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Notes -
Not sure we're in disagreement? 'Premodern' European states are generally considered to be those prior to circa 1500 (obviously Chinese history is very different). Essentially, we're talking about medieval societies with vanishing state capacity beyond the ability to levy armies for war. My argument is that much higher state capacity is required to support free trade. The ability to support free trade scales with the capacity of the state - Revolutionary/Napoleonic France could support trade much better than the Frankish States, but free trade as we commonly understand it today - 0% tariffs, Friedman's Multinational Pencil, etc. requires 20th Century state capacity.
No, I agree with this; but I think that some European states in the early modern period — France under Louis XIV? — had enough pure state capacity to develop the ability to support free trade, and it still took a little while for ideas about free trade to get expressed. Conversely in China, early Ming China most likely had the state capacity to support free trade, but pointedly decided not to. (Chinese state capacity withered away dramatically over the Ming-Qing period anyway; I am happy to be corrected about the European record.)
I suppose what I mean is that a modern state is necessary but insufficient.
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