6 - The Network Foundations of the Great Divergence

Summary

"Theories of niche construction and near-decomposability, which correspond to competition and decentralization in economic parlance, illuminate how respective networks of authority served parochial purposes, with motivations related to specific challenges: in China, to rule a large territory, and in Europe, to enhance the competitive power of small states in a fragmented landscape. A shift toward outward expansion made European elites less parochial and resulted in an explosive wave of innovation. China’s centralized network enabled periods of unmatched stability and prosperity; but the merit-based bureaucracy stifled innovation, preventing the rise of a merchant class, an independent private sector, and outward expansion, all of which were associated with Europe’s industrialization. China’s inward gaze ensured the paramount political power of bureaucratic elites, resulting in systemic corruption that grew extensively over time, impoverishing the peasantry and causing rebellions, chaos, and conflict – a process that repeated itself throughout China’s history.