I’ve touched on this point in earlier posts, but since at present there are lots of new readers, it is worth revisiting, and re-illustrating, the point: the People’s Republic of China (and more specifically, the Chinese Communist Party, that our leaders are so keen to cosy up to) has overseen a really poor economic performance. It is, more or less, what one might have expected knowing that the rule of law would be absent, markets wouldn’t be allowed to function effectively, state subsidies (of all sorts) would be rampant, and so on. It could have been worse, of course – there was the utter chaos, misery, and (for a time) mass starvation from the late 1950s to the mid 1970s. The handful of other remaining Communist-ruled countries are worse. But even having stopped doing so much active destruction, the PRC results are unimpressive. Any other conclusion surely invites that American line about the soft bigotry of low expectations.
Of course, it isn’t the line the PRC would have one believe. And it suits too many politicians in the West to talk up China as a stunning economic success story. But it isn’t. Development economists, left and right, will talk up the hundreds of millions of people who’ve moved above the poverty line. And that is great, except that (a) it was the CCP that did its utmost (perhaps unintentionally) to put them back below the poverty line in the first place, and (b) getting above the poverty line is a pretty feeble standard against which to judge the economic performance of a country that for centuries matched or exceeded the best material living standards anywhere.
Angus Maddison’s great collection of historical GDP per capita estimates is a typical starting point for such comparisons. He reports estimates for some countries every few hundred years from year 1 AD, and then more frequent (increasingly annual) estimates for more countries in more recent centuries. In 1 AD the estimates he reports had Italy with the highest material living standards, followed by Greece. China was about the level – or a bit ahead – of most other places in Europe. In 1000 AD, China was top of the rankings – not by much, but it was number 1. That shouldn’t be any great surprise to anyone who recalls the various Chinese inventions ahead of the discoveries of such things (printing presses, paper money, even very big ships) in the West. By 1500, China was a bit behind Italy and Belgium, but not much different to most of the rest of western Europe (all well ahead of what is now the United States).
Scholars spill a lot of ink debating why China went into such severe relative decline (Japan also fell well behind and I presume – though Maddison doesn’t have estimates – other east Asian places did too). Whatever the precise mix of explanatory factors that slippage happened. In 1850, Maddison’s estimates have Chinese GDP per capita at about a quarter of that in the UK and the Netherlands, and less than 40 per cent of his “Western European 12 countries” average. By 1900, estimated per capita GDP was only about 15 per cent of that in the highest income countries.
But perhaps as importantly, in 1900 China’s GDP per capita is estimated to have been about half that in Japan, and just a bit behind that in Taiwan (by then a Japanese possession). As late as 1870, China had been not far from the GDP per capita in a range of Asian countries/territories for which Maddison now has estimates – about on par with Korea, Taiwan, and Thailand, and a bit behind Japan, Hong Kong and Singapore.
And this is what they’d been further reduced to by 1976, the year Mao died. I’m using the Conference Board’s PPP estimates, and have shown a mix of countries – mostly east Asian and European, but with a few other interesting cases (eg Israel – brand new in 1948) thrown in.
Such utter self-destruction and failure. It wasn’t done by outsiders. It wasn’t as if the PRC had faced uniquely bad external threats. It was like economic suttee, with the depraved indifference of mass starvation thrown into the mix.
And how does the picture look today, with the Conference Board’s 2017 estimates.
The PRC has rocketed past the Philippines and Sri Lanka, and still trails the rest of this pack rather badly. And this isn’t Tanzania or Rwanda, but a country that was once – for centuries – among the highest living standards anywhere in the world. A country in a region where South Korea, Japan, Taiwan, and Singapore now manage advanced country living standards – one of those a country that struggles to get international recognition and under constant threat from the PRC.
From the Maddison estimates, in 1980 the Soviet Union – a region never at the forefront of material living standards – had GDP per capita about the same ratio to that in the western European countries that China has today. In fact, about where China was – in relative terms – in 1850 (see above). It is a simply dismal economic failure in a country – by a Party – that would have so much potential were its people ever to be free, to ever be properly governed with the rule of law rather than the rule of Xi.
For the same countries, here are the real GDP per hour worked estimates.
It really is an astonishingly poor performance. Or at least it would be unless you’d been told in advance that Japan, Singapore, Taiwan, and South Korea would establish market economies with the rule of law, sound governance etc etc (and none of it perfect) and that the PRC would remain a land where the (Communist) Party actively rules. Then, the outcomes are probably much as one might expect – China lags very badly behind, to the disadvantage of its people, even if to the enrichment (power, money) of its rulers.
On the IMF’s full list of countries, the PRC now ranks 79th (out of 187) in the GDP per capita (PPP) stakes. Average real GDP per capita is a touch behind that in Iraq (yes, I was surprised) and the Dominican Republic, and a little ahead of Brazil and Macedonia. Perhaps China’s growth rates are faster than those places, at least if one (a) believes the official data for the Xi period, and (b) discounts the massive distortions and misallocations associated with one of the largest credit booms in history. But there is no sign of Chinese per capita incomes catching those of the leading countries any decade soon (if things unwind nastily, the gaps would even widen a bit for some years).
Taiwan, Korea, Japan, and Singapore are genuine economic success stories – catch-up and convergence more or less as the textbooks suggested was possible. Cause for celebration in fact. The PRC? Anything but. Being big doesn’t change that – even if it gives geopolitical clout to a lagging middle income country – it just means more people are failed by their rulers (and by those in countries such as ours who give the rulers aid and comfort, pander to them, or simply cower in a corner).