The Dragon and the Elephant

Roots of India and China

The economies of India and China are so ancient that it is hard to trace their origins. Even in 9000 B.C.E., there were potters in China, and by 7000 B.C.E. there were farmers. The Indus Valley hosted a sophisticated civilization as early as 3000 B.C.E.

The riches of the Indies were fabulous during the European Dark Ages. So, too, was the opulence of China. Yet this wealth did not provide a stable foundation for further development and progress. Both civilizations stagnated. India may have made wondrous discoveries in astronomy and mathematics, but these discoveries were of negligible practical value. Extremes of riches and penury characterized the population, and no leaders seem to have had real incentives or abilities to change that situation. So, India stood still while the rest of the world passed it by. Something similar seems to have occurred in China. Although China made a great early start by inventing such technologies as gunpowder and water clocks, it did not carry those innovations forward and develop them. Adam Smith remarked in The Wealth of Nations that, although China was among the “most fertile, best cultivated...