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Nicholas Gordon
Hello, I'm Nicholas Gordon, host of the Asia Review of Books podcast in partnership with the New Books Network. In this podcast, we interview fiction and nonfiction authors working in, around and about the Asia Pacific region. It's one of the biggest questions of economic history. How did a richer, more advanced China fall behind Europe? Why was Europe the home of the Industrial Revolution and not China? And what does that journey tell us about politics and Culture in Two Paths to Prosperity? Culture Institutions in Europe and China 1000-2000 Guido Tabellini, alongside his co authors, argued that the answer comes from how European and Chinese organize cooperation through corporations in Europe and through clans in China and how that shaped each one society. Guido Tabellini is the Inteza San Paulo Chair in Political Economics and Vice President at Bocconi University. So, Guido, thank you so much for coming on the show today.
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Nicholas Gordon
You know, I want to start by talking about the puzzle your book is trying to explain, which is kind of the great divergence. You know, what is this idea and what are some of the normal explanations as to like what caused it?
Guido Tabellini
So by great divergence, or maybe would be better to call it great reversal that we do in parts of the book, we mean the fact that about a thousand years ago China was well Ahead of Europe in economic terms and in cultural terms. It was a well established civilization which had achieved the technological improvements, it was functioning well, was getting urbanized, Whereas Europe was really in a very primitive state. The collapse of the Roman Empire had brought population decreases and distractions of all sorts. So it was very, very much behind. But then, over the course of history, China did not improve much. It stagnated. In some sense, it declined, whereas Europe eventually took off and it became much, much richer. So great divergence is the history, the puzzle as to why do we see this increasing divergence or reversal between the European path and the Chinese path. And in the book, we emphasize that it's not just an economic divergence. There are many ways in which, over the course of the centuries, these two civilizations became further and further apart in their political institutions, in their social structures, in their family patterns, in their cultural environments. And of course, historians have devoted a lot of attention and time to discussing why this took place. And I don't think there is a single explanation of it. There are many explanations. And certainly plurality of causes must be behind this great divergence. The existing explanation that we find more compelling, to which we add, we build on that, but is already in the literature, is that China was able to achieve unification very early on, at the time of or even before the time of the Roman Empire in Europe, and it maintained a unified state structure over time, and that enabled it to build strong state institutions during the first millennium of the prize. Whereas Europe, after the collapse of the Roman Empire, was totally fragmented. It was fragmented between a plurality of entities. States emerged later on, but also internally within these entities, it was fragmented in many political ways. And so this contrast between a strong unitary state that developed early on and a plurality of fragmented entities in Europe is seen as an important cause of this divergence because it allowed Europe to develop more inclusive democratic institutions. And it also facilitated escaping the control of the state over the accumulation of knowledge. And eventually this facilitated the advent of the Industrial revolution in Europe rather than in China. So we build on this theory, steam, and we emphasize the importance of the steam. But the literature has many other causes that we discuss in the book, Some pointing to geography as being a cause of this greater fragmentation in Europe, but also a cause of the fact that the Industrial revolution took place in Europe and not in China. We discounted instead the role of geography, and we point to the importance of culture as a more important feature of the causes that led to the great divergence.
Nicholas Gordon
So what's your take on this? I mean, how. What do you See as the core reasons behind Europe overtaking China.
Guido Tabellini
So the, of course Europe overtook China because of the Industrial Revolution. So from an economic point of view, your question has to be why did the Industrial Revolution occur in Europe and not in China? And the second part of the question which I alluded to is also why did Europe develop inclusive and democratic institutions, whereas China remained an autocracy all the time? So we add to this perspective of a unitary state versus a fragmented society by arguing in our book that a key difference between Europe and China is also the internal organization of society. So we have to think about how these societies look like at the turn of the first millennium. At that time, the state that we take for granted was non existent in Europe. And it was of course, although developed, still not very effective in China, because had such a huge territory that could not be controlled due to transportation and communication difficulties. And so in both parts of the world, to survive, you have to think of a situation in which most interactions were almost exclusively local and trade and commerce were occurring locally. But to survive, these local communities needed basic local public goods. They needed protection, they needed risk sharing, they needed, they needed some form of education, they needed infrastructure for trading, infrastructure or methods for resolving conflicts. And they could not be provided by the state, either because the state did not exist or because it was too far away in the case of China. And so the way in which this need for these local public goods was resolved was through non state private arrangements that sustained local cooperation both. And this occurred both in China and in Europe. But the nature of these local social organizations was very different between these two parts of the world because of cultural reasons. In China, these local arrangements were mostly within clan like structure. Dynastic organizations defined by patrilineal descent. Whereas in Europe, because of the role of the church. Maybe we can elaborate more on this. Dynastic ties had been weakened and cooperation took the form of associations between unrelated individuals who got together for a purpose, like in monasteries or in universities, or eventually in self governing towns. We call these European associations corporations. And we describe in the book how these Chinese clans and European corporations perform very similar functions. They provided very similar public goods, but they were built on very different principles. Because of the fact that in one case it was a dynastic association and the other was an association between unrelated individuals. They were organized differently and these differences played a big role in the divergence between China and Europe because they influenced how state institutions evolved, they influenced the accumulation of knowledge, and eventually they gave rise or facilitated the emergence of the Industrial revolution in Europe and not in China.
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Because there's always something new.
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Nicholas Gordon
So why don't we, why don't we kind of dive into like exactly kind of what it means to. What it means kind of in terms of the different organizations we see in Europe and China. Let's, and let's start with Europe. I mean, how does kind of cooperation between individuals, non relayed individuals kind of grow over the centuries in Western Europe? I mean, what do you see as its starting point and what are the institutions that kind of led to, I guess, what eventually becomes the corporation many, many centuries down the line?
Guido Tabellini
So it all started with a church policy. In the second half of the first millennium, the church in Europe took a deliberate decision to dismantle tribal traditions and reduce the importance of extended families and facilitate the emergence of, of nuclear families, which means smaller families whereby men and a woman, when they get married, go and live on their own and don't remain in the household of one of the parents. The church did this in part for ideological, cultural reasons, to emphasize the importance of universalistic values and being fair, good towards everybody, not just towards your friends and Relatives, perhaps in part also for material reasons, having smaller families made it more likely that if there was no heir, the church would appropriate the inheritance of the rich family. Whatever the reason, the church was a big force in discouraging the persistence of the extended family. They did so by emphasizing discouraging second cousin marriage, by accepting celibacy, by discouraging adoptions, by insisting that the women had an important role in, in the family and so dismantling the tradition of patrilinear descent. This was already a feature. The bilinear descent was already a feature of the Germanic tribes. If you don't have a patrilinear descent, becomes harder to keep track of your ancestors. So because of this cultural environments promoted by the church, the family structure in Europe at the turn of the first millennium is very much consistent with notions of nuclear families. Now, if you think about how to sustain cooperation in a world in which households are relatively small, it means that you have to cooperate among strangers, among unrelated individuals. And so that's how the corporations got started. These unrelated individuals got together for a purpose. This was also a period of significant migrations from one place to the other. People needed protection and they formed fraternities and associations to get protection. They needed to cooperate in economic environments. And they formed the guilds in urban centers, namely associations of artisans or traders. They formed religious associations. Monasteries are one of the first kinds of corporations that emerged for religious purposes. But they also sustained economic development through agriculture and feeds. And eventually they formed self governing towns. And these corporations and later on the modern corporation, namely a corporate structure in the economic sphere, the modern firm as we know it. But this came later. The first corporations that emerged were not necessarily in economic domains. And some had a, an important political role in self governing these associations. So that's how internal society evolved in Europe. And individuals often belong to more than one such corporation. They were member of a parish, maybe they were member of a fraternity, of a guild, of a town. And so they were used to cooperating among each other in this structure of overlapping association. Whereas China was, was very different in its internal organization.
Nicholas Gordon
And let's kind of, let's talk about China now. I mean, so when you talk about China kind of having organizing around kin, kin based organizations as opposed to something else, I mean, what do you, what does that actually mean? And similarly with Western Europe, how did kind of kin based organizations then lead institutions that kind of then led to the, to the result at the very end of this process.
Guido Tabellini
So there too the origin of this internal organization is a cultural origin. And it has to do with the Confucian tradition, which was very important in China very early on. Then it was replaced by a more universalistic culture, the Buddhist culture. But then it took over again towards the end of the first millennium, and Confucianism became the more important traditional doctrine in China. And the key feature of Confucianism is that is the importance of the patrilinear dynastic ties, the importance of ancestor worship and the notion that morality depends. And so value systems are not necessarily universalistic, but they vary depending on the relationship between the relationships between individuals. They are particularly strong among related individuals, related in a patrilinear way. They are weaker among strangers. And so in a society where the value system is more, we call it communitarian, it gives emphasis to these local communities and to the networks defined by a common patrilinear descent. In such a society, it's obviously easier to sustain cooperation within your dynasty, within a lineage defined along the patrilinear ancestor. And so Chinese society became organized in clans in large lineages, which performed the same functions as the European corporation. But they were different in that the same organization produced sustained cooperation in many domains. So you had a single clan that settled disputes, organized religious ceremonies to honor your ancestors. It provided settlement of disputes, it facilitated trade and provided a variety of public goods. Whereas in Europe you had a plethora of different corporations, one for each purpose. The membership in these Chinese clans was defined by your dynasty. And because it was meant to sustain the Chinese clan, was meant to sustain cooperation among people who belong to the same family, altruistic ties were much more important. And so you did not need very explicit enforcement rules. Often cooperation was system. And invariably cooperation was defined, was sustained by reputational methods, by repeated interactions. And seniority was an important criterion for governing these associations. In Europe, by contrast, because you were talking about cooperation among unrelated individuals, you needed stronger enforcement methods to sustain cooperation, to make sure that people did not cheat. Because these people were not so used to to hierarchy within family. You also gave more attention to collective decision making rules. So the agreements that sustain these corporations define the rights of the minorities. The right of the majority defined who had the important decision making rights inside this organization. And. And think about the self governing towns as a key example of these arrangements. In China, this did not took place. You had important urban centers, as important, but more important than Europe, but they were not self governing. They were part of the state administration. And the these lineages, these clan associations were instead the structure around which society was organized and the state exploited in China, these clan associations also to collect taxes, to provide military services. So the clans became stronger over time also through the their interactions with the state. The same thing happened in Europe. When the states emerged, they interacted with the corporations, with the self governing towns in particular. And that contributed to strengthen and legitimize these associations within European society. But they were very different kinds of organizations in China and in Europe.
Nicholas Gordon
You, your book covers a lot of different data and has a lot and measures a lot of different variables. I mean, what are the sorts of things that you're measuring in this book and how did you, you know, find
Guido Tabellini
some of this data In China? We exploit genealogies, namely records of dynasty, of dynastic types, ties between individuals. Because ancestor worships was so important. People recorded who their ancestor was. They updated the evolution of these dynasties. And so that's a source of data that people have used and we have used that document the spread of these clans in Europe. These corporations had been studied extensively. So I guess here it was easier. And we rely on the existing historical literature that studies monasteries, that studies guilds, studies self governing towns. And relative to this historical literature, we make an effort of trying to look at the big picture and combining this data so that it gives a broad picture of what happens. But these European corporations have been studied extensively by previous historians. I guess what we add to those studies in the case of Europe is the importance that these corporations had in influencing the legal system in Europe and influencing state institutions. So the legal system in Europe emerged very much bottom up. The new state enforce emerge when they're still very weak in an environment in which corporations already existed and conventions and norms had already emerged as part of this private arrangement. And so the legal system in Europe codified and systematized a system of civil rules that had already emerged spontaneously within European society. And corporations exerted a very strong influence in the evolution of these European legal systems precisely because they had to define systems of contract enforcement and decision making rules that emerged before European states. When these European states emerged, they somehow codified this existing structure. And so that explains why the principle of the rule of law emerges so naturally in Europe. Because the rule, the law, does not arrive in a vacuum, but emerges in a society that has already a tradition that has to be respected. And so nobody is above the law. And the changes in the law have to somehow take place within a structure that is already there and that binds the evolution of the law. Similarly, the collective decision rules that these corporations had adopted, and the Church is an important example of this, get transplanted into these emerging state institutions. And the principle of. Of majority rule, for instance, apparently emerged in guilds. Before that, decision making was more under unanimity rule or acclamation or by decision of leader. But the principle of majority rule emerges in these private organizations and then is adapted to. To new state institutions. So that's how, maybe going back to your earlier question, how this system of European corporations influences the legal codes and the institutions in Europe. In China instead, because it had achieved the unification early on, before society was. Was very structured, the legal system was much top down. And civil arrangements were left out of the Chinese legal system. They were responsibility of clans. But clans, because of their dynastic nature, did not emphasize very strict rules. They were more governed by morality and norms of good behavior rather than by contractual, explicit contractual arrangements. And so the Chinese legal system, rather than devoting attention to horizontal relations between members of society, pays a lot of attention to criminal law, so law and order, and to vertical relations between the state and the citizens, so to the public administration. Whereas commercial law is developed in much more primitive way in the Chinese system. And also the political institution is more coherent with the paternalistic view of society, where the elders somehow take important decisions within this private organization.
Nicholas Gordon
How do all of these factors then get us to the end point, which is where we have an industrialized Europe or an industrialized west that is ahead of China. How do we get from, again from from point a way at the beginning, all the way through to kind of the great reversal, as you call it. How do we get there?
Guido Tabellini
Right? So society is organized in these very different ways internally, with different legal systems and with different institutions, because of what I summarized. Now, to answer the question of what does this have to do with Industrial revolution? I think the answer is that the reason why the Industrial revolution took place when it did and where it did really has to do with the accumulation of knowledge. So you have to see the Industrial Revolution as the culmination of the scientific process of accumulation of useful knowledge, which then is exploited for productive purposes. And so this accumulation of useful knowledge takes place more easily in Europe for two reasons. One reason is because the main reason, because of its fragmentation, there is no way in which European states can influence the evolution and the accumulation of knowledge. If you try to impose censorship, people escape to a neighboring city or to a neighboring state. And so the role of the state on the accumulation of knowledge was almost non existent. It was impossible. In addition, these Europeans were used to cooperating among strangers. And scientific societies played a very important role in facilitating the Emergence of modern scientific knowledge pretty much as they do today, not only in universities, but really often in scholarly associations different from universities. So the existence of these corporations facilitated the emergence of a class of intellectual that was widespread throughout Europe and interacted critically with each other. A third factor that is important, we think, is also the way in which corporations organized production. The corporate structure in production concentrates control, rights and ownership in the hands of the entrepreneur of the capitalist who decides how much to invest and hires wage labor. And wage labor was the dominant form of production in agriculture in England on the eve of the Industrial Revolution. And if you think about an entrepreneur who pays wages and who decides on how and on what to invest, clearly he has strong incentives to invest in labor saving innovations. Because if he can enact these labor saving innovations, he can substitute workers with machine and produce at the at a lower cost. In China instead. There are two differences. The first concerns the accumulation of knowledge. Sorry, just to finish the previous argument. So in Europe you had structure of society that facilitated the emergence spontaneously of scientific knowledge and the accumulation of knowledge. And an organization of production with strong incentives to exploit these scientific insights to reduce the cost of production through labor saving innovation. In China, both features are absent. The accumulation of knowledge was controlled by the state, not only because it was a unitary state, but also because it had chosen a very meritocratic procedure for selecting public administrators. The bureaucracy, which is a good thing. But the meritocracy took the form of a centralized exam. And to pass the exam, you needed to be proficient in issues that were chosen by the state. And the state tested you on your knowledge of classical Confucian doctrine. And there were clans who provided education that their main purpose was to train you to pass the exam. And so the knowledge that was diffused and accumulated in China was not useful scientific knowledge. It was really produced in order to pass this exam. The content of the exam were decided by the state. And unfortunately for China, the emphasis was on the classical Confucian tradition. So the wrong kind of knowledge was accumulated. On top of that, the production was organized not through farms, but often through within extended families. So through labor sharing arrangements. And the incentive to introduce labor saving innovations in that environment are much weaker. Because if I introduce a machine that replaces workers, I still have to take care of the survival of these family members that are employed as workers. And so I cannot just fire them, as was happening in Europe. So both the incentive to innovate in a society in which ancestor worship and seniority were more important, and the kind of knowledge that was accumulated was the wrong kind of knowledge. Explains why the industrial revolution took place in in Europe and not in China.
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Guido Tabellini
It is an honor to share.
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Guido Tabellini
It is our larger honor. No, really, stop.
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Nicholas Gordon
and participate in McDonald's while supplies last. I want to kind of talk about the. The China of today. And I do mean of, of today, of like 2026, you know, and, and how much continuity you see between the China today and the China of many, many centuries ago. And specifically, you know, people talk about the China of today taking a different path to prosperity, to development with, without exactly following Western laws, economics and politics. And I'm using the word exactly because obviously it did adopt some capitalist stuff and didn't adopt others and all this stuff. But kind of after kind of doing this research and thinking about China's path from the year 1000 to the year 2000. I mean, how do you see China's economic structure today kind of in, in. In light of all the other research you've done.
Guido Tabellini
So clearly there are important differences. Imperial China was very closed. Modern China is very open to the world thanks to Deng Xiaoping and the emphasis on stability that was typical of Imperial China has been integrated with an emphasis on growth and development. The knowledge that is accumulated in China today is clearly forefront scientific knowledge. Mao got rid of the Confucian tradition, tried to destroy it so there are many differences in China is now growing very, very rapidly. Nevertheless, there are important aspects of persistence and similarity with the past. One aspect of persistence is the cultural tradition, the value system, the emphasis on communitarian values. Mao had tried to eradicate, as I said, the Confucian tradition. But after his death, you see a reemergence of clans, a reemergence of ancestor worship. And in fact, clans were instrumental in helping China to grow in an environment of weak property rights protection. The private property in China was formally introduced not immediately at the death of Mao, but much later on. And even today, private property is not really protected against the government abuse. Nevertheless, despite weaker property rights after the the death of Mao, China was able to function as the market system and in part as a capitalist system, because it exploited the clan structure, the re emerging clans that involved often local politicians to make sure that the new enterprises would not be abused by local politicians. So if in Europe we are used to think of politically run enterprises as inefficient, in China, the enterprises that somehow could be linked to local politicians were actually doing better than others. And the clan structure was one way in which you obtained that protection and also in which you channeled financial resources to sustain investment in an environment in which financial markets still did not exist. So that's one aspect of continuity, the reemergence of lineages and communal associations as instruments to allow the well functioning of the market economy. But perhaps the biggest aspects of continuity are in the structure of the state, which of course remains an autocracy. It remains a very paternalistic state, like it was in China. The Confucian ideology has been replaced by the party ideology. But another feature or two features of the state institutions that somehow exhibit continuity are first, the selection of the bureaucrats of the administration. So it remains highly meritocratic, much more so than in many Western countries. And of course that's good. And the criterion for meritocracy are no longer, of course, the Confucian tradition traditions. They are more ideological alignment with the party structure and also abilities in scientific and educational training. So it remains meritocratic and it remains an administration that gives a lot of freedom to experiment to local governments. So decentralization is an important aspect of the success of the Chinese economy today in an environment, though, in which the state controls the appointment of these local bureaucrats with a very strong incentive structure. So if you facilitate strong performance at the local level, you are going to be promoted. A strong economic development is a priority, of course, of the state. And that's the criterion of promotion within the state bureaucracy. So that's a similarity with older China, although the criteria for promotions of course are different and the details of the organizations are different. So overall I think there is remarkable continuity with important changes to your final question of how could China achieve this and what's the outlook given that it's not following the Western model of economic development? I guess the big question to which whether we pose as a question I think nobody is able to answer this is whether remaining an autocracy, which with censorship and an important key role of state control on the economic priorities of society, whether this feature of China is consistent with the goal of being at the forefront of innovation and we don't know the answer. Clearly in some domain China is at the forefront of innovation. Clearly the Chinese state is investing huge amounts in having a top university system and in time and supporting research and science. Nevertheless, you wonder whether they can really innovate in a radical way or whether the innovation that is taking place in China is more incremental and marginal. And I think you can remain skeptical. We remain skeptical on the feasibility of radical innovation in a system that remains politically closed and in which there is a strong control of the state on intellectual life. And this is particularly true under Xi Jinping. I think before the emergence of Xi Jinping as a leader, China was not as hierarchical, not as close. The choice of leadership was really meritocratic also at the very top level. And so you could have confidence in a system that would be able to choose the best people among the political elites. Now the system has become much more personalized. There will be a succession problem when Xi Jinping has to give up for age related reasons, his control over China. And in a system where control remains so personalized, the possibility of mistakes and becomes higher and the feasibility of radical innovation of course is diminished. So we remain with a question mark about whether this Chinese system, which work very well in the phase of growth as a catch up growth, can also serve the interest of China at a time in which China has now caught up and the future growth has to come from the ability to inflate.
Nicholas Gordon
So I think that's a great place to end our conversation with Guido Tabellini, author, one of the authors of Two Paths to Prosperity Cultural Institutions in Europe and China 1000-2000 Guido, I actually have two final questions for you which are where can people find your work? Not just this book, but all of your work and what's next for you? What do you think the next project might be?
Guido Tabellini
Well, I'm not an economic historian, unlike my two co authors. So I don't think I'll keep working on economic history. But this book has taught me a lot about how to think about Europe. We view Europe in the book as really a part of the world that has something very important and strong and deep in common. And so this is something on which I'm working now, namely how to think of European integration going forward in a world in which nation states probably are becoming less important. They have to be bigger economies of scale are more important. And so history has taught me a lot about how to think about what is common about Europe and what are the challenges for Europe going forward. I guess that's the main area on which I thought to devote my future research efforts.
Nicholas Gordon
So you can follow me, Nicholas Gordon on Twitter at Nick R I Gordon that's N I C K R I G O R D O N. You can go to asiaviewbooks.com and other reviews, essays, interviews and excerpts. Follow them on Twitter @BookReviews Asia. That's reviews plural. And you can find many more author reviews at the New Books Network and new books network.com we're on all of your podcast apps, Apple Podcasts, Spotify rate us, recommend us, share us with your friends of course. Interviewing those running in around and about Asia Next week, Josh interview with Jin Woo park, author of Oxford Soju Club. But before then, Guido, thank you so much for coming on the show today.
Guido Tabellini
Thank you. And to whoever is has been listening, thank you.
Date: April 2, 2026
Guest: Guido Tabellini (Inteza San Paolo Chair in Political Economics and Vice President at Bocconi University)
Host: Nicholas Gordon
In this episode, Nicholas Gordon interviews Guido Tabellini, co-author of Two Paths to Prosperity: Culture and Institutions in Europe and China, 1000–2000, which examines why China, once more advanced than Europe, eventually fell behind during the "great divergence." The discussion explores how distinct cultural norms and social organizations—corporations in Europe and clans in China—shaped divergent economic and institutional developments, influencing the eventual rise of the West and persistent differences in modern times.
The Puzzle: Why did technologically and culturally advanced China, ahead of Europe around the year 1000, stagnate while fragmented, less-developed Europe went on to lead the Industrial Revolution?
Common Explanations: Historians have credited geography, early state formation, and political fragmentation, among others. Tabellini and co-authors build on the importance of Europe’s political fragmentation and China’s early unification but focus especially on internal social organization and culture.
“We mean the fact that about a thousand years ago China was well ahead of Europe ... But then ... China did not improve much. It stagnated ... whereas Europe eventually took off and it became much, much richer.”
—Guido Tabellini (02:27)
Origins in Church Policy: The Church deliberately undermined tribal and extended family structures in favor of nuclear families, fostering universalistic values and cooperation beyond kin.
Associational Life: To meet communal needs, unrelated individuals formed corporations—monasteries, guilds, self-governing towns, fraternities—which became increasingly complex over time.
Institutional Outcomes: These corporations influenced legal development, promoted interaction among strangers, and laid the foundation for democratic institutions.
“So it all started with a church policy ... the church in Europe took a deliberate decision to dismantle tribal traditions and reduce the importance of extended families ... The family structure in Europe ... is very much consistent with notions of nuclear families. Now ... you have to cooperate among strangers.”
—Guido Tabellini (13:52)
Confucian Roots: Emphasized patrilineal descent, ancestor worship, and communitarian values—cooperation was strongest among kin.
Function of Clans: Clans provided public goods, education, dispute resolution, and commerce support—functions undertaken by various corporations in Europe.
State Integration: Clans interacted with the state for tax collection and military service, but remained governed by tradition, seniority, and moral norms rather than explicit contracts.
“The key feature of Confucianism is ... the importance of patrilinear dynastic ties ... values are not necessarily universalistic ... In such a society, it’s obviously easier to sustain cooperation within your dynasty.”
—Guido Tabellini (19:01)
Europe: State and law emerged bottom-up, codifying pre-existing private arrangements. Rule of law, majority rule, and institutional checks evolved from practices within corporations and towns.
China: Law was top-down, focused on criminal and state-citizen relations. Civil society and contracts between individuals were largely the domain of clans, not the formal legal system.
“In Europe, corporations exerted a very strong influence in the evolution of these European legal systems precisely because they had to define systems of contract enforcement ... When these European states emerged, they somehow codified this existing structure.”
—Guido Tabellini (25:29)
Drivers in Europe:
“The reason why the Industrial revolution took place ... has to do with the accumulation of knowledge. ... In Europe you had structure of society that facilitated the emergence spontaneously of scientific knowledge and the accumulation of knowledge.”
—Guido Tabellini (31:28)
Limitations in China:
“The knowledge that was diffused and accumulated in China was not useful scientific knowledge. ... On top of that, production was organized ... through within extended families. ... Incentive to introduce labor saving innovations in that environment are much weaker.”
—Guido Tabellini (35:37)
Modern Adaptations: Post-Mao China is more open and growth-focused. Forefront scientific knowledge is now integral, but property rights protections remain weaker than Europe.
Resurgence of Clans: Clans re-emerged after Mao, facilitating economic growth, contract enforcement, and protection for private enterprise where formal legal institutions lag.
Persistent Features:
Innovation Limits: The authors express skepticism about whether China’s autocratic, top-down system can drive radical innovation over the long term, especially under Xi Jinping’s personalized rule.
“We remain skeptical on the feasibility of radical innovation in a system that remains politically closed and in which there is a strong control of the state on intellectual life. And this is particularly true under Xi Jinping.”
—Guido Tabellini (46:45)
On the core reasons for divergence:
“A key difference between Europe and China is also the internal organization of society ... Dynastic organizations defined by patrilineal descent in China, associations between unrelated individuals in Europe ... These differences played a big role in the divergence ... they influenced how state institutions evolved, they influenced the accumulation of knowledge, and eventually ... facilitated the emergence of the Industrial revolution in Europe and not in China.”
—Guido Tabellini (07:28)
On the persistence of historical paths:
“After [Mao’s] death, you see a reemergence of clans, a reemergence of ancestor worship ... The biggest aspects of continuity are in the structure of the state, which of course remains an autocracy. It remains a very paternalistic state, like it was in China.”
—Guido Tabellini (41:15)
On the current Chinese system's prospects:
“You wonder whether they can really innovate in a radical way or whether the innovation that is taking place in China is more incremental and marginal ... the possibility of mistakes becomes higher and the feasibility of radical innovation ... is diminished.”
—Guido Tabellini (46:00)
This episode offers a nuanced view of the cultural and institutional roots of European and Chinese economic trajectories. By focusing on the persistent role of local social organizations—corporations and clans—the authors illuminate how underlying cultural norms shaped the nature of cooperation, legal development, and incentives for innovation, with enduring consequences lasting into the 21st century.