Tyler Cowen on the Chinese Tea Party

1 09 2011

In a recent post on the Marginal Revolution blog, economist Tyler Cowen made an interesting historical parallel comparing anti-tax sentiment in the present-day United States with that in the Qing, the last of China’s dynasties. The Qing dynasty lasted from 1844 until 1911. The Tea Party in the United States thinks that it would be unacceptable to raise any taxes on anyone at any point in the future and that dealing with the deficit must be met 100% by spending cuts, regardless of their impact on the social programmes, military capability, or infrastructure of the United States.

Tea Party Rally

In 1712, the Kangxi Emperor permanently froze the land tax, the major source of the state’s revenue. This decree bound his descendants to keep this tax low. According to historian William T. Rowe, this decision had the long-term effect of weakening the Chinese state. Future emperors had less money to spend on maintaining infrastructure (e.g., canals), paying civil servants, or fighting off foreigners (e.g., British merchants selling opium).

Cowen’s post was inspired by something he read in Strange Parallels: Volume 2, Mainland Mirrors: Europe, Japan, China, South Asia, and the Islands: Southeast Asia in Global Context, c.800-1830 (Studies in Comparative World History) (9780521530361):

I’m going to reproduce Cowen’s post below in italics, putting Cowen’s original quote from Lieberman in red font. Then I’ll discuss it.

…best estimates are that during the second half of the 18th century imperial taxes captured only 5 percent of the gross national product in China, compared to 12-15 percent in Russia, 9-13 percent of national commodity production in France, and 16-24 percent of national commodity production in Britain.  During the 18th century in Russia, moreover, corvees and military service were far more onerous than in China, where most labor services had been commuted.  If we consider that under the Northern Song in 1080, imperial revenue averaged about 13 percent of national income, and under the Ming in 1550 6-8 percent, we find some support for Skinner’s thesis that percentage of the surplus captured in imperial taxes shrank steadily relative to the share retained by local systems.

Victor Lieberman presents “philosophical commitment to low taxes” as a major reason for this pattern.  Further explanations are a lack of foreign threats and that the Chinese state did not always have the capacity to collect much more.

I was intrigued by Cowen`s post for several reasons.

First, I teach a lecture class on global history and one of our central themes is the role of institutions in the Great Divergence. The Great Divergence is one of the central research questions in global history and the debate about it boils down to this: 500 years ago, Western civilization was at roughly the same economic and technological level as the other great civilizations of Eurasia. In fact, there is evidence that Chinese civilization was somewhat more advanced that that of Europe in terms of technology and economic development. So why did the Industrial Revolution take place in Western Europe and not some other part of the world, such as China? Why did Western Europeans and their descendants dominate the world in the 19th and 20th centuries? Why did they have the advanced technology? Why were the British able to set up a colony in Hong Kong? Why wasn’t it the other way around? Why didn’t the Chinese set up a colony on, say, the Isle of Wight?  Taxes may be a big part of the explanation. We’ve long known that the greater willingness of upper-class Britons to pay taxes was one of reasons why Britain was able to defeat France is the great conflicts of the 18th and early 19th centuries. It appears that this pattern was replicated on a somewhat grander, civilizational level.

Second, there is some literature on the history of laissez-faire ideology in China. The present-day libertarian mantra that small government is good and taxes are bad has parallels in ancient Chinese economic thought. Moreover, as Christian Gerlach of LSE has argued, the Chinese doctrine of laissez-faire was imported by European philosophers in the 17th and 18th centuries when all things Chinese were fashionable in Europe.