UGCP1002 Hong Kong in the Wider Constitutional Order PDF

UGCP1002 Hong Kong in the Wider Constitutional Order All rights reserved. This transcript is for the exclusive use of students currently enrolled in the course “UGCP1002 Hong Kong in the Wider Constitutional Order”. No part of this transcript may be reproduced in any form or made available to ot...

UGCP1002 Hong Kong in the Wider Constitutional Order All rights reserved. This transcript is for the exclusive use of students currently enrolled in the course “UGCP1002 Hong Kong in the Wider Constitutional Order”. No part of this transcript may be reproduced in any form or made available to others without the prior permission in writing of the Office of University General Education, The Chinese University of Hong Kong. Transcript of video lecture of Professor WANG Shaoguang State Capacity and Economic Growth 1. The Great Divergence Hello, everyone. The topic today is "State capacity and economic growth". Economic growth concerns each of us. If the economy does not develop, the society will stagnate. And it will be difficult to improve our living standards. Economic growth is basically a concept in economics. State capacity may not be familiar to all. It is a concept in political science. People don’t usually associate economic growth with state capacity. How do these concepts relate to each other? This is our focus today. Let’s start with economic growth. The motive force of economic development is economic growth. Today, economic growth is taken as something like the norm, something that should happen, and something we expect to happen. But for the entire mankind, it has been something difficult. We have a very long human history of about three million years. Most of the time in those three million years, our economy showed no growth. The mankind had been in a prolonged low-income trap, until about 300 years ago, when some economies began to grow in some parts of the world, and per capita income levels began to rise. Until then, the level of per capita income had hardly improved. In the duration of a year, a decade, a century, a millennium, even ten millenniums, there was no change at all. Human life expectancy was about 35 years. Not everyone could live as long as 35 years.35 years was just the average. The lifespan of babies was particularly short. After birth, only a few of them could survive 3 months, not to mention 5 months, 6 months or a year. Human life expectancy was very short. Economic growth was a very recent, modern phenomenon with a history of about 300 years. Major changes took place after the 16th century. Before the 16th century, in Europe, Asia, Africa, and Latin America that we know of today, the economies developed at a similar rate, towards a similar direction. What direction was it? Universal, zero growth. It was not until after the 16th and 17th centuries that some parts of the world, mainly the Atlantic regions of Europe, or Western Europe, began to show some economic growth, and some leading momentum. But the momentum wasn’t strong enough for these regions to lead the world in the 16th and 17th centuries. The real big change occurred in the century surrounding 1800. The period from 1750 to 1840 witnessed a major change. At that time, Europe began to grow economically, while other places remained pretty much the same. Scholars termed this difference as the Great Divergence. It was a substantial divergence, with some countries going one way and others moving towards the other way. What caused the Great Divergence? One reason is a transition that everyone may have heard of the Industrial Revolution. That brought about the real change after the 16th century. Take a look at this chart (refer to p. 5 of the PowerPoint slide). We can see clearly that in the year 1 AD, which was 2022 years ago, in all regions in the world, the situation was similar. In 1000 AD, or 1000 years later, the global income level was similar to that of 1 AD. Compared to 2000 or so years ago, it was even a bit lower. The numbers on the chart are self-explanatory. In 1000 AD, there was not much difference between Africa and Europe. Income levels were 1 UGCP1002 Hong Kong in the Wider Constitutional Order similar among these two regions, and among all parts of the world. China was at the same level too. Asia was a little better off than Europe and might also be better than Africa. But there was not much difference. However, in 1500, when we entered the 16th century, changes began. By 1600 and 1700, the changes had become slightly more observable. From 1820 onwards, the changes became phenomenal. In these numbers, we might look for China. There had been not much change in China. From 1 AD, or over 2000 years ago, all the way to 1950, people’s living standards did not change. That means, in 2000 years, there was no change at all in income level. Moreover, if we take the year 1500 as a reference point, by 1950, China’s per capita income level had dropped to below that of 1500. In this period, China recorded a decrease, while Europe and America showed a tendency to rise. There was a difference in momentum, and in consequence, the Great Divergence. The change was very recent. It took place just about 300 years ago. You might ask – Why the Great Divergence? About the fact that the Great Divergence did happen we have no doubter controversy. But there is a huge controversy about the cause of the Great Divergence. Why did some countries develop, while other countries did not? This question has been much debated. In fact, we should ask not just one question but two. The first question: why did some countries pioneer economic growth, while others remained stagnant for a long time? Regions such as Africa and Asia, including China, remained stagnant for a long time, while Europe and North America embarked on a fast-developing track. The second question is about the timing. Why did the Great Divergence occur after the mid-1800s, but never before? Here we have the two questions. These questions are interrelated. They are our leading questions today. 2. Prevalent theories We hear about many theories. Perhaps you’ve never studied economics, or political science, but in everyday life, in media, and on various occasions, you may have heard of many prevalent, popular theories. Let me introduce some of them. If you were living in the 19th century, things would be explained to you this way. Look at these two illustrations (refer to p.9 of the PowerPoint slide) There was a phrase in English, “The white man’s burden”. The two cartoons here were published in the late 19th century. At that time, in Europe and North America, including the United States, a popular theory maintained that whites were a superior race. It was natural that they developed. People back then had forgotten about their long history with no development, because by the end of the 19th century, they had been developing for one or two hundred years. So, they had forgotten about the past of little progress. In their words, the white people were an excellent race. That was why they were able to develop. People of other races were inferior, so they weren’t able to develop. The inferior races were a burden for the whites. Look at the cartoons. The white man is carrying a black man, and an Asian man into civilization. They were civilized whites were civilized. Others were not, so they needed to be carried into civilization by the whites. This was one theory. It’s the white man’s explanation on the matter of race. This theory belonged to the 19th century. After the 20th century, the racist theory on development had been tested in Nazi Germany, which was also founded on racism. The theory was eventually abandoned, ending in bankruptcy. But “the white man’s burden” had residual influence. Here’re some sources from the late 19th and early 20th century. I refer to two books written by an American author (refer to p.10 of the PowerPoint slide) The books explained how the white people emerged as a superior race, and how they led the whole world forward. So, initially, the Great Divergence was explained in racist terms. Let’s now turn to the present. I’d like to show you a recent book. The subtitle is sharp: Why Some Are So Rich and Some So Poor (refer to p.11-12 of the PowerPoint slide). 2 UGCP1002 Hong Kong in the Wider Constitutional Order Jared Diamond, the author, is a well-acclaimed scholar, and an author of many popular books. In his book, Diamond’s answer to the question why the Great Divergence happened attached much importance to geography. For instance, he discussed the importance of geographical latitude. In his opinion, the countries in the northern hemisphere are more developed, and the countries in the southern hemisphere are less developed. So, geographical latitude matters. Another factor is land structure. On a flat, unified land, a region does not develop much. In a region like Europe, with geographical structures like the Elspeth land is naturally divided, giving shape to many small countries, which are forced into competition. In competition, they become wealthier. The countries with longer coastlines also have advantages over others. They have better positions in trade, and a higher chance of development. Finally, the author discussed “the curse of nature”. In other words, the curse of limited natural resources. What does it mean? That is, in a country rich in oil and mineral resources, the people tend to be more laid-back, and less likely to develop. The countries lacking resources must compete. In order to compete, they must develop. Does it make sense to you? It does, to many. But after a good thought, perhaps it doesn’t make sense at all. For example, Singapore is in the southern hemisphere. But, it is a very well-developed country. If we look from within a country, it does seem that the northern areas are more developed and the southern areas are poorer. This is the case in the United States, where the northern areas are richer and the southern poorer. Mississippi is poor, while areas surrounding New England are more developed. In Brazil, the north-south wealth gap is similar. In Italy and Europe, there was also a north-south difference in wealth. But this is not always the case. Let’s consider China. The Pearl River Delta region is certainly the wealthiest area in China. It is in the southern part of China. What about northern China, for example, the north-eastern region? It is not so wealthy. So, the argument with geographical latitude sounds reasonable, but in fact, it is not good reasoning. The argument is a European take on the world, which seems plausible. But if you move beyond the European worldview, you see a different picture. Then let’s discuss land structure. According to the author, the mountainous terrain in Europe has barred the countries from forming a unified entity, forcing them to compete with each other. This sounds plausible. In fact, over 100 years ago, a Chinese gentleman named Zhang Zhidong said something similar. He had a similar hypothesis. But give it another thought. In Latin America, the Middle East or Africa, the countries are not unified, scattering across the continent, and always in mutual competition. However, these countries did not develop well. Let’s also consider the argument with coastlines. The importance of coastlines to development is theorized upon one condition. That is, marine trade has become crucial, and navigation has reached a very advanced stage. But before the 16th century, neither was the reality. Marine trade wasn’t so important; nor was navigation so advanced. So, these arguments sound plausible, but don't really make much sense. The book included a specific discussion of China on why it lost the leading status. The author mentioned that in ancient times, China was world-leading in science and technology. How did China lose that status? There were two reasons, one geographical, the other institutional. Geographically, China was a unified regime. Since 221 BC, when Qin Shi Huang became the first Emperor of China, unification was achieved. In this tradition, conventions were followed, and there was no need for competition. But, in Europe, the large number of countries were in constant competition. They learned from each other and progressed. This is the author’s explanation, which perhaps doesn’t make sense either. If the factor he discussed was important, that is, if competition among countries was important, then why didn’t it bring out any change before the 18th century? So, while Diamond's explanation may sound reasonable, there is not much good reasoning in it. The most fundamental flaw in the geographical interpretation is that geography is a factor that rarely changes, but global development may undergo defining 3 UGCP1002 Hong Kong in the Wider Constitutional Order changes, even reversals, in a matter of decades and centuries. To put it in scientific language – using a constant variable, like geography, which is fundamentally unchanging, to explain a changing variable illogical. Take the Roman Empire for example. It was a huge country. After its fall, from 4 to 5 BC through the 16th century, Europe was in ceaseless war and fierce competition. But the centuries of turmoil did not boost development. China, to date, has remained enormous and unified, but it has developed very well over the past 70 years. To these cases, the geography-oriented theory fails to offer an explanation. Let me introduce another example. This book is also widely known. It has already been translated into Chinese. It was authored by Niall Ferguson, a British scholar, and grandly titled Civilization (refer to p.14 of the PowerPoint slide). In the book, the author said that beginning around 1500 (after the 16th century), “a few small polities on the western end of the Eurasian landmass came to dominate the rest of the world. “He was referring to Spain, Portugal, the United Kingdom and the Netherlands. He attempted to explain their gradual ascendance to world leadership. How did these countries emerge? The author believed these countries were equipped with six “killer apps”. In the six killer apps, the first is competition, the second is the rule of law, the third is work ethics, the fourth is consumerism, the fifth is science, and the sixth is medicine. The six killer apps make me wonder if they were just some random ideas that happened to cross the author’s mind. A light analysis would reveal that the six killer apps are in three categories. The first category is institution, namely competition and rule of law. They’re emblematic of the prestigious institution of Europe and, more generally, the Western nations. The third and fourth apps, namely work ethics and consumerism, belong to the category of culture. Europe was superior in culture. The fifth and sixth apps, namely science and medicine, are under the category of science and technology. In other words, the Great Divergence was explained here in terms of institution, culture, science and technology. In fact, the six apps are not useful in explanation. Many of them did not exist before the 16th century, or even before the 18th century. Many of them were consequences of the Great Divergence, not the causes. The author has mistaken consequences as causes. Here’s another recent book with an equally catchy title: Why Nations Fail (refer to p.15 of the PowerPoint slide). It’s co-authored by two very well-known economists. Their theory was based one thing – a system. Countries with good systems developed; Countries with bad systems ceased to develop. They called the good ones “inclusive systems”. With an inclusive political and economic system, a country would develop. In other words, the inclusive systems in Europe and the US are why they have developed. The reason why some countries failed or stagnated lies in their “extractive systems”. Extractive systems have deterred development in some countries. If you examine this theory in light of history, you’ll find it completely groundless. So, there are many prevalent theories in the West which I don’t find convincing. There are a lot of books of a similar nature. You may refer to the list on this slide (refer to p.16 of the PowerPoint slide). There’re many more. My list shows just a few. Some are earlier works, such as The Rise of the West in 1963, The European Miracle in 1981, among many. The listed works and the 19th-century work I’ve just introduced share several views in common. One view is that the people in the West were a superior race, which was why they developed. Another view is that the culture in the West was exceptional, which was why the western countries developed. Yet another view is that the institution in the West was more advanced, which explains its development. Surely, geography was also a factor that explains differences in culture and institution. So, we’ve gone through some popular theories in the West and in the media. These theories, logically, fail to explain one thing. That is, no matter in terms of institution, culture, or race, they can't explain why the Great Divergence occurred in the period from the 16th to the 18th century. If the structural advantages were always there, then why didn’t the Great Divergence occur sooner, but much 4 UGCP1002 Hong Kong in the Wider Constitutional Order later? The flaw in race-, culture- and institution-oriented theories is obvious when we think logically. 3. State capacity and economic growth First, I should share my basic, key argument. My key argument is simple. It can be summarized in one sentence. Infrastructural state capacity is a necessary prerequisite for economic development. A synonym of “prerequisite” would be “precondition”, which means necessary condition. This is my point of viewing one sentence. Infrastructural state capacity is a necessary prerequisite for economic development. You might ask –what is infrastructural state capacity? First, let’s define state capacity. What is state capacity? In this context, Guojia in Chinese does not mean “country”, or “nation”. It means “state”. That is, the political system and institution. How do we define state capacity? It is the ability of the state to turn its will into action and reality. A state may have many aspirations. Some states have more aspirations than others, desiring wealth and nation-wide economic development. The inability to put ideas into practice is the lack of capacity. The ability to turn will into action is state capacity. This is the definition of state capacity. What is infrastructural state capacity? I divide state capacity into seven categories. First, coercive capacity. Second, extractive capacity. Third, assimilative capacity. Fourth, the capacity to identify. Fifth, the capacity to regulate. Sixth, the capacity to steer. Seventh, the capacity to redistribute. Here are the seven categories. I consider the first three as the fundamental capacity of early modern states. The rest are the fundamental capacity of modern states. Today, I will put aside the latter four capacities, and focus on the fundamental capacity of the modern states –coercive capacity, extractive capacity and assimilative capacity. Coercion, as a word, is not pleasing to the ear. No one enjoys being coerced into anything. But coercion is the unique and most significant characteristic of a state. A brief study in political science would convince you that coercion is the most fundamental definition of a state. What is a state? A state is an institution that monopolizes the legitimate use of violence. The fundamental attribute of a state is the monopoly of the legitimate use of violence. In other words, coercion. There are two aspects to coercion. Externally, the state must be able to ward off outside threats to its sovereignty and defend its core interests. Internally, the state must be able to maintain peace and stability. In practical terms, it means there mustn’t be robbery or murder, battles or wars, or warlord upheavals. If a state is capable of coercion, it can counter external threats, safeguard its interests, and protect internal peace. What happens if a state lacks coercive capacity? Invasions and riots. So, the capacity to coerce is very important. It may not be pleasing to the ear, but it is the basis for the existence of every state. This is the first capacity, coercion. Next, extractive capacity. What is extractive capacity? We’ve just talked about coercive capacity. It’s expensive to maintain an armed force, such as an army or a police system. Where does the money come from if the state is unable to extract? Besides, a state has more functions than maintaining armed forces. Modern states, in particular, have various functions, such as providing welfare. All the functions require a large budget. In order to function well on all fronts, the state must be able to extract a portion of resources from the economic activities and the society to fund state capacities. Extraction is usually achieved through taxing. Look around the world. There is no state that does not tax its people. The only difference lies in capacity. Some states can extract more, while others are less able to do so. Take the Nordic countries for example. In Norway, Denmark and Sweden, the state tends to extract most of the socio- economic output, which amounts to 50% to 60% of the total output. That is, from every 100- dollar worth of output, the state takes 50 to 60 dollars. Some countries, such as developing countries, are weaker in extraction. They take less from the people. Without extraction, the state will lose the foundation for all its functions. Take the human body as a metaphor for a state. 5 UGCP1002 Hong Kong in the Wider Constitutional Order Coercion is like the bones, and extraction is like the circulatory system and the hematopoietic mechanism. The third capacity is assimilation. No country can rely solely on violence to maintain internal order, Because, if all the unrests are to be suppressed through violence, the cost will be overly high. The state must formulate two things under its administration. First, national identity. This is to gradually cultivate an identity among the residing populations that they develop a sense of belonging to the country. This is something every state works on. Let me also add that in the early periods, this was done in the West with much cruelty. For example, according to this book, not many people in France used to consider themselves as French. They didn’t even speak French. The assimilation was achieved only after the 1850s, through very strong, aggressive means. Today, the French people are proud of their language, and take pride in being French. This is not a born affection. This is a construct by the state. National identity is very important. The state needs yet another set of beliefs: core values. This is to develop a general understanding of what is right, what is wrong, what should be done, what must not be done, and what would be subject to social condemnation and even legal sanctions against what cannot be done if they are carried out. Such understanding constitutes core values. In sum, there are two aspects to a state’s assimilative capacity: national identity and core values. The lack of assimilation divides the state. When some portion of the population considers themselves as not belonging to the state, and other portions hold a similar view, the state will be divided. Such a situation is not unusual in today’s world. The lack of assimilation will also result in a disordered society. In a society without order, people have no idea what is right or wrong. Things that some believe to be correct are denied by others. Then there are conflicts. This is what happens when there’s no social norm to follow. So, all three capacities are very important. Coercion functions as the backbone of the state. Extraction provides for the state like the blood does for the human body. Assimilation works like the central nervous system. All three capacities are important. They are fundamental state capacities. As I’ve put it, “infrastructural state capacity is a necessary prerequisite for economic development.” State capacity was recognized in Europe precisely in about the 16th century. By that time, people had clearly understood its importance. Around the 16th century, there was a gentleman named Thomas Hobbes. Hobbes wrote the well-known classic Leviathan. He said, “In the absence of a common power to keep all people in awe, they are in that condition which is called war, in which every man is against every man.” It’s war of everyone against everyone. That is to say, without a central authority to exercise coercive capacity, the state will fall into anarchy, where everyone can kill everyone else. Under such conditions, economic development is impossible. Let me quote the words of Hobbes, “In such condition, there is no place for Industry; because the fruit thereof is uncertain”. In other words, in a ceaselessly warring state, any fruit and profit of development would be taken away as soon as it turns up; robbers would not be punished by anyone; whoever stronger, and more armed, would rob. Hobbes continued, “and there is, which is worst of all, continual fear, and danger of violent death; And the life of man, solitary, poor, nasty, brutish, and short. “These are the words of a very important thinker in the 16th-century Europe, who recognized the importance of the state, and the significance of state coercion. This is one example of such an understanding. Surely, when we talk about Hobbes, we’d say that, as far as we know, this thinker attached great emphasis to the function of the state. There are other notable thinkers. Some, like Adam Smith, emphasized liberty. Many of us have heard about Adam Smith, his concept of “the invisible hand”, and his idea that the government should leave things alone and grant liberty to the people so that the economy can grow. Many people have heard that this is Adam Smith's theory. But this is not his only theory. He put forward other theories as well. In 1763, at the beginning of the Industrial 6 UGCP1002 Hong Kong in the Wider Constitutional Order Revolution in Britain, Adam Smith gave a series of lectures later titled “Lectures on Justice, Police, Revenue and Arms”. Look at the keywords: justice, police, revenue and arms. Now listen to them. Don’t they echo two of the things we’ve discussed? One is coercion. The other is extraction. This was in 1763. 3 years later, Adam Smith wrote his most famous work The Wealth of Nations. About the Wealth of Nations, many people would recall that Adam Smith’s focus was that the market should be competitive and that the government should stay away. These people have not read the book thoroughly. They’ve probably read just a part or two. Let’s turn to the third part of the book. Book III was about “The Different Progress of Opulence in Different Nations”. In this part, Adam Smith particularly emphasized the effect of force on economic development. He believed that if there was no force to counter violence, and if the state had no coercive capacity, there would be no chance for development. Now let’s turn to Book V of Adam Smith’s classic, which is on “The Revenue of the Sovereign or Commonwealth”. This part was about national defence and jurisdiction. The focus remained on the coercive capability. So, even Adam Smith valued coercive and extractive capacities. Without these capacities, the economy would not develop. This is a very simple principle. As I said earlier, “infrastructural state capacity is a necessary prerequisite for economic development. “What I’m yet to deliver are two extended arguments. First, coercion can be used for ill purposes. One may use coercion not only to defend oneself and one’s internal stability, but also to invade others. Second, the use of force had a deep connection to the rise of the West. 4. Force, conquest and the rise of the West To conquer with force is to use coercive capacity. We need this idea to explain the Great Divergence. As I’ve discussed, the prevalent theories fail to explain the occurrence of the Great Divergence after the 16th century. Nor can they explain its strong manifestation from the 18th century onwards. To explain the occurrence of the Great Divergence, we should start by reviewing the prior events. There are several key events. First, the Military Revolution from the 16th to 18th century. Second, the large-scale colonialism from the 16th to 19th century. Third, the slave trade and slavery from the 16th to 19th century. Fourth, the growth in tax revenue from the 17th to 20th century. Finally, the Industrial Revolution. The Industrial Revolution first took place in Britain in the second half of the 18th century, lasting from 1750 to about 1840. This was the first industrial revolution. It was preceded by the Military Revolution, colonialism, the slave trade, slavery and tax increases. These prior events were very likely the causes of the Great Divergence. Let's start with the Military Revolution. The concept of military revolution was first proposed by an expert in 1956 (refer to p.29 of the PowerPoint slide). Later, a lot was written about the military revolution. There were debates on it, too. But by now, basically, no one disagrees with the idea that from the 16th to 18th century, there was a military revolution in the West. The Military Revolution was manifested in the evolution of weaponry. There was a shift from the prevalence of cold weapons to the proliferation of hot weapons, firearms, guns and cannons. The scale of the army also changed. Armies expanded, comprising land force and navy. The air force wasn’t there yet, but there was the navy. The third aspect of the revolution was military organization. The military forces became more tightly organized. This was the Military Revolution. Why did it happen at that time? The reason was probably quite simple. We can see it clearly from this chart (refer to p.30 of the PowerPoint slide). The chart shows that from the 16th century through the 18th and 19th centuries, wars were very frequent in Europe. There were many, frequent wars between the countries. How frequent? This chart compares the frequency of wars in Europe and that in China. We can see that in the same period, within China, after the unification of the Qing dynasty, the state was relatively stable, with fewer wars. Europe, by comparison, went through many more wars. How frequent were the wars in Europe? We can see it more clearly from another simple chart. In the 16th and 17th centuries, every year – by 7 UGCP1002 Hong Kong in the Wider Constitutional Order saying “every year”, I really do mean it, and we are talking about every year in 200 years –the probability of war was more than 90%. If you lived in Europe in the 16th and 17th centuries， the likelihood of war in your country was very, very high. Because wars occurred so frequently, people were eager to improve their arms, expand the scale of their armies, and reform the military organization for higher performance, so that they could secure a better chance at winning. So, in Europe, the high frequency of wars induced the Military Revolution. The chart shows the army size of the major powers in Europe in the years 1550, 1700 and 1780 (refer to p.32 of the PowerPoint slide). In 1550, around the mid-16th century, the strongest countries in Europe – especially at sea – were Spain and England. At that time, Spain was also the wealthiest country in the world. By 1700, Spain had shown signs of decline, while England, France and the Netherlands had developed the strongest military forces. This was also the time when the Netherlands, France, and England began to get rich. By 1780, towards the end of the 18th century, these countries remained the top military powers. But the Netherlands had weakened. As we know, by then, the level of wealth of the Netherlands had begun to change; its economic growth had gone down. So, we can be certain about the impact of the army size. Western scholars have long attached great importance to the militarisation of a country. There is an expert who spent years on this subject. His name is Charles Talentedly formulated an equation: “militarization = civilization." Another highly notable scholar is Ian Morris. In the Measure of Civilisation, a more recent work (refer to p.33 of the PowerPoint slide), Morris argued that one of the measures of civilisation is "war-making capacity." The capacity to war is a measure of civilisation. Ian Morris compiled a table (refer to p.34 of the PowerPoint slide) to compare the war-making capacities of the East and the West. On the table, we can see that from 4,000 years ago to 600 years ago, in general, the East was probably stronger than the West in terms of war-making capacity. But in the 16th century, or after 1500, both sides began to change dramatically. By 1500, the West had surpassed the East, by a little. By 1600, the gap had widened a little more. By 1700, the West had become more than twice as strong as the East. By 1800, the West had far exceeded the East. In both military competence and war-making capabilities, the West had become stronger than the East. In other words, the West had shown a higher coercive capacity. It was able to not only defend itself but also combat overseas. What does the coercive capacity have to do with economic growth? The connection is actually very easy to understand. It only requires the simplest way of thinking. With coercive capacity, a state maintains a peaceful, internal environment, where people won’t destroy each other’s wealth, and where the wealth created can be accumulated and used for investment for further economic development. So, internally, coercive capacity plays a very important role. Externally, coercive capacity is fundamental to the state’s self-defence, but it may also be mobilised by some countries in the West for overseas plunder and market expansion. Moreover, coercive capacity can be deployed to cultivate management talents. We haven’t talked much about this point, so let me explain briefly. There are some words in use today that are taken as commercial terminology. For example, “company”, and “entrepreneur”. You may not know that these words have military origins. “Company” is used to refer to military organisation. For instance, Britain used to have the East India Company. That company was not a commercial business. The word “company” didn’t mean a corporation. It meant a military group. The East India Company owned a formidable military force, as well as its own army, and its own navy. Similarly, the Netherlands had its own East India Company. So did many countries in Europe. All their companies were not purely commercial enterprises, but military organisations. The nature of their companies also forged an association between war, business, and plunder. To do business involved plundering. That was how coercive capacity was related 8 UGCP1002 Hong Kong in the Wider Constitutional Order to economic growth. European colonialism began in the 16th century, starting with Portugal and Spain. From the 16th to 18th century, it was mainly the Netherlands, England and France that began to establish overseas colonies. The focus of the competition at that time was on the Americas. At that time, a new continent had just been discovered. The discovery led to the division and colonisation of the Americas. From the 19th to the mid-20th century, the colonial expansion primarily covered the Americas, Africa and Asia, with the participation of the United States, Germany, and Japan. That is to say, nearly all Western European countries were engaged in colonialism, including the seemingly peaceful countries we know of today, such as Sweden, Denmark, Finland, and Norway. All of them were engaged in colonisation, traveling across oceans to occupy others’ lands, claiming them as their own, then turning the local people into slaves and victims of slavery. Many people are not aware that the United States was also a colonial country. The first states in the United States were the 13 states on the eastern coast. Then its territory expanded to cover almost the entire Americas. The expansion took place in the 19th century. The areas taken did not belong to the United States. They were seized from other colonisers. It was essentially colonial to turn land that belonged to others into one’s own and continue to expand one’s territory in this way. In this process, colonialism was very brutal. It is estimated that in 1491, at the end of the 15th century, in the western hemisphere, on the continent of today's Americas, there lived a population of about 145 million people. Sweet potato and corn, which we Chinese often eat today, all came from the Americas. These crops have one common characteristic – they can be produced in large quantities. Since they were imported to China in the 18th and 19th centuries, they’ve become the food source for many. This was because the produce of rice and wheat alone couldn’t feed all, while corn and sweet potatoes grew easily and had a high yield. Because of the good food source, the population in South America was huge, approximating 145 million in 1491. 200 years later, as a result of Western colonialization population of the native Americans dropped by 90% to 95%. That is, 90 to 95 people out of 100 had died.130 million people disappeared. By 1900, there were fewer than 300,000 native Americans left. Colonialism was indeed very, very brutal. The entire indigenous population of the Americas was basically wiped out. And upon arrival in the New World, the colonisers began to practice slavery. Where did they gather the first slaves? By turning the natives into slaves. Later, a large population was transported from Africa to the Americas as slaves. The United States seized the land, while importing labour to its new territory. European colonisers had the same practice elsewhere. One example is the British plantations in the Caribbean, which generated huge profits from planting sugar cane. Today, sugar is something we’re advised to cut back on. But at that time, sugar was lucrative. Here we consider the New World in connection to slavery, and slavery in connection to the transatlantic slave trade. The transatlantic slave trade did not happen in one or two days. It went on for 300 years. The history of the slave trade spanned the 16th through 19th century, starting with Spain, Portugal, then the Netherlands, England, France, and finally engaging other European countries. People in Africa were held and turned into slaves, put on ships, and sent overseas to work as slaves. About 12 million people were shipped from Africa to the Americas as slaves. Some scholars estimate that the figure to be even higher. 12 million is a terrifying number, even in today’s point of view. And the world’s population back then was much smaller. So, 12 million was a really large proportion. Of these 12 million people, the old, the weak, and the handicapped would not have been included. Only men at prime age were sought. Thus, a large number of young and middle-aged African men were exported as slaves. The 12 million people left home. Many of them lost their lives on the way. In number, those who died on the way were close to those who arrived. That means Africa lost tens of millions of its population to the slave trade. The lost population was mainly able-bodied men. 9 UGCP1002 Hong Kong in the Wider Constitutional Order This chart (refer to p.41 of the PowerPoint slide) shows us clearly the decimation of the African population. In 1700, Africa accounted for 21% of the world's population, while Europe accounted for 18%. By 1820, or 120 years later, Africa’s population had fallen to 13% of the world's population, while Europe's had increased to 20%. By 1913, Africa's share of the world's population had dropped to 8%, and Europe's share had gone up to 25%. There was a huge loss of the African population. You might wonder why Africa's economy was not developing. In the early periods, economic growth depended on two factors: resources and labour. With a huge loss of labour, how could a country develop its economy? There was no way to do so. So, Africa was destroyed. Scholars in African Studies generally agree that Africa’s underdevelopment was not a historical norm, or something inevitable. For a long time, the development from within Africa had been more advanced than that in the Americas and Oceania, which is Australia and New Zealand today. The development in Africa was even comparable to that of Europe and Asia. The real tragedy hit Africa from 1500 onwards, when colonialism and the slave trade dragged it into long-term stagnation, with residual impact even to this day. Take Belgium for example. As you know, Belgium is not a big country. Belgium has probably never been a very big country. But Belgium occupied the Congo in the 19th century, and the colony was 80 times the size of the land of the colonizer. How many deaths did it cause in the Congo? Between 10 million and 13 million, equivalent to half of the Congolese population at the time. That is, one in every two people died. Survivors who did not obey would have their hands chopped off. To date, we can still find a lot of photographic evidence that recorded images of the de-limbed Congolese people. Belgium was a very brutal colonial power. Yet it was just one among many alike. For another example, take Germany, which killed 80% to 90% of the people in Namibia. It was only this year (2022) that Germany agreed to pay Namibia a small amount of compensation for the killings at the time. Now we only hear about how cruel the Nazis were, but colonialism at that time was more than 10 times more brutal than the Nazis. Even in the West, this was unacceptable to some. William Howitt, an English writer, published a book titled Colonization and Christianity in 1838. Let me quote this passage in the book. Howitt said, “The barbarities and desperate outrages of the so-called Christian race, throughout every region of the world, and upon every people they have been able to subdue, are not to be paralleled by those of any other race, however fierce, however untaught, and however reckless of mercy and of shame, in any age of the earth. “That is to say, the most brutal domination in human history was the combination of the slave trade, slavery, and colonialism. This is a Westerner’s own opinion. Howitt wasn’t known for his political viewpoints. Nor was he a political activist. But he wrote Colonization and Christianity in 1838. This book is now free for download. You may find it and read it. We also know the thinker, Karl Marx. Marx wrote the book Capital to discuss capitalism. When we call an institution “capitalism,” we mean that the capital is essential, and that the capital must be accumulated for the purpose of development. The institution founded on this basis is called capitalism. So where does the capital come from? There is a chapter in Capital on “The Accumulation of Capital”, in which Marx discussed colonialism and the slave trade. He said, “The colonial system ripened, like a hot-house, trade and navigation. … The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother country, “That means the colonisers went out to plunder, treasures were brought to the colonial powers, and then “were turned into capita.”. The generation of capital through colonialism was essential here. Marx also spoke of the slave trade. He said, “The discovery of gold and silver in America, the extirpation, enslavement, and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production.” These are the preconditions for the birth of capitalism. As Marx concluded, “These idyllic proceedings are the chief momenta 10 UGCP1002 Hong Kong in the Wider Constitutional Order of primitive accumulation. “The emergence of capitalism in the West relied omits capital, or the "first pot of gold" as we often call it today. Where did the capital come from? Right here. Which countries were involved in colonialism and the slave trade? As you can see on this slide, there were many of them. The countries in Western Europe were particularly active colonisers. Those slave-trading countries were also mainly the Western European countries along the coastline of the Atlantic Ocean. They had been involved in the slave trade and colonialism for 300 years, and they’ve been out of the slave trade and colonialism for just over 100 years or so. Their practice had a much longer history than their non-practice. The period from the 16th to 19th century allows us to conduct a so-called natural experiment, where we can observe which countries were on the rise, and which countries failed to rise. Now we can see very clearly. The first countries to rise were the Atlantic European countries. The countries in this region were the first to rise. They were also the countries that were deeply involved in colonialism, slave trade, and slavery. Spatially, the countries involved in colonialism and the slave trade have risen, and those that were not involved have not risen. For example, the Eastern European countries. They were not close to the Atlantic coast. Countries like Poland were still lagging behind because they were not involved in the trend at that time. In terms of time, the countries rose only after having engaged in slave trade and colonialism. Before that, the Atlantic European countries were no different from the rest of the world. Now we see clearly what was crucial to development. The prevalent theories, the premise on geography, race, culture, and institution would fail to explain the difference in development. Exactly how many resources were looted through colonialism? It is difficult to estimate. But attempts were made. Here I refer to a book in 1962 which summarised the estimates by many scholars up to 1962 (refer to p.48 of the PowerPoint slide). I will not read them one by one. We can see that whether in Latin America, Indonesia, Africa, or India, the colonial powers, including Britain, France, the Netherlands and many others, amassed vast amounts of wealth. How much wealth? The total amount probably exceeded the capital of all the industrial enterprises operated by steam which existed in Europe around 1800.In other words, when capitalism and the Industrial Revolution began to take shape in Europe in the late 18th and early 19th century, where did the capital come from? The fruit of plundering was basically its capital. Today, many countries have demanded reparation from former colonisers. I'm not going to read the list either. We can find a lot of sources on this matter. In fact, on the agenda of the recent climate change conference in Egypt, there was the issue of reparation demand. Some Western countries are worsening climate change because their gas emissions caused much loss and damage to the atmosphere. So, reparations were demanded from these countries. On the slide I list a few reparations demands from former colonies. The requested amounts were astronomical. For example, in 1999, Africa demanded 777 trillion US dollars from the developed countries as reparation. This is not a special request of some individual countries. The United Nations has held a series of conferences since 2001 to support developing countries in demanding reparation from developed countries. The collective demands must not be underestimated. An Indian scholar argued that Britain should pay India $45 trillion in compensation for its enslavement and massive plundering of India. How much is a trillion? I'll give you a simple comparison and you'll know. China, as the world's second-largest economy, recorded a total GDP of $17.5 trillion last year, almost two-thirds less than the $45 trillion India demanded from Britain. 11 UGCP1002 Hong Kong in the Wider Constitutional Order So, by whatever estimate, colonialism, slavery and the slave trade brought massive wealth to the West to the detriment of the developing countries. This is a very important factor in explaining the Great Divergence. It was coercion, armed forces and the Military revolution that enabled them to rise. These owed much to the simultaneous increase in extractive capacity in Europe, because war was the driving force of not only the military revolution, but also the European fiscal revolution. While the war was going on, in order to improve their war-making capacity, these European countries had to increase their extractive capacity. We can see it clearly in these two charts (refer to p.51 of the PowerPoint slide). One chart shows the situation before 1789, from around 1500 to 1789. The other chart shows the changes from 1789 to 1910. In this period, we see an overall increase in the fiscal extractive capacity of almost all countries in Europe, and the rise was earlier and more in the major colonial powers, including Britain, France, the Netherlands, and so on. The general extractive capacity of these countries also showed significant improvement. How strong was the extractive capacity? This chart offers a clear idea (refer to p.52 of the PowerPoint slide). You don’t need to examine the chart closely. Locate China, and you’ll get the idea. China was nowhere close to the Netherlands, Britain, France and Spain. We can’t really compare them when China’s extraction was at an extremely low level. So, extraction is also related to economic growth. On one aspect, extraction supports a military state, bringing coercion to a high level. On the other aspect, extraction funds infrastructure. Road building, for example, is very crucial to a state. A research report in 2015 found that using the extraction of European countries after the 17th century as a variable, we can basically tell which countries will develop faster and which countries will fall behind. So, again, extraction is related to economic growth. Let me give you a brief summary. What are the keys to the rise of the West? Military revolution and fiscal revolution. The military revolution strengthened coercion, and the financial revolution strengthened extraction. Coercion and extraction are mutually complementary, enabling states to not only protect themselves, but also practice colonialism, slave trade and slavery overseas. These practices contributed to the accumulation of a huge amount of capital, and finally gave rise to an industrial revolution. I am not alone in making this argument. Geoffrey Parker is one of the most famous scholars of military revolution in the West. Here I quote his words, “In large measure, ‘the rise of the West’ depended on the exercise of force”. The rise of the West depended on the exercise of force. “Westerners founded the first groups of global empires between 1500 and 1750. The key to their success was the increase of war- making capacity, which has come to be known as the Military Revolution.” Coercion and war- making capacity enabled their rise. Though you might not have heard much about Parker, you might have heard of another scholar, Samuel Huntington. Samuel Huntington published a best- seller some years ago. The title is The Clash of Civilizations. Perhaps everybody would focus on his thoughts about the clash of civilizations and may miss this paragraph about the secret of the rise of the West. He said, “The West won the world not by the superiority of its ideas or values or religion, but rather by its superiority in applying organized violence.” Organized violence means armed forces. He continued, “Westerners often forget this fact; non-Westerners never do.” If you visit Africa, and ask the locals about this, they never forget. Take the question to the Caribbean: every one of the fourteen countries of the Caribbean’s people there will never forget. By now, I have delivered the main ideas of this lecture. Let me make a quick summary. My key argument is simple. That is, “Infrastructural state capacity.” is a necessary prerequisite and precondition for economic development. Whether in Europe, the United States or Japan, the increase of state capacity came first, followed by economic growth. Moreover, Europe, the United States and Japan all mobilised state capacity first to plunder overseas. In addition to 12 UGCP1002 Hong Kong in the Wider Constitutional Order maintaining internal peace, they plundered externally. State capacity can be applied in explaining not only the Great Divergence between the West and the East, but also the Great Divergence between Japan and China from the mid-1800s onwards. In the next lecture, I will talk about the Great Divergence between Japan and China. State capacity will be similarly applicable to this case, as well as to the analysis of the Great Divergence between East Asia and other developing countries in the second half of the 20th century and beyond. In the 20th century, after 1950, East Asian economies began to develop, but other developing countries did not. One determining factor here is also state capacity. So, the relationship between state capacity and economic growth is very clear. In the case of China, in particular, I quote the views of two experts. The first one is a Dutch scholar. He said, “the root cause of ‘the decline of the East’ and ‘the rise of the West’ in the early modern era would be the major difference in the importance, role and function of the state.” So, it is a matter of having or not having good state capacity. The second scholar I’m quoting is a Chinese professor, who spent a lifetime teaching in the United States. His name is Sun Lung-Kee. In one of his recent articles, he said, “China failed to become a leading sheep in the world economy in modern history because it did not become a fiscal-military state.” Fiscal- military state is a research theme in the West. A fiscal-military state is characterized by two capacities: coercion and extraction. Why did China not develop at that time? According to Sun, this is the problem. For China, I will discuss more in the next two lectures. One lecture will be on the reason for China’s backwardness. The reason was that in the late Qing and Republican period, China's state capacity was very, very limited, hence its economy fell behind. Following the liberation of mainland China in 1949 and the establishment of New China, China was able to rise, also because of the change in state capacity. So, what exactly was the change? Let me continue in the next two lectures. That’s all for today. Thank you. 13