Paths to Opulence
Adam Smith in Beijing: Lineages of the Twenty-First Century, Giovanni Arrighi, 2007.
When I closed my review of Giovanni Arrighi’s The Long Twentieth Century in the last post, I could not help but reflect on his failure to note that the end of Japan’s boom in the 90s revealed that Japan was not the next global hegemon. This may have been just a little harsh, as Arrighi was far from the only analyst to overhype the Japanese ascendence. But it was a poorly-aged note to finish his grandiose theorising with. Arrighi would rectify this mistake, however. For while when The Long Twentieth Century was published in 1994 the staggering rise of China may not have been totally obvious, by 2007 — when Adam Smith in Beijing was written — it undoubtedly was. Gone now are dated illusions of an era of Japanese hegemony; instead, Arrighi argues China may, in a twisted End of History-esque prophecy, make the conditions for “a commonwealth of civilisations truly respectful of cultural differences”; or, in other words, China may end the global cycles of accumulation Arrighi traces down the centuries.
Adam Smith in Beijing is an unusual book. While The Long Twentieth Century, despite its flaws, was a lean and tightly-focussed study, this is not. In fact, the book is really four different books inelegantly stitched together. First, there is a little intellectual history. Arrighi argues Adam Smith distinguished a ‘bad’ — European — from a ‘good’ — Chinese — path of development. Then there is an abrupt turn back to The Long Twentieth Century, during which Arrighi spends many chapters responding to his critics and reiterating the arguments of that book.1 After that he turns to the Iraq War and the neoconservative Project for the New American Century, focussing on the eerily contemporary US debates over China policy. So, surprisingly given the title of the book, Arrighi engages with China directly only at the very end, as he attempts to draw a line linking Chinese economic development today all the way back to the Ming. There is a logic to this: the middle topics cover American decline, while others chart the Chinese rise. But it is a tenuous one. It does feel as if Arrighi simply had many different ideas he needed to get down on paper — perhaps aware he was not long of this mortal coil, as he died in early 2009. I will not focus on the middle — it is mostly just a re-engagement with The Long Twentieth Century. But the beginning and the end together tell an interesting story about the origins and nature of Chinese economic development.
So what is Adam Smith supposedly doing in Beijing? Arrighi’s answer lies with a theory that should be familiar if you have read any of my recent reviews: the “extroverted" model of early-modern European development. The Dutch, and later the English, built their prosperity by mobilising scarce labour to control and profit from long-distance trade and empire. Small states in a competitive environment with limited resources, they relied on high finance and military prowess to maintain the hegemony that facilitated their growth. This system worked quite well; even if, as Arrighi argues in the Long Twentieth Century, it was highly unstable. But Adam Smith was not a fan. He believed, Arrighi says, that this European development path was “unnatural and retrograde”; largely because it led to the relative overdevelopment of urban areas and commerce compared to the agricultural economy. Improvement in agriculture, however, was the only solid basis for economic development — it was not vulnerable to the vicissitudes of the world market to the same extent as manufacturing. As a result, Smith saw a “natural path to opulence”; where domestic, not foreign, trade facilitated a market which produced prosperity on an agricultural basis. And he saw this in China.
The unnatural path, of course, ultimately triumphed over the natural, and for the centuries between Smith’s time and ours, Europe and its offshoots set the tone of global economic development. Smith appears wrong: it turns out that the unnatural path to opulence, by harnessing Joseph Schumpeter’s forces of creative destruction and the fiscal-military state, performed in the long-term better than the natural path that mired China in a high-level equilibrium trap. But, Arrighi argues, what if this was only temporarily true? Economic success in China may indicate Smith’s natural path to opulence was down but not out.
When it comes to Chinese economic development, Arrighi makes two claims. First, he argues that Smith was right about China, insofar as the ‘natural path to opulence’ Smith theorised describes early-modern China well. Arrighi then makes the more controversial claim that contemporary Chinese growth marks a continuation of this economic legacy. Arrighi’s early-modern China is much influenced by Kenneth Pomeranz’s The Great Divergence; which given the era is unsurprising, although Arrighi does suggest that Pomeranz is prefigured by Braudel — a point I actually made some weeks back.2 In light of Smith, Arrighi argues, the famous inwards-turn by the Ming in the fifteenth century was no mistake. It was “eminently reasonable for the Ming not to waste resources in trying to control East-West sea lanes and concentrate instead on developing the national market”. Similarly, the efforts by the Qing in the eighteenth century to develop the ‘ever-normal granaries’ — China’s famed anti-cyclical agricultural buffer system — instead of encouraging trade “is precisely what Smith advocated in the Wealth of Nations”. With a well integrated, essentially agricultural market economy, Qing China was a Smithian dream. However, it did not have Genoese financiers, Dutch merchants, and English industrialists pulling the strings of its state apparatus. A market society without capitalism, China’s prosperity was gnawed away by Europe in the nineteenth century.
However, it is this legacy of non-capitalist market development which Arrighi believes lies behind the growth of post-reform China. Smithian principles, as expressed by the Qing, were embodied in the key policies of the reform era — gradualism in market liberalisation, expansion of education, and development of the rural economy. In connecting Qing policies to market liberalisation, the first argument Arrighi makes is basically Weber’s in How China Escaped Shock Therapy, just with the Smith connection taped on. The second is probably the most interesting: Arrighi points out how China’s growth was never only about cheap labour, but rather relatively cheap skilled labour. He gives a fascinating anecdote about how in a Shanghai automotive factory circa 2004, Jeeps were built by hand in a factory without ‘a single robot in sight’. The cost of labour-intensive production contributed to making this feasible, but only because of the thousands of graduates from technical schools who could build a modern car with rubber mallets and electric drills. Arrighi’s third argument, the “most crucial factor” of China’s reforms, concerns the developmental significance of the Township and Village Enterprises (TVEs). The TVEs, introduced just after the beginning of the Household Responsibility System (which gave economic autonomy to rural households), were collective enterprises which let farmers “leave the land without leaving the village”; producing non-agricultural goods for export. Arrighi believes TVEs absorbed rural surplus labour without urban migration, facilitated investment in rural industry, and reduced fiscal burdens on peasants, all the while keeping the balance between city and country that Smith thought so important.
It is a neat trick to tie Smith, the Qing, and Deng Xiaoping together. But I am not sure I buy it. The first point is the clearest in terms of its contribution to development and its connection to the Qing/Adam Smith — bearing in mind that the link is purely theoretical in nature. The others, however, just do not work. Arrighi’s theory about education and labour-intensity perhaps held for China back in 2007, but no longer — as of 2022, China has a higher density of industrial robots than the United States. A highly skilled labour force relative to income is still key to the Chinese story, but labour-intensive production is not. Furthermore, the link between technical education and Smith is basically non-existent, and Arrighi does not even try to connect them — a fairly major problem for his thesis. The argument about TVE’s is particularly unfortunate, since it is Arrighi’s strongest link to Smith and his weakest link to reality. The TVEs, even at their peak in the 90’s, accounted for less than 40% of industrial output. By 2006, a year before Adam Smith in Beijing, this collapsed to almost nothing. Chinese economic development since 2000 has been a conversation between state-owned and private enterprises — as it has in the West. Overall, Arrighi’s contention that modern Chinese growth represents a natural path to opulence such as the Qing practiced, and Smith anticipated, is unconvincing. If we take a longue durée perspective — as Arrighi would no doubt implore us to — is the Chinese experience meaningfully ‘gradual’ or ‘balanced’ in any way Smith would recognise? Or is it in fact much more explosive and novel, closer to the development of the United States in the late nineteenth century, but in truth, almost wholly unprecedented?
Adam Smith in Beijing is an optimistic book. Arrighi argues that the US might step aside bloodlessly as the hegemon, as did Britain before it. He finds China will be always more interested in economic growth than regional domination. Most of all, perhaps, Arrighi believes Chinese economic development – driven by Smithian market principles, not capitalism — might ‘break the wheel’ of his systemic cycles of accumulation, bringing forth a new geopolitical dynamic. It is an optimism you cannot help but admire. But it is nearly impossible to take seriously two decades later. Just like The Long Twentieth Century, most of the predictions in Adam Smith in Beijing faded into implausibility within years of when they were published. 2007 was a different world to our own; before the financial crisis, Xi Jinping, Jake Sullivan, and the overlapping crises of the last few years. Excluding his insight into Smith and some enduring comments on the ingredients of Chinese growth, Arrighi’s ideas are trapped by blind spots both personal and epochal. Adam Smith in Beijing is not irrelevant, but it tells you more about the context of its creation than about what it describes. It is already a piece of intellectual history.
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I won’t talk about this because it would involve wading into the Brenner debate, as much Arrighi’s axe-grinding is with Robert Brenner and his theory that the origins of capitalism are in English agriculture, not the Genoese-Dutch financial axis. But I’m sure there will be an opportunity to discuss it in the future…
If you are unfamiliar, Pomeranz famously argued that the divergence between Europe and China (specifically, between England and the Yangtze Delta) in living standards was later than was previously thought. In his view, only during the late eighteenth century did substantial divergence occur.