A Book review, Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000-2000 by Avner Greif, Guido Tabellini, Joel Mokyr
The book offers a truly convincing answer to an enigma that has troubled me for at least 30 years. That is, China is not deaf or blind; it’s not that it hadn’t heard or seen the Western world or what was happening there. In fact, we have at least two, and maybe three, instances in which China confronted the Western world but didn’t pursue it.
The first event occurred in the late 1500s, when Spaniards and Portuguese arrived from Mexico to trade. There was even a Spanish plan to invade China around 1590[1], as they had done with the Aztecs and Incas in the Americas. Possibly, the Chinese heard about it and doubted the Jesuits, who were trying to reach Beijing, were Spanish spies sent to prepare the attack. In 1571, just a few months apart, Spain stopped the Turks at Lepanto and conquered Manila from a community of Chinese merchants who were there without support from the central government. From Manila, the Spanish-Portuguese Empire built a large trade network with China. China became wealthy from it. Much of the Mexican silver ended up in China because the Spaniards wanted to buy ceramics and silk.
Still, the Thirty Years’ War, which ended in 1648, shifted Spain’s priorities. By the 1620s, as the war increased the need for silver, demand for porcelain and silks declined. Silver circulation in China then slowed; people started hoarding silver. There was a severe inflation that lasted for over ten years. Ming China had a bimetallic economy, with taxes paid in silver but local market transactions in copper, and silver’s value increased tenfold compared to copper over a decade. Peasants grew impoverished, lost their ability to pay taxes, revolted, turned into bandits, and sparked a revolution. Li Zicheng forced the last Ming emperor to commit suicide; a loyalist general called in the Manchus, who finally arrived in China in 1644, drove out the revolutionaries, and established a new dynasty, the Qing.
Similar Episodes 200 Years Later
Something similar happened exactly 200 years later. The book correctly states that England’s per capita income was higher than China’s at the start of the 1800s. However, overall, China probably had a GDP- according to Chinese statisticians (I’m reporting what they told me many times)- around a third to half of the world’s GDP. Certainly, with a population of 3 to 400 million people, possibly about half of the global population, there was enough money to feed them.
In 1792, during the famous Macartney mission, the British offered to trade. The entire world—or the developed world—wanted Chinese tea, as shown by Americans disguised as Indians throwing tea into Boston Harbor in 1773, one of the first actions of the American War of Independence. Tea was essential because Europe was industrializing; urban water was dirty, but with some tea leaves, it became drinkable. Once again, a large flow of silver, which was the currency of the time, headed toward China.
According to economic historians from the Academy of Social Sciences, I interviewed in 1997, in 1827, China had about 70% of the world’s silver. In the 1820s, China was pushing the English empire and global trade toward financial collapse, much like what’s happening today with its large commercial growth. Still, the Chinese refused to buy from the English; this time, because they said, “We don’t need anything, give us only silver,” similar to what the Ming had said 200 years earlier.
The only thing the Chinese people wanted from abroad was opium. Still, rightly, the Chinese authorities didn’t want it sold, so there was the famous first Opium War in 1841-42, the second in 1864, in which the English and then the French and others imposed the opium trade in China. Then the silver flow that had arrived in China returned to Europe and America.
These two episodes clearly show that the Chinese were aware of what was happening in the world, but did not want to adapt to global trade. Additionally, there is a third episode: in the mid-1400s, the famous trading voyages of Admiral Zheng He took place. By the way, this admiral was Muslim; Muslim merchants had been trading through southern China since 1300-1400; Canton was a major Muslim city; Chinese communities in Southeast Asia, and even in India, began to develop between 1300-1400.
But the Chinese government didn’t protect them, and if there was a choice between the Chinese and the Portuguese or Spaniards in Manila, they chose the Spaniards, not the Chinese. Why? This was my big question for over 30 years, and this book, in my opinion, gives the most convincing answer: because, as today, the problem is not China’s development but its stability.[2]
Imperial Exam System and Clan Stability
What we see from the intersection of the imperial examination system and the clan system established by the Song dynasty around 1000-1100 is a very strong structure. This structure was so strong that the Song system could withstand challenges—a unique occurrence in Chinese history—even when it was weakened. In fact, when the Mongols invaded China and conquered half of it, the Song persisted in the other half. This never happened before in Chinese history; they were able to resist because of this structure.
Incidentally, during the Southern Song Dynasty (1127–1279), the kingdom called itself ‘zhongguo,’ central state, and not ‘tianxia,’ all under Heaven, as Ge Zhaoguang underscored[3]. The term zhongguo was ancient but traditionally indicated the older states of the central plain of the Yellow River basin, contrasting them with states that morphed on the periphery, such as Qin or Chu. The term zhongguo was revived by Ricci in the early 17th century in his first western-style map of the world drawn for China, and was later adopted by modern Chinese to define themselves.
The book is right: around the year 1000, Europe and China moved in divergent directions.
The Mongols partially dismantled this system; the Ming restored it, and the Qing added their input. This system provided the country with significant stability, which the Chinese believed would have been at risk if they had opted for a more liberal approach of voluntary cooperation, like in Europe. China favored enforced cooperation. This enforced cooperation, through officials selected by meritocratic exams (aligned with Neo-Confucian culture), also interacted with the powerful clans’ rule. It offered stability, peace, and political control, and was clearly organized. Voluntary cooperation, on the other hand, is more unstable.
So, economic development driven by 1300s Chinese merchants, innovations brought by Matteo Ricci and the Jesuits in the 1600s, and up to the 1700s—these innovations fall like drops in the desert. At the same time, we instead see a very strong influence of Chinese ideas in Europe. All European philosophers competed to study China: Leibniz, Kant, Hegel. They all studied Chinese things; Voltaire said China was the model in the Enlightenment. But China didn’t absorb ideas from the missionaries who went there not to spread Chinese ideas in Europe, but to spread European ideas to China.
The missionaries introduced new types of cannons and Euclidean geometry, but that was as far as it went, because voluntary cooperation is alien to the Chinese social and cultural mindset. It is unfamiliar because the Song had found this solution to a vexing problem. The problem must be understood with the eyes of the year 1000, as the book rightly states.
China’s History of Fragmentation vs. Mediterranean Unity
Today, we tend to think of China as a unified entity. However, that may not be accurate. When we look at Chinese history around the year 1000 and compare it to Western history, we see that in the West, the Roman Empire was actually founded around the third century BC, marked by the Second Punic War, the defeat of Carthage, and Roman control over the Mediterranean Sea. The Western Roman Empire remained very powerful until the 5th century. Meanwhile, the Han Empire—which emerged from Qin’s 11-year unification—lasted only 400 years, compared to the Romans’ already 700.
Furthermore, if we shift our perspective from Europe to the broader Mediterranean world—since Rome unified not Europe but the Mediterranean—we see that around the year 1000, the Roman Empire was still alive, and what an empire it was. Byzantium, the Eastern Roman Empire, remained the dominant power in the Mediterranean despite Arab attempts to destroy it. There was a renaissance of the Eastern Roman Empire. To the west, near Rome, there was the Western Roman Empire, the Holy Roman Empire, with its core between Rome, which was established as a Papal State, and Europe, namely France, Germany, and other regions. Sicily had been conquered from the Arabs, and the Christian reconquest of Spain was beginning.
So, around 1000 AD, Europe was still part of the Roman world or the wider European Mediterranean. This means we have 12 centuries of continuous Roman Empire history. In fact, the Roman Empire only ended in 1453.
On the other hand, in China, the situation was quite different. They had 400 years under the Han Dynasty. Before that, there was the Warring States period, and even earlier, during the Spring and Autumn period, about 200 to 300 small states fought each other.
After the third century AD, China experienced around 500 years of internal warfare among various states. It was chaotic, with little unity. The Sui dynasty and then the Tang unified roughly what is now China during the 7th century AD. However, the Tang were a semi-Turkic people who adopted Chinese culture and restored some unity. That unity, however, disintegrated again by the end of the Tang, around the 10th century. The first Song emperor was actually a general from one of the smaller states that formed after the Tang’s collapse. He, Taizu, took 30 years to reunify China. His brother, Taizong, then possibly killed him, seized power, and, around the late 11th century, the Song Dynasty was established, bringing a fragile sense of unity back to China.
Incidentally, at nearly the same time as the Battle of Manzikert, the Seljuks gained control of Anatolia for the first time and began to pose a real threat to the Byzantine Empire.
Song Miracle
That is, the Song dynasty achieved a remarkable feat: they established the examination system, which was a novelty even if somewhat borrowed from the past, and the clan system, also theoretically borrowed but very interesting—correctly cited in this fundamental book by Zhang Taisu [4]—which reports that 70% of Chinese surnames originate from that period, not from other times. Paradoxically, ancient surnames have vanished. They were eliminated or wiped out, or people associated with the new clans who had connections to officials who passed the imperial exams and were part of the local government.
Around 1000-1100, a unique and formidable structure was built that protected China from war and bloodshed. It has since been treasured and holds great significance. As the book rightly states, this is the true obstacle to embracing what was, rather than the liberal reform that originated around the same time in the Mediterranean world, where the circumstances were very different. The Roman world, in fact, remains a cultural and political model to this day.
It established a cultural model and a social-administrative structure that worked.
The current situation is complex. I largely agree with what the book argues, both about the state, the form of the ancient state that reappears and persists, and about modernity, but with some caveats.
The first caveat is this: the state described in the Song is truly innovative, because the Tang state, founded two and a half centuries earlier, and even more so the Han state before that, had different characteristics. But there is a fundamental point: the law.
Western law comes from the same root as “legare” (to bind). We are all equal, and it’s a cooperative law dating back to the Greeks. Chinese law is imperative because the State is organized differently, born differently. Even in the earliest texts, the Rites of Zhou, which might date back to around 600 BC, the State had two tools: the administration and the criminal law imposed by the king or sovereign on subjects, while Western law is the law of equals. Perceptions of law differ between the West and China. In the West, the binding law is generally seen as beneficial to all participants, although some may slack off. But in China, the authoritative system prompts Chinese people to find loopholes – zhongyang you zhengce difang you duice 中央有政策,地方有對策, “the center has policies, localities have countermeasures.”
The two traditions may stem from the fact that the Mediterranean and China fought in different ways. The Western military model was the phalanx, then the legion made of equals: everyone carries the shield together; the king, along with everyone else, is equal and participates in the battle and dies in the battle—the famous Leonidas and his 300 hoplites, or the phalanx of equals that repels the Persian king at Marathon.
Chinese warfare is very different. We don’t have these formations of equals; we have a king who administers, the State provides equipment, a general who is a great strategist, and then the mass that has to be killed. That’s why the law is different, and that’s why the State is different.
Perhaps, flipping the theories of Hans Delbrück and Victor Hanson, it was not that people in China fought according to their culture. Perhaps the organization of their war, derived from their geographic environment, made their culture. The way of winning a war was the driving force. If there’s one constant in these 2500-3000 years of history, it’s how China thought and made war.
The problem now is: can traditional Chinese culture of war win a modern battle with Westernized countries? Maybe democracy would be the best line for China. (I explore the subject in my forthcoming Thinking from the Tip of the Spear)
Why didn’t Europe become China?
Here are three elements we might want to consider.
First, from the 6th to the 7th centuries AD, the Tang and Song dynasties saw Chinese civilization spread and take root in Japan, which was not under Chinese rule at the time, unlike Korea or Vietnam. Korea and Vietnam eventually moved out of the Chinese political sphere but remained within the Chinese cultural world. This cultural influence hadn’t happened before, reinforcing the idea that the Song unification truly marked a turning point in Chinese history, promoting the concept of a united China that could be divided but would eventually regain its unity.
Second. Unlike China, which always insisted on the same geographical space, Western civilization maintained a strong connection to the Greek-Roman-Judaic tradition while shifting its center of gravity. It was first Greece and Rome, then Constantinople, then back to the Italian peninsula, but eventually moved to the European Atlantic coast, and in the last century migrated to North America. This happened while the Western tradition dovetailed with Arabs, who also studied Greek philosophy, worshipped the Bible, and Sultan Mehmed II in 1453 proclaimed himself Emperor of the Romans, and in Moscow, the Third Rome.
Third, the final point is the one Dingxin Zhao[5] specifically raised. Why did 17th-century Europe, which was so eager to learn from China and where Hobbes’ Leviathan reworked hyper-rational political theories, not undergo a gradual process of consolidation and unification as China did in the 4th and 3rd centuries BC? The answer, perhaps, is that, unlike China, which had a clear enclosed space between deserts, mountains, and seas, Europe didn’t have a distinct geography to unify. The only political unification was around a sea, the Mediterranean, a crossroads of commerce and exchanges. Additionally, the Roman imperial legacy provided a lasting cultural framework that shaped and continues to shape the world, influencing both Christian and Muslim civilizations. China, relying on a hard-wired political framework, had to reinvent itself after the fall of each dynasty, claiming continuity with the past that had to be constantly redefined.
But Zhao’s question could be crucial today for the Western world: can the West learn more about the ancient Chinese drive for total unification and strict social and political control? In modern times, technology might offer a convenient shortcut, replacing older, heavy-handed methods. Temptations in this direction should be rejected, as Hobbes was a very influential thinker of his time.
Clan Renaissance in Modern China?
The book is correct again in the sense that there is a kind of renaissance or readaptation of clans. However, this readaptation is consociational yet hierarchical, since clans were originally highly hierarchical. There were family laws—each family had its own, and they varied. They conducted their business and affairs under different norms and were organized as associations. The Chinese Communist Party was modeled on a kind of clan association, but it was not based on patriarchal bloodlines like the old clans.
The old clans no longer exist because the great patriarchal family no longer exists. The clan was based on the idea of an important grandfather who had five or ten wives and, in turn, dozens of sons and hundreds of grandchildren. Among this large family of landowners, there were one or two sons who became officials, bringing wealth and power to the clan. The great patriarchal family ended because concubinage ended, and then, with the one-child policy from 1980, there was only one child per family. And the old family pyramid has been totally reversed, with four grandparents tending a single grandchild.
Still, in ancient China, there were more than just clans; there were also affiliations and chosen brotherhoods. These were somewhat like Western fraternities, but after the third century BC, they turned into bandit brotherhoods and became subversive. The Mohists 墨者 may have been the first, possibly originating from a carpenters’ and masons’ guild. The mo 墨 (literally ‘ink’) was the line with lead and ink used to set walls straight. The organization might have inspired rebels led by Liu Bang, who founded the Han dynasty; the Yellow Turbans, who overthrew the Han; and even the communists, who represented the last revolution. That is: these fraternities were a powerful yet disruptive force within the empire. The Song dynasty replaced them with bloodline clans.
When the Mongols ruled without the full cooperation of the social control of the clans, some “fraternities,” like the Red Turbans and the White Lotus, organized a rebellion that eventually overthrew their power and established the Ming dynasty. The Ming improved the “examination cum clans” system set up by the Song, which effectively suppressed “fraternities,” until inflation and increasing poverty fueled the Li Zicheng rebellion, another fraternity.
“Fraternities” that in Europe were the backbone of social development leading to modernity, according to the book, in China became the backbone of the modern Triads, for example.
The issue today is how to approach innovation. As the book explains, China’s success story is now somewhat straightforward because there is the American model—I see what works in AI, I take my DeepSeek, and instead of investing 100 million in 100 projects, I invest 100 million in a single project. This way, my DeepSeek can outperform various other AIs.
Challenges Without a Model
But as General Philosopher Liu Yazhou said in a 2015 essay[6], if China no longer has the US weather vane that guides it, how can it innovate? That is, China actually adopted the Japanese model from the 1950s-60s as its development blueprint, and the terms are the same. The Japanese call it kaizen, with Chinese characters pronounced gai zhan in Mandarin—”modify and develop”—they’re the same concept. China has far more resources, many more people, many more intelligent individuals eager to learn, and a selective, efficient bureaucracy that is very open—because it’s closed externally but very open internally—and that manages to drive this catch-up effect.
But the problem isn’t the catch-up; it’s what happens if I need to overtake — the famous Italian “sorpasso.” How do I do it? Apparently, the Chinese don’t have a model for this, and that’s the challenge; they understand it’s a common problem. But for the Chinese, who are practical and realistic — not ideological — and seek stability without risking chaos, because they know how to govern a country by their rules — the party’s rules — yet they don’t know how to govern under democratic rules.
The problem also lies with us. If we establish a model of “stability,” they will follow it, just as Deng Xiaoping and others adopted the American model because they saw it outperform the Soviet one in the 1970s and 1980s.
Then, a shift in mentality began with the American failures in the Iraq and Afghanistan wars, followed by around 2004-2005 and the 2008 financial crisis. This brings the history to the present.
Four derailments
Right at the end of the period examined by the book, around the year 2000, some major turn of events set China on a different trajectory.
Between 1999 and 2001, four incidents rocked US-China relations and set it on the present track.
The first incident occurred on April 25th, 1999, involving a demonstration by a then-little-known religious group called Falun Gong. They protested around the Chinese government compound, Zhongnanhai, demanding recognition as an official religion. The protest was seen as a threat, almost a coup against the government. After a few months of debate and deliberation, the organization was banned and declared illegal in July.
This episode showed the government that China was not open enough. It was still somewhat closed, as some of the core beliefs of the organization went against modern science, were xenophobic, and denied basic realities. Diseases were considered just sins that could be cured by prayer and devotion. Yet, ordinary people believed it because they lacked modern scientific education.
Another significant event was the May 8th bombing of the Chinese Embassy in Belgrade by the US that year. Since the start of the NATO attacks against Serbia, China has supported the small Serbian Republic, citing non-interference in other countries’ internal affairs. NATO supported greater autonomy for the Albanian majority in Kosovo, a region of Serbia, and the Beijing government feared this could soon be used to justify intervention in support of Tibetans against China. Possibly, China also gave intelligence aid to Serbian forces. In fact, a bomb was accidentally dropped on the Chinese embassy. This caused a big controversy, but relations were eventually repaired.
Another significant event was the first release of the Cox Report in January 1999. It accused China of widespread IPR violations, espionage, and technology thefts, all of which threatened US national security. The Report inspired a turn in the Bush administration, starting in 2001.
Lastly, on April 1st, 2001, a US surveillance plane, EP-3, crash-landed on the southern Chinese island of Hainan after colliding mid-air with a Chinese fighter. After considerable tension, relations were eventually mended.
These four episodes showed China that, on the one hand, it still had major weaknesses, and, on the other hand, it was quite vulnerable to the US. China was unsure how to escape its tough situation.
The 9/11 terrorist attack on New York gave China an opening. Beijing moved quickly to support American efforts in Afghanistan with intelligence and information, and bilateral relations appeared to be improving. It is no coincidence that China signed the agreement to join the WTO on November 10, 2001.
In light of this history, some in China also believed that the only way to ensure Chinese security vis-à-vis America was to adopt the American political and financial system, achieve full convertibility for the RMB, and integrate China into the global economic and political system.
These ideas were widespread, though there was no complete consensus. China remained undecided, observing how the US would perform in Afghanistan and Iraq in its declared effort to export democracy. If democracy had been fully and successfully exported to Afghanistan and Iraq, it might also have influenced Beijing’s move to reform. Instead, the opposite occurred.
In those 4-5 years, the Chinese convinced themselves that the Western political system could not be copied, because the Americans can’t export democracy to Iraq, Afghanistan; can they export it to China? There are also doubts about the financial system because of the 2008 financial crisis.
They grew to believe that the US financial system, meant to guide the world, was not as secure as it should have been. It was fragile, and they noticed that updates or improvements to Wall Street’s governance system were not implemented. Some responsible parties were not held accountable. For the severe Chinese responsibility system, this was very important. As a result, they became disillusioned and more confident in their own system, which, on the other hand, endured the crisis and, for the first time, made a significant contribution to the global economic recovery in 2009 and 2010.
Therefore, if our model is missing and we fail to provide a positive example today, the Chinese, who are practical, will stand back and watch.
Maybe their system will collapse because it may well be unsustainable, but it might not want to follow the unstable Western model.
[1] Ollé, Manel (2002). La empresa de china: de la Armada Invencible al Galeón de Manila. Acantilado. And Thomas, Hugh (2015). World Without End: Spain, Philip II, and the First Global Empire. Random House.
[2] The Clan and the City: Sustaining Cooperation in China and Europe Avner Greif and Guido Tabellini Stanford University and Bocconi University http://piketty.pse.ens.fr/files/GreifTabellini.pdf
[3] Ge Zhaoguang, Zhongguo sixiang shi, History of Chinese Thought, Fudan Un. Press 2001
[4] The Ideological Foundations of Qing Taxation: Belief Systems, Politics, and Institutions, Cambridge University Press, 2023, The Laws and Economics of Confucianism: Kinship and Property in Pre-Industrial China and England, Cambridge University Press, 2017
[5] “The Confucian-Legalist State: A New Theory of Chinese History” Oxford University Press 2018
[6]See my translation of his 2005 interview https://issuu.com/matteo210/docs/2005_01c_china_america_the_great_game
