The starkly different paths of economic development followed by China and the West leading to the Industrial Revolution is often being attributed to environmental factors. This column argues that institutions and culture played a key role in setting Europe and China on divergent paths well before the onset of the Industrial Revolution, but the role they played was mediated by a critical difference between the two civilizations: the nature of their prevalent social organizations. A key factor behind China’s remarkable economic resurgence has been its capacity to adapt traditional institutions and cultural practices to the needs of a modern economy.