Prosperity then and now

I have a few other things on today, so these are just a couple of charts that are background for a post I may write tomorrow, prompted by this article.

The first shows the countries with the highest GDP per capita in 1900, expressed in international dollars, and taken from the Maddison project database.  Where I stopped is a bit arbitrary, but there is a reasonable step down from Chile to the next group of countries (ones in Europe).  Which countries make the list doesn’t depend on the precise choice of year (I checked 1913 and got the same list).

1900 GDP pc

I’ve also marked, in red, the countries that wouldn’t make a top-tier grouping today.

And here is the top tier of countries now, ranked by real GDP per hour worked (a better indicator of the capacity/possibilities of an economy, but for which there isn’t data for the earlier periods).   I’ve included a slightly larger number of countries, recognising that some of the very small ones (notably Luxembourg and Iceland) weren’t in the 1900 database.  For Ireland, I have followed the local authorities’ guidance and used their “modified GNI measure”.

GDP phw 2018

I find both the similarities and differences striking.

Most of the top-tier countries in 1900 are still there now.  Most of today’s top-tier countries (recognising that the oil exporters generally aren’t in the database) were there in 1900. Long-term persistence in prosperity is well-recognised in the literature.

But there are differences too.

In 1900, four Anglo countries topped the chart.  These days, only the United States is anywhere near the top.

And of the five southern hemisphere countries on the list in 1900, only one (Australia) is still there today.  All of the four who have dropped off the list are well below the lowest country on it (Ireland).

And the only Asian country that yet makes the list is Singapore (although Taiwan and Japan would take two of the next three places).

 

11 thoughts on “Prosperity then and now

  1. Interesting that Germany, Benelux, Denmark and France are all contiguous and manage to have similar productivity to the US (with much better quality of life IMHO).

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  2. You could widen that out to include Switzerland, Sweden and Norway (which would be high – just not that high – without oil/gas). GDP per capita in the US is higher than in those European countries (longer lifetime working hours). I guess the quality of life issue is partly a matter of taste (and position on the income distribution spectrum perhaps?).

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  3. You really need to take out farming out of the productivity graphs that you like to put up. Our idea of increased productivity in 1990s is to add a few extra sheep up to 70 million sheep at its peak and magically we have NZ economists idea of how fantastic the NZ economy was. Of course in recent years it has been to add cows until we hit 10 million cows and our NZ economists hailed how fabulous at our white gold productivity compared to the rest of the world. What utter nonsense led us down is merry path?

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      • You certainly have used provincial NZ productivity charts, regions that are mainly farming against Auckland’s poorer productivity with its 3.5 million people and did specifically point to the lack of Auckland’s productivity and higher people count which is a nonsense comparative because adding cows to increase productivity has led us to this merry path.

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  4. The position of Switzerland in the later chart, relative to France (especially), Germany, Netherlands, Denmark and Belgium has me puzzled. Could there be anything in the way the data are generated (perhaps in the PPP calculation) that might explain this? I seem to recall on other measures, Switzerland lately has been ahead of at least some of this group of five.

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    • Historically – much of the 20th C – Switzerland had the highest average productivity of this group. But for the last 50 years their productivity growth rate has been v poor (similar to NZ’s). That had left Switzerland quite a bit behind the leading bunch you refer to, until late last year some new OECD work resulted in a levels lift (getting properly comparable measurement) for a number of countries. The changes were material for (from memory, and among the richer OECD countries) the UK, Switzerland, Sweden and Austria.

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  5. What was New Zealand’s population in 1900?

    What date did New Zealand’s prosperity (on your preferred measure) peak?

    What is the divergence that we have had from peak to now? i.e. what growth rate would we have needed to achieve to maintain our peak prosperity?

    Really enjoy these posts! Many thanks in advance!

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    • NZ’s population in 1900 was about 800,000.

      On the only measure really available for historical periods – GDP per capita estimates (stress on that final word) – our peak was just prior to WW1. But one could mount a reasonable argument that we more or less held that position right up to WW2. On the Maddison estimates, in 1939 NZ’s GDp pc in 1939 was 2% less than that of the US and 2% more than that of Switzerland, but that might be a bit generous to NZ as most observers would interpret the US at the time as not having fully recovered from the Great Depression. That is consistent with the larger gaps apparent once WW2 was over and both countries were fully employed again.

      If you take that leading group of countries now – using the GDP per hour worked measure – even if you exclude Norway (oil) and Luxembourg – the leading bunch is about 60 per cent ahead of us. If our annual productivity growth rate had averaged 1.7 percentage points higher (than it was) since 1990 – a common benchmark date, when many of our reforms had been done – we’d have caught up by now.

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      • Not counting 70 million sheep but counting 800,000 monkeys is a nonsense productivity measure. Whats the difference between these 2 animals? You need to start taking out farming animals from your economic equations.

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      • Correction: You need to take out the production value of farming animals out of your productivity equations.

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