Contemporary Development and Economic History: How do we Know what Matters?

ABSTRACT

“Development” involves increases in human and physical capital, plus institutional changes, that are characteristic of whole societies, not just particular sectors. Such changes are not necessarily well-reflected in GDP figures at the time that these changes are occurring – even assuming that we can measure GDP in historical societies with sufficient accuracy. Consequently, types of largely narrative long-run history focused on one or a few case studies are a vital supplement to more econometric and formally-modeled studies. They are particularly useful as correctives to historical work that aims at finding a single variable or event separating cases of developmental “success” and “failure.” However, the claims that emerge from such case studies are quite hard to verify. The article uses examples drawn from East Asia at certain moments a possible example of “failure,” but more recently assumed to be an example of “success” – to both identify historical findings that might have implications for contemporary development choices and to explore why such inferences are necessarily very fragile.

Keywords:

• economic development
• East Asia
• history
• China
• methodology
• comparison

JEL classification:

• B00
• N00
• O1
• O5
• P4

Notes

¹My thanks to Gareth Austin for his very helpful comments on an earlier draft of this paper.

³Allen et al. 2011; for a further explanation of why this has limited implications for general living standards see Pomeranz 2008, 2011. For discussions of 18th century Anglo-Indian wage comparisons, raising questions on different grounds, see Parthasarathi 2011 and Sivaramakrishna 2009. None of this changes the fact that this study is a significant advance on earlier real wage comparisons, and that it may give us some important comparative information (e.g. about labour productivity in particular sectors).But as an overall summary statistic, its significance is probably less than one might think.

⁴See, for instance, the discussion in Clark 2007.

⁵See for instance Crafts 1995, especially 751–6. Helpman 2004 is a useful summary of endogenous growth theory.

⁶Acemoglu, Johnson and Robinson, 2002. The historical irony, in their view, is that bad institutions were most likely to be imposed in places that had significant concentrations of wealth to extract – a sign that they had previously had relatively good institutions, while the areas that had very sparse populations (a sign of particularly bad institutions) were perfect for settlers, and thus wound up with good institutions. Thus the “reversal of fortune” to which they allude.

⁷Much of South America, for instance, has had property rights, institutions for contract enforcement, etc., for most of the last two centuries that resembled those in the US and Western Europe far more than, say, South Korea or coastal China has had; and even the latifundia and labour-repressive institutions sometimes blamed for those countries’ divergence from, say, the United States may not look that different from the US South.

⁸Mexico GDP data: http://pwt.econ.upenn.edu/php_site/pwt70/pwt70_retrieve.php; see also Maddison 2001, 90.

⁹See Pomeranz 2002, 2008, 2011. Allen et al. (2011) is the strongest case for a large earlier divergence, though; as noted above, that paper seems to me reconcilable with most of my claims.

¹⁰More recent data can be obtained from the Center for International Comparisons at the University of Pennsylvania: http://pwt.econ.upenn.edu/

¹¹Provincial data for China are available at http://en.wikipedia.org/wiki/List_of_Chinese_administrative_divisions_by_Human_Development_Index. If one combines Jiangsu, Zhejiang and Shanghai, one gets a population-weighted average of 0.850; this figure should understate the Delta's HDI, since both Zhejiang and Jiangsu contain substantial regions that are less well off than any part of the Delta. For comparison, the following are official figures for 2010: France 0.872; Iceland, 0.86; Italy, 0.854, UK, 0.849. For the European data see Jeni Klugman et al. 2010, 139.

¹²Data from the Penn World Data tables, available at http://www.bized.co.uk/dataserv/penndata/pennhome.htm.

¹³See Allen 2009 for an even larger contrast with English per acre yields.

¹⁴Sugihara 2003 is probably the best single statement. See also Pomeranz 2001.

¹⁵See Pomeranz 2008 on pre-1949 incentives which made staying in the countryside preferable, even for most of the poor; since 1949 legislation restricting migration has been much more important.

¹⁶Though some still do: see Brenner and Isett 2002, Huang 2002; for replies see Pomeranz 2002, Pomeranz 2003.

¹⁷One could, for instance argue that the more complicated land rights in this kind of agrarian system made it harder to use land as collateral for loans, and thus contributed to relatively high capital costs; or to argue that the location of so much proto-industrial activity in the countryside inhibited mechanisation, either because it reduced agglomeration effects that might contribute to innovation or because locating in the countryside, where labour was cheaper and capital more expensive than in cities, meant that technological choices in East Asian industry did not have the same capital-intensive bias that they had in Europe – one which may have been inefficient in the short run but eventually produced very important breakthroughs. For an example of the latter argument – though they attribute the East/West difference in the location of industry to very different institutional concerns – see Rosenthal and Wong 2011.

¹⁸Note here Sugihara's (2003) emphasis on how the East Asian path was able to effectively fuse with the Western one once the Cold War order guaranteed Japan, Taiwan, and so on access to global markets and resources without the need for overseas military capabilities of their own.

¹⁹For an argument to this effect, see Amsden 1992, 56–8.

²⁰China's gains in life expectancy and literacy during the Maoist period, for instance, were quite impressive, and stand out relative both to earlier periods and the era of post-Mao reform. The same was true with respect to certain kinds of infrastructure, such as irrigation facilities. In that non-trivial sense, the Maoist era has to be part of our explanation for the very rapid growth of the reform era, rather than being nothing but a blind alley that was pursued prior to the adoption of better institutions. But that certainly does not mean that Maoism was the only or best way that the groundwork for post-1978 development could have been laid, or even close.