Annual EBHS Conference, 39th Annual Economic and Business History Society Conference

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Why was there no capitalism in Early Modern China?
Tiago Nasser Appel

Last modified: 2014-03-10


In this paper, we initially bear on the Marxist debate on the transition from feudalism to capitalism to ask the following question: why couldn’t Early Modern China make the leap to capitalism, as we have come to know it in the West? Concluding that it is unwarranted to search in class conflict per se the key to explaining such transition, we seek to answer the question with which we named this article by calling upon the “Braudelian/Arrighian school of Political Economy,” which draws a distinction between capitalism and the market economy. 

Following this distinction, we suggest that, even if China compared well with the West in key economic features – commercialization and commodification of goods, land, labor – up to the 18th century, as Gunder Frank argues in his ReOrient, it did not traverse the path to Capitalism, in the Braudelian sense of the word, because of the “fact of empire”. 

Lacking the scale of fiscal difficulties encountered in Early Modern Europe, Late Imperial China did not have to heavily tax merchants and notables; therefore, it did not have to negotiate rights and duties with the mercantile class. In other words, Chinese officials did not have to make concessions to the nascent-capitalist class, concessions that granted European economic elites an unprecedented voice in government, with which they enacted reforms that all societies had previously thought unnatural. 

More innovatively, we also propose that the relative lack of fiscal difficulties meant that China failed to develop a “virtuous symbiosis” between taxing, monetization of the economy and public debt. This is because, essentially, it was the mobilization of society’s resources – primarily by way of public debt or taxes – towards the support of a military force that created the first real opportunities for merchants and bankers to amass immense and unprecedented wealth. 

Empirically, we sustain the aforementioned arguments by demonstrating that Early Modern Chinese merchants did not receive as much support as their European counterparts when it came to the enforcement of monopolistic rights and other kinds of “rents” that were vital for the development of capitalist dynasties. Accordingly, we demonstrate that Chinese merchants did not have as strong a stake in the government.