Speaker: Prof. Wan Junmin, Professor of Economics, Fukuoka University, Japan

Visiting Professor, Institute of New Structural Economics, Peking University

Time: 10:00 AM, March 24, 2025 (Monday)

Venue: Room 222, School of Economics and Management

Abstract:

The dramatic economic expansion of the British Empire compared with the tragical declining of the Qing Empire in the late 18th and 19th centuries has been called the Great Divergence, while there is no consensus on its cause. It is found here that, for over one hundred years, the smuggling and the forced imports of opium from the British Empire to the Qing Empire had exceeded the state revenues of the Qing Empire. To capture this historical fact, we present a theory of opium intake in a dynamic framework after empirically confirming its explosiveness, then we incorporate it into (a)symmetric two countries' endogenous growth model. It is proved that opium serves to transfer the savings from one country to the other one so that the abnormal growth of one country accompanies the shrinkage of the other one. The opium intake was considered as a market failure, so the Qing Empire prohibited it by law after 1729, while the state capacity was not enough to execute the law. Therefore, the Great Divergence could be due to the cunning use of opium by Britain Empire and the incompetent Qing Empire. We also provide new insight on why there was rare capital in the Qing Empire, and on why the efficient market and facilitating state argued by Lin, Justin Yifu (2011) is indispensable for economic development.