We are living through an extraordinary reversal of economic fortunes after 500 years when the big story was what historians call "the great divergence." Beginning in 1500, Europeans and European settlers in North America began to get richer than Asians (and everyone else, too). The gap between the "West and the Rest" widened at an accelerating rate until the later 1970s. But then -- on our watch -- that trend went into high-speed reverse.  Watch Niall Ferguson's TED talk  So what has been going on?  The West first surged ahead of the rest thanks to a series of institutional innovations that I call the "killer applications":  1. Competition. Europe was politically fragmented into multiple monarchies and republics, which were in turn internally divided into competing corporate entities, among them the ancestors of modern business corporations.  2. The Scientific Revolution. All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe.  3. The rule of law and representative government. An optimal system of social and political order emerged in the English-speaking world, based on private-property rights and the representation of property owners in elected legislatures.  4. Modern medicine. Nearly all the major 19th- and 20th-century breakthroughs in health care were made by Western Europeans and North Americans.  5. The consumer society. The Industrial Revolution took place where there was both a supply of productivity-enhancing technologies and a demand for more, better and cheaper goods, beginning with cotton garments.  6. The work ethic. Westerners were the first people in the world to combine more extensive and intensive labor with higher savings rates, permitting sustained capital accumulation.
It says it all when Europe turns to China for a bailout. That was what happened last week when the man in charge of the European Financial Stability Fund flew to Beijing to see if he could interest