Sunday, February 16, 2014

The spatial dimension of polities

The book "Before and Beyond Convergence. The Politics of Economic Change in China and Europe", by Jean-Laurent Rosenthal and R. Bin Wong, is much more than a comparative history of China in Europe in the last ten centuries, although it is also that. It is a vindication of the importance of the spatial dimension of polities. In particular, it criticizes the notion that political competition between jurisdictions has advantages similar to economic competition between firms, in terms of fostering innovation and better tayloring of public action to the preferences of citizens/consumers. The history of Europe since the fall of the Roman Empire in the first centuries of our era has been a history of political fragmentation and competition, whereas the history of China has been one of more successful political integration. For most of the period under study, this allowed China to develop a larger market with relatively low taxation and high level of public good production, thanks to a lower intensity of wars and more unrestricted trade as compared to Europe. The markets of Adam Smith develop more easily in larger polities, not among quarrelling ones that prevent the creation and regulation of large markets. Public policies such as responding to financial or natural catastrophes are also easier in large polities. The concentration of people in cities and the differences in relative prices that encouraged the industrial revolution in some European countries and not in China, were an unintended and late consequence of political fragmentation. After missing that revolution, the incredible economic development of China in the recent decades owes a lot to previous informal institutions and to the channels that are made possible by a large polity. The attempts of Europe to proceed to higher levels of harmonization and integration are the result of the tragic lessons of the twentieth century which did nothing else that culminate a trajectory of disastrous fragmentation. The industrial revolution took place in spite of this, not as a result of this. The limits to European integration that come from nationalist shortsightedness are a symptom that the right lessons have not been fully learned.

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