Why Nations Fail

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Absolutism reigned not just in much of Europe but also in
Asia, and similarly prevented industrialization during the
critical juncture created by the Industrial Revolution. The
Ming and Qing dynasties of China and the absolutism of
the Ottoman Empire illustrate this pattern. Under the Song
dynasty, between 960 and 1279, China led the world in
many technological innovations. The Chinese invented
clocks, the compass, gunpowder, paper and paper money,
porcelain, and blast furnaces to make cast iron before
Europe did. They independently developed spinning
wheels and waterpower at more or less the same time that
these emerged at the other end of Eurasia. In
consequence, in 1500 standards of living were probably at
least as high in China as they were in Europe. For
centuries China also had a centralized state with a
meritocratically recruited civil service.
Yet China was absolutist, and the growth under the Song
dynasty was under extractive institutions. There was no
political representation for groups other than the monarchy
in society, nothing resembling a Parliament or a Cortes.
Merchants always had a precarious status in China, and
the great inventions of the Song were not spurred by
market incentives but were brought into existence under the
auspices, or even the orders, of the government. Little of
this was commercialized. The grip of the state tightened
during the Ming and Qing dynasties that followed the Song.
At the root of all this was the usual logic of extractive
institutions. As most rulers presiding over extractive
institutions, the absolutist emperors of China opposed
change, sought stability, and in essence feared creative
destruction.
This is best illustrated by the history of international trade.
As we have seen, the discovery of the Americas and the
way international trade was organized played a key role in

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the political conflicts and institutional changes of early
modern Europe. In China, while private merchants were
commonly involved in trade within the country, the state
monopolized overseas trade. When the Ming dynasty came
to power in 1368, it was Emperor Hongwu who first ruled,
for thirty years. Hongwu was concerned that overseas trade
would be politically and socially destabilizing and he
allowed international trade to take place only if it were
organized by the government and only if it involved tribute
giving, and not commercial activity. Hongwu even executed
hundreds of people accused of trying to turn tribute
missions into commercial ventures. Between 1377 and
1397, no oceangoing tribute missions were allowed. He
banned private individuals from trading with foreigners and
would not allow Chinese to sail overseas.
In 1402 Emperor Yongle came to the throne and initiated
one of the most famous periods of Chinese history by
restarting government-sponsored foreign trade on a big
scale. Yongle sponsored Admiral Zheng He to undertake
six huge missions to Southeast and South Asia, Arabia,
and Africa. The Chinese knew about these places from a
long history of trading relations, but nothing had ever
happened on this scale before. The first fleet included
27,800 men and 62 large treasure ships, accompanied by
190 smaller ships, including ones specifically for carrying
freshwater, others for supplies, and others for troops. Yet
Emperor Yongle put a temporary stop on the missions after
the sixth one in 1422. This was made permanent by his
successor, Hongxi, who ruled from 1424 to 1425. Hongxi’s
premature death brought to the throne Emperor Xuande,
who at first allowed Zheng He a final mission, in 1433. But
after this, all overseas trade was banned. By 1436 the
construction of seagoing ships was even made illegal. The
ban on overseas trade was not lifted until 1567.
These events, though only the tip of the extractive iceberg
that prevented many economic activities deemed to be
potentially destabilizing, were to have a fundamental impact
on Chinese economic development. Just at the time when
international trade and the discovery of the Americas were
fundamentally transforming the institutions of England,
China was cutting itself off from this critical juncture and
turning inward. This inward turn did not end in 1567. The

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Ming dynasty was overrun in 1644 by the Jurchen people,
the Manchus of inner Asia, who created the Qing dynasty. A
period of intense political instability then ensued. The Qings
engaged in mass expropriation of property and assets. In
the 1690s, T’ang Chen, a retired Chinese scholar and
failed merchant, wrote:
More than fifty years have passed since the
founding of the Ch’ing [Qing] dynasty, and the
empire grows poorer each day. Farmers are
destitute, artisans are destitute, merchants
are destitute, and officials too are destitute.
Grain is cheap, yet it is hard to eat one’s fill.
Cloth is cheap, yet it is hard to cover one’s
skin. Boatloads of goods travel from one
marketplace to another, but the cargoes must
be sold at a loss. Officials upon leaving their
posts discover they have no wherewithal to
support their households. Indeed the four
occupations are all impoverished.
In 1661 the emperor Kangxi ordered that all people living
along the coast from Vietnam to Chekiang—essentially the
entire southern coast, once the most commercially active