Asia’s ‘little divergence’ in the twentieth century: evidence from PPP-based direct estimates of GDP per capita, 1913–69

by Jean-Pascal Bassino (ENS Lyon) and Pierre van der Eng (Australian National University)

This blog is part of a larger research paper published in the Economic History Review.

 

Bassino1
Vietnam, rice paddy. Available at Pixabay.

In the ‘great divergence’ debate, China, India, and Japan have been used to represent the Asian continent. However, their development experience is not likely to be representative of the whole of Asia. The countries of Southeast Asia were relatively underpopulated for a considerable period.  Very different endowments of natural resources (particularly land) and labour were key parameters that determined economic development options.

Maddison’s series of per-capita GDP in purchasing power parity (PPP) adjusted international dollars, based on a single 1990 benchmark and backward extrapolation, indicate that a divergence took place in 19th century Asia: Japan was well above other Asian countries in 1913. In 2018 the Maddison Project Database released a new international series of GDP per capita that accommodate the available historical PPP-based converters. Due to the very limited availability of historical PPP-based converters for Asian countries, the 2018 database retains many of the shortcomings of the single-year extrapolation.

Maddison’s estimates indicate that Japan’s GDP per capita in 1913 was much higher than in other Asian countries, and that Asian countries started their development experiences from broadly comparable levels of GDP per capita in the early nineteenth century. This implies that an Asian divergence took place in the 19th century as a consequence of Japan’s economic transformation during the Meiji era (1868-1912). There is now  growing recognition that the use of a single benchmark year and the choice of a particular year may influence the historical levels of GDP per capita across countries. Relative levels of Asian countries based on Maddison’s estimates of per capita GDP are not confirmed by other indicators such as real unskilled wages or the average height of adults.

Our study uses available estimates of GDP per capita in current prices from historical national accounting projects, and estimates PPP-based converters and PPP-adjusted GDP with multiple benchmarks years (1913, 1922, 1938, 1952, 1958, and 1969) for India, Indonesia, Korea, Malaya, Myanmar (then Burma), the Philippines, Sri Lanka (then Ceylon), Taiwan, Thailand and Vietnam, relative to Japan. China is added on the basis of other studies. PPP-based converters are used to calculate GDP per capita in constant PPP yen. The indices of GDP per capita in Japan and other countries were expressed as a proportion of GDP per capita in Japan during the years 1910–70 in 1934–6 yen, and then converted to 1990 international dollars by relying on PPP-adjusted Japanese series comparable to US GDP series. Figure 1 presents the resulting series for Asian countries.

 

Figure 1. GDP per capita in selected Asian countries, 1910–1970 (1934–6 Japanese yen)

Bassino2
Sources: see original article.

 

The conventional view dates the start of the divergence to the nineteenth century. Our study identifies the First World War and the 1920s as the era during which the little divergence in Asia occurred. During the 1920s, most countries in Asia — except Japan —depended significantly on exports of primary commodities. The growth experience of Southeast Asia seems to have been largely characterised by market integration in national economies and by the mobilisation of hitherto underutilised resources (labour and land) for export production. Particularly in the land-abundant parts of Asia, the opening-up of land for agricultural production led to economic growth.

Commodity price changes may have become debilitating when their volatility increased after 1913. This was followed by episodes of import-substituting industrialisation, particularly during after 1945.  While Japan rapidly developed its export-oriented manufacturing industries from the First World War, other Asian countries increasingly had inward-looking economies. This pattern lasted until the 1970s, when some Asian countries followed Japan on a path of export-oriented industrialisation and economic growth. For some countries this was a staggered process that lasted well into the 1990s, when the World Bank labelled this development the ‘East Asian miracle’.

 

To contact the authors:

jean-pascal.bassino@ens-lyon.fr

pierre.vandereng@anu.edu.au

 

References

Bassino, J-P. and Van der Eng, P., ‘Asia’s ‘little divergence’ in the twentieth century: evidence from PPP-based direct estimates of GDP per capita, 1913–69’, Economic History Review (forthcoming).

Fouquet, R. and Broadberry, S., ‘Seven centuries of European economic growth and decline’, Journal of Economic Perspectives, 29 (2015), pp. 227–44.

Fukao, K., Ma, D., and Yuan, T., ‘Real GDP in pre-war Asia: a 1934–36 benchmark purchasing power parity comparison with the US’, Review of Income and Wealth, 53 (2007), pp. 503–37.

Inklaar, R., de Jong, H., Bolt, J., and van Zanden, J. L., ‘Rebasing “Maddison”: new income comparisons and the shape of long-run economic development’, Groningen Growth and Development Centre Research Memorandum no. 174 (2018).

Link to the website of the Southeast Asian Development in the Long Term (SEA-DELT) project:  https://seadelt.net

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