GeraltofRivia
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Recently I have a fireside chat with a good friend of mine about Industrial revolution, the role of productivity and cost advantage. We talked about how these basic economical factors underpins the human history over the last 500 years - the rise of Europe, then rise of US and fall of Europe and finally rise of China and fall of US. He has some interesting thoughts and I like to share.
First we discussed how China became so backward and economically collapsed in the recent history. The reason is not so much that China has gone backward in terms of its capability to produce but rather it was outcompeted by European nations through their cost advantage.
China has been a successful producer nation civilization in the world for over 2000 years, evidenced by the popularity of its main exporting products - silk and Proclain. The long success has made China unaware that things has changed dramatically in other part of the world around 1500s - the discovery of America by European nations, initially Spain and Portugal, later British and French. European nations like British managed to transformed itself into a major producer in textile, built on slavery plantation, gold and silver from central America and the vast fertile land in America,
Using the cotton produced from slavery plantation in New America, British has had unparalleled cost advantage against the traditional producer nations in textile. Despite being a low key everyday product, textile production and trade were critical part of economy for many nations in the world, supporting livelihood for mass population. After losing the Opium war, China was forced to open its market to British made textile products, which was obviously much cheaper than locally made textile. The consequence of importing textile in massive quantity had a catastrophic impact to China’s rural economy - many households used to make living by making and selling handcraft textile were driven into poverty. The sudden reduction in demand from low class had chain effect to other part of the economy and caused the overall economy to collapse. The same thing happened to other part of the world. Most part of the world has been colonized by European power, providing raw material and becoming their captive market.
The economic and human misery of China and the rest of the world, colonized or not, paved the way to Europe to achieve industrialization. Its historical impact can be seen to this day - they control the majority of the wealth in the world despite having a small population. Despite Europe’s road to industrialization was full of blood and suffering, my friend was of the view that European nations, particularly British, should be credited to for the accomplishment of taking humanity into industry age. This is because the upgrade from agricultural production to industrial production required such a vast amount of capital and rather unique condition that cannot be created by other nations or civilizations.
It was European’s lust for fortunate and ruthlessness to other races that generated sufficient imbalance and capital to provide the necessary condition that stimulated the first industrial revolution. These are critical characteristics underpining their actions. They annihilated the entire population of native American and turned America into a giant plantation - manned by slaves captured from Africa. These actions provided them the captial and cost advantage that dominated the traditional nations in the world. It is difficult to image that another civilization or race has the same characteristics to carry out the things European have done.
However, after the end of Second World War, the liberation of colonized country removed the cost advantage that European country has enjoyed over the last 200 years. Without the cheap raw material from conlonized countries and slavery, they could no longer compete fairly with new industrial power in US that was built on one thing - scale of economy. The once leading producer nation like British simply regressed over time into a hollow shell, as we can see today.
Fast forward to now, China, once fully industrialized, has regained its power as the most productive country in the global market by the very same formula that US dethrone Europe - scale of economy. US may fight on to keep its share in the niche high value added market but overall it will follow the same path like its predecessor British. It is nothing but a natural revolution of productivity in human society. There will be another country that becomes more productive than China at some point in the future and take its place as the leading industrial power, but it is the topic for another day.
First we discussed how China became so backward and economically collapsed in the recent history. The reason is not so much that China has gone backward in terms of its capability to produce but rather it was outcompeted by European nations through their cost advantage.
China has been a successful producer nation civilization in the world for over 2000 years, evidenced by the popularity of its main exporting products - silk and Proclain. The long success has made China unaware that things has changed dramatically in other part of the world around 1500s - the discovery of America by European nations, initially Spain and Portugal, later British and French. European nations like British managed to transformed itself into a major producer in textile, built on slavery plantation, gold and silver from central America and the vast fertile land in America,
Using the cotton produced from slavery plantation in New America, British has had unparalleled cost advantage against the traditional producer nations in textile. Despite being a low key everyday product, textile production and trade were critical part of economy for many nations in the world, supporting livelihood for mass population. After losing the Opium war, China was forced to open its market to British made textile products, which was obviously much cheaper than locally made textile. The consequence of importing textile in massive quantity had a catastrophic impact to China’s rural economy - many households used to make living by making and selling handcraft textile were driven into poverty. The sudden reduction in demand from low class had chain effect to other part of the economy and caused the overall economy to collapse. The same thing happened to other part of the world. Most part of the world has been colonized by European power, providing raw material and becoming their captive market.
The economic and human misery of China and the rest of the world, colonized or not, paved the way to Europe to achieve industrialization. Its historical impact can be seen to this day - they control the majority of the wealth in the world despite having a small population. Despite Europe’s road to industrialization was full of blood and suffering, my friend was of the view that European nations, particularly British, should be credited to for the accomplishment of taking humanity into industry age. This is because the upgrade from agricultural production to industrial production required such a vast amount of capital and rather unique condition that cannot be created by other nations or civilizations.
It was European’s lust for fortunate and ruthlessness to other races that generated sufficient imbalance and capital to provide the necessary condition that stimulated the first industrial revolution. These are critical characteristics underpining their actions. They annihilated the entire population of native American and turned America into a giant plantation - manned by slaves captured from Africa. These actions provided them the captial and cost advantage that dominated the traditional nations in the world. It is difficult to image that another civilization or race has the same characteristics to carry out the things European have done.
However, after the end of Second World War, the liberation of colonized country removed the cost advantage that European country has enjoyed over the last 200 years. Without the cheap raw material from conlonized countries and slavery, they could no longer compete fairly with new industrial power in US that was built on one thing - scale of economy. The once leading producer nation like British simply regressed over time into a hollow shell, as we can see today.
Fast forward to now, China, once fully industrialized, has regained its power as the most productive country in the global market by the very same formula that US dethrone Europe - scale of economy. US may fight on to keep its share in the niche high value added market but overall it will follow the same path like its predecessor British. It is nothing but a natural revolution of productivity in human society. There will be another country that becomes more productive than China at some point in the future and take its place as the leading industrial power, but it is the topic for another day.
