Institutional Change and Rural Industrialization in China

The following sections are included:

• Contents
• List of Tables
• List of Figures

What are the stimuli for economic growth before industrialization? Since Adam Smith, there have been two answers to this question in economic history fields. The first one is the Smithian Growth form widely accepted by European society before the Industrial Revolution. This view, derived from Adam Smith’s classic discussion, mainly refers to economic growth promoted by division of labor, regional specialization and market expansion. This mode is different from the so-called Kuznetzian Growth to a large extent, which is driven by machine production and technical changes provided by the Industrial Revolution. Before the 1960s and 1970s, economic historians generally regard the Smithian Growth form as the economic growth mode of pre-industrial societies, including non-European countries, like China, Japan, and India. However, since Clifford Geertz’s pioneering study on the Southeast Asian paddy in the 1960s, more and more economists and historians have started to pay attention to another growth mode, called Involution Growth by Geertz (Geertz, 1963)…

The author will review what has been discussed in the Introduction and inspect the previous findings and debates to lay a foundation for future analysis. The literature review will be focused on the following questions: What were the properties and fate of the handicraft industry from the Ming and Qing Dynasties to the Republic of China, especially in the late Qing and the early Republic of China periods? Was the handicraft industry flourishing or completely destroyed under the influence of commercialization? If it developed to some extent or flourished, what was the driving force? What was the effect of institutional change on the handicraft industry?

This chapter and the next one will carry out a historical study about the nature of the cotton textile industry in North China and south of the Yangtze River during the period of the Ming Dynasty, the Qing Dynasty and the Republic of China. Based on the study about primary industrialization in Europe in the last chapter, this chapter tries to answer one basic question: Were there any areas in China which formed “rural industry” or “primary industrialization” like those in Europe? In other words, were there signs of a scattered handicraft industry in rural areas being organized by remote dealers and forming handicraft concentration producing areas like Flanders and the south of Italy? Located in the east of Eurasia, China is far away from Western Europe and filled with ocean of rural economy like Western Europe before the Industrial Revolution in the 17^th and 19^th century, with handicraft industry scattered among the rural family’s sideline. Next let us search the islands aimed at remote trade, which are surrounded by ocean of “self-sufficient” natural economy. These islands will be the starting point for me to analyze why China’s handicraft industry changed rapidly in modern times. I will study the background of producing and circulating handicraft since the Ming and Qing Dynasties, and then I will analyze the two most developed areas — Hebei Province, Shandong Province and Henan Province in North China and Jiangsu Province and Zhejiang Province in the lower reaches of the Yangtze River respectively, during which I will try to make the island of primary industrialization and the island being formed clear.

In the previous chapter, the industrialization process of rural areas in the north of China was investigated, and it was found that some rural areas there began a process similar to proto-industrialization in Western Europe until the early 20^th century, when the manufacturing industry spread on a large scale. Now let us move the attention to the rural industry of the Yangtze River Delta. The question to be answered here is very similar to that in the previous chapter: was the rural industry the start point or result of agricultural involution there if it did exist? To what extent can the rural industrialization be called proto-industialization?

To answer this question, the key is the degree of labor transfer to the cotton textile industry and the net profit of laborers carrying on cotton textile work, which was quite similar to the work done in the previous chapter. If the return to laborers of the cotton textile industry was higher than the average income of the labor market, and the mass of laborers entering the cotton textile industry was on a large scale, the cotton textile industry should be defined as flourishing industrialization rather than the sideline of peasant households or an involutionary industry with a diminishing profit. Let us start from the late Ming Dynasty to reveal the change in different historical stages in the cotton textile industries of Songjiang prefecture and the surrounding areas.

In the previous two chapters, we explored the history of cotton textile industry in the North China Plain and Jiangnan Region. We discovered that despite differences in their flourishing levels and development times, cotton textile industry in the rural areas achieved its peak simultaneously after entering the 19^th century. During this period, many cloth-spinning areas in both Jiangnan and Jiangbei (north of the Yangtze River) regions had extraordinarily active performance, and showed very similar characteristics of European proto-industrialization prior to the Industrial Revolution, such as the interference of labor forces, the prevailing of the putting-out system, and the improving of income from spinning, etc. This chapter will analyze these cloth-spinning regions. The problem to be solved is very simple and clear: why did cloth-spinning regions appear in these regions? What made the rural industry in one region more flourishing than another?…

I explored the reasons how the homespun industry developed and reached its prime using the quantitative method in the previous chapter, demonstrating that as a pattern of industry and market organization, the puttingout system played a decisive role in some cotton textile industry areas. From the perspective of quantitative analysis, the key to whether the weaving industry could develop relied on the existence of the putting-out system. This chapter goes further to answer two questions based on these…

In the eyes of economic historians, the Chinese economy in the Ming and Qing Dynasties had two different appearances. On the one hand, studies by some scholars show that under the pressure of population growth, economic growth was maintained at the level of Song Dynasty since the agricultural technology and labor productivity peaked in the Song Dynasty (960–1279), and there was no improvement after that (Perkins, 1969). This was due to the fast growth of population that created negative pressure on the increase of per capita production and technological progress. A large number of surplus labor forces existed in the economic system, and land was delicately divided into many scattered pieces. Peasants adopted intensive cultivation, investing surplus labors into limited farm land, and aimed at the increase of overall production with the decline of labor productivity. This phenomenon was called “High-level Trap” by Mark Elvin, and “involution” by Philip Huang. On the other hand, some other scholars are impressed by the Chinese economy in that historical period. According to Angus Maddison’s estimation, China and Europe were the two largest economic systems in the world before the Industrial Revolution. In 1700, the gross domestic product (GDP) of China and that of Europe accounted for 23.1% and 23.3% respectively of the total GDP of the world, while it came to be 33.4% and 26.6% respectively in 1820, when those ratios of India, Japan, America and Russia respectively were 15.7%, 3.0%, 1.8% and 4.8%. As for the rate of economic growth, China and Europe were the two fastest-growing regions apart from America and Russia. Between 1700 and 1820, China had an annual GDP growth of 0.85% and that of Europe was 0.68%, both of which were higher than that of the world’s average (0.57%) (Maddison, 1998). But how did the Chinese economy in the Ming and Qing Dynasties grow? According to some economic historians and the analysis in Chapters 2 and 3 of this book, what sustained the economic growth were the following: the expansion of the domestic market and the prosperity of remote trades, regional specialization and the development in division of labor, which were also the features of the Smithian growth, among which the prosperity of the cotton textile industry in the south of the Yangtze River and the booming national cotton trade thereafter especially stood out (Feuerwerker, 1970, 1995)…

The following sections are included:

• Bibliography
• Index