two regions could not have been equal in any meaningful sense. The problem here lies in Morris' use of city size as a proxy for organizational capacity. Lagos is now about as large as New York, but the organizational capabilities of Nigeria and the United States obviously differ. Nigeria is not yet ready to put a man on the moon, for example. A more refined measure of organizational capacity -- one that accounted for the organizational options available to private commercial enterprises -- would have shown Europe to be in the lead centuries earlier.

As it happened, modern economic institutions failed to emerge organically in the East. After colonization, Eastern leaders tried to overcome this deficiency by adopting Western institutions so as to achieve, in short order, the transformation that Europe went through over an entire millennium. Still today, the reforms remain incomplete. For modern economic organizations to work well, a country needs to have developed a host of complementary institutions, such as fair courts, norms of impersonal exchange, and trust in organizations. These are hard to transplant. In most parts of the East, they are still developing and spreading slowly.

China's growth is entirely a function of succumbing to our way of doing things. It has nothing of its own to offer except for cheap labor. When that's gone, they cease to matter.

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Posted by Orrin Judd at January 22, 2011 5:42 AM
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