feudal order in medieval Europe. It also underpinned another strong form of absolutism under the Mughal rulers. Most European countries had similar systems in the Middle Ages. Modern Anglo-Saxon surnames such as Baker, Cooper, and Smith are direct descendants of hereditary occupational categories. Bakers baked, coopers made barrels, and smiths forged metals. But these categories were never as rigid as Indian caste distinctions and gradually became meaningless as predictors of a person’ s occupation. Though Indian merchants did trade throughout the Indian Ocean, and a major textile industry developed, the caste system and Mughal absolutism were serious impediments to the development of inclusive economic institutions in India. By the nineteenth century, things were even less hospitable for industrialization as India became an extractive colony of the English. China was never formally colonized by a European power, but after the English successfully defeated the Chinese in the Opium Wars between 1839 and 1842, and then again between 1856 and 1860, China had to sign a series of humiliating treaties and allow European exports to enter. As China, India, and others failed to take advantage of commercial and industrial opportunities, Asia, except for Japan, lagged behind as Western Europe was forging ahead.
THE COURSE OF institutional development that Japan charted in the nineteenth century again illustrates the interaction between critical junctures and small differences created by institutional drift. Japan, like China, was under absolutist rule. The Tokugawa family took over in 1600 and ruled over a feudal system that also banned international trade. Japan, too, faced a critical juncture created by Western intervention as four U. S. warships, commanded by Matthew C. Perry, entered Edo Bay in July 1853, demanding trade concessions similar to those England obtained from the Chinese in the Opium Wars. But this critical juncture played out very differently in Japan. Despite their proximity and frequent interactions, by the nineteenth century China and Japan had already drifted apart institutionally.
While Tokugawa rule in Japan was absolutist and extractive, it had only a tenuous hold on the leaders of the