Cultural and Institutional Bifurcation China and Europe Compared, by Avner Greif and Guido Tabellini, American Economic Review, 2010

How to explain the cultural and institutional bifurcations between China and Europe? In their paper Cultural and Institutional Bifurcation China and Europe Compared, Avner Greif and Guido Tabellini (AER 2010 citation:187) demonstrated that initial distribution of values and social heterogeneity themselves alone could be the reason. Two otherwise identical societies can evolve along different self-reinforcing trajectories of both cultural traits and organizational forms.

The collapse of the Chinese Han dynasty and the Roman Empire (after 220 CE) were turning points in the cultural and institutional evolution of China and Europe respectively. Large kinship organizations were common in the former but not the latter and this remarks the distinction in initial conditions. In China, the Han dynasty came to power while advocating Confucianism as an alternative to the Legalism of the previous Qin dynasty. Confucianism considers moral obligations among kin as the basis for social order, while Legalism emphasizes legal obligations. After a period of uncertainty, Confucianism, and thus kinship, survived as the main orthodox value from Tang dynasty until Qing dynasty. In Europe, the Church undermined tribalism by advocating generalized morality and discouraging practices that sustain kinship groups, such as adoption, polygamy, concubinage, marriages among distant kin, and marriages without the woman’s consent.

Moreover, values evolve and self-reinforce. A society in which cooperation¹ occurs within the clan² is likely to foster clan loyalty. By contrast, cooperation in cities³ with a large and heterogeneous population foster generalized morality and respect for formal institutions.

In the paper, the authors provide evidences from different aspects. In China, the state reinforced intra-clan cohesion by rules, such as linking rights to buying land to local clans’ members, and by promoting Neo Confucianism in which “the family was given a metaphysical foundation, and filial piety was promoted” (T. Ruskola 2000, p. 1622). A legal system, which would have undermined the clans, is opposed by the elders who controlled the clans and the state encouraged intra-clan disputes resolution instead of unified commercial code (Hui-Chen Wang Liu, 1959). Even large scale cooperation, such as organizing long-distance trade, was to form clan and regional merchant groups that relied on moral obligations and reputations related by kinship or place of residence (Debin Ma 2004, p. 267). Pervasive kinship structure facilitated state control over cities and attributes partly to the lack of self-governance of cites. Immigrants to cities remained affiliated with their rural kinship groups. Guilds-like organizations (huiguan) extended the reach of the rural clans into the city and in order to be a member it was necessary to belong to a particular place of origin (Christine Moll-Murata, 2008).

In Europe, instead, individuals created cities with the support of the Church and secular rulers. Cooperation among relatively large populations enabled most cities in Western Europe to gain self-governance by 1350, which provided motivation to foster the Christian dogma of generalized morality. Formal enforcement, such as transitions from ‘hand-shakes’ to contracts and from voluntary judges relying on customary law to professional judges relying on a formal legal code, supported intra-city, inter-lineage cooperation. Enforcement costs were nevertheless high and both the crime rate and ‘policemen’ per-capita were higher in large pre-modern European cities than in contemporary ones. Self-governed cities, by collecting tax, providing navies, fighting in wars, and administering justice on behalf of the state, extended the power of monarchs beyond clans’ capacity. Intra-city formal enforcement supported inter-city impersonal exchange through the Community Responsibility System and, in turn, reinforced generalized morality (Greif 2005, 2006).

In subsequent centuries significant institutional and cultural changes took place in both Europe and China. In particular, the rise of the West entailed a major backlash (including the Communist Revolution) against Chinese traditions. Yet economic arrangements continue to reflect different traditions. In China, family-firms are common and business relations are personal and this, in turn, reinforces limited morality. The World Value Survey (WVS, 2005-8) reveals that only 11.3% of Chinese trust a person whom they met for the first time compared to between 26.1% to 49.3% in the West (i.e., France, GB, USA and Germany). Friendship is ‘very important’ to less than 30% of Chinese but, on average, to almost 60% in the West. In the US, the level of trust toward strangers exceeds 60%, in China it is less than 40% (Roland Inglehart, et al 1998). A 1994-5 survey of Chinese businessmen in Thailand and Hong-Kong finds that “Westerners are considered [by the Chinese] to be attractive partners for ... their respect for the law and keeping of promises.” (T.R. Pyatt and S.G. Redding 2000, p. 59).

Although I agree with the authors on the initial starting point and subsequent evolution processes, I doubt whether the surveys results reflect current institutional environment or current value system in China. Personally, I do feel Chinese, especially young people, trust Chinese strangers more when they are aboard. One interesting research could be to disentangle the persistence in institutional environment from persistence in people’s values using the large population of immigrants and oversea returnees. Maybe, in such an integrated modern world with rich networks of Internet, telecommunications and airlines, people’s opinions depend more on which environment they are in.

1 Cooperation can either refer to bilateral exchange or to public good provision.

2 The clan (lineage) is a kinship-based community whose members identify with and are loyal to. Cooperation is sustained mainly by moral obligations and reputational incentives in clans

3 The city is composed of members of many lineages. Formal enforcement is indispensable to sustain cooperation in cities. Morality also plays a role but moral obligations within the city have a wider scope but a weaker intensity.

References

Greif, Avner. 2005. “Commitment, Coercion, and Markets: The Nature and Dynamics of Institutions Supporting Exchange.” Handbook for NIE. C. Menard and MM. Shirley (eds).

Greif, Avner. 2006. “Family Structure, Institutions, and Growth.” American Economic Review. 96(2), pp. 308-312.

Greif, Avner, and Guido Tabellini. 2010. "Cultural and Institutional Bifurcation: China and Europe Compared." American Economic Review, 100(2): 135-40.

Inglehart, Ronald, Miguel Ba sanez, and Alejandro Moreno. 1998.  Human Values and Beliefs. A Cross-Cultural Sourcebook. Ann Harbor: Michigan University Press.

Liu, Hui-Chen Wang. 1959. “The Traditional Chinese Clan Rules.”  Monographs of the Association for Asian Studies , vol. 7. New York: J. J. Austion

Ma, Debin. 2004. “Growth, Institutions and Knowledge: a Review and Reflection on 18th-20th Century Chinese Historiography.”  Australian Economic History Review , 44(3), pp. 259-77

Moll-Murata, Christine. 2008. “Chinese Guilds from the Seventeenth to the Twentieth Centuries: An Overview.”  International Review  of Social History, 53, pp. 213–47.

Pyatt, T.R., Redding, S.G. (2000), "Trust and forbearance in ethnic Chinese business relationships in Hong Kong and Thailand." Journal of Asian Business, 16(1), pp. 41-63.

Ruskola, T. 2000. “Conceptualizing Corporations and Kinship.”  Stanford Law Review , 52, pp.1599-1729.