I’ve been reading a wave of books in the last few weeks about modern Japan – the rapid economic rise from the mid 19th century, the out of control militarism that led to the war from 1937 to 1945, and the post-war revival (rather than the last few decades). And as I read, it left me pondering the relative economic fortunes of Japan and China.
According to the standard reference source for such things – Angus Maddison’s collection of estimates of GDP per capita since the year 1 AD – in earlier centuries Japan and China were more or less level-pegging for centuries, with China a bit ahead of Japan (a thousand years ago, China is generally accepted as having the highest material living standards anywhere). Here are the estimates (in 1990 international dollars) through to the 18th century.
There was, of course, a great divergence between economic progress and living standards in the leading European (and offshoots) economies and those of east Asia, but today I’m more interested in the less-highlighted, but scarcely less dramatic, divergence between economic performance in Japan and that in China.
Maddison’s estimates report that – despite having turned its back on the world – Japan had moved ahead of China over the 18th century and the first half of the 19th century: for 1850 the reported estimates are Japan $679 and China $650. There are only scattered estimates for China for the following few decades, but here is the reported estimate of average per capita real GDP per capita, China as a per cent of Japan.
| China GDP pc as % of Japan | |
| 1850 | 88 |
| 1870 | 72 |
| 1890 | 53 |
| 1900 | 46 |
| 1913 | 40 |
A bit later, the annual estimates start – with a break when Japan was attempting to conquer China. Here is the chart to 2008 when Maddison’s estimates end.
The Conference Board has estimates through to the present day, but they only start from 1950. Here is the PRC’s real GDP per capita as a percentage of Japan’s.
Productivity estimates are available only for even more recent periods, but on Conference Board numbers they show a pretty similar picture: as at last year, average productivity in the PRC just over 30 per cent of that in Japan. And that is still probably worse than the situation at the turn of the last century (when – see above – China’s real GDP per capita was about 45 per cent of Japan’s).
Of course, it isn’t only Japan that China has fallen so far behind. Taiwan was a Japanese territory for 50 years after the Sino-Japanese War in the 1890s, and Korea was a Japanese colony/conquest for 40 years. On the Maddison estimates, 150 years ago both Korea and Taiwan had GDP per capita (estimated at) not much different from that of China. These days, South Korea (historically less well-developed than the north) has real GDP per capita about 10 per cent less than that of Japan, while Taiwan has real GDP per capita about 15 per cent more than that of Japan. Both, in other words, are far ahead of the PRC.
Relative to Taiwan, the PRC has just now managed to get back up to the relative living standards just prior to the Cultural Revolution. (And yet this is the regime whose “successes” Simon Bridges lauds.)
There isn’t really much debate about why the PRC has over recent decades still been the disastrous laggard among the historically more advanced east Asian economies (North Korea of course marking out an even worse extreme) – absence of the rule of law, absence of the sorts of incentives that make for the efficient allocation of capital, primacy of the Party etc etc will do that to a country (the Soviet Union in the 80s was closer in living standards to Japan then than the PRC is to Japan now).
But in some ways I’m more interested in how the gaps opened up in the first place – before 1950, or even before the overthrow of the Manchu emperors in 1911. It is easy to say that Japan embraced greater openness, Western technology etc – initially under external pressure – but what was it that meant Japan (having, if anything, been more isolated than China for the previous few centuries) made that choice and China did not? In looking around, I’ve found a couple of relevant journal articles, but if any readers happen to have suggestions of good treatments of the issue (book or article) I would really welcome them.
croaking cassandra 
From memory there is a kind of “off-shore island” hypothesis that notes similarities between Britain and Japan, and the ability of both to provide consistent rule of law because the centre was able to control robber barons and their Japanese equivalent. In my mind I associate it with the “Guns, Germs and Steel” view of development, though it is so long since I read anything by Jared Diamond that may be a false memory. (It also seems a classic example of the ‘theory of everything that explains nothing’ theorising pilloried by Popper so I am not recommending it as an explanation.)
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Thanks. Yes, one journal article I found talked of greater and more effective state capacity in Japan (incl a higher tax share of GDP pre 1850s), although that only pushes the question back one step.
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The claim is something like:
– In continental states, central government trades off real control with robber barons, with the latter providing the first line of defence against potential invaders. This materially weakens the ability of central government in continental countries to exert its will so institutions that would be instruments of that will are not developed.
– In England (and presumably Japan) there was less need to make this trade off (actually that’s a simplification as anyone who sees the castles in Northumberland and South Wales can see, but the fringe countries were militarily too weak to be any threat beyond raiding). The central government built up stronger non-military institutions including a proto-police of Sheriffs, an active Parliament made up of local representatives (first done in 1254 through the Sheriffs) and a centralised system of “circuit courts”.
– The economic benefits of these institutions was not a driver for their creation, but those benefits were a reason for England’s later success.
I buy this for England, but I am not sure if it is more widely true.
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Thanks. One of the problems with much of the econ history of the second millennium AD is that there are rarely enough degrees of freedom. That story for the UK sounds plausible, but then again for a hundred years or more Netherlands was more advanced economically than the UK.
I recall Hoffman in his fascinating book on why Europe came to dominate https://press.princeton.edu/titles/10452.html making quite a bit of that border issue – altho my impression was that China under the Manchus had fairly settled borders.
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Gregory Clark, the Economic Historian at UC Santa Cruz might have written on this issue, or know the literature.
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Thanks for the suggestion.
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https://www.jstor.org/stable/43217295?seq=1#metadata_info_tab_contents
https://www.britannica.com/event/Meiji-Restoration
I think the key fact is that the protagonists of the Meiji Restoration were true patriots and saw economic development as a KPI (“Rich country, strong army”). Incidentally this also explains why NZ does not have economic development.
From what I have read about pre-Meiji life, it had very well developed product markets and services, even without Western technology.
Also, education and learning was (and is) seen as a virtue.
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Thanks Blair
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China had an extreme superiority complex, they wanted to have nothing to do with the Western powers. Japan had always to some degree looked up to China as the regional superpower, when the Black Ships finally came and made them an offer they couldn’t refuse they didn’t refuse it. China refused and got the Opium War as a rebuttal.
There is also that China is an imperial-state, more concerned with internal cohesion, and Japan is a nation-state and so as a single people group can make collective decisions much more easily.
Sorry that I can’t point to specific books or papers right now to back this up.
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I don’t think it is an extreme superiority complex but more to do with western interference in state affairs and its people. The opium wars and the boxer rebellion arose as a result of western influences to undermine the emperors authority.
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The Imperial Chinese policy of “tribute” was very expensive – they demanded tribute from surrounding countries and then gave back out of largesse more than the first country gave in the first place. I believe the Mongolians did really well out of it.
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I think the Imperial tribute is a form of taxation to police the waters from pirates. Throughout South east asia, in many of their older historical towns and villages within reach of the South China Sea there are hero tributes to Imperial Chinese commanders for their exploits. Admiral Change He or Cheng Ho and many others with chinese names comes up often in seaside towns.
It is less expensive than the tributes required by the Imperial British Crown which is all of your lands and people to be gifted to the Imperial British Crown.
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Huntington and Fukuyama probably have good analyses of their development differences. Fukuyama would probably stress social capital [see e.g. “Social Capital in the Global economy”: Foreign Affairs article 1995 https://www.foreignaffairs.com/articles/1995-09-01/social-capital-and-global-economy-redrawn-map-world (or on jstor)]. As I recall his lengthy “the Origins of political order and Political order and Political decay” books also provide some insights.
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Fukuyama’s book “Trust, the Social Virtues and the Creation of Prosperity” (1995) explores this in terms of the culture/social structure of Chinese and Japanese society. This may be an expanded version of the Foreign Affairs article that William Foster cites.
IFIRC, the imperial Chinese state’s agents were likely to steal anybody’s assets, but so were the neighbours – only family members could be trusted to manage the business. In addition, estates were traditionally split between sons, so accumulated assets were quickly dispersed.
In Japan, there was a wider circle of trust, and primogeniture to keep the assets together, and even a tradition of adopting sons to inherit the family assets if the eldest son was incapable. This led naturally to a Japanese willingness to employ competent managers from outside the family to protect and develop the growing resources of a growing firm. For any given set of other legal and economic institutions, having good managers is likely to lead to better outcomes, and larger firms have capabilities that smaller ones do not.
There is still a structural difference between Taiwanese and Japanese firms, that seems to have its origin in these historic cultural differences (although Taiwan with the rule of law has done much better than China without).
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Hello Michael
One of the most memorable courses I took at the University of Canterbury as an undergraduate was a course on the comparative history of early modern China and Japan taught by Neville Bennett and Sam Adshead. Neville Bennett is a still-active economic historian who occasionally writes for interest.co.nz – you might want to contact him. I seem to remember writing essays on the thesis that Japan became both traditional and modern, while China was neither. We read a very good book on the transormation of Japan and China by Reischauer, a Professor of Japanese history at Harvard who was also the Ambassador to Japan under President Kennedy (where he survived but was injured in an assasination attempt – the things you remember! ) I think the Japanese history centre at Harvard is still named after him. I think you could do a lot worse than read his books on the transformation of East Asia after 1850.
Andrew
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THanks Andrew. I recognise the Reischauer name and will chase down his books.
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In Why Nations Fail, Daron Acemoglu explains the difference as being due to extractive or non-extractive institutions – Japan largely removed its extractive institutions but China did not. In the Meiji Restoration (1868) “the leaders of the Satsuma domain realized that economic growth—perhaps even Japanese survival—could be achieved only by institutional reforms, but the shogun opposed this because his power was tied to the existing set of institutions. To exact reforms, the shogun had to be overthrown, and he was. The situation was similar in China, but the different initial political institutions made it much harder to overthrow the emperor, something that happened only in 1911. Instead of reforming institutions, the Chinese tried to match the British militarily by importing modern weapons. The Japanese built their own armaments industry. As a consequence of these initial differences, each country responded differently to the challenges of the nineteenth century, and Japan and China diverged dramatically in the face of the critical juncture created by the Industrial Revolution.” p296
Not a new book, but I’d be very interested to hear what you think of the thesis it pushes.
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Thanks
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“…writing of the Chinese that “even those reduced to working like horses never give the impression of conscious suffering. A peculiar herd-like nation [ … ] often more like automatons than people.” “Einstein’s perceptions of the Japanese he meets are, in contrast, more positive: “Japanese unostentatious, decent, altogether very appealing,” he writes. “Pure souls as nowhere else among people. One has to love and admire this country.””
https://www.theguardian.com/books/2018/jun/12/einsteins-travel-diaries-reveal-shocking-xenophobia
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